In today's competitive market, there are ample number of opportunities prevails in the market that needs to be properly exploited by entrepreneur so as to gain high competitive advantage over other rivals (Block and Wagner, 2010). It is the willingness and capacity of entrepreneur to develop, manage and organize a new business venture along with any type of risk associated with it in order to make profit. They carried out their business activities in such a manner that contributes significantly towards the growth and development of the country. The selected company for this report is Natural Essence which is a skin and health care industry. The company has decided to launch new range of cosmetic product that are made up of organic and natural ingredients. This business will commercially viable with the help of new and innovative methods of marketing. Natural essence can expand business with the help of partnership or franchise business. IT includes assessment of various sources of entrepreneurial ideas, SWOT analysis, rational deciosn taken and interpretation of data.
P1 Identification and assessment of different sources of entrepreneurial ideas
An entrepreneur is the one who instead of working as an employee, found and run a small business taking on financial risk in the hope of making profit. In order to determine the impact of external factor on business operation and activities, STEEP tools is taken into consideration. It is important for every company to consider some external forces before taking final decision. This analysis is often conducted by entities so to get a detailed overview on what external elements determine the trend. STEEP stands for social, technological, economical, environmental and political.
Social Factor: It include factors like demographics, lifestyles, values, purchasing pattern of customer etc. Needs and wants of customers are rapidly changing, therefore it is essential for every firm to identify what are the current like and dislikes of customer. For example: Natural essence is introducing new range of cosmetic product made up of organic and natural ingredients. So they need to investigate whether it will liked by customer or not keeping in mind their current requirement.
Technological Factor: This factor highly focuses on technological advancement. It encompasses innovation, research and development, life-cycle of product, transport etc. Everyday new innovation or invention takes place which creates an urge among entities to update their current technology with the latest and advance one (Dimov, 2011). High end technology creates lots of opportunities for the company and provide them the advantage to gain high competitive advantage in the market. For example: With latest and innovative technology, Natural Essence can manufacture their product in a cost-effective and timely manner.
Economical Factor: The economic condition of respective country is strongly inter-linked with customer's buying position. It include factors like savings, international trade, inflation, interest rate, subsidies etc. The company is introducing new organic range of cosmetic products in the market. The cost of organic product is little higher as compared to other product. Now if inflation arises in the economy, prices of these products automatically increases. With such high prices there might be chances that customer may shift to some other local brand (Ekpe, Mat and Razak, 2010).
Environmental Factors: Such factors are associated with ecosystem factors like water, pollution, environment regulation, pollution etc. The company indirectly benefits the environment as they deal in offering new range of cosmetic product that is made up al natural and organic ingredients.
Political Factors: Such factors determine the extent of government in terms of impacting business activities and operation. It include factors like political stability, tax policies, price regulation etc. Before launching new business venture in the market, entrepreneur needs to analyse the political situation of respective country in which they are planning to introduce its product.
7 Drucker's Source of Innovation: It includes
The Unexpected: It is an outside event that mainly takes place independently of what the company is working on. There are large number of opportunities exist in the market, only the entrepreneur must know how to exploit it in an appropriate manner.
Incongruities: It is a disconnect between what it actually is and what people assume to be. For example: The demand of organic product increases but the economic performance of company is not. It mainly outlines the difference between reality and assumption.
Process Needs: Firms tries to implement new innovative methods that help in carrying out business operation and activities in an effectual manner.
Industry and Market Structure: In today's competitive era, where nothing is constant everyday new invention or innovation takes place. Therefore company needs to keep an eye on these changes that takes place on continually basis (Foo,2011).
Demographic: Factors like income level, population, human capital are continually changes that enable company to pay attention towards these factors. Any change in income will directly impact overall profitability of Natural Essence.
Change in Perception, Mood and Meaning: Over time people and population change. The way they view life, their perception, liking everything changer. It is primarily important for the company to produce such product that satisfy customer needs and wants in an effective and efficient manner (Heinonen, Hytti and Stenholm, 2011).
New Knowledge: With advance technology, more opportunities prevails in the market only the person should know how to exploit it properly. For example: Natural Essence can take the help of social networking sites in order to promote its product in the market.
Types of Innovation:
Innovation play key role in organisational growth and development It enable firm to gain high competitive edge in the market over other competitors. Following are the different types of innovation:
Product: It deals with change in product that has been offered by company to target customers. For example: Natural Essence is going to introduce new range of cosmetic-products that are made up with organic or natural ingredients.
Process: It refers to the change or innovation that takes place in workflow or business process that directly affect overall performance and productivity of the company.
Place: It deals with introducing right product at right place on right time.
Schumpeter's source of innovation: The theory states that any change in investment accompanied by monetary expansion. It states that innovation is the main reason for business fluctuation and increased investments. It does not mean invention rather it means commercial application of new material, technology, methods and source of energy.
P2 Rationale and market gap for particular entrepreneurial idea by using appropriate tools
In the modern era, every day new change takes place in the market whether in the form of innovation or invention that possess direct impact on overall performance of the company (Quan, 2012). The main objective of any company is to develop unique and innovative products that contribute significantly towards organisational success and growth. Situation like Brexit has a direct impact on overall working and operation of the company. With Brexit there are various changes that takes place in UK's legislation. However local residents were not aware of such changes and this is the reason why activities are not carried out in a proper manner (.Renko, Shrader and Simon, 2012). Though there are ample number of opportunities that are available in the market but they don't know how to exploit such opportunities in an effective manner. This can be done by analysing environmental factors that possess either direct or indirect impact on company's overall operation. In the given report, Natural Essence came up with innovative idea of launching new range of cosmetic-products that are made up with only organic and natural environment that they do not cause any harm to customer and their skin. R&D department of respective firm has analysed that now a days consumer prefer to purchase such products that organic in nature whether in food or cosmetic sector. With the introduction of this innovative product, company can easily attract large number of customers and attain high market over their rivals. The main benefit of this innovative product is it can be utilized by age group of any people because of its composition of natural and organic ingredients that they do not harm the skin of the customers.
Industry life cycle- this is the cycle which provides information about different stages of business operate, progress, prospect and lump. This cycle provides information about scope and growth of start up business. In this cycle there are start up, growth, shake-out, maturity and decline stage. In case of Essence company, when company started business in industry, then they enter with start up stage, then they went to growth stage. With growth of business, they enter in shake-out stage. In this they have to make some new and innovation in their product and services otherwise they went in maturity stage which is negative for Essence Group. After wards it gets in decline stage. This makers product old and blunt in industry.
Some common features of entrepreneurial idea are discussed below:
Example For All: The innovative idea that has been formulated by entrepreneur must practically possible and play key role satisfying customer needs and wants in an effective manner. If the product they are offering innovative product in the market that are different from existing ones than it can be set as a good example for all. The reason is simple it represents that company is modifying their product as per the requirement of the customers. For instance: Natural Essence become the first one to introduce organic range of cosmetic-products in the market place in which no harmful chemical has been used in their making.
Creates Benefits For All: As the product introduced by entrepreneur is innovative and unique, chances of satisfying customers increases. In addition to that it also creates employment opportunities in the respective country. As a result new business venture is also contributing in the growth and development of the country (Short and et. al., 2010).
Market Segmentation: It include classifying the broad range of customer into small sub groups. It assist the firm in analysing the customers and segregate them on the basis of certain aspects. Some of the categories of market segmentation is discussed below:
Demographic: Under this market segment, population is categorised on the basis of age, lifestyle, gender and income etc. Skin care products are usually sold on the basis of consciousness of buyers in respect to their health which may vary from one person to another (Tang, Kacmar and Busenitz, 2012).
Behavioural: Under this, behaviour and perception of customers are analysed and on the basis of that customers are classified. For instance: If a customer is more particular towards their health and skin then definitely they are going to use organic made products.
Geographic: Under this, population is categories on the basis of geographic region where they reside. Policy of each country vary from one another.
Porter's Five Forces Model:
Industry Rivalry: There are various other companies exist in the market that offer similar products that leads to create strong competition in the market. Competitors firms using distinctive strategies such as clever pricing, promotional strategies that cause strong competition in the market. The biggest rival of Natural Essence is Lavender Group
Threat from substitute products: There are large number of rivalry firm exit n the market that offer similar products as Natural Essence. As a result, there are ample of substitute goods present in the market.
Bargaining power of suppliers: Suppliers also affect the functioning and operation of production and operation department. The company is buying goods in bulk quantity from suppliers. Therefore any change in policy will adversely affect profitability and margin ratio of the company.
Bargaining power of buyers: It has been assumed that when buyers are more for particular product then prices of goods also gets affected. With high bargaining power of buyer, company needs to drop down the price of their product.
Threat from potential entrant: The company is facing strong competition in the form of its strong competitors. Some of the common threats that they are facing is lack of adequate funds, economies of scale, government policy and regulation and product differentiation.
P3 Data needed that help in evaluating entrepreneurial idea
There are various factors that are present in the market and also posses an impact on overall functioning and operation of company (Vaghely and Julien, 2010). Therefore it needs to assesses in proper manner. Natural Essence needs to undertake various aspects before launching its business in the market.
The company requires to investigate policies and strategies of competitors firm as well. This can properly be done its R&D who will collect or gather data related with competitors that help company in gaining high competitive edge in the market place.
Competition in market
Natural essence is selling their product at comparatively lesser rate that help them in gaining high competitive edge in the market over other rivals. Price of their product is $3000.
Competitors are selling their product at higher rate which turn out to be advantage for Natural Essence. They are normally offering their product at 5% higher rates.
New entrances in industry
As the company is selling their product at an economical rate they can easily open up more stores so as to increase its market base. In-fact in order to increase its customers base the company is giving discount to its loyal customers so as to retain them for longer period.
Rivalry firm is selling their product at higher prices and do not offer and discount to customers.
Power of supplier
Supplier cost is low as compared to others i.e. 3000$. They are not charging any commission from them.
Suppliers are charging high commission which is the reason why competitors goods are so over priced.
Power of buyer
They laid stress on meeting customer requirement by providing them product as per their needs and wants.
Competitors firms mainly emphasize on earning higher profit instead of focusing on meeting customer requirement.
P4 Interpretation of the data
From the above picture it is identified that people are more conscious about their skin and health as compared to past years. So scope of making good brand in industry is possible. It is important to make changes in product so they can make long term existence in society. Number of users of skin care products are increasing year by year so this makes demand for natural and organic products as well.
From the above collected data , following discussion are made:
- There is a strong competition prevails in beauty and skin care sector. The company is liable to produce such products that effectively satisfies customers needs and wants (Wang, Ellinger and Jim Wu, 2013).
- The company needs to use high end technology in order to promote its product in the marketplace. They can use promotional channel like social media platform, public relation, sales promotion etc.
- The major weakness of Natural Essence is their customers are shifting to other local brands which results in decreasing their sales and profitability ratio.
P5 Application of SWOT analysis to measure entrepreneurial idea
SWOT Analysis is mainly used by companies in order to figure out their strength, weakness, threats and opportunities so that formulate strategies accordingly. Discussed below is SWOT Analysis of Natural Essence:
Strength: Main strength of the company is extensive use of high end technology which gives them the advantage to meet customer requirement in an effective and efficient manner. If the demand of organic cosmetic-products increased in the market then the company needs to serve high quality products in the market that ultimately increases their productivity (Wood and McKinley, 2010). In addition to that, if company wants to raise their growth and sustainability in the marketplace then they need to deliver goods of high quality that fulfil customer requirement effectively.
Weakness: The company is mainly selling their product at low prices which creates its negative image in the market that ultimately affect its overall profitability and sales figure. If customers found products costly then they will switch to some local company which gives them product at low cost.
Opportunities: Company can take the advantage of using high end technology for effectively promoting their product in the market place. They can use social networking sites such as facebook, instagram for promoting its product. This result in increasing the sales figures of the company.
Threats: The company is facing strong competition in the market as there are other competitors who are also providing the same product (Frank, 2014). Also the company is not having adequate funds which become another reason for not expanding its business operation in other countries.
P6 Evaluation of market and competitive environment to assess potential viability
In order to gain high competitive advantage in the market it is important for every company to understand current market trend and also figure out prevailing competition in the market. All such factors needs to be taken into account as it directly or indirectly affect overall operation and functioning of the company. When an entrepreneur starts its new business venture, he needs to examine the market situation first and then formulate strategies accordingly which help in launching business in the market in an effective manner. Employees of Natural Essence needs to analyse whole market before launching its product in the market so as to check its viability. With the help of competitive and market analysis company can figure out whether their product is going to be accepted in the market or not (Wedge and Fee, 2016).
Competitive Market: By doing this analysis, Natural Essence can identify their sustainability in the market. It provide growth and development opportunities to the company that deals in similar industry or sector. It also help in gaining high competitive advantage in the market over other rivals. It includes:
Substitute Goods: Purchasing pattern of customer is also influenced by substitute goods. If customers found any local company that provide them similar kind of products but at comparatively lower prices then they instantly shift to that local company. Therefore it is always important to analyse existence of substitute goods first and then launch business in the market.
Demand: There is high demand of organic product in the market. Taking the advantage of this situation company needs to analyse the market trend first so that they produce products accordingly.
Market Environment: It compromise of two factors:
Macro Environment: It include all external factors that directly or indirectly impact overall operation and functioning of the company. There are certain factors that exist in the external environment that needs to be taken into account by Natural Essence. Female are conscious towards their health and skin as compared to male. The company is also gets a certification of from FDA that signifies their products are safer to use (Heinonen, 2013).
Micro Environment: There are some other factors that exist within the working surrounding that also possess an impact on the overall performance of the firm. It include factors like employees, customers, suppliers etc.
As there is more trend for skin products, then Essence Group can get success in industry. External environment of UK is also favourable for natural and organic product. So scope of business is more with regular innovation. As there are more competitors in UK regarding cosmetics, so it is important to make changes in products according to consumer demand.
According to above mentioned report it can be concluded that there are ample number of opportunities exist in the market but only few of them are actually good. Therefore, entrepreneur must know how to exploit such opportunities. Cosmetic Industry is one of the fastest growing industry. Today people are more conscious towards their health and skin which creates an urge for the company to produce such products and services that satisfy customer requirement in an effective manner.
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