How entrepreneurship affect country's economy

  • Published on
    12-Nov-2014

  • View
    7

  • Download
    3

DESCRIPTION

The assignment answer's how entrepreneurship affects the economy and analyzes 3 cases from paul burns book.

Transcript

Entreprenuership and Business Planning

Group Assessment Semester 2 2012 /2013

Airin Listya Hanish Singh Olisa Ebonwu Kaustubh Lohiya Tanveer Islam

Table of ContentsPart 1: Question ...................................................................................................................................... 3 How does entrepreneurship encourage economic growth? .............................................................. 3 Part 2: CASE STUDIES .............................................................................................................................. 4 B & Q ................................................................................................................................................... 4 What lesson can be learned from the experience of B&Q in China?.......................................... 4 Body shop............................................................................................................................................ 6 Why was the Decision to Franchise the body shop an important Part of its success? ................... 6 What are the Dangers for the Franchisor of Franchising? .............................................................. 7 3.What are the Dangers for the Franchisee? .................................................................................. 8 eBay......................................................................................................................................................... 8 1) Why is eBays business model so attractive ? ............................................................................ 8 2) How does paypal enhance this business model? ........................................................................ 9 3) Why does one element of eBays strategy involve market dominance? .................................... 9 REFERENCES .......................................................................................................................................... 11

Part 1: QuestionHow does entrepreneurship encourage economic growth?Entrepreneurship is defined to be the capacity and willingness of an individual to develop, organize and manage a business venture (Basil 2012). It also means undertaking any of the risks in order to make profit. Thus entrepreneurship through means of goods and services creates wealth (Dr. Joytsna, n.d.). Clearly this is a positive note for the countrys economic development as it has positive impact on the per capita income of the country. Hence economic development is achieved via entrepreneurial activity; in fact it is an important part and a crucial input to the development of economy. Entrepreneurship create opportunity of employment, and increase production of good and service which leads to higher rate of economy, the place factor also plays an important role as in entrepreneurial activity can lead to development of backward regions of a country. It can be observed that if a country does not have enough of entrepreneurial activity then usually foreign entrepreneurs step in, to produce goods and services desired. Entrepreneurship can also lead to a chain reaction (Dr. Joytsna, n.d.) i.e. in a business venture the entrepreneur always seeks to improve the goods or services they are providing and also undertake new research to add more products to their portfolio. This process not only benefits the employees and people but also other companies and organisations in the local market. One of the e.g. stated by Dr. Joytsna (2012) was about Computers, when they landed in market and became commercial; there was always a drive for improvements from desktop to drift towards laptop, achieving faster processor speeds and more memory. This not only helped computer industry but also other industries like software industry developed. Development had a booming effect on the airline industries, educational institutes etc. Entrepreneur activity in one region of country even helped other industries as well as its own country. This can be seen from the development of two giants in same region, Intel and Microsoft and using the talent of the entrepreneurship the country transforms from traditional lethargy to a modern industrial cultural. Job creation, an important outcome through entrepreneurship increases the standard of living for the population of the country by distribution of income. This further has effect on the government resources by means of various taxation and subsidiary policies. A stronger

government can offer benefits to its people by development of infrastructure and facilities like hospitals (Amit, 2012). A study conducted by Global Entrepreneurship Monitor Project concluded that there exist more than 70 % correlations between the economic growth of a country and entrepreneurial activity in the country (CIPE, n.d.). The study also suggested that high entrepreneurial nations have an economic growth which is above average. One of the best examples to this is USA which is the hosts to the big entrepreneurial companies like Facebook, Apple, Microsoft, Google and Twitter. Another best example is Safaricom from Kenya, which grabbed the opportunity to develop innovative product and achieved extraordinary growth over a sustained period. Their products like M-Oesa and M-Kesho put Kenya on significant economic growth by boosting movement of cash (CIPE, n.d.). Thus the role of an entrepreneur is very significant in economic growth and plays a significant role in accelerating the growth of other dependent industries in developing countries.

Part 2: CASE STUDIESB&QWhat lesson can be learned from the experience of B&Q in China?

a. Generating Ideas to do the Business Expansion (Set the Vision) In business, the first thing to learn is always about generating idea or vision. B&Q have vision for internationalize its business in China. They saw opportunities, market, economies of scale, and competition in international industry. It means that they do not sit comfortably in their comfortable zone. They keep seek for a better ways to improve the business. b. Running the Business: taking risk, joint venture When first started the business expansion in China, B&Q took a degree of risk by getting the business internationally. Moreover, their brand name and market share are not as wellknown as IKEA. B&Q entered the China market which has restriction: the Governments policies (partnership with the local company and limited location for foreign business). Some

of successful companies do not always willing to enter the chinas market due to their Government or political policies, social and cultural differences as well. Moreover, China is well known for having many administrative and bureaucratic tasks which cause timeconsuming in business. However, these barriers did not keep them away from the objective of expanding their business internationally, so they made joint venture business with the local company for the land, whilst stay with the cash and expertise. c. Planning for Growth: Evaluating the Business Idea, listening to the customer, adaptability, and expand beyond large cities B&Q business strategy is about learning by doing. Though B&Q already have the business strategy: DIY (Do It Yourself), they kept observe the market. They did market research to evaluate their business idea and listen to their customer. In cultural analysis, B&Q found that the Chinese customer behaviour is different from the B&Qs main country and they adaptable of this issue. In economic analysis, they found that the labour is significantly cheaper than in the West. So, after they did the market research and related it to evaluate their business strategy, they learned that they should be adaptable to their business circumstances in order to maintain their business sustainability. B&Q evolution strategy become more focus with the customer value, various range of services, and expand their market in China to several secondary cities. d. Creativity and Innovation: New Services and Establish Business Relationship B&Q started the creativity and innovation by established the services that offer delivery and installation to its customers, such as design and contractor services. They establish relationship with the suppliers and other functional firm to make sure their customer oriented business can be applied. e. Strategic evolution due to crisis: Restructure However, in 2008/ 2009, B&Q faced sales declined and losses as the impact of the world recession. B&Q solved the problem by doing restructure. They understand the challenge and whether they chose to get out from the crisis as the winner or the loser; the choice was determined with common sense. So, they took the right decision at the time by doing reorganisation and reduction in the number of shops in China from 83 to 43 which keep B&Q on track to break even in 2011.

Body shopWhy was the Decision to Franchise the body shop an important Part of its success?

Franchising is the only one of many business expansion alternatives. According to Seid & Thomas(2007) one of the major importance for franchising a business is to expand the business and distribute goods and the opportunity to operate a business under a recognized and proven brand name. Data monitor (2006) reported that the body shop is famous for creating a niche market that is inspired by the creation of quality and naturally inspired skin and Hair care products. The body shop is a multi-local business built on a social franchise and its operating in a very competitive industry, franchising the business was a very important part of the success of the Body shop especially when Anita Rodrick decided not to manufacture or invest in the distribution system but to develop the brand and improve its quality through creative thinking. Kestenbaum & Genn(2008, p.8) further suggested that that one of the body shops major attributes is to grow the concept internationally and regionally into many countries providing an avenue for expansion. Body Shop at the time was facing a Financial Crunch and they needed to get past survival and expand the brand for fear of being copied and imitated. The Body Shop could have sourced for other Alternatives like issuing Licenses, Distributorship, Joint Ventures and partnership but they were particular about maintain the quality and Brand Name. According to Strafford(2007)Lush one of Bodys Shop competitors which runs a similar model chose partnership as its business model to maintain the integrity of the business, to expand the business without fear of internal and external competition, to enable its partners build a brand identity and they do not offer single store franchise as body shop do. The decision to franchise the body shop was important and geared towards: Expanding and growing the brand worldwide Reduce the operating cost and increase profit by means of royalty fee. Create a sustainable brand name Stay above Competition

What are the Dangers for the Franchisor of Franchising?

Keup (2007) suggested that the success or failure of the franchisor or franchisee relationship determines the failure or success of the business IFA (2004). The International Franchising Association statistics supports this fact with its statistics, there is a 95% of Success rate and a failure rate of 85% which shows the dangers and risk a franchisor is exposed to. Masetti (2007) the failure of the franchise to provide units with a quality product or service that is in high demand and will steadily generate royalties will mean failure franchisee network and the franchisor. There needs to be a constant trend for innovation to be accommodated. For the Franchisor the major dangers are: Systematic Failures: Franchisees are expected to follow the business model; Inconsistent behaviours by the franchisee can negatively influence the reputation of the organization as a whole which can have a significant effect on the business and sales revenue. There is also a risk of failure in the first year of the business. Loss of absolute Control: The franchisor might lose absolute control of the business especially if there is not adequate monitoring and directives to maintain the vision of the business model. Difficulties :Monitoring and Managing Franchisees can be difficult especially in new markets, there has to be close monitoring especially when the PEST analysis is strategically analyzed due to the fact that cultures, laws, geography differs. If Franchisees do not Provide Start-up capital, they act more opportunistically. Business/Incentive Risk: Franchising a business is seen as a huge business risk if adequate standards are not followed and due to how sensitive it is,since incentives are often set up with a geographical location in mind there is a risk of changing to the initial mission due especially when trying to adapt to other locations.e.g Burger King faced a similar challenge of product quality, store image and design but decided give franchises to already established companies in different locations to protect its image and brand. Brand/Quality Damage: The products might be at risk especially if the product is imitated or copied, thereby damaging the brand. Data (2006) the proliferation of counterfeit goods is affecting the sales of branded cosmetics and accessories. Similarly for organizations in a

competitive industry, its a major danger for the franchisor because it could be copied competitors in the same industry. Poorly Performing Franchisees: When there are so many poorly performing franchises in a particular area, it reduces consumers confidence in the products, thereby reducing its growth potentials. Complexity in Franchising Laws: Franchising laws are complex and complying with them might divert resources from other aspects of the business.

3.What are the Dangers for the Franchisee?

Model/Structure:

Structure of the Business will be affected by the franchise because it

requires the franchisee to give up considerable independence in the way the he intends to run the business. The business model must be in line with the franchisor and the concept cannot be changed. Reliance/Dependent: The franchisee is reliant and dependent on the franchisor because the franchisee must follow a particular direction and process; the franchisee needs to balance system restrictions with their personal ability to manage their own business. Information Sharing and Lack of Privacy: The Franchisor is required to share some personal information about his business to be seen as running a transparent business model. Inflexibility: For the Franchisee the business becomes inflexible because certain principles must be followed under the franchising laws.

eBayWhy is eBays business model so attractive? EBay is the world's leading ecommerce company. Its global range of businesses enables hundreds of millions of people to buy, sell and pay online. (EBay, 2013)

EBay's business is...

Recommended

View more >