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.....................................................................................................................................2

How does entrepreneurship encourage economic growth?.............................................................2

Part 2: CASE STUDIES.............................................................................................................................3

B & Q.................................................................................................................................................3

What lesson can be learned from the experience of B&Q in China?.........................................3

Body shop..........................................................................................................................................5

Why was the Decision to Franchise the body shop an important Part of its success?...................5

What are the Dangers for the Franchisor of Franchising?.............................................................6

3.What are the Dangers for the Franchisee?.................................................................................7

eBay.......................................................................................................................................................7

1) Why is eBay’s business model so attractive ?...........................................................................8

2) How does paypal enhance this business model?........................................................................8

3) Why does one element of eBay’s strategy involve market dominance?....................................8

REFERENCES..........................................................................................................................................9

Part 1: Question

How 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 country’s 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 STUDIES

B & Q

What 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 well-

known as IKEA. B&Q entered the China market which has restriction: the Government’s

policies (partnership with the local company and limited location for foreign business). Some

of successful companies do not always willing to enter the china’s 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 time-

consuming 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&Q’s 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 shop

Why 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

Body’s 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, it’s 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.

eBay

Why is eBay’s 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 the global online marketplace where the business has made a platform for

sale of goods and services to the community. EBay has also claimed over hundred of million

registered members and estimated returns or $9 bn.

EBay's business is an attractive model because of its virtual business that sells advertising

freedom. EBay is very simple software based trading platform which is nothing more than

intermediary with no stock or inventory. A well designed and innovative software supports

all the transactions rather people which reduce the possibility of error. EBay invests most of

its profits on research and development of new software which can enhance their web server

to gain the competitive advantage in the market (EBay, 2013). Additionally, the customers,

both the buyers and the sellers, can operate the software for their transactions and do the

settlements of payments and delivery and EBay takes 17 to 18% of the transaction

commission for the use of its software (Blacharkis, 2007). EBay with the above features has

made the business succeed in the market.

How does paypal enhance this business model?

PayPal (a leading internet payment provider) allows any business or individual with an email

address and a password to securely, conveniently and cost-effectively send and receive

payments online (PayPal, 2013).PayPal has enhanced EBay’s business model by letting

customers to register with the company with their credit or debit cards or bank account details

so they can purchase and pay online which is also based on network effects (software) and

again does not depend on people which make it more reliable (Blacharkis, 2007).

EBay has achieved the market share through use of PayPal which has turned the buyers in the

customers. For example, EBay take over the global market of online Businesses by having a

share for each new PayPal registration. When the buyer and the seller use the PayPal account

to settle their transactions, EBay has a share in that transaction, hence gaining in the market

(Blacharkis, 2007)

Why does one element of eBay’s strategy involve market dominance?

REFERENCES

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April 2013]

8. Kastenbaum,H and Genn,M.A (2008) So you want to Franchise your business?

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<http://www.franchise.org>[Accesed on 9April 2013]

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