714NVC New Venture Creation

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714NVC New Venture Creation

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714NVC New Venture Creation

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Course Code: 714NVC
University: Australian Institute Of Business

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Country: Australia

Question:

You are a consultant for new business start-ups in your preferred industry. In the course of your work you thought of a great new business idea, which you want to pursue.
 
Write a short business plan for your new business idea. Provide only a very brief overview of the marketing strategy, except as it relates to the innovative aspects of your business idea. Because you are a consultant you should include references to appropriate theory to support and justify your decisions.
Focus mainly on the following discussion points:Show your calculations for your estimate or forecasts for sales and costs in the first year at least.
â—¦When will the business start to make a profitâ—¦How profitable will the business be when it is establishedâ—¦How big will the business be then? For example, you could use employee or location numbers to indicate size.

Answer:

New business venture requires careful planning and research. The entrepreneur has to make sure that he arranges all the resources and identifies the opportunities in the market. New ventures require raw materials, technology, employees and machineries. Apart from this, new ventures need necessary capital to initiate the operations (Fernhaber and Li, 2013 p. 316). The present report is based on the new start up business: Gifts for You Company. It will provide gifts, invitation cards and other personalized items to the customers. It will help the consumers to send gifts to their loved ones by ordering it online through the site of the company. It is a new idea which will require business plan, sales forecasting, market research, business strategies, human resource and finance. Along with this, the challenges and methods to overcome it to accomplish the main goals of the organization have also been included in the report.  
Size of the business
Gifts for You Company will be a small sized business which will be located only in Brisbane, Australia. The company will add new locations once the business starts to grow and the demands of the products increase in the market. Initially, only 35 people will be appointed in the business. It will include experts, salesman, computer operators, store managers etc. Gifts for You Company will have both online and physical store (Hiatt and Sine, 2014 p. 773). Online website will be promoted more because it will help the company to increase their market share. Furthermore, they will not require huge inventory and working capital. But physical store is also needed because they will also provide experts services and consultations to the customers. Online facility will allow the customers to interact with the company and he/ she can place orders at ease. It will help them to build their brand without spending huge funds on marketing strategy. They can even collect the feedback and reviews of the consumers which will allow them to make changes in their existing business structure and other activities (Madsen, 2013 p. 65). The size of the business will be increase once the company starts generating enough profits.           
Business plan
The business plan which should be used by Gifts for You Company to set up their business in the industry has been given below:

1. Choosing the business idea: Gifts, invitation cards and other personalized items
2. Business opportunities: Youth, working class and corporate.
3. Business model selection: Physical and online store
4. Setting up objectives, mission and vision
5. Formation of target market
6. Defining USPs and value added activities
7. Creation of positioning strategy
8. Feasibility and Market research
9. Sales forecasting and estimations
10. Service analysis and analysis of the Industry
11. Organizational evaluation
12. Financial impactions study: Loan from bank
13. Competitiveness  
14. Resources requirement analysis
15. Review
16. Monitoring and evaluation of the sales and revenues
17. Corrective Measures

Gifts for You Company will be located in Brisbane, Australia. The main reason for choosing Brisbane is that the office space and housing is within the range of the startup business. Furthermore, it has good infrastructure and transport facilities which are available to affordable prices. The company will provide facilities to the customers to place order at any time. They can use telephones, emails or online website to choose the product (Klotz, Hmieleski and Busenitz,  2014 . 226).
Mission and Vision
The mission of the company is to spread happiness by providing products which makes them happy and causes no harm to the environment. Similarly, their vision statement is to become global leader to provide customized products and services at affordable cost.            
Products and services
Gifts for You Company should have wide range of products which allows the customer to browse and customize them. It should include personalized gifts, invitations cards to different occasions, customized gift baskets and gift wrapping facility (Söderblom, Samuelsson and Sandberg, 2015 p. 1501). Apart from this, the company will also provide free shipping and doorstep delivery of the products. The customers can also avail the facility of delivering personal messages to their dear ones at their doorstep. Furthermore, expert’s advices will also be provided to the customers who will help them to create products as per their requirements.
Value added
The value added feature of Gifts for You Company is their customized products and services. It will provide an opportunity to the customers to discuss their needs and preferences. The expert service will be provided to them as per their choice of time and convenient place. The gift items will be presented as per the directions of the customers (Kuratko, Fisher and Hornsby, 2017 p. 119). They can decide the products, personal messages, delivery methods, time and date of delivery. Along with this, the company will provide the customers to place order with the help of telephone, online websites, emails and messages.     
Marketing strategy
Target customers
The target market for Gifts for You Company has been given below:

Young people: In Australia, there is high demand for customized products, luxury products and personalized services. Gifts for You Company will be benefitted by targeting young people in the country (Ko, Wiklund and Nason, 2015 p. 18). They will help the business to grow and they will easily connect with the idea. Furthermore, it will allow them to increase their customer base and loyalty.     
Working class: It is a convenient method for working class people because they have less time to select the products and send it to their loved ones. Most of them have high disposable income. They can take the help of the company in shopping, inviting guests and for other preparations (Jin, Madison, Kraiczy and Xi, 2016 p. 55).     
Business organization: Many companies send gifts and cards to their employees and customers. It helps them to improve their brand image in the market. Gifts for You Company and their services are useful for corporate people.     
Other target groups: Gifts for You Company can also target occasions, celebrations, festivals, society etc (Kuratko, Fisher and Hornsby, 2017 p. 130).  

Positioning
Gifts for You Company are a unique company which can easily spread its distribution network in the country.  The company should position themselves as an entity which helps the customers to express their feelings to their loved ones through gifts and personalized items. The company also provides the facility to send gifts and flowers in midnight. Similarly, they offer same day delivery services to the customers (Schjoedt, Monsen and Chrisman, 2013 p. 14). It can be very useful for those people who want to send products at the last minute. Apart from this, personalized products add value to them.
It has provided them an opportunity to create a differentiated market for their products and services. But it is important for them to focus on their USPs and value added services such as experts services and consultations. Positioning can be very helpful for the company to create awareness sand build reputation in the industry. There are many strategies which can be used by the company to improve their brand image (Lee, Yin and Peng, 2015 p. 823). But in the initial stages they should use product user approach. They should provided products and services as per the demands and requirements of the users.
They have to focus on their target market because it will provide them lot of opportunities to grow. Their promotional programs, advertisements and PR campaigns should be based on providing solutions to the customers so that they can share love with their loved ones (Hiatt and Sine, 2014 p. 773). Along with this, corporate bodies should be encouraged to develop relations with their customers, employees and stakeholders. It will be useful for the long term survival of the business. Apart from this, competitor approach should be used to make changes in the existing plans and strategies to reach the customers.             
SWOT analysis
The SWOT analysis will be helpful in understanding the strengths weaknesses, opportunities and threats of the business idea.

Strengths

Weaknesses

New idea
Unique concept
Online presence
Expert service and consultation

Presence of some branded companies
Limited capital and budget
Less information about the market

Opportunities

Threats

Creativity and innovative products
Increased customer base and Opportunity in the market
New products and services

Increased competition
Financial difficulties
Changes in demand and preferences of the consumers

Financial implications
Gifts for You Company will require initial capital of AUD 50,000. It will be better for them to raise some money from friends and family. It is important for them to follow the principles of entrepreneurial finance. More cash should be preferred than less cash which affects the liquidity of the company. The cash should be available at the time of need and less risky cash should be obtained.   They can take loan from the bank for the rest of the amount. There are many banks which will provide the funds to the start up. Furthermore, they will not take part in the decision making or any other internal activities. AUD 30,000 should be borrowed from the banks and rest AUD 20,000 can be obtained from other people (Klotz, Hmieleski and Busenitz, 2014 p. 226).
The interest rate for the loan will be 10% annually which can be paid from the profits every year. The main reason for choosing bank loan is that it is not possible for the entrepreneur to accumulate AUD 20,000 from friends and relatives. Furthermore, obtaining funds from venture capitalist will affect the internal control and decision making. Banks have no interference in the company which will allow the entrepreneur to make changes as per the needs of the business. But it is important for the management to compare the terms and interest rates of different banks to select the most suitable one (Maissenhaelter and Milanov, 2016 p. 88). The profits of the company will reduce due to interest payment obligations but they can look for the possibility of private equity once the business starts to grow.           
Estimation and sales forecast
The sales forecast for the first two years has been given below. Gifts for You Company will require working capital of AUD 10,000. The office can be taken on rent but still they will need fixed assets. The fixed cost of the company will consist of brochures, business cards, internet connection, telephone lines, printers, salaries and wages to workers and delivery van for delivering the products (Fernhaber and Li, 2013 p. 320). In the initial years the profits of the company will low because they have to spend most of their funds on sales and marketing of the products. They have to operate with minimum margin for the initial years. Their sales and profits will increase as the will receive more orders from the customers (Lee, Yin and Peng, 2015 p. 823). Apart from this, the cost of the company will also include the interest payments which they are obligated to pay for the loan that they have taken.       

Month

Sales Forecast 2017

Estimated cost 2017

Expected profit 2017

Sales Forecast 2018

Estimated cost 2018

Expected profit 2018

January

4000

3500

17750

5000

3700

20850

February

4500

4000

5200

4200

March

6000

4500

6100

4600

April

6500

5000

6600

5200

May

7000

5500

7200

5500

June

7500

6000

7800

6000

July

8000

6500

8100

6500

August

8500

6750

8600

6750

September

9000

7500

9300

7500

October

9600

7600

9600

7600

November

10000

8000

10000

7900

December

11000

9000

11000

8200

Total Sales expected

91600

73850

94500

73650

Breakeven point
Breakeven point is a point which indicates no profit or loss situation. Breakeven point for Gifts for You Company is AUD 73850 which includes the interest payments for the loan. It is important for the company to cover their fixed costs. They have to increase their sales so as to cover the entire cost of the company. If they are not able to generate enough sales then it will be difficult for them to continue their business (Madsen, 2013 p. 65). They have to pay loan irrespective of profit or loss of the company. Therefore, it is essential for the management to follow the sales forecast. The business swill start making profit after the company has generated sales of AUD 73850. They have to monitor the progress of the company and corrective actions have to be taken to avoid any difficulties in the future.     
Challenges in growth
The main challenge of the company has been their limitations in terms of resources and funds for improving their business. They have limited funds which have to be divided among different activities. Apart from this, they have been facing stiff competition from other branded gift shops in the country (Ko, Wiklund and Nason, 2015 p. 88). They have established market and customers. But the biggest problem of the company has been their brand awareness. They are relatively new in the market and lot of people is unaware about them. Gifts for You Company do not have funds to use marketing campaigns and promotional programs for their promotions.
They have lack of experience and management qualities which is required to take the business to the new level. They have their own limitations which have not allowed them to take benefit of the opportunities available to them. Most of the new ventures fail because they have their own limitations which do not allow them to grow. It creates tough conditions for them which lead to failure (Jin, Madison, Kraiczy and Xi, 2016 p. 8). Gifts for You Company can face similar issues in the future if they fail to incorporate their goals and objectives in their day to day working. They have to follow their strategies and business plans. Apart from this, increasing the sales and profits is yet another challenge for the company.               
Methods to overcome challenges
Gifts for You Company should monitor their progress from the beginning. It will allow them to keep a track of all the activities and business processes. They should take feedback from the customer and changes should be made according to it (Maissenhaelter and Milanov, 2016 p. 44). Furthermore, they should look for private equity funding that can take the business to another level. But this aspect has to be considered after the business starts generating profits as consistent level. It will help them to grow and expand the business at the right time.
Apart from this, employees should be given responsibility to find innovative methods to complete the task and to attract customers. Gifts for You Company has limited budget but they have to allocate it to ensure that all the aspects are considered. Customer satisfaction and quality of the products are key for the success of the business (Söderblom, Samuelsson and Sandberg, 2015 p. 1522). The company cannot afford to delay the delivery because it will lead to dissatisfaction of the customers. It will affect the image of the business and it will detrimental for their interest. Gifts for You Company should improve their efficiency and productivity. It will help them to reduce the cost of the products and services which can be passed on to the customers.
Long term harvesting and exit strategies
Exit strategy is used when the business or any product is not generating returns. It allows the investor to exit from the business. It is important to develop a strategy which can be implemented if the sales of the of the company slowdown. The best exit strategy for Gifts for You Company is to sell the business in the open market. The owner will get the desired price and he/she can easily retire from the business. Furthermore, there are many people who are ready to buy business units which are profitable. The assets and other investments can be included in it to get better returns. But it is essential for Gifts for You Company to make it appear more attractive for the potential buyers.                     
Conclusion
New business venture requires analysis, planning and research of the market. The entrepreneur has to make sure that he arranges all the resources and identifies the opportunities in the market. It requires raw materials, technology, employees and machineries. Furthermore, financial requirements and cost estimations have to be done to make sure that the business generates enough profits. Gifts for You Company will need capital of AUD 50,000 to start its operations. Breakeven point is a point which indicates no profit or loss situation is AUD 73850. After this level the company will starts generating profits. Furthermore business plan and sales forecasting have to be followed to make sure that the business progresses as planned in the initial stages.     
References
Arregle, J.L., Batjargal, B., Hitt, M.A., Webb, J.W., Miller, T. and Tsui, A.S., 2015. Family ties in entrepreneurs’ social networks and new venture growth. Entrepreneurship Theory and Practice, 39(2), pp.313-344.
Fernhaber, S.A. and Li, D., 2013. International exposure through network relationships: Implications for new venture internationalization. Journal of Business Venturing, 28(2), pp.316-334.
Hiatt, S.R. and Sine, W.D., 2014. Clear and present danger: Planning and new venture survival amid political and civil violence. Strategic Management Journal, 35(5), pp.773-785.
Jin, L., Madison, K., Kraiczy, N.D., Kellermanns, F.W., Crook, T.R. and Xi, J., 2016. EntrepreneurialTeam Composition Characteristics and New Venture Performance: A Meta?Analysis. EntrepreneurshipTheory and Practice.
Klotz, A.C., Hmieleski, K.M., Bradley, B.H. and Busenitz, L.W., 2014. New venture teams: A review of the literature and roadmap for future research. Journal of Management, 40(1), pp.226-255.
Ko, E.J., Wiklund, J. and Nason, R.S., 2015, January. Team Diversity and New Venture Performance: The Role of Family Relationships. In Academy of Management Proceedings (Vol. 2015, No. 1, p. 18156). Academy of Management.
Kuratko, D.F., Fisher, G., Bloodgood, J.M. and Hornsby, J.S., 2017. The paradox of new venture legitimation within an entrepreneurial ecosystem. Small Business Economics, 49(1), pp.119-140.
Lee, M., Yin, X., Lee, S., Weng, D.H. and Peng, M., 2015. The impact of home country institutions on new venture export: examining new ventures in transition economies. International Entrepreneurship and Management Journal, 11(4), p.823.
Madsen, T.K., 2013. Early and rapidly internationalizing ventures: Similarities and differences between classifications based on the original international new venture and born global literatures. Journal of International Entrepreneurship, 11(1), p.65.
Maissenhaelter, B.E. and Milanov, H., 2016, January. Going Abroad to Win at Home: New Venture Internationalization as a Legitimation Strategy. In Academy of Management Proceedings (Vol. 2016, No. 1, p. 16481). Academy of Management.
Schjoedt, L., Monsen, E., Pearson, A., Barnett, T. and Chrisman, J.J., 2013. New venture and family business teams: Understanding team formation, composition, behaviors, and performance. Entrepreneurship Theory and Practice, 37(1), pp.1-15.
Söderblom, A., Samuelsson, M., Wiklund, J. and Sandberg, R., 2015. Inside the black box of outcome additionality: Effects of early-stage government subsidies on resource accumulation and new venture performance. Research Policy, 44(8), pp.1501-1512.

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