Entrepreneurship Feasibility - Literature review Example

Entrepreneurship Entrepreneurship Feasibility Report In entrepreneurship, the main concept is an innovation, an entrepreneur always looks at possible business ideas and innovatively use the idea to develop something new that has economic and social benefits. To be beneficial a business idea must be feasible and viable. The viability and feasibility of a venture depend on a variety of things. Some of those determinants are related to the venture itself while others are related to the environment in which the venture is intended including the people involved ( Henry et al. 2005). This paper is a feasibility analysis report of a venture desired. The venture involves the establishment of a mobile phones retail shop in my residential area. The report will entail the analysis results of the venture, its overview, the market and products analysis as well as the financial status. The report is aimed at providing prove that the business venture intended is viable and can be trusted to provide the projected financial, social and psychological benefits (Greve & Salaff 2003). To analyze the feasibility of a venture, the report will first provide an overview of the venture, the industry, and the market. The report will also focus on analyzing the products and the operations intended to bring up the business and ensure its success. Further the report will support the feasibility results with a description of the exit plan and the financial estimates of the venture in the long-run. Venture Overview GlobalConnect Enterprises is an upcoming mobile phones and accessories retail and wholesale shop. The idea was first developed one year ago. The development was in the background of increasing use and demand for mobile connectivity. The initial idea however was to come up with a shop that could buy and sell used phones from the people around the estate. This was to help them acquire new phones and exchange them when in good condition. However, with the increasing theft of mobile phones, the originators of the idea realized that it would be a security risk to buy and sell used phones since most lacked the original receipts as proves of ownership. It was then agreed that selling new phones and their accessories and accompaniments such as headphones, screen guards, memory chips, and pouches. The enterprise is a partnership between three individuals with like-minds and ideas. The three of us have been working together in s mobile store and are therefore experienced in the issues related to the products and the industry. Besides, we are also from the same background and shared a lot of experiences from childhood. This makes bonding easy and decision-making rather easy (Bygrave & Hofer 1991). It also contributes to the mutual trust that partners ought to have regarding the use and sharing of resources and responsibilities. Our main objective is to develop the enterprise from a small to medium and later to a large corporation that can compete in the market. The strategy to achieve this is to use the available resources and the developing technology wisely. The partners will first start with the sale of mobile phones accessories. The source of finances for the establishment is to be members’ savings. This is the short-term goal of the venture (Wennekers & Thurik 1999). Later, the business will expand in medium-term. Using the profits from the sales, members’ savings and loans from financial institutions and social development agencies to incorporate the sale of new phones in retail and wholesale. In the long-term, it is expected that the venture will attract the interest of the mobile phones companies to partner and use the GlobalConnect as a mega store for their products. This will be the basis of a franchise proposal which is the venture’s exit strategy (Eckhardt & Shane 2003). The Product and Services Mobile phones are a new necessity in the world. People are increasingly finding the need to connect with themselves and the rest of the world. This has been made easier by technology. However, to enjoy the provisions of the technological development, people must have the appropriate gadgets and devices. Our business is to bring these devices close to the people who need them. First, starting with mobile phones attachments and accompaniments will provide an opportunity to study the population’s needs and also create a business niche that will be important in the expansion and exit strategies. In addition, the repair and maintenance services will be offered at the shop to attract customers. It is the variety of services that will help the enterprise realize the stated objectives. Being the first of the kind in the vicinity, we expect to acquire and retain a wide customer base with whom we will move towards the intended progression and advancement. Periodic promotions will help in retaining the customer loyalty. Marketplace Analysis In any venture, the determinant of the profits and gains is the market. The neighborhood in which we expect to establish the business is a residential estate. The area has an approximate population of 7,000 residents with more than three-quarters of them being college students and their tutors from the nearby institutions. This means that the population that requires the use of mobile phones in their daily lives (Terjesen et al. 2012). As studies have shown, more that ninety percent of the world population between the ages of 20 and 30 use mobile phones more than once each hour. The implication of this is that the mobile phones demand will be increased in this population. Moreover, the hourly use of mobile phones will lead to an increased demand for repairs and replacements of the appliances, attachments and even the phones themselves. The market, therefore, is available for the venture and this is an indication that the objectives and laid down the strategy is viable. The variety of products, phone models and appliances with varying prices and specifications will be a great motivation for purchase for the devices and their appliances as well as the attraction that will make them come back. The major players in the market are only two smaller shops that are a distance away from the residential area. From the market research conducted, these two shops often lack new appliances and most people are forced to travel to the city to obtain their required services. Capitalizing on this lack of satisfactory services will be an important approach to the market ( Henry et al. 2005). This has led to research into what the people really need and hence the enterprise will endeavor to meet the customers’ expectation through initial provision of products and services that they lack in the other two shops. Marketing Strategy Our target customers are largely the young students and their tutors who are in need of mobile phones and their appliances and accessories. Being minute-by-minute users of the devices, the population need periodic servicing of the devices and the use of more than one accessories. This is in line with the requirements and demands that the new technology is bringing into the picture. The enterprise will provide solutions to all their mobile problems. This will include minor repairs, programming and installation of software that are important for the students in their learning and socialization. These will include mobile gaming and educational applications for use in the classroom. In this area, there are no similar services and hence there is a chance to monopolize the market. The weakness, however, is based on the inadequacy of funds to purchase all the available applications. However, systematically introducing the applications as the enterprise expands will be a good strategy for two main reasons. First, this will allow for monitored planning and allocation of resources. Secondly, the time that will be taken before the introduction of specific applications will be used in verifying the demand for the application and hence ensuring that the applications will be accepted in the market (Terjesen et al. 2012). This is important because if accepted, we will be able to count on the sales from the applications immediately they are introduced. To attract the customers, our prices of almost all the items will be similar to those in the city. This will provide a kind of the local solution that the customers will enjoy. The enterprise will also engage in periodic promotion strategies to attract new customers especially at the beginning of the academic years in the institutions to attract the freshmen. To reach a wider population, distributors, and commissionable sales persons will be recruited from among the customers who are also students. This will ensure that the products are as close to the intended customers as possible. To reinforce this, a marketing and distribution program will be applied and planned for. Operations and Management Strategy Initially, the enterprise will not be in a financial position to provide employment for the three partners. This will mean that for most of the time, only one of the partners will be permanently at the shop. This is, however, a great strategy because one of the partners is an expert in repairs and servicing of mobile phones. The partner will provide the repair services and also sell the appliances, accessories, phones, and applications (Kuehn 2008). As the enterprise grows, however, there will be enough work for the three partners and departmentalization will be the best way to handle the business (Barringer 2012). Each of the partners will be in-charge of specific number of departments and sections. Throughout the progress, the management decisions will be a preserve of all the partners equally. Financial Plan The enterprise is a profit-making venture (Wennekers & Thurik 1999). This implies that the venture must make money enough to sustain itself and also pay the partners an encouraging amount of money. A financial research has been conducted and an estimated first-year financial plan developed. The financial plan is shown in the table below. Table 1. Financial Plan for Year 1. Summarize estimates made in previous sections: $ A. Annual unit sales: 2500 B. Average Price per unit: 100 C. Variable cost per unit (production and sales): 25 D. Fixed costs (admin, production, and sales): 2200 E. One-time start-up costs (eqpmt, mktg, legal, etc.): 2000 F. Working capital rqd (receivables , inventory, etc.): 3500 Calculate estimated annual gross revenues and income: G. Estimated annual revenues (A*B): 250000 H. Estimated annual variable costs (A*C): 62500 I. Estimated annual contribution margin (G-H-D): 185300 Calculate break-even figures: J. Contribution margin per unit (B-C): 75 K. Annual break-even quantity (D/J): 88 L. Ratio of break-even to expected quantities (K/A): 0.0352 Estimate the money you will initially need to start your business: M. Total up-front funds required (E+F): 5500 N. Additional units to cover up-front funds (M/J): 73.33 O. Break-even quantity with up-front funds (K+N): 161.33 Calculate financial performance figures: P. Payback period for startup funds (M/I): 0.29 Q. Annual return on start-up investment (I/M): 33.69 R. Variable cost to price ratio (C/B): 0.25 S. Contribution margin ratio (I/G): 0.741 Conclusion The feasibility analysis of the entrepreneurship indicate that the venture is viable and profitable (Ulhøi 2005). By the end of the first year, the venture will be able to employ the partners and also have money remaining to suffice further expansion into the medium and long-term strategy. References Barringer, B. R. (2012). Entrepreneurship: successfully launching new ventures. Boston, Pearson. Henry , C., Hill , Frances & Leitch , Claire , 2005. Entrepreneurship education and training: can entrepreneurship be taught? Part II. Education + Training, 47, pp.158–169. Bygrave, W.D. & Hofer, C.W., 1991. Theorizing about Entrepreneurship. Entrepreneurship: Theory & Practice, 16, pp.13–22. Available at: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=9606211420&site=ehost-live. Eckhardt, J.T. & Shane, S.A., 2003. Opportunities and entrepreneurship. Journal of Management, 29, pp.333–349. Greve, A. & Salaff, J.W., 2003. Social networks and entrepreneurship. Entrepreneurship Theory and Practice, 28, pp.1–22. Kuehn, K.W., 2008. Entrepreneurial intentions research: Implications for entrepreneurship education. Journal of Entrepreneurship Education, 11, pp.87–98. Available at: http://ezproxy.umuc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=34160639&site=eds-live&scope=site. Terjesen, S. et al., 2012. Global Entrepreneurship Monitor Report on Social Entrepreneurship Executive Summary. Journal of Entrepreneurship, 21, pp.25–58. Available at: http://joe.sagepub.com/cgi/doi/10.1177/097135571102100102. Ulhøi, J.P., 2005. The social dimensions of entrepreneurship. Technovation, 25, pp.939–946. Volkmann, C. K., Tokarski, K. O., & GrüNhagen, M. (2010). Entrepreneurship in a European perspective concepts for the creation and growth of new ventures. Wiesbaden, Gabler. http://dx.doi.org/10.1007/978-3-8349-8752-5 Wennekers, S. & Thurik, R., 1999. Linking entrepreneurship and economic growth. Small business economics, 13, pp.27–55. Available at: http://link.springer.com/article/10.1023/A:1008063200484. Read More