Identify at least three challenges when setting up a business. Explain why they are challenges.
Setting up a business is not an easy undertaking. Of course people have or may have idealistic ideas about them sitting in a luxurious workplace, with the fresh gentle wind emanating from the air conditioner and blowing in the face. One visualizes him/herself holding a hot cup of coffee in their hands, as he/she looks on to the floor that is filled with patrons and with business coming in addition to a general friendly atmosphere there about. This is a noble vision characterizes all business ventures, except for the fact it may not all the time come true, in fact things cannot be further from the truth most time. This is the hard truth. It is not an attempt to bust the bubble of those who are interested in setting up a new business; it is merely laying bare the facts. There are numerous challenges when starting a new business venture and for an extended time after it has started, until the venture at last arrives at a point where it can earn the starter some profits (Burton, 2005). Until that point is arrived at, there will be a myriad of challenges when setting up a new business venture that the starter will have to run into. The silver lining to this seemingly dark cloud is that if one is aware of the challenges when starting a business venture, then the person is in a better place to surmount them. So what are some of these challenges?
The challenges expected to be faced will differ in line with the type of the business. In several start-ups the major challenge is obtaining sufficient capital, in others it is establishing a client base and/or brand presence, others, still, obtaining the needed permits from the concerned authorities. In others it is obtaining the talents and/or personnel obligatory to be successful that is the trickiest. We will however look at three challenges that are likely to be faced by a start-up business venture.
Obtaining adequate capital is a major challenge when starting up a new business. A new business typically runs into numerous challenges when trying to get loans from an exterior source such as finance institutions and the starters have to normally depend on their personal savings or on borrowed funds from associates. Limited capital directly impact on the development of the new business since there are not adequate funds to expand at once and the demand to pay-off debts is tall. The starter should bear in mind that it is possible that profits will be non existent for a while after stating the business.
Experience and Expertise
A lot of people who start new businesses do so with no experience or expertise in the same. They fail to research into the business or the market well. Operating a business calls for the operator to have skills in each and every specialty that is imperative to run a flourishing business. For instance, accounting, advertising, procurement et cetera are needed. This can be overcome by researching into the market well and know the business adequately.
This is a hard challenge to run into in regards to setting up new businesses. That is primarily for the reason that the starter lacks adequate capital and consequently the business lacks the capacity to offer personnel benefits or a high pay.
Define what a “niche” product is. Give at least three examples of niche products.
A niche product is a product that meets a particular need or demand that few providers meet. A niche product is more like a business that has specialized in a narrow market and serves that market principally and that very few other businesses do what they do. If a consumer wants this product that the business offers, then that business is the "go to" business. A niche product is fashioned to appeal to a specific target. For instance, (at least according to commercials) Nationwide Insurance that presents accident forgiveness as well as the possibility of reducing the policy holders deductible on the basis of a good driving record can be seen as a "niche" products. Other examples include ethnic grocery outlets, Gold's gym (meant for bodybuilders), and women’s expensive lingerie store.
Explain why a niche company might have an advantage in a market. Would price necessarily be an advantage? Explain why or why not.
Niche' company are businesses that specialize on a niche market. They exist in an environment where the company is the sole provider (or among the few providers) of a specialized product and/or service. This means there is little or no competition for the company. The company has its own niche market and as such no one interferes in the company’s focused market. Niche marketing makes it possible for a business to center its resources on a specialized small market fragment. As such the firm is more efficient as well as effective than those serving an unspecialized market. Niche companies have an unparalleled advantage in having a chance to meet customer need since the customers are well defined (Burton, 2005). The company can even tailor make their products and/or services in line with the niche market wants and needs.
Identify and explain three reasons why customers would pay more for exclusivity.
Exclusivity is connoted by specialty and scarcity or limitedness of a good or service. The factors that motivate the clientele to indulge into the purchase of the exclusive goods or services are either because of the limited supply or the pursuit for personal gratification. In most cases, it is informed by the urge to gain access to comfort and quality which would otherwise be difficult to due to the limited supply of the good or service in question (Holmes, 2002). The core motivating factors behind the pursuit for exclusivity include; quality& comfort, rarity and, self gratification.
To begin with, exclusivity is perceived by many consumers as the perfect avenue to quality and comfort. Consumers always seek to gain sufficient value for their money. By purchasing into exclusivity, the consumers garner their way to the highest scales of quality and comfort as compared to purchases of the regular items. The pricing is not a worry to the consumers as mostly they are in pursuit of quality and work their money all for the sake of attaining their intended value, quality and comfort. Purchases of exclusivity offer comfort in that they are specifically modified to suit the high standards expected by the clientele and also because the quality and comfort act as a marketing strategy and cushion the intent of the market venture in its bid to attract and retain customers.
Secondly, rarity of goods and services makes customers prefer exclusivity. In rarity, the supply does not meet the demand and thus the available supplies are deemed exclusively available to a certain group depending on the varied purchasing power. Ultimately, what ensues is a situation in which the available goods are exclusively available to a certain cluster of consumers, the type that is capable of purchasing or can have immediate access to the exclusive goods or services. Rarity also implies uncertainty in immediate or future supply, thus meaning that the trends are completely unpredictable and do not even reflect future increase in supply, rather they might mean declining numbers in the supply chains. Eventually though, it is either one person or a few who have access to the good or service meaning it is unique and it is associated to very few persons.
Finally, consumers opt for exclusivity in pursuit of self gratification. In most cases, consumers set high tastes and personal preferences. Ultimately, to achieve these high targets, they have to settle for goods and/or services that are on offer with exorbitant prices. In addition, the quest for value and quality buoys the motivation for goods on offer in exclusive terms. Such a move is aimed at satisfying the motives of the consumers and postulates a mentality of financial ability.
Whatever the motives for exclusivity, it is quite clear that some people want to attain the maximal value and returns on the goods and services. On the other hand, it all narrows down to financial muscle or the determination to be and remain unique either for impressing others or to make a social statement.
Explain how a niche player “chips away” at a larger competitor’s base.
The need to attract and retain customers means a stable flow of customers thus leading to stable business flow. This is quite important for the in the quest to establish a firm foundation for the business in preparation for future business ventures. To do this, the business needs not only to invest in supplying quality goods and services, but also its services need to reflect a commitment to the offering quality and value in return for customer royalty (Holmes, 2002). To chip away from a larger competitor’s base will also require perfect business strategies and policy execution so much that the business is operating at a stable and a fast advancing environment all for the sake of ensuring stability in the market share.
Niche market players survive mostly through thorough marketing ventures. Exquisite branding and image packaging is the key for sustained business for the niche player. To achieve this, it is imperative that advertising, branding, promotions, aft sale services and other marketing strategies become the order of the day for these business ventures. Eventually, what happens is that the ‘niche’ clientele get to know of the existence of the niche player, the goods and services on offer as well as the rates. Discounts are usually a good trick to attracting and maintaining the clientele and in most cases it has worked the miracles for most ‘niche players’ who have been able to ‘chip away’ the competitor’s base.
Examples of retailers who have been able to ‘chip away’ a competitor’s base
Coldcore Inc. a cake manufacturer has been successful to this end through their exquisite cake offers, mostly designed for royal functions, and have succeeded to get people to pay more for a product whose value and quality cannot be met. Plus they offer after sal- services and ensure they have people deliver and assist in these functions. They call it the grand cake!
EHobbies.com, a online company has narrowed down to hobby items and offers a range of these in large numbers. The exclusivity and uniqueness of their products has ensured they grab most of the clientele from the major stores and entertainment joints, albeit only those focused on having fun! The trick is hinged on their offer for a single premium product.
Apple; through well researched and innovative IT products, Apple has outshone the bulk of market producers. It’s a niche company because of the exclusivity of its products and services. In addition, the marketing strategies it has adopted mean that they have become a market favorite.