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| English: Moscow-city 2010,March (Photo credit: Wikipedia) |
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| Business in London (Photo credit: Stuck in Customs) |
According to McCubbrey (2009), a venture capitalist is a person or a company which invests money into a business that needs funding. They have grown to a certain extent and cannot grow further without financial assistance. The businesses they choose are usually young businesses with strong management or a specific unique product. Venture capitalists have typically invested in technology companies in the past. The venture capitalist invests in the company with the hopes of a profit return. This is risky for the business because if the plan fails a debt is owed to the venture capitalist or the business can be consumed by the venture capitalist leaving the business owner with nothing. If the company is successful they will grow to the point of having their stocks available to the public.
The three building blocks for managers to use in developing an innovative and effective business model that I chose are core capacities, the configuration of activities and relationships. Here are my explanations of these building blocks and how they apply to my small business.
In the three years that I have been selling jewelry online I have transformed a small hobby into a streamlined process. By trial and error and after hundreds of sales I have discovered which core capacities are absolutely necessary and how to configure the activities of my shop so that it runs more smoothly than when I first started. Core capacities are basically the things that my shop must have to actually be a shop. This includes a reliable internet service provider, a computer, a printer, the items I have for sale, packaging material such as small jewelry bags and shipping material such as flat rate boxes and tape and more. These are all things that are necessary to keep my shop running. Through out the life of my shop I have been able to find the most cost effective way to obtain all of these things and still continue to tweak my core capacities so they deliver the maximum amount of return and not hurt my profit margin and still maintain my brand and company culture.
At the same time I have been able to organize the processes of creation of products and shipment after a sale. This is called the configuration of activities. When I first opened my shop I would create one item at a time, list one item at a time for sale on my site and cross my fingers that they would sell. After time, I was able to figure out which items I was producing were the most popular. I have since purchased the supplies for those popular items by wholesale, thus lowering the cost to produce these items and raising my profit margin for each item sold. I have attacked the shipment of my products the same way. For example I went from wrapping each individual item in stamped kraft paper, which was a long process when there are several orders to slipping items in a draw string jewelry bag which is a much quicker process and one I believe looks much better. All my shipping supplies are prepared and stocked so that when a sale is made everything is organized. Time is money when you own your own business so I believe that in streamlining these activities I have succeeded in generating more time for my self to focus on other important activities which need my attention.
Such as customer relationships! The relationships that I build with my customers is very important because they are the driving force of profitability for my shop. The object is to develop a brand and company culture along with a product that my customers are so satisfied with that they return for more. Eventually I would like my customers to visit my shop regularly to see what new items I have and make purchases because they habitually buy my products.
What is a competitive advantage? How does marketing contribute to the creation of a competitive advantage
Competitive advantage is the ability to create a necessity for the product or service you are offering for sale instead of a desire. It is basically how the consumer views your product or service against that of your competitors. If the consumer chooses your product or service over your competitors product or service you have developed a competitive advantage. In order to develop a competitive advantage via marketing one must have a plan. Marketing is important because it encompasses many of the nuances of your business model and small details in running a business. From internal organization, treatment of employees, to company culture, branding, packaging to the quality and how readily available your goods and services are. These are all aspects of marketing and how you present your business to your consumers and the market. Taking the time to develop and perfect every last detail of your business plan so that your customers turn your brand into a household name. What comes to mind is a movie entitled Corina Corina. In one of the scenes the little girl is asked how to spell the word vacuum and she responds with H-O-O-V-E-R. You know that you are marketing your target audience correctly when your brand name becomes synonymous with the type of product that you are selling.
Market segmentation refers to market research. Hunt and Arnett state "Its fundamental thesis is that, to achieve competitive advantage and, thereby, superior financial performance, firms should (1) identify segments of demand, (2) target specific segments, and (3) develop specific marketing "mixes" for each targeted market segment."In order to target different markets a company must do research in order to find an angle in which to market their products to different niche markets.
In order to gain profit a business wants it's product to be readily available to everyone, but not everyone will purchase the product for the same reasons. Marketing segmentation is the process of developing a way to target diverse markets in order to make a profit. In order to do this a company must first figure out what the customers in a specific market desire or what they are in need of. The business must locate where their competitive advantage lies and focus on it. Publix has a competitive advantage over other supermarkets because it realized how popular sushi was becoming. Publix now offers sushi in their stores for a lower price of dining out. They target their customers with sushi by placing the sushi near the international food aisle and the seafood.
Once the market for a specific product is found different marketing techniques can be used to find out which is more profitable for the business.
Hunt, S. D. & Arnett, D. B. (2004). Market Segmentation Strategy, Competitive Advantage, and Public Policy: Grounding Segmentation Strategy in Resource-Advantage Theory. Australasian Marketing Journal. 12 (1), 7-25. http://search.proquest.com.ezproxy2.apus.edu/docview/199330650?accountid=8289
Discuss several reasons why marketers continue to have a difficult time understanding, predicting, and explaining consumer behavior.
The reason that marketers have a difficult time understand predicting and explaining consumer behavior is because all markets are dynamic. Consumerism is an ever-changing atmosphere and cannot be relied upon to ever remain consistent. What holds true about your market can change by tomorrow with the development of new products on the market, new business arising and new technology as a few examples. The example made by a classmate in the forums regarding Blockbuster video is a perfect explanation of this. Blockbuster video under estimated the power of technology in it's market segment. They relied on their popularity to carry them into a new segment of the market in which they did not have a stronghold on. Without doing market research they were not able to predict that their customers would no longer need to rent videos as technology developed because videos would be readily available over the net (Netflix on video game consoles and television interfaces) and more convenient places (like Redbox at every Walgreens). The inability to evolve with it's ever-changing market caused the demise of Blockbuster video.
There four types of business legal entities.
Sole proprietor is the typical small business. It is usually run by a person or family. The risks that the small business owners takes is high because they are responsible for everything the business entails. From every day business processes to responsibility of debts that may incur. The owner may choose to remain small or grow and change it's legal entity.
Partnerships are basically the conjoining of sole proprietorships. Responsibility and liability are shared and agreed upon along with other aspects of business operations including distribution of work and profits.
Corporations are managed by the state in which they reside. They receive investments from shareholders or stock owners and can be publicly or privately traded. Corporations are lower risk because of the disbursement of liability to all people involved. Corporations are run by the share holders who's investment and liability directly correlate to each other.
LLC stands for Limited Liability Company. It benefits from the low risk of liability of a corporation but acts like a sole proprietorship or partnership depending on how many people are involved.
Cultural differences affect international marketing activities because there are so many diverse cultures in the world. Different cultures have different set of beliefs, ethics and morals. Marketing strategies that work with one culture may or may not be effective in a different country where the culture is based on a different belief system. For instance you would not want to open a slaughter house in Israel to sell pork products because due to their belief system most people of the Jewish religion do not eat port. However if you were to open that same slaughter house in a country that eats more pork than others you could have a fairly successful business venture on your hands. This is one of the reasons why market research is so important. No one wants to open a business blindly without any type of knowledge of the market.
The flat organization structure is what most small businesses utilize. The owner of the small business makes all of the decisions necessary for business operations. This is due to the small stature of the business. There are less employees involved if any, so communication is spread out horizontally. Employees are empowered to make decisions and communicate with each other for the benefit of the business. Because communication is stronger problem solving is quicker with everyone working together as a whole. The downside to the flat organization structure is that it is less structured or disciplined then the tall. As the company grows, so does the employee count and without that structure employees can easily lose sight of the company's mission if management does not keep a close eye on daily operations. A good example of a flat organization is a mom and pop owned restaurant.
In contrast, the tall organization structure has multiple levels of management. Much like the United States government, all jobs are broken down into specialized areas. One person at the top makes all of the decisions. Each employee is responsible for specific job duties, unlike the flat organization where employees have a plethora of duties. As each employee specializes in their area they get better with experience and can ultimately cut costs. One of the downsides of the tall organization structure is that employees can become so specialized in their specific field that they lose the human touch that most consumers appreciate about businesses. Communication between employees with different job duties may suffer because they are only focused on the tasks they have at hand and they do no collaborate ideas on how to improve business or functions.
I believe that employee empowerment and the concept of employees as stakeholders goes hand in hand. An employee has a large stake in the company that they work for. Not only do employees count on their job for money which allows them to live a certain type of lifestyle their jobs also give them a sense of purpose. By empowering employees with the tools, information and benefits they need to do their job as well as promoting a close knit and teamwork oriented work place, you are only setting your business up for success. Employees respond better and work more efficiently if they feel like they have the resources and support to do their job appropriately. People in general will take pride in their work when they feel like they are a crucial part of the organization instead of just another "brick in the wall" so to speak. Employees are one of the most important stakeholders in a company and should be treated as such. Overlooking any stakeholder can be detrimental to the success of your business.
McCubbrey D.J. (2009) Business Fundamentals. Global Text Project.
