Essay on Managerial Planning
Number of words: 2299
Barriers to entry are a variety of characteristics that make it difficult for new businesses to enter a market. As a result, the market becomes less pleasant and less comparable. The connection between entrance barriers and market competitiveness is that the more entry obstacles there are, the less competitive the market is.Aggregate planning becomes easy when a business’s demand for its products or services is steady throughout time or its assets are infinite. Forecasted demand is translated into resource needs, the facilities required to satisfy demand are purchased and sustained across the plan’s timeframe, and minor changes in demand are managed using overtime or under time. When demand changes across the lead time, the aggregated planning process becomes difficult. Seasonal demand trends can be handled in this situation by;
- Constant-rate production with stockpiles to absorb changes in demand.
- Hiring and firing employees to meet the need
- Keeping resources available in the event of significant demand.
- Working hours might be increased or decreased.
- Work is subcontracted to other kinds.
- Using part-time employees
When a firm employs one of these managerial strategies, it is considered to have a pure demand-satisfaction approach. When a firm employs two or more of these strategies, it is considered a mixed strategy. When determining a market to enter, the entrepreneur must examine many things. The financial requirements and profitability of the business and other hazards that the firm may face are some of the most significant variables to consider. Starting a new business, purchasing an existing firm, or purchasing a new franchise are three possibilities for entrepreneurs when selecting where to invest. However, making this selection is difficult since one must weigh the benefits and drawbacks of each option before deciding on the best option for them. The following is an assessment of each of the above-mentioned potential projects.
Starting a new business
Starting a new business entails creating a new business entity that did not previously exist and also did not have a market share. When starting a new firm, one must select what items to make (Scarborough & Cornwall, 2019). In this instance, performing extensive business research on the size of the market and the existing market gap is critical. Understanding the market allows one to choose the type of product to join the market and the one with which such a person can compete competitively. Regardless, there are benefits and drawbacks to starting a new firm over the other two alternatives accessible to an entrepreneur. The following are the benefits and drawbacks.
Advantages of starting a new business
Setting up a business helps the entrepreneur select the best market for their products and the most favorable degree of competition. Entrepreneurs typically discover gaps in the market and launch such items (Burns, 2016). In this instance, the firm has a good chance of succeeding since it provides a service that the market lacks.
Furthermore, the entrepreneur can build a competitive edge from the moment the new firm enters the market. The plan created at this point may assist the firm in effortlessly growing in the market and remain profitable for an extended time. The fact that a market gap decides the product utilized by the business to enter the market helps the firm quickly join the market and expand its client base. Starting a new business allows you to choose the best option for your company that is also compatible with the contemporary business environment. Coming up with a new business allows the entrepreneur to plan how the business would plan for future changes in its operations (Tukker & Tischner, 2017). In the process, the entrepreneur leaves gaps for modernization to attach. This makes it easy for the business to make any implementation in its operation and also in its way of operation. An entrepreneur, therefore, can predict the future changes that the business may go through and prepare early enough to accommodate these changes. Being able to plan for the future allows the business to have a sense of focus and to remain competitive in the market. The entrepreneur can develop the business in the best way that suits them.
Buying an existing business has the disadvantage of inheriting any negativity associated with the business. However, when one starts the business from the beginning, they can structure it in the best way that suits it and avoid any negativity that may destroy the business’s reputation in the market (Biech, 2019). Therefore, the business can develop a good history from its beginning and maintain the same during its operations in the market. Also, the new business can identify the most suitable suppliers and develop the best inventory for itself. This makes it easier for the operation of the business.
Disadvantages of starting a new business
It is always not easy to start a new business and to enter the market. To begin with, the new business may take longer to adapt to the market and earn back the initial capital. Sometimes the level of competition is very high for the new business to enter into the market. Thus it may take longer than expected to earn back the initial capital invested. In addition, if the business is not well managed, it is also likely to perish even before it succeeds in the market.
Entrepreneurs who come up with a new business, therefore, have the task of ensuring that they manage it carefully to prevent it from collapsing before it gains market share. Also, the new business must have a great strategy in reaching the market to win new consumers. The products also offered by the new business must be of high quality for the business to attract consumers.
A new business has no clientele by the time it gets to the market. When an entrepreneur starts a new business, it normally does not have a specific customer but has a target clientele (Biech, 2019). This limits the chances of the business succeeding in the market since it has to start from the bottom by winning consumers and convincing them that its products are the best in the market. In the process, it may be extremely hard for the business to gain the consumers’ confidence, and it may take time to achieve this hence remaining for long before it gets to the normal operation. In addition, the business may be required to use free samples and gifts to the consumers to convince them that the products are unique, which are expensive ways of advertisement, hence spending a lot.
By the time of starting the new business, it normally does not have inventory on its shelves. The business premises are normally empty, and it is required to spend a lot while buying the inventory. In addition, the business also does not have suppliers in place, and therefore, it is also required to identify them and strike a deal on how the products will be provided (Moratis & Cochius, 2017). Also, the entrepreneur has the task of choosing the most suitable supplier as they need to evaluate the quality of the products available in their stores before choosing the supplier. Determining the first supplier is crucial to the business as in case of poor products, the business may collapse. Therefore, starting a new business has no assurance that it will succeed in the market. The entrepreneur must remain very keen in the market while choosing the best supplier for the company.
Buying an existing business
The decision to buy an existing business is never an easy task, but when one settles in its decision, one gets an opportunity to become an entrepreneur without starting a business from scratch. Many people consider buying an existing business as one of the best ways of gaining easy access to the market without struggling much in making a name for the business, which most of the time takes time. This method of entering the market is common because it allows the entrepreneur to skip some of the challenging moments of coming launching a business anew in the market. However, the challenge of getting a business on sale, negotiating, and reaching an agreement is not an easy one, and hence, it is associated with some benefits and challenges.
Advantages of buying an existing business
An existing business already has a clientele, and it is already established. Buying an existing business relieves the entrepreneur of the challenge of looking for potential customers and establishing the business since it is already developed (Barringer, 2015). The buyer’s responsibility is to maintain the existing customers and attract others to increase the performance of the business rather than looking for new customers as the case of starting a new business. The business has also proven the suitability of its place of operation and has made a name for itself in operating in such a place. The buyer, therefore, will not incur many costs while advertising the business since the available consumers are aware of the business’s existence.
The buyer gets a business that has a ready inventory and suppliers. The business is given to the buyer already has a ready inventory on its shelves. In addition, the business has already identified its suppliers whose reliability is proved. Therefore, the business does not have to waste time looking for new suppliers in the market. This gives the business the chance of starting its operation as soon as possible after the transaction is completed since everything else is in place. In addition to this, the business has equipment in place, which makes it easy for the buyer to continue with operations immediately after purchasing it.
The new entrepreneur receives a business with a good history over the past and no need to develop a new history for the business. After starting a new business, the entrepreneur has the task of creating a history to improve its competitiveness in the market. However, buying an existing business allows one to get a business that has already made a name for itself in the market, thus giving it all the important competitive advantage it may need. In addition to this, the buyer can add more products to the company since the company has a ready market. It is also possible for the entrepreneur to open other branches with the same business names since the business already has made a name in the market. Hence, opening another outlet will enable it to compete favorably in the market.
Disadvantages of buying an existing business
Despite the advantages associated with buying an existing business, there are also several disadvantages associated with this. Some of the existing business has some ill history. When the new buyer gets the business, they inherit the bad history known for the business. Therefore, the operation of the new buyer may also be hindered by the negativity developed by the seller. The business, therefore, may not have direct success in the market. Due to this reason, buyers of such businesses find it important to change its name before they can venture into its actual operation. Changing the name may require the buyer to start advertising their business afresh again, which may be costly to the business, considered that the buyer also spends a lot in buying the business.
The business buyer may also be forced to inherit the employees, who are not part of the assets owned by the business. In this case, the buyer may find it hard to handle the employees used to being managed by different people. This may affect the performance of the business for a while before the employees adapt to the new management.
Also, the precedence set by the previous owner may not be the most suitable for the new owner (Barringer, 2015). This may be due to the existing standards being not compatible with modernization, making it expensive for the new owner to change the management of the business. If the business owner wants to change the business’s operations, they may be required to change many of how the business operates hence making this very expensive.
The cost of buying the business may be very high and may become a burden to future profits. The business may take long before it earns back the amount invested in buying the new business. This may become a burden to the profit made by the business and hence becoming important to consider the cost of buying an existing business to starting a new business. In addition, the valuation of the available inventory may also involve obsolete merchandise and slow-moving, which may become an extra burden to the buyer. It is, therefore, not easy to decide the value of the available inventory between the buyer and the seller. Changing the owner may also require a lot of documentation and legal processes, which may take time or even become costly to the buyer.
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