Identify the major costs of the following three ways to start a new business. Start-up Business purchase Franchise What do you think is best way to start up this business (creating a new business, buying an existing business or franchising a business)? Why?
Identify the resources, capabilities and core competencies that would be needed for that business.
Resources: Asset that an organization can use when formulating or implementing a strategy.
- Tangible: people, money, equipment, location, supplies
- Intangible: knowledge, patent, trademark, brand, reputation, training system
Capabilities: An organizational and management skill necessary to orchestrate a diverse set of resources and deploy them strategically. This is an intangible.
Core competencies: A unique strength within an organization that allows it to differentiate its products and services from those of its competitors, creating higher value or lower costs for its customers and itself.
Identify the major costs of the following three ways to start a new business.
Start-up
Business purchase
Franchise
What do you think is best way to start up this business (creating a new business, buying an existing business or franchising a business)? Why?
These questions involve several fundamental concepts in business and entrepreneurship. The second question focuses on understanding the major costs associated with three common ways of starting a business. The third question explores the decision-making process when selecting the most appropriate approach to starting a business. These concepts are explained below:
Resources: Resources are the assets and inputs that an organization can use when formulating or implementing its business strategy. They can be categorized into tangible and intangible resources. Tangible resources include physical assets like equipment, facilities, and supplies, while intangible resources include knowledge, patents, trademarks, brand reputation, and human capital (skills and expertise).
Capabilities: Capabilities are the organizational and management skills and competencies necessary to orchestrate and effectively utilize the diverse set of resources. Capabilities are intangible and represent an organization's ability to perform specific activities and tasks efficiently and effectively.
Core Competencies: Core competencies are unique strengths within an organization that provide a competitive advantage. These competencies allow the organization to differentiate its products or services from competitors, creating either higher value for customers or lower costs for the organization itself. Core competencies are a source of sustainable competitive advantage.
Start-up: Starting a business from scratch involves costs such as initial capital for product development, operating expenses (rent, salaries, utilities), legal and regulatory fees, marketing expenses, inventory costs, technology and software investments, and working capital.
Business Purchase: Buying an existing business requires costs such as the purchase price, due diligence expenses, legal and accounting fees, inventory and asset acquisition costs, transition costs, and employee retention or severance costs.
Franchise: Starting a franchise involves costs like the franchise fee paid to the franchisor, ongoing royalties based on sales, initial investments in leasehold improvements and equipment, marketing and advertising fees, supply chain costs, training expenses, and potential renewal or termination fees.
Goals: The entrepreneur's goals and objectives for the business, such as financial returns, control, and personal fulfillment.
Resources: The availability of financial resources, expertise, and experience.
Risk Tolerance: The level of risk the entrepreneur is willing to take on, as different approaches carry varying degrees of risk.
Industry and Market: The specific characteristics of the industry and market in which the business operates, which may influence the choice.
Control vs. Established Systems: Consideration of whether the entrepreneur prefers to have full control over the business or is open to following established systems and guidelines.
Timeframe: The desired timeline for achieving profitability and success.
Adaptability: The entrepreneur's willingness to adapt to existing business processes, culture, and customer relationships (in the case of purchasing an existing business or franchising).
Ultimately, the choice between starting a new business, buying an existing one, or franchising should align with the entrepreneur's goals and circumstances, and it should be based on a thorough assessment of the factors mentioned above. Each approach has its own advantages and disadvantages, and the decision should be made after careful consideration of these factors.
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