Situation 1 You want to start an online clothing store and need information about the size of the market for the marketing section of your business plan. From an online search, you found that Americans spent $18.3 billion online for apparel, accessories, and footwear last year and that the forecast for their spending on these items in the coming year is $22.1 billion. You have also researched publicly traded apparel companies, like GAP, to discover trends in online sales for these firms. Situation 2 You recently visited with a friend who knew you had taken a small business course when you attended college. During your visit, she made the comment, “I plan to open a business this summer. I won't be applying for a bank loan to fund this company, so I don't have a business plan. Do I need one?” Situation 3 John Martin and John Rose decided to start a new business to manufacture noncarbonated soft drinks. They believed that their location, close to high-quality water, would give them a competitive edge. Although Martin and Rose had never worked together, Martin had 17 years of experience in the soft drink industry. Rose had recently sold his firm and had funds to help finance the venture, but the partners still needed to raise additional money from outside investors. They spent almost 18 months developing their business plan. The first paragraph of their executive summary reflected their excitement: The “New Age” beverage market is the result of a spectacular boom in demand for drinks with nutritional value from environmentally safe ingredients and waters that come from deep, clear springs free of chemicals and pollutants. Argon Beverage Corporation will produce and market a full line of sparkling fruit drinks, flavored waters, and sports drinks that are of the highest quality and purity. These drinks have the same delicious taste appeal as soft drinks while using the most healthful fruit juices, natural sugars, and the purest spring water, the hallmark of the “New Age” drink market. With the help of a well-developed plan, the two men were successful in raising the necessary capital to begin their business. They leased facilities and started production. However, after almost two years, the plan's goals were not being met. There were cost overruns, and profits were not up to expectations. 1. Why is your research thus far in Situation 1 inadequate for what you need to know? 2. For Situation 1, what else might you do to find the necessary information? 3. In Situation 2, what would you need to know to answer your friend's question?
Situation 1
You want to start an online clothing store and need information about the size of the market for the marketing section of your business plan. From an online search, you found that Americans spent $18.3 billion online for apparel, accessories, and footwear last year and that the forecast for their spending on these items in the coming year is $22.1 billion. You have also researched publicly traded apparel companies, like GAP, to discover trends in online sales for these firms.
Situation 2
You recently visited with a friend who knew you had taken a small business course when you attended college. During your visit, she made the comment, “I plan to open a business this summer. I won't be applying for a bank loan to fund this company, so I don't have a business plan. Do I need one?”
Situation 3
John Martin and John Rose decided to start a new business to manufacture noncarbonated soft drinks. They believed that their location, close to high-quality water, would give them a competitive edge. Although Martin and Rose had never worked together, Martin had 17 years of experience in the soft drink industry. Rose had recently sold his firm and had funds to help finance the venture, but the partners still needed to raise additional money from outside investors. They spent almost 18 months developing their business plan. The first paragraph of their executive summary reflected their excitement:
The “New Age” beverage market is the result of a spectacular boom in demand for drinks with nutritional value from environmentally safe ingredients and waters that come from deep, clear springs free of chemicals and pollutants. Argon Beverage Corporation will produce and market a full line of sparkling fruit drinks, flavored waters, and sports drinks that are of the highest quality and purity. These drinks have the same delicious taste appeal as soft drinks while using the most healthful fruit juices, natural sugars, and the purest spring water, the hallmark of the “New Age” drink market.
With the help of a well-developed plan, the two men were successful in raising the necessary capital to begin their business. They leased facilities and started production. However, after almost two years, the plan's goals were not being met. There were cost overruns, and profits were not up to expectations.
1. Why is your research thus far in Situation 1 inadequate for what you need to know?
2. For Situation 1, what else might you do to find the necessary information?
3. In Situation 2, what would you need to know to answer your friend's question?
4. If your friend in Situation 2 decides to write a business plan, what advice would you give her?
5. In Situation 3, when looking into why the profits were not up to expectations, Rose discovered that Martin had been embezzling funds from the company. In addition to this problem, what other issues might have contributed to the firm's poor performance?
6. What could Rose have done in Situation 3 to reduce the chance of Martin's embezzlement? What are his options now?
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