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Entrepreneurship Theory And Practice

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Question:

Discuss about the Entrepreneurship Theory and Practice.
 
 

Answer:

Introduction

The report focuses on the business plan of an organization in Australia, which in turn includes the marketing, finance and operational strategies of the organization. The business plan allows the management of the organization to have a solid roadmap in terms of their operational activities in order to increase the sales of the products and services. The organization for which the business plan is created is ‘Kmart Australia’ which operates in the Australian industry of the discount retail stores. The organization focuses on providing the products to the customers at discounted price and in the process gaining a lot of loyal customers, which in turn increases the profits of the organization. The report provides a business plan which the management of Kmart Australia can follow in order to have successful business operations in the corresponding market along with increasing the customer base. The current discount retail store market in Australia provides ample opportunity to Kmart Australia to increase the customer base both in terms of its size and loyalty. The business plan provided in this report allows the management of the organization to have an effective and efficient business model in place for the Australian market, which in turn allows the organization to have a strong presence in the corresponding market. The business plan also focuses on having moderate to high net profit in the first two years of the implementation, which in turn will act as a base for the organization to build its revenue in the corresponding market. Kmart Australia provides various products to the customers at bargain prices (Drucker, 2014).

Market Analysis

Kmart Australia provides various products to the customers at bargain prices, which in turn attracts more customers as the products are of good quality. This section of the report analyzes the corresponding industry in Australia and various factors that can affect the business operations of Kmart Australia.

 

Industry trends

The data from various surveys and questionnaires have made it clear that the customers present in the Australian markets have a tendency to be attracted towards the products having good discounts on them. The market for the discount retail stores in Australia has a trend of customers making the positive purchase decisions very quickly for the discounted products. The market also experiences a trend of increased sales during various festivals and occasions like Christmas and Easter. The analysis of the market also reveals that the customers from various socio economic classes are influenced to a significant amount by the discounted prices on the products (Kuratko, 2016).

SWOT analysis

The SWOT analysis of the corresponding market provides an overview of the strengths and weaknesses of the market along with the opportunities and threats for the business operations of Kmart Australia.

Strengths

  • The stable economy of Australia allows the business operations to have a lot of financial backing.
  • The customers present in the corresponding market value the quality of the products a lot and the products sold by Kmart Australia are of high quality.
  • The cost of employment is quite low in Australia, which in turn allows Kmart Australia to have cost-effective business processes (Maritz, 2015).

Weaknesses

  • A large number of competitors in the discount retail industry in Australia make it difficult for Kmart Australia to sustain.
  • The organization doesn’t have a strong brand presence or brand image in the Australian industry of discount retail stores (Chun, 2013).

Opportunities

  • The Australian market provides a good opportunity for Kmart Australia to expand its business.
  • The growing economy of Australia allows Kmart to yield a lot of revenue out of the sales of the products.

Threats

  • The presence of a large number of organizations in the same industry affects the business processes of Kmart Australia in a negative way.
  • The customers in the discount retail industry in Australia change their buying behavior and trends frequently, which in turn is a threat to the business processes of Kmart Australia (Zielke, 2014).
  • The volatile market trend in the discount retailer industry is also a threat to the business processes of Kmart Australia, which in turn affects the overall sales of the products. The erratic changes in the market demand of the products affects the overall estimates of the products supply and profits of the organization.

Competitor analysis

Some of the organizations operating in the discount retail market in Australia are Big W, Crazy Clark’s, Dimmeys, Clint’s Crazy Bargains, Franklins, Go-Lo, Sam’s Warehouse and Target Australia. Except Target Australia, the other organizations aren’t very big brands with limited worldwide presence. This allows Kmart Australia to have Target Australia as the biggest competitors. The quality of the products sold by Kmart Australia is the biggest advantage it has over its competitors. The existing organizations in the discount retail stores industry aren’t known for their high-quality products. This in turn allows Kmart Australia to have a competitive edge in terms of the quality of the products. The existing competitors in the corresponding market also don’t focus a lot on providing promotional offers and deals on the premium products sold by the organization in order to attract more customers from the high socioeconomic class (Chun, 2013).

 

Target Market

The target market for Kmart Australia is the customers from low to middle socioeconomic classes, who focus a lot on the value for money for each of their purchase decisions. So, the people in the Australian societies with a low or medium standard of lifestyle and income will be targeted by the marketing strategies of the organization. The socioeconomic class of the customers is the biggest segmentation criteria for the marketing strategy of Kmart. Other than the socioeconomic class, the marketing strategy of Kmart will focus on the people who buy similar products frequently (Schaper, 2014). The marketing strategy of Kmart will determine the buying behavior of the customers through online and offline surveys and questionnaires. The efficient segmentation of the market will allow Kmart Australia to have effective marketing strategy for various segments of the market. For example, the marketing strategy of the organization will target the upper-class customers through premium products with discounts, whereas it will target the customers from the low to middle class customers through heavily discounted standard products (Choi, 2015).

Marketing

The products sold by Kmart Australia are discounted products with a wide variety. This in turn will allow the customers of the organization to have a wide range of options for their purchase decisions. The retail stores of Kmart Australia sell a wide range of discount merchandise including greeting cards, toys, dishware, household goods, and candies along with products from a large number of categories. The products are procured from various manufacturers like General mills, American Greetings and Procter & Gamble (Reboud, 2014).

The marketing strategy will focus on positioning the organization as a brand that provides everyday use products with bargain prices. This in turn will allow the customers to see the brand as a reliable organization providing high quality products. So, the marketing strategy of Kmart Australia will focus on bargain price and high quality of the products (Morselli, 2014).

The marketing strategy of Kmart Australia will also focus on the promotional events and offers on the products. The organization will provide free home delivery offers on the purchase of the products with minimum transactional value. The organization will also offer promotional discounts on the premium products during special occasions and festivals in order to attract more customers. The marketing strategy of the organization will focus on setting a brand image of an organization with the lowest price of the high-quality products in the corresponding market (Dukes, 2014).

Financial Plan

This section of the report provides a financial plan for the business processes of Kmart Australia along with the budget, costs and logical expenses. Some of the key focus points of the financial plan are mentioned below.

  • 15% of the sales to be invested in marketing
  • Moderate growth with steady cash flow
  • NOV projections to be used for cash investments to ensure maximum return and limited risks
  • Residual profits to be invested in the financial markets instead of company expansion (Dukes, 2015)

Break-even analysis

This section of the report provides an overview of the break-even analysis for Kmart Australia in the discount retail store industry. This analysis considers the average costs including fixed costs, average variable costs and average sales to provide the income per month to achieve break-even (Schaper, 2016).

Monthly revenue break-even: $30,000

Average variable cost: 50% (assumed)

Estimated monthly fixed cost: $15,000

 

Projected cash flow

Kmart Australia operates in the corresponding market as a medium risk organization with a steady cash flow. Fifty percent of the cash above a certain limit is regularly invested in the financial market in order to decrease the opportunity cost of cash held (Kirzner, 2015).

PRO FORMA CASH FLOW

YEAR 1

YEAR 2

YEAR 3

Cash Received

     

Cash received from operations

     

Cash received from sales

$360,500

$395,500

$450,500

SUBTOTAL CASH FROM OPERATIONS

$360,500

$395,500

$450,500

Additional received cash

     

Taxes

$0

$0

$0

New borrowing

$5,000

$0

$0

Additional liabilities (interest-free)

$0

$0

$0

Additional liabilities (long term)

$0

$0

$0

Current assets sales

$0

$0

$0

Long-term assets sales

$0

$0

$0

Received new investments

$1,000

$2500

$5000

SUBTOTAL RECEIVED CASH

$366,500

$398,000

$455,500

Expenditures

Year 1

Year 2

Year 3

Operational expenditures

     

Spent cash

$160,500

$187,500

$165,000

Bills

$220,000

$215,000

$205,000

SUBTOTAL SPENT ON OPERATIONS

$380,500

$402,500

$370,000

Taxes

$0

$0

$0

Principal repayment of borrowing

$500

$1,500

$2,000

Liabilities principal repayment

$0

$0

$0

Current assets purchase

$0

$0

$0

Long-term assets purchase

$0

$0

$0

Dividends

$0

$0

$0

SUBTOTAL CASH SPENT

$381,000

$351,500

$372,000

Net cash flow

($14,500)

($6,000)

$83,500

 

Projected profit and loss

This section of the report provides an estimate of the profits and losses of the business processes of Kmart Australia as per the cash flow and expenditures. As per the estimates, the costs of various business processes will go down, which will allow the organization to realize profits out of the business processes (Hassan, 2015).

PRO FORMA PROFIT AND LOSS

YEAR 1

YEAR 2

YEAR 3

Sales

$360,500

$395,500

$450,500

Direct costs

$180,250

$197,750

$225,250

Other costs

$0

$0

$0

TOTAL COST OF SALES

$180,250

$197,750

$225,250

Gross margin

$180,250

$197,750

$225,250

Gross margin %

50.00%

50.00%

50.00%

Expenses

     

Payroll

$140,500

$150,000

$160,500

Other expenses

$10,000

$0

$0

Depreciation

$1,250

$1,250

$1,250

Rent

$30,000

$0

$0

Utilities

$4,500

$0

$0

Insurance

$4,000

$0

$0

Payroll taxes

$21,075

$22,500

$24,075

Total operating expenses

$211,325

$173,750

$185,825

Gross profit

($31,075)

$24,000

$39,425

Taxes

$0

$5,760

$9,462

Net profit

($31,075)

$18,240

$29,963

Net profit %

-8.61%

4.61%

6.65%

Critical Risks

This section of the report provides an overview of the critical risks faced by the business operations of Kmart Australia in the corresponding market.

  • The existing organizations in the market of operation has a presence and position of their brands as good discount retailers in the minds of the people in the corresponding market. This in turn is a risk for Kmart Australia to position itself as a better discount retailer and to have a competitive advantage over the organizations which are already operating in the same market for quite some time (Carland, 2015).
  • The frequent promotional offers and deals on the premium products sold by Kmart Australia increases the risks of incurring heavy losses in order to gain competitive advantages over other organizations. The marketing strategy focuses on the promotional offers and deals on the premium products sold by the organization in order to attract more customers in the corresponding market. This in turn could lead to heavy losses that might affect the business processes of Kmart Australia negatively (Bae, 2014).
  • Physical risks to the retail store and products sold in the retail stores can be considered as the critical risks to the business processes of Kmart Australia. These physical risks include various types of risks starting from natural disasters to intentional threats like theft (Gabler, 2017).
  • The volatile buying behavior and trends in the corresponding market is a significant critical risk to the business processes of Kmart Australia. This in turn will require the marketing strategy of Kmart Australia to put more focus on the analysis of the requirements and buying behavior of the customers in the corresponding market of operation. The frequent gathering of the feedbacks and opinions of the customers will help Kmart Australia to gain insights into the market trends and buying behavior of the customers in the corresponding market (Hendrickson, 2015).
 

References

Bae, T.J., Qian, S., Miao, C. and Fiet, J.O., 2014. The relationship between entrepreneurship education and entrepreneurial intentions: A meta?analytic review. Entrepreneurship Theory and Practice, 38(2), pp.217-254.

Carland, J.C., Carland, J.W. and Stewart, W.H., 2015. Seeing what's not there: The enigma of entrepreneurship. Journal of small business strategy, 7(1), pp.1-20.

Choi, R.I., 2015. Structural Relation Model on Customer Satisfaction of Biggest Discount Retailers. Journal of the Korea Society of Computer and Information, 20(2), pp.221-229.

Chun, H., Heo, S. and Lee, Y., 2013. Competition in Large Discount Retailers. Sogang University Working Paper.

Drucker, P., 2014. Innovation and entrepreneurship. Routledge.

Dukes, A., Geylani, T. and Liu, Y., 2014. Dominant retailers’ incentives for product quality in asymmetric distribution channels. Marketing Letters, 25(1), pp.93-107.

Dukes, A.J. and Geylani, T., 2015. Dominant retailers and their impact on marketing channels.

Gabler, C.B., Landers, V.M. and Reynolds, K.E., 2017. Purchase decision regret: Negative consequences of the Steadily Increasing Discount strategy. Journal of Business Research.

Hassan, S., Bucifal, S., Drake, P. and Hendrickson, L., 2015. Australian geography of innovative entrepreneurship. Research Paper, 3, p.2015.

Hendrickson, L., Bucifal, S., Balaguer, A. and Hansell, D., 2015. The employment dynamics of Australian entrepreneurship. Research Paper, 4, p.2015.

Kirzner, I.M., 2015. Competition and entrepreneurship. University of Chicago press.

Kuratko, D.F., 2016. Entrepreneurship: Theory, process, and practice. Cengage Learning.

Maritz, A. and Donovan, J., 2015. Entrepreneurship and innovation: Setting an agenda for greater discipline contextualisation. Education+ Training, 57(1), pp.74-87.

Morselli, D., 2014. Entrepreneurship teaching in vocational education: a comparative study in Italy and Australia using the Change Laboratory (Doctoral dissertation).

Reboud, S., Mazzarol, T. and Soutar, G., 2014. Low-tech vs high-tech entrepreneurship: a study in France and Australia. Journal of Innovation Economics & Management, (2), pp.121-141.

Schaper, M.T., Volery, T., Weber, P.C. and Gibson, B., 2014. Entrepreneurship and small business.

Schaper, M. ed., 2016. Making ecopreneurs: developing sustainable entrepreneurship. CRC Press.

Zielke, S., 2014. Shopping in discount stores: The role of price-related attributions, emotions and value perception. Journal of Retailing and Consumer Services, 21(3), pp.327-338.

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