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National Systems Of Entrepreneurship: Measurement Issues Add in library

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Questions:

1. Craft a brief (1-2 pages) strategy for a business concept that would directly compete with the small business you selected. Explain the rationale for the strategy in detail.

2. Determine if it would make more sense to open the new business you describe or to purchase the existing business you selected. Explain your reasoning.

3. Discuss the most appropriate form of ownership for your new business (assuming your current financial situation).

4. Outline a business plan for your business. Visit https://www.sba.gov for tools and templates. ?

 

Answers:

Introduction:

The cafe and restaurant sector of USA is occupied by both small as well as large     organisations. However demand of customers in this market is still high. It indicates   that    opening a cafe in USA market will be profitable. The current paper contains discussion on    business strategies for running a store in USA market. The paper also contains discussion    on   business strategies of 12   Corners coffee, a New   York   City based   cafe. However the    paper also contains outline of   the   business   plan   for    running   a   cafe    in    New York City.   

1. Strategy for business concept to compete with chosen organisation:

12 Corners Coffee   is one of   the   most   visited cafes   in   New York City. Management    of   the   organisation gives importance on providing innovative product to the customers. However the   management offers   only coffee   based   products   to customers. Customers    of    the   new   business can   be   provided   with   new   deserts, cakes and   pastries. The     visitors of 12   Corners Coffee do not get opportunities for outdoor seating. In new   business,      the     visitors    will   also   be    provided   with   opportunities   for   outdoor    seating.

Rationale for   the strategy:  The strategy   of   introducing new deserts and   cakes   will   be   effective for attracting   children to   the cafe. However the opportunity for   outdoor seating will   also   be   effective   to   attract all    types     of visitors. 

2. Opening   new   business/ purchasing existing business:

As the cafe and restaurant industry of New York City is highly profitable, competition     among   organisations is also   high (Bosma, 2013). The industry comprises   of   both   small cafes as well as   large multinational organisations. Starting a new business in this industry may not be effective to earn high profit as availability of substitute products is also   high (Bosma, 2013). 12 corners coffee is one of the most popular cafes in New York City. Acquiring an organisation will reduce the cost of setting new infrastructure (Chwolka & Raith, 2012). However management of the   new organisation will be able to utilize infrastructure   of acquired business (Decker, Haltiwanger, Jarmin & Miranda, 2014). 

Form of ownership:

Analysis on strategy of new business   indicates that   the management is giving    importance   on acquiring 12 Corners Coffee. However partnership with existing owners of the     organisation   will   be    developed to run    the   cafe. As   level of competition   in   market    is   very    high, retaining customers   will   be difficult. Involving several partners with    the   business will enable the management to reduce risk (Hechavarria, Renko & Matthews, 2011). Apart from this development of   partnership   will    also   be    effective   to lower   the   start up costs (Lind, 2012).It   is evident that   development    of   partnership   will be more suitable   to   run    the   business. 

Outlining    Business   plan:

Cover page:

Company Name:  12 Corners Coffee

Name of Owner:

City:  New York City

State:   New York

Zip code:  10013

Executive summary:

Company: 12 Corners Coffees

Products   and services: Coffee, Espresso, Latte, Cappuccino and other drinks

Audience and target customer: Young people, working professionals, Teen agers, family

Future of business and industry: Although competition is very high   in small cafe   market    in New York City, demand for such cafes is also high (Ács, Autio & Szerb, 2014). It indicates that running a cafe in   New York City will be   profitable.

 

Company Description:

Key employees of business: CEO (I), store   managers, cooks

Mission statement: We offer customers with extra ordinary cafe experience along with       superior   products

Details about product and services: Currently we offer coffee, espresso, latte, ice-coffee    and other drink to customers. In future we will   offer cakes and pastries to   other customers.

Qualities for success: We offer fresh products to customers. However we also give    importance on offering innovative products to visitors.

Market research:

Description of industry: The cafe industry of New York City is highly competitive.    Several small coffee shops such as Abraco ,  Blue Bottle  Coffee,   Cafe  Grumpy along   with   large   multinational cafe  chains such  as  Starbucks (Mariotti & Glackin, 2013, Román, Congregado & Millán, 2013).

Description of larger customer:  At 12 corners coffee, mainly teen agers and young adults are focused.  However the families and children will also be given importance.

Identification of competitors: The competitors of 12 Corners Coffee   are both small   firms as well as large multinationals. Competitors of the Cafe include Abraco, Blue Bottle Coffee, Cafe Grumpy, Joe the Art of Coffee etc. However the organisation also needs to compete    with large multinational organisations such as Starbucks.

Competitive advantages:  At 12 Corners Coffee, the customers are offered with fresh and    innovative products. Along with traditional coffee, espresso and ice coffee, the customers of   12 Corners Coffee   is also   offered   with   innovative products such as Ice Pumpkin Pie Latte. Offering customers with innovative products of high quality enables 12 Corners Coffee   to remain competitive in   market.  

.3. Legal requirements  impacting  company   and   business:

Product / Service line:

Detailed    description   of   product:    At 12 corners   coffee   currently     products   made   from   coffee such as   latte, cappuccino, espresso and   ice coffee are sold. These    products   are   manufactured    at the   cafe. In   future customers of    the   cafe will also   be   provided with   frozen desserts, cakes and pastries. The   products   which are   going to be   included in menu of 12 corners coffee will be prepared by chefs of the cafe.  Raw materials   required for making   the   products will be supplied by   local   suppliers.

Pricing structure: Currently price   of   the    products   are   kept    low    so    that    sale   of    the   product among target customers increase. 

Meeting needs of customers: At 12 Corners Coffee, the management ensures that   customers are being provided with   relaxing environment. The management will also ensure   that   the   customers are getting fresh and   high quality products.

Benefits of product and service:  The products offered by 12 Corners Coffee is available at lower prices. However the cafe also offers innovative drinks to customers.  The customers    are   benefitted as    they    get   fresh and   tasty   drinks at   lower   costs.

Competitive   advantage: The   cafe industry of New York City is mainly   occupied    by   several small and   large cafes (Renko, Kroeck & Bullough, 2011). The   management of 12 Corners coffee gives   importance   on introduction of new products. It enables the   organisation   to   remain competitive in   market.

Current development stage: The organisation is currently operating   in cafe industry   of   New   York   City. However the   new   products   are launched on experimental   basis.    If    these products   are accepted by customers, cafe management will introduce   these   products   on   larger   scale.

Intellectual property rights: As the cafe industry of New York City is highly competitive, management of 12 Corners Coffee will give importance on protecting their unique recipes   such as Ice pumpkin pie latte.

Research and development activities: The management will give importance on      introducing   new items in menu. The   research   and   development activities will   be   based   on    making   new drinks from coffee.

Marketing and sales:

Plans   to grow: Although currently   only coffee   based    products    are   available    at    12   Corners coffee, later    the   management   will   introduce new desserts. Currently only   two   stores are available in New York City. Number of cafes   will also   be    increased later.   Size   of    the   cafe will    be increased so that sitting arrangements can be done outside    of   the   restaurant   also.

 

Communication strategy with customers:

Financial projection:

The financial projection focuses on the company’s financial position. This can be done by analyzing the financial statements, which involve the balance sheet statements, income statements and cash flow statements.  It helps in explaining the financial stability of the company, which can be measured, from its profit position, capital structure, and asset liability proportion and cash availability.

Profit and loss analysis:  

Income Statement (All amounts in thousands)

Particulars

Year 1 $

Year 2 $

Year 3 $

Sales

 $         12,000

 $         16,000

 $         20,000

CGS

 $           5,000

 $           7,000

 $           8,000

G P

 $           7,000

 $           9,000

 $         12,000

Operating Expenses

 $           4,200

 $           5,300

 $           6,400

Salary Expenses

 $              600

 $              800

 $              900

Office Expenses

 $              600

 $              700

 $              800

Maintenance Expenses

 $              500

 $              700

 $              800

Rent Expenses

 $              700

 $              900

 $           1,200

Payroll Expenses

 $              500

 $              600

 $              700

Accounting Expenses

 $              600

 $              700

 $              800

Legal Expenses

 $              400

 $              500

 $              600

Telephone Charges

 $              300

 $              400

 $              600

Operating Income/ EBIDT

 $           2,800

 $           3,700

 $           5,600

Depreciation and Amortization

 $              600

 $              800

 $           1,000

EBIT

 $           2,200

 $           2,900

 $           4,600

Interest

 $              300

 $              400

 $              500

EBT

 $           1,900

 $           2,500

 $           4,100

Tax

 $              200

 $              500

 $              800

EAT

 $           1,700

 $           2,000

 $           3,300


CGS is the cost of goods sold. GP is the gross profit.

EBIDT is earnings before interest, depreciation and tax. EBIT is earnings before interest and tax. EBT is earnings before tax. EAT or PAT is earnings after tax or profit after tax. PAT is the net profit.

 

Cash flow projection:

Cash flow (All amounts in thousands)

Particulars

Pre Startup EST

Year 1

Year 2

Year 3

Total Item EST

Cash on hand

 $              4,200

 $         4,800

 $         4,850

 $         4,350

 $             3,300

Cash Receipts

         

Cash Sales

 $              2,300

 $         2,400

 $         2,500

 $         2,600

 $             2,700

Cash Collections

 $              1,800

 $         1,900

 $         2,000

 $         2,100

 $             2,200

Loan

 $              1,700

 $         1,800

 $         1,900

 $         2,000

 $             2,100

Total Cash Receipts

 $              5,800

 $        6,100

 $        6,400

 $        6,700

 $            7,000

Total Cash Available

 $            10,000

 $      10,900

 $      11,250

 $      11,050

 $          10,300

Cash Paid Out

         

Purchases

 $                 500

 $            550

 $            600

 $            650

 $                700

Gross Wages

 $                 200

 $            250

 $            300

 $            350

 $                400

Supplies

 $                 300

 $            350

 $            400

 $            450

 $                500

Maintenance

 $                 500

 $            550

 $            600

 $            650

 $                700

Advertising

 $                 400

 $            450

 $            500

 $            550

 $                600

Legal & Accounting

 $                 400

 $            450

 $            500

 $            550

 $                600

Insurance

 $                 300

 $            350

 $            400

 $            450

 $                500

Tax

 $                 200

 $            250

 $            300

 $            350

 $                400

Interest

 $                 300

 $            350

 $            400

 $            450

 $                500

Rent

 $                 200

 $            250

 $            300

 $            350

 $                400

Telephone

 $                 200

 $            250

 $            300

 $            350

 $                400

Subtotal

 $              3,500

 $        4,050

 $        4,600

 $        5,150

 $            5,700

Loan payment

 $                 700

 $            800

 $            900

 $         1,000

 $             1,100

Other Costs (Startup)

 $                 400

 $            500

 $            600

 $            700

 $                800

Capital Purchase

 $                 600

 $            700

 $            800

 $            900

 $             1,000

Total Cash Paid Out

 $              5,200

 $        6,050

 $        6,900

 $        7,750

 $            8,600

End cash Value

 $              4,800

 $         4,850

 $         4,350

 $         3,300

 $             1,700


Projected balance sheet

 

Balance Sheet (All amounts in thousands)

Particulars

Start Date Value

End Date Value

Cash in Bank

 $          4,200.00

 $        3,300.00

Assets

   

Inventory

 $             500.00

 $           400.00

Deposits

 $             800.00

 $           700.00

Accounts Receivables

 $             800.00

 $           500.00

Total Current Assets

 $          2,100.00

 $        1,600.00

     

Machines & Equipment

 $          2,000.00

 $        1,500.00

Land & Buildings

 $          2,000.00

 $        1,700.00

Total Fixed Assets

 $          4,000.00

 $        3,200.00

Total Assets

 $          6,100.00

 $        4,800.00

     

Liabilities & Equity

   

Interest Payable

 $             300.00

 $           200.00

Current Debt

 $             800.00

 $           600.00

Accounts Payable

 $             600.00

 $           400.00

Current Liabilities

 $          1,700.00

 $        1,200.00

     

Bank Loans

 $          1,000.00

 $           800.00

Long term Borrowings

 $             800.00

 $           700.00

Other Debts

 $             800.00

 $           600.00

Fixed Liabilities

 $          2,600.00

 $        2,100.00

Total Liabilities

 $          4,300.00

 $        3,300.00

Equity

 $          1,800.00

 $        1,500.00


4. Breakeven analysis:
 

Particulars

Fixed Costs

Variable Costs %

CGS

 $         2,500

50%

Raw Materials

 $            500

20%

Direct Labor

 $            300

30%

Salary Expenses

 $            300

50%

Office Expenses

 $            150

75%

Maintenance Expenses

 $            150

70%

Rent Expenses

 $            280

60%

Payroll Expenses

 $            100

80%

Accounting Expenses

 $            300

50%

Legal Expenses

 $            200

50%

Telephone Charges

 $            180

40%



 

References

12cornerscoffee.com,. (2015). 12  CORNERS  COFFEE. Retrieved 8 July 2015, from https://www.12cornerscoffee.com/location.html

Ács, Z., Autio, E., & Szerb, L. (2014). National Systems of Entrepreneurship: Measurement issues and policy implications. Research Policy, 43(3), 476-494. doi:10.1016/j.respol.2013.08.016

Bosma, N. (2013). The Global Entrepreneurship Monitor (GEM) and Its Impact on Entrepreneurship Research. FNT In Entrepreneurship, 9(2), 143-248. doi:10.1561/0300000033

Chwolka, A., & Raith, M. (2012). The value of business planning before start-up — A decision-theoretical perspective. Journal Of Business Venturing, 27(3), 385-399. doi:10.1016/j.jbusvent.2011.01.002

Decker, R., Haltiwanger, J., Jarmin, R., & Miranda, J. (2014). The Role of Entrepreneurship in US Job Creation and Economic Dynamism †. Journal Of Economic Perspectives, 28(3), 3-24. doi:10.1257/jep.28.3.3

Hechavarria, D., Renko, M., & Matthews, C. (2011). The nascent entrepreneurship hub: goals, entrepreneurial self-efficacy and start-up outcomes. Small Bus Econ, 39(3), 685-701. doi:10.1007/s11187-011-9355-2

Lind, P. (2012). Small business management in cross-cultural environments. New York: Routledge.

Longenecker, J. (2012). Small business management. Mason, OH: South-Western Cengage Learning.

Mariotti, S., & Glackin, C. (2013). Entrepreneurship. Upper Saddle River, N.J.: Pearson/Prentice Hall.

Renko, M., Kroeck, K., & Bullough, A. (2011). Expectancy theory and nascent entrepreneurship. Small Bus Econ, 39(3), 667-684. doi:10.1007/s11187-011-9354-3

Román, C., Congregado, E., & Millán, J. (2013). Start-up incentives: Entrepreneurship policy or active labour market programme?. Journal Of Business Venturing, 28(1), 151-175. doi:10.1016/j.jbusvent.2012.01.004

Thurik, R. (2014). Entrepreneurship and the business cycle. IZA World Of Labor. doi:10.15185/izawol.90

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