Question

In: Economics

The biggest challenges throughout the planning process is determining start up costs, determining inventory and determining...

The biggest challenges throughout the planning process is determining start up costs, determining inventory and determining the location of the store. The start up costs are a big challenge due to there being a number of variables such as how much inventory is smart to start off with, how much to pay in utilities (can easily fluctuate), and how much to pay in advertising the store to customers. Determining inventory is also a challenge because orders must be placed to keep up with inventory and determining a schedule for that is based on revenue, but during the planning process revenue can only be projected and not consistently known. Determining the location of the store is also a challenge, it is an extremely important decision that will make or break the success of the store. Calculating how many customers are nearby, as well as type of income (lower-class, middle-class, upper class, etc.) is also challenging.

The growth potential of my business is tremendous. I view after a few months, for there to be a solid foundation for revenue. The first few months may be tough because the public either doesn’t know about the store, or don’t have a trust built with the store yet. Once I am established, I see my store serving the community with well needed convenience products and establishing a

casual customer base. Once I’m established after a few months, I expect revenue to climb and stabilize. After a few years I expect to be financially in a great position. Some profits can be diverted to upgrades for the store, improving customer experience (maybe experiment with new and diverse products). After a few years, I see myself expanding by buying other Circle K franchises to open or try to buy established stores from owners. This would require saving up a lot of the profit but in the long run it is a great investment in my opinion.

questions

1.This entrepreneur mentioned some big challenges he/she would face when starting this business. Do you agree? Explain your decision

2.Evaluate the growth potential of the business. Would you agree with this entrepreneur’s vision? Why or why not?

Solutions

Expert Solution

1. Yes, i definitely agree with the entrepreneur because the things he mentioned are really challenging and also difficult in determining at the initial stage of business, and they are important as well because without the planning of these 3 things the business can not be started.

The challenges he mentioned which he would face when starting his business are determining start up costs, determining inventory and determining the location of the store.

Determining start up costs: It is really a difficult task because there are number of variables whose costs are supposed to be estimated while starting the business.

Costs include

1. Advertsing costs

2.Research expenses

3.Borrowing costs

4.Equipments

5. Staff recruitment costs.

So it becomes difficult to estimate the entire costs.

Determining inventory: Inventory includes the complete list of stock in hand, raw material,finished goods etc in order to sell and earn profit. At the initial stage when the business is just about to start it is difficult to determine the inventory because for determining the inventory the orders should be made in order to get a correct estimate.

Determining the location of the store: Again setting up the location of store is a very important decision. You need to make choice of the location on the basis of the goods or service you offer. For eg, you can not offer branded clothes in a village because people in village do not prefer branded clothes, so you are going to incur a loss if the proper location is not set.

So it is difficult to determine the location as well.

2. Growth potential of the business: It can be defined as the ability of an organisation to generate large amount of profits,expand the business, increase manforce, build a good reputation.

Yes, i do agree with the entrepreneurs vision, because he knows very well that a business cannot start without a proper plan and he is also aware that in the starting phase we do not earn any profit.

He has a long vision with respect to his business , he expects that after the efforts done in the starting he may develop slowly.

He is not at all in hurry because he is aware that a business takes time to expand, first of all you need to gather the customers and gain their trust, after establishing the customers he expects that the revenue shall climb and he may start earning profits. After that , he may become financially very strong within few years and eventually he may open new stores and expand the business, then after that he may be able to buy other franchises and build a good reputation in the market.

Though it is not easy what he think but the vision he has is correct , if he continues in the same manner then he may achieve the success very easily.


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