Question

Scenario: T-shirt Transformers

You are an aspiring entrepreneur looking to create a new business. So far, you have written the following business idea:

Many people have T-shirts in their closet which are in good condition, but have messages or designs that are now boring. T-shirt Transformers is a service whereby people can bring in these T-shirts and we can re-dye the shirts and return their old shirts with a new design later that day. Customers can choose from a wide variety of designs or provide their own. We will equip a van with a printing machine and the business model will be to sell via temporary stalls at markets (such as O-Week at Macquarie) and transfer the shirts to and from the van, which will be in a nearby carpark. Since there are no materials required apart from ink, the ‘transformed’ t-shirts can be provided at much lower cost than a store-bought shirt, and designs can be changed immediately so that they are always ‘on trend.’ It is anticipated that the shirts will be sold for $25. To launch the business, a competition will be run on Facebook whereby people send in photos of themselves in their new T-shirts and every month a prize will be awarded for the best shirt. To launch the business, the major investments will be the van, a new printing machine and a portable power generator.

Required:

Question 1: What is a ‘megatrend’ and why are megatrends important to setting business strategy? Provide an example of one megatrend and explain how it might affect the business idea.

Question 2: Define the ‘Four P’s’ and how each applies in this case. Also, briefly describe four of the five possible organisational structures. What would be most appropriate in this case and why?

Question 3: You want to pitch your idea to a wealthy relative. What are two important steps to take beforehand in order to prepare a compelling pitch?

Question 4: Your relative agrees to fund your venture, but you are wondering if you should seek venture capital funding as well as (or instead of) your relative. Briefly explain the research findings of Dutta and Folta (2016) and how this might influence your decision.

Answer 1

1) Mega trends, as the name suggests are trends that have a global impact. These include effect on macro-economic factors such as cultural, political, etc. These are important to any business strategy because they create a need for the strategy to give due consideration to the global factors as well and not just take decisions on a local level.

2) The four P's include Product - that is reinvention of older tshirts Price - pricing it cheaper than store bought new tshirts Place - Just as it should be, at the convenience of the customer and Promotion - What better way to promote than by use of social media for the same.

To be honest, there are more than 5 types of organizational structure so it would be difficult for me to try to name which 4 the question is talking about. However, I can definitely suggest the type of organization structure that would be suitable for this type of business model, and that would be the Team structure wherein the organization is divided into teams catering to similar types of activities and each having team leaders amongst them.

3) Two most important points according to me before pitching a startup idea to relatives would be to consider the following -

a) Picking the right moment - ensuring that the talk doesn't come as a surprise and they are prepared for that moment.

b) Formalizing the deal - Many think that keeping it informal with relatives is benefecial, but in the longer run, informal agreements always backfire and you're left with constant risk of it backfiring any time.

4) Both forms of fund raising have their own pros and cons. After going through the research findings of Dutta & Folta, one can conclude that Venture capitalist funding has a tendency to influence the innovation, quality or performance of the startup. They also pointed out that venture capitalist funding tends to receive more media coverage, which definitely works out in favor of the startup. So yes, it is definitely true that venture capitalists bring a lot more to the table than your relative or family or friend can ever do so.

I hope the above solution is what you were looking for. For any further queries or doubts in the solution, please feel free to drop a comment. Please do leave a positive feedback, Thank you :)