The resource ventures should follow
the technological developments characterizing the environment. Ongoing updates
and a profound familiarity with innovations in the professional area of the
business's main product(s) are essential. Consumers keep up and move along with
the times, and they expect the businesses they are dealing with to not onlv
move ahead but also to enlighten them, and to guide them as to which of the
updated products should be purchased.
Entrepreneurs must follow
R&D progress in order to forecast their products' long-term feasibility and
profitability. However, businesses should not consider only the technological
environment; clients' demands for technological improvements in the goods or
services they are buying are important factors in their interactions with
suppliers. Taking the previous example of social spa-ing, even a spa that
offers the best massage treatments but lacks the most technologically
up-to-date equipment such as sophisticated rain showers, steam rooms, and
advanced complementary facilities will be less attractive to important
potential clients, who will opt for the newest, most innovative and most 'in'
products in the technological context (Naman and Slevin 1993; Shane and
Ulrich 2004).
The ecological
environment. Nature, the climate and environmental factors have become focal
points in the entrepreneurial realm. Ecological considerations regarding where
and when to launch a venture (Carroll and Khessina 2005), and global
preservation approaches are emerging almost everywhere. Al Gore's documentary
on global warming, An Inconvenient Truth (2006), is but one illustration
of the 'taking action' or 'proactive' atmosphere in which everyone, but
especially businesses, need to calculate their specific impact on global
ecology. Entrepreneurial businesses should acknowledge these trends: they
should support and preserve clean environments by applying processes that sustain
natural ecosystems and that conser ve and protect natural resources, and, in
general, implement practices that reduce the footprint of development (Carroll
and Khessina 2005; Kariv and Kirschenbaum 2007a, bi.
The operational
environment. Familiarity with one's direct and indirect competitors prior to
launching a new business is extremely important as it allows the entrepreneur
to deal most effectively with the competition, either by finding a different
niche than that of tile competitors or by competing on such factors as price,
quality of service and range of expertise.
The direct competitors
are individuals or companies that offer similar or identical products and/or
services which answer the same customer needs and demands. For example, when
examining where to locate a private dental clinic, the entrepreneur should know
how many dental clinics are already active in the given area, and what specific
expertise they offer (e.g., emergency treatment, preventive, restorative or
cosmetic treatments, treatments for adults, seniors or children, etc.). The
entrepreneur should also find out how successful the competitors are in terms
of size, client diversity, reputation, marketing and advertising.
Indirect competitors are
companies or businesses that offer parallel or similar products or services
that respond to similar client needs or demands. For example, establishing a
new bakery in an area where restaurants and coffee shops abound will
undoubtedly lead to tough competition since the clients have an array of alternative
possible sources of baked goods (D'Souza and McDougall 1989; Waldersee,
Griffiths and Lai 2003).
The entrepreneur should
thus analyze the following aspects of the proposed operational environment:
Existence of active
direct and indirect local competitors. Number of competitors.
Types of products and
services provided bv the competitors. Prices of products and services provided
by the competitors. Present and potential clientele.
Communication
P'anned ius'ress
Distribution and
localization
Production
Prices Sa.es =
Figure 1,1 The main topics in market research
The topics that are
associated with the information gathered from the '4-W technique are presented
in Figure 1.1. Information to answer the above-listed questions can be gathered
in one of two ways: an independent research survev. or encasement ot a
specialist to carry out such a survey. The first option allows for more control
ot the search process by the entrepreneur, as well as ongoing
adaptations to his or her specific needs. Such hands-on management of the
search for information also promotes a more intensive and in-depth study of the
strengths, constraints and limitations of the market. This is the least expensive
option, but it is usually time-consuming.
The internet can and
should be exploited in order to access facts and general knowledge on
entrepreneurship, and there are several sites that provide suet information.3
Other sources may also be utilized: economics journals, academic journals Dr.
economics, trade or professional publications, which have a more practical
perspective and periodicals dealing with ongoing market matters, statistical
data published by the particular country'; bureau of statistics, university
libraries, and centers for entrepreneurs. It is also important to communicate
with active entrepreneurs, to interact with potential clients (asking
questions, analyzing their replies), and to experience similar products and
services provided bv future competitors.
Engaging a specialist or
company that provides data and market analyses can facilitate the
information-gathering process and provide evidence-based support for
decision-making. Not only are such specialists usually more experienced in such
procedures. thev are also very well networked and have access to otherwise less
accessible databases i Chrisman. Chua and Steier 2002)
SUMMARY
Prior to launching a
venture, entrepreneurs should conduct research on both the market and the
environment in which they are planning to operate. Thev must have a thorough
grasp of their potential clients' behaviors regarding similar products and/or
services and be aware of the major trends in terms of the active clients'
profiles and their motivation for purchasing the product to be offered.
Thorough familiarity with the market is a valuable advantage at the pre-launch
stage in either preparing a marketing plan that will attract clients already
engaged with existing businesses (e.g., one that will attract people having
dental treatments in one clinic to a new clinic that is planned for launch in
the same area), or to adjust the products or services of the planned business
so that it will attract a different target clientele or answer different needs
than those provided by the existing businesses (e.g., the new dental clinic can
offer a twenty-four-hour emergency switchboard or employ experts in dental
treatments not available in the specific area).
CASE STUDY 1.1 Baby-Dalozo, Hungary
The book provides a
relatively unique service in Hungary: it offers a catalogue, a magazine and a
website for baby products, equipment and services to both retail stores and
individuals,
Aggie Molnar, a
thirty-three-year-old entrepreneur, launched Baby-Dalozo three years ago .-.hen
her first daughter, Mara, was born and she found it difficult to locate a place
where she could buy both the equipment and the varied products needed for the
new infant. Aggie Molnar and her husband were even more frustrated when they
realized that the shops they found were either very expensive or did not carry
some of the products they asked for: xln one shop there .vere beds
and baby carriages, but no toys or baby clothes for newborns. So we went to a
different shop where they told us that they had baby clothes but did not have
any guidance books for new carents. We were going from one shop to another, and
in each one there was always something acking,' says Molnar.
The manager of one of the
baby stores told Molnar and her husband that he buys most of the store's
merchandise according to market demand as he is never sure if
merchandise that is not 'n demand will be sold and does not want to keep unsold
stock in the store. He also remarked that although he had been in the business
for about thirty years, he himself had no idea who the oest manufacturers for
baby products were. Molnar did not pay attention to the man's remark at
the time, but when Mara was about eight months old, she decided to quit her
job, and the store owner's words came back to her: she decided to launch a
business. Her idea was to gather information about baby products and equipment
and put them all into a catalogue that would be distributed to a broad range of
suppliers and consumers; she envisioned a database, updated •nonthly, that would include a list of suppliers and buyers of
products and equipment for infants, v/ith prices and sales, recommendations,
and many other details that might ease the entire process. Using personal
savings, she started working from home.
Molnar expected that it
would be relatively easy to penetrate the market, since it was necessary only
to present the new idea to suppliers, free of charge (at first), in order to
produce the first catalogue. To her surprise, not a single business owner was
willing to include the name of his or her business in the catalogue. She was
aware that marketing and advertising were at a very early stage in Hungary at
that time, and that most baby supplies were acquired in neighborhood stores 3r by
finding other sources, usually by chance. She was convinced this was neither
the most economical nor the most satisfying way of outfitting the new baby.
Although she was disappointed 'n her failure to produce the catalogue, Molnar
launched a company - with great concern but much support from her husband.
Founding a catalogue for businesses producing and selling baby aroducts and
equipment was an innovative concept, but she felt that, although it would
entail a :ertain amount of consumer education, the Hungarian market was ripe
for such a new idea. Molnar says that most of the people with whom she and her
husband discussed her idea suggested that she consider going into a different
business.
Molnar began by
conducting a market survey, by telephoning companies in order to find those
that might suit the catalogue. Most were very suspicious about her proposed
service, particularly about the vfree-of-charge' advertising and
distribution of the catalogue. After three months, supplier response was still
very limited, and she decided on a different strategy. At her husband's
suggestion, she posted the catalogue on the internet. She arranged it both by
types of products; and equipment and
by suppliers, in alphabetical order. Going on to the internet obliged Aggie ; Molnar
to be more creative and dynamic; she hired a young graphics student to design
the catalogue, making it both user-friendly and attractive.
By going on the Web,
Molnar's concept gradually penetrated the market, and the catalogue's range of
advertisers expanded. She believes that the internet made her services more
visible; the products and services were
categorized and we I! organized, the photographs of the equipment and products were attractively displayed, and it was easy
to contact the companies that advertised on
the website. Both manufacturers and store owners benefited from the catalogue;
their sales increased, and requests to
advertise in Baby-Daidzo increased as well. Molnar's marketing concept was based on a one-month, commitment-free tria: \r
aavert'sing; businesses wishing to continue advertising
once the month was up had to pay. Recasts :c advertise in the Baby-Dalozd
catalogue also increased, and some links she
had been t.-v'-g to establish several months earlier, tomanufacturers
outside Hungary, began to become ac:'.e: Pc-iaman, Moldavian, Italian, Polish
and French manufacturers of baby products ar.d e3-'c™;er: started to advertise in the Baby-
: Daldzd internet catalogue.
; 'The problem of penetrating the
market witr a far'.'a.-, expected product or service versus
i an innovative concept is always there; I
could have .',a:~.~3 -":." a while and
started this business
: after someone else had introduced the
concept. It r.'3^: -a.s been easier; my husband and I
! spent a lot of money at the beginning of
my business /,':- -: 'euros. The competitors we face
; now had a smoother path. However, I am glad
:hat '. .'.as :re founder of such an idea in
i Hungary. If you research your environment
very caye~i. _. ,;.,:
a'ways find some open-minded
; people who are prepared for a different
concept. T~:s 's -;,•, _,
;j create your own niche,' says
; Molnar.
; 'At first, sales were fairly poor, as
I had expected; s:". ': ;,as disappointing and somehow
; frightening. I couldn't guarantee that
things wou.d ge: ce::ei- £
t-cugh I had a strong intuitive
; feeling that they would. In order to
target my pctert'a : 'e-is, I used many
techniques simultaneously; besides the market research, which re cec —.s segment my potential
clients and
; sort their products and services, I was
constantly ;ookr'g -':<•
c:-"oaries that were active in the
• market. I mainly used
the internet for this, but I a.'sc Lsea —y ccntacts to find such companies;
: finding the companies was
relatively easy, but getrir; :-5- :; ccoperate was very difficult. I I personally contacted each one of them
and presented -;. se - a-a' rr.y new concept. I was trying i to emphasize the win-win aspect of the
situation, of cccc~"=:vg together on such a project, as ; well as to show them the potential avenues
of our ccocerat'cr. Some of those companies that I I contacted acknowledged the potential
of such a p':.:ect and agreed to advertise through our ; catalogue; but I couldn't be sure how much
they trustee that :t would enhance their sales. I was ; persistent in looking for different
companies thai \vere active in the market, and that suited the ; catalogue and could benefit from it. It
was a lot of ;, or<, and sometimes frustrating; there were i many refusals, but there was also
corresponding y positive feedback from those that had been > advertising in Baby-Dalozd.'
.' After a while, the range and number
of companies advertising in Baby-Dalozd expanded. Baby-
; Dalozo continues to grow in terms of
sales, number of companies advertising in the catalogue,
; product innovation, product diversity,
number of employees, and more. But Aggie Molnar says
J that her satisfaction comes mostly from
product innovation: 'I've had very positive feedback from
? relatives and friends on the use they make
of the catalogue as individuals, so I launched a different
THE ENVIRONMENT AND
ENTREPRENEURSHIP
magazine - one that
targets parents and pregnant women. It provides lists of stores and
manu--'acturers, but has many other sections, such as an interactive blog where
parents can communicate •.vith each other, a recommendation-of-the-day
section; a "beautiful baby of the month" contest, and much more.'
QUESTIONS FOR DISCUSSION
I Identify the different environments that Aggie
Molnar worked in, from pre-launch to the present. C What are the main relationships between
the sociocultural and technological sub-environments
that Baby-Dalozo is
active in? J What was Aggie Molnar's
main focus while launching her company? Can you analyze the
motives that led her to
focus especially on this particular aspect? - With Hungary now rapidly entering the
internet era, how would you suggest that Aggie Molnar
proceed with her
services?
NOTES
At www.oecd.org/. At
www.gemconsortium.org/.
The sites, in
alphabetical order, are: ADI, the African Development Institute, dedicated to
fostering and promoting the human and material development of Africa,
www.africainstitute.com/about.html; ASES, an international entrepreneurship
network, focused around the Asia-Pacific region, that nelps foster a new
generation of entrepreneurs ready to innovate in the ever-changing global
markets, www.asesinternational.org/mission.htm; CIE, the Center for
Innovation and Enterprise ;n Africa, www.ifc.org; CORDIS, Community
Research and Development Information Service on European Research and
Innovation activities, http://cordis.europa.eu/en/home.html; EBAN, a European
angel network promoting the exchange of experiences and good practice and the
role of ousiness angels and their networks near public authorities, http://www.eban.org/;
Eureka, a network -"or market-oriented R&D, www.eureka.be/home.do;
GEM, Global Entrepreneurship Monitor, ;,ww.gemconsortium.org/; for each
country, government websites for entrepreneurship or SMEs; IFC, Private
Enterprise Partnership for Africa, to stimulate private-sector growth, promote
sustainable private-sector investment in developing countries, helping to
reduce poverty and improve reople's lives, www.ifc.org/about; International
Council for Small Business, www.icsb.org/; IRC network, supporting innovation
and transnational technological cooperation in Europe, ,\
,vw.innovationrelay.net; local authority for SMEs, microbusinesses; local
Ministry of Trade, Industry, Employment, per country, per region.
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