Business Coursework- Setting up an business

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To From

Date 4th February 00

Introduction




As part of my GCSE Business Studies Coursework assignment Marketing Strategies (London Board syllabus 150), I have researched into the potential opportunity to set up a sports shop in Leytonstone. I have decided to call my sports shop, “The Sports Centre”. I would be looking to sell all types of sports equipment ranging from jerseys to balls to sports protection and trainers.

Action Plan

I have drawn up an action plan so that I can approach the task or product in an organised fashion to help me monitor my coursework and progress.

Business Objectives

My business objectives for the first year is to simply break even and survive. I am aiming to make a good business image in Leytonstone so that I will attract more customers and therefore make a profit hopefully the following year. If I make a profit the first year then that would be a great achievement because it will show that my business has been a success. I am looking to provide a good service to make a good public image so that the customers will be satisfied and word of mouth will spread about my sports shop. Eventually, I will be looking to expand my business and maybe set up another branch. I want to be the biggest sports shop in the market and be of the highest quality. I will also be looking to add new departments to my shop such as a new name-printing department.

Location of Proposed Business

When I chose the location of my business I would have to consider if the environment would suit my business. I would have to keep in account of what my business objectives are. My new business will be welcomed in Leytonstone as I have found out from my survey (see results).

I have chosen to be situated in Leytonstone High Road in Leytonstone. This is a busy road and is in the middle of the town shopping center so this would attract the customers. The shop is large enough to fit all the products such as jerseys, balls, footwear, equipment, etc into it. There is also a fair sized storage room, which will be adequate.

My business would appeal to the younger generation being teenagers and students. At an age of 1-5, sports is a great interest to them and I would feel that they would be the greatest customers. There are local schools situated near my business- Leytonstone High School, Norlington School and Connaught School. These schools have students ranging from 11-18 year old; this category of students is the most popular group of people who are interested in sports. These schools have a strong sports programme so therefore my shop would appeal to them because my shop is local to the schools.

Legal Identity

I am going to become a sole proprietor instead of a partnership, which I was considering but after looking at the advantages and disadvantages of each type of business, I have chosen to become a sole proprietor.

Advantages of a sole proprietor

· Small start up costs- it is simple and inexpensive to start up a sole proprietorship.

· Profits are all kept- I do not have to share any profits by distributing wages to staff or anyone else.

· Flexibility- I get to decide when I am opening and I get to make all of the decisions by myself.

Disadvantages of sole proprietor

· Unlimited liability- if I do no succeed then I stand to lose everything I own.

· High risks- the chances of succeeding in a sole proprietorship are very slim and chances are that I will not succeed because of competition.

· Difficult to raise capital- it is sometimes difficult to raise all the money by yourself.

· Lack of continuity- if the owner dies then the business dies as well.

Advantages of a partnership

· There is limited liability- I do not stand to lose everything if the business does not work.

· Each partner may specialize in different parts to run a successful business.

· Other partners may make the business more profitable.

· It is easier to raise the capital.

Disadvantages of a partnership-

· You do not get to keep all of the profits.

· Maybe disagreements.

· You do not get to make all of the decisions by yourself.

· Resentment that one partner is not doing his or her share of the work.

I do not want to share my profits in a partnership so a sole proprietorship would suit me and be ideal. Another reason why I want to become a sole proprietor is because I want to be in total control of my business and I do not want anyone else to have any say in how my business is run. One factor that I took into consideration is the fact that I am risking losing everything if my business is unsuccessful- unlimited liability.

Sources of Finance

I will be using both internal and external sources of finance.

Internal

Day-to-day cash from the business.

Profits.

Trade Credit.

Selling assets

Depreciation

Owner’s funds

Personal assets

External

Bank loans

Hiring and leasing

Mortgage loans

Government loans and grants

Overdraft

Buying of shares in a PLC

Medium term loan.

My main source of internal finance will be my own personal funds from my family. My parents have lent me £5000 and I used part of my savings being £000.

My main source of external finance will be a bank loan from Halifax because they have a low interest rate for a loan of £5000. I have phoned the bank to see if I can get a short term business loan of £5000 over 1 year with the base rate of 4% and an interest rate of 1.8%. This had a lower interest rate than my other choice of bank being Barclays.

Barclays interest rate is 14.% so it is more expensive to take out the same price loan. The total that I would have to pay for a loan from Halifax is £5640 and the total from Barclays is £5710 so the difference being £70.

I will be paying back a total of £470 a month for 1 year. For Barclays I would be paying back £475 a month.

Insurance

I will be taking out public limited liability insurance so that if a member of staff or the public gets injured on the premises then I cannot be held liable for it. I will also be carrying building damages insurance so that if my premises get heavily damaged I will be covered and if any of my goods gets stolen.

What is marketing?

Marketing is finding consumers and their wants and desires and creating a product to satisfy those wants at a profit.

Market or Product Orientated

For my coursework I will be looking to see if I am going to do a product orientated approach or a market-orientated approach.

Product Orientated

This means that I will be looking to be making or selling a product and this would be the highest priority to me and then seeing if this will be popular amongst the consumers will be second. I would not be investigating the market first to see if there is any demand for it.

Market Orientated

This is where I do field research on the market to see if the product will be welcomed there and to see if there is any demand for it. It is to see what the consumers want before starting production

I will be taking on the market orientated approach and I will be conducting field research to see what the consumers want.

The point of market research is to find out how want people there are to buy its product and to find out what products are liked by the public and dislikes. Also to find out how much they are willing to pay and to check the local competition.

Field Research

Primary Research This is first hand information from market research surveys of consumers. Field researchers like street interviewers collect the data.

Examples of primary information are

§ Face to face interviews- this can be expensive but this is a good method.

§ Internet- emails can be sent to the recipients and this method is popular but usually has a low response rate.

§ Telephone Interviews- this is a quickly and cheap method but has a low response rate.

§ Printed Questionnaires- very popular method, cheap, questionnaires can be placed in newspapers and magazines.

§ Observation- trained observers can be used to study the consumer’s reactions to the product. Also to check competitors prices.

§ Panel Researchers- a group of people on a panel can be asked the same questions and responses can be checked through them.

Secondary Research this is information that already exists which comes from research done previously. It is also called desk research because most of the information is collected from sitting at a desk.

Examples of secondary information are

§ Newspapers

§ Books

§ Internet

I have chosen primary research using a questionnaire that I have designed. I prefer to do primary research because I feel that this method would be more accurate and it will provide more information.

The Marketing Mix

This consists of the 4 P’s

Place- my retail outlet will be situated in Leytonstone on the High Road. This is a fairly busy road because it is in the centre of the town shopping centre. Because it is in the middle of the town shopping centre it will attract customers. The premise is a fair size, it is big enough for me to operate my business in and it is suitable for my new business. There is not much competition in the area apart from a well-established sports shop called, “Monarch” which is situated down the other end of the high road.

Price- the type of pricing that I will be doing is competitive. This means that I will base my pricing upon how much the local competition sells their goods for and trying and make my pricing low enough to beat the competitor’s prices and make a profit. For example a football jersey in Monarch is £4. so therefore I will be looking to sell my jersey for £41. so I will attract customers and create a good public image. I cannot afford to take the prices down much lower because I will be risking making a loss instead of a profit, which is one of my business objectives and provide to provide good service. My prices will start off low to attract the customers buy then gradually increase a bit so I can reach a margin of safety and survive. This will be a short-term strategy that I will be doing so I can secure the market. By doing this I will get back the money that I spent on setting up the business- start up costs.

Product- there will be a large variety of products ranging from equipment to football jerseys and jerseys in general. If I expand I will invest in having extras such as name printing on jerseys and I may also decide to start selling sports videos.

Promotion- to help the promotion of my new business I will be looking to advertise in the local newspaper to attract local customers. The cost of an advertisement slot in the Leytonstone Guardian newspaper will cost me £00, which is well within my budget. My budget has a limit of £600 on advertisements. I will be looking to advertise using leaflets. I will be looking to buy 1000 leaflets for £150, which consists of colours. I will have £50 spare, which I will be looking to invest in my business. I picked the local newspaper to advertise simply because it is cheap and popular. My questionnaire shows that the Guardian is very popular and an advertisement in it costs £150 but in the Ilford Recorder costs £150. Because my shop is based in Leytonstone then I am going to concentrate on advertising in Leytonstone.

Also discounts will be given at first to customers and to students that go to local schools so I will achieve a good public image so therefore have more customers.

The advantages of promotion are

§ That it will help boost sales when they are low.

§ Gets new customers to try old products.

§ Gets people to use new products.

§ Encourages the purchasing of that type of brand.

Conclusion

I have met the main factors of the business to the best of my ability and I have planned and developed ideas to make my business a success in Leytonstone. I have put a lot of effort into my business in order for it to be successful. To make sure that I do everything that I can to make my business successful I have created and followed an action plan.

I have made a S.W.O.T and P.E.S.T analysis for my business. This is so that I can think for the future of my business and how I am going to prosper.

S.W.O.T Analysis

Strengths I have a fair deal of experience and knowledge on how to run a business and how they work due to my father is running a successful business.

Weakness My questionnaire is based upon the answers of only 0 people, which is not a great deal. I feel that it is not enough research. Monarch is already a well-established shop in Leytonstone so I will have some competition but I believe with my lower prices and advanced equipment will attract more customers. Because it is a well-established shop and has a good public image the customers might not be willing to try out my new sports shop so I will have to promote my business well.

Opportunity these are mentioned in my business objectives. One of the things I would do is to expand by opening up another branch to increase the profits. A name-printing department would also be opened.

Threats my only threat is a well-established sports shop called, “Monarch” on the High Road. Because this is down the other end of the High Road I feel that it will not affect my business too much so the competition is inferior and will not be so intense.

P.E.S.T Analysis

It is important for my business to consider these factors before beginning the marketing process because this will affect my business

Political I would have to consider the taxation- Corporation Tax. If the tax increases, then my profits will drop and sales will decrease. I would have to pay out more money on the tax therefore my profits will decrease because I will not have as much profit as before. I will only pay a substantiated amount of tax depending on how well my business is going. Because profit is my main objective I feel that I will have a to pay a fair amount of tax on my business because I will do whatever I need to do to survive.

Economic An issue that I would have to consider is the unemployment rate. If the unemployment rate is high then customers would decline therefore I would be losing money and my profits would decrease.

Social I would be looking to have mainly students in my shop so therefore such products as footwear like trainers would appeal to 1-5 year olds. There are more activities that require trainers such as clubs and gyms.

Technological Because trainers are even more popular, there are more styles being created and more materials being used. There are now specialised shoes that are used in specific activities.

Evaluation I believe that if my sports shop were opened then it would be a success because there is a lack of competition in Leytonstone except for Monarch.



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