Business expansion is an indication of growth and development. An entrepreneur works for achieving significant growth and reputation. Acquiring a part of business or its complete functioning rights are two different perspectives. This report serves the purpose of acquiring an existing business by outright purchasing. Before running a business it is important that entrepreneur must be aware about his working principles and vision, without this knowledge it becomes highly difficult to manage operations and future consequences. A brief analytical view of positioning and resourcing options that buyer company will require are evaluated so that best decisions could be formulated.
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Principles of entrepreneurship
Entrepreneurship is a phenomena that involves processing of unique thoughts and ideas into businesses. Traditional follow up of working in companies is broken by individuals known as entrepreneurs. They are solely responsible for all activities that are involved in initial stages of business operations. Principles and concepts that are involved in this unique and refreshing method of business ownership are described ahead:
Having a vision and mission
Visions and objectives give a direction for working. An entrepreneur cannot mould his ideas and thoughts unless he/she has a vision. It is the chief important principle of working in the competitive markets.
Being a solution provider
Instead of waiting for a solution to come up on its own, every individual who perceives to be an entrepreneur must be able to provide solutions to all the problems that are being faced by him and his working staff.
In growing competition, only new and unique products/services that are viable by purchasers can co-exist. It becomes easy to survive such brutality when particular qualities are unique to the proposed commodity (Kirzner, 2015). Technological support can be taken by businesses to evolve their products.
Leadership and management
Innovation with effective leadership skills is always beneficial. Great entrepreneurs are never completely satisfied by their piece of work. This leads to developments and steady growth during tough times.
Motivated and encouraging
Giving up is not a cup of tea for an entrepreneur. Persistence and determination are keys for unlocking motivation and encouragement.
Respecting investors, customers and employees: Stakeholders are most important to every business. Experiences of successful businessmen denote that it is highly important to respect their external and internal stakeholders (Kuratko, 2016). It not only helps in contributing to growth but also develops good relations within markets.
I had been leading a fashion firm Cotton On which is based in Australia. My vision and goals was to make my brand the most prominent one in native markets. This urge to excel and develop in my career led for the choice of entrepreneurship. It not only provides freedom to a person for practising his working style but also helps in earning huge profits. Lover is the prospective company that I wish to acquire by purchasing its complete existing market. With my capital power and accountability I will be able to manage this venture with at most efficacy.
Fashion industry and markets of Australia
The 21st century has witnessed lot of technological advancements. From inventions and developments of smartphones to rapid growth of e-commerce, everything has changed the perceptions of customers towards fashion and retail industry (Baum, Frese and Baron, 2014). Online payment options and convenient shopping trials is the best outcome of this progress. Cotton On is a renowned fashion retailer that has been dealing largely in clothing and cosmetics for all age groups and irrespective of gender (About Us, 2017). Being a multinational company, it has acquired many small scale businesses for expanding its product range and market share.
On the contrary, Lover is also a clothing company but has specific product range. Their unique clothing and apparel range is inspired by music, art and creativity. Launched in 2001, the company had been running very well during initial years of their launch but currently it has been facing a lot of criticism due to weak business strategies. Australian markets for fashion are trending and always aspire for unique and innovative products. Billabong and Rip Curl have been leading competitors of these markets in fashion and clothing industry. Entrepreneurial activities are highly encouraged so that customers won't feel bored and acquainted by repetitive products.
Acquisition of existing business through outright purchase
Performing outright purchase of a company is the most viable business option for a successful firm (Carraher and Paridon, 2015). It becomes easier to start a new venture from an old set up because it requires less resources and materials for development. Quick implementation of strategies is experienced in this method despite of high purchasing costs which cannot be neglected. Business acquisition involves certain procedures that have to be followed by entrepreneurs for getting a dimensional view of strategies. Following steps are designed to understand business purchase process:
- Determining overall investment amount or cost price of the business. This includes evaluation of properties like inclusion of stock values, share prices, etc.
- Allocation of prices for assets and deductions for liabilities is the next stage in analysis of pricing of business. Inventory details, capital leases, assets gathered from research and developments, intangible components, etc. must also be evaluated accurately so that no hidden facts will change dynamics of purchasing company.
- The final stage is declaring the partial results for first year in buyer organisation's financial statements. There are certain rules that have to be followed for enacting this step. Listing of conditions and quantification of investments is done so that a rough estimate of profit would be gained which will help in confirming respective decisions (Jones, Macpherson and Jayawarna, 2013).
Cotton On is proposing to acquire Lovers by buying its rights and existing markets of Australia. This will result in Cotton On being sole owner of the other company. The company had been running efficiently but owners decided to earn steady profit by selling their brand. This will help the buyer to increase its market share and launch this unique product under Cotton On's brand name.
Buying an existing business involves a lot of risk but it helps in recovering soon. Generally such deals take place only between a large company and a small company or between comparative businesses. Choice of correct business is most crucial to this step. Entrepreneurs have to make sure that current position of the respective business that is to be bought must be feasible and irreversible. This will help in applying innovative strategies in efficient manner and yield good profits.
Analytical positioning of product/service in Australian market
Markets are full of competition. When Cotton On will acquire the markets of Lovers, then certain tactical implications must be evaluated so that further decision making process gets easier. Financial analysis is also a part of product positioning. A marketing tool known as STP (Segmentation, targeting and positioning) is used for developing a foundation for the business. Positioning method that can be adopted by Cotton On after acquiring the business of Lovers must be based on Experiential positioning.
The brand will target its customers based on emotional or sensory characteristics. It involves direct connection with purchasers with a humane touch. Positioning is important because it will help the company gain an insight about taste and preferences of customers related with the new or refurbished products they are going to launch. The use of this technique will not only provide better competitor analysis but also help in formulating current customer value for the proposed product.
Process in which complete business evaluation is provided with regards to capital values, suitability, budgets and revenues, etc. is called as financial analysis. Ratios are calculated so that financial status of the company being sold can be visualised by purchaser.
Digital techniques can be utilised for analysing customer demands and needs. Several forums and platforms have emerged that perform this task on behalf of desirable business venture. In this case, Cotton On can opt for conducting a survey that will analyse current fashion trends which are adopted by all age group clients. If there is large inclination for products of Lover, then Cotton on can opt for buying this small level organisation. If the results are negative then certain changes in products can be made and evaluation can be performed. Positioning will only help in giving specific services to specific group of people.
Options for resourcing business
No strategy can function without application of principle theories and models. STP provides businesses a better and easy way to deliver their products and services to deserving customers. Data that is to be acquired must be distinct and differentiable. This will help in creating proper action plans for each interpreted information. Resources are finalised after positioning is accomplished. It is well known that businesses cannot function without resources. Multiple options for gathering resources must always be available with every entrepreneur so that business operations are not disrupted at time of execution.
Human resource is most important part of every organisation. Acquiring through purchasing existing business helps in managing resources that will be required for establishing new businesses. Money can be saved in purchasing land, furniture, equipments and most important inventory for setting new branches. Human resource will also be readily available. It is essential to out weigh all possible outcomes so that investors won't face any difficulties while beginning their work procedure. Quality of resources must never be compromised for saving costs. If potential of development is visible then, trainings can be imparted. Irrelevant materials and resources which won't be useful for Cotton On must be disposed timely for creating more room.
Correct resourcing becomes beneficial for future. If analysis and evaluation of resources is not performed with 100% efficacy then, purchaser will have to face further problems in near future. Laws and legislations that have been defined by national and local government must be followed so that no breach of contract is faced by the entities involved. Strategies must be designed by creating less reliability over law. It improves litigation costs and financial expenses during resourcing for business expansion.
Recommendations on acquainting the proposed business
Clothing giant Cotton On must be consider following recommendations or suggestions which are based on the results of positioning analysis and resourcing options need to purchase existing business of Lover clothing company.
- The reason behind selling rights over a business must be clearly communicated so that no unwanted advantage is taken by the other company. Myriad of all reasons related to selling of one's practically implemented thoughts must be known to purchaser. This helps in practising ethical contract of selling and purchasing.
- Cotton On must also consider the location, size and internal constructional details before making any proceedings in acquisition. This helps in getting an estimate for profits. It also helps in figuring out possibilities for likeability by audience.
- Research is essential for every business expansion. It is recommended that proper research must be conducted by company so that hidden flaws and defects are easily detected.
- The complete procedure must be handled by professionals that have sound legal and financial knowledge. Often situations arise where it becomes difficult to understand certain specific terms and policies which can be harmful for the company in long run. Hiring correct individuals will help in understanding these aspects and help Cotton On to make correct decisions.
An entrepreneur must always be handy with information on every future strategy he/she is going to make. This report helps in getting better understanding of expanding business through acquisition of existing business in Australian market. Cotton On is going to own Lovers which are two clothing companies of fashion industry in Australia. With proper analysis of products, services and components that are related with business a company can get overview of this proposal. Purchasing procedure must be conducted crucially so that no future consequences are faced by buyer. This technique is not only beneficial and less risky but also helpful in enhancing brand reputation.
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