Entrepreneurship :Mo Bros Case study

1.0 Ideas and the Strategies Adopted

The success of a start-up is pegged on the strategies and ideas implemented by the founders. Creative founders and those who implement effective strategies position their businesses on the path to success. On the other hand, founders with skills shortage fail to create the right environment to enable the business to have a good take off leading to losses. Dattanis’ and the other founders had specific ideas and also implemented effective strategies that enabled Mo Bros to generate sales worth £3million from an initial investment of £750.

1.1 Innovation

Dattanis emphasised on innovation to ensure the business can counter environmental forces. Innovation was applied in different areas of the business process that in turn gave the business a competitive advantage. The founder’s father who had engineering skills used innovation to improve the production systems. This intervention played a crucial role in ensuring the business meets its production goals. Start-up manufacturers face problems in putting in place the right manufacturing environment, and this limits their abilities to meet customer demands. Innovation was applied in financing where profit was reinvested to avoid borrowing and venture capitalists intervention. Human resource management was characterized by innovation as the founders created room for family members to help. The use of the internet in marketing and research shows high level innovation. Dattanis used internet tools creatively to conduct a market survey and also to popularize Mo Bros products.

1.2 Cost Minimization

Dattanis emphasised on minimising costs to enable the company to meet its costs at minimum cost possible. One of the common problems that face start-up businesses is lack of capital and this compromise the firm’s ability to pursue its ambitions (Shane & Stuart 2002). Mo Bros was no exemption as it was facing resources constraints.  Cost cutting was applied where the founders avoided making unnecessary expenditures. The founders used their personal computers for business purposes, and this helped them to avoid the costs of buying the computers. They also minimized labour costs by fully committing themselves to serving the business. The family members played critical roles in helping reduce labour costs. Parents used their free time to aid in manufacturing activities, and this helped Mo Bros to keep costs low. The founders avoided paying themselves huge salaries aimed at keeping costs low.

1.3 Ploughing Back Profit

Reinvesting back the profit enabled Mo Bros to meet financial requirement. According to Shane & Stuart 2002, retaining earnings is the cheapest financing method compared debt and equity financing. For debt financing, a business is required to pay interest, and this erodes profitability. Also, a loan demands periodic payments a practice that can deplete the company’s cash resources leading to a cash flow problem.  On the other hand, equity financing commits a business into a lifetime commitment as the new shareholders are guaranteed a profit share.  Equity finance also dilutes the founders’ control thus compromising independence in decision making (Fama & French 2005). The decision to reinvest capital is responsible for the company’s strong balance sheet that is characterized by low debt exploitation.

1.4 Market Survey

Market survey enabled the business to implement effective strategies.  According to Makadok & Barney 2001, market survey enables a business to acquire essential market intelligence that is used as a basis for developing strategies. The survey provides information about the customers and competitors that determine how a business shapes its operations. Intelligence about customers and their needs enables a firm to create products that are in line with the current need. Mo Bros used the internet to study the market needs, and these needs provide a basis for product development. According to Malhotra, Birks, Palmer, & Koenig-Lewis 2003, a business idea should be based on an attempt to serve a market need. Mo Bros founders were aware of this fact, and they ensured that their products reflected the exact market needs. They closely monitored potential customers with the aim of understanding their tastes and preferences. As a result, the company’s product gained immense popularity due to their ability to meet market needs. Acquiring intelligence about the competitors enabled the firm to implement effective marketing strategies that created a competitive advantage.

2.0 Opportunities Capitalised On

The environment provides vast opportunities that are exploited by businesses to create some value.  Both internal and external environments provide valuable opportunities that improve business’ position. Mo Bros exploited both internal and external opportunities to strengthen their position in the market.  The main opportunities exploited by the business include using internet for research, exploiting internet in marketing, capitalizing on family support, and globalization opportunities.

2.1 Internet for Research

The internet provides access to diverse information resources that are of great help to businesses. Research and development is a crucial function in a business that is serious about long term success. According to Von Zedtwitz & Gassmann 2002, research and development provide the intelligence needed for process improvement as well as the introduction of competitive products. Mo Bros used the internet to acquire essential information that supported the improvement of processes. The company used both free and commercial internet tools to conduct research. The internet provided a valuable opportunity for improving the company’s products. Emphasis was placed on the gathering of intelligence about customer needs, and this intelligence was used in product design that led to the development of products that meet the exact customer needs.

2.2 Internet for Marketing

The internet provided an invaluable marketing opportunity for Mo Bros.  Cost, coverage, and time are the main advantages of internet marketing compared to the traditional marketing approaches.  The cost of advertising through the internet is negligible, especially when using free internet tools such the social media. Dattanis ensured full exploitation of internet resources in the spirit of cutting marketing costs. Another advantage of the internet in marketing emanates from its ability to span the globe (Prasad, Ramamurthy, & Naidu 2001). Mo Bros was seeking to serve the global market, and the internet enabled the company to access potential customers from all corners of the world. The company also exploited the time advantage of the internet when it comes to marketing communication(Prasad, Ramamurthy, & Naidu 2001). The internet allows marketing information to be sent within seconds to geographically dispersed potential and actual customers.

2.3 Family Support

Dattanis capitalized on family support to create value for the business. The family gave the founders human resource and moral support when establishing the business. Start-up businesses face human resource challenges an issue that hinders business progress. The availability of the family members enables Mo Bros to overcome the human resource problems. Founders of a business get discouraged by the many challenges that face young businesses. The availability of the family members especially the parents provided the right encouragement.

2.4 Globalization

Globalization opportunities provided a valuable opportunity to Mo Bros.  Globalization in business perspective refers to the elimination of commerce barriers that enables businesses to conduct transactions across borders. Dattanis was conscious of the massive opportunities provided by global markets and was committed to exploiting these opportunities. Mo Bros customers are spread across 78 countries, and this is a clear indication that the company has positioned itself strategically to exploit the opportunities provided by globalization. The implementation of an internet-based business model was in line with the need to exploit globalization opportunities.  Using e-bay as a selling platform was aimed at reaching geographically dispersed customers.  Launching a website and business profiles on different social media platforms was aimed at positioning the company well in exploiting globalization opportunities.

3.0 Business Risks

Start-ups and well-established businesses face risks that limit goals realization. The threat of these risks is more serious to start up companies compared to well-established businesses since the former has not developed resilience to confront the risks. Mo Bros is exposed to some of these risks, and the future of the company is pegged on the extent to which risk mitigation strategies are effective. Some of the risks relevant to the company include human resource risk, currency risk, competition, compliance, customer service, and reputation.

3.1 Human Resource Risks

Human resource risk is a serious threat to Mo Bros. Dattanis confessed that hiring the right people is a challenge to businesses and this sentiment must have been influenced by the problems that the company faced at its initial stages. People are priceless resources when it comes to their input in organizational goals. Failure to get the right people to carry forward the vision of a company is a recipe for failure (Olson, Slater, & Hult 2005). Dattanis was able to manage the human resource threat initially, but the risk remains a major challenge to the company.

3.2 Currency risk

Currency risk affects companies whose supply chain transverse countries using different currencies. It is caused by fluctuations in currency rate that can lead to losses emanating from translating currencies into the local currency. These fluctuations also compromise effective budgeting and planning as it is difficult to objectively project costs and revenues in an environment that is characterized by fluctuating currency exchange rate. Mo Bros operates in the global market implying that exchange rate affects its pricing.  Denominating prices in one currency affect customers in foreign currencies as the price keeps changing and this can have a negative impact when managing relationships with customers.

3.3 Competition

Competitions are a major threat to the company. Michael Porter recognized competitive rivalry as a strong threat that can push a business out of the market. According to Porter 2008,  fierce competition leads to price wars and other competitive strategies that can drive weak firms out of the market. Mo Bros industry is comprised of many players with different capacities. Each player is seeking to acquire a larger market share that is leading to fierce competition. There are also new entrants that are threatening the market shares of the existing players.

3.4 Compliance

Failure to comply with the relevant regulatory agencies is a serious threat. Beauty products are highly regulated to ensure they meet the highest quality standards. In the past players in this industry have been accused of using unsafe ingredients that end up harming the users’ health. Failure by the company to comply with the quality regulations can lead to costly litigations that can threaten survival. In additional to the quality regulations, there are other business regulations whose noncompliance would have grave ramifications.

3.5 Customer Service

The long term success of a business is influenced by service quality. Customers are only willing to engage a seller whose customer service is outstanding (Brady & Cronin 2001). Dattanis said that the fast growth of their company overwhelmed them and this limited their ability to pay attention to some aspects of their business. In such a situation, customer service is likely to suffer leading to eroded customer loyalty. The reducing customer loyalty can lead to some customers stopping using the company’s products. The ability of a company to grow its market share depends on customer retention and attracting new customers.

3.6 Reputation

Business reputation is everything when seeking to grow a business. Today’s society is unwilling to transact with businesses that engage in unethical practices. This trend has compelled businesses to invest heavily in managing reputation through different public relations strategies (Bendapudi & Leone 2002). Mo Bros has been using online marketing strategies that are vulnerable to being misused by people seeking to tarnish the company’s name. Failure to meet customer demands can also tarnish the company’s image, and this occurrence would limit the ability to build a strong brand.

4.0 Evaluating the Business Future

Business founders have hopes that their businesses will stand the test of time and grow into a big business. However, the future of a business is influenced by complex factors some that are not within the founder’s control. The environment is complex and provides opportunities and threats that have an impact on the business’ future.  The ability of a business to thrive in the foreseeable future is dependent on the manager’s ability to develop and implement effective strategies that are directed toward empowering the company to exploit opportunities and take cover against the threats (Ross &Vitale 2000). Failure to implement such strategies leads to business failure. The internal environment of a business is also a key determinant of its future. This part of the environment is comprised of factors that are within the organization’s boundary that influence the realization of organizational goals. These factors are related to systems, strategies, structures, policies and other internal resources. These factors are fully under the control of managers and are influenced by policies and decisions. Mo Bros future is pegged on how best the management deals with both the internal and external environment.  In specific it depends on the effectiveness of dealing with the risks and exploiting the opportunities.

The effective utilization of human resources will affect the company’s success. It is apparent that the company is growing at an alarming rate that makes necessary to put in place the right workforce that is in line with the prevailing human resource needs.  Management competency is an important ingredient of the human resources that is a key determinant of organizational success. Executives that have the interests of the company’s heart are important as they direct the company towards actualizing its vision. They perform the leadership role that is concerned with influencing the internal stakeholders towards a common purpose. Based on the current situation in Mo Bros, the founders are aware of the importance of human resources in the business process. The Dattanis have the best interests of the company at heart and are competent enough to steer the company forward.  They are aware that getting the right people is an uphill task and this will increase their commitment to human resources management that will secure the company’s future regarding the effectiveness of human resources.

The quality of customer service is a key determinant of the company’s future success. The best way of building customer loyalty and a strong brand is to offer an outstanding customer service that is in line with the customers’ expectation. Such an accomplishment enables a company to create customer intimacy that deters customers from trying competitors’ services. The Dattanis are aware of the importance of offering an outstanding service quality. The company has been investing heavily in market research aimed at generating intelligence about how best to meet customer needs.  The fact that the founders are aware of the importance of market research to improve service positions the company favourably in future. Customer service is a core value in Mo Bros corporate culture, and this element will influence the current and future employees thus safeguarding quality in the long run.

Regarding whether the company will last or fizzle out, all indicators shows that the main threats are addressed. Mo Bros has positioned itself strategically to address its threats and at the same time exploiting strategies emanating from the environment. The Dattanis are talented business leaders who will continue to provide the right leadership to the company. They are young this places them in a favourable position to serve the company for decades to come. They are also committed to ensuring the existence of the right employees. The high commitment to improving service delivery is another success factor. It is therefore clear that Mo Bros will stand the test of time to have a lasting impact in its industry.

List of References

Bendapudi, N. & Leone, R.P., 2002, ‘Managing business-to-business customer relationships following key contact employee turnover in a vendor firm.’ Journal of Marketing,vol. 66,no.2, pp.83-101.

Brady, M.K. & Cronin Jr, J.J., 2001,  ‘Customer orientation: Effects on customer service perceptions and outcome behaviors.’ Journal of service Research, vol.3, no.3, pp.241-251.

Claus, J. & Thomas, J., 2001, ‘Equity premia as low as three percent? Evidence from analysts’ earnings forecasts for domestic and international stock markets.’ The Journal of Finance, vol.56,no.5, pp.1629-1666.

Fama, E.F. & French, K.R., 2005, ‘Financing decisions: who issues stock?.’ Journal of financial economics, vol.76,no.3, pp.549-582.

Makadok, R. & Barney, J.B., 2001, ‘Strategic factor market intelligence: An application of information economics to strategy formulation and competitor intelligence.’ Management Science, vol.47, no.12, pp.1621-1638.

Malhotra, N.K., Birks, D.F., Palmer, A. & Koenig-Lewis, N., 2003, ‘Market research: an applied approach.’ Journal of marketing management, no.27, vol.27 , pp.1208-1213.

Olson, E.M., Slater, S.F. & Hult, G.T.M., 2005, ‘The importance of structure and process to strategy implementation.’ Business horizons, vol.48,no.1, pp.47-54.

Porter, M.E., 2008, ‘The five competitive forces that shape strategy.’ Harvard business review, vol. 86, no.1, pp.25-40.

Prasad, V.K., Ramamurthy, K. & Naidu, G.M., 2001, ‘The influence of internet-marketing integration on marketing competencies and export performance.’ Journal of International Marketing, vol.9, no.4, pp.82-110.

Ross, J.W. &Vitale, M.R., 2000, ‘The ERP revolution: surviving vs. thriving.’ Information systems frontiers, vol.2,no.2, pp.233-241.

Shane, S. & Stuart, T., 2002, ‘Organizational endowments and the performance of university start-ups.’ Management science, vol.48,no.1, pp.154-170.

Von Zedtwitz, M. & Gassmann, O., 2002, ‘ Market versus technology drive in R&D internationalization: four different patterns of managing research and development.’ Research policy, vol.31,no.4, pp.569-588.

 

 

 

 

 

 

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