Magoosh GRE

Report showing a Business is Viable

| March 31, 2015

Introduction
As an innovative and profit oriented enterprise operating in an increasingly challenging globalised market, the viability of our business plan matters to our future outlook because it would help to understand and plan breaking-through complex marketing and operational issues. This section of the entire report clarifies some of our business plans and strategies employed to ensure that our business can succeed in the coming year’s inspite of the uncertainty and seemingly challenging forces of the external market environment today. Similarly, as a legal entity, guarding our legal identity would help to protect our business concept and intellectual ideas. As stated in the other parts of the report, dudu osun is one of its kinds in the market and has been specially formulated with herbs and natural ingredients, this innovative way of meeting consumers’ growing demand for natural products needs to be legally protected so that future threats of sub standards and breach of our intellectual property can be avoided. To clearly demonstrate the viability of our business plan as well as how our legal identity has been protected, this report is divided into three different parts. The first part looks at some theoretical issues and conceptualises what is meant by viability as well as establishes the factors of our business which makes us a viable venture, the second part of the report is called legal aspects and clearly presents what steps we have taken so far in protecting our legal identity. The final part is the conclusion which draws an end and summary to the report.

Viability of our Business Plan
In the resource based view theory of an organisation, the most important factor when it comes to the viability of a business plan is the ability of the business to pull together both tangible and intangible resources in a manner that creates a credible strategy and exploits a market advantage(Wicham, 2004). Meanwhile there is another business proposition which suggests that a viable business plan must be able to positively answer the following questions such as: does the business have an advantage over competitors, how imitable is such advantage and is the business sustainable or economically viable to sustain itself over a short to long term period? (See: Thompson, 2003). The problem with some of these views as some authors and business executives would argue is that in today’s environment, viability can longer be determined by the internal fit or resource capability of an organisation alone. They argue that today, business performance will forever be dependent upon industry and external changes, therefore, viability must be measured by how an organisation is able to effectively deploy its resources to meet the constantly changing demand of consumer tastes and cope with the unpredictably changing market environment of today (Grofton, 2001).
The main point of this argument is that in addition to the internal resources possessed by an organisation, there must be a clear link between such resources and the external market condition. Thompson (2003) presents the argument that in light of challenges of the external environment; a viable business proposition must take into consideration, the risks and problems as well as industry dynamics of the business environment. In view of this debate, the following sections of the report present the viability of our business plan through the use of strategic tools such as PEST analysis, Porter’s five frameworks and SWOT analysis.
The PESTEL analysis helps to shed light to the external environment and some of the issues which can threaten the future of business. Similarly, the Porter’s five framework deconstructs the industry in which our business operates and helps to shed better understanding on the industry dynamics and issues such as competitiveness. The SWOT analysis on the other hand, analyses the strengths, weaknesses and opportunities of the business. All these are essential factors in determining the viability of a business plan (Goldman, 2010).

Porter’s Five Analyses:
Threat of New Entrants

Generally, the threat of new entrants to the soap market is high because soap making is an art which can be learnt with easy steps and that which new entrants requires no huge entry cost and relatively little barrier to produce and distribute, this threat can therefore be said to be intense (Curtis, 2007). However, since the soap market is fragmented into different niches, such as beauty, natural/herbs and toilet soaps, fragments such as beauty and toilet sections are considered more attractive to new entrants than the niche for natural and herbal soaps. The reason is that the natural and herbal soap market is just emerging and has more complex understanding than others, hence posses a relatively high barrier to new entrants. Although, in the coming years the market will become increasingly competitive as it is forecast that the global market for natural and herbal products will be over $5 Trillion by 2050 (Dabur Research Foundation, 2010). Hence, it is expected that gradually, the threat to new entrant will be lower.

Threat of Substitute Products

The threat of substitute is made high in the industry because customers face no cost of switching from one product to another. However, customer’s propensity in switching is dependent on a lot of factors – such as how brand owners understand and meet their consumer needs. The threat of substitute products can be said to be high.
Competitive Rivalry within the Industry
Because of the relatively low barrier to entry into the industry, there can be said to be intense competitive rivalry in the general soap market. However, to talk about the natural and herbal fragments, the intensity of competition is low because as stated earlier, the natural and herbal fragments are just emerging as consumer awareness to natural products is just rising. Competitive rivalry can also be said to be less in the natural and herbal markets because in recent years, the beauty and toilet fragments have witnessed phenomenal growth which includes new openings in the liquid, soap free and synthetic markets. This has taken most of the attention of most competitors in the soap market; hence, the natural and herbal soap territory is one that has drawn less competitive attention (Mintel, 2000).

Bargaining Power of Suppliers

Because of the increasing scarcity of certain raw materials used in herbal and natural soap making, the bargaining power of suppliers can be said to be high, more so because such raw materials only exist in certain parts of the world. The ‘osun’ (shea butter) used as key ingredient in dudu osun soap for example only exists in Africa and are only supplied by key African dealers, hence, the scarcity and limited availability of the products makes the bargaining power of suppliers high.

Bargaining Power of Customers

Because of the wide distribution of customers in the industry, there can be said to be no concentration of power possessed by customers. Similarly, because customers are not used to buying in volumes, they have relatively low power. Although, buyers are always price sensitive in the general soap market and thus might react when a competitor decreases their cost. However, as research has shown that positioning matters (See: Euro monitor, 2001), dudu osun’s position makes it immune from any problem of price sensitivity. Hence, cannot be most often affected by customers bargaining powers.

PEST Analysis
Political: – Generally, the political environment for soap production has always been favourable as most soap manufacturers are SME’s who have consistently been the focus of the government in terms of policy support in a bid to make them contribute better to a healthy economic environment.
Economic: – Although the current austere economic environment is affecting consumer behaviour, however the general increase in consumer spending due to their bigger purchasing power makes the affordability of soaps like dudu osun better than before. Similarly, higher import costs for other soap fragments makes herbal and natural soap more affordable and marketable to consumers.
Social: – Education is generally increasing amongst consumers in terms of the benefits and advantages of natural and herbal products including soaps. The increasingly negative reputation of beauty and toilet soaps as being too chemically formulated has also made the awareness for natural soaps more popular. Similarly, consumer taste is gradually changing from what it was to a new phase in which consumers are tended towards naturally made products because of its generally perceived advantages.
Technological: – Technology has no doubt affected almost all of human endeavours in the 21st century. For the natural and herbal soap industry, technology has increased outputs and production capacity because of better mechanized ways of producing soaps.
Environment: – Natural and herbal soaps, in contrast to others are known to be of advantage to the environment because they are its by products. Shea butter ingredient used in dudu osun for example is naturally produced from trees and has no negative environmental impact. Although there is increasing threat to the production of shea butter as there are less and less trees which produces it. However, there is a strategy in place to address this by the company for a sustainable long term advantage.

Legal: – The legal environment for soap is such that there is increasing problem as a result of intellectual property issues. For instance few soap making companies have accused each other of stealing one another’s ideas and business concepts (Hunt, 1999).

Summary
Having understood the industry dynamics of the soap market through the presentation of PEST and porter’s five analyses, the market viability as well as sustainability of our company’s advantage has been brought to the fore. However, since other inputs such as financial capability, opportunities, product uniqueness, as well as profitability are important in explaining our business viability – using the SWOT analysis, the following section shows the strengths of our business as well as possible threats and future opportunities to the viability of the business venture.

SWOT Analysis
STRENGHTS
• Globally distributed Brand: – While the brand is still seeking wide recognition, it is however globally distributed. Having originated from Africa, the product is available in Europe, America’s, Australia and Asia. This global distribution has increased the company’s sales over the years while it has given the brand more recognition across a wide range of consumers. This is considered by the company as one of its prerequisites to building a globally recognisable brand and brand awareness which would improve company strength and growth in the coming years.

• Profitable Venture: – Since the beginning of this decade, dudu osun has delivered sustainable income and has been growing steadily in terms of sales and product distribution. These increasing sales shows that our product has been in continuous demand, the increasing sales also shows that the future of the industry in bright as it is new and emerging and consumers are just gradually becoming more aware of natural and herbal products.
• Naturally Oriented business concept: – This is considered strength because most competitors in the industry today are becoming increasingly condemned for adding too many chemicals to their products, hence, herbal products with multiple natural functions made with herbs are considered suitable options. Similarly, today’s consumers are leaned towards consuming products that are naturally inclined because of their perceived advantages as well as their less damaging impact on the environment.

WEAKNESSES
• Low Brand awareness: – Because of the relative newness of dudu osun to the market in contrast to many other traditional products and competitors, there is low brand awareness across all target consumers. While the product is well distributed across small soap and beauty shops, it hasn’t find its way into the mainstream markets such as big supermarket chains in Europe and the United states where it would generate more attention thus lead into more sales.

OPPORTUNITIES
• An increasingly aware consumer base: – One of the factors which makes our brand profitable and investable as well as have a bright future is the fact that it has an increasingly large base of consumers who are becoming aware of its advantages. This is evident from our sales figures over the years which has grown 4% every year. As the market for natural and herbal soaps grow through more consumer awareness, this would turn to sales and more business opportunities for us in the future. Thus when the long term profitability of our business is considered, this is an important factor

• Growing natural and herbal soap market: – The speed with which the natural and herbal soap market has grown in the last ten years have been phenomenal, coupled with the fact that the industry will growth to about $2.5 billion by 2020 and $5billion 2050 (Mintel, 2000). This figure shows the promising future of the industry and how dudu osun has the propensity to increase its market share as well as sales.
• Opportunity for diversification: – As we have many possible infrastructure and resources, there is opportunity for increasing our business scope and market for increased market share and profitability through diversification. Such diversification would be built on tapping into our existing channels and customers or new customers and channels building on our business experience and resources. This is offers a potential opportunity for prospective investors to be part of our growth.

THREATS
• Competition: – The threat of competition is one of the most feared problems in most industries today and it is same in ours. This can be supported with the fact in the past 10 years, there were very few other products in the herbal and natural soap fragment but today, there are couple of them as dudu osun with same natural and herbal orientation. In fact, research suggests that as more consumers are becoming aware, demands will increase and the more the demand there are is the more there will be the need for supply – which will consequently give room to more competitors.

The Legal Aspect of Business

As a creative, profit oriented enterprise whose idea is innovative and both original, there are bound to be legal issues with enormous implications for business. Consequently, over the years, these issues have been dealt with in a number of ways.
Some of the key legal areas are those of intellectual property rights and the protection o our original and innovative ideas. This was approached by seeing out a patent application on the dudu osun invention which gave us the “right to exclude others from making, using, offering for sale, or selling” the invention in the UK, the United States and two African countries or “importing” the invention for commercial use without our due approval. An international patent application would have been better considered but the huge financial cost deterred us from pursuing one.
Before patenting, we did a global patent search to ensure the idea isn’t existing somewhere around the world. Following that, we filled in a patent application. Once everything was fine, the patent was granted and today we have a patent on the product across four countries.
According to Texiera (2005), “the power of a brand in the market is directly related to the legal protection of the trademark. Therefore, any company that desires to be competitive and maintain or improve its own image in the market must adopt an international intellectual property (IP) strategy in order to have a strong trademark”. In light of this statement and following the granting of our patent, we also took out a trademark application to protect the dudu osun trade mark, signs logos and its words.
Thirdly, we took out a copyright application to protect our design, concept and idea which by extension means that copies of our product cannot be made, issued, rented or loaned without our permission. The advantage of these legal protections is to guard our business concept, and the way in which we carry it out so as to be able to sustain the business over a long period of time. By protecting the business, we have also ensured that our product and business idea cannot be copied or used by anyone in any way, form or method without adequate consultation and approval from us.
All these legal protections are on top of the business being registered as limited liability company with registered distributors in every continent. As a limited liability we have legal rights and protection against certain occurrences and we can introduce new investors anytime as agreed by the board of directors. All these protective positions are to ensure the viability of our business and to ensure its long term sustainability. Particularly because we have an innovative product and strong brand, these steps would help protect our ideas and protect the business against opportunity takers in the business environment of today.

Conclusions

By presenting both the factors that makes our business a viable venture and the steps taken so far to protect our legal identify, this report has shown thus far that we are indeed a viable business – because we are profitable and such profits can be sustained for a long time coming as our product is gradually becoming widely known and accepted globally. The multiple use of the product also particularly offers a great deal of advantage because it gives consumers the reason to continue patronising us. This increasing patronage is what will help us build competitive advantage over other competitors in the market in the long term.
This report has also shown that while the general soap market is very intense in terms of competition, the fragment of the industry in which we operate is just emerging and not well known to competitors because of the extreme processes involved in souring key raw materials and reaching a wide range of customers not just in one market but across other markets. For these reasons, our business is not just sustainable over a long term, it is both viable and has a competitive advantage which is an assurance that investors would be able to make good return on their investments within a short period of time.

References

Curtis V, (2007). A Could Washing Hands with Soap Save a Million Lives? (in
preparation)

Dabur Research Foundation (2010). The growing market for natural and herbal products.

Euromonitor (2001). World Cosmetics and Toiletries Marketing Directory 2000.

Grofton, L. (2001). Business Market Research. London, Kogan Page

Hunt J.A. (1999). A short history of soap. Pharmaceutical Journal, 1999; 263: 985-989

Market Assessment Publications. The Cosmetics and Toiletries Market in Central
and Eastern Europe. MAP

Mintel (2000). The UK Market for Cosmetics and Toiletries. Mintel Keynote,

Reckitt-Benckiser Annual Review

Thompson, A. (2003). Understanding the proof of business concept, Perth. Best Entrepreneur

Texiera, K. (2005). Legally protecting your business. Why you need to do it. Available at http://www.businessblofshub.com/2010/11/how-to-protect-your-intellectual-property-4-easy-ways-to-protect-your-intellectual-property/

Wickham, P. (2004). Strategic Entrepreneurship, Essex, Pearson Education.

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