Lesson 3: Types of Business and The Market

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Workshop Scenario:

Please think of yourself in the following scenario as you complete this workshop.

Are you an independent thinker? Are you frustrated with employment, or have you ever imagined a better way to complete a process? Would you like to be in control of your work environment? Would you like to build something great, something that's YOURS? Have you ever thought of starting your own business?

Your objective for today is to evaluate the steps required to begin a start-up and analyze what you need to create an appropriate business plan.

Important Questions to Answer While Reading:

In order to be successful in this lesson, you must be able to answer these important questions.

• What are the disadvantages of franchising?

• What are the pros of a family business?

Entrepreneurial Business Types

Franchising and Its Advantages and Disadvantages

Franchising has many opportunities and helps entrepreneurs get their feet off the ground in the business world. Unlike opening a start-up unique to you, where business owners invest more capital or take on a business partner, franchising allows growth opportunities by scaling and selling options to run a business to franchisees. Franchising provides franchisees with resources for running their franchised locations; franchising creates a franchisor-franchisee relationship that keeps a legal barrier and doesn't carry the same risks as a joint venture while growing your business. Because franchisees don't carry the same risk as someone opening their own business, those interested in opening a start-up business do forfeit some of the autonomy of someone who has taken on that risk. This means franchisers must contend with company and corporation guidelines that a franchiser must abide by, but there are also legal barriers the franchisee must take on.

Buyouts & Their Advantages and Disadvantages

There are many pros and cons when it comes to buying out a company for both the buyer and the seller, and the agreement should be structured so that the needs of both companies are met. Neither side will get everything they want, which is one thing to be aware of when considering this option.

One advantage is that smaller companies often have access to more and better resources when absorbed. This means more products or technology can be offered to a larger customer base. The larger business can incorporate new products or technology into its existing product line. This can positively impact customers, who may experience decreased prices for a company’s products or services. Less competition means a business can spend more time expanding.

Conversely, when integrating business, some cons will arise. Resistance to change is inevitable and will happen. Plans must be established before events change to help address integration, loss of productivity, and changes in key personnel.

Family Businesses and Its Advantages and Disadvantages

There are many advantages to running a family business, such as stability, commitment, and flexibility. A family business position is often determined by your role in the family and can often lead to a long last business venture. Family firms tend to have greater commitment and accountability because they work not simply for a boss or a paycheck but for their benefit, livelihood, and the well-being of those they love and care for. The desire for family and business to stay strong fosters additional benefits, including a greater understanding of the industry, business, and the job; stronger customer relationships; and more effective sales and marketing.

Alternatively, there can also be quite a bit of hardship and struggle in a family business, as human dynamics and family history can alter the course of a company through nepotism, conflict between members, lack of structure, and the adversity that comes with succession planning.

The Market

Regardless of what type of business you venture into, all successful entrepreneurs must have a tangible understanding of the market and how it will affect them.

Conducting a Market Analysis

Market analysis is the act of gathering information about conditions within a particular marketplace. Market analysis helps to assess the market in a specific industry and provides an entrepreneur with a better understanding of their audience and competition. This information helps to build a more targeted marketing strategy. Within the analysis are particular dynamics such as potential customers, purchasing habits, what customers are willing to pay for a specific product, who your competition is, and their strengths and weaknesses. Performing a market analysis will alleviate risk and uncover emerging trends, the context for past mistakes, and revenue projections. Drawbacks to performing this are cost and time. If you’re unfamiliar with marketing concepts, outsourcing may be the best choice as it is intensive and time-consuming.

Understanding Your Target Market

You are narrowing your market analysis to a specific group – perhaps current customers – to lower costs. This is the target marketing concept which means focusing on marketing to a particular portion of the population. Target marketing is vital to your business because it is broken into clearly defined pieces and helps to concentrate your efforts on as few elements as possible, focusing on a few key components of the customers whose needs and desires most closely align with your service or product. Knowing this will help you concentrate on sustaining and growing your business.

Closing Assessment:

Please respond to the lesson email with answers to the following questions, and one of our instructional design mentors will respond with feedback.

• What are the disadvantages of franchising?

• What are the pros of a family business

Advance your understanding by participating in the 24/7 Discussion Forum:

Please answer the following questions in the comment section below and interact with learners from around the world.

As you are gaining clarity on your product/ service for a business idea, who might be some of the people in your target market? Why do you think that?

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