BSS018-2 Entrepreneurship and Leadership of Business Venture

BSS018-2 Entrepreneurship and Leadership of Business Ventures

Introduction

A business plan refers to a document where details of an organisation’s objectives, and the execution plan for achieving those goals are mentioned clearly. Therefore, a business plan can be referred to as a written roadmap for the firm on how it is going to set all details of the operational activities, marketing, and financial standpoints.

Apart from this information, the strategic managers mention the mission and vision statement of the business, the product service, the ground information of the company and the strategic planning to execute the business plan, leadership and team management, and budgeting. Location setting and other pieces of information. In this way, through effective business planning, the operation managers summarise the whereabouts of the business and how it is going to survive the market to the investors or any other people who are interested in the business. In this report, a business plan for a new product is going to be developed.

Business details

UpCycled Foot is a London-based footwear company in the UK aiming to bring changes in society; hence, they decided they will be manufacturing eco-friendly shoes. The company has claimed that each pair of shoes from their new line will help to recycle 17 plastic bottles on average from landfills. As mentioned by Gebre et al. (2021), Plastics is something that has become an integral part of the daily lives of human being and this is the reason that the amount of plastic waste is increasing by days.

As plastic is low-cost, durable and easily accessible, the daily consumption of plastic has become a recurrent social issue. In the European Union, the average growth rate of plastic waste is 3.9% each year. As Plastic is a bio-non-degradable product, therefore, destruction of this material is impossible because incineration or landfills technique eventually ends up polluting the surrounding ecosystem.

Therefore, the only effective way to control plastic waste is recycling. However, globally it has been identified that 91% of plastic waste is not recycled. Therefore, to promote the importance of recycling plastic, this new company is going to focus on manufacturing shoes from recycled plastics because sustainability is the future and Green-business is the key to achieving it.

Location

London has been chosen the as the target location because it is the capital city of England and one of the largest and busiest cities in the UK. In response to the “United Kingdom’s resources and waste strategy” England is supposed to recycle 50% of the plastic waste, especially in the packaging by 2025. This percentage is likely to increase to 55% by the end of 2030 (Statista, 2022). Therefore, the local government has been very active to motivate and influence commercial companies to experiment with plastic recycling and bring about innovative strategies to manufacture products made out of recycled plastics.

The Local Authority Collected Waste (LACW) of London mentioned that 29.9% of all the plastics wastes collected from households and commercial sites is recycled in 2020/21 (London, 2022). However, the local authority ash set a target of a 50% recycling rate by 2025.

Therefore, it can be seen that a significant initiative has been taken by the local governing authority of London to support businesses to focus on recycling. Because of these reasons, starting a new business of recycled shoes in the heart of London will be beneficial because it will receive governmental support and also can avail the assistance from governmental Reduction and Recycling Plans (RRPs), and the ReLondon initiative while establishing a commercial waste network.

Market / Industry Analysis – PESTLE

According to Çitilci and Akbalık (2020), PESTEL Analysis is one of the most used strategic tools for the Environmental Scanning Process. In order to gain a competitive edge and sustain the market, analysing the market environment becomes very important. This environment scanning is of two types- internal and external. Industry analysis falls into the external market environment and to analyse it, PESTLE is the best strategic tool.

PESTLE is the expanded version of PEST. The importance of this framework is that it helps to understand the larger corporate environment in a better manner. Further, it encourages the growth of strategic and outside-the-box thinking. Through this theoretical framework, an organisation is able to foresee potential dangers to its operations in the future and take proactive measures to mitigate or eliminate their effects. In the latter section, PESTLE Analysis of the recycled plastic industry in the UK has been discussed to understand the business scope of UpCycled Foot in the market.

 Table 1: PESTLE Analysis (Source: Self-created)

Product/Service Description

Often people think that recycled shoes are garbage and there is no palace for a fashion statement in them. However, the reality is entirely different. Recycled materials are used for manufacturing the shoes that make the product comfortable and durable. Whereas, there are designers who work tirelessly for the designs which make the shoe stylish looking. Coming to recycled plastic material, in the fashion industry it has become a new trend to use recycled plastic for manufacturing “high-quality apparel and gear”.

Leonas (2017) mentioned that using recycled materials in the design and manufacture of new products, including fibre, yarn, fabric, and other product contents has become a part of the fashion industry. In addition to technological advancements in the textile and clothing industries, throughout the first half of the 20th century, the creation of synthetic and regenerated polymers best for use as textile fibres boosted the availability of raw materials.

In the current recycled footwear business, polyester and plastic bottles are made up of the main substance named “polyethene terephthalate or PET”. After recycling this substance, recycled material will be made to manufacture the recycled shoes. The company will be having its own ecycling centre, where the clear plastic bottles will be sorted first by removing the labels. In the next stage, the clear bottles will be thoroughly cleaned and by using the shredding machine the plastics are cut into flakes (Saolashoes, 2022).

Then through the drying process, the recycled PET will be dried up and broken down further to gain the shape of firm plastic pellets. These pellets will be then melted down to get filaments. At last, those fibres will be spun into threads and will be woven to make fabric from which the base cloth or fibre of the shoes will be made (Saolashoes, 2022).

On average 17-20 plastic bottles will be recycled to manufacture a pair of shoes. The reason for the popularity of recycled PET is gaining importance because, like traditional polyester, this recycled material is also “stretchy, soft, and breathable”. Thus, the demand for sustainable shoes is rising and people are also understanding the least environmental impact and the maximum sustainable benefits, they are offering.

USP, Identification of customers and Competitor analysis and justification and justification for the competitive edge

USP of the recycled shoes are the following:

The prime USP of these recycled shoes is that not only the shoes are made up of recycled plastic but also the company will be aiming to influence the target audience to take part in the cyclical process that will occur between the consumers and the products.

In this process, the company will educate the consumers about their active participation in the recycled and reuse strategy. Here, the consumers will purchase the shoe, use them as long as they want, and when the time comes for disposal, they will be returning the product back to the company. To motivate consumers, the company will be introducing a 5% discount on giving each pair of shoes back to the company.   

Identification of customers:

According to Gichuru and Limiri (2017), Marketing segments are crucial for any business plan and strategic planning because their direct impact falls on the company’s financial performance. Also, through effective segmentation, customer retention, customer loyalty and customer satisfaction can be achieved. Thus, segmentation helps in the growth of the business to a larger extent. This segmentation can be done based on four main factors which include “demographics, psychographic, behavioural and geographic location”.

Demographic segmentation refers to a group of people’s common characteristics, for example, similar kinds of “lifestyle patterns, tastes, and interests in their purchasing decision-making. 88% of UK households believe in plastic recycling and they are willing to pay extra money to afford plastic-recycled products (Recycling Bins, 2021). Demographic-wise, this particular percentage of people will be targeted for this new business.

Psychographic segmentation is the process in which the target group of audience is segmented based on the similarity between their “personality, lifestyle, social status, activities, interests, opinions, and attitudes”. Whereas, behavioural segmentation is finding the best customer segments based on their buying process, ideologies, their needs and expectation from the products and others. All the people who believe that climate change is real and plastic pollution is a big factor contributing to this challenge will be targeted because will be able to understand the value of this recycled product and be eager to buy it from the sense of being a responsible citizen to save the planet.

Geographic segmentation is the process of selecting a target audience based on where they live or work or stay at the maximum time of their day.  Here, London has been chosen because the local governing authority (“The Local Authority Collected Waste” (LACW) ) is very active in supporting recycled businesses and set a target of a 50% recycling rate by 2025 (London, 2022).

Porter’s generic strategy for competitive edge

As mentioned by Ali and Anwar (2021), Porter’s generic forces explain that to combat the five different market forces, every company needs to strategies a strong defence mechanism. These mechanisms are of four different kinds which are “cost leadership, differentiation, cost-focus and differentiation focus”. Cost leadership is the strategy of lowering the price which bears the risk of low input and the wider scope of manufacturing similar products having similar features at low cost.

In this strategy, the company may always look for different strategies to increase production efficiency to hold on to the customer base and increase profitability. Differentiation is the strategy in which, the company aims to “re-branding or develop new specialised products” with premium prices within the existing brand.

Focus is the strategy in which the company is focused on building a product value to increase productivity, and profitability and gain a competitive edge.  As the company is new and also aims to launch an extremely new product- recycled shoes, it would be better to use the Cost leadership strategy in the initial stage, it will help to scale up production at a lower price.

Operations Plan and identification of operating resources

As mentioned by Roscoe et al. (2020), the operations planning process is a strategic tool that helps the company to work on its “economic, environmental, and social performance” through effective stakeholder management. Following are some of the relevant steps for effective operations planning.

• Preparation: This is the initial stage of setting goals, and addressing the mission and vision statement. For example, the mission statement of the current business will be to “make eco-friendly shoes that are healthy for the customers and the planet as well”. The scope of the business is another important to understand the life cycle of the business and assessing both the internal and external resources and capabilities to generate maximum profit margins.
• Marketing: This marketing strategy helps in capitalising on available market opportunities to gain a competitive edge so that the business can enjoy healthy financial growth. Further, through effective marketing planning, the company will be able to reach the maximum target customers to spread awareness of its product (Roscoe et al. 2020). Thus, a positive buzz will be created within the market by using different marketing channels, like social media, online, email, telephone and others.
• Logistics: In order to gain a strong logistical output, the company should focus on prior planning so that the journey from supplying raw materials to the warehouse and delivering the product to the nearby market or doorstep of the consumers becomes seamless.
• Human Resources (HR): Employees or the people are the backbones of an organisation and the performance behind it. Therefore, the company should also pay attention to driving the best talent by implementing fair, and transparent protocols for employee hiring and retention.
• Financial limits: This is the process of carefully articulating the best financial plan so that the picture of future purchases remains clear. In one-word skilled finance team need to be hired so that proper budgeting is qualified (Roscoe et al. 2020). Apart from all these five main operational plans, the company’s hierarchy should always look for a backup plan and understand that agility is key. Operational strategies need to be flexible enough to be changed whenever needed.

Risk and Contingency Plans

As mentioned by Marshall (2016), a risk register matrix is a strategic tool that helps the organisation to identify risks related to the business and helps to manage those risks through effective contingency planning. Following is the risks register matrix given for the new business plan for the recycled shoe business.

 Table 2: Risk REgietr matrix Analysis (Source: Self-created)

Sales and marketing strategy

As mentioned by Ferrell et al. (2021), sales and marketing strategy is a strategic approach that helps an organisation to develop the right marketing strategy to drive sales and initiate the best functional business decisions related to marketing. Following is the Sales and marketing strategy for the new business.

• The very first stage is to set goals based on an effective sales plan. For example, this new business of recycled shoes will be to achieve its target of creating a 20% profit margin in the next five years. Now, in order to achieve this set goal, the company will need to have a well-defined strategic direction, outline roles and responsibilities to the team members and continuously monitor the progress of the sales.
• The next stage is effective communication. Without open communication, the company can never translate the sales objectives to the team and explain the necessary strategic plans that will be important to walk in the strategic direction. In this process, the company will be able to identify the right marketing communication channel- social media conversions or email conversations or using Facebook – to drive the best comjunciation within the team.
• To build a strong sales and marketing team, it is very important to divide skilled employees into defined teams and clarifies their job roles and responsibilities. If the tea members remain confused about what to be done then it is never possible to have a good marketing team. Therefore, the focus should be on “delegating tasks effectively, fostering better teamwork, cutting down on duplication, and raising accountability” so that monitoring of sales progress is achieved.

Finance and funding plans

A finance and funding plan is a plan of action that an organisation creates to acquire and manage the financial resources necessary to achieve its objectives (Kabeyi, 2019). This involves identifying funding sources, determining the required funding amount, and devising a plan for obtaining and using the funds (Sachs et al. 2019). The plan usually involves analysing the organisation’s financial situation, including its assets, liabilities, and cash flow, in great detail. In the current scenario, the financial plan for the new businesses being established from recycling plastics to manufacturing shoes is in focus.

The figure depicted above highlights the projections of the balance sheet for the concerned shoe business for five years from now to provide an overview of the financial situation of the business. Upon further analysis, the inventory levels have significantly declined owing to the installation of different machinery within the company. However, no significant long-term assets have been included within the business plan while there have been some long-term liabilities undertaken by the venture capitalists that are projected to the met within the times of 5 years. However, the net worth of the organisation is expected to improve from $10878 during the first year to $57059 in the fifth depicting positive growth and profitability for the organisation.

The figure depicted above highlights the graphical representation of break-even analysis that is essential for businesses to depict the point of no profit or loss to further break even towards profitability in the future. However, our break-even analysis has been significantly depicted in the above figure while monthly break-even revenue is recorded at $6585 while undertaking necessary assumptions like the estimated monthly fixed cost to be $2436 and average variable cost percentage to be 63%. From the overall analysis, it can be stated that we should easily sell more than the break-even in our very first month.

The figure depicted above is hereby focused on highlighting the necessary funding requirements and financial inputs brought into the organisation at its initial position. Initially, the owners of the business are found to be investing $10000 within the business while another $25000 is sought from the venture capitalists in the form of long-term loans that are to be repaired in the period of the next 6 years respectively. While there is an initial loss for the startup of the business, it has been adjusted with the total capital of the firm while the total funding amounting to $35000.

The above figure is focused on highlighting the projected cash flow for the organisation along with the table for cash received and expenditures. Upon further analysis the cash received for the organisation is found to increase from $107859 during the first year that subsequently increases to $121396 in the fifth-year total cash spent initially increases during the third year for the depicted reduction during the fifth-year reduced spending in operations of the business. Altho net cash flow for the company is registered to decrease initially from $11317 in the first year to $3227 in the second while regaining its position to $14438 in the fifth year.

Managing team – justifying your ability to lead and manage this venture (leadership and management qualities, traits and experience)

Managing the team is the most important factor for a business plan because, without proper management or guidance, any business plan or strategic plan can be successful.  There are different leadership styles. According to Al Rahbi et al. (2017), the dynamic leadership theory includes certain leadership styles including the “Authoritarian Leadership Style”, and “Democratic Leadership Style and Laissez-faire style”.

The authoritarian leadership style is a strict and dominating style where the managers possess the entire governing control over the team members. In a democratic leadership style, all employees work freely and in the Laissez-fair style, there is no provision for directing the team members and no supervision. Having analysed the different styles, it can be said that in the initial stage, as the business is new, an authoritarian leadership style will be best suited because the managers will be able to understand what will be best suited for the business and provide guidance accordingly.

The main advantage of this leadership style is managers are experienced in rulemaking, decision making and problem-solving (Al Rahbi et al. 2017). The main characteristic is that through underlying creativity and individuality, the managers are able to guide the team in the right direction.

Once the business becomes stable, then the leadership can be changed to democratic because, by that time, it will be expected that the team members will be equipped with basic work procedures and how to respond to different situations and will be the potential to take part in decision-making and problem-solving process.

The managers will need to have the following traits and skills:

• They will need to have a positive mindset and be able to motivate other team members, especially during a crisis.
• They will also possess exemplary communication skills because managers might need to go through effective negotiation and convincing others.
• Being innovative, open-minded and critical at the same time will help them in better problem-solving.

Conclusion

In light of the current analysis, in conclusion, it can be stated that business planning is not an easy task. The planner will need to have that skill which will be beneficial in effective business planning. Market research is an integral part of any business plan and hence, the manager who will be responsible for documenting the business plan should understand the use of pestle, audience segmentation frameworks and understand the value of operations planning.

Further risk register matrix also included understanding the severity of the possible risks that might occur. The sales and marketing team will be responsible to articulate effective marketing planning so that the new product can reach the maximum intended audience. Hence, one thing is clear- without hiring the best talent, conducting this huge planning is never possible.

References

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