Answer in Management for Fancy #276215
A company is facing a downward trend in its sales values, it is considering moving
into different businesses, apply the concept of decision making, explain the steps to
be used to select one business alternative and explain the challenges likely to affect
the decision-making process with suitable examples.
Ensure that the Service or Product has a Repeat Buy
Ensuring that the service or product has a repeat buy is a must. This is a number one factor of a long-term success in a business. There must be a service or a product that people will continue to keep on buying. For instance, it is more profitable and better having a pool cleaning company than having a pool building company. An owner should likewise not only focus on getting a customer but on making a profit from him or her for a long time.
Ensure that a High Profit Margin is Obtainable
Few companies can complete over a long-term period on an inexpensive marketing platform. Thus, in any business, there is a need to watch on the cash flow. In working with a lower profit margin, having a huge working capital in running through the lean profits is a must. It is believed that a higher margin is necessary when it comes to growing a business. This way, one will be able to finance the growth.
Decision Making Process
Once the decision has been made to look at creating a new business or enterprise, a planning process should be determined. Numerous resources with a variety of lists exist on how people go through the decision making process. Most processes start with goals designed to begin defining the business idea. This is often followed by a current assessment. The purpose for these first two steps is to begin to determine the feasibility of the new venture. It is important that there is a broad focus on products, markets and ideas. From the broad focus, a concise concept will be developed. If the process is started with only one idea in the beginning, the number of opportunities is often limited and risk increases. Therefore, it is better to keep an open and flexible mind in the early steps.
From the assessment or feasibility analysis, a concise business plan should be developed. The business plan, however, still needs to have a flexible focus on the product market and ideas. Flexibility is important because conditions and the business environment change. The last step is to fund or finance your business idea. Keep in mind that many new entrepreneurs want to start with financing the business, focusing on sources of funds first. Without a concise plan, often new businesses exist only as long as the stream of financing is in place. Start with goals.
The decision making process should always start with goals and abilities. Ask questions such as: what do I love to do, what do I know how to do, and what do I do well (Bubl and Stephenson, 2001). Maybe a better question is what is motivating me to plan? Start with the last question first because it will determine the overall goal. The other questions will help narrow and refine the decision making process. Goals vary and are either non-financial (e.g., partner- ship with the local community or provide healthy products) or financial (e.g., provide a fair return to my labor and management). Goals that are financial should be compared to existing businesses or indus- try averages to determine if they are realistic.
Current assessment involves a better understanding of the resources available and the strengths of the business. The potential for the new products need to be understood. Who are the customers and what do they want? Secondly, an assessment of the current resources needs to be made. Does the current busi- ness have the land, labor, management, and capital to meet the potential market? Are there financial resources available to get the proposed product to market? These questions as well as others (see Sul- livan and Greer, 2002; Born, 2001) are designed to evaluate any new business or enterprise.
What alternatives to look at – feasibility and planning.
Once a current assessment is completed, alternatives that match up with the assessment can be evaluated. According to Joel Salatin (referenced in Sullivan and Greer, 2002) there are several factors that will help make the initial choices. Alternatives should have low initial start-up cost and high gross profit margin. They should have relatively low maintenance re- quirements and high cash flow relative to expenses. Alternatives should have a history of high success rates among new enterprises and high demand/low supply in the current marketplace. Lastly, alterna- tives should have high product distinctiveness and be relatively size-neutral regarding profit potential. Each of the potential alternatives should be evalu- ated through a feasibility process. A feasibility study is intended to look at the multiple alternatives and narrow them down to one. The narrowing process should take the following into consideration. First, the alternative should match the goals and objectives of the business. Second, the alternative should match the current assessment of the strengths of the business. Third, market opportunities need to exist for the products. Lastly, the product should be able to be made efficiently and effectively.
In essence the narrowing of the alternatives to one and the refining of the initial business concept leads to the development of a detailed business plan.