Before setting up a business, entrepreneurs will face some difficulties like insufficient of capital and barriers of entrant; therefore they need to have sufficient of capital and have to analyze those competitors' difficulties in order to come out with an easier way or idea and strategy to enter the market.
We plan to start up an information technology company, PC Soft Company. We intend to sell those high tech products, for example desktops, laptops, Android phones, and computer's software such as business software, accounting software, POS system and so forth. Therefore, we can install those computers' software and sell it out to the customers.
Our capital RM100000 is given by family and RM50000 is our own capital. Thus, we spend this amount to operate our new business and to overcome those difficulties as well. The RM150000 may not enough to operate the new business, because to set up a new business we need to spend a lot of money, such as rental fees, and other those expenses.
We had went to other information technology company to interview them and make a survey to find out what are the difficulties that faced by the other companies when they just starting up and operating their new business. As a result, we can generic all those faced by other companies' difficulties, and transfer the data to our business and get more ideas to overcome all those difficulties.
Body of Content
2.0 Difficulties that Faced by 3 Entrepreneurs
2.1 LVBS Technology s/b
LVBS company is under the software industries, this company develops the business software such as accounting system, point of sale system, inventory system, payroll system and other business solution. This company also selling other product likes the computer and some of the part computer's accessories. Due to many computer's shop are allocated in Ipoh area therefore this company have a lot of competitors.
LVBS Company was established in 2002. When this company started to run the business, difficulties were come out. This is because their business still new and lack of company awareness therefore need to put more efforts in this company.
2.1.1 Research and development
The first difficulty have facing in LVBS is the research and development. Before they run their business, they have spent around three years to develop the business software and two years to research the available market in Ipoh. It was highly time consuming. The company often needs to develop more new software to support the business as the environment of the business world keep on changing and this will cause a lot of time for the company.
2.1.2 Financial problem
The financial problem is one of the important issues that they have to deal with. Majority of entrepreneurs faced this same problem, insufficient of capital when they setting up a new business or operating current business. Before LVBS Company starts to operate, the financial problem is a main barrier for them to run the business because they can't afford to buy a shop lot to operating business, therefore they have to rent a shop lot, at the same time they didn't have sufficient of capital to provide a better working environment. Moreover, this problem also caused them unable to achieve economies of scale, because they cannot buy the larger quantities for their stock.
2.1.3 Customer base
As for the customers base, they is need to go to every business' company and ask the potential customers see whether they interested to use the software. They using face-to-face method to get potential customers for the company when the LVBS Company just started operate. During that time they are lack of awareness and reputation therefore they did not have any regular customers.
2.1.4 Human Resource
The human resource is another major problem for this company. In Ipoh area it is very difficult to recruit any younger employees, because younger generations would prefer go to other states such as Kuala Lumpur, Penang and so on to look for jobs as the job opportunity is higher compare to Ipoh. As a result, this company is lacking of on the skill worker such as programmer, marketing executive and so forth, because to get these skill workers the owner need to paid high salary for the employees. In the profit and lose statement shows that the majority expenses were going into the salary column.
When the company just started the business, they only have two people to operation only, and therefore they faced the problem of lack of software support and training.
2.1.5 Competition
Most of the new entrants will face the same difficulty when entering a new market which is competing with the existing competitors in the same industry. For the LVBS, they have a lot of competitors that directly affecting the LVBS company's business, the main competitor is V-POS Company. This competitor's company is the doing specialize software's company and the brand recognition which is very famous in Ipoh. Therefore, LVBS are strongly affected by the V-POS company.
2.1.6 Economic
When running the business, it will influenced by the economic trend. This has be a treat for LVBS Company because this will affect the sales of the company due to the consumers unwillingly to spend and purchase the computer system. Therefore, LVBS have the difficult to clear their stock result in low inventory turnover. People tend to save up their money into the bank during economic downturn period.
2.1.7 Location
When the company owner wanted to establish the business in Ipoh, they have faced the difficulty of finding a strategic location base in Ipoh, because they just rent the shop instead of purchase, therefore LVBS has face the difficulty for the good location. Because the location is the part of the important factors affect the business, if the location is good it will easily attract potential customers. Eventually it will increase the sales of the company as well.
2.2 Starmax Mobile Entriprise
This shop is located in Ipoh Jaya and operated by Chai Chee Chung. It was established on year 2008 and he is doing on selling mobile phone business and includes repairing & maintenance services. Though his shop operated was only one and half year, but those difficulties are obvious.
2.2.1 Amount of Employee
In this shop, it is lacking of employees. It just has one employee who performed all task such as selling mobile phone, maintenance and so forth, just because of professional technician is difficult to recruit. Therefore, they might not able to accept all the business. Other than that, sometimes they only get small amount of profit in the maintenance because may cause the mobile phone broken when repairing due to employee lack of skill in repairing.
2.2.2 Unable to Control Employee's Attitude
Working hour of employee is quite short, and always late went to work. Moreover, the employee worked lazily and this leaded to loss in business. Furthermore, the employee just simply do the checking instead of check carefully the mobile phone, thus will get the complained from customers and also held that is no quality and also sometimes the employee took the shop's capital instead of own salary as compensation for customers. In additional, the employee always didn't open the receipt no matter in selling or maintenance. As a result, he messed up the money of transactions in the accounts book.
2.2.3 Problem of Supplier
Since the supplier who was unhappy with his own industry, hence he was intentionally given wrong price to them which is lower than the market price. When they just realized about that, the supplier was resigned and can't sue them since they didn't sign any contract. Finally, they unable to increased the price, thus this has caused them having heavier burden and broken up with the supplier's industry. Moreover, just because of this is just a small shop, hence they can't get the suppliers easily due to low reputation.
2.2.4 Location
This company has chosen an unsuitable location. This is because there was a shop where doing business with dishonestly acting previously. Therefore, once those people walk through in front of the shop, they will start their gossip about the shop, even though it was changed to another shop. Just because of this, even though the shop belongs to this latest employer now, but it was already affected those people's mentality, hence, the first impression for them is bad.
Other than that, there are few competitors existing at Ipoh Jaya such as High Tech Enterprise, Mobile Choice Enterprise and so forth. Thus, the total sales might be affected because of customers might choose the competitors.
2.2.5 Always Outstation
As an entrepreneur, he needed to upgrade and improve himself. He has to walk around those states every month to see any latest item. It would take some time and spend capital. Hence, his employee will take over the shop temporarily, it might create an opportunity to let employee close the shop and not doing anything.
2.2.6 Economic Trend
The sales drop when the period of economic deterioration. This able totally affect their business since the mobile phone is not a necessary item. Those customers would start to bargain with the seller. As a result, the business had become difficult to success in the transactions.
2.2.7 Cost of Business
Due to the small business, the cash flow of the shop might not be liquid enough. Owner does not have sufficient capital to hire more staffs and purchase stock. If some sudden problems occurred, recovery for those problems would be slower and not quickly enough to respond with the market.
2.3 Tech Link Trading
This company is located at First Garden and just a house instead of a shop. It is operated by Foong Kah Wai and he is doing on sales, repairing, networking and broadband installation.
2.3.1 Lacking of Worker
The owner of the business is the only one who works in handling all the tasks, such as sales, installation, maintenance and repairing. These cause work flow slowly and can't receive potential businesses due to limitation of time and motivation because of individually handling tasks.
2.3.2 Location
Because of his location is in his own house, thus it is not emerged in the available market due to lack of respond to awareness from potential customers, and finally he will easily defeated by other competitors since there are a lot of similar businesses existing. In addition, there are not enough spaces to store those inventories such as those computer accessories and other businesses related necessity. Supplier may find it difficult to distribute solely to this business owner due to lack of strategic location.
2.3.3 Diseconomies of Scale
Supplier might charge higher price due to he can only purchase small quantity of inventories. As a result, economies of scale cannot achieved eventually it indirectly increase the cost for the business and then will not be enjoy the cost efficient. Besides that, he can only rely on fewer suppliers due to low reputation, therefore those suppliers might raise cost. In seriously condition, it may leads to discontinue deal business to him.
2.3.4 Inflexibility of Time
Due to the heavy workload, owner does not have much private time and tight schedule and may cause conflict with customers and suppliers. Other than that, it can cause personal depression and may lead to negatively job satisfaction. Moreover, it can leads the owner to do and make wrong decisions, hence may affect his business operations to not running smoothly and lead to loss profits on his own business.
2.3.5 Transportation
Just because of he working at his own house which is located in First Garden and there is no suppliers around there, hence he needs to get those inventories from other areas by himself. The transportation cost tend to be higher and time consuming too because, he required to delivery the products to his customers by own and might spend a lot of time for those who live in far areas. These two terms able to rise up the expenses cost of transportation. Due to the insufficient of the capital, owner can't be able to recruit more stuff to do distribute the job task.
3.0 The Solutions to Overcome Difficulties
We analyzed those difficulties from different competitors, hence we have came out with few solutions to address them.
3.1 Economical
We can't control the economic trend, but we might be able to reduce the sales drop fiercely. We would like to allow our customers using easy payment which means they can enjoy the products with the service of defer payment. Furthermore, we will do more promotions with offering vouchers RM30 when those customers have purchased RM 100 above.
3.2 Competition
In the situation of forced by the competitor, therefore we do the analysis of promoting strategy in order to defeat other competitors. We can adapt and develop new and better strategy to compete with competitor. Furthermore, we also can utilize the SWOT and PEST analysis to determine the proper solution. Other than that, our products need to cheaper than the competitor, because we are the new entrant into the business environment. Therefore we will offer the better promotion try to attract more and more customers and gain their loyalty.
3.3 Location
In order to sustain the business we should acquire a strategic location, so that customer will aware of existing of our shop. Due to the cost efficient, we will prefer to rental the building, the market place too be preferable at Greentown Business Central, because that has more potential customers and we can compete with other competitor. At the same time that location also has a gap that enables us to enter to the market since we can rely on other shops' reputations which can attract more customers such as there are many food stores, Digi Center and so forth, it means our shop would be located at a place which easily to create awareness.
3.4 Resources Allocate
For the resources allocation, there are two items which are labors and capital. We have to recruit some potential employees around seven people who based on technician, sales person and drivers. Worker as technician should be able to handle and understand customers' requirements and technical specification. In order to have the workflow to progress smoother, the driver of company needs to be able to move about around in town as well as around state.
This can help to sustain a business operation in our company and the market conditions. Other than that, capital for the company should be liquid enough to be handle emergency cases that might appeared during the business operations. We also can utilize the capital for the advertisements such as flyer, newspaper and so on, in order to create awareness for the people.
3.5 Employment
We must come out with the time schedule for the employees to be flexible, so that owner able to enjoy the time flexibility and job satisfaction. Besides that, we can share the heavy workload to the employees and indirectly to reducing stress and gaining extra experiences due to we might allow them to learn everything within the shop, but we have to emphasize centralized organization which means that we still have to hold the full authorities. In order to prevent high turnover rate or low motivation of the employees, we should contribute better about the wages as well as reward to our loyalty employees and also we will lead them to run our operations.
3.6 Security
In order to avoid the case of robbery, we would just put the sample as an item of display.
3.7 Communication and Network
We will ask our sale persons need to be able to handle front desk job with proper attitude and behaviour because the one who is working at front desk is equivalent to image of our shop. And also this can enrich better communication and develop network with suppliers, customers and potential competitors. Services provided should be efficient due to time factor.
Balance Sheet
Fixed Assert
Furniture & Fittings 55000.00
Vehicles 10000.00
Electrical Equipment 15000.00
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80000.00
Current Assert
Bank 50000.00
Stock 10200.00
Cash in Hand 18000.00
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78200.00
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(Less) Current Liabilities
Creditors 8200.00
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8200.00
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Working Capital 70000.00
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150000.00
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Financed By
Capital 150,000.00
---------------------------------
150,000.00
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Conclusion
According to our balance sheet, therefore we have planning to continue run the business. Because our business if operated for nowadays trend might be possible to earn the capital for business purpose. Because our business is the IT company that have selling the software and some of the computer part of accessory, therefore by the trend for today every persons also already have their computer by their own and personal user. Therefore this can be generic nowadays the technology for us is very important. Anyway, this trend will lead our business to go further that can lead our business to global.
Furthermore, our RM15000 capital also enough to using this capital to overcome some of the difficulty we might face also. And the rest capital we also have planning to using to the marketing, and do more advertisement. This is because our business is still new and we need to attract more the potential costumers.
