A. Nature of our business:
We are going to start a new coffee shop business in the United States of America. This coffee shop would be a partnership business, where capital would be brought by the partners and the profits and losses of this business would be shared by the partners in proportion to their invested capital. Initially, this shop would be started at a small level, but after gaining customer loyalty, we have a plan to expand this business. The business would be started with the partners’ capital instead of using debt facilities. Later on, as we have a plan to expand the business, we might require debt facilities from available sources.
B. Advantages of owning your own business:
• You can earn higher financial rewards through business ownership rather than working for someone else.
• Business owners enjoy flexibility in their lifestyles; they get the opportunity to spend time with their families according to their desire, while working for someone else doesn’t provide this much flexibility in time schedules. (U.S. Small Business Administration, n.d.)
• Business ownership provides more personal satisfaction and opportunity for growth as compared to working for someone else.
Disadvantages of owning your own business:
• The biggest disadvantage of owning your own business is the risk of losing money. As a business startup requires a lot of money to manage the cost of material and other pre-commencement expenditures, there is always a fear that all of the amounts will be lost due to unfavorable circumstances.
• The failure of a business may lead to various health and stress issues, especially if the business is managed through a loan, creating additional pressure on loan repayment in case of business failure.
• Owning your own business requires more personal commitment in terms of time and dedication. This may badly impact your personal life and family expectations.
C. PESTEL:
PESTEL analysis is the assessment of the external environmental factors of a business. This analysis consists of political, economic, social, technological, ecological, and legal factors. It identifies the opportunities and threats present in the environment for a given business. It helps a business capitalize on its potential opportunities and minimize threats from the external environment. It also helps in product and market positioning. PESTEL analysis provides the basis for formulating business strategies. Plans for future business activities can be based on this analysis.
A- Globalization:
Globalization is the process of conducting business in multiple countries. Under globalization, business decisions are made for the global profitability of a business rather than on a domestic profitability basis. Globalization can impact a business in multiple ways. The following are two examples of impacts that globalization can have on our business.
1- Low cost of production:
Under globalization, production can be located in countries where the availability of resources is cheaper; hence, the cost of production can be minimized, and profitability can be enhanced. As we have a coffee shop business, we can locate our business mostly in countries where materials and labor for coffee production are cheaply available. Lower rates of shop rental can also be a factor in locating shops in different countries.
2- Expansion of market:
Under globalization, a business is conducted in different countries; hence, the market of a business is widened. If we conduct our coffee shop business globally, we can have a bigger target market and a higher number of customers. Having a bigger target market also causes larger production, which results in low production costs as the fixed cost of production usually remains the same.
B- Suitable technology:
In today’s world, every business needs technology to improve its performance. PESTEL analysis is also used to assess technological changes in the environment of a business. Technology can be an opportunity or a threat. As our business is a coffee shop, we can use e-commerce for our business. E-commerce is the use of the Internet and computer technology for conducting business. A website can be developed for any business. Although we will not solely rely on conducting business on the Internet, we can use our business website to boost our sales revenue. Our website would provide the facility for ordering from home and getting delivery. Besides online ordering, this website would provide a facility for reserving tables at our shop.
Computer system technology can result in efficient operations and timely decision-making. Software like “Enterprise Resource Planning” can be used to manage the resources of a business in an optimal way. We can maximize our return from the coffee shop by effectively using these available software technologies.
The Internet provides a vast and fast medium for advertising a business. Our coffee shop business would use the Internet to capture the attention of our target customers. As our core customers would be the working class of the United States of America, this class uses the Internet widely; therefore, the Internet would result in the most effective advertising (Laverty & Littel, 2020).
5
LO1/3
Your answer should go in the box below.
a. Customer analysis is one of the most important features of a successful business. The business strategy can’t be successfully formulated and implemented unless the company understands its customers. Customers are considered the most precious asset for any business. Every company, irrespective of its business nature, has to segment its market according to customers’ habits and preferences. The firm can get a competitive advantage if it anticipates and fulfills the needs of customers better than its competitors. The more the firm knows its customers, the more effective the marketing efforts and sales will be. The firm is always looking to identify who the customers are.
What are their needs?
How can the firm fulfill their needs?
The firm cannot achieve its sales objectives if it is unable to segment its customers properly. The firm can stand out from its competitors if it is able to meet customers’ expectations better than its rivals.
As we are providing coffee at low rates in the main market, we hope that we will be able to acquire a wide range of customers. Coffee is the most popular beverage in the United States of America. A person usually spends $21 per week on coffee. The working class constitutes the major portion of the target customers of our business. Employees can relieve their stress and work pressure during hectic routines by enjoying delicious coffee.
(b)
The firm can attract customers either by providing the product to customers at a low cost or by providing the product with unique and superior features as compared to other rivals within the same industry. The firm can compete better if it becomes the lowest-cost producer because this provides the opportunity for the firm to deliver its products at lower rates as compared to other competitors. On the other hand, the firm can get a competitive edge by providing a superior product in terms of features or quality. This is possible if the firm is good at innovation and is renowned for product design and product innovation. This will allow the firm to charge a premium to its customers due to higher quality. However, marketing efforts would play a critical role in the success of the business strategy irrespective of whether the company adopted a low-cost strategy or a best-value strategy.
(a)
Nowadays, ethics have become one of the most important features of business. Customers like to buy products or services from firms that follow ethical requirements. Moreover, the company may need to face heavy regulatory damages, fines, or penalties if it is unable to follow ethical requirements. Customers like companies that play an active role in corporate social responsibility. Companies that follow ethical practices generate more value as compared to companies that do not follow ethical practices because they have more dedicated employees, and thus, this increases the efficiency of the employees, which further increases the overall productivity of the firm. It also helps in acquiring new customers and improving customer loyalty. Moreover, it helps in making a positive impact on the community. Business ethics provide the basis for managing a sustainable business and long-term profit. It is possible to earn a short-term profit through any immoral or unethical business practice, but a business can’t earn a long-term return that way.
(b)
There are various ways to show that the firm is treating its staff in an ethical way, such as by providing excellent working conditions and maintaining adequate safety requirements in the employees’ workplace. The company also provides bonuses if an employee plays an active role in corporate social responsibility. The firm pays wages and salaries to its employees on time. There should be a policy in the firm to take care of the family members of employees. Moreover, it is essential that the firm produces ISO-certified products that do not create any hazard to the health of employees (Bright & Cortes, 2019).
References
U.S. Small Business Administration. (n.d.). Business guide. https://www.sba.gov/business-guide
Laverty, M., & Littel, C. (2020). Entrepreneurship. OpenStax. https://openstax.org/books/entrepreneurship/pages/1-introduction
Bright, D. S., & Cortes, A. H. (2019). Principles of management. OpenStax. https://openstax.org/books/principles-management/pages/1-introduction
Academic Master Education Team is a group of academic editors and subject specialists responsible for producing structured, research-backed essays across multiple disciplines. Each article is developed following Academic Master’s Editorial Policy and supported by credible academic references. The team ensures clarity, citation accuracy, and adherence to ethical academic writing standards
Content reviewed under Academic Master Editorial Policy.
