Professional Documents
Culture Documents
REG# : H160203W
LECTURE : Dr A. MAKASI
TITLE : ASSIGNMENT 2
QUESTION
You plan to start a Technopreneurial business venture in a market where there is intense
competition. Discuss the following:
Note: Provide a brief description of the nature of the business venture and highlight existing
and potential competition before attempting the question.
As a Technopreneur I planned to start business a sole proprietorship which deals with installing
new electrical equipment in homes and companies for example DSTV installation, CCTV
installation and TV wall mounting. The business venture would also be based on fixing the
electrical appliances for example repairing faulty equipment such as TVs, decoders, stoves,
laptops etc. So I will have to find employees trained to perform specific task of this business
venture.
This nature of business service is multi-usable where we have two goal to fix and install
these electrical equipment but then there are already companies and people who are already
in this business. This means there is now competition.
Existing competition
1. Already existing DSTV installations and repairs companies such as Satellite TV services
who install DSTV and repair the decoders in home and companies. So these companies
have been in the business for a long time now and they now have experience in the
business, which is an advantage because they already have the customers loyalty. They
also mount televisions on walls.
2. Competition from Cable tech who already have connections in setting up TV needs in
hotels. Because they have experience and are trusted they competitors to us.
3. Companies like Lenovo which has warrants on their products. So if the laptop has a fault
during the warrant period the offer repair services for free which is a disadvantage to my
business venture and brings up competition.
4. Existing competition is also from companies like Eletro Tronic which installs and repairs
electrical equipment especially in companies and these provide quality services in these
areas.
Potential competition may come from self-employed electricians who offer these kind of
services at reasonable cost but of poor quality at times. But because their prices are affordable
and they are known buy the community they might be potential competitors to us.
In starting every new business there are always obstacles that make it difficult to enter a business
and also obstacles an individual faces to gain entrance into a profession such as education and
licensing requirements. In my business venture they are there are several potential barriers to
entry which might hinder me from starting my business and to enter this market. Im going to
discuss potential 10 barriers to entry that my business may face in order to enter the market.
Capital investment
This is a very important and strong barriers to entry as I would need capital to start up
such as equipment, machines for installations, materials, R&D, employee training and
advertising. So in order to enter this business I have to be financially stable. This may
deter entry into this market.
Customer Loyalty
A business cannot be productive without having gained the loyalty of the customers to
their product or service. Companies like Lenovo have gained the customers loyalty to
fixing their laptops in the best way. Having strong quality skills of fixing/repairing theses
appliances can deter entry in this market.
Advertising
In order to be recognized and known in the community that we have great quality fixing
and installation skills advertisements need to be done. A lot of money needs to be spend
in advertising which is a sunk cost and deterrent to entry.
Network effects
People dont necessarily choose the best fixer / installer but usually choose the ones their
friends use. The greater the number of users using a specific service the greater the
individual benefit. There is already a strong network which exist which limits my
business to gain sufficient users to create a positive network
Limiting Pricing
Since there already exist competition a firm may lower prices/ charges for a specific
service, for example mounting TV at lower costs, so as to deter entry. This also prevents
competition.
Economies of scale
Usually occur when increased output leads to the lowering average costs. Most people
buy their appliances from TV sales thus there is increased output of sales and therefore
offer free installation services to their customers .it would be difficult for my business
which doesnt have a significant cost advantage of installation. Therefore the prospect of
higher average cost will deter entry.
Government policy
Government may support local firms through licensing requirements to the extent that
new entrants find it much harder to a profitable entry into the market. Taking in account
the government in Zimbabwe which is corrupt which makes it weak in some areas of
protecting intellectual properties. In such cases my company which is going to have
strong IP advantages such as new methods of installing and fixing these appliances may
choose not to enter the local market where unfettered coping would rife.
At some point in my business venture there will be a time where I would wish to exit the
market and there are always obstacle which might prevent me from exiting this market. The
obstacles may cost the firm financially to leave the market and prohibit us from doing so.
These obstacles are barriers to exit and if significant; this firm may be forced to continue
competing in the market because the cost of leaving may be higher than those of incurred if
we continue competing in the market. Factors forming barriers to exit may include:
Contractual arrangements
We may have entered into contracts with our customers and suppliers to repair or fix their
electrical equipment where breaching of these contracts creates punitive damages which
we cannot afford. This can deter us from exiting.
Sunk costs
These are costs that cannot be recovered if a firm leaves a market which include
marketing and advertising costs. These costs can deter us to leave the market since we
would have invested much in advertising.
Potential upturn
The influence of a potential upturn in the market for example new installation projects
which may reverse our current financial situation may deter the company from exiting the
market since this will boost the finance of the company.
REFERENCES
1. Economics Help, (2015), Barriers To Entry.[online] Available at :
http://www.economicshelp.org/microessays/markets/barriers-entry/ [Accessed 1 Oct,
2016]
2. Boundless, (2016) Entry and Exit of Firms. Boundless Economics.[online]
Boundless, Available at :
https://www.boundless.com/economics/textbooks/boundless-economics-
textbook/competitive-markets-10/long-run-outcomes-68/entry-and-exit-of-firms-259-
12356/ [Accessed 2 Oct, 2016]
3. Simister, Paul, (2011). Exit Barriers Intensify Competitive Rivalry. [online]
Differentiate Your Business. Available at :
http://www.differentiateyourbusiness.co.uk/exit-barriers-intensify-competitive-rivalry
[Accessed : 1 Oct 2016]
4. Changing Works, (2016).Barriers To Entry. [online]. Available at :
http://changingminds.org/disciplines/marketing/understanding_markets/barriers_entry
.htm [Accessed 30 Sept, 2016]
5. Economics Online, (2016). Barriers to entry.[online] Available at :
http://www.economicsonline.co.uk/Business_economics/Barriers_to_entry.html
[Accessed 2 Oct,2016]