Challenges when starting up a business
Business challenges refer to factors that make it hard for entrepreneurs to launch their new businesses successfully. Many entrepreneurs are faced with the problem of creating a vision and a business idea. When starting up a business from scratch, most entrepreneurs find it difficult to come up with an ideal business opportunity. Entrepreneurship calls for one to make things happen by offering customer satisfaction and value.
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It requires one to identify a gap in the market and thus convert it into a viable business enterprise. Prospective entrepreneurs should look at situations from different perspectives. This enables them to see certain things that others don’t see. Many entrepreneurs thus do not recognize the hidden opportunities (Aspatore, 2002, pg. 13-20). The pioneers of Urban Outfitters i.e. Richard, Judy, and Scott recognized the market gap that existed and thus decided to open their store.
Raising capital is another challenge that many people face when starting up a business. Obtaining the right amount of start-up capital is the key to building a solid foundation for a business. Many people do not have sufficient savings to start up a business. Also, many people lack collateral for securing bank loans that they require to start up a business. In order to acquire funds for starting up a business, one is required to convince others of the potential of his or her idea.
It is often difficult to find investors especially when one does not have business ideas that have merits and potential. Investors are usually concerned with passionate individuals who believe in their ideas and are determined to ensure that their ideas succeed (Aspatore, 2002, pg. 13-20). In creating Urban Outfitters, the pioneers had a sufficient amount of capital at their disposal.
The other challenge that entrepreneurs encounter when starting up a business is finding a suitable location. A good location is a critical factor for success when starting up a business. A poor location can cause a company not to attract many customers. Thus, retailers who find a bad location for their businesses do not attract many clients (Aspatore, 2002, 13-20). The decision to locate Urban Outfitters Ltd near the University of Pennsylvania was correct. This is because the college students provided the company with the market for its unique products.
A niche product
A niche product refers to a product that is designed for specific needs only. A niche product is thus aimed for specific customers only. Examples of niche products include used clothes, bohemian knickknacks e.t.c (Stanton and George, 1999, 249-252).
Advantage of niche marketing
Niche marketing enhances specialization i.e. enables people to concentrate on their business. Niche marketing thus ensures that the employees in an organization enjoy their work. Specialization also enhances the effectiveness and efficiency of employees in an organization. Customer’s needs are therefore addressed well and this makes a company be credible to potential customers (Stanton and George, 1999, 249-252).
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Niche marketing is advantageous as it helps to reduce marketing costs. This is because an entrepreneur targets only a small audience and therefore the advertising budget is low. Urban Outfitters Ltd made huge profits by adopting a niche marketing approach. By specializing in only a few products, the company charged high prices (Stanton and George, 1999, 249-252).
Niche marketing is advantageous as it enables a company to offer distinct products to its prospective clients. Uniqueness provides a company with a competitive advantage over its rivals. By producing unique products, Urban Outfitters Ltd made it extremely hard for the competitors to follow (Stanton and George, 1999, 249-252).
Reasons why customers would pay more for exclusivity
The following are reasons why customers would pay more for exclusivity; Customers would be willing and ready to pay more for exclusivity in case of goods of high quality. Customers usually value quality and style. The college students at the University of Pennsylvania were ready to pay more for Urban Outfitters products as they considered them to be of high quality (Mukerjee, 2007, 4-7).
The other reason why customers would be willing to pay more for exclusivity is the company’s reputation. Customers would be willing to pay more if they believe that an organization has a good reputation. Urban Outfitters Ltd provided their clients with excellent services and this enhanced their relationships with the clients (Mukerjee, 2007, 4-7).
The third reason why customers would be willing to pay more is comfort. In today’s world, a large number of customers are willing to pay higher prices for goods and services that provide them with comfort (Mukerjee, 2007, 4-7).
How a niche player chips away at a large competitor’s base
The following explains how a niche player chips away at a large competitor’s base; a niche player usually chips away at a large competitor’s base by specializing in one theme or product line. Whereas a large competitor’s base goes for more than one product, a niche player has a narrow product line. By focusing on only one product line, a niche player is able to offer a wider selection of a product as opposed to the competitors. An example of a niche player who adopted this approach in urban outfitters.
A niche player can chip away at a larger competitor’s base by providing its clients with a premium product. A niche player does this by providing its clients with a unique product and thus making the customers pay more for it. The following are examples of retailers that started out as a niche player i.e. Starbucks Ltd, Rolls-Royce Ltd, and Porsche Ltd (Stanton and George, 1999, 249-252).
Aspatore, J. (2002). Vault guide to starting your own business. New York: Vault Inc.
Mukerjee, K. (2007).Customers Relationship Management: A Strategic Approach to Marketing. New Delhi: PHI Learning Pvt. Ltd.
Stanton, J. and George, R. (1999). Success leaves clues: practical tools for effective sales and marketing. London: Silver Lake Publishing.