The term business venture can be defined as a start up entity which has been developed with the intention to get profited financially. The success of a business venture is highly dependent on the efficiency and farsightedness of the entrepreneur. Majority of the business ventures are created on the basis of the demand of the market. Entrepreneurs generally identify the needs of the consumers for the specific product or service and based on the specific requirements of the consumers, the investors proceed to develop innovative ideas. These ideas are then marketed and the final product is old to the consumers to meet their requirements and experience gradual enhancement in the revenue of the system. A business venture can be conducted by a single entrepreneur as well as a group of entrepreneur with the same objective of gaining financial success. According to researchers, conducting a business venture in a already saturated market may result in failure (Beamish, 2013). Hence, it is highly crucial for the entrepreneurs to conduct in depth research of the market about the availability of the product or services to be offered to the consumers. Majority of the successful business ventured has taken note of the demand of the market since high demand along with lack of supply of the product or services to be offered to the consumers facilitates busies venture. When it comes to the entraprenual business venture, the venture includes new products instead of old business models.
In this report, the business venture of John Paul DeJoria, one of the most renowned American entrepreneur and a self made billionaire has been highlighted upon. He is best known for being the cofounder of the Paul Mitchell line of hair products and for being the founder of The Patrón Spirits Company. While DeJoria committed himself to the business of Paul Mitchell, who was a superstar hairdresser of his time, the startup for the business was only 700 dollars. Within the time span of 2 years the Mitchell-DeJoria due were able to raise the profit of the company to a huge amount and currently, the company generates approximately 1.5 billion dollar every year. When it comes to his business of Patron Spirits, it can be said that the business have gained success due to the incredible approaches to the challenges taken by the mentioned entrepreneur.
In this section, detailed discussion about the origin of the capital sources for new venture and the methods to obtain the some will be performed along with that, this section will also include detailed description of the challenges faced by the venture and the potential risks associated with the business venture.
Financial stability can be considered as one of the most crucial factor that needs to be considered while supporting a new business venture. According to researchers, the chief capital sources for the new venture include financial resources, human resources, educational resources, physical resources and finally emotional resources (Schaper, 2016). While starting a new business venture it is highly crucial for the entrepreneur to collect adequate resources so that the business can be established successfully. In the following paragphs the methods of obtaining the above mentioned capital resources have been discussed.
As being discussed earlier, the most crucial element need to start the new business venture includes funding. Even the most basic business does need a good amount of startup cost that hlps the entrepreneur to register the business name and obtain a business telephone line as well as printing business cards. Generally entrepreneurs obtained financial resources from a variety of sources, the most common being the personal accounts of the Founder. When it comes to the hair dressing business of John Paul DeJoria, he had invested a lump some money of 700 dollars as the investment for his business venture. According to researchers, for investors who are unable to fun the business with the help of personal accounts, loans granted by the financial institutions, private investors, debt from friends and relatives and loan taken from the governments are considered to the alternative methods for financial investments (Morris, Shirokova & Shatalov, 2013).
The success of a new business venture is highly dependent on the skill level of its employees. Hiring skilled candidates who possess the track record of excellence in their area of expertise ensures that the goal of the company will be achieved efficiently within a shorter period of time. Considering the fact that the business venture of John Paul DeJoria and Mitshell includes hair dressing, recruiting employees who have got previous experience in the mentioned profession and possess expertise to satisfy the consumers are highly crucial (Mohammed & Obeleagu-Nzelibe, 2014). Since Paul Mitchell himself was a highly renowned hair dresser, he was able to provide effective training to the employees which in turn enhance their skill level and eventually resulted in the enhancement of the revenue of the business.wen it comes to recruitment of employees and supplier of the Patron Sprit company, as the founder, DeJoria has invested high on the recruitment procedure so that only the best of the candidates are recruited as the employees of the company.
In order to gain success in the new business venture, it is highly crucial or the entrepreneur to gain as much knowledge about the service or the product as possible. Gaining knowledge about the industry to be operated helps the entrepreneur to understand his competition and get prepared to make smarter decision so that success can be achieved easily. In case of John Paul DeJoria, he had gathered enough knowledge about the upcoming demand of the hair dressers and hair care products in the American market before investing in the same (Macht & Weatherston, 2014). When it comes to Patron Spirit, the knowledge that the demand for high end alcohol within the American society is gradually increasing, has led to the establishment of the company. Some of the methods by which the mentioned resource is obtained are through professional trade associations, the local chamber of commerce as well as the small business organization.
Physical resources are defined as the area that is needed by any business to survive. Physical resources chiefly includes an appropriate work place, properly working internet or telephone lines, effective marketing material and adequate information system. This aspect of a new business venture can be costlier than the others. In case of the hair care products line, the financial resources invested by John Paul DeJoria along with Michell are the chief source of the physical resources. The physical resources of the Patron Spirit Company were also obtained through personal investment of the entrepreneur himself.
According to researchers, for an entrepreneur, initiating a business can be extremely stressful. In order to maintain the sanity as well as to stay motivated, it is highly crucial to have team support as well as support from the family and friends (Jentsch, Trost & Sterner, 2014). John Paul DeJoria, being one of the greatest entrepreneurs of all time have always kept himself motivated. This in turn have imposed positive impact on his business and within a span of 2 years, he has enhanced the revenue of the organization almost by 3 times of the investment.
The challenges associated with a new business venture are highly associated with the type of the business venture. However, irrespective of the type of the business, the following are the major challenges that are faced by the business entrepreneur.
Cash flow management:
During the startup, it gets highly difficult for the entrepreneurs to manage the cash inflow as well as outflow at the same time. For instance, several entrepreneurs are found to struggle to pay the bills while waiting for the checks to arrive. The major reasons behinds the issue includes delayed invoicing.
Recruitment
During the initial stage of the business, it becomes difficult for the entrepreneurs to recruit skilled employees and pay them the salary demanded. This is because, being new to the business, the entrepreneur lacks the financial stability that is needed to pay the skilled employees. John Paul DeJoria, in order to cope up with the mentioned issue had implemented the strategy of recruiting fresher employees and provide them with effective training so that that they can obtain the potential to become the asset for the company (Grilli & Murtinu, 2014).
Time management
Considering the fact that during the initial period of the business venture, an entrepreneur has to perform several roles within the business, it becomes highly difficult for him to demonstrate effective time management. In order to eradicate the issue, creating goal lists and religiously abiding by them can be considered as an effective method.
In order to understand the potential challenges and difficulties faced by John Paul DeJoria while conducting the new business venture, PESTLE analysis of the USA market has been conducted bellow.
|
Political Factor |
· Stable political climate · USA is considered to be a great destination for foreign investment · High control of the government on the cosmetics and the alcohol manufacturing industry. · High tax rates |
|
Economic Factor |
· Deterioration of the economic condition due to recession. · Recent drop of GDP in the year 2017 · High unemployment rate |
|
Socio-cultural factor |
· Aging population · Health conscious population · lower consumption of alcohol among elite class · High Literacy rate · Socio economic mobility in USA has got increased |
|
Technological factor |
· Highly advanced technology · 24*7 hours transportation and internet service · More than 90 percent of the population uses popular social media sites like Facebook, Instagram and others · Rate of technological innovation is rapid in the nation |
|
Legal factor |
· Each state of USA has its own governmental structure · The nation has strict regulations (Drucker, 2014) · minimum 135 days for initiating a new business venture · 34.5 percent of the GDP is taxable |
|
Environmental factor |
· The population is highly conscious about environmental degradation · All the industries are entitled to high fine in case of not abiding by environmental lrules and regulation · Extreme climate disaster have resulted in financial damages and disruption in everyday life · |
USA is the second largest democracy across the world and the elections held in the nation is usually transparent and fair. Stable political condition does impose positive impact on new business ventures (Cavusgil et al., 2014). Stable political condition attracts foreign investors to invest in the local industry. USA has been the 1st choice for investment for several multinational organizations for a prolonged period of time. However, the fact that the government imposes high control over the alcohol and cosmetic producing organizations does has the potential to impose negative impact on the business venture of John Paul DeJoria.
In spite of being a developed nation, the recent recession has imposed highly negative impact on the economic stability of the country. The rate of unemployment has got increased. However, this factor has added a benefit for new venture across the nation. Entrepreneurs are able to recruit skilled labor at a much cheaper rate. When it comes to the business venture of DeJoria, financial crisis has created a major challenge for the business since it hinders the consumers to invest more in cosmetic and hair care products.
USA has aging population. Due to this, the health consciousness of the citizens is higher. This has created a major challenge for the Patron Spirit Company since the alcohol consumption of the people has got reduced in the recent years. Considering the fact that the company sells only high end alcohol, the business may suffer major loss due to the exiting high demand of luxurious alcohol among the elite class.
USA being a highly technological advanced nation has imposed several positive impact on the new business ventures of the nations. First of all, due to the round the clock availability of the transportation service and the service across the nation, it has become easier for entrepreneur to manage both inbound and outbound logistics more efficiently. Along with that the 24 hours round internet service along with the presence of majority of the citizens in popular social media has made it easier for entrepreneurs to promote their business online through cost effective mediums like social media platforms (Bruton et al., 2015). For instance, social media sites like Facebook and LinkedIn had highly helped DeJoria to promote his hair care product to the consumers. Social media platforms also enable entrepreneurs to enhance their consumer base and loyalty by directly communicating with the consumers through internet and understand their specific requirements.
Since, each of the states in USA has their own rules and regulation, the entrepreneurs needs to abide by both the state as well as country regulations in order to establish the business in the country. Moreover, the high control of the government over the business industries and 34.5 percent of the tax can be considered as another major challenge faced by the new venture (Brenkert, 2017). Along with that, a minimum of 135 das are required in order to open a new business in USA. All these factor if not abided by the entrepreneur has the potential to act as a major challenge for the establishment of the business in USA.
In order to eradicate environmental degradation, the government of USA has imposed several rules and regulation and all the business organizations are liable to abide by the same. Moreover, the population of the nation is also highly conscious about the environmental sustainability. Hence entrepreneurs need to abide by the environmental regulations in order to successfully expand their business in Australia.
John Paul DeJoria, being one of the most well known American entrepreneurs has conducted the business venture of providing the people with superstar hairstyle. Along with that, the entrepreneur has successfully established the business of High end alcohol by the name of the Patron Spirit Company. In the above paragraph the external environmental analysis of the market of USA has been conducted. Several risks associated with the mentioned business venture has been detected.
Firstly, due to enhanced health consciousness of the population, the consumption of alcohol among the higher class and deluxe class societies in USA has got reduced (Bertoni, Colombo & Grilli, 2013). This can be considered as a major risk for the Patron Company since it sold high end alcohol to the consumers. In order to deal with the issue, the company can diverge its product so that it can also capture the middle class consumer base.
Secondly, due to recession, the attraction of the consumers towards cosmetics and hair care product has got reduced. The high rate of unemployment has reduced the GDP of the nation and people prefer cheaper skin and hare care products rather than the expensive ones.
Conclusion
From the above discussion it can be conclude that the being farsighted, John Paul DeJoria has successfully established his new business venture in USA. The capital resources possessed as well as obtained by the entrepreneur has helped him to ehance his business in the market o USA. However, the fact that several difficulties and risks are associated with the establishment of the business venture cannot be ignored. In order to deal with the difficulties efficient strategies along with vision of solving the problems are required which in turn will bring great success to the business along with eradicating the issues.
References
Beamish, P. (2013). Multinational joint ventures in developing countries (RLE International Business). Routledge.
Bertoni, F., Colombo, M. G., & Grilli, L. (2013). Venture capital investor type and the growth mode of new technology-based firms. Small Business Economics, 40(3), 527-552.
Brenkert, G. G. (2017). Entrepreneurship, ethics, and the good society. In Entrepreneurship (pp. 85-128). Routledge.
Bruton, G., Khavul, S., Siegel, D., & Wright, M. (2015). New financial alternatives in seeding entrepreneurship: Microfinance, crowdfunding, and peer?to?peer innovations. Entrepreneurship Theory and Practice, 39(1), 9-26.
Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.
Drucker, P. (2014). Innovation and entrepreneurship. Routledge.
Grilli, L., & Murtinu, S. (2014). New technology-based firms in Europe: market penetration, public venture capital, and timing of investment. Industrial and Corporate Change, 24(5), 1109-1148.
Jentsch, M., Trost, T., & Sterner, M. (2014). Optimal use of power-to-gas energy storage systems in an 85% renewable energy scenario. Energy Procedia, 46, 254-261.
Macht, S. A., & Weatherston, J. (2014). The benefits of online crowdfunding for fund?seeking business ventures. Strategic Change, 23(1?2), 1-14.
Mohammed, U. D., & Obeleagu-Nzelibe, C. G. (2014, January). Entrepreneurial skills and profitability of Small and Medium Enterprises (SMEs): Resource acquisition strategies for new ventures in Nigeria. In Proceedings of 25th International Business Research Conference (Vol. 64, No. 16, pp. 1-21).
Morris, M. H., Shirokova, G., & Shatalov, A. (2013). The business model and firm performance: The case of Russian foodservice ventures. Journal of Small Business Management, 51(1), 46-65.
Schaper, M. (Ed.). (2016). Making ecopreneurs: developing sustainable entrepreneurship. CRC Press.
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