Mountain State University Introduction to Business Assignment
Entrepreneurship and Business Planning
Small Business Case Study
Creating a business
Alys Navarro used to tutor her friends in math for free. She realized that
she was very effective at tutoring and has decided to create a math tutoring
business. She will not just try to explain the concepts, but will create a set
of questions that can help students determine whether they really understand the
concepts. She views this strategy as a competitive advantage over the other
students who already provide math tutorial services. Alys established this
business with very little funding because she does not need an office to provide
the service. She will rely on cheap advertising in the school newspaper and will
post messages on bulletin boards for students who may need to hire a tutor. She
also hopes to receive referrals from previous customers.
Impact of competition and demand
Why might the demand for the math tutorial services offered by Alys change over time in response to the competition?
An increase in the amount of competition may decrease the demand for Alys services. In contrast, if Alys method of doing business results in a stronger market share; therefore reducing the numbers of competitors, the demand for her services may increase.
Establishing a competitive advantage
How do you think customers who rely on Alys for the Tutorial service will judge whether her service was worthwhile?
Other tutors may not offer the same quality of services as Alys. For example, she explains the concepts and uses a question set to determine whether her students understand the concepts. Alys customers will judge her services by comparing everything that encompasses Alys business; including marketing, advertising, delivery method, and costs, to other businesses.
Risk of Business Expansion
If Alyss expands her business by hiring new employees, why might she possibly lose her competitive advantage over time?
Alys business is based on her expertise and reputation as an individual and not as a company. She has established a market share through her competitive advantage as an individual tutor. Customers may wish to work directly with an individual and not a company; therefore, Alys could lose here competitive advantage.
Risk of a business dominated by one person
Explain why the math tutorial business is risky as a result of heavy reliance on one owner?
By establishing a firm that relies on the service of an individual, the firm may suffer greatly in the event the owner gets sick or passes away. The firm was established and built by marketing and advertising the services of one individual; therefore, the firm is the individual. Also, as a sole proprietorship, the liability lies completely on the owner. In the event the owner is not able to respond to financial responsibility of the firm, the firm will fail. In contrast, a firm that has shared responsibility, such as a partnership, the financial responsibility is shared among the partners.