Running head: EXPLORATION OF CHALLENGES AND NICHE FACTORS 1
Exploration of Challenges and Niche Factors
July 22, 2010
How well researched each of the steps in the start- up process have been, greatly affects whether the business is a success or failure. Three of the challenges startups face, include; choosing a product or service and market location: deciding on ownership arrangements: and maintaining integrity in an unethical business environment. Researching demographics and studying forms of ownership, until there is a comfortable level of certainty behind the final choices, can improve the chance for success. It may also prevent ...view middle of the document...
Find out who and what will be your competition. Which of the four degrees of competition would you be facing: pure competition, monopolistic competition, oligopoly, monopoly (including natural monopolies)? In addition, you must study the demographics of the area; For example, can the target consumers afford the price of what you are offering? Otherwise, you could have a great product/service that still isn’t successful. It would be like trying to sell arctic parkas in Tahiti, not very practical. So, where you offer your product or service is also vital to the success of the business.
Challenge Two: Deciding the form of ownership to use.
Of the four major forms of ownership; sole proprietorship, partnership, corporation, or limited liability company; each contains their own advantages and disadvantages (Kelly & McGowan, 2008). With each option comes major differences in how a company does business.
Kelly & McGowan (2008) plainly state the impact this challenge has:
The form they choose will affect virtually every aspect of establishing and operating the firm. For example, the form of ownership affects the initial cost of setting up the business, the way the profits will be distributed , and the types of taxes (if any) the business must pay.( p. 69)
So, the challenge is to choose which ownership arrangement will best meet your business goals. If you select a sole proprietorship, you have minimal difficulty in formation, complete retention of control and profits, and pay only personal income taxes on earnings. However, it contains unlimited liability with no distinction between personal or business assets and a potentially heavy load of work and responsibility. This form also tends to limit financial resources and ceases to legally exist if the owner dies or is no longer available to the company.
General, limited, and limited liability partnerships share similarities to the sole proprietorship, with a few general differences. First, they operate under legally binding partnership agreements that allow two or more people to maintain shared responsibilities and profits in an agreeable and mutually beneficial manner. Unfortunately, this agreement may also make it difficult to leave a partnership, and disagreements between partners can cause substantial problems. Levels of liability vary between types of partnerships, from full liability, to degrees of limited liability ; For example, limited partners have liability based only on their contributions, but they also forego an active role in management decision-making. An attractive aspect of partnerships, in contrast to sole proprietorships, however, is the considerable expansion of financial resources and profit margins.
Ultimately, when considering resources and profit margins, it is the vastly different and more complex corporation that takes center stage. Corporations are capable of raising large amounts of capital and attracting skilled individuals for employment. Several types of...