ENTREPRENEURSHIP

GLOBAL INNOVATIVE LEADERSHIP MODULE

ERASMUS+ STRATEGIC PARTNERSHIP FOR YOUTH 2015-2-TR01-KA205-022935 www.eleaderstochange.com

Table Of Contents 1.1. What is ? ...... 3 1.2. Characteristics of an entrepreneur ...... 3 1.2.1. Characteristics of successful entrepreneurs ...... 3 1.3. Types of Entrepreneurs ...... 4 1.3.1. Classification according to motive and business practice ...... 4 1.3.2. Classification according to social identity ...... 5 1.4. The business environment ...... 5 1. Starting A Business ...... 6 1.1. The business idea...... 7 1.2. A business idea and the four questions ...... 7 1.3. Developing the business idea ...... 8 1.4. Who do I sell my products / services to? ...... 8 1.4.1. Customer focused from the very beginning ...... 9 1.4.2. Segmentation ...... 9 1.5. Address the customer’s / segment’s needs ...... 10 1.6. What can I offer my future clients? ...... 11 1.7. Why would customers buy your product/service? ...... 11 1.8. How to organize your business? ...... 13 1.9. Summarizing the business idea ...... 13 1.9.1. Business Idea Matrix ...... 13 1.9.2. Starting a business ...... 14 1.9.3. The steps of establishing a company ...... 14 1.9.4. Business forms ...... 14 1.9.4.1. Factors affecting the business form ...... 15 1.9.4.2. Private entrepreneur (private business name) ...... 15 1.9.4.3. Partnership and limited partnership ...... 16 1.9.4.3.1. General Partnership ...... 16 1.9.4.3.2. Limited partnership ...... 16 1.9.4.4. Limited company ...... 17 1.9.4.4.1. Establishing a limited liability company ...... 17 1.9.4.5. Cooperative ...... 18 1.9.4.5.1. Establishing a cooperative ...... 18 1.9.4.6. Small cooperatives and leadership ...... 19 Question ...... 19 • Do I have the intention to be an entrepreneur? ...... 20 • Do I have the skills to be entrepreneur? ...... 20 • Am I a risk taker? ...... 20 • Do I have the necessary organizational skills? ...... 21 • Do I have the necessary planning skills? ...... 21 • What type of decision maker am I? ...... 21 • Can I identify entrepreneurial opportunities? ...... 21 • Is my business idea viable?...... 22 • Analyzing my competition ...... 22 • Choosing the right name for my company ...... 22 • Choosing the right location for my company ...... 22 • Choosing the best finance option for me ...... 23 • Calculating the startup capital ...... 23 • Forecasting my Cash Flow ...... 23 • Calculating the break-even point ...... 24 • Making decisions related to the product ...... 24 • Product life cycle stages ...... 24 • Choosing an effective pricing strategy ...... 24 • Evaluating the distribution channels ...... 25 • Developing a promotion strategy ...... 25 A Bannatyne case study ...... 26 A Boots case study ...... 31

CHAPTER 1: THEORETICAL BACKGROUND

1.1. What is entrepreneurship?

Entrepreneurship means independently undertaking a business activity of which the outcome is not fixed. Entrepreneurship requires a positive attitude, a drive to advance and improve. You may be a natural born entrepreneur, you can inherit the idea of entrepreneurship or you can grow into it. Anyone can become an entrepreneur no matter what cultural or societal norms may be. Becoming an entrepreneur may also be a decision based on careful and deliberate calculation. Entrepreneurship is not an exact science, and it does not require an extensive education.

Anybody can choose to be entrepreneurial. External entrepreneurship means acting as an entrepreneur, establishing a company and running a business. Internal entrepreneurship, on the other hand, refers to an individual’s entrepreneurial behavior at the service of someone else. Independent individual entrepreneurship is developing an active, extroverted, open personality and having a positive attitude towards life.

1.2. Characteristics of an entrepreneur

"An entrepreneur is a person who likes both their work and their life; work is a hobby and a personal interest.”

An entrepreneur is often seen as an active, open person who is interested in what is happening around him/her and in society at large. Entrepreneurs are said to know what they are doing and why they are doing it. They are thought to have a clear understanding of their skills and know-how.

1.2.1. Characteristics of successful entrepreneurs

• creativity and independence,

• determination and decisiveness,

• self-confidence and a belief in one’s abilities,

• innovativeness and risk taking, • goal-orientation, initiative taking, relentlessness,

• desire to achieve positive results,

• ability to motivate, guide, support and lead others,

• extroverted communication skills and the ability to influence others,

• vision,

• ability to learn from both experience and failure,

• preparedness for harsh competition, desire to be better and more effective than the competition,

• the desire and ability to learn continuously,

• ability to draw upon the expertise of others,

• organizational capability,

• ability to cooperate,

• the understanding that the success of others also benefits oneself.

Entrepreneurs must set a clear goal that they can then seek to attain through concrete actions. A goal is the end result, position or state of affairs that the business aims to be in as a result of specific actions. In some cases reaching this goal may take several generations and the goals might also benefit society in general.

Entrepreneurs must have a clear idea of why their business exists. The company’s mission statement is often only a few sentences long and as such it can be revisited both on a regular basis and as circumstances demand. The mission statement can include one or even several business ideas. Through the use of strategy and solid business practices the entrepreneur aims to attain the goals set out for the business and consequently for him or herself.

1.3. Types of Entrepreneurs

Entrepreneurs can be classified in a number of different ways. The following are two such classifications.

1.3.1. Classification according to motive and business practice

Entrepreneurs can be categorized as either opportunistic or professional entrepreneurs based upon the individual’s motives and business practices. Opportunistic entrepreneurs seek growth and continuously scan the business environment for new business opportunities and possibilities to exploit. A professional entrepreneur is generally a sole entrepreneur who is independently self-employed. Entrepreneurship is not only a profession but it is a way of life for the professional entrepreneur. The growth of the business is not the primary objective. The goal of this entrepreneur is to provide for him or herself.

1.3.2. Classification according to social identity

Entrepreneurs can also be classified according to their social identity. Entrepreneur-managers are the natural leaders of growing firms. These entrepreneurs play an active role in society and they know their place within the firm. The goal of this entrepreneur is to manage and grow the firm for the next generation. Craftsman entrepreneurs, on the other hand, emphasize service and the importance of customer satisfaction. Their primary reason for starting their own business is independence. A third type of entrepreneur is the classical entrepreneur. The classical entrepreneur seeks business results and to maximize the profitability of the firm

1.4. The business environment

Society’s opinion and its valuation of entrepreneurship affect the business environment. Therefore it is necessary to also look at entrepreneurship in a wider context. The business environment has a significant impact on determining a company’s potential and success. Therefore, thoroughly thought out business goals and strategy must take into account the environment and must be ready to adapt to possible changes. The business environment may present the entrepreneur many opportunities though it may also create difficult obstacles.

CHAPTER 2: APPLICATION

1. Starting A Business The educational unit «Starting A Business» will help you understand what a business idea is and how it is developed.

Learning Outcomes After finishing participants will :

Knowledge (theoretical Skills (cognitive and Competences (responsibility and/or factual) practical) and autonomy) H/She is able to: H/She is able to: H/She is able to:

Summarize the Classify the Select the appropriate entrepreneurial business different business legal status of a new idea matrix legal types business

List the steps to start a Develop a Find an attractive market new enterprise business idea that can be reached economically Recognize the factors that affect a start-up

Outline the principles of a start-up capital and financing a new business

1.1. The business idea

‘The business idea is the starting point of all entrepreneurship. The business and the entrepreneur’s work is built around the business idea’

The business idea is a concrete practical description of how the company plans to conduct profitable business activities. It concisely presents the key elements of the business: who is sold to, what is sold, what the business does and what kind of image does the business project to its stakeholders. In addition to this it is important to remember the business’ protective measures such as patents and copyrights.

All parts of the business idea must be compatible with each other. The business idea is formed out of all of these elements and should be based upon the company’s strengths.

A promising business idea must fulfill the customer’s needs, be innovative and unique. It must have a clear concept and it must be profitable in the long run. (McKinsey & Company 2000).

1.2. A business idea and the four questions

Who are the company’s products or services aimed at? What are the target segments that the firm’s products or services are aimed at? What are the segments defining characteristics that the firm’s products or services specifically address?

What does the company offer to its customers or what customer needs does the company serve? The products or services must match with the customer’s needs so that they add value by solving the customer’s problem.

How does the company function? How does the company work or how is the company organized? Which of the entrepreneur’s resources can be invested into the business?

What is the company’s image? How are the company’s products or services viewed?

The most important thing is to clearly define the key elements of the business. Already during the planning phase it is important to learn to separate that which is relevant to the business from the irrelevant. Looking at the business idea from many different perspectives allows for an objective assessment and increases the probability of success. Don’t give up even if all these elements don’t fit together perfectly in the very beginning!

Take a closer look at business idea material:

1. Developing the business idea (includes a matrix diagram) 2. Who do I sell my products/services to? 3. What are my customer’s / target segment’s needs? 4. What can I offer future clients? 5. Why should customers specifically by my products / services (image)? 6. How to organize the business? 7. Summarizing the business idea

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1.3. Developing the business idea

A business idea can often be condensed into a single sentence. For example, ”I will establish a company that offers translation services to companies.” This sentence describes the basis for a business but does not answer some fundamental questions. What kind of companies will be served? What kind of translation services? Why you specifically? How will you organize an effective business?

In order to plan the business in more detail it is important to address the basic questions more specifically. A useful tool is the following matrix where you can map your choices and business ideas according to a number of basic questions. The business idea is the most utilized tool for describing a business based on a single product or product area. The tool addresses many of the entrepreneur’s fundamental strategic decisions.

• What? • Products/Services? • Why? • Customers’ and target segments’ needs or problems? • Who? • Target segment or segments? • How? How to organize? • How is the business organized efficiently and made profitable?

1.4. Who do I sell my products / services to?

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Who do I sell my products / services to?

1.4.1. Customer focused from the very beginning

The development of the business idea can be done in stages by addressing each question one by one. While it may seem logical to start with the ‘What?’ question in many cases it is more productive to narrow down the customer segment the business aims to serve. Identifying the potential customer base’s needs will then help with the development of the product or service offering.

1.4.2. Segmentation

In order to further answer the question more planning tools are needed. Segmentation is the categorization of potential customers in a market into groups by common needs or demands.

The founder of a new business would like as many clients as possible and market the company’s products or services to as many types of customers as possible. However, this usually leads to unfocused activities and ineffective marketing. The business is unable to build its reputation amongst potential customers and develop a competitive edge. On the other hand, specializing within a specific target segment may be a better starting point for the business. In the translation service example the potential customers could be ”law firms in the

Helsinki/Larnaca/Kaunas area”. Having defined the segment the marketing can be focused according to specific customer demands, the market potential can be estimated, pricing can be determined more easily, etc.

Examples for segmentation criteria can be:

• Consumers: Customer information such as age, gender, income, profession, marital status, education, location, etc. • Businesses and groups: Size of the organization, industry, location, stage of development, etc. • Within a business: professional group, position within the organization, etc. • Customer / user values and attitudes: lifestyle, hobbies, etc. • Other criteria such as the intensity of use of the product or service: heavy-light user, mass-occasional consumer, potential consumer.

By gaining a deep understanding of the customer’s or user’s needs, problems and expectations of the product and its purchase or use the entrepreneur can plan a sustainable business.

The segmentation can also be drawn out. In the below example a gardening contractor could consider if his or her business should market its offering to all potential customers or if it is wiser to start by selling to local building companies as a sub-contractor.

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Defining customer needs through segmentation allows the business to develop its offering and uncover opportunities.

1.5. Address the customer’s / segment’s needs

Creativity and brainstorming are often associated with product or service development phase of business development. However, in many cases, the critical idea and the idea for the company’s product comes from defining the market segment. The below example illustrates this point and refers to a products targeted to the below groups:

For example, limiting the market to newborns and their parents helps to understand the customer needs.

Sleeping Cribs, beds, carriages.. Outdoors Sleeping bag, raincoats... Clothing Overalls, shirts... Hygiene Diapers, skin care... Parties Baptism dresses... Gifts Rattles… Food Baby foods, juices… Dining Cups, plates… 10 Childcare Babysitter, changing table… etc.

The customer needs can be expanded upon endlessly. Even if needs are further limited by focusing on, for example needs served solely by plastic products, there are still countless products to choose from!

1.6. What can I offer my future clients?

When you have gained an understanding of your future customer base you can move onto developing the product / service. The previous customer need based brainstorming can be a useful exercise, however it is easy to spend too much time or resources on this stage. It is important to maintain a focus of what is relevant to your business. An assessment of your own skills is also a good starting point in terms of developing a business idea. In the translation services example the entrepreneur would need to specify whether the offered service involves the translation of documents or oral simultaneous translator services. Similarly an area of further specialization could range from EU legislation to local environmental regulations. This kind of analysis again would lead the entrepreneur to an assessment of the target segment. This means revisiting the matrix presented earlier. When the answers to the basic questions start to emerge your business idea is closer to becoming reality.

The product or service offering can also be defined in the following manner. The example illustrates the options available to a carpenter.

Carpentry shop

Painted, Doors, Moldings, Finished wooden products, Windows, Installation, Custom manufacturing, Components, Finished products

1.7. Why would customers buy your product/service?

In order for the above to become reality your product or service has to be positively differentiated from the competition’s offering. A useful approach by which to ensure this is to address the issue from the perspective of the target segment. In choosing a product or service, 11 a customer is faced with actual differences between product / service offerings. However, the customer is also influenced by perceptions. You should not underestimate the impact of image and it should be accounted for when planning the business’ activities. It is even claimed that image can be more important than the objective rationale in choosing one product over another. ”Choices are made based on perceptions, which are then rationalized” says Timo Rope, a marketing professional.

Think about the basis by which your customers decide upon the product or service and include this in the business idea matrix. Note the factors that lead a customer to decide whether a business has a positive or negative image and plan your business accordingly.

Below is Timo Rope’s diagram of these diverse factors. Add to this diagram the factors that are relevant to your industry. The diagram is not complete but it will get you started. The example of the image of a translation services business will be based upon very different factors than that of a carpenter.

• Business Idea, Culture, Values • Physical Product / Packaging, Brand, Logo, Look • Office, Work Space / Style, Practicality, Location • Furnishings / Shape, Style, Visibility • Pricing / Price level, Discounts, Sales • Quantity and Quality of Communication / Aggressiveness, Visibility, Style • Service / Speed, Customer orientation, Professionalism, Friendliness • Management / Personality, Style, Presentation 12

1.8. How to organize your business?

There is one more square remaining in the matrix. You should imagine the basic decisions that need to be made in terms of the activities that describe your business. How to organize your company’s activities so that the selected target segments can access your products or services, how they are produced, with what kind of personnel, etc. The answers to these questions often are dependent on the specific industry and the individual company. An entrepreneur can look at the best practices of successful established firms to gauge the available options. The solutions don’t need to be replicated exactly as each entrepreneur has the opportunity to innovate. However, learning from successful competitors is never a bad idea.

Think about: • How do you market your product / service? How do you make your company known among potential customers? What is the role of sales and how are they carried out? What do you do yourself? What services do you outsource? • How do you develop your products? • How are your products or services produced? With what equipment? With which technology? What do you do yourself and what do you sub-contract? If you have physical products you need to consider the manufacturing process, logistics, etc. • What kind of personnel is needed? What skills do you need? What is a suitable division of labor for your company? How is the staff motivated to perform? • What kinds of systems support your activities and make you more efficient? • What sort of network would enhance your profitability?

1.9. Summarizing the business idea

As you have noticed, answering all four fundamental questions requires careful consideration and difficult decisions. You may possibly need to learn more by observing your competition and even interviewing potential customers. Careful planning and decisions made at this early stage, however, will save you time and money as you implement your business idea. Also, the subsequent stages of business planning, such as the business plan and economic forecasting, will become easier if the business idea is thoroughly thought through.

Condense your basic decisions into the matrix. Using this tool it is easy to describe your company’s future activities to possible financiers, future employees and even customers.

Make sure that each of your choices is compatible with each other and analyze your business concept as a whole.

1.9.1. Business Idea Matrix

The business idea matrix is the most utilized tool for describing a business based on a single product or product area. The tool addresses many of the entrepreneur’s fundamental strategic decisions.

• What? • Products/Services?

13 • Why? • Customers’ and target segments’ needs or problems? • Who? • Target segment or segments? • How? How to organize? • How is the business organized efficiently and made profitable? • Why? Attractiveness? • Why would the target segment buy the product/service? • Image, product profile, product description? • Compatibility • Will the business idea still work in 5 years time?

1.9.2. Starting a business

Starting a new company is the most challenging way to start a business. The establishment of a company is accomplished through a gradual development process that starts with the summation of the business idea and is only complete once the company is up and running.

1.9.3. The steps of establishing a company

The following list describes the practical steps required to establish a company. The amount of time needed for each step and the manner in which it is documented depends on the individual entrepreneur, the size of the company and the industry or sector. What is common to all companies is that the process starts from the business plan.

1. Forming a business idea and drafting a preliminary business plan 2. Assessing the business’ profitability and organizing financing 3. Selecting a business form 4. Choosing a business name 5. Relevance of business licenses or notifications 6. Basic notification to the Trade Register 7. Obtaining a Business Identity Code (Y-tunnus) 8. Start-up notification to the Tax Administration 9. Assessing risks and insurance 10. Accounting arrangements 11. Selecting the location for the business

1.9.4. Business forms

"The private business name is the simplest business form, the limited liability company the most complex and also the most bureaucratic.”

The most common business forms can be divided into three categories:

1. private entrepreneur (so-called private business name) 2. partnership (general and limited partnership) 3. limited liability company

14 1.9.4.1. Factors affecting the business form

Factors that affect the selection of business form include the number of founders, the required capital and issues related to taxation:

Number of founders. A more complex business form is suggested as the number of founding partners increases.

Start-up capital. As the requirements for start-up capital and risk increase the business form also becomes more complex. Certain sectors such as heavy industry generally require significantly more initial start-up capital than do service businesses.

Responsibility & company. The willingness of the entrepreneur to be personally responsible for the business’ liabilities also affects the choice of business form. In a general or limited partnership the entrepreneur is more liable for the business than is a shareholder of a limited company. The entrepreneur must also think about how much he or she can trust the other partners in the business. If the entrepreneur can not fully trust the partners this should be reflected in the choice of business form.

Flexibility of operations. The governance or organization of a limited company is also more complex than that of a partnership. A limited company must hold the regular meetings as demanded by the law while a partnership does not. In terms of flexibility the private business name is the most straight forward and simplest of the business forms.

Distribution of profits (Coverage of losses). Is the business’ profit divided amongst the partners or does it belong to the company? What kinds of dividends should be paid out to the shareholders? The entrepreneur must also think about how potential losses are covered by the people involved in the business.

Salary. When choosing a business form the entrepreneur must consider the need for employees. The general rule of thumb is that the more employees in a company the more complex the business form. In a private business name the entrepreneur cannot employ his or her spouse or children under the age of 14.

Taxation. Taxation policies change frequently and it is difficult to predict the level of taxes to be paid well in advance. Taxation policies also change depending on the business form.

1.9.4.2. Private entrepreneur (private business name)

A private entrepreneur can either be categorized as a general self-employed professional or a so-called tradesperson entrepreneur.

A self-employed professional is an entrepreneur who practices a certain business and who is not bound to a fixed place of business. For example, washing machine repair men, taxi drivers, plumbers or electricians are professionals who can be in business without having a physical location from which they operate.

A tradesperson is an entrepreneur who has a permanent place of business outside of the home. For instance, barbers and hairdressers, auto mechanics, restaurateurs and kiosk operators are

15 categorized as so-called tradesperson entrepreneurs.

1.9.4.3. Partnership and limited partnership

There are two types of partnerships, general and limited partnerships. Partnerships are legally established when the founding partners agree to the articles of association.

The law does not require adherence to a set form so the agreement may even be entered into orally. A written agreement, however, is seen as more concrete and thus safer for all persons involved.

The partnership is registered with the Trade Register/Register Centre. In order to file a notification form an original written partnership agreement and a certified copy of the agreement must be delivered to the Trade Register/ Register Centre. However, the partnership is seen as legally established even without notification to the Trade Register.

1.9.4.3.1. General Partnership

There must be at least two responsible partners in a general partnership. The general partnership is also a legal entity unto itself. The partners have personal, joint and several liability, for the partnership’s commitments. In a limited partnership there must be at least one general partner and one silent partner. The silent partner invests capital into the company and receives annual interest as compensation. It is suggested that the exact sum of the capital commitment and the amount of the return or percentage of interest is agreed upon. The partnership agreement must also state when and how the return on the investment is paid to the silent partner.

1.9.4.3.2. Limited partnership

In a limited partnership the general partners have personal, joint and several liability, for the partnerships commitments. The silent partner, on the other hand, is only liable up to the amount of the monetary investment invested into the partnership. The general partner may enter into contracts on behalf of the partnership as agreed to in the articles of association. The partners’ power to represent the partnership, however, is limited on the basis of the partnership's line of business and the scope of its operations. A notification can even be filed with the Trade Register/Register Centre whereby the power or representation of certain partners can be restricted or removed entirely. Similarly, an agreement can be registered by which two or more partners share the power of representation.

The silent partner has the right to monitor how the partnership into which they have invested is being run. At the minimum, the silent partner must be allowed an annual occasion when they can go over the partnership’s books and accounting. The way in which this is practically arranged must be agreed to in the articles of association.

Once the silent partner has received the annual return on the capital investment the remaining profit is divided among the general partners and taxed accordingly. The general partners do not necessarily receive a salary but receive their income through the so-called private use of profits. The profits are generally divided evenly amongst the partners though the general partners may agree to another division. For example, when a family establishes a limited

16 partnership and one partner spends more time working for the business than the spouse, the profits may be split 70 / 30 to reflect the division of labor.

1.9.4.4. Limited company

Limited companies, both private and public, cooperatives and foundations are all classified as corporations. The following will examine the limited liability company in more detail.

Limited liability companies are generally established when there are many partners, there are large scale business activities or when the entrepreneur wants to reduce his or her personal risk or liability. Legally, a limited liability company is established only once it has been registered with the Trade Register/ Register Centre. Until it is registered the company can act or engage in business but only at the cost and full personal liability of its founding partners. Once the company is registered it becomes a legal entity responsible for its own commitments. After the company becomes legally registered neither the founding partners, shareholders or board are personally directly liable for the companies actions.

A limited liability company is a taxable entity which is taxed independently from its shareholders. The partners and shareholders can be paid employees of the company while transferring company funds for ’personal use’ is not allowed. On the other hand, shareholders can be paid dividends.

1.9.4.4.1. Establishing a limited liability company

A limited liability company is established by drafting a memorandum of association or articles of incorporation and holding a founding or constitutive meeting. The memorandum of association must state the amount of capital stock or share capital of the company. The minimum share capital set by the law is 8000 Euros. The corporation’s bylaws or corporation charter as determined by the corporation may also state a maximum amount of capital stock. The Companies Act states what other elements need to be included in the memorandum of association. The founders must also note other possible aspects of the business form such as non-public shareholder contracts.

After the signing of the memorandum of association the business must hold a constitutive meeting. This meeting is generally held immediately after the drafting of the memorandum of association without any separate invitation. The meeting officially decides upon the establishment of the limited company as set forth in the memorandum of association. A majority of the votes are required in order to establish the company and the meeting requires at least a two thirds quorum of the corporation’s shareholders.

A board is then selected for the corporation according to the corporation’s bylaws. If the number of board members is fewer than three persons a deputy member must also be selected. In addition to the board members the auditors and deputy auditor are selected along with a possible managing director or chief executive. It is not mandatory to select a managing director as this function can be filled by the board at a separate meeting. At the constitutive meeting the corporation’s bylaws are accepted. The bylaws are a document which determines how a business functions and how it is organized.

The votes in the constitutive meeting are held by the founding shareholders are distributed according to the number of shares owned by each person. It is not necessary to hold a 17 constitutive meeting if all the founders subscribe to all of the corporation’s shares. If this is the case the memorandum of association must note that a constitutive meeting was not held and it must list the names of the persons selected according to the corporation’s bylaws.

1.9.4.5. Cooperative

Limited companies, both listed and unlisted, cooperatives and foundations are all classified as corporations. The following section will examine the cooperative business form in more detail. The purpose of a cooperative is to manage the finances of its members or support the member’s trade through the use of the corporation’s services. The cooperative entrepreneurship business form suits those businesses that have a fixed functional or operational relationship with their members and which operate in sectors requiring know-how and small capital investments.

The membership of the cooperative is open and it is easy to accept new members. A member of the cooperative can resign or be fired but the membership cannot be given up. It is possible, however, to transfer the membership to another person once they are accepted by the cooperative.

1.9.4.5.1. Establishing a cooperative

A cooperative is established by a written contract known as the charter of foundation. The signatories of the charter of foundation are the cooperatives founding members and members of the cooperative. A cooperative may be established by no fewer than three individuals or other legal entities. There is no upper limit to the number of founders. There are no minimum requirements concerning the capital requirements of the cooperative. The co-operative contribution or participation share is the same for all members and is returned when the member leaves the cooperative. The bylaws governing the cooperative can require a higher fee for members joining after the foundation of the cooperative, supplementary fees for specified purposes and other additional charges (additional participation share, investment portion capital).

The decision making power rests with the members and the cooperative meeting. The cooperative must have set bylaws or rules as well as a board that represents it. It is not mandatory to have a managing director or chief executive officer. The members of the cooperative are not personally liable for the cooperative’s debts unless so specified by the cooperative’s bylaws.

Cooperatives are required to maintain accounting records and conduct audits. The cooperative is also required to maintain a reserve fund with injections of 5 percent of any surplus until the fund amounts to 1 percent of the balance sheet and is a sum of at least 2 500 Euros. In case the cooperative incurs a loss it is first covered by the reserve fund. As such the reserve fund is comparable to the capital stock of a limited company.

A cooperative does not have the same liability as a limited liability company regarding liquidation and thus the loss of its capital. The cooperative can be forced into liquidation if the number of members decreases to fewer than three individuals.

The new cooperative law allows cooperatives to act in a manner resembling limited 18 companies with the possibility of additional investment portions as well as the remittance of bonus issues. If a cooperative is dissolved, its assets can be distributed amongst its members. In this respect, a limited company can also be organized in a so-called cooperative manner.

1.9.4.6. Small cooperatives and leadership

Managing a small cooperative requires skill and leadership. A well managed cooperative can reduce the cost of decision making. Strong vision and strategic leadership can motivate the members of the cooperative towards a common goal.

Question

Develop the business idea for a hypothetical enterprise based on Business Idea Matrix. In order to do that, keep in mind the following:

Describe the products or services you intend to make/sell. Why do customers need your product/service? How will the product or service be priced and how it will make you a profit? How are you different to the competition? Tell us a little about you and what inspired you to think of this idea? Who will your customers be and how/where will they buy your product/service? Are they in a specific age range, are they mostly male or female, do they have specific interests, do they live in certain places, or are they a very mixed group? Also where will they buy your product /service will it be at the market, on the internet, local shops? What are the main challenges you face and how will you make your business idea a reality?

19 CHAPTER 3: TOOLS

A very good application that new entrepreneurs can use is the online business platform iGoStartup (www.igostartup.com). iGoStartup is an online business platform which provides tools that can guide students to start a new business. Using the packs the entrepreneur is provided with an instant, professional, consulting assistance. The Basic Startup Pack can be used as a training tool for students and as a consulting tool for graduates and young people to help them start their company. More specifically it helps them through specific steps to identify their potential in entrepreneurship, evaluate their entrepreneurial idea, deal with financial issues, and develop their marketing strategies. The steps for its use are specific: 1. Each person will be registerd for free with the use of a specific coupon (STARTUPNOW) 2. They will use the Basic Startup Pack as a part of their training programme 3. They will test their skills and benchmark with other people

Below there are described some of the tools that the platform has. • Do I have the intention to be an entrepreneur? This questionnaire measures the intention of someone who wants to startup a new business. Entrepreneurial intention is evaluated by four variables: perceived desirability, perceived feasibility, subjective norm and self- efficacy

• Do I have the skills to be entrepreneur? The quickest and most likely answer to pop in someone mind when he is asked the question, “Do I have the skills to start a new business?” to yourself will be, “Yes, Of course, I have!” This is because we humans are a very optimistic species. Optimism is a great quality in many areas of life but decision making is one of those areas where someone need to slow down. The tool “Do I have the skills to be entrepreneur?” helps the user to diagnose problems / difficulties that he may be facing in terms of business startup and development. Specifically, the user assesses entrepreneurial skills in areas such as risk-taking, market analysis, management and administration of business and others that relate to entrepreneurship.

• Am I a risk taker? Entrepreneurship is closely associated with one’s ability to take risks. Many psychologists, academicians and other experts in the field strongly believe that risk taking is an entrepreneur’s most needed quality to succeed in business. This questionnaire propose the extent to which someone is taking risks in terms of his/her decisions and actions. After the quiz’s completion, the user can find out in which of the five (5) risk-taking categories he

20 belongs to: aggressive risk taker, moderately aggressive risk taker, moderate risk taker, moderately conservative risk taker and conservative risk taker.

• Do I have the necessary organizational skills? Organizational skills are an important asset for managers and owners of businesses, who have many demands on their work time. Organizational skills can make or break any business. The best way for someone to find out about his/her abilities to run a startup business is using this tool that will give the user comprehensive insights and benchmarking advices. The questionnaire is measuring whether user’s organizational skills are well-developed or not. The specific variables measured are related to planning ability, prioritization of objectives, proper time management, use of schedules, focusing on details, use of filing systems, consistency etc. After the quiz’s completion, the user can find out in which of the three (3) organized types he belongs to: well organized, average organized and poorly organized.

• Do I have the necessary planning skills? Starting a small business involves performing at least rudimentary business planning in order to address such factors as: defining the goals of the company, obtaining operating licenses, incorporating the business if appropriate, and defining the basic structure for the startup. After the completion of the online business consulting quiz, the user will be able find out the level of his planning skills: well-developed planning skills, good planning skills, below the average skills and poor planning skills.

• What type of decision maker am I? Entrepreneurship is closely associated with one’s ability to decide. Many psychologists, academicians and other experts in the field strongly believe that decision making is the entrepreneur’s most needed ability. The checklist “decision making” helps the user determine the type of decision making that characterizes him/her and then allows him/her to be able to correct any weaknesses featured in each type of decision making. Depending on the answers given, the startup tool calculates the overall score of the respondent for each of the 3 types of decision-making separately: rational type, intuitive type and addicted type.

• Can I identify entrepreneurial opportunities? What is the single most quality that every aspiring entrepreneur must have? It is the ability to foresee new opportunities and make use of it the right way. Opportunities are new business ideas, needs, wants, problems, and challenges that point to a market—to customers who would buy the innovative solutions that an entrepreneur creates to meet the needs, satisfy the wants, solve the problems, or meet the challenges. The quiz

21 assesses the ability one has to identify “entrepreneurial opportunities” and new business ideas. The user by answering a checklist can see the average score to the four (4) following areas: 1. Identifying entrepreneurial opportunities from the economic environment 2. Identifying entrepreneurial opportunities from the technological environment 3. Identifying entrepreneurial opportunities from the social environment 4. Identifying entrepreneurial opportunities from the political environment

• Is my business idea viable? The tool "Business Idea Evaluation" helps the individual interested in starting up a business to evaluate his business idea, to understand the ease of application and to improve the points that it lags in. Specifically, it considers the maturity and applicability of the business idea with respect to the following areas: market, marketing, finance and exploitation. The results of this tool are accompanied by proposals for improvement of those items that the business idea "lags" in.

• Analyzing my competition Analyzing of competition is one of the most crucial steps in a startup business as well as establishing it to make profits. Analyzing carefully what the competition is doing and finding a loophole that gives a business opportunity can be done through careful research, crucial observation and good knowledge. The “Analyzing my competition” questionnaire has been designed according to the model of five competitive forces that identifies the competitive power in a business situation. The five competitive forces identified by Michael Porter are: threat of substitute products, threat of new entrants, intense rivalry among existing players, bargaining power of suppliers and bargaining power of buyers.

• Choosing the right name for my company Selecting a name for a new business is not an easy task. A business name does more than identifying the company. Finding the right name for the business can sometimes make all the difference when it comes to pushing the business to success rather than just making it slog. Names can be quite powerful and pretty much play an important role in consumer mind in making their purchase decisions. The “Choosing the right name for my company” tool checklist includes all the parameters (business tips) that somebody should consider for choosing the name / brand of the company.

• Choosing the right location for my company

22 Choosing the right location for the company is all about identifying what's absolutely critical and what can be safely compromised. It involves looking at demographics, assessing the supply chain, scoping the competition, staying on budget, understanding state laws and taxes, and much more. The “Choosing the right location” tool includes all the parameters (business tips) that somebody should consider about the selection of the location of the company.

• Choosing the best finance option for me Funding is one of the most crucial steps in starting a business and the biggest challenge as well. Every new business needs money when starting up. It is essential to have an accurate overview of financial needs. Fortunately, there are more than enough options out there for someone to fund his new company, but finding the right source to get funding done takes careful research, amazing negotiation skills, and above all, a strong commitment to start the business. The “Choosing the best finance option for me” tool evaluates the advantages and disadvantages of the five (5) possible financial options that someone has in order to obtain his startup capital: 1. Use own money to set up a business 2. Use funds from friends and family to set up a business 3. Use bank finance to start a business 4. Use investors to finance a business 5. Use other grants or government support to start a business

• Calculating the startup capital Starting a business is extremely difficult and, for most entrepreneurs, the most challenging aspect is to raise the startup capital. This online startup capital calculator helps the individuals to estimate and even calculate the capital needed for starting their new business venture. This particular tool will help an individual calculate the startup capital and keep up backup cash for at least six months. The initial startup cost includes one-time initial expenses of the business such as renovation of premises, sourcing of equipment, modification of layout, getting electrical work done etc.

• Forecasting my Cash Flow Cash flow can provide information about changes in net assets and financial assets of a company and whether a business can affect the amounts and timing of cash flows, given the conditions of the economy and the industry in which it belongs. In addition, it examines whether a company can generate cash and cash equivalents.

23 • Calculating the break-even point The core objective of every business is to start making profit. Predictably, no business starts making profit the moment it launches in the market. Till the point a product starts making profit, a business has to bear all the expenses and may even go on loss to convince their target audience. Break-Even Analysis is a mathematical computation that helps a business identify the point from which it becomes profitable (break-even point). It indicates the point where total revenue (total sales) equal total cost.

• Making decisions related to the product The product, although only one portion of the marketing mix, reflects the focus of the user’s competitive advantage and the customer’s perception of it. It should represent the visible output of the process of investigating marketplace needs and responding to them. The “Making decisions related to the product” quiz helps the user to design his product’s strategy. It analyzes the products or services which are offered to the customer: their physical attributes, what they do, how they differ from the competitors’ ones (benchmarking method) and what benefits they provide. The user will learn about the competition, the difference toward competitors’ products and trends and key drivers that determine where the products or services “fit in the industry”.

• Product life cycle stages In today’s highly dynamic marketing environment, a company’s marketing strategy must change as the product, market, and competitors change over time. Each entrepreneur should know his product life cycle so he can take the most efficient decisions. The “Product life cycle” tool describes the concept of the product life cycle (PLC) and the changes that the entrepreneur has to make as the product passes through each stage of the life cycle. As a planning tool, this concept will help the user to characterize the main marketing challenges in each stage of a product’s life and to develop major alternative marketing strategies. Thus, he will be able to control and design his marketing decisions based on one of the four (4) product stage that his product/service belongs to: introduction stage, growth stage, maturity stage or decline stage.

• Choosing an effective pricing strategy Price is the one element of the marketing mix that produces revenue. Some of its characteristics are: ✓ It changes quickly, unlike product features and channel commitments ✓ It is a key element used to support a product’s quality and the enterprise strategy and objectives By completing the “Choosing an effective pricing strategy” online tool the entrepreneur can receive feedback about the one out of five (5) pricing strategies that he/she can adopt:

24 1. Maximum market skimming 2. Product-quality leadership 3. Maximum market share 4. Maximum current profit 5. Survival

• Evaluating the distribution channels Selecting a distribution channel is an important aspect of building a competitive advantage for the enterprise regardless of each size. The right distribution channel ensures that customers in different locations around the country, or around the world, can buy exact the same products and get the right service from the company. “Evaluating the distribution channel” online tool helps the entrepreneur to understand his role, duty and responsibilities to the supply chain through specific steps: 1. Selecting the distribution channel 2. Designing the distribution channel 3. Implementing the distribution strategy

• Developing a promotion strategy Modern marketing calls for more than developing a good product, pricing it attractively, and making it accessible. Given the fragmenting of mass markets into minimarkets, the proliferation of new types of media and the growing sophistication of consumers, companies need to use a wider range of communication tools, messages, and audiences. Usually, the question is not whether to communicate but rather what to say, to whom, and how. Some of these questions are answered by using the “Developing a promotion strategy” online tool. The entreprenur will be advised to embrace integrated marketing communication which includes the advertising, the sales promotion, the direct marketing, the personal selling and the public relations.

25 CHAPTER 4: CASE STUDIES

A Bannatyne case study Every year thousands of entrepreneurs decide to set up their own business, anticipating great financial rewards. However, over half of new business start-ups fail in their first year. So what makes the difference between those and profitable business ventures? What makes an entrepreneur extraordinary? This case study focuses on Duncan Bannatyne, one of the UK's best-known entrepreneurs. His career shows that there is no single factor that makes an entrepreneur. As he says, 'Anyone can do it'.

Duncan Bannatyne grew up in , in poor circumstances, the second of seven children. He spent the first few years after leaving school serving in the . In his twenties, he moved through a range of jobs, including taxi driving and selling ice cream in . However, he realised he wanted more out of life. At an early age he experienced his first taste of entrepreneurship. In order to earn money for a much-wanted bike, he applied for a newspaper round. Being told there were no rounds available, he went door-to-door to ask if people in the neighbourhood wanted papers delivered. This research established that there was demand and enabled him to get the job.

One key factor in building his businesses is Duncan's ability to recognise and seize opportunities. In his early thirties he bought an ice cream van for £450. He built this into Duncan's Super Ices, with a fleet of vans and a business turnover of £300,000 per year. During the 1980s, he spotted that the government was helping unemployed people by paying their rents. He used surplus profits from the ice cream business to buy and convert houses into bedsits for rent. This guaranteed revenue from the government. To finance setting up a chain of care homes, he sold his ice cream business and almost every other assethe owned. The homes eventually sold for £46 million. Duncan's business empire now includes the Bannatyne Health Club chain, Bannatyne Hotels, Bar Bannatyne and more recently a chain of spas. 26 His empire is now valued at over £310 million (according to The Sunday Times Rich List), making him one of the wealthiest people in the UK. In recent years, Duncan Bannatyne has become a household name due to his role in the BBC series 'Dragons' Den'.

What makes an idea grow into a business? Duncan's ventures into the ice cream business, bedsits, nursing homes, day nurseries, health clubs, hotels and spas highlight many of the key elements:

Identify a gap in the market do research. What do people need, what is missing from the market? Proving there was demand for a paper round enabled Duncan to get a job. Many of Duncan's business enterprise ideas have come from reading local and national press and watching news programmes.

• Do something better than or different to competitors. Duncan improved ice cream sales by using a new scoop that speeded up serving and made a shape like a smile in the ice cream. This meant he could charge a little more for these special ices. • Have a business plan. This is a key tool when starting a business. It shows what start-up and running costs will be, what resources are needed, the estimated value of sales and whether the business will give the right return on investment. • Know where finance will come from and when. A business needs good cash flow to keep running. • Ensure the people in the business have the necessary skills. For example, Duncan had the experience to start up Duncan's Super Ices from his time selling ice cream in Jersey. • Be prepared to delegate work and responsibility but be clear about standards. Duncan's ethos is to provide quality products and services for customers. • Commit to the business. When building costs for the first residential home almost bankrupted the company before the project was finished, Duncan, his partner, friends and family completed the work. This saved money as well as demonstrating commitment to the venture. • Pay attention to detail and understand what affects the business. Duncan increased sales for his ice cream business by buying an exclusive position in a local park for £2,000. This gave him profits of £18,000 in one summer - a huge return on his investment. • Be prepared to take risks. To set up the new care home business Duncan had to sell his ice cream business, as well as his house, his car and colour television.

27 Choosing the most appropriate source of finance for the size and needs of the enterprise is important:

• Sole traders: Duncan's first ice cream van was an example of this type of business - owned and run by just one person who takes all responsibility and all the profit. The small investment for the van was covered by personal funds. This is typical of many start-up businesses. • Partnership: This is usually owned by between 2 and 20 people. The joint owners share responsibility and the profits. Duncan went into partnership for the first care home. The investment was much bigger and needed borrowing from a bank. • Limited companies may be private, for example, a family business, or public, where anyone can buy shares in the company. To build more care homes, Duncan used a mix of profits, borrowings and offering shares in the company. This was achieved by 'going public' andfloating the company on the stock exchange.

The start-up costs of Duncan's business ventures varied in size. There are several options available for financing new business start-ups and for expanding established businesses. Duncan believes entrepreneurs must demonstrate commitment to the business. When assessing whether to invest in new enterprises such as those in Dragons' Den, Duncan wants to know how much of their own money new entrepreneurs are willing to put in. If they are not willing to risk their own money, Duncan almost always declares himself out.

Banks are a major source of finance for all businesses, providing finance for starting up, running the business and for expansion:

• loans can be short-term, medium-term or long-term, depending on need. • mortgages are long-term loans for the purpose of buying fixed assets such as buildings and equipment. 28 • overdraftsare short-term loans with limited duration which can help the day-to-day running of the business.

Duncan has used most sources of finance at different times:

• When setting up Duncan's Super Ices, he used personal savings of £450 to cover the main cost for the van itself. • For setting up the bedsits, his main source was re-invested profits from the ice cream vans. • He took on a bank loan and a re-mortgage on his own home to buy the land for the first nursing home. The building costs of the nursing home were to be financed by a 70% mortgage. However,the bank would only release the money once the home was finished and full.

In order to build the home:

• Duncan used profits from the ice cream business, as well as selling his car, TV and stereo • he re-mortgaged the Scarborough residential home and took out several credit cards to cover ongoing costs • as a last resort, he sold Duncan's Super Ices for £28,000 to finish the nursing home.

The total set-up costs were £360,000. However, the bank valued the finished care home at £600,000. The 70% mortgage was therefore worth £420,000. This meant Duncan recovered all costs and had equity to fund the next project.

By buying larger plots of land for health club sites, Duncan has also been able to diversify his business by building Bannatyne Hotels next to health clubs. These save on costs by sharing staffing, reception and breakfast facilities whilst offering customers something different, the use of the health club when staying at the hotel. Duncan has also been able to sell spare land to finance new projects. This illustrates the importance of using fully any assets the business has.

There are different types of investor funding available to businesses. These are from:

29 • shares - Duncan raised funds from shareholders by floating his Quality Care Home business as a public limited company on the stock exchange. Shares are especially relevant to large projects needing several million pounds of investment. • venture capital - Venture capitalists invest in businesses by providing funds, business advice and access to contacts, in return for a share in the business. Individual venture capitalist investors such as Duncan Bannatyne are called business angels.

Before investing, Duncan Bannatyne looks for several key elements in an entrepreneur's business plan. These reflect his own approach to investment:

• Do they understand their product, customers and the market? • Have they worked out what the costs and projected profit will be? Clear research into the market and projections for revenues and costs is important. Duncan would not consider investing in a business which lacked a detailed business plan.

• Do they believe in their product and are they willing to work hard at it? Duncan believes entrepreneurs need to show conviction by investing their own finance into the business. • Will it give 20-25% return on investment? Unless the idea can yield around 25% return on initial investment, it will not be worth the risking. • What is the exit strategy for investors? Venture capitalists such as the Dragons usually seek to exit the business after three or four years. This enables them to recover investment costs and ideally, generate profit from the sale of their shares.

Receiving funds from venture capitalists can provide benefits for businesses but also some risks.

Over the past 30 years Duncan Bannatyne has used his drive, ambition and skills to develop a business empire worth £310 million. The move from ice cream to care homes to the Bannatyne Health and Leisure chain reflects this entrepreneurial drive. He saw the potential for profits in each sector. He was willing to take risks, for example, by exiting profitable businesses like the care homes in order to maximise the opportunity of the new health club venture.

During his time in the Dragons' Den series, Duncan has invested in several entrepreneurs. He has provided venture capital and advice to help enterprise ideas develop into more profitable

30 businesses. He only invests when there is a potential 20-25% return on capital and evidence of the entrepreneur's clear commitment and belief in their own ideas. By using opportunity, taking risks and having a plan, Duncan Bannatyne believes that anyone can be an entrepreneur.

A Boots case study

Cosmetics is a huge and fast growing industry comprising fragrances, traditional cosmetics, beauty and skin-care preparations as well as many different hair care and toiletry products. These are sold in a variety of ways: through Boots department stores, supermarkets, pharmacies as well as other outlets and direct sales. Brands play a key role within this industry. Through names, terms, signs or symbols, brands provide a product with an identity. Consequently, the product is perceived according to the various qualities, strengths, characteristics and attributes the brand represents. Though brands encourage loyalty and make repeat purchasing easy, educated and progressive consumers are increasingly seeking the latest innovations. Consumers enjoy a choice of brands; they appreciate unique features and typically buy three or more brands on a regular basis. Consequently, a critical task acing any organisation wishing to launch new products is how to position a new brand so that it occupies a distinctive and desirable place in the minds of customers.

This case study focuses upon the Ruby & Millie brand, hailed as Britain’s most exciting range of personality-driven make-up since the launch of Mary Quant 30 years ago. First launched in October 1997, the brand comes under the Boots The Chemists' beauty product portfolio. However, the unique positioning feature of this brand is the personal profile of the two gifted entrepreneurs, Ruby and Millie.

Product positioning emphasises the unique features of a brand. It is the place a brand occupies within a given market as perceived by a group of consumers that helps it in relation to its competitors. Therefore successful positioning of a product will help a brand to stand out in a clearly defined part of the marketplace.

Boots The Chemists is the UK’s leading retailer of health and beauty products. It employs over 58,000 people and has more than 1,400 stores ranging from small community pharmacies to city centre department stores. In the beauty market it is a leader in cosmetics

31 including No7 the leading cosmetics brand in the UK, and 17, the leading teenage cosmetics brand. It is also the market leader for fragrances, skincare, dental, haircare and bath toiletries.

Born in Nigeria of Bangladeshi parents, Ruby Hammer came to live in Britain when she was 12. Ruby is an experienced make-up artist to supermodels including Cindy Crawford, Kate Moss and Naomi Campbell. Millie Kendall has widespread experience of the beauty industry. She is a high-powered beauty publicist, who grew up in Beverly Hills, California, but is now based in .

One key feature of an entrepreneur is creativity and having good ideas. When you have a good idea and think that the goal is achievable, it is important to accept that challenge and have the confidence to follow it through.

Ruby and Millie have considerable creative energy and enthusiasm that complements their experience of the beauty industry. Knowing the industry well, they identified a gap in the market from which they developed an idea for a new range of personality-driven make-up products, but were then faced with the challenge of translating their creative and fashion skills into production.

Developing a business idea into reality requires considerable energy, planning and attention to detail. It also requires belief and commitment in all that you are doing. George Hammer of Gram Corporation, and husband of Ruby, suggested that they approach Boots The Chemists with their idea. Neither Ruby nor Millie had previous experience of translating their creativity and fashion skills into mass production. Boots The Chemists and Boots Contract Manufacturing had no previous experience of dealing with make-up artists and beauty publicists.

It is unusual for large organisations to enter into entrepreneurial partnerships with enterprising individuals but, after considerable discussion, Boots The Chemists reached an agreement with Gram for Boots Contract Manufacturing to develop and manufacture the makeup range and for Boots The Chemists to market and distribute it. The result was a steep learning curve for all! A business agreement had been reached between a corporate giant and two aspiring entrepreneurs.

32 The Boots Company possesses a vast wealth of experience, expertise, raw materials and equipment. It was prepared to take on-board the ideas of Ruby and Millie and to invest a lot of time, effort and money into the range, while Ruby and Millie used their personal experience and skills to contribute their in-depth knowledge of cutting-edge fashion. It was like having a huge kitchen with the finest chefs, with Ruby and Millie testing the ingredients to make them tastier.

Even though Boots Contract Manufacturing was used to launching whole ranges at a time through its product development and production capabilities, the Ruby & Millie work was demanding and stretching. As part of a make-up artist range, the product briefs required the best professional formulations with a wide range of colours and effects. The collaboration was far-reaching and revolutionary.

At times the production area of the factory in Airdrie resembled a kitchen rather than a factory, with domestic sized mixing bowls used to blend colour and microwave ovens to melt waxes. The factory staff found themselves stretched in terms of the resourcefulness and creativity required in handling so many new elements. Almost 200 manufacturing trials were needed to ensure that the new formulae developed in the laboratory could be repeated in manufacture.

The packaging also had to be innovative, unique and stylish. Silversmiths, Wright and Teague were commissioned to design a range of Perspex and silver components for the brand.

A niche brand is one that specialises in meeting the needs of customers in a particular market position. A niche brand only succeeds if the company has in-depth knowledge of the target group so its needs can be served more precisely.

300 different products have been produced and since the Ruby & Millie brand was launched in sleek, simple, stylish and futuristic silver and Perspex packaging, customer and media interest has been intense.

Unlike No7 and 17 products, Ruby & Millie was launched in two Harvey Nichols stores before going into Boots The Chemists stores. Since then it has become available in larger Boots The Chemists stores and has been adapted in preparation for when Boots International Retail launches Ruby & Millie in Japan. It was important that the brand image was projected

33 at the point of launch. The launch made a big impact and emphasised the mystique of the brand. At the same time, promotional materials built hype around the brand to provide it with the cult status required to support its position in the market.

Ruby and Millie have been continually projected in terms of their personality and credibility in the market. There have been some exciting activities within stores which have been supportive of make-up artists. For example, Ruby Hammer worked on Rachel Venning, a Boots Contract Manufacturing buyer, at the Ruby & Millie counter in Nottingham. A promotional programme has emphasised the attributes of the products and the focus has been on product performance.

The brand’s key competitors are MAC, Shu Uemura, Bobbie Brown, Nars and elements of other niche cosmetic brands such as Hard Candy. The key features of these brands are:

• in-store make-up artist consultants • mystique/exclusivity • make-up artist support • innovative products/presentation in-store • good PR support • breadth of offer • unique components.

Though the Ruby & Millie brand succeeds in meeting the above criteria, it differentiates itself from its competitors as:

• it is a British make-up artist brand • the ‘human’ element is projected and emphasised • prices are matched to MAC which is more ‘accessible’ than any of the other brands • there is greater availability in a less intimidating environment.

A key element in the positioning process for any brand is pricing. The pricing structure for Ruby & Millie has been broadly aligned to MAC. This means that it is well-priced and value for money in comparison with premium or highly-priced brands. For example, the range is priced at 15% below Clinique.

34 Key to the product positioning of the Ruby & Millie brand has been the personal profiles and specialist skills of Ruby and Millie themselves, which appeals to consumers who want more than just a set of products. This is because the brand is correctly perceived, through solid PR support, to have been developed by opinion leaders in the market.

Ruby’s role is to shape make-up fashions and her ability to do this ensures constant innovation in the product range, while Millie provides expert knowledge of make-up. Her eye for seeking out innovative new beauty products around the world ensures that the range is constantly updated. Both have been featured in articles in popular magazines, such as MARIE CLAIRE, Elle and Cosmopolitan, their names developing their brand’s image and status. Vogue ran an exclusive feature during the launch of the brand.

Effective PR (public relations) also aids in furthering the brand’s credibility among consumers together with influential media voices and leaders in the market. The benefits include cost-effective exposure such as being featured in magazine articles; which is significantly cheaper than TV promotion and enables the correct target audience to be reached. The uniqueness of the brand became the main focus and the publicity resulted directly in sales double that of original forecasts.

Another unique feature of the brand is that it is the first comprehensive British make-up artist range and, whilst distribution in Boots The Chemists is limited, it does mean that the brand is accessible. During its first year there were 28 stockists in addition to Harvey Nichols (Leeds and London) and Selfridges (London). It is envisaged that the range would potentially be available in up to 40 Boots The Chemists outlets in the UK and Eire.

One of the most distinctive skills of marketers is to create, maintain and protect their brands by consistently helping it to deliver a specific set of features and benefits associated with its position within the market. A good brand effectively guarantees that it will deliver all of the qualities that the consumer associates with it.

Almost 200 manufacturing trials were needed to ensure that the qualities of the Ruby & Millie brand would be carried through to manufacture, more than for any other cosmetic range Boots Contract Manufacturing had handled before.

35 All of the formulations for Ruby & Millie have been developed to an exacting standard and are based upon either the best available in the market, or better. Performance is tested via professional use. The brand’s credibility is further enhanced as Ruby and other high-profile make-up artists use the product during the course of their work.

The British and international fashion and beauty press embraced the Ruby & Millie brand. Many elements outperformed their original sales forecast. Best sellers included lipgloss and the cream eye colour, both packed in brush-tipped pens designed by the Japanese company Mitsubishi. The Ruby & Millie brand has given Boots The Chemists added kudos and credibility in the cosmetics market. Since the Ruby & Millie launch they have been approached by other niche brands, all of which has raised the status of the chain store as a retailer of niche cosmetics.

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“Funded by the Erasmus+ Program of the . However, European Commission and Turkish National Agency cannot be held responsible for any use which may be made of the information contained therein”

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