BUS 402: Small Business Management ESSAY

Strategic business plan

Bobby Harper

8/1/2021

BUS 402: Small Business Management

Dr. Garabedian

The idea selected for the small business is to establish an online store to sell products through the internet. AB Corporation is a small retailer store located in Seattle, California. The company has physical stores in strategic locations across California. However, the company does not have any online presence and all its products are sold through its physical outlets. The new idea that the company can implement is to move half of its inventory online. To start an ecommerce retail website where customers can make orders online and have their products delivered at their doorstep. During this period of COVID-19, shoppers have changed their purchase patterns and most of are doing their shopping through the internet to avoid physical conducts in physical stores where they can contract the virus. In addition, consumer shopping patterns have changed and consumers are not significantly interested in physical shopping but rather prefer making their orders online and have them delivered at their doorstep. Therefore, for a retailer business to stay afloat, it must either shift to internet commerce completely, or focus on both physical stores and online store.

One of the most competitive industry especially for small businesses is the e-commerce industry. There are already established businesses that are enjoying economies of scale to control the ecommerce market. Key competitors to the AB retail company include Amazon, Target, Walmart, Alibaba, and eBay. Amazon is the leading internet commerce company and leverages its economies of scale to control the industry. For instance, other companies rely on Amazon to set their market price. Therefore, AB corporation will face significant from these major stores both online and physical retail.

Amazon being the leading internet retailer in the world it derives its strengths significantly from a three-pronged strategic thrust on differentiation, cost leadership and focus (Management Study Guide). Amazon strives to offer its products to customers at the lowest price as possible. This creates a competitive advantage for the company as many customers will go for the cheaply selling products. In addition, the company derives its competitive edge by leveraging information technology through innovation to create a competitive advantage. For instance, Amazon is in the process of automating its warehouse processes so it can cut off additional human labor thus reducing its production cost. Consequently, the company would be able to offer its products to customers at reduced prices. Another strength of Amazon is that it has strong global brand recognition (Management Study Guide). With strong global brand recognition, the company can easily launch new products and have them penetrate into the market with ease.

However, despite its size and success in the internet retail, Amazon has some weaknesses. As part of its diversification, Amazon has allowed its focus to waver from its core competence of focusing on a small inventory and allowed itself to venture into newer areas. Although this might be a great strategy by from the risk diversification point of view, Amazon has to be cognizant of losing its strategic advantage as it shifts from its core competence (Management Study Guide). Another major weakness of Amazon is that it has had a negative reputation when it comes to treatment of workers. In several occasions, Amazon workers in the UK have protested against poor working conditions. Amazon workers have significantly complained about poor working conditions and this has significantly build a negative reputation of the company. Another weakness by Amazon is that it operates in near zero margin business model which has severely dented its profitability. Therefore, the company has to make significantly voluminous sales in order to enjoy meaningful profits and revenues.

The mission statement of AB Corporation is to be a one stop online store for customers looking to do all their shopping at one place and to provide real time delivery customers’ orders without any delay. The target market for the company is consumers with basic internet usage and who are have a busy schedule such that they do not have time to visit physical retail stores, but instead would prefer shopping online and having their orders delivered at their doorstep. AB is a partnership business with five cofounders. This implies that managerial decisions are made by the five partners, which at some point might negatively affect the business especially when they have differing opinions regarding business aspects. Furthermore, when a business has multiple owners, it is significantly exposed to liability because negligent actions of either party affects the entire business (Etti, Patrick & Yehuda, 2006). However, an advantage of having multiple owners of a business is that the cost of formation of the business is low since the members are able to cost share the costs of running the business. Also, income tax of a partnership firm and LLP is significantly higher compared to a sole owner business.

In conclusion, moving into internet retail will create significant opportunities for AB Corporation. The company will be able to serve a wide market through its online website. With the right shipping channels, the company can serve customers in a wide geographical location.

References

Etti, B., Patrick, L. B., & Yehuda, K. (2006). Risk Management for Enterprises and Individuals. J. of organizational Management3(2), 23-35.

Management Study Guide. (n.d.). SWOT analysis of Amazon. https://www.managementstudyguide.com/swot-analysis-of-amazon.htm