1. Identify at least three challenges when setting up a business. Explain why they are challenges
Fear of taking risk:
For any new business to be prosper, the owner of the business has to be ready to take calculated risks. Many business men have what it takes to set a business but they are scared of taking that decision. Fear should serve as a guarding force in any business and not a hindrance.
Lack of enough capital has been one of the main reasons holding back most of the business ventures today. Decrease or lack of capital may be as result of many factors which will end up affecting the business at large. Without enough money and capital, a business cannot be established in the first place and if so it won’t be managed for a while thus realising losses which will eventually lead to its close down (Dimitratos and Jones, 2009).
Failure of similar business or stiff challenges from other business can result to low motivation for fear of not doing well due to the harsh business environment. This will make businessmen opt for other alternatives or seat back before taking any risk in getting into business.
2. Define what a "niche" product is. Give at least three examples of niche products.
A niche product in the business world refers to something that is very specific like a new market that is not regularly found in big stores. Such products can only be found in specific shop and need to be ordered before they are purchased. Examples of niche products include; a dog treadmill, Full skin swimming suit (body-length, and professional shoes that are highly durable to be used for extreme outdoor conditions (Congregado, 2010).
3. Explain why a niche company might have an advantage in a market. Would price necessarily be an advantage? Explain why or why not
Niche Company refers to a business specialist in any market. In a business environment where there is a solo provider of a particular service, and the service happens to be a specialist, then there will exist minimal competition for the business. This will make the company enjoy greater advantage over other upcoming business thus they can easily charge lower prices attracting more customers. Niche markets have proved to be extremely cost effective. A good example is a service or good offered to selected ethnic group or demographic group. It will be far much easier to advertise the service or product in on the ethnic stations.
Such stations will definitely be of lower rates compared to national stations that call for broader audience. This will enable the marketing budget give room for the advert to use more media mix that are more comprehensive or with greater frequency. A niche company might decide to cater to a segment of the whole market on the basis of factors like the competition, product type, organizational size, and resources. The niche company offers a secure area for a company to service and maximise on profits (Mclntyre, 2010).
4. Identify and explain three reasons why customers would pay more for exclusivity
I) Improved Perceived Quality:
Exclusive products are believed to have the connotation of standing out as to be of better quality products. It is to the expectations of the consumers that the exclusive products will deliver more speed, more comfort, or more functionality. For example, home towels sold at high-end boutiques are softer compared to those sold in department stores. Marketing company’s make use of the expectation of high quality to attract consumers who are in a position to have high quality products than others.
II) Rarity Imparts Value
A product being exclusive means that it is not widely available in the common market. Such product could be limited by time, location or quantity. Due to the difficulties experienced in finding and purchasing it, consumers will be willing to dig deeper into their pockets to have the product at ant costs when they get the chance. The consumers perceive the product with a higher value now that they are rare. For example, goods made from ostrich leather are very hard to find because ostrich is not found in most of the countries. The meat is normally sold as a by-product of its hide. This is different from the case of a cow which the meat is the main product.
Rare products happen to be appealing to consumers who want to be exclusive and stand out from the rest. For example; a women may go for a dress found in the only retail shop in the world in order to make sure that no other person at any special event will be in a similar dress. Some consumers just want to have some things that others cannot be able to afford. This may also stand out as a special present. Being in ownership of high-end luxury products may reinforce a consumer’s status and self sense in a given social circle (Smith and Katzenbech, 2003).
5. Explain how a niche player "chips away" at a larger competitor's base. Give three examples of retailers who have done this
There are a number of ways in which a niche player can do this when faced with a larger competitor’s base: First the player needs to go for a different delivery or sales channel a good example being the online retailer amazon.com. This retailer was once a small set up back in the days that strategically and slowly ate up the market share of larger and established bookstores because of its its channel of using the internet. This means that one will be required to provide premium services or products like McDonalds or Starbucks.
This is because the player is provided with the opportunities of settling for an otherwise normal product but still have the public to pay more money for the same product. By providing more information on fast food concept in the situation of a European style gourmet or McDonalds, there will be a coffee experience against the ordinary standard cup of coffee. The best way for the player to make his or her product more appealing is by the inclusion of fresh ingredients that come at a low cost and go ahead to promote the product accordingly. This way, the business will develop awareness of the niche product and can go ahead to create and develop a lot of sales if provided with a suitable budget that will help develop a smart marketing strategy.
One leading factor for the player to take into consideration is the specialization in a single line of product through choosing to concentrate on either fast food items consisting of fries and burgers or settle for coffee business. There still exist a wide range of options than the ones named above. The player while taking a walk may end up in a general store where he or she can negotiate for a place for the new business. The most important thing for the player is to create a gap in the available market and come up with his or her own niche accordingly (Press, 2010).