Papyrus Laser (A): December 1994 Case Solution
3. Key Success Factors
The most important key success factors are business planning, its development, operations, marketing and financing. If these all factors are properly managed, it would provide adequate facilities to the business and the organization can have furthergrowth so that the business could flourish and be successful. For introducing new business in the market where you have low prices and you provide quality-based product and the competitors are higher in number,it would be difficult to have expansion there. The most important thing is the risk factor, which can create hurdles in your business’ growth. The most frequently risks are:
3.1 Business Risks
Economic risk
The economic stability where you run your business is the most important factor. The laws, taxes, and government policies must be favorable to the business. Papyrus laser must assure that whether the French economy is feasible for its new business or not.
Market Competition
The existence of the competitors is a risk for the firm, because if they have the competitive edge and you do not have it, so there are higher chances for your market value to be lower as compared to your competitors. Moreover, the competitors can be risky for your business.
Financial risk
Finance is the part and parcel of any business. If you do not have the proper financing and the investment is low, then you cannot operate properly and the innovations and advancements can be complex to do so.
Market Positioning
The new business needs market positioning and acquiring the potential customers is a time consuming and a very difficult task. The other factor is the choice of customers, which tends to affect the business in either way.
Operational risk
The operations of the business can be profit or loss generating. If proper strategies are made and the execution is done according to the plan, then you can have the positive net income, but if the operations are not well, then you have the risk of incurring loss.
4. Analysis
The overview of the annual report describes the loss in the initial years,after which the forecasting of profit is done. According to my analysis, the idea is an ace and is proving the lucrative source of business, but in the market where the competitors are existent and have good brand positioning,it would be difficult to sustain your business. Furthermore, providing quality-based products cannot be cheap unless the economies of scale-strategy are generated. The other factor is that the entrepreneur is starting the business on the basis of equity but not debts. The business must be initiated on debts as well, because 100% equity is not appropriate for any business. Debts can give tax shield and the rate of return is fixed on debts as compared to equity. Furthermore, you do not have to share your profit in debts.
4.1 Important questions for investment in the business
If I invest in this business, certain questions will be raised in my mind, such as:
- How the business can gain market share?
- Who will be the investors?
- What are the criteria of the benchmark?
- How the business can raise funds
- How the cost-effective strategy could be applied? Is there a possibility of it or not?
- Does business have growth or not?
- How can they expand their market........................
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