New Business Road Test – Case Assignment

Case #1. De Beers

1.   What industry is De Beers in?

            De Beers is in the Diamond mining and trading industry (Pearce, 2005). According to Mullins (2013), there are advantages of defining an industry either narrowly or broadly. Defining De Beers narrowly as a diamond trading business helps to clarify the focus of the company keeping in mind who the competitors are. This helps the company to assess the competitive rivalry. It is also important for the company to be defined this narrowly so that it thinks clearly about differentiation. However, a broad definition of De Beers as Diamond mining and trading industry makes the company to be able to bring in substitutes. For instance, with this broad definition. De Beers can mine, distribute, sell and buy anything that has been made of diamonds (Mullins, 2013).

2.   How attractive was De Beer’s industry pre 1990? Use applicable models.

            For long, before the 1990s, De Beers had the largest share of market in the diamonds mining and trading industry. During that era, De Beers could sell eighty to ninety percent of the total diamonds in the world. With all this market share, it was like De Beers owned diamond’s market and it would therefore dictate the prices. Such market domination made the prices to remain stable as competitors were few (Weimer, 2005). According to Mullins (2013), the attractiveness of every business is caused by the key models that De Beers exhibited including revenue model, operating model, model of working capital as well as the investment model. These elements made De Beers succeed in the pre-1990.

3.   Which of Porter’s Five Forces have changed since 1990? What has been the effect on industry attractiveness?

            The attractiveness of De Beers began changing in the 1990s when new mines of diamonds were opened in Australia, Russia and in Canada. The new mines either sold their diamonds or failed to play balls with this company. Since 1990, some of Porter’s five forces were changed. They include: threat to entry force, supplier power and the competitive rivalry. Before then it was difficult for others to enter the industry but things changed since 1990, companies could mine and sell the diamonds. Mining companies, the suppliers begun setting terms and conditions. Once diamonds mines were opened in Canada, Australia and Russia, competitors increased, thereby raising competitive rivalry (Mullins, 2013).

4.   Based on your observations above, how do you feel De Beer’s will perform in the future?

            Three out of the Porter’s five forces have so far changed since 1990. The market share has also fallen from 85 to 65 percent. As competitors continue to get into the Diamond mining and trading industry, De Beer will continue losing the market share because it would not be the only company that dictates the price of diamonds. I feel that prices would not remain stable as each competitor would try to put up a price that would attract a market share. Porter’s two remaining forces will also change, that is, buyers will gain the power to set conditions and terms in future. Competitors might also come up with substitutes so that De Beers will perform poorly in future.

Case #2. Red Bicyclette

1.   What was the nature of the customer pain which Gallo sought to resolve with Red Bicyclette?   

            According to Gallo’s state-of-art- market research, Americans believed that French wines were ones with the best quality. However, they used to drink less of them because they found them to be intimidating and confusing. Gallo sought to end the confusion by striking a deal with Languedoc. Customer confusion was the customer pain that Gallo was seeking to resolve. According to Mullins (2013), if there is no pain, then there is no gain. Gallo resolved customer’s pain by proposing a brand of French wine that had a non-threatening name and whose label was also easier to read. Confusion was the nature of customer pain resolved. Launch of Red Bicyclette increased the sales of French wines rapidly in America.

2.   What segment(s) of the market did Red Bicyclette target and what benefit(s) did it offer?

            There are various types of market segments. Red Bicyclette in this case targeted the wine drinking market segment, more particularly those whose favorites are French wines. Once the label was made easy to read and the name was non- threatening, Red Bicyclette was launched and it sold rapidly. There had been a decline of about eight years on the sales of French wines. Once the sales rose once again, competition among the wine companies was back. This is a benefit to the customers because each company wants to provide customers with the best quality of wine (Sant, 2004).

3.   Were the benefits offered by Red Bicyclette, in the customers’ minds, different from and superior in some way to what was offered by other solutions?

            Yes, the benefits offered by the Red Bicyclette in the minds of the customers was different and superior from the others. With a name that was non-threatening for a wine whose label was also easy to read, the customers considered Red Bicyclette the best wine. The main reason was because customer’s pain, according to Lai (2014), had been eliminated. However, the truth of the matter is that there was nothing superior and nothing different. Gallo had partnered with Languedoc so that the wine drinkers would think that it was a French wine because Languedoc was involved. Gallo on the other hand dictated how the wine would be made, just the same way as all his other brands of wine. The main aim was to targeting the market and taking it back.

4.   Did entry into this segment of the market provide any opportunities to enter other segments?

            Red Bicyclette made it easier to enter into the French wine drinkers’ market segment. This provided a good opportunity of entering all the other market segments of wine drinkers. This is because, keen drinkers would later realize that Red Bicyclette tastes the same way as Gallo’s other wine brands, and not as the other French wines. The perception of Red Bicyclette being the best wine and its relationship to Gallo’s other brands would make French wine drinkers to turn to the other brands. This will have taken the market segment belonging to the French thereby increasing the market share segment of Gallo’s wine brands.

Question #3

What drives your entrepreneurial dream?

            My entrepreneurial dream is driven by a mission to ensure that customers in restaurants gain an excellent experience while dining and gaming with friends. The customers would get value for their money, not by paying more for the games but by enjoying their meals at GameTime. The gaming restaurant will be dedicated to prioritizing the expectations and the needs of its customers. Customer’s experience will be made better not only by gaming services but also by making delicious foods.

What are your personal aspirations for this venture?

This entrepreneurial dream is driven by my aspirations of making GameTime a large restaurant within and beyond Toronto. The restaurant has plans to expand beyond Toronto in order to benefit non-Toronto residents with the unique services that it shall be offering. There are also plans to meet the requisite demand. My aspirations are to also change the nature of eateries and make them a place where one can enjoy spending time, unlike most of the restaurants in Toronto.

What do you really want out of being an entrepreneur?

            What I really want from being an entrepreneur is ensuring that my idea applies and serves the people of Toronto and beyond. I want the market to realize that there is something better than what they have been experiencing for long. As an entrepreneur, I would want to see that I achieved my dream once the business succeeds. Becoming an entrepreneur will encourage me to be a maker of ideas that can be implemented for success.

What is your level and propensity for risk?

            Restaurants are made for people to visit and eat. This makes them to be open without so much items, objects or materials within. Seats and tables are the only things found therein. However, GameTime is prepared to add more items including Television installations on each table and provision of games. GameTime will take the risk of installing TVs in the feeding areas. Anything may happen to those electronics and lead to losses.

Compare yourself to Howard Schultz of Starbucks (p144). What insights stand out? What are your thoughts?

            Schultz, just like me, had a clear mission of what he wanted to build. He wanted a company that brought Italian coffee to the United States while I want a restaurant that includes gaming as part of its services. Just like me, Schultz also had audacious aspirations of creating something big, profitable and prominent. I think that every entrepreneur who plans to succeed would have to have a mission, risk propensity and personal aspirations just like Howard Schulz (Mullins, 2013).

References

Lai, P. (2014). Utilizing the access value of customers. Business Horizons, 57(1), 61-71. http://dx.doi.org/10.1016/j.bushor.2013.09.002

Mullins, J. (2013). The new business road test. Harlow, England: Pearson.

Pearce, L. (2005). Encyclopedia of American industries. Detroit, Mich.: Gale.

Sant, T. (2004). Persuasive business proposals. New York: Amacom.

Weimer, A. (1965). The idea business. Business Horizons, 8(3), 69-70. http://dx.doi.org/10.1016/0007-6813 (65)90007-8