Nature of the industry
External environment analysis
Internal environment analysis
A business plan describes the plans that an entrepreneur wants to do in the future. The plan conveys the objectives of the business and strategies required to achieve these objectives. It also analyzes the problems that the business is likely to face and ways of solving them. The plan is crucial in attracting potential employees, suppliers, and business financiers (Holden, Belew, Elad and Rich 79-80).
Lemonade Stand is an economics game that was developed by Bob Jamison back in early 1970s. The game was ported into computer software by Apple Computers later in 1980s. The game is easy to play because players are offered various options that determine whether they are successful or not. The player is required to choose the right prices and quantities that guarantee consumer satisfaction to make greater profits from the enterprise. Weather reports are generated for players who are then required to pick from three available values. The values include the number of Lemonade glasses, their prices, and advertising symbols to be used by the player. Reports of a day’s earnings are given by the program that could be thunderstorm, which may occur on a cloudy day accompanied by color animation. This denotes loss to the player and thus loss of investment of the day. There is no limitation on the number of players required. This game can be played by various players. Each player has to sale lemonade regardless of the number of players participating.
The population composition of the business location provides an opportunity for this business investment. The majority of our target customers are children and teenagers. We have realized that most children and teenagers lack enough leisure activities during school holidays. We expect positive results keeping in mind that these generations need to be engaged in leisure activities during school holidays. Our choice of this venture was also based on the advantage we have over our rivals in the video game business. Our business is located close to a children sporting complex, and this offers us a great competitive advantage.
Nature of the industry
The video game industry is involved in the development, marketing, and sale of video games. The industry is characterized by great profit margins that are largely attributed to the increasing demand. Many casual games that have been developed have successfully become popular among children and young people.
The video game industry has had significant growth over the past years. As the world moves further into digital platform, it is expected that the video gaming industry is also going to grow further. The local gaming industry is characterized by large numbers of gaming studios that offer the gaming services. The major Lemonade game competitors are Lemonade Tycoon and Dope Wars. The ever-expanding gaming industry coupled with technical creativity in the game software development presents an important opportunity to venture into Lemonade Stand business.
The business is subjected to intense competition from the market competitors that have specialized in other video games. They offer lemonade gaming and Dope War gaming services. Major businesses that provide other gaming services are well established. We are among the first providers of this game in the locality. The competitors have a limited game variety to meet customer demands.
There is also a potential threat for substitute leisure service like television, theatre, movies, and other spotting events. However, the positive shift in video gaming preferences is an opportunity for the business. This is the most likely scenario because the substitute services are widely known and utilized by the residents within the locality.
External environment analysis
An analysis of the external environment is extremely important for identification of the great opportunities that are external to the business (Kew and Stredwick37-42). It is also important in the identification of threats that may be posed by exteriorenvironmental aspects. The aspects in the exterior environment include advancement in technology and other aspects such as politics, economic, social and cultural elements.
Technology is one of the external factors that should be considered when writing a business plan. Therefore, it is a very critical factor in the video gaming industry. Technology will thus affect any business venture from time to time. Technological changes in the recent periods present a major opportunity for growth in the gaming industry. The video games developers produce significantly specialized gaming software as compared to the past. The recent periods have witnessed large scale advancement in the design, development, and publishing of game software. Many game platforms have been developed to facilitate the accessing of the games. The technological breakthroughs have simplified the game management tools hence allowing the end user to have a friendly interface. Technology has also enabled the commercialization of most games hence the games can easily be accessed in the market. Technology is also unpredictable, and may have adverse effects on the business if not well prepared. Technological change may change the video gaming industry that we may be unable to adapt.
The social factors also pose threats and presents opportunities to the video gaming industry. There have been significant shifts in the tastes and preferences for video games over the years. The positive shifts in the demand of lemonade games by children and youth are encouraging. The major threat is on health grounds. In this case, video gaming contributes to increasing cases of obesity among the young generation. Children spend most of their time gaming and lack some time to exercise. The video gaming is also threatened by the general perception from the society that it is contributing to violent behaviors among children. Since the youth form the majority of the population, it is a great opportunity for this business venture.
The country has been witnessing severe economic situations recently. This has had a great effect on the prices of computers and other electronic equipment. Though the inflationary pressure may lead to increased prices of computers for business, the reverse of the trend is imminent. Therefore, the business is expected to absorb these shocks in the short run.
The uncertainty surrounding future investment in this segment also presents another challenge to the business. A small change in the focus by big businesses operating in the neighboring locality might push us out of the market. Technically, the neighboring locality is much ahead of our locality in terms of investments in the video gaming. This is the major reason why the neighboring locality has established gaming enterprises than the ones existing in our locality. If they focus on our promising market, then it will be difficult to catch up with them.
The business will be subjected to intense competition from the market competitors that are specialized in other video games. The competitors are specialized in lemonade tycoon and Dope War. Major businesses that provide other gaming services are well established. The advantage of this venture is that we are among the first businesses to run the lemonade gaming within the locality. Competitors are disadvantaged by limited variety of games that players can choose. An increased number of players in the market will also result to increased bargaining power by customers who may ultimately push down the prices of the services.
There is also a potential threat for substitute leisure services like television, theatre, movies and other spotting events. However, a positive shift in customers’ video gaming preference is an opportunity for our business. This is the most likely scenario because the substitute services are widely known and utilized by residents within the locality. The major threat will be if the other leisure activities are preferred to video gaming.
The customer analysis carried out depicts unmet needs in the video gaming industry. The analysis shows that there is demand for gaming services among teenagers who prefer to play games away from their families. Teenagers feel free to play games without supervision from the family. They seem to enjoy playing games with their age mates rather than with family members. These present an opportunity to offer gaming services away from home and to a certain age group.
Political factors also play an important role in the success and growth of any business. Industry conditions are determined by political conditions than any other external environment factors (Kew and Stredwick37-38). The industry is entirely controlled by specified code of country rules. In addition, production of product specifications and restrictions are determined through a political process. The protection of intellectual property rights such as copyrights, trademarks, licenses, and patents is strongly protected by the government (Kew and Stredwick 39-42).
On considering our business type, we looked at the desirability of the political environment. The political environment is positive regarding the video gamming industry. The video gamming industry in the country generates a lot of income to the government. Thus, special considerations are accorded to the industry. This offers a chance to utilize this positive political acceptance and go ahead with a lemonade stand venture.
Internal environment analysis
The analysis of internal business environment focuses on internal factors that give the business an advantage over the competitors or those factors that disadvantage the business in the market environment (Kew and Stredwick 46). The business advantages are the strengths whereas the disadvantages are the weaknesses. Strengths may be business competencies that the business has acquired over the years. Weaknesses are restrictionsthat a business has to endure in the development and application of policies (Kew and Stredwick 48).
SWOT analysis is useful in the analysis of strengths and weaknesses of a business. This method focuses on the internal business strengths and weaknesses, as well as the external opportunities and threats to the business (Kew and Stredwick 51). SWOT analysis pinpoints key activities that make the business to stand out from the rest. Through SWOT analysis, the business discovers where it does well, how it can improve, whether the available opportunities are fully utilized, and whether there are external environmental changes likely to affect the business.
The Lemonade venture has been in operation for quite some time. This can be regarded as strength for this new venture. The company has so many strengths that are not limited by the few weaknesses present. The business has to utilize its strength at the same time improve on its weaknesses.
The major strength of the business is our excellent customer service. The business staffs are polite and attentive to customer needs. At the same time, the feedbacks we receive from our customers are encouraging. The business offers a friendly environment to both employees and customers. The quality of our services to our clients makes them come back. The client loyalty to the games we offer is a boost to the entire business fraternity.
The business also recognizes that it has its own disadvantages. Our weakness acts as our point of improvement to continue offering quality services to our customers. The greatest undoing for our business is the lack of refreshment for clients who come at our premises. We have recognized that our customers have to request for refreshments outside our premise. This negatively affects our business. We take this as a challenge for future improvement.
Business plan objective
Our objective is to become the leading provider of the lemonade stand gaming services. The business has been operating in the area for a reasonable time. Our objective is crafted on the fact that the game is not very popular in the locality. The emphasis is to provide specialized services based on our knowledge in video gaming services. We intend to capitalize on our established reputation to achieve our core objective and other business goals.
The business expects to make small after- tax profit of $1,800 in the first financial year. The profits are expected to increase in subsequent years. Below are illustrations of the current and estimated financial statements of the business.
Income Statement 2012
Sales-Lemonade service $ 2500
Cost of Lemonade services (300)
Gross Margin 2200
Payroll Expenses (200)
Fixed/administrative expenses (100)
Operating income 1900
Other income and expenses (50)
Interest expenses (40)
Net income 1800
Estimated Income Statement 2014
Sales-Lemonade service $ 3300
Cost of Lemonade services (500)
Gross Margin 2800
Payroll Expenses (250)
Fixed/administrative expenses (150)
Operating income 2400
Other income and expenses (50)
Interest expenses (40)
Net income $ 2280
Balance Sheet 2012
Cash $ 750
Other Current Assets 150
Total current Assets 900
Fixed Assets (Cost) 1050
Cumulative Depreciation (550)
Net Fixed Assets 500
Other Assets 50
Total Assets $1400
Current Liabilities 400
Other liabilities 100
Owner Equity 700
Total Liability and Equity $ 1400
Estimated Balance Sheet 2013
Cash $ 1000
Other Current Assets 700
Total current Assets 1700
Fixed Assets (Cost) 2050
Cumulative Depreciation (800)
Net Fixed Assets 1250
Other Assets 50
Total Assets $ 3000
Current Liabilities 1000
Other liabilities 250
Owner Equity 1000
Total Liability and Equity $ 3000
When preparing a strategic plan, an entrepreneur must conduct a thorough analysis of the external environment. This is done with a view of identifying any opportunities and threats that the business might encounter. An analysis of the strengths and weaknesses is also critical to enable the formulation of suitable strategies. In addition, market analysis is crucial in the strategic planning of the business. This is because it presents information regarding the purchase patterns and behavior of the target market.
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