THE LIFE CYCLE OF A BUSINESS

LIFE CYCLE OF A BUSINESS Every business goes through 4 basic stage before it reaches full maturity. Stages 3 and 4 tend to continue to occur in mature companies.

LIFE CYCLE OF A BUSINESS A. CONCEPTUAL/ ESTABLISHMENT STAGE B. START-UP/GROWTH STAGE C. STABILIZATION STAGE D. Post-MATURITY STAGE

The four phases of the business life cycle There are four phases of the business life cycle: establishment growth maturity post-maturity.

A. CONCEPTUAL/ ESTABLISHMENT STAGE This stage is divided into four steps: 1. HAVING AN IDEA or RECOGNIZING AN OPPORTUNITY: Opportunities are found where needs or problems exist. The need or the problem is the opportunity. The skill of identifying these needs or problems is a skill that can be developed when one becomes aware of their surroundings.

A. CONCEPTUAL STAGE 2. ANALYSING THE IDEA Gather information and ask questions designed to assess the opportunity. 3. ORGANIZING THE RESOURCES Weigh the money-making potential against the costs of its start up and maintenance. 4. MOBILIZING THE RESOURCES Prepare for day-to-day running of business. (i.e., rent space). Once this stage is complete business is born

A. CONCEPTUAL STAGE THE ULTIMATE SUCCESS OF ANY VENTURE IS DETERMINED BY HOW WELL THE ENTREPRENEURS EXECUTE THE FOUR STEPS OF THE CONCEPTUAL STAGE. THE CONCEPTUAL STAGE CAN TAKE A FEW WEEKS, BUT ON AVERAGE, 6 – 9 MONTHS

B. THE START-UP STAGE Vision is tested Business Plan needs revision because everything usually takes longer and cost more to implement than was originally planned. MOST CRUCIAL stage in the life cycle BACK TO THE DRAWING BOARD!!!

C. STABILIZATION STAGE When a business reaches stabilization, the cash flow is relatively stable and the financial statements may start showing a profit. It is during this period that an organization’s structure begins to take shape.

D. POST-MATURITY STAGE Entrepreneur decides if they want to take business beyond the stabilization stage. Re-enters planning mode & may require additional financing. Needs long-term strategies May start delegating tasks to others. May need more of the following: structure, employees, funds, expansion. Advertising budgets & new technology become important to stay competitive May end up closing/downsizing .

The four phases of the business life cycle Post-maturity phase The post-maturity phase is the final stage of the business life cycle. There are four very different stages in the post-maturity phase: steady state, decline, renewal and cessation

The four phases of the business life cycle Cessation Cessation refers to the closure of a business. Voluntary cessation occurs when the owner of a business decides to cease the operations of the business. Involuntary cessation occurs when the closure of the business is forced on the owner. The most common cause of involuntary cessation is the inability of the business to repay its debt.

The four phases of the business life cycle Bankruptcy Bankruptcy occurs when a sole trader or business partnership is unable to repay the financial obligations (debt) of the business. A business will enter liquidation when an independent party is appointed by the court to sell the assets of the business so as to recover all outstanding debt owing to the business’s creditors.

INTERNAL AND EXTERNAL BUSINESS ENVIRONMENT

INTERNAL ENVIRONMENT These are factors from inside the firm that could affect performance. Finance Available – without money the firm may not be able to do what they wish. Ability of Staff – the more capable staff are the more productive they will be. Information Available – the better the information the better the decisions made.

ICT Availability – this can influence the quality and quantity of what is produced Ability of Management – good managers will make good decisions Changes in Costs – increases in wages or raw materials can affect the profitability of the firm

EXTERNAL ENVIRONMENT This is summarised as: Political Economic Social Technological Environmental Competitive

The 21st Century Emergence of the “Global Village” New opportunities New global challenges www.census.gov/ipc/www/wp98.html 2

The 21st Century Macroenvironment Microenvironment Broad societal forces that influence every business and nonprofit marketer Microenvironment Consists of its customers and the economic institutions that shape its marketing practices 3

Macroenvironmental Influences on the Marketing Mix Physical environ. Science & Tech. Marketing Mix Economic & Competition Socio- cultural Demo- graphic Political & Legal

Macroenvironment: Physical Environment Ecological systems Natural resources Climate Geography Pollution levels Water & Air 4

3.2 The General Environment and Environmental Forces Affecting Organizations The General Environment Cultural Forces Political - Legal Forces Technological Forces Ecosystem Competitive Forces Political System Organization Economic System Demographics Adapted from Figure 3.1 3

The General Environment Sometimes called the macro-environment. Are external factors, such as inflation and demographics, that usually affect indirectly all or most organizations.

Factors in the General Environment Type of economic system and economic conditions Type of political system Condition of the ecosystem Demographics Cultural Background

POLITICAL Laws passed in the different countries can affect the what a business does. E.g. shops are not allowed to sell alcohol on Sunday mornings or the smoking ban in public places. Failure to follow laws will result in fines. Other ways the government can influence is through setting taxation rates and investment in infrastructure.

Roles of Government in Business In Canada, the US, and others, the government acts as a watchdog over business Provides direction in areas such as: antitrust, monetary policy, defense, human rights environmental matters

ECONOMIC This includes changes in interest rates, exchange rates, inflation and the economic cycle. If interest rates are high this could stop firms from borrowing money also customers are less likely to borrow or use credit cards to make purchases.

If the dollar is high against other currencies this makes it hard to export goods abroad, reducing the number of sales. If inflation is high, the prices of raw materials can be expensive which can reduce profits. If the economy is in recession, people tend to be unemployed or worried about losing their job, therefore not spending money on luxury goods.

The Economic System Western countries have an economic system in which there are: privately controlled markets based on supply and demand free market competition private contracts profit incentives technological advancement

SOCIAL DEMOGRAPHIC CHANGES This is to do with the size and distribution of the population of a country. E.g. Many countries have an ageing population, this has led to a rise in products aimed at older people and firms recruiting older workers

Slides prepared by: Joe Rosagrata Demographics The statistical study of human population and its distribution. E.g. age, gender, income, religion. Ageing population—baby boomers (pre-1965) Generation ‘X’—mid-1960s–1970s. Generation “Y” – early 1980s-2000 New Generation “Z” » now Single people. Two-person household. Increasing cultural diversity. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata

Demographics Characteristics of a population such as age, race, gender, ethnic origin, and social class determine the characteristics of work groups, organizations, specific markets, or nations population. Demographics influence marketing, advertising, and human resources decisions. Such as the number of individuals the ages of 18 to 25 They change all the time.

Macroenvironment: Key Trends The changing population Migration Urbanization Sunbelt growth Age & Generations Aging “boomers” Generation “X” Generation “Y” Changing household Family & household income Multicultural population 10

Demographics: Age Segments https://www.youtube.com/watch?v=IfYjGxI6AJ8 Seniors Pre-1946 X Generation X 1965-1980 Generation Y 1980-1997 ? Y Baby Boomers 1946-1965

Macroenvironment: Changing World Populations Europe Pacific Rim South and Central America Asia 13

World Population Growth 1987 5 billion Billions of people 1820 1 billion 1930 2 billion

Cultural Forces Culture is the shared characteristics, values, and beliefs of a group that distinguishes them from another group Such as religion, language, and heritage

Social and cultural forces Business are faced with changing socio-cultural patterns, lifestyles, social values and beliefs. Changes that have significant marketing implications: Emphasis on quality of life. Changing gender roles. Attitudes towards health, nutrition and well-being. Impulse buying. Desire for convenience and a premium on time. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata

SOCIO-CULTURAL CHANGES This is about changes in lifestyle and attitude. E.g. More women working has seen a rise in ready meal and later opening hours More concern about the environment, forcing firms to maybe use recycled products. People have more leisure time, changes in attitude to single mothers have also affected the types of products offered.

Our changing world https://www.youtube.com/watch?v=JFR99KoMxrk Changing attitudes to Work. Leisure. Lifestyle. New gender and family roles. Communication revolution. Tougher market conditions. Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata

TECHNOLOGICAL Firms need to keep up-to-date with the latest technology in order to remain competitive. Have seen a huge growth in e-commerce (buying and selling online) Use of machinery in the production process – more efficient and cheaper.

Impact of Technology What is technology? knowledge, tools, techniques, and actions used to transform material , information, and other inputs into finished goods and services plays pivotal role in creating and changing an organization’s task environment

Impact of Technology cont... Role in Strategy : creates strategic options not feasible with older technologies approaching those of traditional large-scale manufacturing facilities marketing over the internet online, real-time financial management systems can determine profit and loss on a a daily basis improved access to services (e.g. Banking)

ENVIRONMENTAL Firms are aware that they have to be more environmentally friendly, not only because that is what customers want, but can be forced by the government to do so. It can also include storms, floods, noise. All these can affect how a business operates.

Environmentally-Conscious Business Practices 3.3 Environmentally-Conscious Business Practices Cut back on environmentally unsafe operations Compensate for environmentally risky endeavors Avoid confrontation with state and federal pollution control agencies Comply early with government regulations Promote new manufacturing technologies Recycle wastes

COMPETITIVE What the competition is doing can affect how a business operates. Firms now not only face domestic competition but also foreign. Have to keep up or be better than your competition to keep your customers.

Competitors Importance and Effect of Competitors competitors are an important day-to-day environmental force facing organizations rivalry among competitors leads to price cutting advertising promotions enhanced customer service or warranties improvements in product or service quality