KATHMANDU UNIVERSITY

DHULIKHEL, KAVREPALANCHOK

Subject: CIEG 405 – Entrepreneurship and Ethics

Midterm Assessment/Individual Assignment

SUBMITTED TO:
Mr. Bibhu Ratna Tuladhar
Department of Civil Engineering

SUBMITTED BY:
Sumiran Shrestha
Roll No: 47
Group: CIEG (4TH Year/1ST Semester)

Date of Submission: 8th July, 2021

 1. Consider a local business you are familiar with and explain its competitive advantage
in its market? How does the company sustain its competitive advantage?
Ans.

Tourism industry has taken the development of our nation into new heights in the recent
years. With that being said, I favor travel agency which is a local as well as small
business that can bring positive changes in the market in the upcoming years. The travel
industry includes both supply and demand. It provides to make a package and provide all
the attractions, amenities, accesses, services to the tourists. Hence, for a travel agency to
achieve success in the fast growing travel & tourism environment, is to ensure that it has
relevant and appropriate competitive advantages globally.
I’m familiar with “Summit International Travels & Tours” located in the busiest part
of Kathmandu in Thamel. The major function of this agency is to make a package and
provide all the attractions, amenities, accesses services to the tourists. This travel agency
also sells inclusive tours, holiday, makes perfect arrangements of travel ticket, travel
documents (visa, passports, and other essential required documents), entertainment,
accommodation, attraction tickets and insurance to the public. These particular survives
prove them to have more competitive advantage in the market. Since, more number of
tourist either domestic or foreign visit Thamel, this business seems to be in a perfect
location. Summit International Travels & Tours is a full-service travel agency that serves
both ordinary customers who mostly travel for leisure & holidays and corporate clients
who often travel for business. Similarly, the pricing of this company is moderate for its
customers and it also offers discounts or bonuses for their regular customers. Also,
unpublished airfares are available through this agency. The company has its own user-
friendly website https://www.summitnepaltours.com/ through which the customers can
access its contact details and other services.
However, there is a huge number of travel agency in Thamel which offers similar
competitive advantage in the market. So, a travel agency to sustain its competitive
advantage, must have access to a large network of suppliers for various travel and holiday
options and packages. This enables a business to have greater focus, more sales, better
profit margins, and higher customer and then competitors. In this light, Summit
International Travels & Tours partners and cooperates with multiple suppliers tourism
related services from national to international routes and works together with the
intention of mutual cooperation. This agency provides services from India to Tibet and
from Bhutan to Thailand. It is also crucial to develop a strategic plan for creating a
sustainable competitive advantage in the market. This company understands the market
and its segments. It analyzes other markets, its services and finds the defect in these
market and correspondingly, employs the solution for these defects in its market
Likewise, it develops an understanding of what customers really want and establish a
value proposition that grabs their attention. This company also establishes marketing and
public relations strategies. Advertising strategy also plays a decisive role in sustaining
competitive advantage which is done in this case.
 2. Identify the opportunities and threats facing Tootle. How could Tootle use its existing
marketing strategy to ensure that it retains its competitive advantage in the face of
these opportunities and threats?
Ans.
Tootle is a ride-sharing platform inside Kathmandu valley since 2017. Following are the
opportunities and threats facing Tootle.
Opportunities
i. It can exploit new and big markets where taxi or bus services are inconvenient and
expensive.
ii. Customers are often dissatisfied with unavailability of buses or cars during urgent hours.
iii. Rise in number of Tootle riders will reduce the estimated time of arrival. This will make
Tootle more liked. The startup will get more revenue and drivers will be profited as well.
iv. Tootle can increase the valuation. This might appeal more investors. As a result, Tootle
will have more money to operate.

Threats
1. Increasing competition such as Pathao will ultimately decrease prices. This will
discourage riders from joining the startup in new markets. This will result in loss of
customers which will decline revenues.

2. Riders aren’t happy with the low-profit margins. This might lead to bad publicity. This
can in turn discourage the new drivers from joining Tootle.
3. Though it have rating facility of the rider, but there is not extra ratings like the habit of
the rider.
4. The price is already fixed and there is no system for price on the go unlike other ride
sharing apps.
5. It doesn’t have a 24 hr. service and has a fixed service time of 6 AM- 9 PM, so users who
want bike service except this time don’t have alternative to this.

There is no doubt that the customers love Tootle due to its easy interface and cheaper
preferences. They enjoy benefits of the service. So, in order for it to retain its competitive
advantage in the face of opportunities and threats, it must ensure various marketing
strategies. Technology must be the core of Tootle’s business model. Tootle began as a
simple app to connect riders with customers. So, the simple app must be evolved and
include a lot more features to make users’ task simpler. For example, you can rate your
ride and leave suggestions for the company. Tootle must possess global network in order
to provide services all across Nepal since it is operated only inside the Kathmandu valley.
Its main competitors are Pathao and a few other taxi services. Pathao provides a full
range of app-based services including ride-sharing, food delivery and free games. So,
Tootle must provide other extra services other than ride sharing platform which could be
significant source of competitive advantage for the ride hailing company. Tootle must
maintain the level of focus on customer service. This is not just about the prices but it
must extend to the convenience of hailing a ride and being connected with best riders too.
Apart from that it must listen to customer complaints and try to improve its services.
Customers are a central focus in its business model. In this way, Tootle should create a
system that place high level focus on the users and try to create the best benefits for them.

Tootle must offer a large service range that addresses the needs of several customer
segments.  Apart from individual riders and users, Tootle must bring attractive services
for businesses. Its services must not be limited to bike rides but extend to other areas too
including food delivery, health and logistics. Unlike Pathao which provides wide range of
services, Tootle must cater to a variety of customer segments including individual riders,
groups and families as well as businesses. Tootle’s affordable pricing model has proved
to be a key driver of demand and growth in the valley. So, Tootle must further provide a
large range of affordably priced services for public which would drive its popularity high
and also made transportation affordable for thousand around the nation. Lastly, Tootle’s
business model must be attractive, strong as well as profitable. It should adopt a business
model that allows it to cut down operational costs while also keep prices low and deliver
the best performance. 
 3. Suppose that a close friend is considering launching a new restaurant (or some other
type of business you choose). Why type of research would you advise your friend to
conduct? Where would you suggest your friend look for the information he or she
needs?
Ans.
If a close friend of mine is considering launching a new restaurant business I would help
him provide a better plan for this startup. Various research has to be carried out for the
successful running of the new restaurant. The purpose of finding out how to do market
research for a restaurant is that it allows you to assess whether there is sufficient demand
within your chosen location to open up a new restaurant.
Initially, I would suggest him to make sure that the market is not already saturated or not.
Local market must be big enough to support the establishment of new restaurant so, I’d
suggest him to check out that particular thing. My friend must also identify the type of
customers (coming from every age) which will allow him to come up with a menu and
concept that suits the right demographic - paving the way for success. The concept of
restaurant business must include the type of restaurant he wants to open, the style of
cuisine and service style he’ll use. His restaurant name, logo, menu design, and
merchandise should all be presented to provide a cohesive image of his brand. Also, I
would suggest him to build out his menu which will dictate the skills he should look for
in his staff, and the type of crowd he hopes to attract. Most importantly, my friend must
have enough capital to cover the overall cost of opening a restaurant. Other than that, he
must get the word out and attract his future customers by advertising. Advertising will
provides basic information about his restaurant so that prospective customers know
where the restaurant is located and what type of cuisine he is serving.
The restaurant industry is a competitive one. So, before my friend intend to launch a new
restaurant I would provide him all the information he requires. Initially, I’d suggest him
to go through a deep market research about the restaurant business in the locality he’s
going to build one. This covers many areas of analysis, and some involve more
investment of time and resources than others. This will help him keep track of his
competition and assess his own marketing practices so he can see where he stands in
relation to others in the industry. He should also look in the websites or apps about
various information such as the prices of certain foods, possibility of online delivering
etc. I would suggest him to choose a location where similar restaurants are successful,
but avoid a neighborhood that is saturated with restaurants that directly compete with his
concept. Also, he must look for the quality suppliers that provides fresh products for his
restaurant. When launching a restaurants, there are usually many hidden costs which
often causes the initial budget to be short on money. In such cases, I would suggest him
to plan his budget with care to take in account of his costs.
 4. List and explain the stages in the product life cycle. Elaborate how a small firm can
extend its product’s life (with relevant example).
Ans.
The product life cycle is the course of the life of a product from when the product is in
development to after it has been removed from the market.
Generally, there are four stages to the product life cycle, from the product's development
to its decline in value and eventual retirement from the market. 
i. Introductory stage
ii. Growth and acceptance stage
iii. Maturity and competition stage
iv. Market saturation stage
v. Product decline stage

i. Introductory Stage:
Once a product has been developed, the first stage is its introduction stage. In this
stage, the product is being released into the market. When a new product is released, it is
often a high-stakes time in the product's life cycle - although it does not necessarily make
or break the product's eventual success.
During the introduction stage, marketing and promotion are at a high - and the
company often invests the most in promoting the product and getting it into the hands of
consumers.

ii. Growth and acceptance stage:

By the growth stage, consumers are already taking to the product and increasingly
buying it. The product concept is proven and is becoming more popular - and sales are
increasing. 
Other companies become aware of the product and its space in the market, which
is beginning to draw attention and increasingly pull in revenue. If competition for the
product is especially high, the company may still heavily invest in advertising and
promotion of the product to beat out competitors. As a result of the product growing, the
market itself tends to expand. The product in the growth stage is typically tweaked to
improve functions and features.

iii. Maturity and competition stage:

When a product reaches maturity, its sales tend to slow or even stop - signaling a
largely saturated market. At this point, sales can even start to drop. Pricing at this stage
can tend to get competitive, signaling margin shrinking as prices begin falling due to the
weight of outside pressures like competition or lower demand. Marketing at this point is
 targeted at fending off competition, and companies will often develop new or altered
products to reach different market segments.

iv. Market saturation stage:

During the product saturation stage, competitors have begun to take a portion of
the market and products will experience neither growth nor decline in sales. Typically,
this is the point when most consumers are using a product, but there are many competing
companies. In this stage, saturation is reached and sales volume is maxed out. Companies
often begin innovating to maintain or increase their market share, changing or developing
their product to meet with new demographics or developing technologies.

v. Product decline stage:

Eventually, the market for a product will start to shrink, and this is what’s known
as the decline stage. This shrinkage could be due to the market becoming saturated (i.e.
all the customers who will buy the product have already purchased it), or because the
consumers are switching to a different type of product. While this decline may be
inevitable, it may still be possible for companies to make some profit by switching to
less-expensive production methods and cheaper markets.

Fig; The Product Life Cycle

 5. Describe why is it important for entrepreneurs to research their industry and markets
before launching a business. Why do so many fail to do so?
Ans.
Once an entrepreneur begins the process of developing a strong business concept and
model, they need to consider the market they are about to enter. Market research builds a
sturdy foundation for a business to be built upon, preparing the company for any threats
or weaknesses that may arise as the business grows. From getting to know our target
audience to exploring potential competitors, market research gives businesses a
competitive edge, allowing us to thrive in new environments.
Before an entrepreneur begin making any big steps in business, he/she needs to ensure
there’s an audience for him/her to sell to. Without customers, there are no sales. Market
research will determine if they have a potential audience and where they’re hiding. If no
one’s interested in the product or service they’re offering, they’ll need to reconsider if
starting a new business in that direction is the best idea or not. Knowing how to sell to
the customers should be their number-one priority. Having a thorough understanding of
their target audience will help them determine not only who to sell to, but how to sell to
them. Market research allows to know the best platforms for them to sell to their
audience. When starting a new business, it’s imperative that they’re aware of any
companies that may be considered competition. Whether it’s a direct or indirect
competitor, knowing how their businesses may threaten ours will help us better promote
our own product and remain competitive within the shared audience. Market research
determines who might pose a threat to our new business, giving us the upper hand.
Combining market research with the professional support of an inbound marketing
agency can help us improve our communication tactics.  From content creation to social
media management, an inbound marketing agency can combine the information from our
market research with the most effective marketing and sales tactics to drive results. Only
with the in-depth knowledge of our target audience can an agency effectively
successfully promote the business. 
It's often said that more than half of new businesses fail during the first year. There are
various reasons to why entrepreneurs fail in launching a new business. New businesses
often fail when entrepreneurs don't have the resources or knowledge to properly execute
their ideas. They are often weak on strategy, building a product that no-one wants to buy
as they failed to do enough work to validate the ideas before and during development. A
major reason that startups fail is because they ran out of cash. It is often seen that people
pursue their brilliant ideas without realizing that they lack proper funding which are
needed for any particular business. Similar, they lack market research on a specific
business module they’re going to offer. This is one of the most fundamental strategy in
developing one’s business therefore, there should not be negligence in this activity. A
weak management plan leads to poor establishment of the product which no one wants to
buy and ultimately results in failure. They also fail to develop a product that meets the
market need. This can either be due to simple execution or it can be a far more strategic
problem, which is a failure to achieve product fit. Many people think that they will do
well without the proper marketing but they are simply mistaken. Ignoring marketing
simply means that you have opened up a company and you do not want people to know
about it. So, improper marketing also leads to failure of the startup business.
Hence, entrepreneurs tend to fail due to the above mentioned reasons. That is why, I
would just say that when you are up for entrepreneurship you have to have a checklist of
a various important factors and you have to be pretty particular about all of these. The
most important of which are; a proper focus, a workable plan, a brilliant idea, sufficient
funds, a solid marketing strategy and a dedicated team.
 Read the following case carefully and answer the questions that follow:

Joe and Kaitlin Eden, co-owners of Eden’s Garden, a small nursery lawn, and garden
supply business, have just received their year-end financial statements from their
accountant. At their last meeting with their accountant, Shelley Edison, three months ago,
the Eden’s have mentioned that their seemed to be having trouble paying their bills on
time. “Some of our suppliers have threatened to put us on ‘credit-hold,’” said Joe.
“I think you need to sit down with me very soon and let me show you how to analyze
your financial statements so you can see what’s happening in your business,” Edison told
them at that meeting. Unfortunately, that was the beginning of Eden’s Garden’s busy
season, and the Eden’s were busy running the company that they never got around to
setting a time to meet with Shelley.
“Now that business has slowed down a little, perhaps we should call Shelley and see what
she can do to help us understand what our financial statements are trying to tell us,” said
Kaitlin.
“Right. Before it’s too late to do anything about it,” said Joe, pulling out the following
financial statements.

a) Assume the role of Shelley Edison. Using the financial statements for Eden’s Garden,
calculate four important financial ratios that include liquidity ratio, leverage ratio,
operating ratio, and profitability ratio respectively.
Current Ratio = Current Assets / Current Liabilities
= $129,936 / $87,622
= 1.48
Quick Ratio = Quick Assets / Current Liabilities
= $35,609 / $87,622
= 0.4
Debt Ratio = Total Liabilities / Total Assets
= $207,468 / $280,843
= 0.73
Debt-to-Net-Worth Ratio = Total Liabilities / Tangible Net Worth
= $207,468 / $73,375
= 2.82
Time-Interest-Earned Ratio = EBIT / Total Interest Expenses
= $295,564 / $21,978
=13.35
Average Inventory-Turnover Ratio = COG’s / Average Inventory
= $481,840 / $82,214
= 5.86
Average Collection Period Ratio = Credit Sales / AR
= $289,484 / $29,152
= 9.93 days
Average Payable Period Ratio = Purchases / Account Payable
= $403,569 / $54,258
= 7.43
Net-Sales-to-Total Assets Ratio = Net Sales / Net Total Assets
= $689,247 / $280,843
= 2.5

Net Profit on Sales Ratio = Net Profit / Net Sales

= $30,189 / $689,247
= 0.04
Net-Profit-to-Assets Ratio = Net Profit / Net Assets
= $30,189 / $280,843
= 0.1
Net-Profit-to-Equity Ratio = Net Profit / Owners Equity
= $30,189 / $73,375
= 0.41