Entrepreneurship: Report on Acquiring a Fashion Business in Australia

This report delves into the realm of entrepreneurship, specifically focusing on the acquisition of an existing business within the Australian fashion industry. The report begins by establishing the fundamental principles of entrepreneurship, emphasizing the importance of vision, solution-oriented thinking, and unique product offerings. It then provides an overview of the Australian fashion market, highlighting the competitive landscape and the specific characteristics of companies like Cotton On and Lover. The core of the report focuses on the process of acquiring a business through outright purchase, outlining the necessary steps such as determining investment costs, asset valuation, and financial statement adjustments. The report also includes an analytical positioning of a product/service in the Australian market, employing the STP (Segmentation, Targeting, and Positioning) model, with an emphasis on experiential positioning and financial analysis. Furthermore, the report explores various options for resourcing the acquired business, including human resources and financial management, while also considering the importance of adhering to legal and governmental regulations. Finally, the report offers recommendations for the acquisition of the proposed business, stressing the importance of understanding the reasons for selling, conducting thorough research, and utilizing professional expertise. The report concludes by summarizing the key insights, emphasizing the importance of strategic planning and market awareness for entrepreneurial success.

Entrepreneurship and
acquiring a business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK A ..........................................................................................................................................3
Principles of entrepreneurship.....................................................................................................3
Fashion industry and markets of Australia..................................................................................4
Acquisition of existing business through outright purchase........................................................5
Analytical positioning of product/service in Australian market..................................................6
Options for resourcing business...................................................................................................6
Recommendations on acquainting the proposed business...........................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9
2

INTRODUCTION
Business expansion is an indication of growth and development. An entrepreneur works
for achieving significant growth and reputation. Acquiring a part of business or its complete
functioning rights are two different perspectives. This report serves the purpose of acquiring an
existing business by outright purchasing. Before running a business it is important that
entrepreneur must be aware about his working principles and vision, without this knowledge it
becomes highly difficult to manage operations and future consequences. A brief analytical view
of positioning and resourcing options that buyer company will require are evaluated so that best
decisions could be formulated.
TASK A
Principles of entrepreneurship
Entrepreneurship is a phenomena that involves processing of unique thoughts and ideas
into businesses (Drucker, 2014). Traditional follow up of working in companies is broken by
individuals known as entrepreneurs. They are solely responsible for all activities that are
involved in initial stages of business operations. Principles and concepts that are involved in this
unique and refreshing method of business ownership are described ahead: Having a vision and mission: Visions and objectives give a direction for working. An
entrepreneur cannot mould his ideas and thoughts unless he/she has a vision. It is the
chief important principle of working in the competitive markets. Being a solution provider: Instead of waiting for a solution to come up on its own, every
individual who perceives to be an entrepreneur must be able to provide solutions to all
the problems that are being faced by him and his working staff. Unique product/service: In growing competition, only new and unique products/services
that are viable by purchasers can co-exist. It becomes easy to survive such brutality when
particular qualities are unique to the proposed commodity (Kirzner, 2015). Technological
support can be taken by businesses to evolve their products. Leadership and management: Innovation with effective leadership skills is always
beneficial. Great entrepreneurs are never completely satisfied by their piece of work. This
leads to developments and steady growth during tough times.
3

 Motivated and encouraging: Giving up is not a cup of tea for an entrepreneur. Persistence
and determination are keys for unlocking motivation and encouragement.
 Respecting investors, customers and employees: Stakeholders are most important to every
business. Experiences of successful businessmen denote that it is highly important to
respect their external and internal stakeholders (Kuratko, 2016). It not only helps in
contributing to growth but also develops good relations within markets.
I had been leading a fashion firm Cotton On which is based in Australia. My vision and
goals was to make my brand the most prominent one in native markets. This urge to excel and
develop in my career led for the choice of entrepreneurship. It not only provides freedom to a
person for practising his working style but also helps in earning huge profits. Lover is the
prospective company that I wish to acquire by purchasing its complete existing market. With my
capital power and accountability I will be able to manage this venture with at most efficacy.
Fashion industry and markets of Australia
The 21st century has witnessed lot of technological advancements. From inventions and
developments of smartphones to rapid growth of e-commerce, everything has changed the
perceptions of customers towards fashion and retail industry (Baum, Frese and Baron, 2014).
Online payment options and convenient shopping trials is the best outcome of this progress.
Cotton On is a renowned fashion retailer that has been dealing largely in clothing and cosmetics
for all age groups and irrespective of gender (About Us, 2017). Being a multinational company, it
has acquired many small scale businesses for expanding its product range and market share.
On the contrary, Lover is also a clothing company but has specific product range. Their
unique clothing and apparel range is inspired by music, art and creativity. Launched in 2001, the
company had been running very well during initial years of their launch but currently it has been
facing a lot of criticism due to weak business strategies (About, 2017). Australian markets for
fashion are trending and always aspire for unique and innovative products. Billabong and Rip
Curl have been leading competitors of these markets in fashion and clothing industry.
Entrepreneurial activities are highly encouraged so that customers won't feel bored and
acquainted by repetitive products.
4

Acquisition of existing business through outright purchase
Performing outright purchase of a company is the most viable business option for a
successful firm (Carraher and Paridon, 2015). It becomes easier to start a new venture from an
old set up because it requires less resources and materials for development. Quick
implementation of strategies is experienced in this method despite of high purchasing costs
which cannot be neglected. Business acquisition involves certain procedures that have to be
followed by entrepreneurs for getting a dimensional view of strategies. Following steps are
designed to understand business purchase process:
1. Determining overall investment amount or cost price of the business. This includes
evaluation of properties like inclusion of stock values, share prices, etc.
2. Allocation of prices for assets and deductions for liabilities is the next stage in analysis of
pricing of business. Inventory details, capital leases, assets gathered from research and
developments, intangible components, etc. must also be evaluated accurately so that no
hidden facts will change dynamics of purchasing company.
3. The final stage is declaring the partial results for first year in buyer organisation's
financial statements. There are certain rules that have to be followed for enacting this
step. Listing of conditions and quantification of investments is done so that a rough
estimate of profit would be gained which will help in confirming respective decisions
(Jones, Macpherson and Jayawarna, 2013).
Cotton On is proposing to acquire Lovers by buying its rights and existing markets of
Australia. This will result in Cotton On being sole owner of the other company. The company
had been running efficiently but owners decided to earn steady profit by selling their brand. This
will help the buyer to increase its market share and launch this unique product under Cotton On's
brand name.
Buying an existing business involves a lot of risk but it helps in recovering soon.
Generally such deals take place only between a large company and a small company or between
comparative businesses. Choice of correct business is most crucial to this step. Entrepreneurs
have to make sure that current position of the respective business that is to be bought must be
feasible and irreversible (Kwak and Kim, 2013). This will help in applying innovative strategies
in efficient manner and yield good profits.
5

Analytical positioning of product/service in Australian market
Markets are full of competition. When Cotton On will acquire the markets of Lovers,
then certain tactical implications must be evaluated so that further decision making process gets
easier. Financial analysis is also a part of product positioning. A marketing tool known as STP
(Segmentation, targeting and positioning) is used for developing a foundation for the business.
Positioning method that can be adopted by Cotton On after acquiring the business of Lovers
must be based on Experiential positioning.
Experiential Positioning: The brand will target its customers based on emotional or
sensory characteristics. It involves direct connection with purchasers with a humane touch.
Positioning is important because it will help the company gain an insight about taste and
preferences of customers related with the new or refurbished products they are going to launch.
The use of this technique will not only provide better competitor analysis but also help in
formulating current customer value for the proposed product.
Financial Analysis: Process in which complete business evaluation is provided with
regards to capital values, suitability, budgets and revenues, etc. is called as financial analysis.
Ratios are calculated so that financial status of the company being sold can be visualised by
purchaser (Lei and Moon, 2015).
Digital techniques can be utilised for analysing customer demands and needs. Several
forums and platforms have emerged that perform this task on behalf of desirable business
venture. In this case, Cotton On can opt for conducting a survey that will analyse current fashion
trends which are adopted by all age group clients. If there is large inclination for products of
Lover, then Cotton on can opt for buying this small level organisation. If the results are negative
then certain changes in products can be made and evaluation can be performed. Positioning will
only help in giving specific services to specific group of people.
Options for resourcing business
No strategy can function without application of principle theories and models. STP
provides businesses a better and easy way to deliver their products and services to deserving
customers. Data that is to be acquired must be distinct and differentiable (Schlegelmilch, 2016).
This will help in creating proper action plans for each interpreted information. Resources are
finalised after positioning is accomplished. It is well known that businesses cannot function
6

without resources. Multiple options for gathering resources must always be available with every
entrepreneur so that business operations are not disrupted at time of execution.
Human resource is most important part of every organisation. Acquiring through
purchasing existing business helps in managing resources that will be required for establishing
new businesses. Money can be saved in purchasing land, furniture, equipments and most
important inventory for setting new branches. Human resource will also be readily available. It is
essential to out weigh all possible outcomes so that investors won't face any difficulties while
beginning their work procedure. Quality of resources must never be compromised for saving
costs (Roberts, 2015). If potential of development is visible then, trainings can be imparted.
Irrelevant materials and resources which won't be useful for Cotton On must be disposed timely
for creating more room.
Correct resourcing becomes beneficial for future. If analysis and evaluation of resources
is not performed with 100% efficacy then, purchaser will have to face further problems in near
future. Laws and legislations that have been defined by national and local government must be
followed so that no breach of contract is faced by the entities involved. Strategies must be
designed by creating less reliability over law. It improves litigation costs and financial expenses
during resourcing for business expansion.
Recommendations on acquainting the proposed business
Clothing giant Cotton On must be consider following recommendations or suggestions
which are based on the results of positioning analysis and resourcing options need to purchase
existing business of Lover clothing company.
 The reason behind selling rights over a business must be clearly communicated so that no
unwanted advantage is taken by the other company. Myriad of all reasons related to
selling of one's practically implemented thoughts must be known to purchaser. This helps
in practising ethical contract of selling and purchasing (Cartwright and Cooper, 2014).
 Cotton On must also consider the location, size and internal constructional details before
making any proceedings in acquisition. This helps in getting an estimate for profits. It
also helps in figuring out possibilities for likeability by audience.
7

 Research is essential for every business expansion. It is recommended that proper
research must be conducted by company so that hidden flaws and defects are easily
detected.
 The complete procedure must be handled by professionals that have sound legal and
financial knowledge. Often situations arise where it becomes difficult to understand
certain specific terms and policies which can be harmful for the company in long run.
Hiring correct individuals will help in understanding these aspects and help Cotton On to
make correct decisions.
CONCLUSION
An entrepreneur must always be handy with information on every future strategy he/she
is going to make. This report helps in getting better understanding of expanding business through
acquisition of existing business in Australian market. Cotton On is going to own Lovers which
are two clothing companies of fashion industry in Australia. With proper analysis of products,
services and components that are related with business a company can get overview of this
proposal. Purchasing procedure must be conducted crucially so that no future consequences are
faced by buyer. This technique is not only beneficial and less risky but also helpful in enhancing
brand reputation.
8

REFERENCES
Books and Journals
Drucker, P., 2014. Innovation and entrepreneurship. Routledge.
Kirzner, I. M., 2015. Competition and entrepreneurship. University of Chicago press.
Kuratko, D. F., 2016. Entrepreneurship: Theory, process, and practice. Cengage Learning.
Baum, J. R., Frese, M. and Baron, R. A., 2014. The psychology of entrepreneurship. Psychology
Press.
Carraher, S. M. and Paridon, T. J., 2015. Entrepreneurship journal rankings across the discipline.
Journal of Small Business Strategy. 19(2). pp.89-98.
Cartwright, S. and Cooper, C. L., 2014. Mergers and acquisitions: The human factor.
Butterworth-Heinemann.
Roberts, R., 2015. Finance for Small and Entrepreneurial Business. Routledge.
Schlegelmilch, B. B., 2016. Segmenting Targeting and Positioning in Global Markets. In Global
Marketing Strategy Springer International Publishing.pp. 63-82.
Lei, N. and Moon, S. K., 2015. A Decision Support System for market-driven product
positioning and design. Decision Support Systems, 69, pp.82-91.
Kwak, M. and Kim, H., 2013. Market positioning of remanufactured products with optimal
planning for part upgrades. Journal of Mechanical Design. 135(1). p.011007.
Jones, O., Macpherson, A. and Jayawarna, D., 2013. Resourcing the start-up business: Creating
dynamic entrepreneurial learning capabilities. Routledge.
Online
About Us. 2017. [Online]. Available through:<http://cottonongroup.com.au/about_us/our-
history>. [Accessed on 14th January, 2017].
About. 2017. [Online]. Available through:<http://loverthelabel.com/about/>. [Accessed on 14th
January,2017].
9