Factors that enable business startups

This piece by Nicky Jackson on the entrepreneur.com website is headlined “10 forces that have caused the packaged food startup explosion”.  I’m not sure that these can be categorised as “forces”, that they have “caused” anything (maybe ‘helped shape’?), nor that there is a “startup explosion”.  But despite the hyperbole of the headline, Jackson makes some interesting points, some of which may help to explain startups across many sector, not just packaged foods.  Let’s take a look…

  1. Social media – this enables new entrants in markets to reach consumers relatively easily and very cheaply.
  2. Crowdfunding – entrepreneurs can now source their capital funding from a much wider range of providers.
  3. C0-manufacturing – production can be outsourced (our Operations Insight about Monty’s Bakehouse on page 85 of our book explains in detail how this operator went about this).
  4. Co-packaging – this too can be outsourced.
  5. ecommerce – smaller brands can use the internet to sell directly to consumers, thereby maintaining high margins.
  6. ‘Localisation’ – national brands are recognising the demand from consumers for ‘local produce’.  By definition new entrant will tend to start off locally.
  7. Outsourcing – non-operations functions can also be outsourced more easily, such as legal services, financial services, and so on.
  8. Fixed costs – if co-manufacturing, co-packaging and outsourcing are adopted there will be little or no fixed cost.
  9. ‘Selectionist consumption’ – 30% of food shoppers are ‘selectionists’ i.e. they buy based on trends not brands.  If the startup aligns with these trends, it can grow very rapidly.
  10. Higher prices – if trendy, local and crowd sourced, startups’ products can often command a higher price than established brands.
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This entry was posted in Chap 12 New products and services, Sector: Manufacturing, Sector: Retail and tagged , , , , . Bookmark the permalink.

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