The partnership firm refers to the association of two or more individual's who carry on a business organisation together in order to share profit and loss. As it is considered as a most ideal form of organisation because it requires moderate amount of capital as well as diversified managerial talent. The case of “YOGHURTOLOGY FROZEN YOGHURT SHOP” is chosen which is a partnership firm that owned by the Frank Jones and Peter Jackson jointly eighteen months ago. Now they want to diversify their product range along with the market expansion so it requires to prepare a report which includes the evaluation of partnership firm, porters five force model as well as macro environmental factors for their successful diversification.
Evaluate a partnership as a type of business organisation within the context of Yoghurtology Frozen Yoghurt shop.
Partnership termed as a form of organisations in which two or more persons share their ownerships, profit, loss as well as have liability to manage day to day working and make effective decisions jointly. For this, a partnership deed is prepared which is to be required for classifying the terms and conditions along with the all details of all partners in detail as it is necessary for all partnership firm because it is essential consideration of legal formalities of any corporations. It also said that partnership firm is established by legal agreement among all partners and mutually understanding between all (Namada, 2018).
Within the context of âYOGHURTOLOGY FROZEN YOGHURT SHOPâ there are two partners in this business that named are Peter Jackson and Frank Jones. They mutually agreed on the single terms and conditions and open a shop in busy Bullring shopping centre in Birmingham that is an ice-cream parlour which mainly specialise in offering frozen yogurt. Both the partners have strong knowledge and experience in hospitality sector as they earlier employed at hotels or restaurants at a good position. Both decided to establish shop as jointly and each one contributed Â£30,000 that was invested in securing the lease on shop for the time period of three years and ensuring the requirement of working capital that required for the daily operations. As per their partnership they gain many advantages or benefits which helps in strongly increasing their sales as well as revenue.
Benefits of partnership firm with respect of YOGHURTOLOGY shop:Â
- For the shop, partnership firm is advantageous as it was easy to set up at a low cost.
- Partnership firm will have high capacity of borrowings.
- This kind of business do not have to pay taxes on their income because all partners files all records at a personal level and return income tax personally (Lapierre, 2018).
Drawbacks of Partnership firm:
- As all partners are liable to share profit and loss equally even if losses are incurred by others so it can place more burden on personal assets and funds.
- Sometimes, it creates conflicts among partners due to the emotional issues as well as unequal efforts and varied thoughts within a business.
Use of Porter's five force framework
This model was defined by the Michael E. Porter that is based on the mainly five forces of industry in order to determine the competition intensity within an industry and their level of profitability. This will help in identifying the structure of industry along with the competition level that assist âYOGHURTOLOGY FROZEN YOGHURT SHOPâ to examine the competitive position within an industry. The five forces of this model are discussed as follows:
Threat of new entrants: Within the context of YOGHURTOLOGY shop the threat of new entrance is high because it requires less capital to invest in a business (SHTAL, 2018). Also, there is no barrier to enter into that market so many firms easily starts their own businesses in frozen yoghurt. There are some way that can be used by the Frank and Peter in order to tackle the new entrants threats such as follows:
- By brining innovative goods and services by using fresh and organic ingredients helps in minimising the new entrants threat.
- The company can spend huge money on the research and development activities as well as enhance the capacity level also.
Bargaining power of supplier: It is associated with the number of suppliers in the market who supply milk for making frozen yoghurt as well as materials (Julita, 2019). So the bargaining power of suppliers is low because of the many suppliers and all industries are tied to the suppliers closely. Within the context of Yougurtology shop, the company can tackle the bargaining power of suppliers in many ways such are discussed as follows:
- The company can buy raw material from suppliers like local organic farms at a low cost.
- Yougurtology can develop their supply chain efficiently along with the more number of suppliers.
- By experimenting with more products designs such as they focused on premium products which is organic and healthy.
Threats of substitution: It is related to the availability of substitutes within the industry or marketplace which influence the profitability of company by attracting customers. It will occurs when the needs or wants of the customers fulfilled by similar products (Clarke, 2019). The threat of substitution is immense in frozen yoghurt industry and the company YOGHURTOLOGY can tackle substitution threats by following ways such as:
- As they can emphasise on the services instead of being product oriented by maintaining good infrastructure and facilitates many services like Wi-Fi at their shops.
- By raising the switching cost for their customers.
- Focused on the customers requirements instead of what they buying.Â Â
Bargaining power of buyers: These are the king of the market and basically they can easily attracted towards the low prices. But in UK, people are healthy conscious so they moves towards the healthy product even ready to pay high prices for it. So the buyers bargaining power is low in that industry and in some cases the company can tackle this factor in following manner like:
- Increasing the customer base which helps in reducing the buyers bargaining powers.
- Continuously focused on creating or bringing new products and services.
Rivalry among existing players: When the rivalry among existing competitors is immense then it will decline the prices and entire profitability of a business organisation (Christodoulou, 2019). As there are less numbers of competition in the market where the company YOGHURTOLOGY open their shop or can say that there are the only one seller of frozen yoghurt in that area so the competition is less. In some adverse situation a company can tackle rivalry by following manners such as:
- Focus on product differentiations.
- Conduct appropriate market research.
- Use promotional tools and advertising methods for promoting a business.
Discuss macro environmental factors
There are several external factor which influence a business organisation at a great extent as it includes political, economical, social and so on (Bruijl, 2018). Within the context of YOGHURTOLOGY SHOP the study of few environmental factors in order to increase their performance and market that are as follows:
- Political factors: The country United Kingdom operates under the influences of parliamentary system as it is one of the most successful country regarding the implications of rules and regulations. Whereas, hidden corruptions as well as Brexit deal considered as a negative aspects for the company (Scott, 2019). So the Yougurtology can easily diversify their businesses because of the governmental stability.
- Economical factors: As the country UK has strong economic position as compared to others and has high rate of GDP, large population, diversified economy as well. But the negative factors are the slow rate of economic recession recovery and the huge amount of money spending on public services. This will gives an opportunity to Yougurtology in order to diversify their market easily.
- Social factors: It is associated with the people behaviour, culture, values and so on factors that influence the purchasing power of each customers in a different way. As the population of UK is highly attracted towards the health conscious products which facilitate opportunity to Yougurtology to grow at local level and also the people have high level of living standard. Whereas, increasing the dependency ration may effect the sales and revenue of company or shop (Peachey, 2018).
It has been concluded from the above report of case study as partnership form of business is more suitable for the companies as it helps in lowering the cost as well as required less capital to establish. Also, to know about the competitive position in the marketplace a company can use porters five force in order to gain a competitive edge. Lastly, analyse the macro environmental factors in order to know the product as well as market development area for a business which are either in favour or adverse.
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