Barriers to Entrepreneurship

Recognizing a need and having an idea of how to fill it are rarely a strong enough basis for launching a new venture, particularly if the would be entrepreneur needs to borrow capital. Most successful entrepreneurs also create a business plan, a formal document that contains a statement of purpose, a description of the products or services to be offered a market analysis, financial projections and some management procedures designed to attain the firm’s goals. Before they can write a business plan, though, entrepreneurs must be aware of the barriers entry.

Why do entrepreneurs fail? The most common reason is ‘lack of a viable concept’. Another common problem is a lack of market knowledge. Sometimes it is hard to attract the people with the best information because they already have good jobs, are chained to their present employers by ‘golden handcuffs’ or are too complacent to feel a need to do truly first rate or important work. Even a lack of technical skills can be a problem.

Then, too, there is the difficulty of finding the $25,000 to $100,000 a start up typically needs. Capital is even harder for women to come by, because women often start businesses in the service sector where, a start up costs are lower, banks make less money on the smaller loans. Women borrowed also complain about discrimination especially among venture capitalists. Some banks, seeing the growing number of women owned business as a potential lucrative market have risen the demand and set up special loan programs for women and minorities with existing businesses. Bank of America and Harris Trust are among the banks with such programs.

A certain number of entrepreneurs fail after start up because they lack general business know how. Some would be entrepreneurs are deterred from entering certain lines of work – for example, housecleaning by what they see as a social stigma. In all, twelve common barriers to entrepreneurs can be listed.

Stiff competition from large, entrenched corporations can also present a formidable obstacle to an entrepreneur. Here is where the new competitive relationships created by entrepreneurs are planned to see. There is no reason to believe that managers already in a particular market will take lightly the entrance of a start up company. Ben Cohen and Jerry Greenfield of Ben & Jerry’s Homemade learned this lesson.

The ice cream wars: David and Goliath

Battle lines have been drawn in a modern version of David and Goliath: Ben & Jerry’s Homemade and Haagen-Dazs are fighting over the market for super-premium ice cream, which has become big business. During the last decade, Americans began to consume the high fat low air treat in ever increasing amounts. By 1993, the domestic ice cream industry reached $10 billion.

Not surprisingly this boom in demand has flattened and resulted in the introduction of numerous brands and fierce competitions of market shares. Ice cream companies are having to explore exotic flavors such as cookie dough, in order it hang on to market share. In 1992, supermarket sales of ice cream rose barely 1 percent and production fell from 882 million gallons in 1988 to 863 million gallons in 1991.

In beginning was Haagen-Dazs begun by a Brooklyn immigrant who sold his company to Pillsbury as the market was expanding. Before long, other brands emerged on the scene, including Ben & Jerry’s which was originally developed by Ben Chen and Jerry Greenfield to cater to the college population in Vermont. Although there are several other brands in the market, these two are now the major competitors in one of the business world’s fiercest battles for consumers. Market leaders Haagen-Dazs and Ben & Jerry’ were only 1 percent apart in market share of 1992 with Haagen-Dazs barely holding on to its lead.

As a subsidiary of large company Haagen-Dazs has enjoyed national distribution. Ben & Jerry’s has now expanded to the point that it is currently distributed in all 50 states, with more than 100 shops in 18 states. Initially much of their distribution has been threatened by a Haagen-Dazs move to create exclusive distributorship: Haagen-Dazs would like to require that distributors and retailers who handle its product handle no other ice cream in the super-premium class.

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