000147503 147503 (1)

Academic supervisor: Kai Kristensen BPM Master Students:

Erika Bendixen Emma Migliorini

MASTER THESIS

Entrepreneurship and women:

The making of a business plan for the

creation of a distribution business in

Denmark

Aarhus School of Business April 2006

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Table of contents

Introduction ................................................................................................................................ 4

Scope and limitation................................................................................................................... 5

1. Insights to entrepreneurship: a comprehensive literature review........................................... 7

1.1 Definition of the terms “entrepreneur” and “entrepreneurship” ...................................... 8

1.2 The economic approach: different views on the role of the entrepreneur...................... 10

1.2.1 Cantillon and Say .................................................................................................... 10

1.2.2 Kirzner..................................................................................................................... 11

1.2.3 Schumpeter.............................................................................................................. 11

1.2.4 Knight...................................................................................................................... 13

1.2.5 Casson ..................................................................................................................... 14

1.2.6 Lazear’s “jacks-of-all-trades” theory: A revived view of the economic approach . 14

1.3 Trait approach: personal characteristics ......................................................................... 16

1.4 Social-behavioral approach: a dynamic process ............................................................ 20

1.5 Conclusion...................................................................................................................... 25

2. Entrepreneurship and women............................................................................................... 27

2.1 Analyzing women start-up business: Gartner versus EFQM ......................................... 28

2.2 New venture creation framework: a study on women entrepreneurs............................. 30

2.2.1 Individual characteristics......................................................................................... 30

2.2.2 Organization characteristics .................................................................................... 36

2.2.3 Process of creating a business: focus on networks.................................................. 43

2.2.4 Environmental factors ............................................................................................. 48

2.3 Conclusion...................................................................................................................... 52

3. Making of the business plan................................................................................................. 55

3.1 The business idea ........................................................................................................... 56

3.1.1 Definition of a business idea ................................................................................... 56

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3.1.2 Presentation of the product lines ............................................................................. 56

3.1.3 Consumer benefit .................................................................................................... 58

3.2 Organizational plan ........................................................................................................ 60

3.2.1 Business Philosophy................................................................................................ 60

3.2.2 Corporate structure: limited liability (ApS) ............................................................ 61

3.2.3 The business system: a distribution business .......................................................... 62

3.2.4 Supplier development: a core process ..................................................................... 64

3.2.5 Legal environment: Intellectual Property Rights .................................................... 66

3.3 Management team .......................................................................................................... 69

3.3.1 Founders profile ...................................................................................................... 70

3.3.2 Allocation of tasks and roles ................................................................................... 73

3.4 Realization schedule....................................................................................................... 77

3.5 Risks ............................................................................................................................... 79

3.6 Marketing plan ............................................................................................................... 82

3.6.1 Target market .......................................................................................................... 83

3.6.2 Competition............................................................................................................. 95

3.6.3 Methods of distribution ........................................................................................... 97

3.6.4 Advertising ............................................................................................................ 101

3.6.5 Pricing ................................................................................................................... 103

3.6.6 Product design ....................................................................................................... 103

3.6.7 Timing of market entry ......................................................................................... 104

3.6.8 Location................................................................................................................. 104

3.6.9 Industry trends....................................................................................................... 105

3.6.10 Conclusion........................................................................................................... 106

3.7 Financial plan ............................................................................................................... 108

3.7.1 Industry sales......................................................................................................... 108

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3.7.2 Projected Sales ...................................................................................................... 110

3.7.3 Cost analysis.......................................................................................................... 111

4. The final remarks of the thesis ........................................................................................... 116

4.1 The concluding results ................................................................................................. 116

4.2 Observations for the future........................................................................................... 118

References .............................................................................................................................. 119

APPENDIX I.......................................................................................................................... 135

APPENDIX II ........................................................................................................................ 140

APPENDIX III ....................................................................................................................... 143

APPENDIX IV....................................................................................................................... 146

APPENDIX V ........................................................................................................................ 152

APPENDIX VI....................................................................................................................... 154

APPENDIX VII...................................................................................................................... 156

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Introduction

Entrepreneurship is a complex concept, which many scholars in the field of economy, sociol-

ogy, psychology and sciences have tried to define. Despite all efforts, no consensus has been

reached regarding the boundaries of the definition of entrepreneurship. However, many schol-

ars agree that the field of entrepreneurship positively influences on a country’s economy. Ac-

cording to Kjeldsen and Nielsen (2000, p.6), creating new enterprises constitute the base for

“maintaining a country’s international competitive power, economic development, employ-

ment, and standard of living”.

Behind the authors desire to study the field of entrepreneurship is a strong willingness and

motivation to create a new venture. The idea is to create a distribution firm, buying Mexican

jewelry and selling it on the Danish market with possibilities for product category expansion.

An initial desk research revealed particular characteristics that successful entrepreneurs have

in common. Despite the shared characteristics, gender-based differences have been found to

influence both business start-up and performance (e.g. Greene et al., 2003; Loscocco & Leicht

1993; Lerner & Almor 2002). This reality influenced the authors not only to study the field of

entrepreneurship following a general and theoretical approach, but to focus on the obstacles

women encounter when engaging in entrepreneurship.

.At this point the authors questioned themselves: What are the obstacles and risks women

face when entering entrepreneurship? Finding the answer to this question will become the

base for concretizing the business idea through a business plan. This leads the authors to raise

a second question: Is this business idea a viable one? These two questions constitute the

problem statements of the thesis.

The goal of this paper is to provide an answer to the above mentioned questions. To reach this

end, the thesis will begin by presenting an insight on the field of entrepreneurship, focusing

on its evolution and on female entrepreneurs. This literature review will serve as a guideline

to avoid mistakes during the making of the business plan, which constitutes the second key

component of this paper. This paper ends by drawing concrete conclusions regarding the vi-

ability of the business idea and discusses the possibilities of future research.

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Scope and limitation

The aim of the paper’s first chapter is to provide a comprehensive and synthetic literature re-

view of the field of entrepreneurship. There is no intention to construct an exhaustive discus-

sion of all the research that has been done in this field so far. Rather, the authors have selected

representative studies so as to highlight the essential findings which are of the authors’ inter-

est for the realization of the business plan. This first chapter is structured to present the pro-

gress in the field of entrepreneurship for the last 200 years. To provide a concise work, the

authors will base this part on Deakins and Freel’s (2003) three approaches to entrepreneur-

ship. Before studying deeply these approaches, definitions of the concept of entrepreneur are

presented to understand the latent aspect of entrepreneurship. The intention is to reveal that

the concept of entrepreneurship is complex in the sense that no consensus concerning the

definition has been reached by scholars so far.

The objective of the second chapter on women entrepreneurs is to provide an insight into this

popular field of research by examining major studies in this area. The purpose is to be able to

answer key questions essential for the good implementation of the business plan. There is no

attempt to provide a cross-cultural analysis where women entrepreneurs in developed coun-

tries would be compared to women entrepreneurs in non-OECD and developing economies.

Nor do the authors attempt to study one specific area such as the environmental conditions

affecting women and men business formation across different countries1. Rather, the focus is

on gender differences between women and men entrepreneurs in general. More precisely, the

aim is to analyze if differences exist between women and men entrepreneurs and their condi-

tions for business start-up.

The first and second chapters are essential to collect necessary information for the implemen-

tation of a sound business plan. In short, these chapters, which are theoretical in nature, will

serve as a guideline for avoiding mistakes when nascent female entrepreneurs intend to start

their own business.

Chapter three does not intend to present directly the finished version of the business plan.

Instead it provides a detailed analysis of each component of the business plan. The final busi-

1 See: Kolvereid et al., 1993

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ness plan, which serves as an official document to gain access to financial capital, will be pre-

sented in a separate chapter only if the business idea is viable. It is worth noting that the re-

search by Honig and Karlsson (2001, p.19) states that “firms do business plans for institu-

tional reasons rather than for instrumental reasons”. In addition, the results of their study sup-

port that “producing business plans will increase the probability of nascent firms persistence”

(Honig & Karlsson, 2001, p.15).

On chapter four the authors provide a detailed conclusion on the knowledge acquired during

the making of the master thesis. In this last chapter final remarks will be discussed providing

concluding results, as well as observations for the future.

Throughout the paper the authors approach the terms entrepreneurship and self-employment

as synonyms. This point is essential to note as Kjeldsen and Nielsen (2000, p.7) make a dif-

ference between the two concepts: “entrepreneurship accounts for renewal in a Danish busi-

ness sector, i.e. setting up a genuinely new enterprise, whereas self-employment stands more

for a continuance of the existing business sector”. This differentiation will not be taken into

account throughout this paper. In addition, it is worth noting that, for writing purposes, the

authors will use the masculine pronoun “his” when referring to male and female entrepreneur.

Moreover, the authors will refer to Denmark for illustrative examples. The raison d'être being

that Denmark will constitute the test market for the launch of the business idea, and therefore

specific information on the country is essential.

Finally, “Focus Groups” is used as a tool in the marketing plan to gather detailed information

about the future customers. This method was chosen for three distinct reasons: (1) exploring

and discovering the target group of the business, (2) understanding the future consumer’s

thoughts and experiences with similar products, and (3) interpreting consumer behavior. Nev-

ertheless, the authors are conscious of the limits of this kind of qualitative research methods.

The results of the focus group sessions reflect only a small segment of the market and cannot

be applied to the population as a whole. The authors are aware that focus groups constitute

only one fraction of the decision-making process and therefore, in the future, the intention is

to follow-up with quantitative research method with larger samples in order to statistically

support the project.

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1. Insights to entrepreneurship: a comprehensive literature review

In 1985, Shapero (p.1) underlines “entrepreneurship is “in” ”. Since then, the field of entre-

preneurship has gained the interest of individuals, governments, cities and corporations

(Shapero, 1985) in that they perceive an opportunity in it. Likewise, as a vital and relevant

field of study, scholars recognize entrepreneurs “to act as engines of growth in the economy”

(Dutta & Crossan, 2005, p.425). “As Baumol2 eloquently remarks, the study of business with-

out an understanding of entrepreneurship is like the study of Shakespeare in which the Prince

of Denmark has been expunged from the discussion of Hamlet”.

The aim of this chapter is to provide insights into the complex field of entrepreneurship in

order to gain sustainable knowledge essential for the empirical part of this thesis. This chapter

will be structured as follows: the first part will review some of the scholar’s definitions on

entrepreneurship, while the subsequent three parts will review the contribution of acknowl-

edged theorists on entrepreneurship, in order to achieve a better understanding of the essence

of entrepreneurship. To this end, the three last parts will be based on Deakins and Freel’s

(2003) three dominant approaches to entrepreneurship, which concretize all efforts made on

the entrepreneurial research field. This theoretical view was previously examined by Steven-

son and Sahlman (1984)3 who recognize three main schools of thought concerning the es-

sence of entrepreneurial activity: 1) the functional perspective or what Deakins and Freel

(2003) call the “economic approach”, 2) the personality perspective or “trait approach” and 3)

behavioral perspective or “social-behavioral approach”:

2 See: Shane and Venkataraman, 2000, p.219 3 See: Cope, 2005, p. 373

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Figure 1: Deakins and Freel (2003, p.2)

A review of the entrepreneurship literature is essential for understanding entrepreneurial ac-

tivity. The authors believe that the examination of dominant theoretical perspectives in entre-

preneurship is vital for understanding female entrepreneurs in a male dominated arena. When

necessary, the authors will provide concrete examples to illustrate gender-based differences.

1.1 Definition of the terms “entrepreneur” and “entrepreneurship”

The essence of the noun “entrepreneur” is French and translated literally it signifies “one who

takes in between” (Deakins & Freel, 2003, p.3). The word entrepreneur was originally em-

ployed in the Middle Ages and signified “a person who is active, who gets things done”

(Swedberg, 2000, p.11). In 1723 a French dictionary underlined that an entrepreneur is “one

undertaking a project, a manufacturer, a master builder”, while in England in the 18th century

an entrepreneur is “an adventurer, projector and undertaker”4. Webster’s Third New Interna-

tional Dictionary (1961) describes an entrepreneur as “the organizer of an economic venture,

especially one who organizes, owns, manages, and assumes the risk of a business” (Robert &

Brockhaus, 1980, p.509). A contemporary definition from the Cambridge on-line5 dictionary

defines the term of entrepreneur as “a person who attempts to make a profit by starting their

own company or by operating alone in the business world, especially when it involves taking

risks”. From Baumol’s (1990, p.897) point of view entrepreneurs are “persons who are ingen-

ious and creative in finding ways that add to their own wealth, power and prestige”.

4 http://www.engin.brown.edu/courses/en9/spring/handouts/1. (23/11/05) 5 http://dictionary.cambridge.org/define.asp?key=entrepreneur*1+0&dict=A (23/11/05)

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Some researchers have focused on the differences between “entrepreneur” and “manager”. As

an example, Robert and Brockhaus (1980) refer to the study of Mill (1848) which underlines

that “the inclusion of risk bearing distinguished the term “entrepreneur” from the term “man-

ager”…” (Robert & Brockhaus, 1980, p.509), while on the contrary Schumpeter considered

that both the entrepreneur and the manager are enrolled in the risk of failure. Another view-

point discussed was McClelland’s (1961) principle that managers with decision making re-

sponsibilities can also be seen as entrepreneurs. Finally, another relevant example provided by

Robert and Brockhaus (1980, p.510) is the work of Weber (1947) which distinguish the entre-

preneur from the manager by the fact that the entrepreneur represents the decisive foundation

of all official authority within the business venture.

The term “entrepreneurship” falls into two conceptualization “categories” (Wiklund et al.

2001, p.289). The first, which takes its roots in Gartner (1988, p.62), indicates that “entrepre-

neurship is the creation of new organizations”. For instance, if the inventor uses his existing

firm to commercialize his invention, there is in this sense “no act of entrepreneurship”. On the

other hand, the second category views that “entrepreneurship is the creation of new economic

activity”. In this sense, any invention may be commercialized “by existing or newly created

firms or through trading them on the market” (Wiklund et al., 2001, p.289).

In short, the definitions of “entrepreneur” and “entrepreneurship” are still subject of persistent

discussion and as a consequence, these terms are not yet utterly defined. Many scholars (e.g.

Lumpkin & Dess, 1996; Shane & Venkataraman, 2000; Deakins & Freel, 2003) have given

their respective idea on entrepreneurship; nevertheless no consensus regarding the definition

of entrepreneur has been reached. According to Lumpkin and Dess (1996) this lack of con-

sensus acts as a barrier to the development of the theory of entrepreneurship. At present, most

scholars have defined the field of entrepreneurship only by answering who the entrepreneur is

and what his function is. This involves that the majority of researchers have ignored to deter-

mine opportunities (Shane & Venkataraman, 2000 p.218) or to answer the question how. Op-

portunities can be of different nature: an opportunity concerning product markets, such as the

creation of innovative information or factor markets such as the finding of new resources

(Shane & Venkataraman, 2000, p.220). Nevertheless, scholars in the field of organization are

answering in detail the following three questions concerning entrepreneurship:”(1) why,

when, and how opportunities for the creation of goods and services come into existence; (2)

why, when, and how some people and not others discover and exploit these opportunities; and

(3) why, when, and how different modes of action are used to exploit entrepreneurial oppor-

tunities” (Shane & Venkataraman, 2000, p.218).

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1.2 The economic approach: different views on the role of the entrepreneur

In order to understand the contemporary entrepreneur, it is productive to examine the litera-

ture review of the leading theorists on the concept of entrepreneurship. The entrepreneurship

school of thought can be divided into two approaches: scholars defining entrepreneurship as

an economic function, and those focusing on the individual characteristics (Stevenson et al,

2000, p.4). This section will synthesize the work of major theorists who belong to the eco-

nomic approach and who tried to answer the following question: Does the entrepreneur play a

central role in the economic growth?

Since the early Industrial Revolution (Deakins & Freel, 2003) many scholars have contributed

views on the topic of entrepreneurship. The aim of this section is not to discuss the theories of

all contributors, but instead present the work of the key economic writers on the role of entre-

preneurship.

1.2.1 Cantillon and Say

Cantillon and Say were two significant French writers who belonged to the French school of

thought, named “physiocrats” (Deakins & Freel, 2003, p.4). The two French economic writers

recognize the entrepreneur as “an organizer of factors of production” (Deakins & Freel, 2003,

p.3).

Richard Cantillon identifies the entrepreneur as a key player in economic development. His

theory on the role of entrepreneur is based on individual property rights. For Cantillon, entre-

preneurs represent the first class of three, while the other two classes were property-owners

and workers (Deakins & Freel, 2003). He recognizes the entrepreneur as a risk-taker, one who

is determinate “to buy at a certain price and sell at an uncertain price” (Swedberg, 2000,

p.78). In short, Cantillon’s entrepreneur is motivated to anticipate risk for the search of profit.

Concerning this aspect, Brush (1992, p. 12) refers to the works of Sexton and Bowman (1986,

1990) who identify gender-based differences concerning risk. The conclusion drawn by their

studies is that women entrepreneurs have a “lower risk-taking propensity” compared to their

male counterparts.

Ever since the 18th century, the notion of risk-taking is embodied in the definition of entrepre-

neur. This notion is still valid nowadays, e.g. Olson (2001, p. 56) underlined that “entrepre-

neurship […] requires a willingness to take calculated risks-both personal and financial” and

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Dictionary.com6 defines the entrepreneur as “a person who organizes, operates, and assumes

the risk for a business venture”.

Jean Baptiste Say, who got inspired by his compatriot Cantillon, also recognizes the central

role of the entrepreneur in economic change and growth. Say defines the entrepreneur not as

an innovator but as a trader of the innovation7.

1.2.2 Kirzner

Kirzner studied entrepreneurship from a cognitive approach, to understand the intrinsic stim-

uli which influence the entrepreneur’s behavior (Das & Teng, 1998). Kirzner supports a the-

ory of creative alertness, where the focus is on the entrepreneur’s aptitude to discover and

utilize opportunity that others do not witness (Das & Teng, 1998). In other words, Kirzner’s

entrepreneur is opportunistic in planning and showing evidence of low risk-averting behavior

(Das & Teng, 1998).

1.2.3 Schumpeter

Classified as Austrian economist, Schumpeter is one of the most acknowledged figures in

entrepreneurship theory.

Schumpeter’s entrepreneur is an innovator who develops new technology. The entrepreneur is

neither an “economic man” who takes short term actions nor a “non-hedonic nature entrepre-

neur” (Brouwer, 2002, p.90). He is “forward-looking” (Brouwer, 2002, p.91) and thus thinks

long-term. From a gender-based perspective, this aspect leads to the following question: Do

women entrepreneurs reflect the Schumpeterian entrepreneur? It seems that women business

owners do not fall under the Schumpeterian definition. Typically, male entrepreneurs follow a

long-term strategic management style, whereas women entrepreneurs have “limited vision”

and think “in terms of the short-run” (Chaganti, 1986, p. 21). This influences the authors to

conclude that women entrepreneurs are in general not entrepreneurs in the Schumpeterian

way.

6 www.reference.com/browse/columbia/entrepre (05/11/05) 7 http://www.engin.brown.edu/courses/en9/spring/handouts/1 (05/10/05)

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Furthermore, the Schumpeterian entrepreneur is a hero, in the sense that all the steps he un-

dertakes turn to be successful (Brouwer, 2002). He is at the same time the creator of a new

business entity and a fundamental catalyst for economic change. This latter role is character-

ized by the entrepreneur’s “ability to disturb economic status quo through innovations” (Goss,

2005, p.206). Schumpeter perceives innovation “as the primary internal element in the evolu-

tion of capitalism” (Metcalfe, 2004, p.163). Innovation, or what Schumpeter defines as “the

carrying out of new combinations” (Baumol, 1990, p.896) designates “the introduction of a

new good, or of a new quality of a good, the introduction of a new method of production, the

opening of a new market, the conquest of a new source of supply of raw materials or half-

manufactured goods, as well as the carrying out of a new organization of an industry” (Ebner,

2003, p.130). On that matter, Schumpeter underlines in his work on The instability of capital-

ism (1928) that “what we unscientifically call economic progress means essentially putting

productive resources to uses hitherto untried in practice, and withdrawing them from the uses

they have served so far” (Metcalfe 2004, p.163). The unique qualities of the entrepreneur

guide him in his innovative process. The Schumpeterian entrepreneur does not follow the so

called circular flow, which reflects a steady economy (Brouwer, 2002). Schumpeter employs

the notion of circular flow to designate a period of transition occurred by the foreword of in-

novations. Concerning the aspect of innovation, Hisrich and Brush (1983) conclude that the

majority of women entrepreneurs prefer not to engage in innovative activities in products or

services, but rather “compete on existing markets” (Bowen & Hisrich, 1986, p.402). One

more time this finding raises the question: could we qualify women entrepreneurs as being

Schumpeterian? From this point of view the authors’ answer is no.

Concerning investment and entrepreneurship, Schumpeter expresses that in order to carry out

the new combination, financing and credit are essential (Swedberg, 2000). On that matter,

Schumpeter talks about “means of payment” which acts as “ready money for trade” (Swed-

berg, 2000, p.57) lend by bankers also called “the ephor of the exchange economy” (Swed-

berg, 2000, p.58).

Another essential aspect for the Schumpeterian entrepreneur is to accomplish his goal, regard-

less of time and effort. One of the goals of the Schumpeterian entrepreneur is to reach a better

“social position (and that of his family) in this world” (Brouwer, 2002, p.90).This aspect

needs to be viewed from a gender-based perspective. Women entrepreneur’s main motive to

enter into entrepreneurship is to reach a certain degree of flexibility between family and work

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(Brush, 1992) and less for an economic motive compared to their male counterparts (Cromie,

1987).

It can be concluded that the essence of the Schumpeterian entrepreneur is to be found in the

carrying out of new combinations (Swedberg, 2000). As Bruyat and Julien (2001, p.167)

wrote, the Schumpeterian entrepreneur “is purely functionalist: entrepreneurs are people who

perform the function of reforming or revolutionizing the productive system, and they continue

to be entrepreneurs only for as long as they continue to perform that function”.

1.2.4 Knight

Knight perceives the entrepreneur as a risk-taker8. The entrepreneur is a person who acts in an

unstable world where profit is reached through risk. Blaug (2000, p.82) underlines that “the

beauty of Knight’s argument was to show that the presence of true uncertainty about the fu-

ture may allow entrepreneurs to earn positive profits despite perfect competition, long-run

equilibrium and product exhaustation”.

In Knight’s view, risk and uncertainty are to be differentiated (Deakins & Freel, 2003; Brou-

wer, 2002). The essence of risk is stimulated by uncertain outcomes, but can be measured a

priori. One example provided by Deakins and Freel (2003, p.6) concerning stolen cars is that

“the outcome that your car will be stolen or not stolen is uncertain, but the risk that your car

will be stolen can be calculated with some degree of probability and the risk can be insured

against.” On the other hand, uncertainty emerges as a result of the unfeasibility of calculating

the probability outcomes. Only uncertainty is the rationale of profits and losses. Thus, a per-

son who establishes a business entity cannot assure that his business will fail or succeed be-

cause that specific outcome cannot be forecasted in advance. In other words, the main distinc-

tion between risk and uncertainty is made up of the possibility of predicting ex ante the degree

of probability of the outcome of an incident (Brouwer, 2002).

8 Welsch and Young (1982, p.53) define risk-taking as “the willingness to commit to a course of action which may result in rewards or penalties associated with success or failure.” In this same perspective, Brockhaus (1980, p. 513) defines the propensity for risk taking as “the perceived probability of receiving the rewards asso-ciated with success of a proposed situation, which is required by an individual before he will subject himself to the consequences associated with failure, the alternative solution providing less reward as well as less severe consequences than the proposed situation.”

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Concerning this aspect, Sexton and Kent (1981) find that female entrepreneurs perceive them-

selves as “moderate or calculated risk-takers” (Bowen & Hisrich, 1986, p.398). Masters and

Meier (1988, p.34) analyze this aspect from a gender-based perspective. Despite the fact that

”women have been stereotyped as conservative and risk-averse”, the results of the study of

Masters and Meier (1988) indicate that no significant differences exist between male and fe-

male entrepreneurs in terms of risk-taking propensity.

1.2.5 Casson

Casson’s theory of entrepreneurship constitutes an extension of the earlier work of Knight,

Schumpeter and Kirzner. Nevertheless, Casson’s work on entrepreneurship resembles mainly

that of Knight (Deakins & Freel, 2003).

Casson perceives the entrepreneur as an organizer of resources (Deakins & Freel, 2003, p.3),

and more precisely “as someone who specializes in taking judgmental decisions about the

coordination of scarce resources” (Blaug, 2000, p.85). This could be for instance the financial

investment to concretize a business plan (Metcalfe, 2004). The entrepreneur has a unique set

of skills and resources which enable him to gain competitive advantage over other actors in

the playing field.

1.2.6 Lazear’s “jacks-of-all-trades” theory: A revived view of the economic ap-

proach

To the question, who is an entrepreneur? Lazear (2003, p.2) defines the entrepreneur as some-

one who, to this question responds affirmatively: “I am among those who initially established

the business”. Lazear makes a clear distinction between the concept of entrepreneur and self-

employment. “A self-employed person need not have any other employees and the kinds and

combinations of skills that are necessary for real entrepreneurship are less important for, say,

a self-employed handyman who works alone” (Lazear, 2003, p.3).

The theory proposed by Lazear defines entrepreneurs as “jacks-of-all-trades who may not

excel in any one skill, but are competent in many” (Lazear, 2003, Abstract). The underlying

principle suggests that “individuals with balanced skills” (Lazear, 2003, Abstract) have

greater chance to become entrepreneurs. One of the key criteria for becoming an entrepreneur

is to have acquired in the past a large set of “different roles” (Lazear, 2003, Abstract). As bal-

anced individuals, entrepreneurs have to excel in a number of different domains to reach a

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large amount of essential skills to implement a successful business (Lazear, 2003). In

Lazear’s (2003) theory a balanced human capital investment strategy is used as a prediction

criterion on the likelihood to become an entrepreneur.

Lazear used a data set of Stanford Alumni to test his hypothesis. His findings support that a

more “varied experience” (Lazear, 2003, p.37) turns into a higher probability for a person to

create his own business entity. Lazear found that factors such as “gender, ethnicity, age and

experience”9 do not affect the probability of becoming an entrepreneur. The key factor that

affects whether an individual is more or less likely than another to found his own business is

the number of different types of positions held by this individual in the past. Individuals who

have followed a “general curriculum” (Lazear, 2003, p.37) during their studies are more prone

to become entrepreneurs. The findings also indicate that students which have more “uniform

grades” (Lazear, 2003, p.36) in all courses have a higher probability to become entrepreneurs.

Finally, the results support that Lazear’s entrepreneur is not one “who performs well in a spe-

cialized area” (Lazear, 2003, p.37). This aspect revives the Schumpeterian view in that the

findings indicate that “entrepreneurs […] are jacks-of-all-trades, not specialists […] but gen-

eralists […] and business innovators” 10. For Lazear “the innovation may be as seemingly mi-

nor as recognizing that a particular street corner would be a good location for a dry cleaner.

Most entrepreneurs are non-technical people who form businesses in non-technical fields”11.

In short, this theory rejects Schumpeter’s idea of the entrepreneur as a specialist who builds

his business entity on innovation.

Lazear’s study supports the “jack-of-all-trades” hypothesis of entrepreneurship (2003). Wag-

ner (2003) empirically tested Lazear’s hypothesis using a German representative sample and

found indications of statistical significance for the “jack-of-all-trades” theory. Wagner con-

cludes that Lazear’s theory is an “important tool for economists in entrepreneurship research”

(Wagner, 2003, p.10).

To answer the initial question, a consensus has been reached by the dominant scholars in that

the entrepreneur is a catalyst in the economy. Nevertheless, the study of the different views

reflects some fundamental differences between them. As Deakins and Freel (2003) conclude,

9 http://www.gsb.stanford.edu/news/research/entrep_roles.shtml (11/01/06) 10 http://www.gsb.stanford.edu/news/research/entrep_lazear_generalists.shtml (04/01/06) 11 http://www.gsb.stanford.edu/news/research/entrep_lazear_generalists.shtml (11/01/06)

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there are two predominant streams of thinking: the Schumpeterian approach, which considers

the entrepreneur as an innovator, and the Knightian approach that regards the entrepreneur as

a risk-taker. Lazear’s “jack-of-all-trades” theory represents a revived view of the economic

approach in that it contradicts the Schumpeterian approach, by highlighting that the entrepre-

neur should be a generalist and not a specialist. This review of key economic writers and

theorists on the role of entrepreneurship in economic development constitutes the first step for

the understanding of the concept of entrepreneur. To gain a better knowledge about this cen-

tral notion, the following part examines the trait approach to entrepreneurship.

1.3 Trait approach: personal characteristics

The trait approach is aimed at identifying personal characteristics of successful entrepreneurs.

One question is raised: what are the key inherent characteristics of successful entrepreneurs?

As Deakins and Freel (2003, p.13) mention:” if entrepreneurial characteristics are inherent

then there is little to be gained from direct interventions to encourage new entrepreneurs to

start new businesses”. There is still a real difficulty to examine the entrepreneurial personality

(DeVries, 1977) firstly, because no clear definition exists on the concept of entrepreneur; sec-

ondly, numerous research have studied specific entities such as high technology entrepreneur

or have focused solely on the link between entrepreneurial characteristics and business per-

formance. Due to these limitations, the conclusion of this section will be more general than

specific.

One of the gurus in the search of entrepreneurial personality is McClelland (Deakins & Freel,

2003; DeVries, 1977). McClelland concludes from his study of entrepreneurship that the suc-

cessful entrepreneur has the following key competencies: (1) high need for achievement12 and

ability to perceive and act on advantageous situations; (2) proactive approach in that the en-

trepreneur takes own initiative or responsibility when he undertakes an activity and causes

changes; (3) McClelland’s entrepreneur is not the risk-taker entrepreneur of Knight, in that he

tries to avoid taking high risk; in that sense he is a moderate risk-taker, which is especially

true for women entrepreneurs (Sexton & Bowman, 1986, 1990); (4) the entrepreneur is com-

12 Need for achievement is defined by Murray (1938, p.164) as: “To accomplish something difficult. To master, manipulate, or organize physical objects, human beings, or ideas. To do this as rapidly and as independently as possible. To overcome obstacles and attain a high standard. To excel one’s self. To rival and surpass others. To increase self-regard by the successful exercise of talent”.

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mitted to third entities; and finally (5) the entrepreneur does not like to follow an habitual or

fixed way of doing things, but rather likes different tasks and spontaneity in work. Neverthe-

less, it is worth noting that in his latest work, McClelland (DeVries, 1977) changes one of

these points. Achievement has been replaced by power, leaving high power motivation and

high self-control as the driving forces to reach organizational effectiveness.

In addition, Waddell (1983) found that women entrepreneurs score high on “masculinity”

which in turn means that women entrepreneurs “are associated with the masculine sex-role

stereotype such as autonomy, aggression, independence and leadership” (Bowen & Hisrich,

1986, p.398).

Schrage (1965, p.64) concludes that ”the most successful individual is high in achievement

motivation, low in power motivation, and high in awareness of self, the market, and his em-

ployees”. This study can be linked with Changanti’s study (1986) on management in women-

owned enterprises. The comparison study between the feminine entrepreneur and the success-

ful entrepreneur (typically men) in terms of shared values for business conclude that differ-

ences exist. The successful male entrepreneur undertakes “aggressive” steps to achieve profit

with an aim to reach continuous growth whereas female entrepreneur follows “modest” steps

to achieve profit with the primary motivation being personal satisfaction.

Litzinger (1965, p.268-269) undertook a study in the motel industry in order to ascertain if

there exists differences between entrepreneurs “who are goal and action oriented” and manag-

ers “who carry out policies and procedures in achieving the goals”13. The results showed that

motel entrepreneurs and motel managers differ notably regarding personality variables. For

instance motel entrepreneurs scored lower in ‘support’ than the motel managers in that “they

placed a lower value than the chain motel managers on being understood, receiving encour-

agement, and being treated with consideration” (Litzinger, 1965, p.280).

13 To this end, Litzinger (1965, p.269-270) used two tools: (1) the ‘Gordon Survey of Interpersonal Values’, measuring the following six key values: support, conformity, recognition, independence, benevolence, leader-ship; and (2) the ‘Fleishman Leadership Opinion Questionnaire’ to measure the following two leadership con-cepts: structure and consideration.

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Lynn (1969) extended the work of Eysenck14 by focusing on entrepreneurs and managers. The

principal finding is that entrepreneurs scored higher on neuroticism or anxiety, than general

managers. To interpret this result, Lynn (1969) presents different hypothesis: (1) entrepre-

neurs are faced with a stressful life which has a direct effect on the score on neuroticism; and

(2) creativity is linked to neuroticism. As a creative person, the entrepreneur has the idea of a

new concept but need the energy to concretize this idea into reality. This aspect could stimu-

late the entrepreneur’s anxiety or neuroticism.

Professors Litvak and Maule (1976) studied some of the key characteristics of technical en-

trepreneurs in Canada. The results indicate that the entrepreneurs are “relatively well edu-

cated” and “come from families in which the father is self-employed” (Litvak & Maule, 1976,

p.32). Concerning the education, Lazear’s15 (2005) recent study indicates that “individuals

with balanced skills are more likely than others to become entrepreneurs”. In addition, the

study of Litvak and Maule (1976, p.33) found three reasons which motivate entrepreneurs to

establish their own business: (1) the challenges, (2) being ones own boss, and (3) the freedom

to explore new ideas. This aspect needs to be looked from a gender-based perspective since

some scholars believe that differences do exist between male and female entrepreneurs con-

cerning motivations for business start-up (Cromie, 1987; Gatewood et al., 1995; Brush, 1992).

For instance, Brush (1992) found that women motivations for creating a new business include

creating a job and combining family and work in a flexible way; whereas men are more con-

cerned with making money (Cromie, 1987).

Meredith et al. (1982)16 conclude in their work that the entrepreneur possesses five key traits:

(1) self-confidence, (2) risk-taking activity like Knight’s entrepreneur, (3) flexibility, (4) need

for achievement like McClelland’s entrepreneur and (5) strong desire to be independent like

Litvak and Maule’s entrepreneur, also designated as the “pull factor” by Birley (1989, p. 33).

Once again there is a need to look separately at female and male entrepreneurs concerning

14 Eysenck, H.J (1967) conducted a survey of the trait characteristics of six different groups of businessmen, using a personality inventory. A questionnaire was to measure the following three criterions: extraversion, neu-roticism, information and probability of faking. For more details see Eysenck’s study (1967): Personality Pat-terns in Various Groups of Businessmen. Occupational Psychology, 41, p.249-250. 15http://www.journals.uchicago.edu/JOLE/journal/issues/v23n4/230401/brief/230401.abstract.html?erFrom=-8244514994449468033Guest (04/01/06) 16 See: Deakins and Freel (2003, p.33).

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their personality traits. Regarding self-confidence, Birley (1989) underlines that women en-

trepreneur lack self-confidence compared to their male counterparts.

Brandstätter (1997, p.163) studied some key personality differences between entrepreneurs

and general population in Austria. The results showed that “risk taking, extraversion, social

recognition and readiness for change” constitute some of the trait characteristics of the entre-

preneurs compared to the general Austrian population.

Shapero (1975)17 looked at the locus of control18 of entrepreneurs and concluded that, on the

scale of Rotter’s (1971)19 internal and external control, the entrepreneurs belong to the inter-

nal level of control. The latter underlines that entrepreneurs “tend to be more self-reliant and

more in need of independence and autonomy” (DeVries, 1977, p.41). This is supported by the

study of Bowen and Hisrich (1986) which provides a deeper view on this aspect by emphasiz-

ing that the typical female entrepreneur is more prone to internal locus of control compared to

the male entrepreneur.

Beugelsdijk and Noorderhaven (2005, p.160) underline that “achievement motivation, locus

of control and preference for innovation” represent three acknowledged characteristics of the

entrepreneur. In addition, the results of their empirical study using the European Values Sur-

vey (EVS) show that “entrepreneurs are more individually oriented than the rest of the popu-

lation” and that “individual responsibility and effort” are two personality characteristics of the

entrepreneurs (Beugelsdijk & Noorderhaven, 2005, p.166).

Hatch and Zweig (2000, p.69) on the question: “what is the stuff of an entrepreneur?” an-

swered the “Entrepreneurial Spirit”. This latter includes: (1) risk tolerance, (2) the desire of

control, (3) a strong will to succeed, (4) perseverance and (5) decisiveness. These characteris-

tics constitute the “building blocks” or “stuff” the entrepreneur needs to create his own busi-

ness. They added that the “entrepreneurial spirit” and the “generation of the business concept”

are not enough to achieve business performance. In order to concretize the business idea it is

17 See: DeVries (1977, p.41). 18 Locus of control is described by Welsch and Young (1982, p. 51) as:” a continuum of beliefs or expectancies ranging from internal to external. The internal end of the continuum refers to the belief that outcomes are a con-sequence of one’s own behavior, whereas external control represents a belief that events are independent of one’s own behavior and are the result of forces such as fate, luck, and powerful others.” 19 See: DeVries (1977, p.41).

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essential to have “some combination of insight, a readiness to act, a core skill - and a healthy

dose of luck” (Hatch & Zweig, 2000, p.72).

No consensus has been reached concerning the personality traits that characterize the success-

ful entrepreneur. The image which emerges from this review on the trait approach is that the

entrepreneur is found to be different by the scholars. Nevertheless, researchers such as

Mitchell et al. (2002) still believe that the entrepreneur category is composed by homogenous

groups with a set of distinctive characteristics. To answer our initial question, the key charac-

teristics which have been identified in the above presented literature concerning the entrepre-

neurial personality are the following: innovator, risk-taker, creativity, need for achievement,

internal locus of control, and need for independence. In short, this section has provided mixed

results concerning the aspect of the personality trait of the entrepreneur as well as underlined

the need to look at entrepreneurship from a gender-based perspective to gain better under-

standing of the concept.

1.4 Social-behavioral approach: a dynamic process

This last approach, mainly studied by managers (Deakins & Freel, 2003), focuses on the en-

trepreneurial socio-behavior which is seen as the “dynamic process”20 of creating a new busi-

ness. The researchers in this field try to answer the following key question: Are entrepreneu-

rial processes different from each other?

This view on entrepreneurship is the most recent approach in the field and is born from the

many criticisms of the trait approach. Deakins and Freel (2003) provided four points of criti-

cisms of the personality characteristics approach: (1) it is inappropriate to search for a signifi-

cant single trait, (2) it ignores environmental factors that may be more important than person-

ality, (3) it comprises an essentially static analysis approach to the dynamic process of entre-

preneurship and (4) it ignores the role of learning, preparation and serendipity in the process

of entrepreneurship. Already Gartner in 1988 argued that “who is an entrepreneur?” is the

wrong question, while Bruyat and Julien (2001, p.171) added that “the entrepreneur taken in

isolation is the wrong research object”. According to Gartner (1985) personality traits are not

enough to understand the entrepreneurship performance. Instead, the behavior of the entrepre-

20 Deakins and Freel (2003, p.23) define entrepreneurial behavior “as a dynamic process”.

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neur, in other words, “what he does”, “is more relevant to the creation of organizations than

psychological traits” (Bouchikhi, 1993, p.551). Bouchikhi (1993, p.550) realizes the impor-

tance to understand “how the outcome of the entrepreneurial process is generated.” In this

same perspective, Fayolle (2002, p.260), underlines that “what seems to have characterized

the evolution of research in entrepreneurship over the last few years [...]is, on the one hand,

the reorientation of the focal point from being centered on the individuals to being centered

on the processes and the shift, from a positivist epistemology to a more constructivist episte-

mology”.

In an effort to better understand the behavioral approach, the authors will study more in depth

the conceptual framework of new venture creation proposed by Gartner (1985), the construc-

tivist framework of Bouchikhi (1993) and the dialogic21 between individual and new value

creation proposed by Bruyat and Julien (2000).

Gartner (1985, p.697) challenged the whole trait approach by arguing that “the creation of

new venture is a multidimensional phenomenon” and that the “entrepreneur is only one di-

mension of this framework”. Gartner (1985) defines new venture creation as “new organiza-

tions” that reflects one of the following profile: (1) an independent entity, (2) a new profit

center within a company which has other established businesses or (3) a joint venture22.

Gartner (1985) proposed a framework for explaining new venture creation. This framework is

composed of four interacting dimensions:

1. individual(s) – the person(s) starting a new business

2. organization – the type of firm that is created

3. environment – the external stimulus influencing the new business entity

4. new venture process – the steps chosen by the individual(s) to establish the venture.

21 Bruyat and Julien (2001, p.169) define dialogic as:” a dual direction logic system or a system with a circular causality process”. The dialogic principle “means that two or more different elements are combined in a complex way in a single unit, without their duality being lost in the combination”. 22 Gartner (1985, p.698) emphasized that the joint venture should satisfy the following criteria: (1) its founders must acquire expertise in products, process, market and/or technology; (2) results are expected beyond the year in which the investment is made; (3) it is considered a new market entrant by its competitors and (4) it is re-garded as a new source of supply by its potential customers.

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Figure 2: Gartner (1985), p. 698

The first dimension, namely individual(s) is defined by two sets of characteristics: (1) psycho-

logical characteristics: need for achievement, locus of control, risk taking propensity23; and

(2) individual characteristics: job satisfaction, previous work experience, entrepreneurial par-

ents, age and education. It is worth noting that Gartner (1985) talks about individual not only

in singular but in plural in that: “the locus of entrepreneurial activity often resides not in one

person, but in many” (Gartner et al., 1994, p.6). This is also underlined by Mitchell et al.

(2002, p.96) who define entrepreneurship as “individuals or teams, creating works, such as

products and services, for other persons in a market-place.”

The second dimension, called process, includes all behaviors or “dynamic aspects” of the en-

trepreneur: locating a business opportunity, collecting resources, marketing products and ser-

vices, producing the product, building an organization, and responding to government and

society.

The third dimension, environment, corresponds to a set of variables which influence the new

venture creation. The conclusion of Gartner (1985) on this dimension is a combination of the

results found by three other scholars: (1) Bruno and Tyebjee (1982) whose findings reveal the

12 factors that influence entrepreneurship; (2) Pennings’ (1980, 1982 a, 1982 b) findings

which underline new venture creation characteristics by regions, and (3) Porter’s (1980) work,

which considers the competitive arena in a specific industry. In this same perspective,

Kolvereid et al. (1993) underline the existence of four aspects of organizational environment

23 For further knowledge on the aspect of risk taking propensity the authors recommend the following reading: Robert H. and Brockhaus, S.R (1980).

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which are essential for business start-up: munificence24, resource availability, hostility and

uncertainty.

The last dimension, organization, deals with the type of firm such as: manufacturing, service,

retail or wholesale. Regarding this aspect, Gartner (1985) recognizes partnership as another

type of firm trait. The main conclusion drawn by Gartner (1985) on this dimension is that two

kind of organizational variables play a role in new venture creation: (1) competitive strategies

(Porter’s, 1980) and (2) competitive entry wedges (Vesper’s, 1980).

Gartner’s (1985, p.701) conceptual framework or “kaleidoscope” reflects the complexity un-

derlying the phenomenon of venture creation. The aim of this framework is to take into con-

sideration the four dimensions so that significant differences and comparisons among new

organizations can be studied. It also serves as a way to analyze past research and can be used

as a guideline for future research. Furthermore, it reflects the essential aspect of interaction of

the variables in identifying the creation of a new venture. Finally, Gartner (1985, p.703) con-

cluded that even if “the description of new venture creation needs to be more comprehensive

than it is at present”, his study “provides a means of making a fundamental shift in the per-

spective on entrepreneurship: away from viewing entrepreneurs and their ventures as an un-

varying, homogeneous population, and towards a recognition and appreciation of the com-

plexity and variation that abounds in the phenomenon of new venture creation”.

More recently, Bouchikhi (1993) argues that the entrepreneur’s personality and the study of

the environment through a sociological or economical perspective constitute weak approaches

to determine the entrepreneurial process outcome. The core of his argument is that the con-

structivist framework, presented below, provides a more realistic way of understanding cur-

rent entrepreneurship performance. Four interrelated elements constitutes Bouchikhi’s con-

structivist framework: entrepreneur, environment, chance and outcome.

24 According to Kolvereid et al. (1993, p.42) environment munificence “measures the worth of the venture op-portunity, encourages business formation”, while environment hostility “reflects the fierceness of competition and thus “discourages new venture formation”.

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Figure 3: Bouchikhi, 1993, p.560

This figure shows chance as an important element of the entrepreneurial process. Bouchikhi

(1993, p.559) defines chance as: “events that occur during the process of starting and develop-

ing a venture and that are not predictable from personality/behavior or context”. He further

underlines that “chance events transform, in an unexpected way, either the context or some

important dimension of the new venture itself, resulting in dramatic consequences” (1993,

p.559). In this same view, Hollensen (2001, p.80) argues that “the most important instance of

chance involves the question of who comes up with a major new idea first”. Finally, the out-

come constitutes an important factor in itself in that success or failure can have a direct con-

sequence on the future of the entrepreneurship process. For instance, an entrepreneur who

experienced failure in the past might take this experience as a valuable learning occasion for

future venturing.

In this same perspective, Bruyat and Julien (2001) proposed a constructivist approach where a

dialogic exists between the Individual (I) and the New Value Creation (NVC). According to

Bruyat and Julien (2001) the field of entrepreneurship is heterogeneous and is concerned with

the aspect of changes for the individual and new value creation. The two scholars believe that

there are four representative entrepreneurial I-NVC dialogics: (1) the entrepreneurial repro-

duction, (2) the entrepreneurial imitation, (3) the entrepreneurial valorization and (4) the en-

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trepreneurial venture. They conclude that it is essential to go beyond the trait approach by

considering the dialogic between the I and the NVC, even if “it seems to be impossible to

propose a general predictive model of the entrepreneurial act and its success” (Bruyat &

Julien, p.177).

Inspired by Gartner (1985), Bouchikhi (1993) and Bruyat and Julien (2001) also regard the

individual(s), the environment, the organization and the process as being key dimensions

when dealing with new venture creation. Nevertheless, the aspect of chance is only mentioned

by Bouchikhi (1993). The three frameworks presented by the researchers underline signifi-

cantly the complexity of the entrepreneurial phenomenon and the necessity to study the field

of entrepreneurship by considering all dimensions.

1.5 Conclusion

The economic perspective of the work of Cantillon, Say, Kirzner, Schumpeter, Knight and

Casson constitute the essence of the contemporary role of the entrepreneur. These economists

provide a view on the role of the entrepreneur in the development of the economic system.

The revived view of the economic approach presented by Lazear (2003) constitutes a key the-

ory to be used in contemporary entrepreneurial activity. After the attempt to answer the ques-

tion “what” by focusing on an economic and functional approach (Cantillon, Say, Schum-

peter, Knight, Casson etc), the research activity on entrepreneurship started to consider the

question “why” in the early 1950s. This latter research question relates to the trait approach

where many researchers, mainly psychologists and sociologists (e.g. Weber, McClelland and

Brockhaus) focused on the individual characteristics and the personality traits of the entrepre-

neur. In the early 1990s the research field was one more time broadened, this time mainly by

managers who focused on the entrepreneur process with the attempt to answer the question

“how”. This last approach is somehow revolutionary in that it “offers new knowledge in the

domain of entrepreneurship” (Fayolle, 2002, p.275).

Over the years, the central point in entrepreneurship has been subject of reorientation “from

being centered on the individuals to being centered on the processes, and the shift from a

positivist epistemology to a more and more constructivist epistemology” (Fayolle, 2002,

p.260). To sum up, even though significant research has been made in the domain of entre-

preneurship, the field still remains a multidisciplinary and complex sphere of study where

many more questions are asked than are answered. In this perspective, the field of entrepre-

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neurship remains a “challenge to researchers in the 21st century” (Bruyat & Julien, 2001,

p.177).

The research literature presented has underlined that there are some gender-based differences

between male and female entrepreneurs. Gender will be taken into account in the analysis in

chapter two by focusing on female entrepreneurs compared to male entrepreneurs. In addition,

the fact that the authors of this study are two women emphasize the need to analyze and dedi-

cate a part on women entrepreneurs in order to anticipate risks and focus on the steps to un-

dertake in order to succeed in a male dominated arena. Cromie (1987, p. 253) pointed out that

“the possible significance of the different social situations which men and women are in, by

virtue of their gender, must always be considered in evaluating any research […]”. This is

true for Gartner who in many of his research has provided a gender-based perspective to ana-

lyze entrepreneurship: Gatewood, Shaver and Gartner, 1995; Shaver, Gartner, Crosby,

Bakalarova, Gatewood, 2001; Gatewood, Shaver, Powers, Gartner, 2002; Shaver, Gatewood

& Gartner 2001. Other scholars, such as Gelderen et al. (2001) measure a few independent

variables in which gender is an important parameter. To quote another one, Greene et al.

(2003, p.2) argues that “it is important to look at female entrepreneurs who, though they share

many characteristics with their male colleagues, are unique in many aspects”. Finally, the

interest of looking separately at women and men is also highlighted by the OECD-

proceedings (1998, p.156)25: “to better understand the phenomenon of entrepreneurship,

populations of women need to be included and studied separately in both academic and gov-

ernment investigation […]. From this a better understanding of the similarities and differences

between women and men entrepreneurs will emerge, as will areas where public policy assis-

tance is needed”.

25 See. Kjeldsen and Nielsen, (2000, p. 22).

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2. Entrepreneurship and women

Since 1970, the percentage of women owned businesses in the U.S has increased from 5% to

30% (New Economic Realities, 1988), “representing nearly four million of the nation’s 12

million small businesses (Report to the President, 1985)” (Brush, 1992, p. 5). Between 1975

and 1990, women engaged in entrepreneurship at a rate more than twice that of their male

counterparts (Moore & Buttner, 1997; Brush & Hisrich, 1991; Brush, 1992; Deakins & Freel,

2003). In 1997, the proportion of women entrepreneur in Denmark was 30% while in France

they represented 26% and 31% in Sweden (Kjeldsen & Nielsen, 2000, p.34). In 2003, 21% of

new firm entrepreneurs in Denmark were women, while in 2004 it reached 28% (Hancock,

2004).

Over the past decade, the number of female entrepreneurs has steadily grown, contributing

revenues, services, and employments to the economy. Parallel to this tendency, more re-

searchers studied the field of women as business owners. Nevertheless, compared to men, the

interest in the phenomenon of women entrepreneurs is rather recent. The first studies on the

investigation of women business owners came into sight in the late 1970s, where the focus

was on the psychological and sociological traits of female entrepreneurs compared to male

entrepreneurs (Brush, 1992).

Even though women business owners around the world have increased dramatically over the

last decade, there is still a considerable gap between the amount of male and female entrepre-

neurially active. This fact leads the authors to investigate the impact of gender differences

when engaging in entrepreneurial activities. Differences exist between male and female in a

number of areas: “industry choices, financing strategies, growth patterns, and governance

structure […] motivation and goals, preparation, organization, strategic orientation, and ac-

cess to resources ” (Greene et al., 2003, p.1-2). According to Greene et al. (2003, p.2) “these

differences provide compelling reasons to study female entrepreneurship – looking specifi-

cally at women founders, their ventures, and their entrepreneurial behaviors as a unique sub-

set of entrepreneurship”.

In this perspective it will be necessary to identify the factors that act as obstacles for women

entrepreneurs. The findings emerging from the following desk research on women business

owners will constitute an essential source of advice for the implementation of the business

plan in the last part of this thesis.

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The following part is twofold: 1) provide the underlying reasons for using this particular

framework to analyze the factors affecting women entrepreneurs and 2) present a detailed

review of the empirical research studies on women entrepreneurs using an adapted framework

of Gartner’s (1985) new venture creation criteria.

2.1 Analyzing women start-up business: Gartner versus EFQM

The authors’ original approach was to use the European Foundation for Quality Management

(EFQM26) model to analyze the factors within and outside the enterprise which may act as

barriers to the establishment and development of women owned businesses. Nevertheless, the

literature review reveals that Gartner’s new venture creation framework is a more suitable tool

to analyze business start-up as it “clearly identifies the four key components of venture crea-

tion and ownership: individual, environment, organization and process” (Brush, 1992, p.8).

In short, “establishing a new enterprise may be seen as the right match between the four fac-

tors” (Kjeldsen & Nielsen, 2000, p.10). An attempt is made to analyze the factors within and

outside the company which may affect women business start-up.

The following questions serve as a base to understand the approach used in this case:

• What is the EFQM model?

• Is EFQM a model only suitable for businesses which are in process or can it be used

as a framework for start-up companies?

• How can the authors best analyze the criteria affecting women owned businesses?

EFQM is “a non-prescriptive framework” (Wongrassamee et al., 2003, p. 16) used for busi-

nesses which are in process. EFQM is used in four different ways27: (1) development of vision

and goals for the future, (2) identification and understanding of the key systemic nature of the

business, the key linkages and cause and effect relationship, (3) form the basis for the Euro-

pean Quality Award, and (4) is a diagnostic tool to assess28 the health of an organization and

to generate realistic business plans as a part of the process. Just as many other performance

measures used for established businesses, the EFQM Excellence Model is also employed to

26 In 1988, the European Foundation for Quality Management (EFQM) was founded by 14 major European companies. For more information see: http://www.efqm.org/ (20/01/06) 27 This information was given during one of the course in Business Performance Management & Organizational Excellence held by Professor Hans Hjørn Juhl at the Aarhus School of Business during spring/summer 2004. 28 Also known as self-assessment.

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“evaluate, control and improve business processes” (Wongrassamee et al., 2003, p. 14). The

EFQM is a well documented framework too complex for Small and Medium Sized Enter-

prises (Wilkes & Dale, 1998; Eskildsen, 200429). In short, this non-holistic management

model is too complex and not user friendly enough for women owned businesses, since these

tend to be small organizations. In this matter, Wilkes and Dale (1998, p. 731) suggest that

there is a need to simplify the language and the format of the model.

In the following part there is no attempt to analyze case studies to prove any difficulties en-

countered by female entrepreneurs when using the EFQM, but rather the aim is to identify the

business conditions affecting the creation of women owned enterprises. In the case of the

creation of a new venture, there is a need for women to be aware of the difficulties and chal-

lenges of becoming an entrepreneur. As the focus is on the conditions, barriers and potentiali-

ties of women entrepreneurs, the authors believe that the EFQM is too internal-oriented in

nature to be applicable for such investigation.

The authors agree that the EFQM model basic concepts and assessment framework are valid

and could be used also for new venture creation, as an orientation in designing a new organi-

zation with a focus on continuous improvement. Nevertheless, the EFQM as a quality tool is

not an ideal framework for analyzing the criteria affecting women business owners in the

phenomenon of new venture creation. Thus trying to apply such framework in its original

state to a business start-up seems illogical, since there is no internal information on the busi-

ness processes that can be evaluated nor controlled.

However, the authors found, after a deep analysis of both the EFQM model and Gartner’s

new venture creation framework, a set of criteria where women act differently than men and

face obstacles affecting the performance of the new venture. Inspired by both models, the

following framework presents the key antecedents found to affect the performance of women

owned businesses:

29 This information was given during the course in Business Performance Management & Organizational Excel-lence held the 06/02/2004 by Professor Jacob Eskildsen at the Aarhus School of Business.

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Figure 4: Authors’ own figure

2.2 New venture creation framework: a study on women entrepreneurs

This first part will offer a basis for understanding the factors influencing women in their busi-

ness creation activities. The authors’ study framework was developed in order to analyze the

four key factors that are essential for establishing and developing new enterprises, namely,

individual, organization, network and environment. This part will attempt to answer the fol-

lowing question: what are the main factors affecting female entrepreneurs’ start-up and busi-

ness performance?

For the purposes of this paper the authors consider a variety of business performance meas-

urements, e.g. growth, sales, number of employees, profit etc. The literature review indicates

that women achieve lower results than their male counterparts regarding business perform-

ance results (e.g., Loscocco et al. 1993; Robb 2002; Loscocco et al. 1991; Lerner & Almor

2002; Kalleberg & Leicht 1991). One of the possible reasons hypothesized in the literature is

that women understand business success differently30. Brush (1992) suggests that women

“view personal success in other terms, such as self-fulfillment” (Lerner & Almor 2002, p.

121).

2.2.1 Individual characteristics

Individual characteristics comprise “the entrepreneur’s psychological, sociological, demo-

graphic, and employment related characteristics or his or her relations to the nearest surround-

ings, such as the personal, family and professional network” (Kjeldsen & Nielsen, 2000,

p.11). This section will analyze the underlying motives of women entrepreneurs influencing

their drive and capacity to start-up and establish a growing business.

30 See: Loscocco et al 1991, p. 71

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The study of this first dimension will attempt to answer the following questions:

5. Why do people start their own business?

6. Do the motivations of women and men differ for business creation?

7. Who is the typical women entrepreneur?

8. Which intrinsic factors of women entrepreneurs affect business survival and growth?

Are there similar to those of men entrepreneurs?

9. How do individual characteristics affect the results obtained by women business own-

ers?

It is worth noting that “new businesses are not created by accident” (Shaver et al. 2001, p. 6).

The act of starting up one’s own business is intentional and is linked to the notion of “per-

sonal causality” (Shaver et al. 2001, p. 10). In order to create a new business venture, the in-

dividual is confronted, over a period of time, with different activities or processes which he

needs to control so as to guarantee “equifinality of the outcome”31 (Shaver et al. 2001, p. 10).

The rationale behind the entrepreneur’s willingness to create his own business has been a cen-

tral issue in academic research. The first noticeable article on women entrepreneurship written

by Schwartz (1976) indicated that women motivations to start their own business were: “the

need to achieve, job satisfaction, economic payoffs and independence” (Greene, 2003, p.5); in

other words, the same motives as their male counterparts. Brockhaus and Nord (1979) distin-

guish two sets of reasons why individuals start their own business: “psychological characteris-

tic explanations and environment push accounts” (Brockhaus & Nord, 1979, p. 364). The

former of these two types is often related to the aspect of challenges and rewards which is

linked to the notion of entrepreneurship. An illustrious example of this approach is

McClelland’s need for achievement. The latter approach recognizes that negative circum-

stances in former work experiences are key reasons stimulating business start-up. Cromie and

Hayes (1998)32 suggest that overcoming discrimination and other employment difficulties are

valid reasons for creating ones own business. In this same line of research, some authors

(Bender 1980; Cromie 1987; Humphreys & McClung 1981)33 conclude that women are more

likely to start-up a business as an answer to the lack of opportunity perceived in the labor

market, even though the motivations for starting a business are similar for women and men.

31 By “equifinality” Shaver et al. (2001, p.10) mean the “desirable” outcome. 32 See: Kalleberg and Leicht 1991, p. 139 33 See: Loscocco et al 1991, p. 66

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In related research, Scheinberg and MacMillan (1988)34 identified, in their eleven-country

study, five distinct reasons for starting a business, which in order of importance are: (1) need

for approval, (2) need for independence, (3) need for personal development, (4) welfare con-

siderations (in the contributing-to-the-community sense), and (5) perceived instrumentality of

wealth. These findings were supported by the empirical analysis of Birley and Westhead

(1994)35 where in addition two more components were identified, namely: (1) tax reduction,

and (2) following role models. These two researches confirm the intentional behavior in the

situation of new venture creation (Shaver et al. 2001).

The longitudinal study of Gatewood et al. (1995) provides interesting results concerning the

cognitive factors influencing start-up behavior and success at venture creation. Gatewood et

al. (1995) tested the factors that influence the persistence of the entrepreneurs which lead

them to successfully start a business. The results indicate that for starting a business, female

entrepreneurs have internal and stable attributions while for male entrepreneurs these attribu-

tions are external and stable. In short, it seems that a contrast between genders exists when

considering the reasons to enter into self-employment.

Chaganti’s (1986, p.23-26) investigation on management in women-owned enterprises finds

that the reasons for women to start a business are: “actual and potential disenchantment with

job opportunities, job frustration, the emergence of an attractive business idea, the desire to be

one’s own boss, desire to make it on their own or monetary success”. The study of Brush

(1992, p.18) reveals that women motivations for start-up and business ownership are: “the

desire to create a job, have flexibility in family and work, and provide response to social is-

sues”. To support this line of research, the authors conducted a phone interview36 with Lis

Beck, one of the founders of the company Becksöndergaard, a Danish brand within fashion

accessories. The research reveals that the motivations for these female entrepreneurs are to

accomplish a dream and at the same time reaching independence and flexibility.

Cromie’s (1987) study on the underlying motives of 35 male and 34 female who intend to

start a new business, indicates that women and men “have similar scores on their need to

achievement and autonomy […] and express equivalent degrees of job dissatisfaction prior to

34 See: Shaver et al. 2001, p. 11 35 See: Shaver et al. 2001, p. 11 36 See appendix II

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founding” (Cromie, 1987, p.259). However, the following dimensions demonstrate statisti-

cally significant differences between the genders: money, career dissatisfaction, child rearing,

and entrepreneurship (Cromie, 1987, p.257). Compared to men, women are less interested in

the economic motive of making money (Cromie, 1987; Kyro, 2001) and are more dissatisfied

with their prior job. Entrepreneurship is perceived as a friendly way to combine work and

child rearing roles. In this same perspective, Brush (1992, p.13) argues that “for women the

dominant impetus is a desire to create employment that allows flexibility to balance work and

family”. Cromie (1987, p.259) concludes that “the different motives of men and women may

be due to socialization rather than intrinsic attributes”.

According to Sexton and Bowman-Upton (1990) the only significant gender-based trait dif-

ferences are: lower scores for women on traits related to energy level and risk taking, and

higher on the traits related to autonomy and change. These findings underline that female en-

trepreneurs do not engage in risk taking situations as much as men and have less vigor to

maintain a growth-oriented business. In short, “while some differences do exist, they would

not be expected to affect the person's ability to manage a growing company” (Sexton and

Bowman-Upton, 1990, p.29).

Besides the few differences in terms of motivation, Gatewood et al (1995), Chaganti (1986),

Brush (1992), Cromie (1987) and Sexton & Bowman-Upton (1990) conclude that no signifi-

cant differences exist between men and women regarding the reasons to start a business. To

conclude, Gatewood et al. (1995, p.376) answer clearly the two first questions of interest by

stating that “the need for achievement, independence, job satisfaction, and economic neces-

sity”, which answer to the question of “why” “seemed to be shared by men and women,

alike”. In short, the great majority of the studies in this field conclude that women entrepre-

neurs are more similar than different from men regarding personality characteristics.

To finalize this section the authors will present the demographic background of women entre-

preneurs, and the intrinsic antecedents affecting business survival and growth of women busi-

ness-owner. According to Brush and Hisrich (1991, p.12) “the typical woman entrepreneur

operating an established venture is 46 years old, married, has two children over 20 years old

and has operated her typically service-oriented business for eight-years. She is college-

educated, usually in the area of liberal arts, and has had occupational experience in the service

area”. Brush and Hisrich (1991, p.10) emphasize that a nationwide investigation on women

entrepreneurs proves that the female business-owner is generally “the first child of middle-

class parents” who engages in entrepreneurship first in the area of service at the age of 35

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“after obtaining a liberal arts degree and raising children”. The results of the study presented

by Brush and Hisrich (1991, p.10) indicate that women business-owners have “very suppor-

tive parents and husbands”37, which demonstrate a close relationship with the surroundings.

Bowen and Hisrich (1986) studied the entrepreneurs’ childhood and concluded that women

entrepreneurs are often first-born child and have self-employed fathers. In this same line of

study, Brush (1992) provides from his literature review study that women and men entrepre-

neurs share some common demographic traits: marital status (married), age (30-45), birth

order (first born), and having a self-employed father. Bowen and Hisrich (1986) referred to

five studies (Hisrich & Brush, 1983; Mescon & Stevens, 1982; Sexton & Kent, 1981;

Waddell, 1983; Watkins & Watkins, 1983) to demonstrate that the occupation of women en-

trepreneurs’ parents reflect to a large extent a higher percentage of father self-employed than

mother self-employed. Morse (2006)38 argues that individuals who have played team sport,

during their childhood, like soccer or hockey, are more likely to become entrepreneurs than

individuals who have played individual sports. Morse (2006) adds that individuals who

started to sell things as a child, like cookies door-to-door or own collections of stones on mar-

kets, were more likely to become entrepreneurs. Finally, Morse (2006) mentions that indi-

viduals whose parents are entrepreneurs have a greater chance to implement his own business.

The following lines discuss how the individual characteristics affect business performance. It

has been suggested by many authors (e.g., Loscocco & Leicht, 1993; Robb 2002; Loscocco et

al 1991; Lerner & Almor 2002) that the results achieved vary according to gender. For exam-

ple, Loscocco and Leicht (1993, p.875-876) suggest that “women owners derive lower earn-

ings from their businesses than do men”; Srinvasan et al. (1994)39 indicate that women owned

businesses “tend to underperform in financial/growth terms compared to male-owned firms”;

Loscocco et al (1991, p.65) find that “women generate lower sales volumes and derive less

income than their male counterparts”. In this same study Loscocco et al (1991, p.65) suggest

that all the possible reasons that contribute to women’s relative lack of financial success can

be categorized “as function of individual differences brought to the small business sector or

37 Hisrich and Brush (1983) found that the women entrepreneur’s spouses are “predominantly professional or technical people who could provide emotional and financial support” ( Bowen & Hisrich, 1986, p. 402) 38 One of the authors of this paper met with Kenneth P. Morse, Senior Lecturer and Managing Director of MIT Entrepreneurship Center. The information on Morse was gathered during the meeting which took place in Co-penhagen at the Hotel D’Angleterre, the 9th of January 2006. 39See: Lerner and Almor 2002, p. 110.

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differences in the businesses themselves”. Further, these two categories can be divided into

four major areas: human capital, personal characteristics, family situation, and features of the

business itself. Regarding the impact of individual characteristics in business performance,

Loscocco et al (1991, p.67-68) summarize the most common personal characteristics that af-

fect business success as follows: “McClelland’s (1961) high need for achievement, Steven-

sons & Grumpert (1985) taking risks, Brockhaus (1982) and Kets deVries (1977) needs for

being their own boss and internal locus of control all these have been linked to economic suc-

cess […] strong commitment to the business (Gofee & Scase 1985; Pellegrino & Reece 1982,

Scase & Gofee 1982)”. This strong commitment is reflected in the long hours small business

owners have to sacrifice in order to achieve success (Loscocco & Leicht 1993). Women who

chose their own business as a way of balancing work and family might be less committed to

long working hours. This leads to lower personal financial success since business commit-

ment affects positively on owners earnings (Loscocco & Leicht 1993). Loscocco et al. (1991)

point out that the differences brought by gender into socialization experiences could result in

women missing some important characteristics (e.g., risk taking and internal locus of control)

that are considered to be paramount to succeed as small business owner. Motivation as an

individual characteristic can also be identified as a reason for lower personal financial success

for women business owners. This can be explained by Rosenfeld (1980)40, who indicates that

“people are motivated to work harder or find higher-paying jobs when they have greater eco-

nomic need”. This is not the case for the majority of women business owners, as pointed out

in the demographic background of the entrepreneur. Following the traditional role distribu-

tion, women tend to be married thus leaving the economic pressure of being a good provider

to their husband, this leading to less motivation for women to work harder. Drive is another

important individual characteristic that enhances business success. According to Loscocco

and Leicht (1993) women who operate a viable business, present the same drive as men, since

commitment is shown to lead to success in the same way for men and women.

From the revised literature, it can be concluded that women entrepreneurs are more similar to

men than different in terms of motivation and demographic background. Concerning business

performance, women lower commitment to business work due to time spend in domestic

work leads to lower business results.

40 See: Loscocco & Leicht, p. 877.

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2.2.2 Organization characteristics

Compared to the individual characteristics, less academic research has focused on the organ-

izational traits of businesses owned by women. Management style, problems at start-up and

the structure of the business are key areas to investigate. To this end, the following questions

will be examined:

1. In what sectors of the market are women entrepreneurs establishing their businesses?

2. What is the common business structure of women enterprises?

3. Is there any difference in leadership style between female and male entrepreneurs?

4. To what extend is a diversified team essential for the development of a business?

5. How do organizational characteristics affect the results obtained by women business

owners?

Women entrepreneurs are represented in all sectors of the economy, but at some different de-

grees. They tend to a large extent to enter traditional female sectors such as retail and ser-

vices, even if a “modest progress has been made in women entering nontraditional fields such

as manufacturing, finance and construction” (Bowen & Hisrich, 1986, p.402).

In a study of 468 women entrepreneurs, Hisrich and Brush (1984) identified that 90 percent of

the women entrepreneurs worked in service businesses, while only 7 percent operated in

manufacturing and just 3 percent in financial institutions. None of the women reflected the

Schumpeterian entrepreneur in that the essence of their businesses was not based on innova-

tion but rather “using an established or slightly modified product for an existing market” (His-

rich & Brush, 1984, p.33). Concerning the form of the business venture, 35 percent were sole

proprietorship, while only 12 percent entered in general partnership. Another interesting point

revealed by this study is that “more than 30 percent of the businesses had no employees other

than the women entrepreneur herself, and 42 percent had only one to four employees” (His-

rich & Brush, 1984, p.33). According to Chaganti (1986) the fact that women businesses re-

main small in size is a way to ensure employee satisfaction.

The findings presented above are consistent with Brush’s (1992, p.13) more recent conclusion

on the investigation of the organization traits of women business owners: women are princi-

pally represented in “service-oriented” businesses, “small in terms of revenues and employ-

ees”, and choose “sole proprietorship” as a form of business structure. In addition, a survey

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conducted by the Danish Agency for Trade and Industry (Nielsen & Kjeldsen, 2000) conclude

that women and men set up their businesses in different industries. In 1997, the majority of

women entrepreneurs established their businesses in retail trade (34 percent) and business

services (34 percent) and less in transport (7 percent) and building construction (2 percent)

compared to men entrepreneurs41. Concerning the form of co-operation, the results of the

qualitative analysis conducted by Kjeldsen and Nielsen (2000) indicates that more than 80

percent of the women entrepreneurs interviewed worked on the whole alone, while this num-

ber is the same for male entrepreneurs.

The fact that a large number of women do not employ staff and want to rely on their own

could be seen as a critical point. Team is one of the key elements to setting-up a company

(Kubr et al., 1998). “The popular image of the lone entrepreneur notwithstanding, high-

growth ventures are usually built around a team” (Foo et al., 2005, p.386). In this same per-

spective, Kubr et al. (1998, p.21) underlines that “high-growth new companies are not one-

man bands”. The rationale is that team members bring complementary skills and views which

are essential to the well-being of a business. The diversity of the team traits such as educa-

tional background which “leads to diversity in perspectives and information” (Foo et al.,

2005, p.386), can facilitate the development of a business idea. In contrast, diversity in traits

such as age and employment status “lead to differences in values, attitudes, and interests”

(Foo et al., 2005, p.386) and could hinder team performance. The results of the empirical

study of Foo et al. (2005) on teams involved in a business plan competition held in Singapore,

indicate that diversity related to task factors, such as the size of the team, were positively re-

lated to team outcomes while diversity in non-task factors, such as age and employment

status, were negatively related to external evaluations of the team’s business idea.

In addition, strong commitment between the members is essential to overcome the barriers

during the start-up phase (Grandi & Grimaldi, 2005). Furthermore, five key roles should be

perceived in an innovative team: (1) idea generator, (2) internal entrepreneur, (3) leader of the

project, (3) technological gatekeeper and (4) project sponsor (Grandi & Grimaldi, 2005).

41 In 1997, male entrepreneurs operated essentially in business service (38 percent) and retail trade (19 percent), but as mentioned established enterprises more than women in the following two lines of business: building and construction (17 percent) and (transport 7 percent) (Nielsen & Kjeldsen, 2000, p.16).

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In short, it is essential for entrepreneurs to build a large sized team, “larger than the two to

four members found in a typical new venture team” (Foo et al., 2005, p.399). The rationale is

that large and diversified entrepreneurial teams, where members have complementary skills,

knowledge, information and resources, will positively benefit business performance (Foo et

al., 2005, p.398). Strong commitment and the team individuals’ roles are also important or-

ganizational factors supporting the positive development of a business.

Concerning leadership skills and style some differences between women and men entrepre-

neurs have been noted. According to Brush’s desk research (1992, p.13), women are more

“feminine”, informal”, and “participative”. In addition, “openness in communications, par-

ticipative decision making, and less hierarchical organizational structures” are also key organ-

izational characteristics of women entrepreneurs (Brush, 1992, p.13). Regarding leadership

style, women are to act like men to succeed: “a majority of women believe that they should be

prepared to compete on the same terms as men and appear as much like men as possible”

(Konek & Kitch, 1994, p.49). Compared to male who characterize themselves as transactional

leaders (Rosener, 1990, p.120), “female leaders […] tend to utilize transformational behav-

iors” and thus follow a transformational leadership which is beneficial to them because of its

androgynous features (Moore & Buttner, 1997; Eagly & Carli, 2003). Transformational lead-

ers “are proactive, raise follower awareness for transcendent collective interests, and help

followers achieve extraordinary goals” (Antonakis et al. 2003, p.264). According to An-

tonakis et al. (2003) transformational leadership consist of five factors: (1) idealized influence

(attributed) – or socialized charisma of the leader, (2) idealized influence (behavior) – or

charismatic actions of the leader, (3) inspirational motivation – or the ways leaders energize

their followers, (4) intellectual stimulation – or leaders action to encourage the followers to

think creatively and solve problems, and (5) individualized consideration – or leader behavior

that stimulates to the follower satisfaction. For instance, quality and outcome are two essential

aspects for the transformational leader who is defined “as the more successful model for lead-

ership” (Moore & Buttner, 1997, p.100). In addition, women leaders perceive relationship as a

central value in strategic management. To reach their aim, women rely on an “interactive”

style where “women encourage participation, share power and information, enhance other

people’s self-worth, and get others excited about their work” (Rosener, 1990, p.120), while

men rely on a “command-and-control” leadership style, “involving the assertion of authority

and the accumulation of power” (Eagly & Carli, 2003, p.810).

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In this same perspective, Chaganti (1986, p.20) presents a “feminine” style of leadership

where women entrepreneurs follow a “friendly, personalized, team-oriented and informal

style”. According to Chaganti (1986, p.20) women entrepreneurs score “low in assertiveness

and sense of power” and follow an “intuitive and emotional approach” to decision-marking. If

we investigate further into the aspect of strategic management in women-owned businesses,

there is evidence that the feminine entrepreneur follows a different strategic management

style than the typical successful small firm (Chaganti, 1986, p.20). Concerning shared values

for business, the feminine entrepreneur’s main interest is personal satisfaction rather than con-

tinuing growth. In marketing strategy, female entrepreneurs tend to sell goods which need

personalized service and enter and remain in small, local market niches. In addition, com-

pared to the successful male entrepreneur who from a financial point of view relies on equity

in the start-up period, the feminine entrepreneur enters low-capital business and follows a

risk-averse financial strategy (Chaganti, 1986, p.21). As already mentioned, the structure of

the female entrepreneur’s organization is often small in size (Brush & Hisrich, 1991, p.11)

and stays informal and decentralized compared to the successful entrepreneur who pursues a

more formal system as the firm grows. Concerning the workforce, Chaganti (1986, p.20) un-

derlines that the feminine entrepreneur feels more comfortable to hire female employees, in

contrast to the successful male entrepreneur who hires principally men because of their know-

how and expertise. Finally, one key barrier for women entrepreneur is often their weak skills

and knowledge in finance, planning and marketing analysis (Chaganti, 1986).

Further differences in terms of individual characteristics between women and men entrepre-

neurs are to be found in the following factors: work experience and education. Brush (1992, p.

12) concludes that female business-owners “had previous work experience in teaching, retail

sales, office administration, or secretarial areas, rather than executive management, scientific

or technical positions more typical for men”. When it comes to the level of prior employment,

men tended to be executives, while women had middle or lower-level management positions

(Loscocco et al, 1991). Concerning education, the main difference between women and men

entrepreneurs has been noted in the field of study. As mentioned previously (Brush & Hisrich,

1991; Buttner, 1993) many women have a degree in liberal arts compared to men who have

pursued studies in the field of business, engineering or technical matter. In regards to the

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length of the education, Boden and Nucci (2000)42 found that in average women have less

years of education than men.

Brush and Hisrich (1991) studied the antecedents of the women entrepreneur which affect

business survival and growth43. The antecedents were classified in four groups of variables:

education, occupational experience, personal factors and business skills. The findings of the

study indicate that for women business-owners “previous experience in the field of the ven-

ture, financial skills, strength in dealing with people, and idea generation combined with mar-

ket opportunity motivation are keys to survival” (Brush & Hisrich, 1991, p.14). Concerning

the factors which contribute to growth of women new business creation, the following factors

were found to be essential: “ability to organize and plan and the educational field of study”

(Brush & Hisrich, 1991, p.14). On the aspect of gender-based differences, Brush and Hisrich

(1991, p.14) conclude that no dissimilarities exist between the antecedents influencing the

successful female entrepreneur and those of the successful male entrepreneur “with the factors

contributing to success and survival being the same”.

To provide a concrete example: Lis Beck and Anna Söndergaard44, the two Danish female

entrepreneurs behind the company Becksöndergaard are between 25-30 years old and have

both a high educational background (a Master Degree at the Copenhagen School of Business).

Prior to start-up, Lis Beck worked four years for Carlsberg, including one year spent as pro-

ject manager in Malaysia and Anna Söndergaard worked four years for McKinsey Manage-

ment in Copenhagen. Lis Beck emphasized on the fact that having a strong work experience is

vital before starting its own business.

Starting and operating a business demands coping with a certain amount of risk and effort.

Disadvantages are even greater for women entrepreneurs as they engage in a “male-

dominated arena” (Hisrich & Brush, 1984, p.30). According to Brush (1992, p.14) “financial

aspects of venture start-up and management are without a doubt the biggest obstacles for

women”. Women’s lack of financial skills acts as a barrier to obtain start-up financial support

and enter informal financial networks. The results of the study of Hisrich and Brush (1984)

indicate that women self-appraisals in financial skills score low. The main obstacles encoun-

42 See: Robb 2002, p. 385-386 43 By growth, Brush and Hisrich (1991, p. 12) mean: “several factors, such as an increase in sales and income, but was primarily measured by an increase in the number of full-time employees”. 44 See appendix II

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tered during the start-up of their businesses were the lack of business training (30 percent),

obtaining lines of credit (28 percent), and lack of financial planning experience (26 percent)

(Hisrich & Brush, 1984). These problems act as obstacles to their business expansion and are

therefore to be taken seriously by women entrepreneurs. On the issue of financial discrimina-

tion, Birley (1989) cites the comparative study of Hertz on British and American women en-

trepreneurs that underlines that women entrepreneurs do not face financial discrimination if

they present healthy business plans. The results show that 60 percent of the women respon-

dents believe that “to succeed, women had to be better than men –a better business person,

more confident, and better at absorbing stress” (Birley, 1989, p.36-37); one of the reasons

being “if women display a stereotypically warm and nurturing feminine style, they will be

liked, but not respected as leaders” (Gundry et al. 2002, p.74). Thus being taken seriously is

perceived as difficult for women entrepreneurs. On this matter, Eagly and Carli (2003) pro-

vide evidence that women leaders face prejudice and discrimination in a male-dominated en-

vironment. According to Eagly and Carli (2003) women are considered to be less agentic than

men but more communal than men45. In this same line, Hisrich and Brush (1984) conclude

that a set of specific changes need to be put into practice if women are to survive and be visi-

ble in a male-dominated business environment: (1) eliminate stereotypes, (2) encourage visi-

ble role models, (3) follow new goals and attitudes, especially motivate women to learn fi-

nance, (4) promote other fields of study than liberal arts, (5) encourage the participation in

strategic seminars covering financial, management and marketing topics, and (6) establish

both formal and informal networks as advisors.

The most important organizational characteristic linked to lower success of women business

owners is firm size (Loscocco & Leicht 1993; Robb 2002; Loscocco et al 1991; Kalleberg &

Leicht 1991). Aldrich and Weiss (1981)46 pinpoint, that regardless of gender, size is the “sin-

gle greatest predictor of income among small capitalists”. Even for highly successful women-

owned businesses firm size has a less positive impact on sales. This aspect is underlined by

Loscocco et al (1991, p.79) who found that “size brings greater volume to male-owned than to

female-owned businesses”, this translating into less success for women. Aldrich and Auster

45 By agentic, Eagly and Carli (2003, p. 818) refer to the following qualities: “assertiveness, and instrumental-ity”; while communal refer to qualities such as “warmth and selflessness”. 46 See: Loscocco et al 1991, p. 75

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(1986)47 results indicate that smaller size affect businesses in four important areas: 1) raising

capital, 2) securing employees, 3) complying with government regulations, and 4) dealing

with tax laws. In this perspective, it is clear that women small sized businesses act as a detri-

ment for success.

Boden and Nucci (2000)48 hypothesize about how differences in the amount of financial and

human capital the new venture owner brings into the business result in the differences in the

survival prospects of the business. Since women bring lower amounts of capital for the start-

up and have fewer years of college education and industry experience (Loscocco et al 1991;

Lerner & Almor 2002) and it has been proven that these two factors affect business perform-

ance, it can be concluded that women owned businesses are less likely to survive than men

owned businesses. In this same line of research, Robb (2002) find that even when controlling

for firm characteristics (i.e. size, industry, legal form, organizational form, and location) the

survival of the business still depends on gender. The author also mentions industry selection

as one of the drivers of the observed differences in survival by gender. This fact can be ob-

served in women’s higher participation rates in some particular industries, like retail and ser-

vices (Robb 2002; Loscocco et al 1991; Kalleberg & Leicht 1991). Robb (2002) and Kalle-

berg and Leicht (1991) point out occupational segregation as a possible cause for women’s

concentration in these particular industries, which according to Loscocco et al (1991) are the

least profitable industries. In this same perspective, Bird and Sapp (2004) underline that the

fact that women’s businesses are located in crowded industries act as an impediment to finan-

cial success. In regards to human capital in form of industry experience, many authors (e.g.,

Robb 2002, Lerner & Almor 2002) agree on this factor being a cause for women’s lesser suc-

cess. Loscocco et al (1991) finds that lack of experience accounts for women’s lower sales

and income, while Brush and Hisrich (1988)49 show that “familiarity” is positively related to

women owned business’s survival and growth. For Lerner and Almor (2002) the success of

the small firm is based on the owner’s skills, background and experience. In their study on

performance, the authors found that: 1) organizational resources have strong correlations with

their measures of performance (sales volume, owner income, and number of employees), 2)

managerial skills and experience in the industry are positively correlated to volume of sales,

47 See: Loscocco et al 1991, p. 81 48 See: Robb 2002, p. 385-386 49 See: Lerner and Almor 2002, p.114

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3) strong financial and human resources, and strategic management skills are highly related to

performance, and that 4) the larger the variety of skills, the higher the volume of sales and the

higher the owner’s income. Some interesting conclusions are reached by this study. The au-

thors point out marketing, budgeting and financial skills, human resource and strategic man-

agement skills as strongly related to performance, while the women in the sample rated these

resources as weak in their firms. Regarding marketing, budgeting and financial skills, human

resource, and strategic management skills, all skills that can be categorized under human capi-

tal, the women of the sample rated themselves low on three of these four skills. The authors of

this study make clear how the lack of human capital and experience in the industry, both re-

lated to performance, act as a detriment in women owned business success.

To conclude, organizational characteristics of female enterprises do not precisely resemble

those of male-owned businesses. The main differences are to be found in the company size,

leadership style and human capital. Bowen and Hisrich (1986, p.402) emphasize that “most

women start small and stay small”. Women’s advantage of following a transformational lead-

ership style - where women leaders establish themselves as role model by gaining follower’s

trust and confidence - might disappear with the disadvantage that streams from prejudice and

discrimination. In this line Lerner and Almor (2002) suggest that unless women use a long-

range, formalized strategic planning, they will continue scoring low on growth and other per-

formance variables. It is also obvious that, even though organizational characteristics affect

business success similar for men and women, women have greater disadvantages (human

capital, experience in the industry, firm size, choice of industry) than their male counterparts.

Finally, entrepreneurs should not neglect the aspect of team building as it encompasses bring-

ing together competencies and skills of different individuals which are essential for the firm’s

performance.

2.2.3 Process of creating a business: focus on networks

In the following section the third dimension of Gartner’s new venture creation framework will

be studied. According to Brush (1992, p.15) the limited number of academic research on this

specific dimension “makes it difficult to identify well-defined trends”. The intention is not to

review the six key actions (Gartner, 1985) undertaken by entrepreneurs to create a new ven-

ture. Rather the aim of this section is to investigate one of the key processes for creating and

acquiring a business, namely networks. “In today’s business environment, the performance of

a firm is not solely a result of the firm itself” (Lindstrand, 2003, p.5). As Wilkinson et al.

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(2000, p.276) underline: “firms are not islands; they are not self-sufficient”. Entrepreneurs

have the knowledge and the abilities to establish a business, but they also need to engage in

network activities in order to acquire external and complementary resources to guide them

through their start-up and development process (Greve & Salaff, 2003, p.2).

Since social capital is an essential part for the creation of a business, networks will be ana-

lyzed in this section with the attempt to answer the following questions:

1. Is there a difference in the processes women and men follow to create businesses that

affect performance?

2. How is network defined and why is it a key process in venture creation?

3. Do women entrepreneurs draw different on network than male entrepreneurs?

Gartner (1985) in his new venture creation framework specifies six clear steps that entrepre-

neurs follow in general when creating new businesses. In the desk research made for the pur-

pose of this thesis the authors find no documented evidence that suggest that there are gender

differences in the processes a business owner follows to create his/her own business. Kalle-

berg and Leicht (1991, p.157) found that “the determinants of survival and success operated

in much the same way for men and women, suggesting that the processes underlying small

businesses performance are similar irrespective of gender”. On the specific terms of income,

Loscocco and Leicht (1993) found that earnings for men and women are determined trough

similar processes. However, in these steps proposed by Gartner (1985) the authors find, spe-

cifically under research accumulation, that network can be analyzed through a gender-based

perspective.

Business network is a unique platform of interdependent business relationships or “mutual

orientation” (Johanson & Mattsson, 1987, p.40) based on different ties to a diversity of player

such as suppliers, sub suppliers, customers, customer’s customer, and competitors (Lind-

strand, 2003; Johanson & Mattsson, 1987), distributors and government (Chetty & Blanken-

burg Holm, 2000). Anderson et al. (1994, p.2) define a business network “as a set of two or

more connected business relationships, in which each exchange relation is between business

firms that are conceptualised as collective actors”. Anderson and Jack (2002, p.207) define

network as a “series of bridges that link numerous individuals”. Strong network is perceived

as key investment as it enables access to complementary resources and information (Anderson

& Jack, 2002) while achieving results that would not have occurred in isolation (Chetty &

Blankenburg Holm, 2000). In other words, firms engaging in network benefit positively

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“from the synergistic effect of pooled resources” (Chetty & Blankenburg Holm, 2000, p.77).

Players in the network field are embedded in interaction processes, such as “exchange and

adaptation” (Johanson & Mattsson, 1987, p.40). In this same perspective, Johanson and

Mattsson (1987, p.36) define the activities of any firm as a “cumulative processes” in that

“relationships are constantly being established, maintained, developed, and broken in order to

give satisfactory, short-term economic returns and to create positions in the network that will

assure the long-term survival and development of the firm”. Anderson et al. (1994) identify

three key components of the business relationships’ function: (1) activities, completed in the

network and their linkages with the other firms (2) actors, with their identity and their rela-

tions with counterparts and (3) resources, exploited in the network and the adaptation pattern

exercised between them. According to Moore and Buttner (1997, p.115), networks are con-

sidered to be “vital links” for women “managerial and entrepreneurial development”. Net-

works are “a critical source of social capital” (Carter et al. 2003, p.6). The creation of rela-

tions and contacts to gain access to opportunities and resources (information, advice and capi-

tal) constitute the key underlying elements of a network (Kjeldsen & Nielsen, 2000, p.105).

Few entrepreneurs start their business “as solo endeavors” (Renzulli et al., 2000, p.524). As

an alternative, future entrepreneurs, or what Renzulli et al. (2000, p.524) name “nascent en-

trepreneurs”, engage in networking activity to seek support (moral or economical) and assis-

tance which arise from “contacts in businesses owned by family members, close friends,

peers, and former employers” (Moore & Buttner, 1997, p.115). Contacts or “entrepreneurial

know-who” benefit positively the start-up process of a business (Moore & Buttner, 1997,

p.116). The results of Lindstrand (September, 2003, p.45) indicate that “firms have to look

beyond the choice of mode of entry, foreign market research, or their global strategies. Firms

need to recognize that they learn how to do business in networks of multiple relationships”.

In terms of internationalization, firms are in position to use their network to successfully “ex-

ternalize” some of their non-core activities “without losing control of its crucial intangible

assets” (Johanson & Mattsson, 1987, p.47). Wilkinson et al. (2000) distinguish between two

types of producer network engaged in the value production system: (1) primary and (2) ancil-

lary. In addition, the authors of the study (Wilkinson et al., 2000) identify two essentials fac-

tors that impact on networks international performance: (1) the location of networks and (2)

the presence of internationally competitive firms. Wilkinson et al. (2000) also underline that

international success is linked to the development and management of tight relations with

other firms using an adaptation process, responding to the needs and problems of their coun-

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terparts. Thus, the actors in the network should rely on mutual commitment and trust for the

good development of their business (Lindstrand, 2003, p.6). In the same line of research,

Lindstrand (September, 2003, p.26) argues that “the use of network experiential knowledge

and learning (or non-learning) in activities in embedded networks will influence the perform-

ance of a firm”. The results of the research study of Blomstermo et al. (2004, p.365) provide

that the greater the perceived usefulness of network experiential knowledge the higher the

performance, in terms of growth, knowledge and customer, in firms’ internationalization

process.

The results of Renzulli’s (1998)50 work using the Research Triangle Entrepreneurial Devel-

opment Study (EDS) indicate that women business owners comprise more “kin”51 in their

networks, thus securing social support, while men include more “coworkers”, thus securing

essential assistance for economic success. This founding is consistent with the study of Kjeld-

sen and Nielsen (2000) where the results indicate that women entrepreneurs seek “50 percent”

of their counseling from their husband, while only “28 percent” of the men entrepreneurs ask

for support from their wife. In addition, it is proved that women entrepreneurs without em-

ployees rely more heavily on the family network, than do women entrepreneurs who have

employees and men entrepreneurs who use a more externally and professional oriented net-

work. Besides the role as consultant regarding the economy and the strategy to reach business

excellence, women’s husbands are seen as a “source of motivation and encouragement”

(Kjeldsen & Nielsen, 2000, p.106). In short, “women are thought to prefer strong ties that are

expressive and characterized by emotional intensity, mutual confiding and intimacy” (Carter

el al., 2003, p.8). In addition, women tend to build networks essentially with female counter-

parts. One explanation could be that women feel more comfortable to communicate and inter-

act with individuals “with similar attitudes, values, and experiences” (Brass, 1985, p.328).

This aspect “could be a disadvantage in the business community for gathering information

and other resources”. (Renzulli et al. 2000, p.530). One of the risks could be to receive redun-

dant information and be at a disadvantageous position “when competing for information with

someone with a large set of diverse ties” (Carter el al. 2003, p.7). Similarly, women form

50 See: Renzulli et al. (2000, p. 524). 51 Kin includes: “spouse, parents, siblings, and in-laws”, while non-kin includes: “friends, neighbors, coworkers, consultants, and group or association members”. (Renzulli et al. 2000, p.527).

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smaller networks than men which could act as a barrier to reach low-cost facilities or trans-

portation52

The conclusion drawn by Kjeldsen and Nielsen (2000) is that women’s networks vary in par-

allel with the start, during and after creation of the business. During the first phase of the

start-up, women rely on peer networks rather than formal and established networks. In the

middle phase, when women evaluate the possibilities of achieving their goals, they tend to use

external advisors and traditional networks. In the later phase of the business development,

women are induced by the values of networking, and thus are willing to join a professional

network and rely on experienced advisors. In short, women entrepreneurs become aware of

the importance of building strong and diversified ties in their networks during the process of

new business creation.

In the case of Scandinavia, Johannisson and Mønsted (1997, p.116) recognize that “female

entrepreneurs use socially biased networks more than men to promote their careers since they

have yet to be recognized as equal to male independent businessmen and therefore have more

limited access to institutional support”. The rationale behind this phenomenon is the “under-

developed entrepreneurial culture” which prevails in Scandinavia.

Concerning the link between network and business performance, Bird and Sapp (2004, p.7)

underline that the “higher collective status” of men and “common gender practices” act as

driving forces to “develop the kinds of human capital and social networks most conductive to

business success”. The study of Weisz et al. (2004, p.5) conclude that the high social capital

of the nascent entrepreneurial team is associated with higher business performance. In this

same perspective, Kristiansen’s (2004) research in an African context underlines that net-

works help reducing risk and transaction costs, and improves access to capital. Using appro-

priate networks affect directly on business performance, survival and growth (Greene, 2003).

Renzulli et al. (2000) highlight the disadvantage of using family as network for the creation of

a new venture.

To conclude, as mentioned by Brush (1992), the process of developing network ties is not

different between female and male entrepreneurs. “Information needs”, “the degree of plan-

ning and importance of personal versus impersonal information” are to a large extent identical

52 See: Aldrich, 1989

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between women and men business owners. Nevertheless, differences exist because of gender

differences in network characteristics (Renzulli et al. 2000), such as network composition and

size (Brush, 1992, p.15; Renzulli et al. 2000), which might have negative impacts on the per-

formance of female-owned businesses.

2.2.4 Environmental factors

The subsequent section will focus on the last key dimension of Gartner’s (1985) explanatory

framework. There are several factors in the external playing field that influence both strategic

and operational assessments throughout the creation of a new business (Kjeldsen & Nielsen,

2000). This area includes the sphere of social, economic and political conditions that influ-

ence the start-up of a new enterprise. Much research on women entrepreneurs state that creat-

ing and operating a new business is more complex for women than men. On that matter,

Pellegrino and Reece (1982, p.15) quoted the Committee on Small Business: “it has conclu-

sively been shown that women business owners encountered more obstacles and face more

risks, financially, socially, economically, culturally, and legally than men business owners

face”. The aim of the following section is not to analyze all of those obstacles, but to focus

above all on one of the key problem women still face, namely access to capital. A few lines

will also be dedicated to the entrepreneurial culture, especially, in Denmark, as it constitutes

the market of the authors’ interest. To this end, this section will attempt to answer the follow-

ing questions:

1. Is gender a problem when accessing capital?

2. Why do women face obstacles when trying to obtain loans at the bank?

3. What is the entrepreneurial culture in Denmark?

4. How do the environmental factors affect the results obtained by women business own-

ers?

Together with the business idea and the management team (Kubr et al., 1998, p.20), access to

capital is one of the key elements or “critical strategic asset” (Bøllingtoft et al., 2003, p.535)

to the creation of a new business and paramount for reaching business performance. Unlike

men, women during the mid-1970 faced “credit discrimination” (Greene, 2003, p.5). On this

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aspect, women worldwide continue facing obstacles when seeking sources of financial sup-

port for their enterprise (Hisrich & O’Brien, 1981; Collerette & Aubry, 199053; Pellegrino &

Reese, 198254). More precisely, women entrepreneurs have difficulties due to gender charac-

terizations to gain financial resources (Marlow & Patton, 2005, Welter, 2001). The barriers

related to gender when seeking financial support are threefold according to Marlow and Pat-

ton (2005). First, socialization and work experiences prior to start-up are essential criteria “in

determining levels of available financial, business, and personal capital available to the poten-

tial entrepreneur” (Marlow & Patton, 2005, p.723). Second, banks are averse to invest in

women small size enterprises which are operating in “crowded sectors”, such as the service

sector (Marlow & Patton, 2005, p.724). Finally, negative and persistent stereotypes “which

portray the feminine as inferior to the masculine” (Marlow & Patton, 2005, p.724).

In this same perspective, Schwartz (1975)55 and Lee-Gosselin & Grise (1990)56 underline that

lack of confidence of women business founders might act as a barrier to capital accessibility.

Likewise, the study of Koreen (2000, p.15) indicates that women’s “lack of collateral, lack of

a credit history, lack of previous entrepreneurial and management experience and need for

small loans, which are unprofitable for banks”, are the main reasons why women entrepre-

neurs have difficulties obtaining loans at a traditional bank, compared to their male counter-

parts. One of the solutions proposed to overcome these obstacles is to utilize “microfinance”,

which according to Koreen (2000, p.15) “is targeted for women entrepreneurs with small size

enterprises”. For instance, in Denmark, entrepreneurs have the possibility to get “state-

guaranteed loans as small as 75,000 DKK” (Nielsen & Kjeldsen, 2000, p.43).

From the author’s interview57 with the owner of Becksondergaard, Lis Beck reveals that the

main challenge she faced during start-up was access to capital. To face this obstacle the solu-

tion was to work close to a well experienced account manager, to write a sound business plan

and “to act like men”58.

Even if a small group of scholars perceive gender discrimination concerning access to finan-

cial capital, the study of Kolvereid et al. (1993, p.49) reveal that “male and female entrepre-

53 See: Kolvereid et al. (1993, p.42). 54 See: Buttner and Rosen (1992, p.58). 55 See: Kolvereid et al. (1993, p.42). 56 Idem 57 See appendix II 58 Idem

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neurs in western countries do not face very different business environments”. This finding

supports the work of Buttner and Rosen (1992) in that no evidence of gender discrimination

was found when searching financial capital.

Even though women still face gender disadvantages when trying to gain access to financial

institutions, women excel in terms of discipline and perseverance when preparing the start-up

phase. This “credibility” factor that together with “industry affiliation” and “complexity of

technology” (Bøllingtoft et al., 2003, p.536), constitutes one of the three key factors influenc-

ing the initial capital structure, and is positively related to female entrepreneurs. For instance,

one of the decisive criteria for credit evaluation when willing to establish an enterprise is a

sound business plan. According to the study of the Danish Agency for Trade and Industry59 a

good business plan is the Alpha and Omega”. Concerning this aspect, Kjeldsen and Nielsen

(2000) underline that business plans presented by women offer the same quality as those of

men. In addition, the study of Kjeldsen and Nielsen (2000, p.27) on women entrepreneur’s

relation to banks indicate that accountants and bank advisers perceive women as being “often

well prepared at the meeting with the bank” and presenting on average realistic and detailed

business plans and budgets. Thus, it seems that women are willing to create healthy relations

to their banks but despite their efforts to do so they remain feminine actors in a masculine

playing field.

Another essential actor in the environment is the influence of the government on new venture

creation. The aim of the Danish Government set in “The Danish Growth Strategy” is to “posi-

tion Denmark by 2010 among the European entrepreneurial elite” (The Danish Government,

2003, p. 3). To this end, clear initiatives have been taken by the government to foster the en-

trepreneurial spirit. The government act jointly with banks, preferably those co-financed from

the state, to improve the often weak dialogue between banks and entrepreneurs. For instance,

banks are encouraged to understand better the motives and barriers of women entrepreneurs

and at the same time act as advisors on different entrepreneurial issues (Kjeldsen and Nielsen,

2000). In collaboration with different ministries and associations, the Danish Government

launched in 2000 a “think tank” to support the national entrepreneurial spirit. In 2002, the

government adopted a strategy called “Promoting Competitiveness” where proposals were

made concerning entrepreneurial taxation (The Danish Government, 2003, p.14). Another

59 http://www.ebst.dk/publikationer/rapporter/bankers.uk/ren.html (01/12/05)

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intention of the government is to “place entrepreneurship on the agenda of the Danish educa-

tion system” (The Danish Government, 2003, p.17) and especially make women aware of the

possibilities of other lines of education. Finally, another essential decision being made is to

establish “contact points for entrepreneurs” in different regions to assist them in their devel-

opment process such as: counseling, course activities, networks, and entrepreneur culture

(Kjeldsen & Nielsen, 2000, p.39-40).

Besides the government, other organizations foster the entrepreneurial activity by inviting

individuals to concretize their business idea. Ernst & Young’s Entrepreneur of the Year

Award, Børsen’s Gazelle competition and the Venture Cup are all illustrative examples.

This is also true for other countries in the world, such as Canada, where the government is

taking initiatives in response to the flourishing increase of women entrepreneurs at the na-

tional level. The Canadian Government has broaden regional projects to support women en-

trepreneurs, has launched a nationwide “Women’s Economic Forum”, and promoted the “Ca-

nadian Women’s Innovation Award” as well as including women entrepreneurs on the agenda

for meetings “between the federal and local levels of government” (Domeisen, 2003, p.11).

Finally, women entrepreneurs worldwide can benefit from international occasions such as

“OECD conferences on women entrepreneurs” and in particular the “Women Entrepreneurial

Best Practices Forum” (Domeisen, 2003, p.12).

From a growth perspective, women do face an impediment to external resources which in turn

act as a barrier to business growth. For instance, Welter (2001, p.92) underlines from his lit-

erature research that “female entrepreneurs start with less capital and their enterprises stay

smaller in terms of employment and turnover compared to businesses led by male entrepre-

neurs.” However, Storey (1994)60 concludes from his research studies on growth factors that

the demographic characteristic of gender is not a factor influencing business performance.

In addition, many environmental factors can be linked to business performance, but one of the

most studied is the impact of the entrepreneur’s family. Depending on the perspective used to

analyze this factor, the arguments vary regarding gender differences linked to success. For

example, Loscocco et al. (1993), describe how domestic load is irrelevant to economic suc-

cess according to the gender similarity perspective. The authors, who concur with this per-

60 See: Welter, 2001, p. 92.

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spective, hypothesize that because of all the obstacles women find in their way they compen-

sate the time they use for domestic work by working even harder. These women may even

sacrifice their own leisure time as to be able to handle both spheres (Stafford, 1980)61. Differ-

ent arguments can be found on the gender difference perspective. The authors that use the

gender difference perspective as ground for their theories believe that women’s commitment

to their enterprise can be affected by trying to balance both work and family, using less time

and effort into the business. This division of commitment has a negative impact on the firm

success. Loscocco and Leicht (1993) have found that family responsibilities directly influence

the revenues obtained by the firm, “with marked gender differences in these effects” (Lo-

scocco & Leicht 1993, p.881-882). In an early work, Loscocco et al. (1991, p.75) find evi-

dence that “family situation does explain part of the gender difference in income”. The au-

thors define family situation with many different variables. Out of these variables, role strain

“is the major explanatory variable for income” (Loscocco et al. 1991, p.75). In more general

terms, Kalleberg and Leicht (1991, p.157) suggest, among other factors, family constraints as

the cause for women to be “pushed into lower-quality opportunities […] and hence may be

prone to poorer business performance than men”.

In short, the environment, and more precisely, venture capital availability and the influence of

the government and family factors are essential in new venture creation. Access to financial

resources remains one of the greatest challenges for women entrepreneurs but it seems that

this crucial problem can be narrowed down with government efforts to promote and support

entrepreneurship. Promoting entrepreneurship is a key element on the agenda of the Danish

Government. Denmark is taking initiatives to become one of the European entrepreneurial

elite while securing future economic growth and employment (The Danish Government,

2003).

2.3 Conclusion

Even though female entrepreneurs remain in minority compared to male entrepreneurs, they

represent an emergent segment of the business population; starting businesses at twice the rate

of men (Chaganti, 1986). The innovative and entrepreneurial potential of women is an under-

61 See: Loscocco and Leicht, 1993, p. 878

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lying source of economic recovery and growth. In this perspective, governments and other

institutions worldwide are encouraging and assisting women to engage in entrepreneurial ac-

tivities.

Research has shown that women face many obstacles in creating and establishing a business.

Although both genders encounter common difficulties, in many cases these difficulties tend to

be more significant for female entrepreneurs. This is due to factors such as differences in edu-

cational background, lack of formal networking, gender discrimination and stereotypes, and

more generally the way women and men approach entrepreneurship.

The following table presents a summary of the factors analyzed in each criterion. These fac-

tors were found to have direct impact on business performance, as proved by scholars in their

research.

Criteria Women’s Result

Individual

characteristics

• Women might show less commitment to their business work in favor for domestic

work. Commitment to work affects positively on owners earnings: less commitment =

lower earnings.

• Lower economic needs leads married women to less motivation to work harder, since

the provider role is taken by men.

Organization

characteristics

• The effects of firm size appear to be gender based, since it brings lower sales volume

to female-owned businesses

• Women bring less human capital (education and industry experience) to the venture,

translating into less success

• Industry selection affects business performance, one cause being that women concen-

trate in less profitable and crowded industries

Processes: emphasis

on network

• Women rely more on kin and other women as their network sacrificing the support

needed to achieve similar success as men.

Environmental

factors

• Access to capital continues to be one of the most mentioned obstacles. Less financial

capital is linked to lower business performance.

• Family is found to be closely related to the performance of the women-owned busi-

ness. When these women try to balance family and work, the latter suffering the con-

sequences: less working hours leading to lower firm success.

Table 1: Women’s results on each criterion.

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The reviewed literature on women entrepreneurs reveals that women business owners are con-

fronted with two key criteria: 1) controlling factors -which can be used actively by women in

the planning of their business, and 2) preventing factors -which act as obstacles to the new

venture creation process, for which women do not have any control. Thus, nascent female

entrepreneurs should be aware of these latter factors to take further action plans to minimize

the impact of possible negative results. The following figure represents a conclusion on this

part on women entrepreneurs in that it summarizes the key criteria that affect women owned

business results:


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3. Making of the business plan

What often leads to the creation of a new venture is the recognition of an opportunity62. This

key element is described by Mitton (1989, p.12), who believes that: “entrepreneurs see ways

to put resources and information together in new combinations. They not only see the system

as it is, but as it might be. They have a knack for looking at the usual and seeing the unusual,

at the ordinary and seeing the extraordinary. Consequently, they can spot opportunities that

turn the commonplace into the unique and unexpected”.

In order for this opportunity to be concretized into an established business, one has to achieve

different tasks. As Shaver and Scott (1991, p.35) argued that “before there can be a new or-

ganization, the founder-to-be must at minimum develop and test prototypes, conduct appro-

priate market research, create the standard financial projections and construct a business plan

suitable for securing venture capital.” These activities are essential for the creation of a new

business, but it is worth noting that despite persistence “rarely each of these activities is com-

pleted to the founder’s satisfaction on the first pass” (Shaver & Scott, 1991, p.35).

The business development process is based on three stages: (1) developing the idea, (2) de-

veloping the business plan, and (3) setting up the company, market entry and growth (Kubr,

1998). Each stage in the start-up process is a challenge for the entrepreneur while for an in-

vestor “each stage ends with a milestone” (Kubr, 1998, p.23).

It is worth noting that the authors of this paper intend to enter entrepreneurship, and as a mat-

ter of fact do not have any managerial experience. Therefore, the development of each com-

ponent of the business plan relies principally on the theory found and discussed in the last

chapters, as well as desk research including market research.

This chapter will focus on the activities that lead to the development of a business plan, in this

case, a distribution business – importing and selling finished jewelry from Mexico to the Dan-

ish market. The aim of this chapter is to elaborate the business idea into a detailed business

plan so as (1) to obtain a document for seeking financial resources and (2) to serve as a guide-

62 Hancok (2004,p.235) distinguishes between two principles to enter into entrepreneurship: “entrepreneurs who have identified and are pursuing a business opportunity and entrepreneurs who are involved in entrepreneurship because they perceive no other choice of work. These two types of entrepreneurs are called, respectively, Oppor-tunity entrepreneurs and Necessity entrepreneurs”. The result of the study indicates that in Denmark, more than 80% of women involved in starting a new business entity are doing so in order to exploit an opportunity.

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line for the business start-up, based on the following problem recognition: is there a demand

on the Danish market for new type of jewelry pieces and jewelry accessories?

This chapter includes four parts: (1) presentation of the business idea, (2) the organizational

plan, (3) the marketing plan and (4) the financial plan.

3.1 The business idea

A business idea is the first step needed for entering entrepreneurship. At this point the entre-

preneur resembles that of Lazear’s (2003) in that a good opportunity is recognized. The pre-

sent part is structured as follows: (1) the idea definition, (2) the presentation of the product

lines and (3) the consumer benefit from a means-end chain perspective.

The aim of this part is to provide the reader a clear definition of the authors’ idea, essential for

the understanding of the business plan.

3.1.1 Definition of a business idea

Normann (1977)63 defines a business idea “ as a system, an aggregate of elements which form

a complex pattern…it would be more accurate to say that the business idea expresses the uni-

fying principle of such a system…it expresses concrete conditions existing in a company; it

describes the company’s actual way of functioning, its organization, its actors, processes and

strategies”. In other words, as Kubr et al. (1998, p.20) mentioned: “without a business idea,

there is no business”. The business idea constitutes the first crucial step in the development

process. One of the key challenges faced by entrepreneurs is to convince the investor of the

business idea’s viability. The authors’ idea is to create a distribution firm, buying Mexican

jewelery to be sold in the Danish market.

3.1.2 Presentation of the product lines

The following section will present: (1) the authors’ business line from a concrete perspective,

describing the two product lines: exotic pieces of jewelry, and the concept of assembling.

63 See: Grandi and Grimaldi (2005, p.826).

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3.1.2.1 Exotic pieces of jewelry

The intention is to buy and sell finished pieces of jewelry from Mexican suppliers to the Dan-

ish market. This business line intends to add value to an existing product, namely jewelry.

The aim is to provide a portfolio of jewelry: necklaces, bracelets, and earrings which reflect

Latin design with a flair of exoticism and sophistication64. The aim of the collection of jew-

elry is to provide the fashionable woman a way of modernizing her wardrobe according to her

own style and taste. The Latin design jewelry will be made of semi-precious stones and ster-

ling silver, providing the customer with a unique and authentic piece of art. Craftsmanship,

design and exoticism are synonyms of the jewelry behind the founders’ future brand. The phi-

losophy is that the jewelry pieces are to complement women’s outfit. The natural materials

mirrored in the pieces will allow the women to wear the jewelry all day long: at the office,

when running errands and at night in town. In this way, the pieces of jewelry will become an

integral element of the women’s everyday life.

3.1.2.2 The concept of assembling

The second idea is to offer consumer the possibility to buy separate pieces of jewelry so as to

assemble them in an easy way to the core pieces. For instance, the consumer will be able to

buy a semi-precious stone to add to her necklace, or to change the feather of her earrings with

a silver flower. This will enable the consumer to change pieces according to her feelings and

mood. In this sense, the woman will create her own style which reflects her personality. The

separate pieces will be in average less expensive than the other jewelry pieces, thus enabling

to buy two for the price of one.

The following chart positions the two concepts of the business idea according to two dimen-

sions: (1) the essence of the product/service and (2) the system used to develop, manufacture

and market the product/service or “business system”.

64 Appendix I

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Figure 6: own adaptation from Kubr et al. 1998, p.38.

The two business ideas presented above will be launched at different time, according to the

market demand and the business’ budget.

3.1.3 Consumer benefit

A business idea once concretized should enable a company to attract, satisfy and retain its

customers. In order to provide high value products to the consumer, the company that the au-

thors intend to create will be customer oriented. This means that there will be a continuous

attempt to understand the consumers in order to fulfill their needs and wants.

The point of departure is that “people do not buy products for the product’s sake, but for the

benefits65 that their consumption can provide” (Costa et al. 2004, p.403). Consumers are

“goal-oriented decision-makers” (Costa et al. 2004, p.404) in that they seek behaviors which

lead to desirable end-states. In other words, the utility of a product is to be found in its “func-

tional and psychological consequences” which are essential to “the realization of consumers’

65 Vriens and Ter Hofstede (2000, p.6) define benefits as “less, or not, directly observable characteristics of a product or brand. They can be a combination of several attributes (observable physical characteristics of a prod-uct or service) and are the result of a consumer using the product”. Examples: “comfort”, “convenience”.

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goals and values” (Costa et al. 2004, p.403). The key element is to provide a benefit to the

client; in other words a new or improved product compared to the competitors solutions. This

means that the products in question are to be clearly differentiated from alternative solutions.

To convince the consumer to buy the products among others in the market, the products will

offer different values. To get insights into consumers’ values, it is important to understand the

attributes that consumers relate to the products.

To this end, the authors hypothesized that the following two means-end chains66 illustrate the

future consumers’ choice to buy the future brand’s products.


66 The means-end chain model was found in Manyiwa and Crawford (2001) paperwork. For more information see: Gutman (1982).

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The business idea is twofold in that it constitutes two distinct lines of products, namely the

exotic pieces of jewelry and the concept of assembling. All products will benefit the end con-

sumers by providing a new variety of innovative pieces of jewelry. In order to verify if there

is a need on the market for such products, focus groups have been conducted with different

segments of the market. This point will be further discussed in the marketing plan. After con-

ceptualizing the business idea, the next step is to assess the elements that compose the desired

organizational form.

3.2 Organizational plan

This part describes the nature of the business and its administrative establishment with a focus

on the steps to follow to run the business in an efficient and cost-effective way. This part is

divided in five sections: (1) the guiding philosophy of the business, (2) the corporate structure

of the business, (3) the business system, (4) the supplier development process and (5) the le-

gal environment.

3.2.1 Business Philosophy

Every business should have a clear vision of its future organization. The following guiding

philosophy represents the company’s vision, together with its core values that highlight the

principal elements of the business (Oakland, 2001, p.8-9). These four values, i.e. continuous

improvement, trust, teamwork and recognition will help the company achieve its key goals.

Continuous improvement will be reached through working toward business excellence. To

achieve operational efficiency, the company will work with quality management tools, appro-

priate for small businesses. Trust will be linked to the implementation of one culture where

continuous people development and two way communication will help strengthen the rela-

tions, both inside and outside the company (the suppliers and the customers) to develop and

keep outstanding people. Teamwork is yet another essential value for the development of the

company. Team members will work together towards achieving competitive advantage

through the understanding of the customers’ needs and wants. Recognition of the company is

twofold: 1) brand expression will be developed through one name, a clear identity and a

unique communication style to reach international recognition and 2) company recognition by

giving back to the society through philanthropic events and other social involvements.

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The mission of the company is to find the optimal channels in order to provide “ego enhan-

cers” to the contemporary women through world class quality accessories. The company will

reflect a friendly business where enjoyment and fun are an integral part of the business cul-

ture. The founders strongly believe that enthusiasm, satisfaction and recognition are the key

underlying principles.

3.2.2 Corporate structure: limited liability (ApS)

The founders of the business will establish a limited liability company in Denmark, also

called Anpartsselskab or ApS. The company will have a share capital of at least 125.000

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DDK67, as required by the law for this type of corporate structure. The founders will be an EU

national with Swedish/French nationality and a Mexican. The two female founders will sub-

scribe to the entire share capital. A formation agreement will be signed by the two founders

and will contain the following: the articles in draft, the subscription price for share issuing,

name and location of the company and the management structure68. The new limited liability

company will be registered at the Danish Commerce and Companies Agency no later than

two months from the date of foundation in order to have an identification number, called CVR

number69. Before the definitive registration, the founders are in person legally responsible for

the activities undertaken by the company, while after registration the company, as a corporate

entity, will take over the responsibilities. It is worth noting that the registration procedure may

take up to six months. Establishing a Danish ApS will require the support of a national law-

yer. As the company will be small in size during start-up there will be no Board of Directors.

Instead the two founders will act as Managing Directors and will have a joint responsibility

for the administration of the company. An external financial accountant will prepare the com-

pany’s annual financial statements and will be reviewed by a State Authorized Public Ac-

countant.

3.2.3 The business system: a distribution business

As a distribution firm the company will not have any production activities. The finished

goods will be directly bought from Mexican manufacturing firms that will take care of the

production and the export activities. In this way, the distribution business located in Denmark

will play the role of an intermediary between the Mexican suppliers and the Danish retailers.

R&D will not be used during the start-up phase but will become an integral part during the

expansion phase.

Following is an overview of the distribution strategy in a value chain perspective:

67 http://www.eogs.dk/sw344.asp (22/01/06) 68 http://www.oresund.com/oresund/investors/establish.htm (22/01/06) 69 http://www.investindk.com/db/filarkiv/632/Establishing_aug2005.pdf

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The advantages of such business system are:

• Access to manufacturer skills and knowledge

• Limited investment required

• Enable flexibility

• Low cost labor linked to lower prices

• Full control over core competences: marketing, sales/service and in the future R&D

The disadvantages are:

• Less control over production

• Quality problems can harm the image of the parent company

• Risk that the supplier becomes a competitor

The rationale is to work with at least three suppliers so as to avoid becoming dependent and

thus ensure a continual flow of the goods regardless of the situation. For instance, if one sup-

plier closes its factory then the distribution business will rely on the second or third supplier

specialized in the same kind of goods. Following is an illustrative schema:

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As a distribution business, the aim is to have full exclusivity on the Danish market, by secur-

ing that the suppliers will not produce for the business competitors. The business founders

will buy the products from Mexican suppliers, put their own brand on the goods, and market

them as their own brand, thus establishing a private label. The aim is to create a flexible busi-

ness where the products are branded differently according to the target market. As a distribu-

tion company the tasks will be to: deal with the Mexican suppliers concerning price, delivery

standards, and distribution. In return, this will allow the parent company to focus on its core

competencies, enabling full control over marketing and sales/services during the start-up

phase.

3.2.4 Supplier development: a core process

A key element on the agenda of the future business is to work towards a good implementation

of the supplier development. The raison d'être is that suppliers have a significant impact on

the company’s overall future performance and at the same time constitute a critical element to

the success of the products in the marketplace. The aim of supplier development is to bring

new and innovative products to the market at a higher rate than the competitors by achieving

complete understanding of customer requirements. To achieve this end, the solution is to tie

the customer requirements with the products, processes and capabilities of the suppliers for

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creating and sustaining competitive advantages in terms of quality, cost and customer service.

This will secure customer satisfaction which is vital for continuous improvement in cost,

quality and service. The approach to be used is to involve the suppliers in the process by pro-

viding the markets inputs provided by the retailers that have direct contact with the market.

The benefits of following such process for the suppliers are:

• Gain market knowledge

• Enhance products’ features

• Secure relationship with the Danish distribution company

The positive benefits of the supplier/distributor relationship will not only impact positively

the Mexican suppliers but also the Danish distribution company.

The supplier development process will be reached following four steps: (1) creating a portfo-

lio of key suppliers, (2) monitoring the suppliers’ business development by focusing on the

suppliers’ performance and the organization continuous improvement and finally (3) to use

motivation tools to grow the relationship.

For the distributor to create a portfolio of key suppliers, the first step is to select suitable sup-

pliers based on the following main criteria:

1. Verify company financial background

2. Quality

3. Total cost

4. Production capacity

5. Delivery time

The first step is to verify that the company has a sound financial background to ensure their

ability to honor their contracts. For jewelry, quality will be defined in terms of their function-

ality and materials. Quality will be agreed upon during the meetings between the suppliers

and the distribution company. The next criteria, total cost, will be discussed during price ne-

gotiation. The cost of the pieces should be in relation to their quality. Production capacity is a

key criterion so as to ensure the continuous flow of the goods according to the market de-

mand. This last criterion is linked to the delivery time. The suppliers will be chosen regarding

their stock capacity since immediate delivery is required.

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When a supplier has been selected to be a part of the portfolio a contract will be drawn up

between the supplier and the distribution company. This written document will enforce the

commitment in the dyads and act as a safeguard to protect and assure the investment. The

collaboration will rely on high-quality relationship with trust70 and commitment71 as the key

underlying principles. Negotiating a contract is often a source of concern when dealing with

foreign suppliers. In this case cultural differences, which often provide communication barri-

ers, will be minimized as one of the business owners is Mexican; enabling to reach a “cultural

fit” which is vital to the collaboration effectiveness (Child & Faulkner, 1998, p. 92-98).

Monitoring activities can be classified by formal and informal. Formal monitoring activities

will be specified in the contract drawn up by both parties. The requisite is to obtain financial

statements to verify the suppliers’ performance. The informal activity will take place every

time there is interaction between the parties, e.g. phone conversation, meetings etc.

Finally motivation is essential to secure long lasting relationship. Bonuses linked to sales per-

formance will also be included in the contract.

In short, the supplier development process is one that will take time but that the good imple-

mentation of the process together with the distribution company’s values will ensure a fruitful

relationship.

3.2.5 Legal environment: Intellectual Property Rights

To develop trust, confidence and loyalty for the new product, the aim is to develop and main-

tain a distinct identity and image. Distinctiveness is one of the key principles of our brand

philosophy. In order to achieve this objective, the founders will create a distinctive brand

name, also called trademark in legal terminology. Under Section (2) 1 of the Danish Trade-

marks Act72, a trademark “may consist of any sign capable of distinguishing the goods or ser-

vices of one enterprise from those of other enterprises and capable of being represented

graphically, in particular:

70 According to Bruggen et al. (2005, p.142) trust “reduces decision-making uncertainty and enhances coopera-tion, continuity and long-term orientation in relationship”. 71 According to Bruggen et al. (2005, p.143) commitment “leads to greater relational social norms and lower opportunistic tendencies, and ultimately, increased relationship benefits”. 72 http://www.dkpto.dk/int/buscar/trademarkact.htm (16/11/05)

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• words and word combinations, including slogans, personal names, company names or

names of real property;

• letters and numerals;

• pictures and designs; or

• the shape, equipment or packaging of the goods”.

In addition, for a trademark to be registered it should reflect distinctiveness (Riis, 2000,

p.138). In this case, the trademark will be composed of the first letter of both founders’ name:

e+e. Thus, the trademark will be inherently distinctive, reflecting the product and image of the

business: e+e trading company.

In order to protect the above mentioned trademark, the aim is to register it officially in the

Danish Patent and Trademark Office73. The first step will be to apply for a Danish trademark

and fill in the application on line74 on the Danish Patent and Trademark Office homepage.

The application fee will cost 2300 DDK with an additional fee of 600 DDK for each class of

goods or services beyond three classes. After a positive examination process, the trademark

will be registered and published in the Danish Trademark Gazette75. It is worth noting that it

takes in average four months from the process of filling to the actual registration. Concerning

the duration of the registration, Section (26) 1 of the Danish Trademarks Act76, indicates that

a Danish trademark registration is valid for ten years and the trademark may be renewed every

ten years (Section (26) 2 of the Danish Trademarks Act).

In the future, after reaching an effective distribution business in Denmark, the aim is to com-

mercialize the products abroad. Since Denmark is a member country of the EU and the Ma-

drid Protocol77, an efficient way of protecting our trademark in Europe and world wide is to

apply for an international trademark with Denmark as Office of Origin78. This provides the

possibility of obtaining protection of the trademark in several jurisdictions by a single regis-

tration called the international registration. Under Part VIII, Section (50) of the Danish

73 See: http://www.dkpto.dk (16/11/05) 74 See: http://www.dkpto.dk/int/buscar/efiling.htm (16/11/05) 75 The Danish Trademark Gazette contains all relevant data and information concerning Danish IPR files. 76 See: http://www.dkpto.dk/int/buscar/trademarkact.htm (16/11/05) 77 Denmark became a member of the Madrid Protocol the 13th of February 1996. See: http://www.wipo.int/treaties/en/documents/pdf/g-mdrd-m.pdf (17/11/05) 78 See: http://www.dkpto.dk/int/buscar/origin.htm (16/11/05)

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Trademarks Act79, “an international Trade mark registration means a registration under the

agreement adopted in Madrid on 14 April 1891 concerning the international registration of

marks as subsequently revised (the Madrid Agreement) or under the Protocol relating to the

Madrid Agreement (the Protocol) adopted in Madrid on 27 June 1989”. To this end it will be

required to fill in the World Intellectual Property Organization’s (WIPO)80 application form

which fee will amount for a total of approximately 500 DDK. Concerning our business the

product will be classified under class 1481 in the “Nice classification”82.

The advantage of such international registration is that the Protocol favors cost and time sav-

ings: the total fee is less than the sum of the national fees in that it avoids “the high filing

costs associated with filing separate national applications in each foreign country”83.

Copyright represents one of the categories belonging to Intellectual Property Rights. In Den-

mark, copyright is not subject to registration and copyright notice (©) is not a requirement for

being protected under the Danish Copyright Act (Riis, 2000, p.28); however it is beneficial in

that the symbol specifies that “the right owner intends to enforce the right” (Riis, 2000, p.28).

The key requirement of copyright protection is originality in that “a work shall originate in

the author” and be the outcome of the author’s own intellectual creation (Riis, 2000, p.29). In

this case, the aim is to copyright the jewelry pieces, the innovative jewelry boxes and the

company’s website. By virtue of Section (1) of the Danish Copyright Act84: (para.1) “the per-

son creating a literary or artistic work shall have copyright therein, be it expressed in writing

or in speech as a fictional or a descriptive representation, or whether it be a musical or dra-

matic work, cinematographic or photographic work, or a work of fine art, architecture, applied

art, or expressed in some other manner; pursuant to (para.2): maps and drawings and other

works of a descriptive nature executed in graphic or plastic form shall be considered as liter-

ary works. According to (para.3) works in the form of computer programs shall be considered

as literary works”. In this perspective, the jewelry falls under Section (1) para.1, the design of

79 See: http://www.dkpto.dk/int/buscar/trademarkact.htm (16/11/05) 80 The World Intellectual Property Organization (WIPO) is an” international organization dedicated to promoting the use and protection of works of the human spirit” (http://www.wipo.int/about-wipo/en/ (16/11/05) 81 Class 14 include: Precious metals and their alloys and goods in precious metals or coated therewith, not in-cluded in other classes; jewellery, precious stones; horological and chronometric instruments. 82 See: http://wipo.int/classifications/fulltext/nice8/enmain.htm 83 See: http://www.inta.org/info/basics_mprotocol.html (17/11/05) 84 See: http://www.kum.dk/sw4550.asp (25/11/05)

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the jewelry boxes falls under para.2 and the firm’s official homepage falls under Section (1)

para.3 of the Copyright Act.

Concerning ownership of copyright of the website, Section (59) of the Danish Copyright Act

underlines that: “where a computer program is created by an employee in the execution of his

duties or following the instructions given by his employer the copyright in such a computer

program shall pass to the employer”. Regarding the jewelry pieces and the jewelry boxes the

copyright protection will be granted to the “person creating the work” (Riis, 2000, p.32): in

this case the manufacturer of the jewelry pieces and the designer of the jewelry boxes. Never-

theless, the authors intend to use the transfer of ownership stated in Section (52) para.4 where:

“the provisions of sections 54-59 on assignment of copyright may be deviated from by

agreement between the parties except where otherwise provided in the individual provisions”.

Thus, the official written agreement between buyer-seller will assure the exclusivity of the

copyright of the goods to the distributor. Regarding patenting issues, a product may be pat-

ented if “a person has made an invention which is susceptible of industrial application” (Riis,

2000, p.81). As this is not the case, no patent will be required for the author’s distribution

business.

Under the Private Companies Act, the private company name ought to be registered by the

Commerce and Companies Agency (Riis, 2000, p.168). The company name, which is in this

case similar to the company’s trademark (e+e) is eligible for protection under the Trademark

Act (Section 2, 1, (i))85.

In short, to maintain a distinct identity, the future company will create a unique brand name or

trademark. This latter will be registered officially in the Danish Patent and Trademark Office.

3.3 Management team

The management team is an essential element capable of influencing the success of any busi-

ness start-up (Grandi, Grimaldi, 2005, p.826). Besides a bright idea, a well functioning team

with different skills and knowledge constitute a pillow for every new firm. As Kubr et al.

(1998, p.70) mention “a team […] produces a result that is greater than the sum of each mem-

ber’s individual performance – but only if it is properly formed and finds the right way of

85 See: http://www.dkpto.dk/int/buscar/trademarkact.htm (29/11/05)

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working together”. As mentioned in the literature review, women tend to rely on small teams

and usually hire employees of the same sex (Chaganti, 1986). The literature provides that

there is a need to rely on a large sized team, “larger than the two to four members found in a

typical new venture team” (Foo et al., 2005, p.399). The reason being that large and diversi-

fied entrepreneurial teams, where members have complementary skills, knowledge, informa-

tion and resources, will positively benefit business performance (Foo et al., 2005). In addition,

strong commitment and the team individuals’ roles are also important organizational factors

supporting the positive development of a business. This latter aspect is often source of chal-

lenges among future entrepreneurs who have to define and clarify the role and responsibility

of each member of the company.

The following part is divided into two sections. The first section provides an outline of the

founders’ profile while the second section describes the different roles and tasks of both busi-

ness founders during the start-up phase and expansion, as well as their respective network.

3.3.1 Founders profile

This section presents the founders respective profile and constitutes the essence of the alloca-

tion of their future roles and tasks. It is well known that no single person possesses all quali-

ties and skills that are require to starting up a business. The solution to this reality is to work

in teams, where complementary skills and knowledge act as the underlying forces of the busi-

ness synergy. Following is an overview of the founders’ demographic traits, experience, edu-

cational background, and skills.

Founder I Founder II

Nationality Mexican French/Swedish

Demographic traits

Age 28 24

Marital status Married Single

Birth order Second Firstborn

Parents occupation Entrepreneur father Entrepreneur father

Work Experience - MAPP Institute, Aarhus Denmark Re-search Centre: Coding and analyzing data.

- English and Spanish teacher for several companies.

- Showroom Coordinator at .|inq| - PR bureau, Copenhagen.

- MAPP Institute, Aarhus, Denmark Re-search Centre: Coding and analysing sur-

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- Danfoss Mexico. Logistic Planer and Purchase assistant.

vey data.

- Internship CHANEL Inc, NYC, (USA) in PR Department.

Educational

background

- Currently writing final thesis for Ms. Sc. in Business Performance Management,

Aarhus School of Business

- B.Sc. Marketing from ITESM, Mexico

- Currently writing final thesis for Ms. Sc. in Business Performance Management,

Aarhus School of Business

- B.Sc. in Applied Languages from Uni-versity of Avignon, France

Language skills Spanish, English, Danish French, English, Swedish, Danish, German

IT skills MS Office, SPSS, BPCS, MS Office, Marketing software (Maxqda, MECanalyst)

Financial skills limited limited

Table 2: Authors’ own table

To conclude on this table, the fact that the founders have followed a general study curriculum,

and that their profile can be classified as generalist instead of specialist, is a positive charac-

teristic to have according to Lazear’s (2003) theory when intending entering the field of en-

trepreneurship. Several authors (e.g. Bowen & Hisrich, 1986; Litvak & Maule, 1976; Hisrich

& Brush, 1983; Mescon & Stevens, 1982; Sexton & Kent, 1981; Waddell, 1983; Watkins &

Watkins, 1983) describe the profile of the average entrepreneurs having, among other charac-

teristics, self-employed fathers, being first-borne, and are college-educated. Both founders

profile reflect many of these characteristics.

In addition to the founders’ profile it is essential to consider the strong and weak points of the

future team players. As McKeever (2005, p.24) mentions “many people don’t realize that

their personalities will have a direct bearing on their business success”. In this sense, it is im-

portant to take seriously into account the personality characteristics of the founders in order to

avoid any gaps between the team personalities and the nature of the business. The following

table highlights what the respective founders believe are their strong and weak points:


Strong points • Strong discipline

• Open to all kind of options • Self-confident • Reliable • Like challenges • Mother caring • Persistent

• Knowledge in fashion & trends

• Good communication skills • Easiness to adapt to new cul-

tural environment • Goal oriented • Tend to plan in long term • Good to set and follow priori-

ties

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• Good to resolve problems • Easy to adapt to new cultural

environment • Good communication skills • Perfectionist • Good listener

• Open to new solutions • Fast to solve solution • Perfectionist (attention to

details) • Organizer

Weak points • Perfectionist • Dislike receiving orders • Impatient • Gets disappointed when things

do not follow plan • Easily distracted

• Impatient • Can be easily upset if things

do not follow plans • Intolerant - Dislike repeating

things • Dislike receiving orders

Table 3: Authors’ own table

The founders presented above represent the original research group involved in the develop-

ment of the business idea as well as the future founding team of the business; whose aim is to

transform the business idea into an operational business. This phase constitutes a complex one

and the two business founders do not possess all skills and knowledge to fulfill this mission

alone. The authors are aware of their weak points and to complement the missing compe-

tences, the authors will rely intensively on external relations. For instance, the founders are

aware of their lack of financial knowledge, which according to the literature review acts as a

barrier for women entrepreneurs. To overcome this obstacle, the founders will use their in-

formal network by consulting Bo Bendixen, financial accountant, and Lise Kristensen, bank

advisor at Djurslandsbank. In short, to efficiently deal with the gaps, the solution will be to

rely on the founders’ formal and informal network.

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Figure 11: Authors’ network

3.3.2 Allocation of tasks and roles

The skills and knowledge of the founders constitute the base for allocating their respective

tasks and roles in the future company. The founders have complementary skills (like language

skills, IT skills) and to some extent a different educational background, since founders gradu-

ated from a different Bachelor degree. On the other hand, both founders have some common

skills and strength, such as studying the same Master degree in Business Performance Man-

agement. A positive aspect of the founders’ relation is that they share the same vision and

willingness to put all efforts and energy to pursuit their common goal, which is concretizing

their business idea. The founders have been working together on several projects during their

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Master studies and know each other well. They stick together and are good to communicate.

Together the members of the team have relevant experience in PR, marketing, logistic and

purchase. The founders are conscious of their weaknesses and are willing to put considerable

efforts to minimize them and to learn from their external relations. Following is an overview

of the team members’ skill profile looking at “hard” and “soft” factors:

Figure 12: Authors’ own adaptation from Kubr et al. (1998, p.73)

This table summarizes the skills of each member and provides that the team has more “soft”

competences than “hard” professional competences. From this table a gap becomes obvious

concerning technological, financial and production skills. Nevertheless, only one seems to be

critical during the start-up phase of the future company, namely financial skills. To minimize

this gap the founders will rely on network and employ a state recognized and experienced

accountant, who will be present during meetings with the bank and other relevant appoint-

ments. To complement any other gap which might occur during the start-up phase, one of the

solutions will be to employ competent freelancers.

Finally, the allocation of the team members roles and tasks is a critical decision making proc-

ess. Belbin’s Team Role Model (Glover, 2002; Fisher et al., 2001) is often used as a tool to

allocate the role of the management team. In this case many of Belbin’s roles will be overlap-

ping. The founders will have to solve multiple tasks, performing a set of different and com-

plementary roles during start-up. Commitment, trust and a two way communication constitute

the underlying principles of the future teamwork. The founders will share some common roles

and tasks due to the small team size, but at the same time they will be responsible for well

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defined areas by working on specific tasks. To operate optimally, tasks and roles have been

allocated according to the founders’ experience, knowledge, weak and strong points, as well

as to their motivation. The following table provides the roles and tasks of the future business

owners during the start-up phase:


• Resource investigator • Monitor-evaluator • Shaper • Implementer • Teamworker

• Resource investigator • Monitor-evaluator • Shaper • Implementer • Plant • Completer-finisher • Coordinator

• Responsible for marketing strategy • Creating suppliers portfolio by (1) selecting

the key suppliers according to the 5 main crite-ria and (2) negotiating and drawing up con-tracts with suppliers

• Supply chain management activities • Responsible for Human Resources • Sales agent for Jylland, responsible for all

sales and post-sale processes • Contact with the bank for loan • In charge of administrative activities

• Responsible for marketing strategy • Creative activities such as development of the busi-

ness idea • Creating suppliers portfolio by attending negotiation

meetings and drawing up contracts • Sales agent for Sjælland and Fyn, responsible for

all sales and post-sale processes • Contact with the external accountant • Idea generator by identifying new possibilities con-

cerning the future product line (material, shape etc.) • Selecting the pieces of jewelry according to the

market demand and trends • Responsible for legal activities • Contact with the bank for loan • Contact with graphic designer for website, logo,

visit cards, and catalog • In charge of administrative activities

Table 4: Authors’ roles and tasks

As a resource investigator, founder I will explore new opportunities, such as finding different

Mexican suppliers, and developing contacts with the future key suppliers. This person will

also negotiate with the Mexican suppliers so as to get innovative and high quality products.

As a resource investigator, founder II will also be part of the negotiation process, participating

in meetings with key suppliers. This person will have a close contact with the certified public

accountant. Founder I will act as a human resource manager dealing with tasks such as: future

employee contracts, employee development, renegotiation of contracts and finding sources for

eventual participation in seminars. In addition, both founder I and II will be resource investi-

gator when acting as sales agent in their respective geographical areas. Both founders will

present the products and catalog to local retailers, since both have sales responsibilities, and

will also be responsible to find the resources to run the business.

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As a monitor-evaluator, founder I will weight up the pro’s and con’s of each manufacturing

firms and select the key suppliers according to five fundamental criteria: financial back-

ground, quality, total cost, and production capacity and delivery time. This person will be

responsible for reporting any problems encountered during field research and the solutions or

suggestions to be discussed during internal meetings. As a monitor-evaluator, founder I will

also be responsible for risk evaluation, supervising inventory, sales volume, and different

transport options to minimize costs.

Both team members with their high need for achievement, and willingness to reach their goals

through hard work, are by definition the shapers and the implementers of the new business.

According to Belbin’s Role Model, Founder I has some of the essential qualities required to

be allocated the role of teamworker: a capacity to support people, mother caring, easy to adapt

to new cultural environment and a good listener.

Founder II will be confronted with tasks for which concentration and accuracy are needed,

e.g. registering the trademark on the Danish Patent and Trademark Office, registering the ApS

at the Danish Commerce and Companies Agency, verifying the contents of contracts. Founder

II can thus be assigned the role of completer-finisher.

Founder II has the creative characteristics to fill in the role of “Plant”, generating new ideas

concerning the products, materials, shape, and colors to be provided by the suppliers. This

person, having knowledge and experience in fashion, will also be responsible for the future

development of the brand portfolio.

Finally, as a coordinator, founder II, will work closely to founder I to coordinate the different

projects from marketing to sales, in order to make the company’s vision a reality

To conclude, the management team during start-up will be composed of two members, which

are the future founders of the distribution company. Due to the small size of the team, the

founders are aware of the necessity to rely on external human capital during the start-up

phase. The solution will be to work closely with the members of their network so as to mini-

mize cost and gain knowledge in relevant areas. Once the expansion phase is reached, and the

founders working time is not enough to efficiently run the venture, full time employees will

become part of the business. They will be employed to support key areas such as finance and

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marketing to ensure the continuous well-being of the company. As Meredith Belbin under-

lined: “nobody’s perfect, but a team can be”86.

3.4 Realization schedule

Planning is a key element for the good implementation of the business. The following section

presents the start-up and development process of the future business and its milestones.

According to Kubr et al. (1998) the start-up and development process is composed of three

stages. The authors have revised Kubr’s et al. (1998) development process separating the last

phase into two distinct phases, since each has different characteristics and requirements to be

fulfilled. The phases are as follows: (1) the development of the business idea, (2) the business

planning (3) the start-up and (4) the expansion phase. The subsequent schema presents a gen-

eral overview of the development process of the future company from a time perspective:

Figure 13: Realization schedule

Phase 1 reflects the development of the business idea which is the first milestone for building

a successful business. This first phase took place during summer 2005, where one of the au-

thors presented to the other some handmade jewelry pieces from Mexico. Both authors agreed

that it would be a good idea to sell the exotic pieces on the Danish market. The authors be-

lieved the master thesis to be an opportunity to determine if the idea of such business is viable

in Denmark.

The second phase reflects the concretization of the business idea. This phase started in Sep-

tember 2005 and is forecasted to end in April 2006, corresponding to the date of delivery of

the master thesis. During these six months the authors read diverse literature on entrepreneur-

ship, and more precisely on female entrepreneurship. This gave the future business owners an

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overview of the factors to consider regarding risks and common mistakes of women entrepre-

neur. This step corresponded to a learning process in the domain of entrepreneurship, essen-

tial to the implementation of a sound business plan. This was followed by the making of a

business plan, including marketing investigation, organizational plan, and financial analysis.

This business plan constitutes a critical phase in that it serves as a base for start-up. After pre-

senting the business plan at Aarhus School of Business (ASB), the authors expect to get rele-

vant feedback, which will help to make a more informed decision regarding the start-up phase

of the business.

The authors will use the business plan and the feedback received to take a decision regarding

the fate of stage three. If the authors decide to enter phase three and start the business, differ-

ent actions are to be fulfilled. The business plan and pertinent documents will be presented to

potential investors with the aim to have access to a loan. When the capital is secured, a travel

to Mexico is required to create a supplier portfolio. Finally, the samples will be presented to

Danish local retailers. During this stage, the founders will act as sales agent, allowing to get a

preliminary overview of the demand of the market. The authors expect that the start-up phase

will take three years of hard work to get to know the industry and the market. This knowledge

is necessary for the business transition into the expansion stage, where different business op-

tions are to be evaluated in order to integrate other product lines to the business.

During the expansion phase, one of the key methods for reaching new customers is to invest

in a spot during jewelry fairs. Getting powerful clients like Illum or Magasin du Nord will be

a concrete sign of expansion. At this stage the organization and structure of the company will

have to be revised with a focus on employee recruitment, strategic planning and brand exten-

sion to gain business performance and to become a well established and recognized company

among others in the playing field. Compared to competitors, the authors believe to reach the

stage of an established and recognized business after operating five to six years in the indus-

try.

To summarize, the realization schedule provides a preliminary overview of the steps under-

taken so far and the future steps to follow to fully concretize the initial business idea. The

authors have been aware of the risks women face when entering entrepreneurship, and have

presented worst case scenarios along the making of the business plan. Still, the authors are

conscious that this business planning is preliminary; being subject to changes as chance

(Bouchikhi, 1993) or crises can arise at any time in the environment that the company oper-

ates in.

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3.5 Risks

Engaging in entrepreneurship activity is a process which requires to cope with several diffi-

culties and to face a certain amount of risks. As Sine et al. (2005, p. 200) underline “entrepre-

neurship is inherently risky”. To make a reference to the literature review and more specifi-

cally to Knight, the entrepreneur is above all a “risk-taker”. To analyse risks, this section will

be mainly based on Porter’s Five Forces Model. The aim is to discover the key risks that the

future company may be exposed to and the countermeasures to take in order to avoid any

menace. In order to analyze all possible risks, other factors not taken in account by Porter’s

framework, will be discussed. This section will be divided as follows: (1) potential entry, (2)

substitutes, (3) buyers, (4) suppliers, (5) rivalry, and (6) other factors.

According to Hollensen (2001, p.85) entry barriers can “make even a potentially lucrative

market unattractive to enter”. In this case, the jewelry industry in Denmark is a crowded one,

where new entrants continuously try to sell their innovative ideas. This reality has a direct

influence in the access to distribution channels. The fact that a retailer based distribution is the

norm of the industry, gives the retailer a large amount of power, being able to disregard

smaller brands. As discussed in the competitor analysis, many different players compete for

the consumers’ loyalty. The size of the firm at start-up stage will act as an entry barrier, since

economies of scale advantages cannot be reached. Product differentiation is another factor to

consider as an entry barrier. In this industry, were fashion trends are to be followed, product

differentiation is difficult to obtain.

Product substitutes are a critical threat in the jewelry industry. Imitation jewelry of low qual-

ity at very low prices constitutes a continuous menace for companies operating in this field.

The fact that fashion trends are so volatile influences the consumers’ decision making proc-

ess, leading them to buy cheaper products to be able to cope with the trends. Indirect com-

petitors constitute another form of threat, since their goal is to reach the same fashion con-

scious consumer. For instance, all kind of accessories (like belts, bags, eyewear, etc) compete

for the same money. Product substitutability becomes easier due to the crowded industry,

where a wide range of products are offered within a small geographical area.

Concerning suppliers, there are different risks to be taken in consideration. Suppliers can in-

tegrate forward, becoming a direct competitor. Another risk the company may face is the

sudden loss of a supplier, e.g. the factory burns down. To be able to minimize the risk of such

situations, the solution is to rely on several suppliers able to provide with the same quality of

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products. Having different suppliers for the same lines of products will also minimize the

supplier bargaining power giving that their size is comparable to the new venture’s size. Be-

ing a small company dealing with large sized suppliers might result in a lower priority for

future orders, thus making it difficult for the founders to comply with the sale orders.

Taking in account that the start-up size of the business is small, the bargaining power of the

buyer (in this case the retailer) is high. The retailers on the market have an established sup-

plier portfolio, but are aware of the large number of suppliers in the market, meaning lower

switching costs. This allows them to press for lower prices. Another threat posed by the buy-

ers, is the possibility of integrating backwards producing their own products, making the dis-

tributor irrelevant. The fact that the products offered are not highly differentiated, gives the

buyer a higher bargaining power. This allows the buyer to get the same products from com-

petitors that provide lower prices.

Yet another impact of the low product differentiation can be found on the industry rivalry.

The low product differentiation makes competitors fight harder to get to the final consumer.

Rivalry becomes more intense when exit costs exceed those of staying and competing. The

low switching costs incurred when retailers change suppliers, also influences the high rivalry

in the industry.

The following figure summarizes the results found using Porter’s Five Forces model:

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In addition to Porter’s framework, the authors will analyze internal factors of the new venture

that might be considered as risk areas. Women tend to rely more on informal network, com-

pared to their male counterparts, thus gaining less knowledge and synergy effects. In order to

avoid this phenomenon, the future company will continuously expand both its informal and

formal external relations. Risk areas can also be found on human capital. For instance, the

roles and tasks of the future entrepreneurs might not be fulfilled successfully due to a lack of

knowledge or motivation. To avoid any management disabilities the roles and tasks of the two

entrepreneurs are allocated according to their skills, education and personal feelings. In addi-

tion, the study of the management team skills’ profile shows risk areas as they lack techno-

logical, financial and production knowledge.

Risks can also be found in the choice of legal structure. Benefits and disadvantages have been

evaluated, and therefore the founders have agreed on created an ApS.

In short, the authors perceive three key internal risks that could influence the success of the

future company, namely (1) relying on informal network only, (2) allocating the wrong roles

and tasks to the management team and (3) choice of legal structure. The future founders will

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attempt to minimize those risks by relying on more formal network, allocating the tasks ac-

cording to the founders’ profile and motivation and rely on an ApS.

The third risk is that the demand is not as high as expected. This could mean for instance that

only half of the products are sold and the other half is left in stocks. This phenomenon could

be a direct result of fierce competition due to a crowded sector where several brands offer

similar products or of fashion changes.

During the start-up phase one of the risks linked to gender could be banks being reluctant to

lend the amount of money needed to establish the new business. As mentioned in the litera-

ture review women have difficulties to access financial capital. Without capital the future

company will not exist.

This section on risks is an overview of the “worst case scenarios” that might threaten the suc-

cess of the company (Kubr et al. 1998, p.123). By analyzing internal and external risks of the

industry and the future venture, the founders are prepared to cope efficiently with changes in

circumstances that could affect negatively their venture. As Kubr et al. (1998 p.123) underline

“assessing risk is a matter of forecasting”

3.6 Marketing plan

The marketing plan is a written document that details the actions necessary to achieve a speci-

fied marketing objective (Wikipedia.org87, 2006). It is well known the importance of a well

developed marketing plan for the implementation of a new business as Pinson and Jinnet

(1993) pinpoint in their article. In this part, the marketing plan will be discussed in detail. For

this purpose the following sections will investigate and analyze information regarding target

market, competition, methods of distribution, advertising, pricing, product design, timing of

entry market, location and industry trends. Many of these areas to study have been already

suggested by Shaver and Scott (1991, p.35) who argued that as a minimum there should be

conducted appropriate market research when creating a new business. This marketing plan

will not only cover this minimum requirement, but will go beyond and analyze deeply into the

marketing mix and other factors relevant to the development and implementation of the busi-

ness idea. The final marketing plan will reflect the marketing strategy to be followed. This

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strategy is based on market dominance i.e. that the firm can be described as a follower and

nicher, depending on the product category.

The business founders had two important objectives in mind when researching for and writing

this marketing plan: firstly, the information shed by this plan should enable the authors to take

informed decisions regarding the business idea, and secondly, this detailed marketing plan

should serve as a ground for a complete business plan, which will be used when seeking for

start-up capital.

The following sections present a detailed analysis of each of the factors forming this market-

ing plan.

3.6.1 Target market

After determining the market scope, decisions can be taken regarding the products to be of-

fered, how these products are to be positioned and what customers are to be pursued (Rao &

Steckel, 1998)

As described in nature of the business, our firm is a distribution company. Our primary busi-

ness is to find jewelry and accessories in Mexico that can be sold to the Danish market. It is

not our purpose to sell directly to the final consumer, but instead to the intermediaries. Our

target market will then be constituted by those retailers that reach our final target market.

The final target markets are differentiated by product category. As discussed earlier, the au-

thors have investigated for two different, yet related, business ideas: a) exotic pieces of jew-

elry and b) the assembling concept. When the different business ideas were completely de-

scribed, it was decided that we needed some distinct knowledge about our target market, be-

cause in the authors mind these target markets should be different from each other. The first

step towards finding the target market was to talk to diverse people (entrepreneurship special-

ist, women of different ages and status, designers, business experts, etc) in unstructured inter-

views, probing for information that could help the authors delimit their hypothesis. After care-

ful analysis of the information obtained in these interviews and from desk research, our hy-

potheses for final target market are as follow:

a) The final target market is constituted by women, between the ages of 15 and 60.

b) The final target market buy impulsively and on the spot, not planning the purchase

of these different products

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c) The final target market is open to try new and exotic pieces of jewelry

The target market the authors will come to deal with as business owners are retailers. As a

distribution company, the focus will be on those retailers that can reach efficiently the final

target market described above. Several kinds of retail shops can be categorized as target mar-

ket, among these can be found specialized jewelry shops, accessories shops, clothing bou-

tiques, decoration/interior design boutiques, and departmental stores. According to

statsbank.dk, at the end of 2003 there were 512 jewelry retail stores, 93 perfumery shops,

1598 ladies clothing shops, 574 furniture shops, and 794 gift shops. It is not the purpose of

the authors to contact every single shop mentioned above. A more detailed selection of these

shops will be made on the basis of geographical location, market reach, and number of shops.

3.6.1.1 Research method

In order to gain a better knowledge of the final target market and the appeal of the authors’

business ideas to this group of consumers, the authors conducted a detailed market research.

To this end, the authors decided to use a qualitative research method, namely focus groups, to

gather detailed information about the future customers. This method was chosen for three

distinct reasons: (1) exploring and discovering the target group of the business, (2) under-

standing the future consumer’s thoughts and experiences with similar products, and (3) inter-

preting consumer behavior. In addition, this method was used for a cost effective reason: first,

the time limitation was one factor which hindered the authors to rely on a qualitative research

method and second the lack of financial resources and knowledge were two other keys factors

which deviated the authors’ willingness to work in first place with such research method. This

part is divided in four points: (1) the definition of a focus group, (2) the goals and purposes of

using such research method, (3) present the research design, (4) the project size and staff.

• Focus group: definitions

Morgan (1998, p.11), who has written several books about the method, defines the focus

group as a “qualitative research method […] using group discussions to generate a rich

understanding of participants’ experiences and beliefs”. In this same perspective, Gold-

man (1962, p.61) defined focus groups as: “group depth interviews”. According to Gold-

man (1962, p.61), it is necessary to analyze each word of the definition to understand the

essence of the approach: a group is composed of interacting people sharing similar inter-

ests; depth means searching for detailed and profound data that would not be available in

traditional one-on-one interviews; interview indicates the presence of a moderator for

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guiding the discussion. Thus, this type of qualitative approach fosters dynamic interac-

tions between the group members, by sharing openly their opinions, and thus enabling to

“stimulate ideas that would not have been available otherwise” (Hartman, 2004, p.402). It

is worth noting that mistakes can be made while using this specific research method. As

Greenbaum (1993) mentions three common mistakes are often made in the use of focus

group: 1) methodological mistakes, 2) procedural mistakes, and 3) analytical mistakes.

Greenbaum’s ideas on these common mistakes are taken into account along this research

so as to avoid falling into these errors.

• Goals and purposes

The aim of the focus group is to attain detailed, descriptive and rich information about a

product or a service, in this case jewelry from the target market in question. The objec-

tives of the focus group are:

1. to examine in-depth attitudes, feelings, and motivations regarding jewelry pur-

chase in general

2. to study the respondents’ attitudes, feelings and motivations regarding the business

idea: handmade exotic pieces of jewelry and observing their reactions, their likes

and dislikes when showing the pieces of jewelry.

3. to gain the respondents views about the new concept of assembling the pieces of

jewelry, and

4. to understand the respondent’s experiences with jewelry boxes and their needs and

wants regarding this product.

In return, the results of the qualitative research will be beneficial: (1) to validate the

business idea and (2) to create the marketing plan: product development, extension of

the brand portfolio, and advertising. In order to reach these benefits, the authors chose

the method of focus group as the best suited tool for obtaining the information re-

quired.

• Research design

To determine the number of focus group to be realized so as to generate sound quality in-

formation, an experimental design was conducted. The authors decided to use a 2k design

since “a factorial experiment is a statistical study in which each observation is categorized

according to more than one factor. Such an experiment allows studying the effect of each

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factor on the response variable, while requiring fewer observations than by conducting

separate experiments for each factor independently”88. This tool helped the authors to de-

cide how many focus groups should be realized, as well as to obtain good quality informa-

tion for later decision making regarding the business plan.

The factors that were taken into consideration for this experiment are the following, pre-

sented in Table 5:

Factors Level 1 (-) Level 2 (+) Total of levels

F1: Children Yes No 2

F2: Activity Employee Unemployed (student)

2

F3: Age 15-25 26-30 2

Total of runs 8

Table 5

The total number of runs indicates the number of focus group that should be conducted to

achieve the optimal information with this amount of factors. In this case the number is 8 runs

or focus group. Due to lack of resources the authors have decided to reduce the number of

runs by one half. This means that for this experiment, a 23 design, assumptions are to be made

in order to reduce the run number. The assumption that no interaction exists between children

and activity was used to reduce the number of runs, thus loosing some information, but still

having reliable information. Following is the description of the factors and levels that com-

pose each focus group on Table 6:

F1 F2 F3

I A B C

(i) + - - +

a + + - -

b + - + -

ab + + + +

Table 6

88 Information found at wikipedia.org

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The subsequent table gives the composition of the four focus groups, as follows in Table

7:

Focus group Children Activity Age

1 Yes Employed 26-30

2 No Employed 15-25

3 Yes Unemployed 15-25

4 No Unemployed 26-30

Table 7

Reviewing table 7 we can see the composition of the four focus groups to be conducted.

The following step will be to find people with these characteristics, willing to participate

in the research.

• Project size and staff

The amount of individuals is an important aspect, in that it “affects the process and out-

come of focus group sessions” (Hartman, 2004, p.404). In order to select a representative

segment of our target market the respondents were selected using a stratified approach89,

so as to have a homogeneous group. This stratified approach is consistent with the factors

considered in the research design. All participants were approached individually. A short

introduction of the project was discussed with every possible participant and demographic

information was asked in order to place the subject in the correct group. If this subject met

the needs of a certain group then she was asked to participate in our sessions. As partici-

pants were found, each group was formed. To ensure enough participants for every ses-

sion, more than the maximum required (10 participants according to Greenbaum, 1993)

were invited to participate. All sessions were conducted at the Aarhus School of Business

(ASB) to keep costs as low as possible. Regarding the ideal number of focus groups, there

is not a specific number to use. Rather, various intervals with a similar amount of partici-

pants have been proposed by different authors, e.g. 6 to10 participants according to Hart-

man, 2004; Hoyer & Maclnnis, 2004; Asa series, 2000, and 4-10 according to Greenbaum

(1993). Sessions 1 and 2 fall under the full group categorization were, according to

89 A stratified approach means that selection criteria are used to ensure representation (Pearce, 1998)

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Greenbaum (1993), there must be 8 to 10 participants. Sessions 3 and 4 are categorized as

minigroup. Greenbaum (1993) defines minigroup as essentially the same as full group,

were generally contains only 4 to 6 participants. Table 8 below shows the number of per-

sons that participated at each session.

Focus group Children Activity Age Participants

1 Yes Employed 26-39 8

2 No Employed 13-25 9

3 Yes Unemployed 13-25 4

4 No Unemployed 26-39 6

Table 8

3.6.1.2 Data collection

The focus group sessions were conducted according to the discussion guideline90, prepared

before the session. The focus group meeting was conducted by the authors of the thesis, thus

highly familiar and involved in the project. One of the authors played the role of the modera-

tor while the other author took notes and video taped the sessions.

The moderator used a “moderately structured interview”, where the primary questions were

planned in advance (Hartman, 2004, p.404). The questions were open-ended and actionable in

order to assure many possible answers.

The guideline was structured in three parts, as suggested by (Kehoe & Lindgren, 2003, p.18):

(1) introductory stage, including the authors’ introduction and the self-presentation of the

participants; pre-focus stage with the opening of the topic of the focus group by asking a gen-

eral question: “Do you buy jewelry?” in order to make the respondents comfortable; (2) task-

oriented stage and focus-stage, with specific questions about buying behavior, product, price,

place and promotion (4Ps) concerning jewelry in general and the business idea with: on the

one hand, questions about the product innovation, with the aspect of creating ones own pieces

of jewelry, and on the other hand, questions about the extension of the brand portfolio and the

introduction of a new product, in this case jewelry boxes; and finally (3) the conclusion stage

90 See appendix III

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where the participants were asked to fill in a questionnaire which included personal informa-

tion and precise questions in order to obtain other information that was not covered during the

session, and the briefing stage where the moderator summarized the topic of the day and

asked the participants to approve the summary. A lottery finalized each focus group where

one of the respondents had the possibility to win one of the pieces of jewelry presented.

3.6.1.3 Analysis and reporting

As research team, the authors analyzed the answers of the respondents with the help of the

video-recorded discussion of the focus groups, the notes taken during the interviews, and the

questionnaire. While analyzing the information given by the participants, the authors tried to

avoid analytical mistakes, following Greenbaum’s (1993) description of the typical errors that

can be made while interpreting focus groups results.

• The discussions results

The structured guideline used for the focus groups will serve as a tool to analyze the re-

sults of each session. The information given by the participant will be condensed and ana-

lyzed according to each question in the guideline to provide one general answer.

All participants, regardless of the group, mentioned either the same or very similar an-

swers to most of the questions. Wherever pertinent, the authors will show the differences

between the groups’ answers.

1) The participants’ reasons for buying jewelry are very varied, yet similar between

groups. Among those reasons were: for decoration, to express your self, to acces-

sories your outfit, to spice up your outfit, to show personality, jewelry was also

equaled to make up (perhaps meant as another way of decoration). Jewelry is basi-

cally used for two major purposes: as decoration, in order to enhance ones image

and to increase self-esteem through the different feelings the various pieces of

jewelry infuse to the subjects. This last reason was slightly more mentioned by the

younger groups,(2-3)

2) The participants made very clear that most of the time their jewelry purchase is

impulsive. The purchase decision was always made in the spot. In most of the

cases purchase was made while the participant was out in a shopping area (win-

dow shopping in the main street, in shopping malls or department stores) running

other different errands (drinking coffee with a friend, buying books for school, get-

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ting shoes for the kids, etc). There are very few cases were the purchase is

planned, and it is often linked to a major event (like graduation, wedding, special

parties, confirmation).

3) Only some of the participants were aware that some jewelry brands have charity

campaigns. Despite small awareness for charity campaigns none of the respon-

dents showed any interest to buy jewelry to help a philanthropic event. It is worth

noting that groups 1 and 4, i.e. the older participants, showed a slightly higher

knowledge of different brands enrolled in charity events.

4) In regards of the origin of the brands, the participants mentioned mostly national

brands. The participants are also aware of foreign brands, but mostly of big, rec-

ognized foreign brands. Among the mentioned were Esprit, D&G, CK, Evita Per-

oni. The younger participants showed the least awareness of foreign brands. This

might be linked to their purchase power, since foreign brands are considered to be

more expensive than national brands.

5) Regarding the jewelry materials, a varied range of different possibilities were men-

tioned. Among those mentioned by all groups are: pearls, glass beads, plastic

beads, natural stones, natural materials (like leather strings), and materials with

matte aspect. A special mention is worth making here with regards of gold and sil-

ver both regarding the materials and the color. All the participants agreed that sil-

ver is more “in” than gold, nevertheless gold and gold-plated pieces are coming

back to fashion, specially the inherited, and old-looking pieces, according to the

younger groups. They mentioned also that the color of ones skin is important when

deciding to buy silver or gold (meaning that gold suits better the darker skins,

while silver is better for the fairer skins). Another important fact mentioned only

by the older participants was the combination of silver and gold. This combination

was very popular among the older participants.

6) The participants describe Danish design in very good terms. They believe that

Danish design (equaled also to Scandinavian design) is full of bright ideas, that it

is not conservative. It is also regarded as exclusive, simple, and classic. While de-

scribing Danish design, most participants agree that the bigger pieces with larger

stones, the more folklore and experimental looking pieces are to be worn in parties

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and special occasions. For daily use the more natural, handcrafted, neutral in color

and smaller pieces are the best option.

7) None of the participants are interested in eco-friendly packages.

8) The answers provided by the participants after looking and touching the Mexican

pieces of jewelry varied widely according to the age groups. Although a general

conclusion can be made for all groups, the interest in the pieces shown is very low.

The younger groups described the pieces as something not special, “not me”,

something that old ladies would wear. They mentioned the necklaces to be too

short, the rings too extravagant for daily wear, and other pieces to be boring. Re-

garding the quality of the pieces the younger participants said that these pieces are

something one would find in second-hand store, that they look cheap and of low

quality. The older groups were more positive about the image and look of the

pieces, being more open to the different aspects of these pieces, yet they show as

their younger counterparts a low interest in buying them. The older groups de-

scribed the pieces as something they could use to spice outfits up, as colorful, very

ethnic and too big. Some pieces were categorized as funny and as special occa-

sion’s items. The participants agreed in general, that even though the look of the

pieces is different from those pieces found in the market today, a few of them do

resemble jewelry pieces accessible on the Danish market. The origin of the pieces

had no impact on their opinions. Though there was one striking comment made by

a participant of the younger groups. This participant said that the reason they look

cheap is because they come from a third world country.

9) The assembly concept is divided further into two different concepts: the “simple”

assembly where only a small change is made to the ground piece, and the “compli-

cated” assembly, where one creates a completely new piece from scratch. The

“simple” assembly was considered as a cheap option to renovate ones accessories,

although it was not considered very original or creative, since there are so many

brands and shops that offer this kind of possibility. The “complicated” assembly is

regarded as fun and creative, but also as very time-consuming. This aspect was

mentioned in particular by those women with children. For them the “compli-

cated” assembly is out of the question due to lack of time. The participants with no

children, though more open to the idea of this “complicated” assembly”, showed

no more interest into this time-consuming pieces than those with children. Never-

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theless a few e participants (25-36 without children) were very enthusiastic of the

idea, since they had already tried it and said they would continue to assembly their

own pieces.

10) The discussion about the jewelry box idea created an enormous amount of infor-

mation. All the participants, regardless of the group, were eager to give their inputs

regarding this specific area. All participants had some kind of box (keeping de-

vice) to store their jewelry. According to the age group we find a difference in the

aspect of the box, based on the descriptions provided by the participants: the

younger the owner, the more basic and cheap is the box; the older the participant

the more specialized and complex is their jewelry box. Some participants, mainly

from the younger group, mentioned that they use as jewelry boxes the small boxes

they get when buying a piece of jewelry. In spite of the different stiles of box de-

scribed by the participants, none of them showed being pleased by their actual

box. Every participant had complaints about the lacking characteristics of their

box. Among the complaints mentioned are the following: the box is old, “I’ve had

it forever”, made of drawers which makes it unpractical for hanging necklaces, not

user-friendly for traveling, very confusing (when referring that they cannot find

the pieces easily), the pieces get tangled, there is never place enough, since the box

is not pretty they put it away and sometimes forget about it, the mirrors found in

the boxes are never big enough or often mentioned to be unnecessary. All the par-

ticipants were also very interested in exposing their ideas regarding the “perfect”

jewelry box: it should be big, with many small compartments in order to separate

the pieces that can get tangled, a see-through material would help finding the

pieces rapidly, the box should be pretty in itself (something that can be displayed

as decoration instead of being put away in ones drawer), and the fake leather used

normally for the jewelry boxes is definitely “out”.

• The questionnaire results

The results of the questionnaire were quantified and separated in two groups, since the an-

swers show to have in-group similarity.

Question Group 13-25 Group 26-39

What pieces do you buy the most? Equal amount of rings and earrings, slightly more neck-laces and bracelets

Equal amount on rings, neck-laces and bracelets, slightly more earrings

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Pieces of jewelry bought per year Group 13-18: less than 6

Group 19-25: between 4 - 12

Between 4-9

Expenditure on jewelry per year Between 200-700 DKK Between 200-700 DKK

Most expensive piece ever bought Group 13-18: 300DKK

Group 19-25: 1200DKK

1500DKK

Kind of shop most used to buy jew-elry

Group 13-18: Clothing stores, small shops, least likely to buy at jewelry stores

Group 19-25: clothing stores, small shops, jewelry stores and own brand shops

Mostly own brand shops and jewelry stores.

Which magazines do you buy? Sirene

Woman

Costume

Eurowoman

Femina

Elle

InStyle

Alt for Damerne

Do you read free catalogues? Yes (Magasin, Sallings, jewelry catalogs)

Yes(Magasin, Sallings, jewelry catalogs)

Which was the last jewelry ad you saw and were?

Most ads were seen on the internet

Most ads were seen on maga-zines and catalogues

Have you ever bought jewelry that was worn by a celebrity?

No No

How often do you look at jewelries homepage?

Not so often Not so often

What is the maximum you would pay for each of the new pieces of jewelry that you just saw?

50DKK – 200DKK 250DKK – 500DKK

Mention five jewelry brands H&M, Pilgrim, Pandora, Smilende Sussi, Pieces

Pilgrim, Dyberg/Kern, Georg Jensen, Ole Lynberg,

Which of the mentioned brands do you buy the most?

H&M, Smilende Sussi Pilgrim, Dyberg/Kern

Table 9: Questionnaire results

The information gathered through the questionnaires provides some very interesting con-

clusions. It can be concluded that the group from 13 to 25 can actually be divided into two

different groups, since their purchase behavior and needs and wants are different accord-

ing to age groups. The younger girls, even though they are aware and are familiar with

expensive brands, only buy jewelry of lower quality at much lower prices. From the focus

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group this information can be linked to some of the comments these young girls made

during the discussion sessions. For example, a 14 year old girl commented that she prefer

to buy something cheap for this season, in order to afford to buy a new piece of the next

collection. This is very different from comments the older women made regarding their

purchase behavior. A 32 year old woman said that she rather invest a bigger amount of

money in a quality piece twice a year, that could be used for longer than just one season,

than buying several cheap pieces each season. Another interesting point to make out of

these questionnaires is that even though the participants show no difference in their yearly

jewelry expenditure, there is a marked difference in the highest price willing to pay for a

single piece. The younger group (from 13 to 18) shows an average maximum of 300DKK,

while the other two groups, 19-25 and 26-39, show higher average maximums at

1200DKK and 1500DKK respectively. Yet another marked difference is the place where

these women buy their jewelry. The younger groups buy jewelry at clothing stores (like

H&M), in accordance to their more limited budget. On the other hand, women with higher

expenditure budgets shop at own-brand shops or at jewelry shops. Regarding the type of

magazines bought by the participants, some differences appear. All participants buy

magazines that are similar in their contents and which are aimed at their age groups.

Some of the older participants mentioned other magazines that can be considered more

lifestyle oriented in contents, than those mentioned by the younger participants. The more

striking difference is the last advertisement the participants remember. The younger par-

ticipants all mentioned to have seen a jewelry advertisement in the internet, while the

older mentioned both magazines and catalogs. The last two questions reveal that even

though the younger participants are aware of brands with a broad price range, they buy

pieces of jewelry and accessories in stores where prices reflect the cheap side of the spec-

trum. The older participants have a tendency to buy more exclusive pieces of jewelry in

special shops, as mentioned in the table above. To finalize the session, the participants

were asked to place in a quality line, the new pieces of jewelry presented, as well as the

brands each of them mentioned during the session. The younger participants all placed the

Mexican jewelry on the lower end of the quality line, while the older participants placed

the Mexican jewelry very close to the other mentioned brands.

To conclude, both the information gathered from the discussion sessions and the results of the

questionnaires have provided a more detailed knowledge of the final market. The results

found constitute an essential source of information to implement a sound business plan. The

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fact that the participants did not like all the jewelry pieces presented as much as the authors

expected, influence to a large extent the future decision of the product line. More concretely,

it seems from the results that there is no demand for the typical Mexican jewelry on the Dan-

ish market, but still a demand is found on the more trendy pieces presented. In order to reach

the target market, there is a need to be careful when selecting the jewelry pieces for the end

consumers. In short, the focus groups have played an essential role in the process of under-

standing the market.

The authors are aware of the disadvantages of using focus groups to get sound information of

the target market. One of these disadvantages is that focus groups can not be used to predict

sales volume (Greenbaum, 1993). For this purpose quantitative methods are more adequate

and will thus be used in the future

3.6.2 Competition

In order to understand the competition on the market, this part provides a detailed analysis of

both direct competitors. After evaluating the quality of the materials and the design of the

pieces of jewelry to be sold, the authors conducted a field research in order to find jewellery

producers and retailers that offer similar pieces to those found in the authors catalog. The

brands that come closer to the product range are Pandora, Dyberg/Kern, and Pilgrim. The au-

thors also found that jewelry stores carry different smaller brands and products without brand

that can also be categorized as competitors.

Item Competitor 1 Competitor 2 Competitor 3 Competitor 4

Name Pilgrim Dyberg/Kern Pandora “Average” jewelry shop

Location HQ: Skanderborg

Sold in 40 different coun-tries through over 4000 locations

HQ: Copenhagen

Sold in 24 countries through more than 2500 retailers

HQ: Rødovre

Sold over 400 retailers in Denmark, Greenland and Farao Islands

All around the coun-try

Products offered Rings, earrings, neck-laces, bracelets, sun-glasses, sunglasses acces-sories, mobile charms, key rings, pendants, cuff-links, brooches. Both for men and women.

Rings, bracelets, neck-laces, bracelets, sun-glasses, watches, scarves, bangles, chok-ers, brooches, belts. Both for men and women.

Rings, earrings, brace-lets, necklaces, charms, toe rings, ankle brace-lets. The charms offer a wide variety of possi-bilities mixed with earrings, bracelets and necklaces. Only for women.

Rings, earrings, bracelets, charms, pendants, cufflinks, brooches, bangles, chokers, ankle brace-lets, toe rings. Both for men and women.

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Distribution methods

Own-brand shops, retail-ers.

Own-brand shops, re-tailers.

Retailers Own shop

Image:

a) Packaging

b)Promotional material

c) Methods of advertising

d) Positioning (customers per-ception of quality)

e) Charity

a) Jewelry set on own-brand holders, sold in special made boxes and bags

b) Home page in internet with all available collec-tions, news and other information. Seasonal catalogues distributed in own shops.

c) Internet, own cata-logues, ads on newspa-pers, ads on catalogues (e.g. Fields, Bruuns Gal-leri), ads on fashion and life style magazines

d) value for money

e) Supports Doctors with-out borders trough sale of special pieces

a) Jewelry set on own-brand holders, sold in special made boxes and bags

b) Home page in internet with all available collec-tions, news and other information. Seasonal catalogues distributed in own shops and by mail.

c) Internet, own cata-logues, ads on newspa-pers, ads on catalogues (e.g. Fields, Bruuns Galleri), ads on fashion and life stile magazines

d) high quality/ high price

e) Supports the Danish Red Cross

a) Jewelry set on own-brand holders, sold in retailer’s bags

b) Home page in inter-net with all available collections, news and other information.

c) Internet, own cata-logues, ads on newspa-pers, ads on catalogues (e.g. Fields, Bruuns Galleri), ads on fashion and life stile magazines

d) high quality/high price

e) Supports the cam-paign against Breast cancer

a) Jewelry set on own-brand or shop holders, sold in re-tailer’s bags

b) Mostly shop cata-logues distributed via mail, some have homepages of varied quality, with different information.

c) Mostly on catalogs and ad inserts on local newspapers

d) value for price

e) Not related to any particular charity

Pricing structure

Wide range of prices, varying according to size, weight, and materials used. Small pieces from 190DKK

Wide range of prices, varying according to size, weight, and materi-als used. Small pieces from 200DKK

Base piece of jewelry from 150.00 DKK, the small spacers from35 DKK, and beads from 100 DKK.

Wide range of prices, varying according to size, weight, and materials used. Small pieces from 140DKK

Performance One of the world’s fastest growing international fashion jewelry and ac-cessory brands, estab-lished in 1983 from hum-ble beginnings to becom-ing a leading brand for fashion jewelry and ac-cessories.

Established in 1987, nominated in 1999 and 2000 as a “Gazelle com-pany”, developing and increasing annual turn-over by 30%. Wins Entrepreneur of the year 2004 by Ernst & Young

Established in 1999 Varied

Market share

& Brand aware-ness

Approximately 16%. From focus groups one can conclude that the products have a high brand awareness

No data available. From the results of the focus groups, higher brand awareness comes from the older group (26-39)

No data available. From the focus groups this brand has a low brand awareness

It varies for each retailer.

Strengths Danish design at an af-fordable price for all segments on the market. Modern, contemporary luxury goods for an inter-national market.

Own flag ship shops all around the country. Al-ready well-established brand on the market.

Position as an exclusive Danish design brand, providing high quality products.

Own flag ship stores all around the country.

Already well-established on the market.

Enlarge portfolio with a new line for man in

First mover for the concept of assembly which the authors refer to the “simple” assem-bly concept.

Unique and handcraft jewelry at affordable price for the contempo-rary woman. Use pre-cious metals and stones.

Provide different brands, thus a large portfolio for the cli-ents. Different prices and products which fulfill the needs and wants of a large seg-ment of the market.

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Enlarge portfolio with a new line for man and eyewear.

New spring collection 2006 presented on a cat-walk show, which is un-usual for jewelry brand.

2004 and eyewear in 2006.

Detailed information on the brand’s products on their website and jew-elry care advices.

Weaknesses Some products look and feel cheap when touching, while the price is high, especially new line of sunglasses.

Some prices do not re-flect the quality of the goods (too expensive)

Web design is not ap-pealing and unpractical.

Old fashioned con-cept store.

Table 10: Competition analysis

3.6.3 Methods of distribution

Distribution channels are the link between producers and final customers (Hollensen, 2001);

therefore a very detailed analysis of the distribution methods for the new business venture

follows in the present section.

This section contains varied information that will allow the new business owners to make

important decisions regarding the methods of distribution that best suit the new firm. Among

the factors to be analyzed are: a) the external determinants of channel decisions, b) the struc-

ture of the channel, c) management of distribution channels, and d) logistics.

3.6.3.1 External determinants of channel decisions

These are the external factors that affect the decision of the distribution method to follow:

a) Customer characteristics: The final consumer represents women from 13 to 60 years old,

buying in average 8 pieces of jewelry per year. The purchase is mostly impulsive, while

they are downtown or in shopping areas. An intense distribution network is more appro-

priate to reach as many consumers as possible.

b) Nature of the product: According to Hollensen (2001, p. 482) low-priced products with

high turnover require intensive distribution networks, while it is not desirable for “prestig-

ious products” to have wide distribution. The product to be offered by the new business is

on the low-price/high-turnover side of the equation. Therefore an intense distribution net-

work will be used to sell these products.

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c) Competition: All competitors use retailers and/or own-brand shop as methods of distribu-

tion. The customer is used to find this kind of product through jewelry retailers, thus giv-

ing an advantage since the customer knows where to find the product.

3.6.3.2 The structure of the channel

Several factors affect the composition of the channel. These factors will be analyzed.

a) Market coverage: the market coverage is directly linked to the number of channel mem-

bers. For the type of product to be sold by the new business founders and the consumer

characteristics, an intensive coverage is more suited since a large number of intermediar-

ies allow reaching a larger number of consumers.

Figure 15: market coverage

b) Channel length: The products will be distributed from the Mexican suppliers businesses to

the business owners working facilities in Denmark and then to the retailers. This method

will be used to secure that the product received match with the orders and that the prod-

ucts are of the quality agreed. This is a mean to secure our clients satisfaction. In addition,

this is a mean not to share confidential information on the clients’ database with the sup-

pliers. In the start-up phase the products will be directly delivered by the company foun-

ders to the customers. In this way the founders will get free information on customer be-

havior and new fashion trend, and establish a close relationship to the retailer.

c) Degree of integration. Even though the possibility of forward of backward integration is

not in the near future plans, the authors consider that both kinds of integrations can be

achieved. On the long run own-brand shops might be opened by the new business foun-

ders in order to minimize the distribution costs. Backward integration is a possibility for

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the future product line, since another possibility is own-designed pieces of jewelry and ac-

cessories.

After reviewing the last two sections, the authors have decided that the best suited method of

distribution to use is retailers. This decision is in line with the advice received by Leif Falch

Olesen (“Udviklingskonsulent”) from the Entrepreneurship Center in Aarhus.

3.6.3.3 Management of the distribution channels

Once the distribution method has been designated, the best suited candidates as retailers are to

be chosen. A guideline for choosing the retailers follows:

a) Screening and selecting. At the start-up phase of the business the authors plan is to reach

as many retailers as possible. In this first round no screening will be made, since the main

objective to achieve is intensive distribution. It is important to achieve a broad retailer

portfolio to reach as many end consumers in the target market as possible. The selection

of the retailers will be made according to geographical considerations.

b) Contracting: In order to have clear boundaries of the working relation between the retailer

and the new venture, a contract will be drawn up. This contract will contain relevant in-

formation such as sales level to be achieved, the particular responsibilities of each party,

contract duration, a specific and detailed payment section, product and conditions of sale,

and means of communication between the parties. A “demo” contract will be made by the

authors, and different conditions can be changed according to the terms and conditions

agreed together with the retailer

c) Controlling: During start-up, the retailers will have the most channel power in the working

relation. However, performance is to be evaluated and assessed continuously to ensure the

good flow of the products.

d) Termination: Whenever considered appropriate, termination of the working relation may

be the most appropriate decision to take. To make this transition as smooth as possible, a

termination paragraph should be also agreed upon in the contract.

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3.6.3.4 Logistics

Logistics can be considered as a tool for getting the products and services where they are

needed and when they are desired91. The main functions of logistic management are: purchas-

ing, transport, warehousing and the organizing and planning of these activities. According to

Hollensen (1993) the primary goal of logistics is the effective coordination between the mate-

rial management phase and the physical distribution phase, so that the firm can achieve

maximum cost-effectiveness. Achieving this balance should not impact negatively the per-

formance of service goals and requirements.

1. Order handling. For an efficient order handling, the procedure is as follows:

a) The sale process

• The retailer sends order confirmation

• The owner (importer)a makes enquiry to supplier on availability of pieces

• Supplier (exporter) confirms availability and sends proforma invoice

• The owner (importer) sends purchase order

• The supplier (exporter) receives purchase order

b) The importer makes deposit for the agreed amount

c) The supplier arranges transportation and documentation (see appendix IV) for the

pieces.

d) The pieces arrive to e+e address

2. Transportation: The jewelry pieces will be sent via air freight through a consolidated cou-

rier. In this case FedEx has been chosen since the principal supplier has used it to export

their products before and always have had successful results. FedEx will be used due to

their expertise and knowledge in the area. The size of the products allows the business

owners to use such a freight supplier. In the case FedEx is unable to deliver the service re-

quested other couriers are available, such as DHL and UPS. Once the pieces are in Den-

mark, they will be transported to the retailers by the business owners on firm’s vehicles.

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3. Inventory at supplier base: As agreed with the suppliers, an inventory of the different

pieces supplied will be carried by the suppliers at all time. The suppliers will always have

products in stock that can be offered to the retailers. This implies no costs for the new

business owners, as it is the supplier’s business policy. For special orders, the supplier has

given a 7 working days limit to find these pieces.

4. Storage/Warehousing. The sizes of the pieces of jewelry to be dealt with allow the new

venture owners to limit the warehousing costs. The pieces will be stocked in the founders’

working premises.

5. Packaging: All product packaging for exporting will be made and provided by the suppli-

ers. This product packaging will ensure that the pieces arrive without damage. Every piece

will be placed individually in a resalable bag, thus protecting the pieces from scratching

and from rubbing.

3.6.4 Advertising

When it comes to advertising, there are divided opinions on the benefits –or disadvantages-

one can obtain for a small business. There is a line of authors that suggest small businesses to

spend small percentages of the business’s budget in advertising as a way of increasing the

business’s profitability. According to Phillips (2005), self-employed individuals rarely find

advertising useful. He describes how “the single-person business, whether that of a lawyer,

doctor, or computer consultant, relies almost exclusively on personal recommendations”

(Phillips, p.18). In this same line, Zahorsky (2006) describes his Low-budget high-impact

marketing plan. In his article, Zahorsky (2006) points out the fallacies of expensive “glossy”

advertising. Jones (2004) agrees with this statement. In his book, Jones talks about the

amounts of money used by big corporations, and how this high advertising expenditure does

not always equals to gaining new consumer nor persuading old and new to buy more. Philips

(2005) is a fervent believer of the benefits of personal recommendation vs. advertising.

Throughout his book a number of examples of how advertising brings no advantage to busi-

nesses can be found. His best offer is to create “such a wonderful operation that your loyal

and satisfied customers will brag about your goods and services far and wide” (Philips, 2005,

p.15). In order to achieve this Philips (2005, p.15) proposes to “spend the same money im-

proving your business and caring for customers” what he believes is a better alternative to

spending money on advertising.

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Once the decision of whether or not to advertise ones products is taken, another decision has

to be made, namely, how can a limited advertising budget reach as many final target consum-

ers as possible? Zahorsky (2006) offers different low-budget techniques that can be used to

accomplish this goal. He believes that a low budget marketing plan is better suited for small

businesses. The reasons offered to back up this statement is that firstly, expensive advertising

does not translates directly into sales, a belief that goes in hand with the points expressed by

Jones (2004). Secondly, advertising strategies that are too expensive for small businesses

budgets, do not allow repetition. This is important since “your target customers need to hear

your marketing messages at least 7 times to influence a buying decision” (Zahorsky, 2006),

which means that inexpensive yet repeated advertising might give better results than one ex-

pensive ad. Finally, Zahorsky believes that multiple marketing channels improve marketing

impact. Zahorsky’s proposition is that if your final target consumer reads “about your com-

pany in the newspaper, attend a seminar, take home a brochure, and visit your small business

website”, a higher marketing impact will be obtained by "stretching your marketing dollars".

This last reason takes us to another important advertising issue: Which media channels do one

has to choose? Pinson and Jinnet (1993) advise that consumer research and competitor

benchmarking are bases for small business owners advertising decision making.

The subjects of the focus groups listed the magazines and catalogues they often read. As de-

scribed in the competitor’s analysis, it can be seen that all competitors’ main form of advertis-

ing is in printed form. Own-brand catalogues and jewelery catalogues make up the main ad-

vertising form competitors use. These catalogues are distributed in own-brand shops. Jewel-

lery shops rely most on their own catalogues, which are sent via mail to every housestand.

The most used media to advertise sales is newspapers.

Since the new venture owners have decided that the most effective distribution method is

through retailers, no direct advertising will be done to the final target market. All advertising

will be done in conjunction with the retailers. Under management of distribution channels, the

use of a contract was described. In this contract, an agreement on conjunct advertising has to

be reached between the parties. Another advertising tool to be used is Public Relations (PR).

This tool will not be used during the start-up phase as this requires that the products are ex-

posed widely across a larger geographical territory, Thus after a year of intense sales activities

across the countries, the founders assess the cost-effectiveness of investing in PR. One of the

authors is experienced in PR and will be in position to handle the PR tasks in house. This will

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consist of writing press releases of the new collection and contacting the key magazines

which are of our final consumer interest, e.g.: Sirene, Eurowoman, and Alt for Damerne.

3.6.5 Pricing

A company’s pricing structure is critical to the success of the venture (Pinson and Jinnet,

1993, p.7), and ultimately will determine its fate (Zahorsky, 2006). To efficiently price prod-

ucts, many different pricing strategies can be followed. Clearly, there is one path a small

business should not follow, e.g. the lowest price strategy. According to Zahorsky (2006), the

lowest price strategy does not give any advantage to a small business; on the contrary the ad-

vantage is for larger companies “with deep pockets and the ability to have lower operating

costs”. The recommendation made by Pinson and Jinet (1993) is to use a basic marketing

strategy to determine prices. They recommend “to price between the price ceiling and the

price floor… [since] profitable business operates between” these two prices (Pinson and Jin-

net, 1993, p.7). Zahorsky (2006) describes a couple of factors to consider before deciding on a

pricing strategy. Those factors are: a) understanding of the demand structure in your industry

(this understanding comes through making a competition analysis, defining price ceiling, and

determining the product elasticity), and b) cost and profit goals. Wikipedia.org92 mentions the

following strategies: 1) Competition based pricing 2) cost-plus pricing 3) creaming or skim-

ming, 4) limit pricing 5) loss leader 6) market orientated pricing 7) penetration pricing 8)

price discrimination and 9) predatory pricing.

After careful deliberation and analysis of the different pricing strategies, it has been agreed

that a combination of two different methods will be followed to price the pieces to be sold.

The new venture owners will use competition based and cost-plus pricing to determine the

price to be paid for the pieces by the retailers.

3.6.6 Product design

The product design of the pieces of jewelry intended to be sold to Danish retailers, will be

decided by the supplier, therefore no product design activities will be performed by e+e at this

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stage, in regards to the pieces of jewelry to be sold. However, it is e+e who will decide which

pieces are to be bought.

Nevertheless, packaging design is an area where the new business owners do have decision

making power. Our own-brand name will be used in the special packaging provided to the

retailers. Special bags will be provided to the retailer free of charge for every piece bought.

The objective of these bags is to give the final target consumer a complete buying experience.

The special bag will be made of a see-through fabric and china paper – with the name of our

brand printed on the surface – it is to be used to wrap the piece of jewelry which then will be

placed inside the bag. The design of the bag and the paper can be found in appendix V. This

kind of packaging is quite different form those currently found in the market (see examples in

appendix VI), thus differentiating the product from the competitors. These bags will be pro-

duced by a Mexican supplier and the producer will also be in charge of sending these bags to

e+e.

As the company develops and reaches the expansion phase, new product lines will be consid-

ered to be part of the product portfolio. Among these products are those falling under the as-

sembly idea

3.6.7 Timing of market entry

The product line will start selling in the beginning of 2007. The purpose of choosing this time

is to be able to have retailers selling our products no later than the summer. One of the rea-

sons behind this statement is that this will allow the customer to know the product, get ac-

quainted with the line and probably try it before the largest selling season: Christmas. During

entry time point-of-purchase advertising will be given to the retailer in order to promote the

new line to be sold. The second reason for choosing this time is that it is a known fact that the

summer season is a slow moving season. B2B sales go down, since decision-makers take time

off during this season, according to Goettsch (2004, p.1)

3.6.8 Location

For the first phase of the business, the new business owners will have no fixed location. How-

ever, for administration purposes the address for e+e is Mikkelsvej 5, 7140 Stouby. It has

been decided that no office building is required, since the major activity of the business is

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sales, and the administrative processes can be done at home. Other factors affecting this deci-

sion are the physical location of the founders (Jylland and Sealand) and that no employees

other than the founders will be employed at this point in time. The first factor actually enables

the founders to reach a larger number of retailers more efficiently and with lower costs.

As the company grows and employees become part of the firm, offices will be necessary in

order to centralize some of the functions. When the time arrives, decisions should be taken

regarding the business location. For this purpose, several factors will come into consideration,

e.g. the founders’ geographical residence, the need for warehouse, etc.

3.6.9 Industry trends

Fashion trends are dynamic, Different styles come with every season. One way to forecast

market changes is by assisting to fashion shows, where the fashion trends of next season are

presented in advance. Other sources of fashion trends can be found on the internet. Various

sites were analyzed to discover the fashion trends in jewelry for spring 2006. The findings

are as follows:

• Deswarte-Immo.com: chunky necklaces and turquoise is the "it" color of the season,

bright accessories, gold and silver go daytime for spring.

• Fashiongates.com: bohemian, accessories like wood beads and bangles, big chunky

pieces, the hottest accessory this spring is necklace used in layers.

• Fashionoffice.org: brooches have made a stunning come back, large and flowery, with

vintage look.

• Bellaonline.com: NBC5 recently reported a "comeback" in vintage fashion jewelry

• Fashion-era.com: Jewelry has texture - carved flowers are everywhere, mother of pearl

pendants are also fashionable, deep ruby colors of reds through burgundy wine, chokers in

the Edwardian or Victorian style, the ethnic theme remains strong,

• Modernjeweller.com: organic, nature-inspired jewelry designs among the most important

trends

• Meevis.com: the new jewelry trend for 2006 is one-of-a-kind designer jewelry, yellow

gold is making a come-back, and circle shapes are hip, soft shades of blue to green.

• Stylespots.com: chandelier style is evolving and charm bracelets are “in”.

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After reviewing this list of fashion trends, it becomes obvious that trend-wise, the pieces of

jewelry showed at the focus groups are actually in accordance with the fashion trends. One of

the authors has been talking to the local retailers and found that these retailers would buy

most of the pieces and that the pieces can certainly be offered to the public.

3.6.10 Conclusion

In the introduction to the marketing part, the importance of a marketing plan was established.

Internal and external criteria were considered in order to analyze all the factors that have a

decisive impact to the marketing plan. The marketing plan is formed by nine sections: 1) tar-

get market, 2) competition, 3) methods of distribution, 4) advertising, 5) pricing, 6) product

design, 7) timing of entry, 8) location, and 9) industry trends. The purpose of all sections

combined is twofold: firstly, to give the business founders information in which to base deci-

sion making processes regarding the business idea, and secondly, serve as a base for the final

business plan to be presented to possible investors.

The information found in the making of this marketing plan is very interesting. When re-

searching for the target market, one of the hypotheses was about how much the target market

would like the pieces presented. To the authors’ surprise, the target market did not show the

excitement expected. Some pieces got more attention than others, and this attraction was dif-

ferent according to the age of the participants. The pieces were better received by the older

groups than by the younger groups. This indicates that a better selecting process should be

used when buying pieces to be sold in Denmark.

Concerning competitor analysis, four key competitors were studied to determine the future

brand’s market positioning. From this research the authors have determined that entering this

market will be a complex task, where many years of hard work and great amounts of money

have to be invested to succeed.

After considering a set of methods of distribution, a retailer based distribution was chosen to

fulfill the objectives of target reach. From this decision, other important agreements were

made regarding advertising and pricing strategies. It was decided that all advertising would be

made in conjunction with the retailers. Regarding the pricing strategy to be followed, a com-

petitor analysis was used, together with a cost-plus pricing strategy to determine the price to

be paid for the pieces.

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Another important part of the marketing plan is devoted to the product design. There will be

no product designing activities during the start-up phase since the pieces to be bought are fin-

ished pieces. The only designing activities at this stage are those regarding the company’s

brand and logo and those required for the advertising to be done with the retailers.

Concerning time of entry, it was decided that the best time of market entry would be after the

Easter season. This will give the consumers time to get acquainted with the product before the

Christmas season, and time for the founders to position the products with the retailers before

the summer.

The working facilities of the founders will not be a fixed location. This will give geographical

advantages to cover as much territory as possible. One founder will be responsible for sales

activities in Jylland and the other for Sealand and Fyn. The possibility of finding a fixed loca-

tion will follow with the growth of the business.

As expected, this marketing plan has shed light into important factors to be taken into consid-

eration when the time comes to decide whether or not the business owners will enter the start-

up phase. Even though retailer opinions and fashion trend analysis are positive regarding the

jewelry pieces, the final consumers expressed a low willingness to buy these kind of jewel-

ries. The information presented in this plan will serve to take decisions regarding the future of

the business idea in conjunction with the following parts of the business plan.

The information used to complete this marketing plan will be taken into consideration to

complete the next part, namely the financial plan, which will reveal if this idea is financially

viable.

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3.7 Financial plan

The idea behind writing a business plan is to accomplish several goals: raise capital, serve as

a guideline for management, uncover strategic opportunity, and provide a benchmark for

measuring success (Coker, 1991). The purpose of a financial plan is to show that the idea pre-

sented is not only viable but also profitable. The financial analysis produced until now has

proven that this particular idea is not profitable. The following documentation will prove how

the authors reached this conclusion. To this end, this part will be structured as follow: (1) in-

dustry sales (past and forecasted), (2) projected sales, and (3) cost analysis. To finalize this

part, a conclusion will be presented.

3.7.1 Industry sales

The industry’s total sales93 serve as a base for projecting future sales. The authors have ana-

lyzed the last six years of sales of the jewelry industry in Denmark, which is constituted by

eight product categories, further divided into two classes, namely jewelry and accessories.

Through the analysis of the past six years (2000-2005), the next four years (2006 – 2009)

were forecasted in order to base projections of future sales.

The following table presents the industry sales for the years 2000-2005.

Year Total Sales

'000 DKK Change Index

2000 91.978 100

2001 88.562 96% 96

2002 111.579 126% 121

2003 135.832 122% 148

2004 137.967 102% 150

2005 168.925 122% 184

Table 11: Industry sales from 2000-2005

93 Industry total sales figures were calculated with data found at www.statbank.dk

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From table 5 it can be concluded that the market for jewelry has been continuously growing.

During a period of six years – from 2000 to 2005 – the total growth was 84%, giving an ap-

proximate growth of 12.5% per year.

From these figures, and assuming an unchanged growth rate of 12.5%, the authors have pro-

jected the industry sales for the four years to come (2006-2009), which are presented in the

following table:

Year Total Projected Sales

'000 DKK Change Index

2006* 190.041 113% 207

2007* 213.796 113% 232

2008* 240.520 113% 261

2009* 270.585 113% 294

Table 12: Projected sales from 2006-2009

From the two previous tables (11 and 12), the authors conclude that the industry is attractive

to enter, from a growth perspective.

Industry Sales

0

50.000

100.000

150.000

200.000

250.000

300.000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

'000

DK

K

Table 13: Industry sales

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3.7.2 Projected Sales

Once the industry sales have been analyzed, the projected sales for the company were fore-

casted. In order to do so, the projected industry sales were used as a base. Table 14 presents

the results:

Projected '000 DKK Product mix94 Sales

2007 2008 2009

23% Necklaces 492 615 768

16% Rings 342 428 534

30% Earrings 641 802 1.002

11% Pendants 235 294 367

12% Bracelets 257 321 401

8% Brooches 171 214 267

100% Total of Sales 2.138 2.672 3.341

Assumptions regarding sales:

Market assumed to increase in line with last 5 years - average around 12.5%.

Sales projections follow the industry growth plus a gain in market share.

Company will end up with a 1.3% market share in year 3.

Every season there will be introduced new products.

Table 14

Several assumptions were made in order to calculate the projected sales for the firm. From the

competitors analysis it was discovered that Pilgrim is the biggest player in the market, with a

market share of about 16% (see appendix VII). It is worth noting that it took 23 years for Pil-

grim to achieve this market share. Using Pilgrim’s growth as a base to calculate the projected

sales of the distribution firm, it was assumed that the firm can accomplish about 1% of the

total market. From the industry sales the authors learned that the industry has been growing

for the past six years at an average rate of ca. 12.5%. This growth rate was assumed to con-

tinue for the next four years, and for the year 2007 the industry’s total sales will total

213,796,000 DKK. For the years 2008 and 2009, an increase of 25% for each year is used to

94 The product mix was determined from the authors own experience

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forecast the company’s sales. This increase is composed by the industry average growth of

12.5%, and a very positive forecast of an additional 12.5% in order for the company to gain

market share. Analyzing these figures, one can see that by the end of 2009, the company will

be having a 1.3% of the total market.

3.7.3 Cost analysis

In order to verify the viability of the business idea, it is essential to make an analysis of the

firm’s cost structure. Table 14 presented the projected sales the authors assumed possible to

reach. Having this as a base, and gathering information regarding the possible costs to be in-

curred in the start-up phase, the firm’s cost structure is presented:

Cost of goods sold '000 DKK

2007 2008 2009

40% Materials 855 1.069 1.336

20% Freight & duty 428 534 668

40% Gross Margin 855 1.069 1.336

Fixed costs '000 DKK

2007 2008 2009

23% Salaries 500 500 500

3% Travel 56 56 56

1% Graphic design 30 30 30

0% Trademark application 3 0 0

0% Fair stand 7 7 7

1% Office costs 12 12 12

11% Car costs 240 240 240

0% Other 0 0 0

Total fixed costs 848 845 845

Table 15: Firm’s cost structure

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The cost of goods sold is composed by the cost of the materials bought in Mexico, and the

cost of the transportation. The cost analysis reveals that the freight cost is a burden to the

price and the probable solutions to this problem carry great risks95. Regarding the fixed costs,

it was decided by the authors that a fixed monthly salary would be paid to the founders. The

founders will also incur in travel expenses each time new collections are to be bought, this

means that the founders will have to travel to Mexico twice a year. A graphic designer will be

employed to work with the firm’s image, having in mind that the firm’s website has to be

renovated every year. A fixed amount has to be paid as a fee for the trademark registration of

the business. Since the founders will not have a fixed business location, the office costs have

been calculated to be around 6.000 DKK per year for each founder. An important percentage

of the fixed costs are incurred by the car costs. It is of imperative necessity for the founders to

have a flexible mode of transportation, since it has been agreed that it is the founders them-

selves that will deliver the products to the retailers in order to gain market knowledge. Other

expenses will arise as the business develops, e.g. advertising.

After discussing the cost structure of the business, the price calculation follows. The authors

decided to calculate the B2B prices backwards from the prices the consumers are willing to

pay. The participants of the focus groups provided their annual expenditure for jewelry and

the price they are willing to pay for the pieces presented. The information is summarized in

the following table:

Group 13-25 Group 26-39

Expenditure on jewelry per year Between 200-700 DKK Between 200-700 DKK

What is the maximum you would pay for each of the new pieces of jewelry that you just saw?

50DKK – 200DKK 250DKK – 500DKK

Table 16

The participants of the focus group sessions use an average expenditure of 450 DKK a year

on jewelry articles, and are willing to pay a minimum average of 150 DKK and a maximum

95 The discussed solutions to this problem are transportation by sea, meaning longer delivery time risking that the pieces might turn unfashionable thus unable to be sold; and larger amounts of pieces transported by air in order to minimize unit freight cost, which in turn will result in larger inventory costs and also risking that pieces be-come unfashionable.

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average of 350DKK for the Mexican pieces. Taking this information into consideration, the

prices to be paid by the retailer are calculated in the following table:

Retail price

DKK BtoB price

DKK Cost DKK

Profit/loss DKK

minimum average

maximum average

minimum cost

average cost

minimum cost

average cost

minimum cost

average cost

% avg. cost

Necklaces 150 350 60 140 110 192 -50 -52 -37%

Rings 150 350 60 140 50 103 10 37 26%

Earrings 150 350 60 140 50 115 10 25 18%

Pendants 150 350 60 140 87 134 -27 6 5%

Bracelets 150 350 60 140 64 110 -4 30 21%

Brooches 150 350 60 140 110 134 -50 6 5%

Table 17

From table 17 it can be concluded that it is less profitable to try to sell the lower cost products

that can be attractive for the younger segments (Group 1). Pieces with a higher price can be

sold with a profit ranging from 5% to 26%. These prices are compatible with those the par-

ticipants of Group 2, i.e. women between the ages of 26-39, are willing to pay. Knowing that

only this segment of the female population is willing to pay the price of these pieces has di-

rect implications for the projected sales. The fact that the products will only be bought by a

smaller market segment, means that the market share of this particular segment has to be big-

ger in order to cover the fixed costs of the company.

From table 14 we can see that forecasted sales are 2,138,000DKK, assuming that we can ob-

tain 1% of the total market during the first year of operation. This amount of sales is neces-

sary in order to cover the costs of the company. The segment willing to buy Mexican jewelry

is composed by women from 25 to 39 years, who sum up a total of 523.740 women, with an

average annual expenditure of 450DKK.

Number of women aged

25 to 39

Total Market Re-tail Price (450

DKK per piece) ‘000 DKK

Total market Wholesale price

(retail price – markup) ‘000 DKK

Forecasted sales

‘000 DKK

Market share

523.740 235.683 94.273 2.137 2,27%

Table 18

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This means that in order to cover the fixed costs of the company (see table 8), the market

share to be reached is approximately 2.3%. This market share is unrealistic to reach being a

new small entrant in a crowded industry, taking Pilgrim’s example in consideration. As men-

tioned earlier, it took 23 years for Pilgrim to reach their actual market share, and following the

assumptions used in the projected sales part, the firm can achieve up to 1.3% of the market

share after 3 years of operation.

After proving from the consumer’s point of view that the idea is not profitable, the authors

will now calculate the prices having in consideration the industry average mark-up. In the

marketing plan the chosen price strategy was a combination of competition based and cost-

plus pricing. To this end, the determination of the retail price was calculated including the

cost of the product and total freight costs plus an extra markup considered as the business

profit. In addition, these prices were benchmarked to those of the competitors. The industry

mark-up used in the pricing strategy for this product category is between 2 to 3 times96 the

wholesaler prices. In order for the authors to make a profit, the BtoB price was calculated by

adding a mark-up to the cost of the pieces. The calculations were done with an average of 2.5

industry mark-up. Using this price the next step was to calculate the probable price the retailer

would use as a selling price, adding up the retailer profit.

Cost DKK

BtoB price DKK

Retail price DKK

minimum

cost average

cost minimum

cost average

cost minimum

cost average

cost

Necklaces 110 192 276 479 690 1197

Rings 50 103 125 258 313 646

Earrings 50 115 125 287 313 719

Pendants 87 134 218 334 545 835

Bracelets 64 110 160 276 400 690

Brooches 110 134 276 334 690 835

Table 19

96 Information provided by Dorthe Christensen, employee at Profilart, Horsens. (10/02/06), and confirmed by Rikke Friis from the Marketing Department at Pilgrim.(2/03/06)

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In order to conclude if these prices are competitive in the market, the information gathered in

table 12 ought to be analyzed together with the results of the focus group sessions.

Analyzing the information of tables 9 and 12 leads the authors to conclude that the retailers’

sale price is not compatible with the information obtained during focus group sessions regard-

ing the final consumer jewelry expenditure.

To conclude, the combined examination of the cost analysis and qualitative research provide a

clear and obvious answer to the second question of the authors’ problem statement: Is this

business idea a viable one? Both from a financial and a consumer perspective, the answer is

categorically no. Thus, it has been proven in detail, that the idea presented by the authors is

not a viable one. Therefore no further calculations will be done, and consequently no business

plan will be developed to raise capital.

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4. The final remarks of the thesis

As Gelderen et al. (2001, p.80) underline “the first success of a firm is that it becomes one”.

The original business idea that of buying Mexican jewelry pieces and selling them to the Dan-

ish market, has been proven not to be feasible. This does not discourage the authors in their

idea of entering entrepreneurship. In this last chapter the authors will provide an answer to the

problem statements and discuss the strength and weaknesses of the approach followed.

4.1 The concluding results

The first two chapters of this paper have attempted to answer the first question of the problem

statement, namely: What are the obstacles and risks women face when entering entrepre-

neurship? The examination of the literature research, based on the venture creation frame-

work, suggests that even if female and male entrepreneurs share some similarities, women do

face unique obstacles and risks when engaging in entrepreneurial activities. The literature

provides that female business founders encounter challenges in the four dimensions of the

venture creation framework. Concerning the individual dimension, there is an ongoing debate

on whether the differences between female and male entrepreneurs are gender-based. In spite

of the diverse opinions on that matter, many researchers do agree to a certain extent that

women achieve lower business results than their male counterparts. Several reasons for these

lower results have been investigated; among those the lower commitment to long working

hours is mentioned. In addition, the fact that women tend to graduate from softer lines of

study rather than the male traditional fields, e.g. business, engineering or science, is often per-

ceived as a handicap. Women are advised to expand their knowledge areas, in particular that

of finance, in order to secure access to financial capital and gain essential skills to run a prof-

itable business. The most significant obstacle often encounter by female entrepreneurs in the

environmental dimension is access to capital. This is influenced by the fact that women tend

to create small sized businesses in traditionally crowded industries, not attractive from the

investors’ point of view. The social network of female entrepreneurs is commonly organized

around family and friends. This affect female business success since it impacts the amount

and quality of the market information the new venture creator can obtain. Regarding the or-

ganizational dimension, most researchers conclude that the small sized businesses women

tend to create act as a significant barrier in achieving business success. Furthermore, the suc-

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cess of women owned businesses tend to be lower due to the fact that they tend to enter al-

ready crowded and least profitable industries, i.e. the service and retail industries.

The authors conclude, from the literature review on women entrepreneurs, that female busi-

ness owners face obstacles and risks categorized under two different sets of factors: 1) the

controlling factors -which can be used actively by women in the planning of their business,

and 2) preventing factors -which act as obstacles to the new venture creation process, for

which women do not have any control. The purpose of this framework is to help female en-

trepreneurs to be aware of the different obstacles and risks that can be found during the new

venture creation process. The authors expect this framework to serve as a useful guideline,

helping women planning ahead for avoiding the preventing factors and using the controlling

factors for their benefit.

The authors have gained essential knowledge throughout the study of the literature on women

and entrepreneurship. The better understanding of this complex field has given the authors

tools to cope with the development process of new venture creation. Having gained this spe-

cific knowledge, the next step was to put the business idea into practice, trying to answer the

second question of the authors’ problem statement, i.e. Is this business idea a viable one?

In order to answer this question, a business development process consisting of three stages

was considered: (1) developing the idea, (2) developing the business plan, and (3) setting up

the company. For the purposes of this thesis, only the first two stages were elaborated to a

certain extent. The business idea was concretized and further developed in what should have

ended with a business plan. The authors did not complete this latter step recognizing that from

the market research and from a financial perspective, the creation of a distribution firm, buy-

ing Mexican jewelry and selling it on the Danish market, is not profitable. This finding has

not affected the authors’ willingness to become entrepreneurs. On the contrary, the market

research conducted for this particular idea, has revealed an unsatisfied need on the market,

more precisely a need for more operational and innovative jewelry boxes.

The authors’ intention in the near future is to investigate further this business idea. The proc-

ess of writing this thesis has provided the authors with the necessary knowledge, tools, ex-

perience and contacts to engage one more time the development process of this new business

idea.

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4.2 Observations for the future

The authors are aware that this original idea turned out not to be profitable. Regardless of

this disappointment, the authors still consider to enter the entrepreneurship field in the

near future. The making of this thesis has given the authors many learning experiences

that can be used in their new spring into this complex field. At this point the authors pre-

sent a list of the strengths and weaknesses found throughout the writing of this thesis.

• Starting the project with a theoretical background provided the authors support and

knowledge to avoid making common mistakes that other women entrepreneurs en-

counter in their process of venture creation.

• The making of this thesis has been an excellent exercise to understand the complexity

of being entrepreneurs, and how things should not be taken lightly, specially the fi-

nancial aspect.

• Time will be better used for the next development process, since several steps and re-

quirements are already fulfilled from the making of this thesis, e.g. information on

business registration, organizational structure.

• From reviewing what we learned in our Master studies, we can see that the EFQM

model is not suitable for small business.

• An important aspect learned in the making of the business plan is that financial calcu-

lations should be conducted first, in order to see before taking any further steps if the

idea is profitable from a financial perspective. This will allow the authors not to use

time on unnecessary research.

• The fact that the authors relied only on qualitative analysis as a marketing tool, with-

out the support of quantitative methods, makes the information less reliable.

• Reducing the number of focus groups from eight to four might have had an impact on

the quality of the conclusions reached, since assumptions were made in order to make

this reduction.

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APPENDIX I

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APPENDIX II

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Phone interview

- Becksöndergaard -

Date and hour: 4th of November 2005 at 13:00

Time: 15 minutes

Interviewer: Emma Migliorini

Interviewee: Lis Beck

Company profile:

Becksöndergaard is a Danish brand within fashion accessories established in 2003 by Lis

Beck and Anna Søndergaard. Since the launch of their brand, the two girls have experienced

great success and the company is rapidly expanding. At present, Becksöndergaard is repre-

sented in fashion shops in Denmark, Sweden, Norway, Germany, Switzerland, Austria and

England. The brand collection currently consists of 5 lines: “eelskin” bags and purses, mohair

shawls, belts, knitwear, and small accessories like brooches.

The reason we chose Becksöndergaard for our interview is simply because the company is led

by two female entrepreneurs in Denmark. The aim was to test the theory literature with a real

case. The results of the interview support the literature review97 in that the interviewee did

face obstacles when starting-up her business in Denmark.

Question 1: What is your background?

Interviewee: “I graduated with a Master Degree at the Copenhagen Business School, and

then I worked four years for Carlsberg as a project manager. I spent one year in Malaysia

while working for Carlsberg. Meanwhile, my colleague, Anna Søndergaard worked for

McKinsey Management.”

Question 2: Why did you start your own company?

97 See chapter 2

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Interviewee: “Anna and I always had a dream to work together and to create our own busi-

ness. Besides the need for independence, we also wanted to reach a certain degree of flexibil-

ity in our work. Money was not one of our main motives…”

Question 3: When did you find the opportunity of starting a business?

Interviewee: “All started, while I was working in Malaysia. It fascinated me to see all the

nice things that you could get and it came to my mind that it would be a great idea to work

together with local suppliers and get the product in Denmark. It first started like a hobby, until

the day we presented the few accessories on a fashion fair and got attention”.

Question 3: As women entrepreneur, did you face any obstacles during start-up?

Interviewee: “we did face a few obstacles, but our strong educational background and work

experience helped us to some extent to face them. Nevertheless, one of the main challenges

for us was to gain access to capital. It is a hard way…the solution for us was to work closely

with a well experienced account manager, who is today 40 years old, and who came with us

and still is coming to the internal and external meetings. He came with us the day we pre-

sented our business plan to the bank. I believe that we were taken more seriously when we

arrived at the meeting with a well experienced man as our account manager. Besides a sound

business plan in hands, I found out that women entrepreneurs really have to act like men to be

taken seriously and to be able to face the obstacles”.

Question 4: How is your organization build today?

Interviewee: “we started with 40.000kr that we loaned from the bank. After half a year, Anna

and I were obliged to invest more money in human resources. Besides the account manager,

we hired two freelancers who worked as salespersons for the home market. As the company

grew, we hired international agents for our foreign markets. Today, after only two years in

business, we have reached a high growth potential and people, such as family, friends and

work colleagues’ advice us to invest more money in our company. Nevertheless, even if we

know that it is true, we don’t want to take risks. We rather go step by step”.

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APPENDIX III

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Guideline: Focus Group

- Presentation of the authors

- Ask people to present themselves (name and study line)

- Ask to put their name on a piece of paper

1) Introduction question: Do you buy jewelry?

Behavior:

- Why do you buy jewelry? ( reason of the purchase)

- How important is jewelry for you? And why?

- Have you ever bought jewelry that contributes to a particular charity? (Ex: Pil-

grim: “médecin sans frontière”) Does the fact that a brand is socially responsible

influence your purchase and the amount of jewelry you buy?

- Is your purchase mostly planed or mostly spontaneous?

- Do you buy foreign jewelry brands? (trying new brands, traditional or global

brand)

Product:

- Which materials do you like?

- Do you like silver jewelry? Why and why not?

- Do you like the combination of different materials? And which ones?

- How do you perceive Danish design jewelry? (please give some adjec-

tives)

- Would eco friendly packaging (ex: recycled paper) affect your decision

of buying? And why?

2) Questions: Business idea

Present the pieces of jewelry: show them: “please look at them, touch them and wear them

and see how it looks on you”

Product:

- How would you describe these pieces? Do you like the materials used? If not,

which materials would you like?

- Of these which one do you like better and why? Do you like them in general (all of

them)? What is that you don’t like about them? What would you change?

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- Do you like the design? Why and why not?

- “Now I will tell you about these pieces: they are handmade jewelry from Mexico,

all made with silver and semi-precious stones”.

- Now that you know that these pieces are hand made jewelry from Mexico, would

you buy them? Do you have another perception? Why and why not?

3) Deeper questions concerning future product innovation and extension of brand port-

folio.

Create own pieces: the concept of assembling

Are you not tired of wearing the same jewelry? Would you like to change your origi-

nal jewelry and add extra pieces to have a new piece of jewelry?

Show the jewelry to the participants:

- What do you think about the concept of assembling?

- Would you like to create your own pieces of jewelry? Meaning assembling in

an easy way the pieces yourself? (Enabling you to switch the core of the jew-

elry, for instance to change the plume with a natural stone)

- Is that something you would wear? Would you then buy them? Why and why

not?

- Making your own jewelry would make you feel…..(fill in the blank)

Boxes: as a brand portfolio extension

- Do you have jewelry boxes? Yes, or no, so where do you put your jewelry?

- How satisfied are you with your boxes?

- How would you describe the boxes that you have at home?

- What would the characteristics of your perfect jewelry box be?

- How much money would you spend on jewelry box? What is the maximum price that you would pay?

- How often do you buy jewelry boxes?

- Where do you place or have your box at home?

4) End of the session:

- Ask the participants to fill in the questionnaire: (have 10min)

- Summarize to them the topic of the day and ask if are missing any-thing

- Lottery and thanks

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APPENDIX IV

General EUR Preferential Invoice Declaration

The exporter of the products covered by this document (customs authorization number ______________________________ *)declares that, except where otherwise clearly indicated, these products are of (country) __________________________________ preferential origin. Place: _______________________________________ Date: ________________________________________ Name: _______________________________________ Signature: ____________________________________ Fedex Air Waybill Number: ______________________ *If you are not an approved exporter, this number is not a requirement.

156035

Note

Accepted set by 156035

156035

Inserted Text

156035

Note


156035

Note


156035

Note


156035

Inserted Text

156035

Cross-Out

156035

Cross-Out

156035

Inserted Text

156035

Line

156035

Note

A good description should answer the following questions: What is it? What is it made of? Where/how will it be used? Customs authorities require an accurate description of shipment contents in written words; a harmonized code number, by itself, is not sufficient.

PACKING LIST (Lista de Embarque) SHIPPED FROM (Envio de): Date (Fecha): Tax ID/VAT No. (No de Identificación):

Contact Name (Nombre): Air Waybill No. (Conocimiento de Embarque):

Telephone No. (Teléfono):

E-Mail (E-Mail): Invoice No. (No de la Factura):

Company Name/Address (Compania/Dirección):

Purchase Order No. (No de Orden de Compra):

Country (Pais):

SHIPPED TO (Envio a): Package Type (Tipo de Paquete): Tax ID/VAT No. (No de Identificación):

Contact Name (Nombre): Total Weight (Lbs/Kgs) (Peso Total [Lbs/Kgs]):

Telephone No. (Teléfono):

E-Mail (E-Mail):

Company Name/Address (Compania/Dirección):

Country (Pais):

No. of Unit of Country Marks & Packages AWB/CRNS Measure Description of Goods of Origin Numbers (No de (Conocimiento de (Unidad de (Descripción de la Mercancia) (Pais de (Marcas & Nos) Paquetes) Embarque/CRNS) Medida) Origen) Total Packages (Total de Paquetes) Special Instructions (Instrucciones Especiales): Signature Title (Firma del Declarante/Puesto) Title (Puesto) Date (Fecha)

I declare all information contained on this invoice to be true and correct.

PROFORMA INVOICENot being in posession of a commercial seller's or shipper's invoice, I request that you accept the statement of value or the price paidin the form of an invoice submitted below. (19CFR 141.85)

DATETITLESIGNATURE

SHIPPER

Description Product No., Harmonized No. Country of Origin, Serial No.

Unit Price

Page ____ of ____

Total PriceItem No

Invoice Date:

UOM

Ship Date:

Quantity

File Number:

CONSIGNEE BILL TO

--- SHIPMENT INFORMATION ---

LettNumer: Mode of Transportation:Customer PO No:

Currency: Transportation Terms:PO Date:

Ref No: Number of Packages:Payment Terms:

AWB/BL No: Gross Weight(Kg):Incoterms Desc:

PROFORMA INVOICECONTINUATION SHEET

Description Product No., Harmonized No. Country of Origin, Serial No.

UOM Unit PriceQuantity

Ship From:

Total Price

Cust PO:

Item No

Page __________ of ______

Ship To: Invoice Date: Ship Date:

Bill To: File Num:

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APPENDIX V

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Example of packaging to be used

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APPENDIX VI

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Types of packaging currently on the market

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APPENDIX VII

000147503 147503 (1)

Business

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