Entrepreneurship Failure: Case of Petite Palate Company - Research Paper Example

? Entrepreneurship Failure Affiliation: Background of Petite Palate Company Business enterprises are established to exploit existing and emerging market opportunities. Competition in these markets is expected to stiffen as more entrants come in, raising the number of competing enterprises in the market. Creativity and innovativeness of an entrepreneur pushes the business to the next level. These are the scenarios that Petite Palate Company had to deal in the with U.S baby food industry when it established its operations in the year 2006. The company was set up in Long Island City, New York. Petite Palate specialized in producing baby food, and targeted Northeast and Midwest markets of the United States. At the time the company started its operations, the market had become significantly competitive due to the number of players that had already established operations in prior years. On the same note, the enterprise was essentially a gourmet baby food company that only pursued this line of production, unlike other players who had mixed lines of production for diversity purposes (Lawrence, Lyons & Wallington, 2012). The dedication by the enterprise to gourmet baby food constrained its operational strategies in terms of diversity. The baby food industry and the markets in this industry were experiencing an ever growing trend in terms of operational business enterprises and baby food and baby formula varieties before and during the time Petite Palate started its operations. As a result, competition in the targeted markets was relatively stiff. Petite Palate had to compete against Gerber Baby Food, Beech-Nut Baby Food, Enfamil, and Carnation Formula among others. Most importantly, capturing Gerber customers was a significant operational challenge for Petite Palate. This was due to Gerber’s size, market share in the industry, and consumer loyalty that it enjoyed in the U.S markets. Petite Palate Company’s business vision was to become one of the leading producers of frozen baby food. This followed the belief that such food was healthier for children, compared to other types of baby foods that were not frozen; like food contained in jars and pouches (Smith, 2007). This business vision lasted for four years, since the company started its operations in the year 2006, only to close four years later in October 2010. In the four-year period that the company operated, it remained within its belief of frozen baby food as opposed to shelf-stable formulations that its rival firms provided in the markets. Reasons for Failure Business enterprises fail due to myriad reasons, all of which revolve around their plans, business strategies, and overall operations. The most contributing factors to business failure are financial, market, or economic-based. Mismanagement of resources has also seen many businesses collapse on the verge of their success. Poor planning, overestimation of business potential, and poor implementation of business strategies are also contributing to business failure (Platt, 2009). In the context of Petite Palate Company, the setting of its operations could have foretold that failure was looming. The company set up its operations in a substantially competitive market, but then limited its production to baby food that could be frozen. As earlier mentioned, the company regarded frozen food as healthier that shelf-stable formulations. This was the belief of the company’s founders; Lisa Beels and Christine Naylor. This belief plunged the company into a limited operational capacity at a time when market growth was exacerbating. In the year 2007, Petite Palate Company’s products hit the Northeast and Midwest markets, selling in about 100 stores (Lawrence, Lyons & Wallington, 2012). The same year, the founders of the company prepared and presented Petite Palate’s business plan in a bid to mobilize investment funds and resources to the company from potential investors. The company hoped to raise an amount between two and a half and five million dollars. The company successfully managed to get potential investors invest in the business. The year 2008 experienced an unstable economic business cycle. During this time, Petite Palate Company’s potential investors withdrew their investments and subsequently pulled out of the company. The company plunged into a financial crisis, and before long many groceries ran out of Petite Palate’s stocks. The company was going through operational hardships in its production line due to lack of adequate finances. Amid this, the founders remained skeptical that the situation would not worsen, and held their frozen food beliefs in relation to children’s health. Due to the financial difficulties that the company was experiencing, it resulted to borrowing in order to finance its production operations. Potential investors shun investing in the company following the decline in economic performance across the United States. Over the next few years, the company got into huge debts, and sometimes failed to service them as they fell due. The situation worsened over the same period, to a point that the business founders could not support the business any longer. As a result, the business collapsed and finally closed in October 2010. There were other contributing factors to the failure of Petite Palate Company. One of these factors is operational inefficiencies. The company failed to exploit its full potential, right from its establishment to the point where it successfully lured investors into the company. The company’s production line was limited following the beliefs that its founders held. The company, therefore, lacked product diversity and competitive advantage. Other competitors in the market like Gerber had established their operations way before Petite Palate did. This gave Gerber and other rival firms a market advantage over Petite Palate. These competitors also offered shelf-stable formulations in the market, thereby outperforming Petite Palate. Over and above this, Beels and Christine’s management style can be termed dysfunctional due to the operational and production decisions they made, thus further contributing to Petite Palate’s failure. Analysis Petite Palate’s survival in the U.S baby food industry was based on more factors than just offering organic frozen baby food in the markets. The founders failed to acknowledge the real world scenario and trends in the U.S markets. Although the product the company was producing was supposed to stand out against competitors, this product could have been complemented by products that other business enterprises were supplying to the markets. Doing so could have made Petite Palate stand out against competitors by offering a unique product, yet fully differentiated from those were already available in the markets. This means that Petite Palate’s organic baby food could have been produced alongside shelf-stable formulations. The management of the company was one-sided. This means that the management was rather fixed in a specific way of doing business, thereby failing to embrace diversity and dynamism of business. As a result, they only held one belief until it was too late to reverse their decisions. The founders of the business should have engaged follow-up programs to assess and evaluate the performance of their product in the target markets. Failure to follow-up and evaluate business performance represents an aspect of dysfunctional management and failure to apply flexible business practices (Keough & Buffett, 2011). The business could have survived if the management could have run product monitoring programs in the relevant markets. The financial aspect of the company appeared to be unstable one year after its establishment. The founders, as earlier mentioned, prepared and presented business plans with an aim to raise more money to run the business. This shows that the financial position of the company was deteriorating one year after its establishment. The management should have been aware that economic downturns result in economic pull outs. In this regard, the management could have pursued alternative financing options, with or without the integration of potential investors. This could have created financial diversity right from the start, rather opting to debts when the business performance could not service debts. The business idea was thoughtfully generated, but the implementation plan was poorly done. Conclusion The success of a business depends on all-round management of the factors and variables that influence that business in its industry. Social, economic, financial, market, and industry factors all account for the success or failure of a business enterprise. Surviving stiff competition requires effective planning and execution of business strategies. Evaluating the potential of the business against financial position of the business is vital in enhances business success. Petite Palate’s failure was pushed by operational factors that could have been addressed before its performance got out of hand, leading to its failure. References Keough, D. & Buffett, W. (2011). The Ten Commandments for Business Failure. New York: Penguin Group USA. Lawrence, G., Lyons, K. & Wallington, T. (2012). Food Security, Nutrition and Sustainability. New York: Routledge. Platt, H. (2009). Why Companies Fail: Strategies for Detecting, Avoiding, and Profiting from Bankruptcy. Michigan: Beard Books. Smith, A. (2007). The Oxford Companion to American Food and Drink. Oxford: Oxford University Press. Read More