Entrepreneurs: Dealing with the rival Sometimes the simplest choices are the hardest ones. For many years, Samad father has operated a small kiosk in the local weekend night street markets (pasar malam). A long time ago he had a clever idea that has since blossomed; directly importing cheap sarongs and shirts from Indonesia, and selling them to the many tourist, students and low income earners who visit the markets. As the only clothing vendor in the night street markets, business has been good for Samad’s father. Income from business is not huge, but it’s worthwhile averaging a net profit of about Rm 300 per day, once the cost of the shirts, stall fees and business operating costs are taken into account. The night street markets operate every Thursday, Friday, Saturday and Sunday, leaving three days per week free to either spend on other pursuits or leisure. Samad has already known the business well, since he has frequently helped in the stall on weekends. Samad’s father has now indicated that he wants to retire and is prepared to sell him the business. If Samad is prepared to give him Rm 200 a week for the next three years, the enterprise can all be his. It’s a very reasonable price, and less than what Samad would pay on the open market. However, just after Samad has finalized the verbal agreement with his father, he received a phone call from a much larger stall trader in another city. She tells him that she plans to move into his markets within the next 12 months, as part of a national expansion plan. She is prepared to pay Samad Rm 35,000 for the business and give him the chance to work for her. Otherwise, she warns, be prepared to face stiff competition in the immediate future. (Source: Chapter 4, Case: The shirt on his back (pp.97), Scharper, M., Volery. T., Weber, P., and Lewis, K., (2011) Entrepreneurship and Small Business 3RD Asia Pacific Edition, John Wiley Publications)
Answer ALL the questions.
1. Describe the different options that Samad has for the next 12 months. (4 marks)
2. Explain each one advantage and disadvantage of the different options that is described in question 1. (16 marks)
3. Would a typical small business owner react differently to this situation than an entrepreneur? Explain your reasoning.