Entrepreneurship involves risk-taking because some of business ventures that entrepreneurs undertake are novel, untested or located in places full of experienced competitors. The microbrewery venture in Virginia Beach is a risky undertaking because the company will face numerous competitors with both resources and experience. Thus, the success of the new venture requires innovation and a continuous supply of new ideas to outperform the competitors and win a significant market share. A microbrewery is a type of business venture that produces less than 15,000 barrels of beer per year. Additionally, the venture must sell at least three quarters of beer off their premises. Given the unique nature of microbrewery compared to a large beer brewing business, it is easy to get the resources needed to undertake the venture with limited constraints. The microbrewery in the Virginia Beach will cater for the local needs of the residents of the area by creatively testing different ingredients and establishing the most ideal combinations. Since the operation will be localized, it will be possible to get feedback from clients at the prototyping stage and incorporate the required changes before full-scale production. The size of the operation will thus be an advantage because the business will incur fewer expenses than a large brewery when testing the products before launching them. This paper will explore whether the microbrewery has a chance to succeed in Virginia Beach, options the business will provide to satisfy the needs of the locals, available competition, an appropriate business model, sustainability of the venture and a reflection on the lessons learned through the new venture creation process. The microbrewery venture will be successful because it will utilize innovation and creativity to appeal to the needs of the local clients and use both market segmentation and targeting to differentiate its products from those of competitors.
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Opportunity and Solution
The population of Virginia Beach is one of the factors that created an ideal opportunity for the operation of a microbrewery. As of the 2016 statistics the population of Virginia Beach is about 437,994 (Suburban Stats, 2017). There are six serious competitors in the microbrewery business in the area. The fact that there are few micro-breweries serving a significant population creates an opportunity because the competitors cannot meet the needs of all people in the area adequately. According to Stokes, Wilson & Mador (2010), unmet needs in a given market represent an opportunity for organizations to enter such markets and satisfy them. Second, there has been a fundamental shift in the beer drinking culture in the United States (Warner & Erie, 2010). When the general beer market stagnated during the recent tough economic times, the craft beer market experienced a steady growth. Such a shift in the drinking culture shows the potential of the microbrewery market segment. The coming of age of millennials has expanded the opportunity (Warner & Erie, 2010). Millennials have redefined the concept of drinking out because they prefer local beer products to national and international ones. Since millennials like new and unique products, micro-breweries are best suited to meet their tastes and preferences. Since micro-breweries are operated by few people within a local area, they can adapt to customers` changing tastes. Virginia Beach has become a famous tourist destination. Most of the existing micro-breweries in the area have themes reflecting local culture. However, as the area turned into a tourist destination it has created an opportunity that others have not explored. Since the tourists may have different tastes and preferences, their needs can be incorporated into the existing recipes. The regulatory regime has also played a part in the creation of opportunities in Virginia Beach. Laws have been changing in the recent past to position Virginia as a leading craft beer destination. Senate Bill 604 allows breweries to offer samples of their products on their premises. The bill has created an opportunity for local micro-breweries as they can provide tasting rooms, thus attracting more clients. Drinking beer from the source is a unique experience that many people in Virginia Beach enjoy. The local authorities of Virginia Beach also scrapped equipment and machinery tax to attract investments. Eliminating the tax is one of the reasons that have made Virginia Beach a leading destination for micro-breweries. As such, entering the microbrewery market in Virginia Beach area is justified by the potential of customers` unsatisfied needs and satisfactory environment.
Given the numerous supporting factors that have created an opportunity for micro-breweries, the venture being reviewed in this paper aims at utilizing the opportunity in different ways. First, its entry into the Virginia Beach market will provide the solution to customers` unsatisfied needs due to the small number of microbrewery businesses located in the area. Second, the investment will play a critical role in the shifting beer drinking culture in Virginia Beach. The shift is an indication that the micro-brewing industry will continue to experience changes. The microbrewery venture, therefore, will become innovative and lead to the shift instead of playing catch-up. Anticipation of the next change in the industry will provide the business with a competitive edge and endear it to the locals (Nirjar, 2011). Third, the venture will capitalize on the growth of tourism to enrich the craft beer market. The microbrewery will examine the number of tourists in the area and their places of origin to customize types of beer accordingly.
The prospective venture will face numerous challenges, one of which is competition. Direct competition from other micro-breweries is the most significant obstacle for the business venture. Although some of them serve the general population without targeting specific groups, others offer specialized products that attract people with certain characteristics. Back Bay Brewing, Pleasure House Brewing, Common Wealth Brewing and Reaver Beach Brewing are some of the most serious competitors as their beer recipes are unique. One fierce competitor is Black Bay Brewing because it has the capacity to change recipes on a weekly basis. Common Wealth Brewing and Pleasure House Brewing participate in charity work to differentiate themselves from the rest of the micro-breweries. Young Veterans Brewing is unique because the founders are army veterans and sell beers with names that reflect military culture, for example, new recruit and pineapple grenade. There are significant numbers of military personnel in Virginia Beach because of numerous military bases in the area. Thus, Young Veterans Brewing is likely to attract the largest number of military personnel in the area. The uniqueness of the place is thus a differentiating feature that makes the microbrewery different from the rest. Wasserhund Brewing combines its beers with various cuisines. For instance, it provides menu that reflects European cuisine; thus it is likely to attract more people of European descent than its competitors. Despite the existence of the competitors, the reviewed microbrewery can still enter the market and win a considerable market share.
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The microbrewery venture will be different from the rest of the competitors in different ways, including market segmentation and targeting. One of the aspects the venture will use to segment the market is ethnicity. Virginia Beach has a population of about 296, 000 Caucasians and 85, 000 African Americans (Suburban Stats, 2017). The existing competitors have focused more on White Americans and their culture and have failed to recognize the potential of the African-American population. Part of the company`s strategy will be targeting African-American neighborhoods with beers made using recipes that reflect their traditions. Such targeting can provide the microbrewery with a first-mover advantage and help it take a leadership position in the market. The second segment will represent the tourists coming to Virginia Beach. The identification of the biggest tourist groups that visit Virginia Beach and their places of origin will help create profiles that can guide the microbrewery in deciding the most profitable tourist groups to target with beers made using ingredients from their home countries. According to Page & Ateljevic (2009), tourists appreciate the effort made by destination managers to offer unique products that appeal to their needs. As such, apart from sampling local beers, the tourists may be pleased if they find offers that appeal to their cultures and traditions. The third segment will be the Caucasians. One of the strategies to differentiate the venture from the competitors will be seeking collaboration with local universities to create unique products and services. Utilizing millennials from institutions of higher learning as interns will inject new knowledge and creativity into the business and empower the enterprise to become more competitive than others. Using millennials to generate ideas will be critical because the potential clients will be millennials (Nieuwenhuizen, 2011). Consequently, making them part of the innovation and idea generation will provide the microbrewery with a unique understanding of millennials behaviors and thus help target them with products that appeal to their tastes and preferences.
Business Model-Financial Considerations
The microbrewery venture will generate revenue by selling beer off-site and on premises. More than three quarters of beer will be sold through third parties such as retailers at various outlets. The enterprise will partner with restaurants to pair beer with food of different cuisines. The compatibility of such pairing has the potential to generate new ideas and increase revenue. The microbrewery will also participate in beer festivals to sell its products. The festivals will act as a source of revenue and a market strategy by exposing the products to current and potential customers. The customer base of the business will be locals from Virginia Beach and tourists visiting the area. The types of beers will grow as new recipes are developed. However, each type of beer will be customized to suit the tastes of each market segment.
The financing of the enterprise will come from personal savings. Although the use of personal savings to start a business is beneficial, it may pose some challenges. The advantages may include the ability to take great risks and being flexible. However, there are several concerns regarding use of one`s savings to finance a business. First, personal savings can be limited and get depleted before the business takes off. The consequence of such an eventuality is that all the savings will be used up and the business will stall for lack of additional capital. Second, the savings may not allow an entrepreneur to hire the required team to facilitate creativity and innovation that power the success of the business.
Some of the solutions include the utilization of interns as employees at the initial stages, prior adequate planning, and collaboration with local universities and colleges. The use of student interns will save money that would have been used to hire employees. Since the entrepreneur starting the venture has expertise, creativity and innovation in the micro-brewing sector, the interns will provide fresh ideas and support. Initial planning is essential to understand the market and customer characteristics, which can help avoid pitfalls that may require additional financial capital. Collaborating with colleges and universities can be beneficial because they can become a potential market and assist in research and development of products at reduced costs.
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The sustainability of any venture depends on how the company manages its finances, and social and physical environments. Failure to manage them appropriately leads to the depletion of resources, inability to maintain operations and lack of support from the locals (Read, Sarasvathy, Dew, Wiltbank, & Ohlsson, 2011). As such, organizations must build resilience by balancing the competing needs among all the stakeholders and managing resources responsibly.
One of the concerns that may affect the microbrewery is the depletion of agricultural resource in Virginia Beach area. The attractive business environment created by the business-friendly regulations has attracted beer brewing investors from different parts of the United States. Consequently, farmers may fail to manage their lands responsibly in pursuit of higher earnings available from various breweries. Eventually, the soil may lose its ability to sustain the growth of hops and other ingredients used in the beer brewing industry, which may affect the sustainability of the microbrewery.
The intense competition may lead to the deterioration of quality, which is the hallmark of the microbrewery sector. As the number of breweries increase, the people operating them may lose focus on quality as they attempt to focus on market acquisition and retention of market share. When the quality deteriorates, there is no differentiating factor between microbreweries and large brewery corporations. The microbrewery may lose market share to large corporations because of loss of quality.
Consolidation and cooperation with other microbreweries can solve the problem of the depletion of resources in agricultural farms. Collaboration can pull resources together to support farmers and to educate them on the use of sustainable methods of farming. Additionally, consolidation can help create entry barriers into the market, which can reduce the inflow of small competitors (Drucker, 2014). The prevention of such competition can ensure sustained revenues.
The microbrewery will solve the quality problem by establishing a quality assurance program. The program presents the conditions that the products should meet. Second, the program will highlight the steps to be taken to facilitate continuous quality improvement. Taking such steps can help the microbrewery succeed and ensure its sustainability.
Reflections & Other Considerations
I have learned many things about myself and venture creation, which will propel me into the future as a confident entrepreneur. I have learned that the ability to perceive needs in the external environment through interactions with other people is essential for an entrepreneur to be successful. The perception helps to identify potential ideas that others have not exploited. Acting on such ideas can lead to innovative products with attractive financial gains. Second, I have learned that I am eager to succeed in every venture and I am attentive to details. The latter has helped me identify the potential in the micro-brewing industry. In regard to the venture creation process, I have learned that innovation and open-mindedness are critical success factors. When searching for an appropriate opportunity to exploit, I have realized that the micro-brewing sector survives due to innovation and the ability to accommodate a change in tastes and preferences. Consequently, I realized that open-mindedness is extremely important as it is related to the way in which people approach the ideas of others, making it possible to come up with revolutionary innovations. In the process of creating the venture, I have realized that both theory and practical knowledge in specific industries are critical to the success of an enterprise. As such, in the future I will be ready to ensure that I have prerequisite skills and knowledge in every venture I set out to establish.
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The existence of unmet needs and the use of segmentation and targeting will enable the microbrewery venture to succeed. The factors that have created the opportunity in Virginia Beach include the population, the number of competitors, the change in the US drinking culture, the presence of millennials, preference of craft beers, and tourism and friendly regulations. The solutions the venture will provide include satisfying the unmet needs, taking the leadership role in the changing drinking culture and capitalizing on tourism to create a new market segment. There are six main competitors in the area. Some target specific types of clients, e.g. war veterans, while others serve the general local population. The microbrewery venture will use targeting and segmentation to differentiate its products. The business will earn money by selling beer in restaurants, on-site and at beer festivals. Personal savings will be used to finance the business, however, there might be a problem as there is a limited amount of money to spend and thus it might be impossible to support the business until it can generate cash of its own. The problem can be solved using interns, planning adequately and collaborating with learning institutions. The threats to the ventures sustainability are depletion of resources and fierce competition, however, they can be overcome using consolidation and working together with other microbreweries.