Evaluation of an entrepreneurial venture Dyson

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Evaluation of an entrepreneurial venture: Dyson

Introduction

James Dyson, a UK based entrepreneur was the founder of Dyson Appliances Ltd (DAL). Dyson is famous for designing the Dual Cyclone bagless vacuum cleaner that functions on a theory of cyclonic separation. With a staggering growth of 300% and a presence in more than 45 countries worldwide, Dyson’s net worth currently is £3 billion (Cozon, 2013). In less than four years, Dyson managed to become a market leader, as regard sales in vacuum cleaners, both in the US and UK markets, which clearly shows its success story. However, the journey that started with launching the Ballbarrow in the 1970s to the production of the extremely successful vacuum cleaner in the 2000s has been a rather difficult one that involved struggles in procuring funds during the initial years to fighting court cases against multinational rivals for patenting rights. Despite these major setbacks, Dyson persevered, and transformed his company into a market leader, amidst stiff competition from large multinational brands. Dyson is considered as a great entrepreneur and his sense of innovation and business acumen is evident in his marketing a product that used a technology rejected by other product manufacturers. The product when launched was priced at double the average market rates for similar products and there were very little advertisements and marketing done to promote it; instead, DAL commissioned retailers through their own efforts, an occasional article that described the product was published in newspapers, and the name was made to spread by a general word of mouth.

Key Historical Facts

The company has a long history since its establishment in the 70s. Here, we will examine some of the key historical facts such as products, market entry, funding and others critical to its start up.

Products

The start of the venture started with solving problems with the wheelbarrow of the time. While he was renovating his house, Dyson found that the conventional wheel sunk into the ground making it inefficient. Dyson found a solution for this by inventing a ballbarrow made out of fiberglass. This was much easier to handle.

After this, Dyson encountered another problem dealing with a vacuum cleaner. The Hoover Junior vacuum cleaner he owned did not perform as he wanted and he therefore took it upon himself to develop a better model. Between 1979 and 1984, he developed over 5000 models of vacuum cleaners trying to make them more efficient. When he produced the first fully functional prototype, he had problems getting licensees in the European and American markets, mainly because other more established producers feared the competition he brought.

In 1986, Dyson began manufacture of the DC-series of vacuum cleaners. These had a lot of success on the market as discussed in the market entry segment. This series started with the DC01, DC02, 03, 04, 05, 06, 07, 08, 08T, DC9, 10, 11, 12, 13, 14, 15, 18, 24, and DC25.

Besides the vacuum cleaners, the company also deals in hand dryers. It is the manufacturer of the Airbade hand dryer series. This series comprises of AB01, AB03, AB06, AB07, AB08,AB09, AB10, AB11. The company also diversified into production of a bladeless fan called the Air Multiplier. The company also produced the contrarotator washing machine CR01. This was followed by the CR02. The company however dropped this product line and ceased to provide any support services for it.

Market entry

The first vacuum cleaner that the company ever sold was sold in Japan for an equivalent of $2000 in 1986. This was not a sustainable venture for mass production. After setting up a research facility in Wiltshire in 1993, a cheaper model, the DA001 was produced and retailed at $200. The DC01 later replaced this model and became popular for its transparent dust box. In just 18 months, the DC01 became the biggest selling vacuum cleaner in the market. Due to its success, the design was heavily copied.

After creating the DC01 design, Dyson used his experiences from his previous other products, especially the ballbarrow, to plan a marketing strategy for his product, wherein he first ensured all patenting rights were secured before starting negotiations (Dyson, 1998). This is an important step in strategic innovation and management, where an entrepreneur in order to protect his intellectual rights from powerful multi-national firms, must secure patenting rights to prevent any future sabotage or theft (Hart, Fazzani and Clark, 2009). However, Dyson in his book mentioned that despite all necessary precautions, from his previous experiences he was almost sure that the corporate giants would aim at stealing the design from him, regardless of all protection taken (Dyson, 1998).

While trying to market his innovation, Dyson was willing to accord a licence to production companies with special rights to patenting, and as takings, Dyson asked for a certain percentage from the profits made on product sales. In this instance, Dyson’s strategy aimed at offering a license for five to ten years, along with 5% royalty on overall price and an immediate down payment of £40,000 (Dyson, 1998). Furthermore, Dyson was willing to help creating the product from its original design. However, the leading manufacturers of vacuum cleaner at that time, such as, Electrolux, Hoover, Vax, Black and Decker, amongst many others refused to take his offer, and instead some focused on finding defects in his design (Dyson, 1998). In some cases, the MNCs expected him to give all patenting rights for a meager compensation. Sometimes Dyson faced difficulties while agreeing to negotiate, owing to the issues of protection of intellectual rights that would inevitably arise during negotiations with the designing experts of the concerned MNC (Dyson, 1998).

Funding

As mentioned earlier, the company faced challenges getting licensees from the American and European markets. However, in 1983, Apex, a Japanese company, licensed the G-Force model and publicized the model in the design magazine that year. In 1986, the production version of the model was launched in the Japanese market. One of the factors that made it very popular was that it could be folded into a table and stored in the small storage areas in Japanese apartments.

With the income earned from the Japanese license, the company was able to set up the Wiltshire research facility and come up with cheaper models. Since all appliance-producing firms had previously rejected his offer Dyson devised a new marketing plan, wherein he decided to offer his product to the UK contract manufacturers (Dyson, 1998). Next, Dyson opted to offer serial contracts to two separate manufacturing companies, where one firm would only create components and the second one would to do the assembling. However, here Dyson faced another setback, where the two firms chosen by him created certain problems. He did not accept the quality of the product manufactured, and found that the firms were placing his work in-between other old contracts, thus not giving the attention necessary to manufacture good quality products. To deal with this setback, Dyson took a major decision, where he decided to produce and assemble all by himself. He started by buying moulds from moulding firms and tried building his own factory (Dyson, 1998). However, here he faced more difficulties, related to procuring adequate funds. He discovered that getting a financial loan, even with a successful business product was extremely difficult. To overcome this problem, Dyson looked at the setting up his factory in places where governmental grants were possible, but David Hunt, a Welsh Minister, rejected his application (Dyson, 1998). By this time, more than a decade had passed and he had spent nearly £2 million. Finally, after a long negotiation, Dyson managed to convince his local bank into granting him a loan, which allowed him to establish his production unit in Wiltshire, and finally the first bagless vacuum cleaners came into the UK market in 1992 (Dyson, 1998). USP (Unique Selling Position)

After the manufacture of first series of the bagless vacuum cleaners (DC01), James Dyson started visiting famous retailers, such as, Comet and Dixons to procure order for sales. Once again, Dyson met with a failure. The retailers failed to understand why consumers would buy a machine that was three times more expensive than any other vacuum cleaner already present in the market. Finally, few home catalogue firms decided to feature the cleaner in their product lists, while a Midlands electric store decided to stock them. The sales picked up very slowly but later showed a constant rise, and finally the John Lewis store decided to stock the innovative cleaners. After this, product sales showed a rapid rise, and the company soon turned into one of the market leaders, in the arena of vacuum cleaners.

James Dyson adopted a new concept in sales and marketing, where no advertisements were made to promote the product, which was another major risk, taking into consideration the hurdles faced previously (Janney and Dess, 2006). In this context, Dyson maintained that being product orientated, he always felt that with good quality products promotional works are not an absolute necessity (Dyson, 1998). Therefore, despite using a completely new technology, he did not spend large amounts on advertisements and relied only on a handful of press releases and print features.

Key Strategic Decisions

In order to survive as an entrepreneur, Dyson had to make several strategic decisions to ensure the well being of his company an profitability.

Target market

Dyson started with markets in Japan. The G-Force design had a feature that allowed it to be folded into a table. The structure of Japanese apartments is small and therefore has limited storage space. The folding feature saved space and made the design popular. This led the design to win the international design fair prize in 1991.

Initially, Dyson had contracted two manufacturers in an effort to serve the needs of the UK market. However, since they did not meet his quality needs, he decided to do the manufacturing himself. Quality was an important contributor to the company’s success.

Funding

After taking over manufacturing from the two companies, Dyson faced challenges in funding and setting up his production plant. His efforts to set up in areas with government grants were futile since his application was rejected. However, he eventually managed to secure a loan from a local bank and establish his production plant in Wiltshire. This made it possible to roll out his products in the UK market.

Marketing strategy

When Dyson entered the US markets in 2002, he decided to adopt a new marketing strategy, where he did not apply for any intellectual property protection, and simply relied on the brand name and image. Currently Dyson is “the top selling upright vacuum cleaner brand in the US, with a near 27% market share” (BBC Business News, 2012). Dyson used a marketing strategy in the US that was different from the UK/Europe strategy, wherein a successful advertising campaign worth millions of dollars was used. In Japan, Dyson became the third largest name in vacuum cleaners after overtaking Toshiba, and here Dyson strategically made an innovation in the name of Dyson DC12, specially designed for consumers in Japan. Owing to the huge success in Japan and the US markets, the company “turnover was £1.05bn, up from £887m in 2010 [and] its earnings grew by 30% in 2011 to £306.3m.

Route to market

Dyson has been increasing the amount of products it sells outside the UK. Last year it sold 85% of its machines outside the UK, compared with 30% in 2005…[furthermore] Dyson – which now employs nearly 4,000 people worldwide – also said that it planned to increase its spend on research and development by 20% over the next five years” (BBC Business News, 2012).

Evaluation of the Decisions

From the review, it is clear that Dyson exhibited many of the characters, skills and behaviours given in the various definitions of entrepreneurs. He exhibited perseverance and self-confidence even when his plans failed to take-off, he remained goal oriented despite constant failure and stiff opposition; he was able to make strong decisions that involved taking risks to some extent. He was oriented towards problem solving, and was a successful negotiator, which is evident in his dealings with the Japanese firm and later the local bank. Besides these, his designs showed creativity, he made use of all possible opportunities, and was adept at dealing with setbacks and uncertainties.

Besides designing a revolutionary technology, Dyson had used various innovative marketing strategies that varied according to the needs of the targeted market. His perseverance in face of constant failures and setbacks, his self-confidence, his sense of conviction in his own invention, and his ability to make decisions and negotiate, made his entrepreneurial venture a complete success, despite lack of promotional advertisements and a stiff competition from powerful multinational brands. The process of entrepreneurship, as derived from the above case study, appears as a persistent pursuit and seizing of opportunities, regardless of the resources that remain under the entrepreneur’s control, and it is in sync with the definitions provided by the experts.

In the last two decades, policy-makers have acknowledged that that small business enterprise play a significant important role in promoting industrial growth and increasing job opportunities (Deakins, and Freel, 2009; Burns, 2011). Reviews showed that in the US, small firms with fewer employees (less than 20), created a large scope for new job opportunities (Birch, 1979). These figures later encouraged the UK government (under Thatcher) to establish a form of ‘enterprise culture’ that encouraged innovations in the field of business and management (Bridge, O’Neill, and Cromie, 1998). This interest by the government was reflected in the form of enhanced focus on innovation and entrepreneurship in the last two decades, in the context of promoting small business firms (Chell, Nicolopoulou and Karatas-Ozkan, 2010).

To delineate an entrepreneurial person some specific characteristics, skills and behaviors are generally associated with that person. Characteristics include perseverance, resourcefulness, confidence, goal oriented and adaptability; skills include ability to make decisions, solve problems and negotiate; and behaviors include creativity, opportunity seeking, and dealing uncertainties and setbacks (Gibb, 1999).

Stevenson and Sahlman suggested, “Entrepreneurship is the relentless pursuit of opportunity without regard to resources currently controlled” (1989, 104). In another definition Stevenson and Jarillo stated, “[It] is a process by which individuals – either on their own or inside organizations – pursue opportunities without regard to the resources currently controlled” (1990, 23). Later Chell claimed that the process of entrepreneurship involves “recognizing and pursuing opportunities with regard to the alienable and inalienable resources currently controlled with a view to value creation (2007, 18). From the above definitions, it is evident that entrepreneurship is a process where a business venture lacks full control over the available resources. In this context, it must be kept in mind that resources do not merely relate to economic terms, but include social and human capital (Barringer and Ireland, 2012). Additionally, to act as an entrepreneur, one must work in a venture that creates and adds value. Besides these, entrepreneurs generally have a strong network, which they use for procuring social capital and creating a wide scope for turning their objectives into reality (Chell and Baines, 2000).

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