My house contractor runs a small contracting business with one of his childhood friends. They rely on word of mouth to attract more business.
An issue that they could potentially run into is scaling up their business. Since there are only two people who are part of the business, they have a limit to how many people they can help in a day. In order to expand their business, they could hire other contractors to help, which would allow them to do multiple houses and also each house faster.
Also, since customers have information asymmetry when they hire the contractors, the initial cost of the service may end up being higher than the customer initially thought. This could affect how the customer views the contractors. The contractors have to make sure that they inform the customers of the potential costs before they begin repairs which is why they offer a quote to the clients.
Shared Value For Stakeholders:
Since they rely so much on word of mouth to attract more business, one of their most important stakeholders is the individual whose house they are fixing/servicing. For example, my contractor services most of the houses in my neighborhood because the customers in the neighborhood see that he is coming to their neighbors houses, which means that there is trust. That trust within the neighborhood which is important because that trust attracts a large amount of repeat clients.
Another stakeholder who is important is Home Depot and other hardware stores. Home Depot is a competitor for contractors because they provide goods and services which can be used to fix your house, which takes business away from the contractor business. The contracting business manages to keep its clients because it offers lower prices than buying the parts or hiring somebody from Home Depot.
The Homeowner’s Association is another stakeholder for the contracting business. The repairs and additions that the contracting business have to abide by the Homeowner Association’s regulations. The business faces the challenge of keeping the client’s interests in mind while also abiding by the Homeowner’s Association’s rules.
Small food stores face the same pressures between the need for attention to financial performance and the need to create shared value for stakeholders. They must abide by regulations and laws set by stakeholders such as the FDA, while also providing a high quality service that can beat fast food chains. To compensate for their higher prices, they must promise a higher quality, better service, or a new experience that you cannot get at a fast food chain or other chain restaurant .