Isfm 300 Kelly's Salon
By: NYCMARINE • December 10, 2016 • Case Study • 1,111 Words (5 Pages) • 2,011 Views
IFSM-300 Case Study, Stage 1: Business Environment
First Name Last Name
University of Maryland University College
7 November 2016
Kelly's Salon is a Mid/high-end salon that has been in business since 1995. In the past few years, Kelly's Salon has experienced an increased in competition. Despite the increased competition Kelly's Salon has managed to maintain popularity due to her location close to the city center and her loyal customer base. However, the latest competitor to Kelly's Salon is Hair Cuttery, a franchise salon, which will be opening at a strip mall 5 miles away. Kelly the owner of Kelly's Salon has identified customer and employee scheduling and the need for an information technology solution as key areas for improvement.
Five Forces Analysis
Porter’s five forces analysis is a simple framework for assessing and evaluating the competitive strength and position of a business. By using this model, Kelly’s Salon will be able to recognize whether new products or services are potentially profitable and identify areas of strength, to improve weaknesses and to avoid making mistakes.
FORCE | EXPLANATION (Minimum 2 good sentences) | IMPACT (POSITIVE, NEGATIVE, or NEUTRAL) | AFFECT STRATEGY? (YES/NO) |
BUYER POWER | Kelly's Salon buyer power seems moderate because the business is close to the city center and caters to the business and fashion district clientele. However, Kelly is currently experiencing customer and employee scheduling challenges, if a new business with a better internal structural balance opens nearby, the buyer power is sure to increase significantly. | POSITIVE | NO |
SUPPLIER POWER | Kelly's Salon has been ordering her supplies from the same supplier for years and prices consistently rising. Kelly has plans to enter into a cooperative with several other businesses that order the same high-end products to further reduce prices paid to her supplier. | NEGATIVE | YES |
THREAT OF SUBSTITUTE PRODUCTS OR SERVICES | Kelly’s Salon is currently thriving in its market due to their skilled hair stylist, superior products used and offered for sale to customers. However, there is a threat the Hair Cuttery could offer similar products and services at reduced prices. | NEGATIVE | YES |
THREAT OF NEW ENTRANTS | Kelly’s Salon is soon to face a threat of new entrants with the opening of the Hair Cuttery only 5 miles away. Anticipating and planning for the threat of a new entrant is the best offense and key to survival for Kelly’s Salon. | NEGATIVE | YES |
RIVALRY AMONG EXISTING COMPETITORS | Kelly's Salon has always stayed competitive with the Med/high-end services and products it sells. However, with a franchise like Hair Cuttery opening up the competition will get a lot tighter if Kelly's Salon fails to make improvement in the areas it has identified. | NEUTRAL | NO |
Justification of Selected Strategy for Competitive Advantage
After several meetings with her staff and suggestions from her customers from surveys done over the last 3 months, Kelly’s Salon selected a Hybrid strategy for competitive advantage of the cost leadership strategy and the differentiation strategy. The reason behind this Hybrid strategy is for the business cut cost (suppliers), stop losses (IT solution), and exploit the niche of providing premium products and services and providing extra benefits (neck messages, campaign, etc.) to customers at a lower cost in some areas (retail products) than the competitors and consequently attract more customers.
The buyer power for Kelly Salon's is moderate, and the impact on the strategy is positive. Hair Cuttery opening just 5 miles from Kelly's Salon will give customers more an alternative to her salon; however, by exploiting her niche of providing premium services and lowering the cost of premium retail products, Kelly will be able to keep the old customers and attract new ones. This force does not affect the strategy selected; the fact that buyers have the power to select the service that offers the best price will be advantageous as her salon is a brand name in the area.
Their supplier power has a negative impact on the business, as Kelly’s Salon has only one supplier that is consistently raising prices. This is affecting the strategy selected because it is very hard to keep costs low when the costs of supplies are constantly going up.
The threat of substitute products or services is moderate to low, as a Kelly's Salon is the premium brand in the area. If Kelly is able to cut cost, stop her losses in the areas identified and add the suggested extras her customer surveys have suggested, Kelly will continue to grow her brand and distance herself from their perceived threats. However, if Hair Cuttery decides to compete with Kelly's Salon by offering the same premium products and services this could have a negative effect on the strategy Kelly's Salon has selected to implement.
A new business, Hair Cuttery, could have a negative impact on Kelly's Salon, but this threat could be more of a perceived threat than an actual threat. Franchises like Hair Cuttery, usually offer cookie cutter type products and services. If they decide to compete with Kelly's Salon by offering the same products and services this can have a negative effect on Kelly's brand and Competitive Strategy.
Business Process
Smith & Fingar (2003) defines a business process as the complete and dynamically coordinated set of collaborative and transactional activities that deliver value to customers. Kelly’s Salon has identified customer and employee scheduling as the area that is most important for her to improve. Because Kelly’s business is customer oriented, scheduling is very important to Kelly’s business. Making sure that the right hairstylist is scheduled with the right customer at the right price when it is most convenient for them is key to the success of Kelly’s Salon. Improving this business process will support Kelly’s Hybrid strategy for competitive advantage and will give Kelly’s Salon the upper hand when it comes to buyer power and reducing the threat of substitute products and services.
Kelly needs to implement a technology solution that will enable her business to be better organized to meet customer needs, track customers and schedule staff. The software should also have cross-functional features that will allow Kelly and her employees to order products, retain customer information, maintain an accurate inventory list and order inventory.
References
Porter's Five Forces a Competitor Analysis tool - RapidBi. (2012, September 7). Retrieved November 7, 2016, from https://rapidbi.com/porterfiveforces/
Smith, H., & Fingar, P. (n.d.). BUSINESS PROCESSES Coordination, Coordination, Coordination. Retrieved November 7, 2016, from http://www.peterfingar.com/Darwin-Coordination.pdf
Effects of Competitive Advantage on Companies Superiority in the Global Market. (2015, August). International Letters of Social and Humanistic Sciences, 57, 65-73. doi:10.18052/www.scipress.com/ILSHS.57.65
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