Pranav Case Analysis by Dr. Anna Noreen Antoinette P. Tamayo

Tamayo, Anna  Noreen Antoinette P. Tamayo

AGSB MBAH 10b  Entrepreneurship

Prof. Jorge Saguinsin

March 4, 2013

Pranav Case Analysis

            This is a case of two graduate school students who have chosen to put up a male salon and spa at Robinson’s Galleria Mall in Pasig.  The idea of putting this up is to fulfill the requirements in one of their subjects in their MBA course.  They had made a market study on their idea through a focus group consisting of their classmates, and a general market study of the patrons of the mall, while completing their loan requirements.  They opened only after a few months, despite the discouragement of their mentors, and less than ideal market study.  After three months, they evaluated the status of their project and learned that they were loosing around 800,000Php.  Along side with this, the threat of failing their subject prompted them to make a follow up market study.

 

            From an external point of view, the concept is new but was something that needs a lot of study and strategy, precisely because it is a new and unexplored.  Though I understand that they had a deadline, and there was, certain optimism, in their focus group, it didn’t excuse their lack of feasibility studies and impulsive decisions to open.

 

            I also think their concept is optimistic with the male vanity trend catching up, but before jumping in, better studies should have been done.  First, the feasibility of their location and market, was not well thought. 

           

            On their location, though Robinson’s itself is a good location for a business, because it is at a cross of main roads and surrounded by business and residential centers, it may not be an ideal location for such an exclusive business concept.  Also, even their location in the mall itself is not a very good location.  They are located on a place, in the mall, where there is hardly any traffic.  It is nice that it belongs to a themed area, and more peaceful, since it is a spa, but it is not going to do anything to make their presence known, but this is what they need, since they are new, their concept is new, and it isn’t for everybody.  They need to be seen.

 

            On their concept, they had a focus group, which was a mismatch with the market of their location.  The focus group, consist of graduate school students.  These are young urban professionals, which will definitely match the PTM of their business, hence their optimism, but this is not the PTM of their location. 

 

            What is more vital is the market study of the Robinson’s Galleria.  They already got some information from the mall regarding foot traffic initially, the results of which, were pointing towards a more widespread market, not just a single leveled market, a majority of which, will most probably not be their patrons, because they are female.   Also, the demographics of their male market is, also mostly mid to lower end.  They are high end, then obviously, the market may not be interested at all in their business.

           

            There are several roads they may take to save their business.  They have already made a study on their competitors, so they know what the Robinson’s male and female market is looking for.  From here, they can decide to either convert it to a unisex salon and spa, or leave it as exclusively male, but find a better location, whether inside the same mall, or in another place, more suitable to their PTM. 

 

            Whichever one they opt for, they must work double time to revive the business.  They need to MARKET themselves.  They need to make their presence known.  They need to RELAUNCH themselves and their new business concept and offerings.  They must give apt weight to the results of their improved market studies, as it should be apparent in their new business and market strategies.  Of course, whichever road they, have chosen, they must make themselves known as such. 

 

            After study, re-launch, presence, and branding, they must also launch their new business offerings, packages and promos, according to their chosen market.  They could also ride with trends and other current interests and link new products to their current services.  Also, their marketing should include every single part of the mall, and its immediate vicinity.  Included in the over-all campaign should be, the Internet or world wide web, social networking sites, and deals and steals sites. 

 

            Lastly, they should invest on those barber chairs, because IT IS, the most prime equipment needed in a salon to maximize its space and services.

Pranav Case Analysis by Deogracias M. Danguilan

Deogracias M. Danguilan

MBAH 10B

Entrepreneurship

Prof. Jorge Saguinsin

 

 

A Micro Market Analysis of Pranav New York

 

To put the case analysis into context, it is necessary to first present an overview of Pranav New York's business concept:

Pranav New York is a one-stop-shop grooming and wellness center for the sophisticated working urban males. Pranav New York is envisioned to be the first male salon/spa in the Philippines and is located within metro manila. It is therefore an integrated full-service barbershop, salon and spa which exudes a masculine atmosphere and that which further differentiates itself through the unique and personalized experience it provides its customers. This business concept was born primarily by the emergence of a trend wherein male individuals are starting to avail of salon and spa services and the lack of an establishment that focuses on serving the male market segment with these particular types of services.

 

Mark and Carlo, before starting their venture, supposedly did due diligence analysis by implementing a relatively extensive research. It was admirable that they did a general scanning of the environment, including using methodologies as exploratory interviews, FGDs and immersion exercises to validate the initial assumptions that they used to formulate their business concept.  As it was presented in the case, however, they still left a lot to be desired in that they should have done more pre-operations analysis and scrutinized better the data that they have gathered. More importantly, the very critical element of micro market analysis which is the location of the business should have been more closely examined and carefully selected before having finally decided.

 

It was not surprising, however, that Pranav New York incurred losses after operating only for three months - obviously, it was still and only at the infancy stage of business. Be that as it may, one cannot help but notice the glaring magnitude of losses incurred and see gaps and loose ends in how they were able to justify pushing through with their business concept in the first place. 

 

 

The business concept of Pranav New York was basically established on a trend of increasing male individuals availing of salon-based services. Looking at trends, especially at trends involving changing patterns of behavior, is helpful at determining emerging markets. A positive trend, however, might not equate to an existence of a viable market. In the case of Pranav New York, it seems that the unique and emerging male market segment is still not ripe for the picking and might not be able to reach a critical mass needed for profitability and sustainability of the business.

 

An important observation to bring up is that the data that was gathered before operations were not reflective of a clear economic potential of Pranav New York and ofcourse did not make much business economic sense. The data that was gathered prior to operations contributed little to make quantifications as to the viability of the concept. The data may have definitely shown the potential of the business concept in terms of trends, however, the analysis that was made was not enough in that it was not able to translate the data into quantifiable terms that are significant to any new business venture such as market size projections, the projected initial market share, the capacity needed in order to be profitable, the projected costs of operations, the profit and cost drivers of the business, and especially the projected future earnings of Pranav New York among others. This just shows the importance of strategic business planning in risk management especially in starting a new enterprise.

 

Of particular interest in the case study worth mentioning was the process in how the location of Pranav New York was selected and decided upon. As shown in the case study, they were influenced much by time requirements, self-imposed or otherwise, and the availability of spaces for lease at their targeted commercial centers. Since the quality of location is very crucial, especially for businesses targeting end consumers, the entrepreneurs should not have made such harried decision.

 

As they continued doing a study on their selected location (and this was after they have already made commitments with the management of Robinson's Galleria), it can be observed initially that it must have been a good pick since the business will have the advantage of having a relatively high exposure to foot traffic. When studied further, however, some subtleties were observed which turned out to be headwinds for their concept such that a female population dominated the demographic mix of the mall (60:40 ratio), and that the male market concentration within the given location of Pranav New York in that part of the mall was relatively low. It is also worth noting that the market leader among its competition targets a low-end mass market. This may largely indicate that the general market within the mall is actually sensitive to price and may mean that only a narrower portion of the general market might qualify for Pranav New York's preferred target market.

 

A further analysis of the case would allow us to see other relevant factors that influence and put pressure on Pranav New York's profitability and sustainability:

a. The current volume of demand was not enough to meet the minimum requirements of the business to break even

b. Adequate attention to increasing the volume of the value-driven services (auxiliary services) delivered is needed since high value services are a major part of forming the business' profit model

c. The infrastructure and equipment should be critically considered as it would affect capacity of the business and would therefore impact profitability (barber's chair vs. a fixed chair, total capacity relative to floor area, etc.)

d. Cost analysis showed that the inherent cost structure of Pranav New York is apparently highly leveraged

e. The female market is far more attractive in terms of spending level (90% more than males on grooming services according to the study)

f. A common age group between the male and female market segments was observed which 20-39 years is

g. It was apparent that the average customer per day was higher with competitors that targeted a unisex market

h. The spa segment of the business is dragging down profitability due to volume and cost and is subject to external threats coming from alternatives and the sensitivity to price of the market.

 

As a result of the analysis made, I am inclined to recommend the following on the premise that the primary problem of the business is the volume of demand relative to its micro market environment:

 

1. It is recommended to upgrade the business model of Pranav New York to be able to accommodate the unisex market and target also the female market segment which will allow the business to increase top-line growth and take advantage of increasing revenues coming from high value services. This means also renovating the layout of the salon to accommodate both market segments.

 

2. I recommend that Pranav New York should continue to retain their male market segment which they have done so efficiently relative to earning a significant male market share within Robinson's Galleria.

 

3. Pranav New York should also focus only on the business segments that are driving profits and remove auxiliary services that drive costs. It should, in particular, discontinue offering spa services and focus more on their core business coming from the salon business segment.

 

4. The business should focus on their niche market which is the working urban professionals within the 20-39 age range. This will allow the business to achieve significant economies of scale in terms of marketing expenses and SGA costs.

 

5. Pranav New York should take advantage of their most apparent strength which is the large floor area of the salon. By leveraging on this advantage, they can increase capacity, increase turnover, and offer a more comfortable and inviting ambiance than their competitors. This way they can establish a unique market position and differentiate the business by highlighting their better ambience and also by competing on the terms of technical capacity and unique and personalized services at competitive prices compared with high end salons. This increases the perceived value of their services and will tend to attract a significant portion of the market.

 

6. As a result of the analysis made, Pranav should be able to reengineer their cost structure and lower their fixed costs by adopting the techniques employed by others in the industry such as implementing something similar to a commission-based remuneration model, and reduce their inventory and other costs by focusing on certain profitable services only.

 

7. Pranav New York should take advantage of the data that they have gathered in terms of the services availed by the different segments of their market. They can use this to bundle services which are fit for the particular segment and market it aggressively to capture significant market share and size which are most needed by the business.     

 

All these, should align their new business concept with their unique target market and should secure a durable competitive advantage especially when orchestrated harmoniously.       

Pranav Case Analysis by Juan A. Villamor

CASE ANALYIS: PRANAV NEW YORK

Juan A. Villamor

MBAH 10B

I.    Major Problem Identified

The major problem in the case of Pranav New York is the financial losses they are suffering because of weak sales. If the trend continues, they might be forced to close the shop since they cannot afford to continue paying fixed costs (e.g., rent and utilities) without sufficient revenues coming in. The following justifies the statement of the problem:

A.  The proprietors are finding it difficult to finance the shop’s expenses, including operational costs, because not enough money is being generated from the shop’s services offerings. The financial statements for the business’ first three months of operations bear this out.

B.  Investments for planned marketing efforts were put on hold to meet the business’ more pressing financial obligations.

C. The more expensive, higher-margin services (spa) are not getting as many clients compared to the lower-end, lower-margin services (haircut and salon). A breakdown of the financial report, correlated with the service offerings availment distribution report, explains this development.

                                                                       

II.    Analysis of the Possible Causes of the Problem

First, there have been questions about the location of the shop, since demographic study of pedestrian traffic in the general area where the shop is located points out the fact that clients are not predisposed to intentionally going up the third floor to get their hair cut, much more avail of spa services. On the contrary, all the shops of a competing barbershop (Roberto’s) are in the ground floor of their service areas.

Second, marketing efforts to promote the business, considering that it’s a novel concept, have not been enough to drive sufficient traffic to the shop. Considering the competition from highly segmented businesses, i.e., barbershops and salons, that specialize on specific services that Pranav New York hopes to both address, then one would assume that it would be very aggressive in creating a new market or attracting a significant chunk of the existing male market for these services to begin patronizing Pranav New York.

Third, the service offerings and service packages failed to take into account the demographics, preferences and behavior of their target potential market. Thus, the shop was losing customers, or business, from clients who just want a quick, no-frills haircut, or from the male customer interested in having his first, all-around spa and salon service because of an ill-designed and ill-equipped shop. In short, a more comprehensive market study, including that of their competitors and other players in the market, but more importantly of the clearly defined segment of the market that they wanted to hook into becoming regular customers, would have provided the answers to some of the puzzling results of their operations three months after their opening.

Fourth, and related to the preceding analysis, is that the business did not look at operational efficiencies in terms of layout and equipment to maximize profit from revenue generating service offerings relative to higher-end, more costly ones that have no guaranteed clientele. For example, this means that the floor area was not appropriately allocated to ensure maximum revenue from guaranteed moneymakers while demand for the higher-end and more costly services are still being built up. Even the chairs for the barbershop services were not designed to encourage additional services (like a foot spa) while the customer is having his hair cut, because of capital expenditure considerations (i.e., the barber’s chair is more expensive).

III.   Alternatives and Possible Solutions

Given the data that the proprietors now have about the business and its first three months of operations, immediate and necessary steps can be taken to ensure not just the survival of the enterprise, but of its long-term viability. The following can be considered:

A.  Infusion of fresh capital to fund promotional and marketing activities, specifically in-mall initiatives to drive male traffic to the shop. If more money can be poured in, then mainstream marketing events can be staged (contests, media campaigns, celebrity endorsements, etc.). The overall objective of the campaign would be to increase awareness of the concept shop and its services.

B.   Re-design of the shop and refurbishment of the furniture to consider greater operational efficiencies and profit maximization from guaranteed bestsellers and quick moneymakers. These would take into consideration the preferences and needs of the defined target market and create the “experience” unique to the shop, which would help generate loyalty and spur word-of-mouth advertising.

C.  Establish other services and come up with more packages to improve availment of higher margin services without changing location. Aside from potentially expanding the market, this will also enhance brand experience and create bigger value for the business. While these will require additional skills training for the staff, the expansion of talent and skills should represent a long-term investment for the business.

D.  Of course, a final alternative must be considered, and that is transferring the shop to a more attractive and potentially profitable location. This alternative can also be considered together with any or all the preceding suggestions, which would make for a major overhaul of the business. Offhand, however, location as a major factor can be expected to immediately impact on the financial performance of the business.

IV.Recommendation

If funds were not a problem, I would immediately recommend that they transfer the shop and look for a more attractive and potentially profitable location. In my mind, this is the major problem of the business, since the business concept is sound and there is indeed a market for the services being offered by the shop. Suggested improvements in the service offerings and packages, together with new services and packages, can likewise be done, either in the new shop or in its present location. Improved operational efficiencies would increase margins and make for improvements in the shop’s “servicescape”, the overall brand experience. On the whole, enhancements should be driven by better information about the potential target market as well as the clearly defined value proposition that the shop offers to the identified client segment.