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.
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