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.
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