Urban Outfitters Continuing Case Study - Essay Example

? Urban Outfitters Continuing Case Study Q1) Identify at least three challenges when setting up a business. Explain why they are challenges. A) The biggest challenge in setting up a business is capital. Either the entrepreneur has his own money or needs to borrow. Borrowing has several issues depending on the type of business opening, its security, and long term success anticipation. Especially in the case of small businesses, most banks are reluctant to provide loans. Also, the government is laid back in supporting small businesses mainly focusing on larger businesses to gain more revenue. However, small businesses are an asset to any country and really enhance the overall GDP. Limited funds are a challenge as they have a direct effect on the growth of the business because there is pressure to pay off debts and concentration on growth is low. Even once the initial investment is made, there might not be enough cash to carry on with the daily operations, and hence, capital is always the main concern. The location is of utmost importance especially in the case of the retailer. In the case study Urban Outfitters decided to focus their store openings near colleges so that the students seeking for funky designs and used clothes can easily purchase in close proximity. Location in terms of clusters and target market are factors to be considered. The proximity and unique distribution creates exclusivity and helps companies with their niche marketing tactics. Employing efficient human resource is vital for creating an impact on consumers. In the case study, Richard and Belair, had entrepreuniral skills and a genuine interest in running their business, therefore they did a good job. Q2) Define what a "niche" product is. Give at least three examples of niche products.  A) A niche product is the one made and marketed for a small but profitable market. It is made for a high potential market which is small in size but profitable to cater. The specific product features designed are aimed to satisfy a specific market (Advantages of Niche Marketing 2009). In order to tap this sort of a potential market, the gap in the market has to be identified. These can be customized items too for example a cake shop customizing cakes for every individual according to their choice. Occasions are always brightened with some delicacy and catering to a customized market can be profitable. Catering to the elite by exclusively creating something can also be called a niche product for example a Rolls Royce. Catering to a particular demographics, class and personality all create niches. A case in point can be websites that provide services for specific categories for example finding your perfect match online, relationships and dating. Such services fulfill the needs of thousands of people but are very limited in its service and not mass marketed. Q3) Explain why a niche company might have an advantage in a market. Would price necessarily be an advantage? Explain why or why not.  A) Customization and exclusivity creates the importance of a niche market. Besides these factors, satisfying the needs of specific demographics in itself is an advantage because the customer feels his/her specific wants are been catered too. In the case study, the stores were located near colleges and the college students were being targeted, therefore, the sale of used clothes was identified as the missing gap for college students that have an economical budget. Therefore, the niche market allows the company to exert out energy on reaching out to the right people. resources are not wasted in mass marketing but are instead focused on serving the small segment of loyal customers. Price may not necessarily be an advantage as seen clearly in this case study. Richard and Belair identified the needs of college students and then further increased their product line in order to synchronize the unique feel and look of each store. Many businesses in the world that operate in niche markets do have an advantage over price such as Lexus that produces limited cars and earns supernormal profits by selling it to a small segment. Other upper tier brands also benefit from price, however, that is not always the case. Niche products cater to a particular segment and price is not necessarily the dominant factor. Niche marketing addresses a smaller market than undifferentiated marketing; therefore, it’s important to communicate their services to reach the audience well. (Advantages of Niche Marketing 2011). They should try to brand their segment as branding is a powerful tool used for communication. The brand should have differentiation, standardization and rationalization. The niche company has comparatively less competition and can tailor its products according to the needs of its segment. The niche company can be recognized in the industry for supplying the particular product and have a cordial customer relationship reputation easily. Q4) Identify and explain three reasons why customers would pay more for exclusivity.  A) One main point to consider can be the status. If a popular expensive brand name is highly valuable in society then it’s bound to attract its segment despite a high price. The price adds to the exclusivity as only a few can afford it then. A Louis Vuitton bag is not affordable by the masses and its exclusivity is the reason for consumers to purchase it. With customization comes exclusivity. Wedding dresses and occasion based cakes are examples of customization specific to the customers wants. A cost is attached in designing these products and outcome is specific to an individual. Individuals will also pay a higher price for the service (Handlin, A. 2011). When the core functions of a product are augmented through customer services, it is highly attractive to some customers. Salons and restaurants are good examples of customized service which is perceived as an element of exclusivity. Q5) Explain how a niche player "chips away" at a larger competitor's base. Give three examples of retailers who have done this.  A) The niche player achieves an important status when it provides what the larger vendor does not offer. One famous example is of Starbucks coffee shop. It managed to take an ordinary product and get the public to pay a premium price for it by providing special blendes of coffee. Moreover, they are very sensitive to the environmental ways of doing business and endeavor to be good corporate citizens. Their cafes welcome the customer with a nice seating with sofas. They have sold their idea as a comfortable zone to meet over coffee and Starbucks was amongst the first few retailers to begin with the internet access. Another example would be Best Buy. Despite being a large scale store, it focuses on providing computer products and the employees are well trained to answer any questions related to it unlike other merchandise retailers, like Wal-Mart, that have a restricted product range in the entertainment market. Moreover, the employees are not as knowledgeable pertaining to computer products. Best buy doesn’t pay commissions to its sales staff unlike other specialty stores that focus on the same target matter. The monthly salary secures the employees and gives a pleasant environment for the customers to shop around. Another niche player is Ben and Jerry’s premium ice cream. They amuse the customers by providing ice cream with thickness and unique flavors. They have attractive names for their flavors such as "Chunky Monkey" and the overall packaging has unique designs that are distinguishable from other brands. Moreover, Ben and Jerry's also has a more environmentally friendly approach in running the business which has caught the attention of most citizens. References (2009, February 22). The Advantages Of Niche Marketing. Free Articles Directory | Submit Articles - ArticlesBase.com. Retrieved October 26, 2011, from http://www.articlesbase.com/online-promotion-articles/the-advantages-of-niche-marketing-784588.html Advantages of Niche Marketing a€“ 7 Advantages of Niche Marketing | StartUp Internet Business. (n.d.). StartUp Internet Business | PV Reymond. Retrieved October 26, 2011, from http://internethomebasedbusiness.startup-internetbusiness.com/advantages-of-niche-marketing/ Handlin, A. (2011, July 22). Reasons Why Consumers Would Pay for Exclusivity | eHow.com. eHow | How to Videos, Articles & More - Discover the expert in you. | eHow.com. Retrieved October 26, 2011, from http://www.ehow.com/info_8772377_reasons-consumers-would-pay-exclusivity.html Read More