Anatomy of Business - Report Example

Small new business Executive Summary The business venture selected is for opening up a beauty salon in the market of the United Arab Emirates which would be dedicated to provide beauty care and grooming services to the young age group of girls preferably of the age group of 1-14 years. The concept is a comparatively new concept in the beauty services sector of the United Arab Emirates, As such; the feasibility of the business is carefully analyzed. The business plan encompasses an industry analysis, a brief outline of the selected business venture and its products and services. The business strategies and the 4Ps of marketing for the beauty salon are discussed. The operational plan and the management structure of the business are also highlighted. The financial forecasts of the business for the next 5 years are done with the aim of understanding the financial feasibility and profitability expected from the beauty salon. The overall analysis indicates high viability of the business in the new market. Briefing about new venture The new venture is for opening up a beauty salon for girls from one to fourteen years of age in the market of the United Arab Emirates under the brand name of La Bella. The beauty salon will be opened up in different locations of the United Arab Emirates with the aim of providing services exclusively for the young girls. This business is aimed at supporting the grooming and beauty consciousness of the girls of the country from a young age. Along with providing personal care and beauty services, the salon would also be dedicated towards providing expert guidance to the young girls about how to maintain and enhance their beauty and take care of their skin, hair, nails etc. from a young age. The beauty salons would also be open for celebrating birthday parties for young girls wherein the girls can come up with their friends for nail coloring, applying henna and getting tattoos done on their body. This is much influenced by the western culture where the young girls are much conscious about their looks and their grooming and see visiting the beauty parlor together as a preferred way of celebrating birthdays and girls’ day outs. The venture would employ professionals and experts in the beauty domain who would provide the basic survives of hennaing, hair cutting, hair coloring, tattooing, nail painting etc. Also, there would be a panel of beauty experts for solving any beauty related issues of the young customers like pimples, acne, blackheads, freckles etc. and also provide them with suggestions regarding their daily beauty regimes. The salon would be dedicated to improve the beauty consciousness and awareness of the young girls as well as make them more knowledgeable about how to handle their skin and hair in a proper way from the young age. The parents who are going out for a party or a movie may drop their children in these salons where they would be looked after along with providing them with suitable and safe beauty services. The venture is expected to be popular among the young generation and also among working parents. The beauty salons would help to remove the boredoms associated with crèches and day schools and provide a better medium of time spending for the young age group of girls. Special issues that are to be kept in mind in this business are the use of skin friendly and safe products because the target customer group is young and may have sensitivity towards different products. The salon would be handled by beauty experts so that the basic and the special services can be provided under the proper supervision of people who are knowledgeable in this domain. Apart from the beauty experts, an in house dermatologists would also be maintained ion the beauty salon who can give basic guidance to the customers, solve any customer issues and attend to the customers in case of any skin or hair related issues ;like allergies, rashes, infections etc. Vision and Mission Statement The vision of the beauty salon venture is to provide beauty care and grooming services to the selected target group of consumers in the United Arab Emirates market while educating them about beauty care and changing the outlook of the customers towards taking care of the skin and hair from an early age. The mission of the beauty salon is to create awareness and consciousness of the beauty care of young aged girls while achieving profitability and a strong customer base for the beauty salon. Acquiring customers quickly and retaining customers efficiently into the business through superior quality and continuums services is a part of the mission statement of the beauty salon. Organization structure The organization structure of the beauty salon would follow the simple structure of a small new business. The ownership of the salon is limited to two partners. Two persons are opening up the beauty salon as a joint venture in the new market. These two owners would be at the position of the managing partners of the company as well who would look at the overall business activities and control the business efficiently in order to make suitable profits and revenues in the United Arab Emirates market. The beauty salon would initially be opened up at a prime location in the United Arab Emirates under the brand name of La Bella and would later be expanded into other cities of the country as well. A single efficient marketing manager would be hired for popularizing the business and promoting and marketing la Bella salons in the market of United Arab Emirates. Each salon would have a head of the department who would supervise and monitor all the activities of the salon. All the department heads would report to the marketing manager who in turn would report to the managing partners of La Bella. Business and Industry Profile The people in the United Arab Emirates are much focused on beauty and good looks. The girls are especially concerned towards maintain their skin and hair. The market is analyzed to be experimental in nature that are inclined to take up new beauty regimes and like to experience with different beautifying and grooming alternatives and products. A fetish for foreign, niche market brands is seen in the market due to the high disposable income and the flourishing economy in the United Arab Emirates. The industry has many established players operating in the general as well as the premium segments. However, the premium segment beauty salons are found to be more profitable as compared to the general beauty salons in the country. An extensive segment of the country’s population is inclined to spend highly towards beauty and grooming products and services. More focus is given by the beauty salons on the customers’ age group of 18-40 years. A large number of local and foreign beauty salons exist in the industry to cater to the customers of age group 18-40. However, almost no salon exists which are aimed at providing beauty care and grooming services to the young aged girls of 1-14 years. The business can thus efficiently position itself in this market gap by providing safe and innovative services. The business would encompass new services as well as sell international beauty products along with their services. The industry seems to be ready for a new entrant in this market segment because of the continuously increasing interests of the consumers towards beauty products and beauty services. With the number of working couples increasing in the country and with the country life becoming busy and fast paced, the beauty parlor for young girls can be seen as a way of social activities and leisure indulgence as well. The increasing interests of the consumers towards high end beauty products and services and the changing perceptions of the customers in the market are likely to act as a favorable factor for the beauty salon business venture. The increasing strengths of the economy of United Arab Emirates, the accelerating level of purchasing power and disposable income levels in the economy are other favorable factors that are likely to help the business in establishing itself in the new market and continue flourishing the business in the different cities of the United Arab Emirates. Since the concept of beauty parlors providing services to the young aged girls is a comparatively new concept in the country, therefore, it can be seen that there are very few competitors or substitute products and services in the market. The only factor that may limit the success of the beauty salon is the concern of the partners towards the health and safety of the children while using the beauty and grooming products and services. This can be easily overcame by the beauty salon by providing safe and high quality products and services that would also help to establish it as a reputed brand and help to penetrate the market in a short time. Business Strategy The strategy of the business of La Bella beauty salons would involve the marketing, promotional as well as operational strategies of the business. The baseness venture would start by employing suitable segmenting, targeting and positioning for the business. The segmentation is done on the basis of age groups of the potential customers. The selected target customer group is girls of 1-14 years of age as mentioned in the beginning of the business plan. The beauty salon would be positioned as a medium to high priced beauty salon dedicated to provide high quality and consistent beauty and grooming services to the selected target customer group. The business would start as a joint venture by opening up a single salon at a prime location in the country. However, after some success, the business would be expanded to other prime cities of the United Arab Emirates so as to expand the business and increase its overall revenue generation, market share and customer base. The beauty salons under the brand name of La Bella would follow a penetration strategy and use the penetration pricing strategy rather than a competitive pricing strategy. The business would team up with suitable local players and alliancing businesses to promote and market the brand effectively and penetrate the UAE market easily (Pinson, 2008). The business strategies of the beauty salon would be aimed at improving the operational and financial prospects of the salon on a regular basis by acquiring new potential customers through effective promotions and promise of high quality services. Also, it would be ensured that the beauty salon lives up to the promises it has made and that continuous high quality services are provided to the customers. Products and Services The products and services of a business are the main deciders of the future success of a business in a new market. The products and services of La Bella salons would be high end and premium quality. Beauty products like creams, hair and skin treatment products, nail paints and lipsticks etc., would be sourced from reputed and reliable sources so that no compromise is made on the quality of [products and services provided by the La Bella salons. The main services [provided in the beauty salons would be hair care, skin care, hennaing, tattooing, hair spa , hair straightening, nail coloring etc. The wide range of products and the high quality of services would act as the core selling proposition for the beauty salon. The services would range from the provision of general beauty services to specialized services like mole removal, treatment of acne, pimples and blackheads, dark circle treatment, anti-tanning, anti-pigmentation and fairness treatments. An in house dermatologist would be present to give any required medical assistance to the target customer group with respect to the skin and beauty problems faced by the customers. Also, they would give suitable diet charts designed for individual clients. The panel of experts in skin care and hair care would not only provide services to the customers but will also guide them effectively in their daily beauty regimes and grooming activities so that more awareness and consciousness is created among the target customers about the need for daily beauty care and grooming. Other augmented services of the beauty salon would include hosting birthday parties for girls so that they can come with their friends and celebrate their birthdays or girls day outs by indulging in a wide array of beauty activities. In the special occasions, all the staffs of the parlor would be dressed as famous fairytale characters like Cinderella, Snow White, Red Riding hood, Anne etc. Also the beauty salon would be designed according to the set theme for the party. Many themes would be available for use during the parties and would be taken from fairytales because fairytales are much popular among the girls of the selected age group. This would ensure the word of mouth publicity for the salons and also create a differentiated and unique image for the salon in the market. The availability of high end products and services coupled with new concepts of marketing and promotion are likely to increase the visibility and the popularity of the beauty salon brand among the customer groups. Legal formalities The legal formalities required for the setting up of the beauty salon in the country include getting a trading license for the business salon in the United Arab Emirates. The company would be established as a limited liability partnership. Therefore, investments would be sourced from potential investors. The company would be set up according to the policies and rules guiding the establishment of a new business in the United Arab Emirates. Suitable permissions from the governing authorities in the United Arab Emirates would be taken so that the business can be established and continued in an unhindered way. Marketing Strategy The marketing mix of the product would be decided so that the business can be suitably established in the United Arab Emirates and would be able to maintain continuity of the operations while ensuring a loyal base of customers and high profitability and revenue generation. Product: The products and services of the La Bella salons would be mainly the beauty are and grooming products and services including hair cutting, hair coloring, hennaing, tattooing, bleaching, facials, waxing, hair straightening, perming etc. The wide range of products and services would act as a core competency for la Bella salons (Kahn, 2011). Place: The place selected for opening up the salons would be prime locations in the cities. The place would be selected such that the area has proper connectivity with other important locations through suitable conveyance modes. Also, salons would be opened up near the restaurants and shipping malls because the parents going to the restaurants or shopping malls would be able to drop their children in the salons. Price: The pricing of the products and services would vary from medium to high range. Since, the marketing of the La Bella beauty salon is to be done in Blue Ocean; therefore, competitive pricing of the products and services would not be required. Alpo, the purchasing power and the propensity of spending of the consumers in the United Arab Emirates are higher which means that a medium to high range of services would act as a penetrating pricing strategy. Also, a higher pricing range would assure the customers that no compromise is made on the service and product quality in the beauty salons of La Bella. Promotion: The promotional activities would include conventional and unconventional promotional mediums. Since the selected consumer group would be inclined to use the internet and visual media frequently, therefore, more advertisements would be done through these mediums. Also, banners and pamphlets would be used as means of advertisement. Banners would be put up near schools, restaurants and in shopping malls. Also, banners would be put up near the offices so that the parents of young girls are made aware of the opening up of a beauty salon with new concepts and ideas. Pamphlets would be distributed in similar places to ensure that more customers are reached. A tie up with a famous doll manufacturing and selling company would be done to facilitate the potions and the business activities in the country. Competitor Analysis The competitors are very less in this sector of the market of the United Arab Emirates because though there are many beauty parlors and premium salons in the region, a special salon targeted only for the young customer group in the country is a comparatively new idea. This idea is taken from the western society and this concept would gain entrance into the United Arab Emirates market through this business venture. The market of beauty products and services for the customers of age group 1-14 is a blue ocean which has no competition from other beauty salons. The salons established in the United Arab Emirates are specialized in providing beauty and grooming services to the customer groups of 18 to 40 years of age. Therefore, the selected target customer group is a non-catered customer group which would mean that the La Bella salons would tap the potential of an untapped group of customers. The salon is also likely to have the first mover’s advantage in this segment of the beauty and grooming industry of the United Arab Emirates. Other social activities like visiting restaurants, local snacks corners, movie theatres and shopping malls may act as substitute activities for visiting the salon. However, there exists no direct competition form other salons in this segment. This is identified to be an important advantage for the La Bella salons because the market place is uncontested in nature. Therefore, the salons can acquire customers very easily and continue building on their customer base by acquiring new customers and retaining old customers on a continuous basis (Finch, 2013). Being a first mover into this segment may also preset an opportunity for the salons to create brand loyalty and maintain a large base of loyal customers which would increase the switching costs in this segment. Since, beauty and grooming are sensitive services; therefore, customer loyalty would be important for the brand and the customers as well. A continuous high quality and friendly service would ensure higher competiveness for the La Bella salons in the future as well when new entrants would emerge in this segment of the beauty industry. Description of Management Team The management team would encompass two owners who are opening up the company as a limited liability partnership firm. The owners would form the managing partners of the La Bella brand and all the decisions for the business would be taken by these two owners. Also, the control and management of all the salons established under the brand name would be at the discretion of the two managing partners. Both the partners would be active partners who would take interest in the operational and managerial aspects of the business. The two entrepreneurs have prior work experience in the beauty and grooming sector in the western countries. Their learning and experiences have instigated tem to introduce the comparatively newer concept of beauty salon for young girls in the potential market of the United Arab Emirates. The capital of the owners and their skills, expertise and prior experience of this sector are likely to act as valuable assets for the La Bella salons business venture in the selected market. The management team would be responsible for directly controlling all other staffs of the salons starting from the marketing manager to the individual salon heads. The marketing, financial and operational domains of the beauty services business venture would be supervised and managed by the two partners. Plan of Operation An extensive plan of operation is devised for the business venture. The operations plan deals with suitable personnel planning and resources and capabilities planning. The business would be set up in prime locations where space would be leased in areas of high visibility and linkage to the important locations in the city. The salons would be designed by efficient architects available in the country. The infrastructural capabilities of the salon would be made robust so that they can efficiently support the existing business activities and any further addition and expansion of the activities of the beauty salons. The salons would be furnished properly and all necessary equipment for the beauty and grooming activities would be bought from high quality and reliable suppliers. Premium equipment, chair, hair wash basins, mirrors and other equipment would be bought for use in the salons. Designer products and upholstery would be used in decorating the salon so that a feel good factor and premium feeling is associated with the brand name. The services cape of the salon would also be improved if the physical appearance of the salon is cozy, classy and premium. This would appeal to the customers and create a differentiated image of the La Bella salons (Schnaars, 2000). A carefully designed personnel plan would be incorporated in which the necessary human resources for each of the salons are devised followed by suitable selection, recruitment and training of the personnel in the salons. The human resources of the salon would be critical resources in the beauty services industry because their knowledge and expertise is essential for the day to day operations of the beauty salons and also for establishing long term relationships with the customers. Financial Review Sources of finance The sources of finance for the business would mainly be the capital of the owners. If there is a shortage identified for the financing of the business, investment from angel investors like the relatives and friends of the owners would be used. The business prefers using internal sources of funding rather than external sources of funding like bank loans because of the high cost of capital associated with the bank loans and debt finances. Mainly internal sources of finance would be considered for the business because of the flexibilities in repayment and because of no associated borrowing costs. Later the company may go on to list its shares in the stock exchange so as to gather public financing. But this plan is left for the future when the bruins would reach a certain amount of profitability and hold on the market. Financial forecast The financial forecasts show high feasibility and profitability of the business. The pro forma income statement, balance sheet and cash flow statements are prepared for the next 5 years of the operations of the beauty salon. The forecasted financial statements are given in Appendix 1-3. The financial statements show that the profitability of the business is likely to be consistent and high. The gross profits and the net profits of the business are forecasted to increase at an accelerated rate on a year on year basis. The cash flow statement for the company shows proper management of cash inflows and outflows and the net cash flows maintained in the business are forested to be strong (Jury, 2006). Break Even Analysis The break-even point of the business venture is reached in the second year of its operations which can be considered to be a positive factor for the business. Reaching the break-even point in such a short term period would be possible because the business is introduced in a blue ocean or an uncontested market place which would help to improve the sales of the business on an accelerated basis (Pandey, 2006). The break even sales would be reached within 2 years after the setting up of the business and subsequently the business is identified to make high profits and maintain a healthy profit margin over the 5 years of forecast. Break Even Point   Total Fixed Cost (A) 90000 Gross Profit (B) 45550 Sales (C) 60000 Break Even time (years) 2.0 Contribution margin 76% Break even sales 118551 Feasibility study The business of beauty salons is identified to be viable and profitable in the short run as well as in the long run. The business venture follows a robust operational, personnel and financial plan and employs suitable business and corporate strategies which are likely to equip the business to remain profitable over the years. It can be expected that the business would be successful in the United Arab Emirates market. The forecasted financial statements indicate the high profitability and continuity of the business venture. The identified marketing and business strategies indicate that the business would remain competitive and sustainable in the future as well. References Finch, B. (2013). How to Write a Business Plan. UK: Kogan Page Publishers. Jury, T. (2006). Cash Flow Analysis and Forecasting: The Definitive Guide to Understanding and Using Published Cash Flow Data. New Jersey: McGraw Hill. Kahn, K. (2011). Product Planning Essential. USA: M.E. Sharpe. Pandey, I. (2006). Finance: A Management Guide For Managing Company Funds And Profits. New Delhi: PHI Learning. Pinson, L. (2008). Anatomy of a Business Plan. USA: aka associates. Schnaars, S. (2000). Marketing Strategy. USA: Simon and Schuster. Appendices Appendix 1: Income Statement Appendix 2: Balance Sheet Appendix 2: Cash Flow Read More