Business Proposal for Lexiliap Fashion Boutique - Research Paper Example

? Business Proposal for Lexiliap Fashion Boutique Insert Insert Grade Insert Insert Introduction Lexiliap Fashion Boutique is a new product that is set to revolutionalise the way individuals choose what to wear depending on occasion. The products are meant for individuals regardless of their age, gender, social or ethnic backgrounds. The concept is therefore built on the basis of providing value for money to all clients so that they make Lexiliap Fashion Boutique their choice destination for all their fashion ware and accessories’ needs. This proposal therefore illustrates the various economic factors that will influence the operations of Lexiliap Fashion Boutique. This report lays particular emphasis on the economic dynamics of the proposed fashion boutique by including assumptions about the elasticity of demand and the market structure in the operational environment. Revenue To begin, revenue is an important factor for the success of Lexiliap Fashion Boutique. Capozzi (2013) highlights the importance of looking at the revenue prospects of a fashion boutique by recognizing the challenges of setting up and deriving gains from one. Fashion boutiques present a challenge to owners because they should find a balance between attracting and retaining customers on one hand whereas striving to achieving or even surpassing the set revenue limits (Gerring, 2007). The fashion boutique intends to use multifaceted promotional campaign to ensure that it drives sales volumes that will surely lead to increased volumes. In particular, the boutique will have an active online presence that will make sure that many clients are targeted and are aware of the enterprise’s products (Ferguson, 2008). Market segmentation strategies will be used to ensure that promotions are custom made to target the youth, women, men and children separately. The shop will also offer competitive pricing so that customers from competing firms are attracted. Determining the Profit-Maximizing Quantity The boutique will deal with different fashion items and accessories. As such, the challenge is to constitute a viable and standard profit maximizing quantity for each of the items. Since items like jewelry and clothing may have defects especially when volume purchases are used to source for the products, the proposed structure relies on this conditionality to propose a standard quantity to be ascertained. Given a unit cost of 10 USD, each product’s price; is it a dress, pant, bangle or ring will be compared against the unit cost value. Taking into consideration that the more items are sold, the higher the revenue; the report then sets the revenue threshold at 100USD meaning ten unit items. As a result, the more valued the item in the boutique, the lower will be its profit maximizing quantity. The projected dollar value for the business is shown in Appendix 1. Profit Maximization Profit maximization is at the core of any enterprise’s operations (Mankiw, 2011). The proposed Fashion Boutique will ensure that there is value for customers on one hand, and value to the owner on the other. To be able to strike this delicate balance between satisfying the needs of the customer whilst maximizing the profits needed for business growth. The marginal cost and marginal revenue concept can be applied to illustrate the technique that will be used to ensure profit maximization. This will be done mainly in the area of stocking for some commodities. Given that fashion industry is dynamic, it is important to stock the current trends for profit maximization (Boyes & Melvin, 2011). As a result, the boutique will review fast moving products and stock them in large number to derive more gains from the sales volumes resulting from the trending items. This is in accordance with the concept that marginal revenue should always be equal to marginal cost for profit maximization (Taylor, 2006). Subsequently, the boutique will require market information on the trending products. This can be obtained from relevant agencies, the media and other fashion forums. The clients will also be engaged to provide the necessary feedback required in this process. Pricing and non- pricing strategies Different pricing strategies will be implored including the use of discount on high volume purchases, coupons and loyalty schemes. The prices of the products will be at least 2% lower than that of the competitors for the first three months of operation to attract customers. The fashion boutique also intends to reward its loyal customers by giving them cash discounts and quantity discounts. Clients who bring new customers in the business will also be further allowed discounts to encourage growth of the enterprise’s market share. Non-pricing strategies will include the provision of pre sales and after sales services. For instance, clients can be given advice on the suitable fashion trends they are likely to blend in easily. Barriers to entry Since competition is high in the fashion industry, the use of entry barriers cannot be ignored for the success of the proposed business. Lexiliap Fashion Boutique will position itself in the market as a one-stop shop for all fashion needs as stated earlier. In order to effectively create an entry barrier, the boutique will make it impossible for its customers to purchase products from other competitors through provision of quality and cost effective alternatives. The effectiveness of service will also be enhanced through use of ultra modern store equipment and facilities with most friendly and helpful customer service representatives. Product differentiation Product differentiation is important since the boutique intends to serve customer from different backgrounds. Customer feedback will be important for this process (Grewal, Levy & Lehmann, 2004). This differentiation strategy will be facilitated through an integrated information system that will facilitate interaction with clients. As a result, the customers will be able to place orders for specialized products according to their tastes and specifications. Since everyone has his or her favorite size or shape, it is important that the company maintains a database containing customized client information that will be updated frequently. The boutique will also provide custom made products that reflect certain aspects of individual customer’s experienced as personally requested during ordering. Cost minimization In addition to other strategies mentioned, the issue of cost minimization is important for the competitiveness of the proposed product. First, there will be a policy of quality assurance within the boutique to eliminate waste and redundancies in the supply chain process that may lead to extra costs being incurred (Finn, 2004). Secondly, it is important that the suppliers provide defect free products that are of higher quality to minimize the costs associated with delivery of rejected customer orders. The boutique will also ensure that it fully embraces the use of modern technology so that there is efficiency in operations. For instance, customer service inventory management and security features of the boutique will rely on the proposed information systems. Lexiliap Fashion Boutique is, therefore, an excellence center that will be designed in line with modern fashion trends. References  Boyes, W. & Melvin, M. (2011). Fundamentals of Economics. Mason, OH: Cengage Learning Capozzi, C. (2013). Risks of Starting a Clothing Store. Retrieved 13 June, 2013 from http://smallbusiness.chron.com/risks-starting-clothing-store-22444.html Ferguson, R. (2008). Word of mouth and viral marketing: taking the temperature of the hottest trend in marketing. Journal of Consumer Marketing, Vol. 25 No. 3, pp. 179-82. Finn, B. (2004). Why pop-up shops are hot. Business 2.0, Vol. 5 No. 11, p. 34. Gerring, J. (2007). Case Study Research: Principles and Practices. New York, NY: Cambridge University Press. Grewal, D., Levy, M. & Lehmann, D.R. (2004). Retail branding and customer loyalty: an overview. Journal of Retailing, Vol. 80 No. 4, pp. 9-12. Mankiw, G. (2011). Principle of Economics. Mason, OH: Cengage Learning Taylor, J. (2006). Economics. Mason, OH: Cengage Learning Appendix 1: Projections Sources and Use of Funds Total dollar amount being sought in this round (Projected dollar value): $83,500 Investment from Principals: External Financing: $41,750 $43,000 USE OF FUNDS Capital Expenditures: Purchase of Equipment/Furniture: $9,225 Other: $1,000 Working Capital: Purchase of Inventory: $39,000 Staff Expansion: $20,000 Additional Marketing Activities: $4,700 Other: Database and Web site $1,325 Read More