Colin’s unemployment status has caused him to consider opening up his own business. His dilemma is deciding where to locate his business; either at Great Eastern Building downtown or Exploits Valley in the mall. Due to him being unemployed, Colin needs to begin earning an income to live. To do so he needs to improve his projected sales so that his net income would be sufficient to live on and to be able to pay back Ed’s investment in the business.
The most feasible solution to Colin’s situation is opening up the business downtown at the Great Eastern Building. This location produces a higher net income and a lower break even point than the mall. Although the net income starts out quite low, once the business is established as a quality store with good merchandise and excellent customer service, customers loyal to them will return to their store when they have a need or want that they can fill.
Before the business is up and running, Colin must determine how he will integrate the four aspects of the marketing mix to satisfy his target market. He will need to decide how he will promote his store to the local citizens in the best way possible, while giving them what they want and need on good quality products at affordable, competitive prices.
Statement of Problem
Given that Colin is in an unfortunate situation, his primary concern now is deciding whether or not to open up a business. His immediate issue resulting from this dilemma is that he must decide where to locate his business. It is this particular dilemma that Colin needs to confront the issue of improving projected sales for the possibility of incurring a profit. In addition to currently being out of work, Colin is looking to change his unemployed status. Colin must first consider his target market and then take into account the marketing mix when deciding where to locate and how he can make the business profitable. This is a two-step process that is the main focus of any marketing manager’s job.
Analysis of Situation
Due to Colin’s unfortunate state of affairs and the situation of his last business, he must immediately find work to earn an income. Before deciding whether or not he should open up a business, he needs to clearly define the market which the company would be gearing towards. Then he needs to manage the marketing process using product, price, place, and promotion. This is also known as the four Ps of the marketing mix. His business plan must be feasible and reasonable to be able to make his business successful.
Many factors must be taken into consideration before deciding where to locate. To do so, he must consider the rent, the size of the store, competition in the area, pedestrian traffic and other things of a similar nature. Colin should construct a projected income statement and break even analysis to compare the two locations to find out which site is more profitable. Furthermore, to avoid his previous cash flow problem he needs to make sure his inventory turnover is not too high and that he does not tie up all his capital in his assets. Either way would tie up his cash and he will not be able to pay his expenses again causing him to declare bankruptcy.
This business has a better chance of succeeding than the last one because this time around Colin will be able to devote all his time to the business instead of letting Ed take care of it for the most part.
For Colin to start working, he must open up a business at the Great Eastern Building. Opening up a business in this location will not only provide Colin with work but it can also help him earn an income. This location not only provides the store with a lower rent than Exploits Valley; it also allows Colin to set his own store hours. This gives him the flexibility to work when he wants and needs to. Since Colin does not like working for others, this situation is ideal for him.
To make his business successful, Colin must consider an integration of price, promotion, place, and product. He must also try and distance themselves from their competition. To do so the brothers must maintain the quality of their merchandise and customer service, reasonable prices, and improve their promotion strategies. For one thing, the price of his products must be within a reasonable range of his competition: Sports Experts. Too low and consumers may think he is offering low quality merchandise; too high and most people will not consider purchasing from his store. Also, Colin must preserve the excellent service he is known for. Prospective customers will go to his store even though pedestrian traffic is not as high as Exploits Valley’s due to his expertise in sports clothing and equipment. He must also uphold merchandise quality because even though he continues to provide advice to consumers, if his products are too shabby, most would not consider returning to his store.
Attracting his target market will comprise of one thing in marketing: providing them with what they want and need . To help promote his store to his target market, Colin must not rely on word-of-mouth advertising even if the location of the store is in a small town. He must attract a potential customer’s eye to enter his store. Distribution of flyers or even through the local radio station will suffice because the store is not located next to the highway.
Although the projected sales are lower than the other location, the projected net income is higher (see Exhibit B). These figures are conservative due to the GAAP conservatism principle . Furthermore, for Colin to break even at Great Eastern he can sell less than he would have had to at Exploits Valley (see Exhibit C). Therefore, it will be easier to make a profit at Great Eastern than at Exploits Valley.
The business may not generate the amount of sales projected, thus not being able to incur a profit. Furthermore, pedestrian traffic may also not be up to par which could possibly lower the number of prospective customers. This would lead to lower sales than expected. Similarly, Colin’s expenses may be more than predicted. There could be some unforeseen problems that need to be fixed. For example, his employee turnover could be higher than expected if the staff he trains is not satisfied working there, they will leave and find employment elsewhere. Not only will they take his expertise with them, but Colin will have to train new employees. Consequently, more money will be needed which will add to his expenses, therefore lowering his net income. Some of these problems combined could lead to another closure. Should Colin’s new business fail after the first year, he should declare bankruptcy and start looking for employment elsewhere.