Myra Morningstar is the owner of the small business, UMUC Haircuts. It is a small shop in the college campus area and Myra is looking to expand her business to meet the needs of customers. In order for her to be successful in her new adventure she will need to consider the needs of her customers, use of technology, and competition with the new local competitor. Barriers to entry in the Hair Care industry are very minimal. When it comes to barbershops and salons, there are a few already in the area with a couple more potentials. High customer volume creates much competition in the market. The only barrier to entry is licensing. Barbershops and salons must have a business license along with a few permits (Barbershop Business Guide, 2014). The fixed costs are minimal and no special products are needed. Loyalty to barbers and hair stylists is moderate and incentives to use a particular provider are almost non-existent.
The market is close to saturated and this particular area will soon become highly competitive. Threats of substitutes for UMUC Haircuts are moderate to low. Women are typically very particular about their hair style and cosmetics. These are items that can create repeat customers; once you accommodate a customer, they’ll be coming back again and again. With the young and low income college students, this may vary slightly more but fashion is always going to be important to most women. Men like convenience and normality so same as women, accommodate them and they’ll come back. Buyers don’t have much bargaining power in the hair care industry because there are so many of them. Almost every person gets their hair cut and usually several times a year. Thus there is a large market of clients for salons and shops. Customers can range from two years old to ninety years old. Even though the costs of switching to a different salon are very low, people are creatures of habit and will normally stick with one salon or barbershop.
Most people who cut their hair regularly and pay for high service will have developed a loyalty to their stylist. Buyers have most, if not all, of the power in this market so it’s important for shops and salons to differentiate and stand out. Suppliers in this market have a low bargaining power. Barbershops and salons are going to be the ones pushing and promoting their products. Shops and salons are free to choose which brands they carry. It is the suppliers’ responsibility to convince the salon to carry their brand, either through discounts, sales, promotions, or other things that benefit the salon. There are enough different brands of hair care products for the supplier power to have relatively low bargaining power. With Hair Cuttery about to set up shop and the few others that are already open for business, it is very hard to gain substantial market power in this industry. There will probably never be a monopoly in the hair industry. The competition amongst salons and barbershops is moderate to high. Not one company dominates the industry. Besides the spa across the street, most are comparable in prices.
The biggest competition will probably be the Hair Cuttery with it being so close and them offering hair care to both men and women. UMUC Haircuts will use operational effectiveness to improve the manner in which internal business processes are executed. Operational effectiveness will help boast the number of customers almost instantly. This will ensure no chairs are empty for any large amount of time and will also cut down the wait time of walk-in customers. Operational effectiveness will decrease Buyer power because there will now be open chairs for walk-ins or a maximum wait time of 15 minutes coming to UMUC Haircuts. Customers that choose to return will be remembered by staff and their past visits will be logged which, will make the customer feel important. Supplier Power will remain the same as before, with the amount of hair care products available. UMUC haircuts will have the power to choose where to buy their supplies from, whether they choose to buy in bulk for a better price or go with top of the line products that will be more affordable to UMUC due to the increase in sales and customers.
The threat of substitute products will be low because the customers will be getting what they want from UMUC. Customers usually look to substitute products when there is a price increase on their normal product, their product is no longer available or they have to wait for what they want. Consumers like instant gratification and that is what UMUC will offer their customers. The threat of new entrants is high and will continue to increase. Improving operational effectiveness won’t stop new salons and shops from popping up but it will help with keeping the customers loyal. If they like the way the business is being run and that they are being put first then they won’t run at first signs of a new shop or salon in town. Rivalry will always be high in this industry due to the amount of salons and shops and how easy it is to enter into hair care.
Innovation and always putting the customer first/customer service are a couple things to help stay ahead of competition. UMUC Haircuts will need to continue to stay ahead of the times with updated technology. UMUC has a few daily processes that need to be improved upon. The daily process that UMUC will tackle is the customer information not being logged effectively and efficiently. By adding a computer to organize and store this type of information, it will help UMUC Haircuts a great deal especially with customer service. Remembering customer’s names can go a long way especially if they staff is able to view their information before an appointment and greet them with a hello and a summary of their last visit.
STRATEGY FOR COMPETITIVE ADVANTAGE: With the use of technology and adding computers, UMUC Haircuts can achieve Operational Effectiveness PROCESS TO BE IMPROVED: Tracking customer information through a computer program to achieve greater customer service.
Barber Shop & Salon Business Guide. (n.d.). Retrieved November 1, 2014. Website. http://business.baltimorecity.gov/BusinessGuides/BarberShopSalon.aspx Porter’s Five Forces in the Hairdressing Industry (in details). (n.d.). Retrieved November 1, 2014. Website. http://www.hairbrained.me/profiles/blogs/porters-five-forces-in-the