In the case of Kelly’s Beauty Salon, there is a new competitor who is moving in close proximity to her business. Kelly is aware of the implications that this will have on business, hence she seeks to develop a solution that will mitigate the threat of a substitute service and new entrant. The new competitor changes the nature of business in the area as the Hair Cuttery becomes an existing competitor, hence there are also implications for buyer power and supplier power. Kelly chose a cost leadership strategy as the foundation for overall business strategy, and cost leadership was selected because Kelly believes that offering man services to many customers at a low price will lead to higher volume (Burns, 2010). To facilitate the formulation of this new business plan Kelly has chosen to use technology to facilitate staffing, advertising, agreements with suppliers, etc. in order to gain a competitive advantage over the Hair Cuttery.
Porter’s Five Forces
Justification for Selected Strategy
Kelly’s strategy is well-justified by the Five Forces model. Buyer power will increase with the entrance of the Hair Cuttery into the market. For this reason it is important that Kelly do things such as extend the number of services she provides maintains low prices. This is because the buyers have power in the scope of the main service of hair cutting, however, additional services may be bluer waters. Suppliers will likely not be a concern because there is marginal impact by the additional hair dresser in the area. The threat of substitute products creates a positive for Kelly. This is because Kelly is able to grow horizontally and provide additional services. The threat of new entrants has a negative impact on business, however, horizontal growth stifles this effect. Rivalry may increase with the addition of the Hair Cuttery, however, the use of technology and additional services will inhibit the impact.
Business Processes
The improvement of customer and employee scheduling will be key to exploiting the strategy for competitive advantage. As Kelly adds more services it is necessary that specialists for these services are available for clients. Kelly will need to match specific skills with customer needs. Also, it also improves general customer service as customers get to choose the hair dresser the prefer. A technology solution can match customers efficiently and effectively. It can also notify customers and workers when they will be scheduled for specific jobs.
References
Burns, P. (2010). Entrepreneurship and Small Business: Start-up. Growth and Maturity. Palgrave Macmillan.
Porter, M. E. (1985). Competitive advantage: creating and sustaining superior performance. New York: Free Press.
Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. New York: Simon and Schuster.
