Myra Morningstar opened up UMUC haircuts around two decades ago, as the only haircut saloon in 10 miles radius. The business flourished with passing time but presently UMUC does not enjoy being the only service in area, as competitors have joined the market. An expensive and big barber outlet is about to open, which raises concerns for UMUC future business. Hence, a business analysis needs to be carried out, aiming at identifying a generic business strategy leading to identify a daily process to be focused upon.
Porter’s Five Forces Model:
Application of Porter’s five forces model will help identifying the major threats to Myra’s business efforts and will assist in carving a future strategy for UMUC haircuts in the 21st century.
Buyer power in the area of operation seems of a medium to high level. Customers can exercise their right of choice in other service outlets in the area. Opening up of new expensive spa in the area is likely to attract customers with higher purchase power and it presents a threat to Myra’s business.
Supplier power remains high in the area. There still are not many saloons or spas, which cannot be served adequately by the suppliers. Suppliers do not have to abide by the conditions of customers like UMUC haircuts, as none of the business concerns is too big and reputed to handle. Hence, suppliers can exercise their bargaining chips to their favor.
Threat of Substantive Products or Services.
This threat still seems to be of a low potency. Not many substantive products or services exist in the area so far, and UMUC business is still on the rise.
Threat of New Entrants.
Threat of new entrants is genuinely high and bothering. The new facility coming up in five miles radius is expected to be more attractive, expensive and well equipped. Moreover, a manicure facility ready to be opened soon, poses a competition to Myra’s business that is yet to start with manicure facility in UMUC haircut saloon.
Rivalry among Existing competitors.
This aspect too is likely to grow. With the stepping in of new facility in 5 miles radius, every incumbent business owner, including UMUC, will feel threatened to varied degrees, depending upon their ongoing business progress.
The analysis of five forces model lead us to focus upon Cost leadership strategy. Based on the analysis of five forces, we know that buyer power is ranging from medium to high and the supplier power is high. Cost leadership strategy focuses on having low cost for the products or services. Upfront investment is needed for cost leadership strategy and Myra is ready to buy the nearby shop put up for sale. This strategy will help her controlling high power of sellers and buyers, at the same time, and will attract more customers due to low prices. Other factors like continued investment, process innovation and monitoring of labor are the ones UMUC owner is already cognizant of (Camacho Arias & Others, 2009).
Strategic Business Area identification.
Having carried out the analysis of five forces, leading to identification of a generic business strategy, the strategic business area which needs further improvement comes out to be the customer. Customer based focus should be implemented for furtherance of business (Camacho Arias & Others, 2009).
Customer information and market as one of the processes already identified by Myra, should be focused upon. Cost leadership strategy entails a focus towards reaching out the customers and informing them about the low costs being offered for the services. This will materialize by seeking customer information and focusing upon marketing the adopted strategy (Camacho Arias & Others, 2009).
Camacho Arias, D. M. & Others (2009). Analysis of michael porter s generic strategies and its usage in a globalized business environment. Universidad del rosario.