Entrepreneurship and Innovation Management
Entrepreneurship and Innovation Management
Evaluate the opportunity that is identified by Chris and Val in the case using the analytical tools you have covered in class?
What Chris and Val discovered was the dry cleaning industry was fragmented, low entry barriers and undifferentiated. The duo started off by working with two professional dry cleaning businesses where they could analyze customer relations, the running and fixed costs, the buying habits and customer retention rate. They found out that the stores were either plant stores or dry stores. The Dry stores are either independently owned or they are owned by plants who own chains. The bridge that Chris and Val are trying to create for the customer is quality and cost of coming to get there cloths dry cleaned.
The customer base they are trying to target is the working class; since many industries like oil industries require their workmen to wear specific suits and they have their own dry cleaning plants. There is a window of opportunity where Chris and Val could have a contract with the big industry for dry cleaning there.
There has been a gradual decline in business, the clean feels that the cost of maintaining the machines and hiring good staff is cutting down on profits. Since most customers cannot afford to have machines fixed in their own houses, they are forced to keep switching cleans and a 35 to 40 percent switch is considered normal for these business but it just keeps going around. People in smaller towns have lesser choices and people in big towns are still restricted to their neighborhood.
Another consideration is the space cost; a plant store will easily spread over thirteen hundred to two thousand square feet whereas five hundred square are required for a dry store. Often strip malls include a dry cleaning store, where the rent cost can vary depending on the location of the mall itself.
Many stores are located next to grocery stores, so when people come to buy groceries they can also come and get their cloths dry cleaned but the cost of renting a place next to a grocery store is still pretty high; around $18 to $30. However, for the DAG group, there is a window of opportunity where a good investment, wisely managed administration will ensure customer loyalty and good profits in the long run.
One thing to be kept in mind is that no customer is going to spend extra money on gas going to the other end of the town to get the cloths dry cleaned better. They might do it for special occasions to ensure the quality of the cleaning and to make sure the fabric is protected but that would be targeting a niche market which is often not the most profitable.
Chris and Val got together and carefully studied the customer segment that comprises of the market base, and they decided that they could be classified in three categories.
The heavy users that dry clean their cloths nearly every day or every other day form the minority of the customers since they belong to white collar professions where they wear expensive clothes, and are more concerned about missing buttons or things that come to notice, time that they spend with the cleaners and convince rather than the quality of the dry cleaning itself. However, since women also form a bulk of those customers, they are likely to notice poor quality of cleaning and switch the stores so it would be better to provide good service, and customers will be willing to pay an extra dollar in return for good services. As far as these affluent customers are concerned, they will merely complain about the price out of habit but they really are not interested in knowing how much they are spending.
Any coupons and discounts available to regular clientele or on bulk orders are going to resolve the issue of costs. In this case,...
References: Bewsey, S., & Bewsey, S. (2002). Start and run a home cleaning business (2nd ed.). North Vancouver, B.C.: International Self-Counsel Press
Dry Cleaning Delivery | Business Idea Center | Entrepreneur.com. (n.d.). Business News & Strategy For Entrepreneurs | Entrepreneur.com. Retrieved June 15, 2013, from http://www.entrepreneur.com/businessideas/dry-cleaning-delivery
Fallek, M., & Johnson, K. (2003). How to set up your own small business ([8th ed.). Minneapolis, Minn.: American Institute of Small Business.
Lewis, J. G., & Renn, L. D. (2007). How to start & manage a dry cleaning business: a practical way to start your own business. Interlochen, MI: Lewis & Renn Associates.
Tipping, G. (2013). How to start a cleaning business: how to set up and run a successful cleaning business.. S.l.: How2become Ltd.
Please join StudyMode to read the full document