Read Case Study Island Shades In a 2-3 page paper answer the following questions:
Island Shades
Terry Allen has an idea for a new business. She would like to start a retail operation that would provide high quality eyewear to discriminating consumers. The business, Island Shades, would use a focused differentiation strategy, catering to middle- and upper-income individuals ranging in age from 16 to 50 years. These customers would range from avid outdoors people to birdwatchers to Sunday drivers. She envisions carrying high-end sunglasses (Gucci, Prada, Oakley, Ray Ban, Costa Del Mar, etc.) and custom-prescription sunglasses. She will stock a wide assortment of styles and a variety of colors.
Although Terry will stock some affordable options in each product category, the bulk of her inventory will priced at $100 or greater. She estimates that she will begin her business and ensure she has the variety and quality her discerning customers will expected. She estimates that her monthly sales will start at $15,000 and fluctuate depending on the seasonal peaks and valleys. For instance, the first, second, and fourth quarters of the year will be much more lucrative than the third quarter due to ski season, summer activities, and the holiday season. Terry expects to average $35,000 per month in sales over this time period. Currently, she is also planning to pay a consultant to develop an interactive Web site enabling customers to purchase merchandise online. The initial quote for the up-front cost for development is 4,000, with an ongoing annual fee of $300.
Terry believes that the perfect location for this retail store is in the Palacio, an upscale and trendy shopping village just off a major interstate highway in a mid-sized city with a population of 295,000 (the population for the greater metropolitan statistical area is 500,000). Palacio is centrally located within the city and easily accessible from several high-end neighborhoods. One key factor in choosing this location is that other upscale retail shops and restaurants currently operate at Palacio that attract the desired target market. Terry believes that she will need around 2,000 to 2,500 square feet. Terry recently checked with a local leasing agent and found out the following information:
A 2,400-square foot corner nit is open.
The rent is $3,300 per month. (taxes and insurance charges are included.)
The build out cost is $16.00 per square foot.
The lease term is 3 to 5 years with several different renewal options.
Terry wants a comfortable friendly atmosphere that is alluring without being stuffy. The quote she received for build out cost would enable her to accomplish this objective. It includes displays, but furniture and accessories would be additional. Terry estimates that these features would run an additional $5,500. Space is available now and going quickly. Even though it is August, she would like to get started and sign a lease agreement.
Terry is quite aware that she will be working long hours at the beginning. She plans to be open Monday through Saturday from 10:00 a.m. to 7:00 p.m. These hours will allow her to operate when potential customers are eating lunch and dinner and browsing at Coldwater Creek, Anne Taylor, Adventure Outdoors, and so on. Based on these hours of operation, Terry believes she needs two to three part-time employees who would rotate shifts. She is planning on tapping the local high schools and universities to recruit quality part-time employees. Based on the data she has gathered, she expects to pay between $8 and $10 an hour. Because she is relying on part-time employees, there would be no need to pay benefits such as medical and dental.
1. Analyze Terry’s goal and plan based on the concepts you learned in this chapter. Are there additional key performance areas that Terry could identify for action? Is her goal realistic?
2. Do you agree with Terry’s view that Island Shades will be successful? Why or why not?
3. Would you recommend any changes or modifications to her goal or plan? Discuss.
4. Present a summary of your analysis and recommendations to this case study.