School of Architecture, Building and Design

Foundation of

Natural Built and Environments

Economics (Ecn30205)

Report Title:

A Comparative Analysis of 2 Businesses of Similar Industry in Different Geographical Locations

Group Members:

Lu Siau Vay 0318567

Siong Jia Yii 0318239

Wah Yun Chen 0319115

Aaron Ngu Nguok Soon 0319396

Lecturer: Mr Chang Jau Ho

Word Count: 2155 words

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Table of Content

No. Content Page number

1. Key summary 3

2. Brief description of the businesses 4-5

3. Comparative Analysis of the Businesses’ Competitive Traits

6-7

4. Recommendation 8

5. Appendices 9-10

6. References 11

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Key Summary

According to the brief of the assignment, we need to find a group with six members at first. After that, we are required to do a comparative research about two same business industry located in Klang Valley.

Our group has decided to choose hair styled salon as our target of research report. A comparative research report had been done by conducting through primary and secondary sources, such as asking permission to interview, organizing questionnaires, arranging the date of interviewing, site observation and so on. Therefore, we have visited and interviewed two hair salons which are ‘Tenze Hair Studio’ and ‘Stella’ to collect information and photos.

While we were doing the research about the hair studios, we found that ‘Tenze Hair Studio’ is a commercialized hair studio that having 6 branches at different area while Stella is a home-based hair salon that placed in Banting. Both of the salons are considered as famous hair salons at their own area and have been operating for 10 years and above.

These two salons had been analysed, synthesized, compared and contrasted in several aspects in terms of brief description, competitive traits, and recommendation to improve and develop better in the same industry.

Brief Description of the Businesses https://www.youtube.com/watch?v=MJMgRDKiD0s&list=

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Salon Name: STELLA

PLO0bO4HBqbYikj7jld65aYe7ERTOuiwJZ

Founded Year 1989 (25 years)

Founder Stella LimCurrent Location Banting, SelangorMotive for Starting Business To learn a technique, InterestMain Services Hair cutting, permingEstimated Number of Customers About 50 per dayAnnual Revenue About 72KCapital Needed for Starting the Business ‘Leaves’ – about RM 15,000

‘Stella’ – about RM 50,000

HISTORY

In the early years, she owned a salon, named ‘Leaves’. ‘Leaves’ were actually belong to another owner and Stella was working with the owner. Few years later, the owner sold the shop to Stella Lim. Ms. Stella Lim mentioned that when she owned the shop during the early years, the business was running very well because it was located at the main street of the town and most of the residences of the town love her hair styling skills.

After a few years, she moved her shop location to another area but it was still in the same town and she named it as ‘Stella’ because she wanted the salon to represent as her. The business of ‘Stella’ was not as good as ‘Leaves’ because the location was not in the uptown, but the old customers still came to her salon as they could not find a second best hair stylist like her.

During the year of 2013, she closed her shop and moved the business to her house because she found that the competition nowadays is too strong but she want to maintain her passion and interest. In addition, to take care of her family, so she still continue engaging her business at her house.

Salon Name: Tenze Hair Studio Sdn. Bhd.

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Founded Year 2002

Founder Mr. Avier NgCurrent Location Tenze Hair Studio Setia Alam

No.18-1-2, Jalan Setia Prima Q U13/Q, Setia Alam Sek U13, 40170 Shah Alam.

Motive for Starting the Business PassionDream

Main Services

1. Hairdo services and Make up for Fashion Show

2. Magazine and Advertisement shooting3. Artist Concerts

Estimated Customers About 60 per dayAnnual Revenue About RM 2.5 millionNumber of Branch Stores 6 branches.Capital to Start his Business RM50k to RM1.5 million

HISTORY

2002Mr. Avier Ng started his first business in 2002, when the time was still not so competitive. So he started the salon which more focus in hairdo services and make up for fashion show, magazine and advertisement shooting and artist concert with his dream and passion successfully during the time.

2004After two years, he opened the second branch store in 2004.

2007His third branch store has been started in 2007, it was three years after his second branch store.

2007-2012In 2007, he realized that the system of management was terrible. So he stopped opening branches for that time and try to focus in setting up the system. After few years keeping the system in a stable situation, finally in 2012 he decided to start training his team and build branding of his stores so that his businesses will run more successfully in the future.

2013He continued opened his fourth and fifth branch stores in 2013 after his businesses were stabled.

2014Since the system and the branding of his studio had stabled, so he continued his sixth branch store in 2014. And he said that he believes it would not be difficult to continue opening branches in the future.

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Comparative analysis of the Businesses’ competitive traitshttps://www.youtube.com/watch?v=2Y5opPT4n4&list=PLO0bO4HBqbYikj7jld65aYe7ERTOuiwJZ

As already been stated, we interviewed two type of business. The first one, Tenze Hair Studio Sdn. Bhd. It is a commercialized business. In this business, they face a lot of competitors in their market. So, we found that they have a least three competitors. The first competitor is ‘AX Hair Style Salon’, it is located at Jalan Prima C, Setia Alam, and it is just right beside ‘Tenze Hair Studio’. The shop is specialized in hair stylist, hair care and so on. The second competitor is located in the same area, called ‘1986 Hair Studio’. This hair studio is different because it provides a café, so that the customers can enjoy while waiting for their turn. The third competitor ‘De Hair Salon’ also located in the same row with the Tenze Hair Studio.

“In 2015, what business does not face any competition?” Mr Avier Ng mentioned it. He has never treated anyone as his competitors. It is because he thinks that he treats them as a friend and share everything with them such as skill, technique and style. Moreover, he also think that he has already won them by attitude. In his point, attitude is very important. In the interview, he mentioned that a very important thing, “Divert the customer away from the competitors to him will build up only enemies, instead of profit.” He thinks that they will use another way to let him lose all the customers if he does so. Therefore, having more friend are always better than having more enemies.

Another hair salon that we are doing is a salon located in Banting which is ‘Stella’. ‘Stella’ is a home based salon. We found that there are three competitors they are facing in the town. One of the competitors is a salon that managed by a young people. His customers is surrounded with young people as well because he knows the most trending hair style. His salon’s name is ‘Pro’. The second competitor, named ‘Mei Hua’ is using the same strategies as ‘Stella’. Their hair styling skills are equally competitive as each other. In addition, they also have a low price and good customer services. The third competitor, Kozo is located at the uptown of Banting. They are competitive because they are more systematic among all of the salons.

Even though she is facing those competitors but she would not want to compete with her competitors because she trusts her customers’ loyalty. “People have their choices in choosing which kind of salon they want”, Stella said. She provides good customer service, such as good hair styling skills and comfortable hair washing. This is what we called ‘differentiated products’ in economics. But what we heard from the founder, Stella, most of her customers still coming to her for hair services even though she kept moving her shop. Up to here, we can know that Stella is a kind and friendly person.

Besides that, every businesses face obstacles while entering the market because nowadays those businesses in the same industry has become more and more. So, there will be a lot of competitors to fight with them. Secondly, they will probably be lack of customers because customers have too much choices. In addition, lack of funding and insufficient cash flow are one of the obstacles. It is very normal when a new business just started and did not work in systematic. Other than that, businesses nowadays are also facing a human resources problem. It is hard for them to recruit talented staffs and manage people. Nowadays, many teenagers did not finish their degree program, some of them went to find a job after getting a SPM certificate. What skills do they still have?

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Pricing decision is also the one of the obstacles faced by new businesses who wish to enter their markets nowadays. Why? It is because if they raise its price, they will lose significant demand for their products because customers will choose their competitors instead. Therefore, due to the intense competition and weak pricing power, most of the monopolistic competitive firms make minimal profits over time in the market. It is difficult to overcome because there are a lot of similar shops in this market even they can retain their customers by differentiating their products.

Competitive Traits Stella Tenze Hair Studio

1. Number of Competitors 2- 10

2. Barrier to Entry Weak. Weak barrier to entry means that many competitors can enter and exit the market easily.

3. Differentiated or Standardized Products

Differentiated Products. For example, good customer service, convenient location.

Differentiated products. They provide new package every months and they usually work in fashion show and artist concert.

4. Pricing Power Price Taker. That means they have weak pricing power because their competition is intense. So that they cannot charge any price it likes.

5. Other Characteristics There many sellers in the market, but no more than 100 firms.Firms are constantly advertising their differentiate products.

6. Verdict Monopolistic Competitive Firm ‘Tenze Hair Studio’ and ‘Stella’ are both monopolistic competitive firms.

Monopolistic competitive firms have five characteristics. Firstly, the market is represented by a fairly large number of firms, such as perfume industry and restaurant industry. The second characteristic is the market is protected by weak barriers to entry, this also explain why new firm can enter and exit the market easily. Since there are so many firms in the market, the competition is very intense. Monopolistic competitive firms cannot charge any price they like or the customers will choose their competitors. Therefore, monopolistic competitive firms have weak pricing power, also known as ‘price taker’ in economics. To increase their pricing power and protect their profit from competitors, those monopolistic competitive firms will strive to differentiate their product or different package. Product differentiation results in customers developing attachment for their products. When a firm has strong attachment, then it is harder for competitors to divert away its customers. Furthermore, constantly advertising is necessary because without advertisement, customers would not be aware of the firm’s product differentiation.

Based on the analysis above, ‘Tenze Hair Studio’ is more commercially successful because they are more systematic. They have a well-managed business compared to ‘Stella’. In addition, launching new package every months and working for other industry, like fashion show and artist’s concert shows that they have differentiated their products. By differentiating their products, consumers have more choices to spend what they prefer. Plus, ‘Tenze Hair Studio’ advertise their products frequently. This enables to beat their competitors because new customers get to know the information of their hair studio from advertisement. That is why advertisement could attract customers to come over their salon.

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Recommendation

Based on the analysis of the previous section, I am going to provide a few recommendations on improving the competitiveness of each business with proper justifications.

STELLA:

From the analysis of Stella’s salon, we can see that they use good customer service and good hair styling skills with cheaper price to keep their customers. In our opinion, since they have good hair styling skills, why not they higher their price a little bit? We think that they can increase their price same as the normal market price in the town. For example, if their competitors collect RM20 for a haircut, they could increase their price to RM20 as well.

Other than that, Stella does not have a well-managed salon. To improve the competitiveness of their business, we think that they should manage their salon’s business in systematically. They could consider about creating a website to advertise their company or sell products like shampoo, conditioner, and hair mask online. Creating a web page is very easy nowadays, you can create a web page on Facebook as well.

TENZE HAIR STUDIO:

To improve their business’s system, setting up a goal every months or every few months will be a good idea. Write down the goal that is possible to achieve and think about strategies to achieve the goal. We think that this hair studio can try to get a tutor to help you on developing their business skills and achieve success earlier than they may have on their own.

Admittedly, improving their customer service can totally help them to earn more from their existing customers and find new customers. Happy customers will refer their business to others and providing you with free, favourable word-of-mouth advertising.

https://www.youtube.com/watch?v=rPLf_V8KCNM&list=PLO0bO4HBqbYikj7jld65aYe7ERTOuiwJZ

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AppendicesPhotos with Interviewees

Site Obse rvation

Competitors

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Interviewee’s contact details:

Stella Lim 0123092373 (Founder)

Diff Ng 0169088358 (Hair stylist)

References1. Small Business Trends LLC. (2015, January 12). Small Business Survey About

Business Obstacles: Small Business Polls. Retrieved from Small Business Trends Web Site: http://smallbiztrends.com/polls/obstacle-holding-business-back

2. The State of Queensland. (2014, May 22). Tips For Improving Your Business: Queensland Government. Retrieved from Queensland Government Web Site:https://www.business.qld.gov.au/business/business-improvement/tips-for-improving-your-business

BIBLIOGRAPHY 323, H. S. (2012, July 9). The History Of Barbering which has develped into today's Modern Salons. Retrieved from Facebook: https://www.facebook.com/notes/hair-studio-322/the-history-of-barbering-which-has-develped-into-todays-modern-salons/491422430873236

Benton, W. (1968). Barber History. In W. Benton, Encyclopaedia Britannica (pp. pages 148-149 and 327-328). Chicago.

Farlander. (2002, November 29). Blood, Bandages, Barber Poles. Retrieved March 1, 2005, from h2g2: http://h2g2.com/entry/A885062

L, S. (2015, January 5). Brief Bios. (A. N. Lu Siau Vay, Interviewer)

Meganomics101. (n.d.). A HISTORY OF THE HAIR SALON & STYLING. Retrieved from Beauty Rival: http://beautyrival.com/beauty-lounge/history-hair-salon-styling/

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Ng, D. (2015, January 8). Brief bios. (L. S. Vay, Interviewer)

Small Business Trends LLC. (2015, January 12). Small Business Survey About Business Obstacles: Small Business Polls. Retrieved from Small Business Trends Web Site: http://smallbiztrends.com/polls/obstacle-holding-business-back

Small Business Trends LLC. (n.d.). Small Business Trends. Retrieved from Small Business Survey About Business Obstacles: http://smallbiztrends.com/polls/obstacle-holding-business-back

The Barbers' History. (n.d.). Retrieved from The History of The Hairs World: http://thehistoryofthehairsworld.com/barbers_history.html

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