Managing an Art Business: Beauclaire - Case Study Example

Managing an Art Business: The Case of Beauclaire Table of Contents Executive Summary 4 2) Values and Strategy 4 a) Mission, vision and core values: 4 b) Aims and Objectives: 5 3) Analysis of the External environment 5 4) Analysis of Internal aspects 7 Risks faced 9 Building Trust 9 Ownership and Legal Structure 9 Key stakeholders 10 5) Sales and Marketing 10 STP Concept (Segmentation, Targeting, Positioning) 10 6) Financial forecasts and requirements 11 Cash-Flow Statement 11 Projected Profit and Loss Statement 11 7) The Future: Challenges and Opportunities 12 Core Challenge 12 Key Events 12 Decisions 12 Works Cited 13 Appendices 15 Appendix-1 15 Appendix-2 16 Appendix-3 17 Name of the Student: Name of the Professor: Course Number: Date of the Paper: 1) Executive Summary This essay has highlighted details about starting a new company, which is related to manufacture and designing of custom and antique jewellery called Beauclaire. The company and the store of Beauclaire will be located in United States. As there are only a few art and fashion jewellery stores in US, it would be lucrative for the company to operate in this country. The company attains significant competitive advantage by offering customers Egyptian style of jewellery designed by artists contracted from Egypt. Attributes such as, superior quality and designs of jewellery offered within various price ranges, enables the company to appeal to the customers. These factors contribute towards positioning the company as market leader in the artificial jewellery industry. Products offered by the company will cater to the needs of all age groups and classes of people. The essay will provide further details about the business plan, which will help to portray viability of starting this business in United States. 2) Values and Strategy a) Mission, vision and core values: Jewellery business falls in the category of art business hence it is obvious that it should be treated from an imaginative point of view. The business plan for Beauclaire will reflect imagination, creativity and it has not followed the traditional business plan formulation approach. The mission of Beauclaire is to design and sell innovative art jewelleries. Through sale of attractive art jewellery, the company aims to attract maximum number of customers from all classes. Services provided by the company desires to exceed expectation of customers. The vision of Beauclaire is to be the leading jewellery selling company of United States within next few years. Core values of the company comprise providing appropriate quality of goods and services to customers. Beauclaire would not compromise on quality and standard of the products offered so as to retain core values developed (Graham 72-74). b) Aims and Objectives: As US lacks Egyptian style of jewelleries, it would be easier for Beauclaire to target the market of United States. Aim of the company is to be a leader in the artificial and antique jewellery industry of United States. The company desires to cater to the needs of individuals across various age groups, especially women. The objectives of the company can be explained through SMART goal setting method. These objectives can be enumerated as follows (Jones 22-25): Specific The specific objective of the company is to penetrate and gain 50% leadership of the artificial and antique jewellery market. Besides that, Beauclaire would ensure that shelf life of the jewelleries is short and not more than a week. The jewelleries will also be sold online and in various galleries of U.S. Measurable For ensuring a high rate of sales, the company would check in the sales details on monthly basis. Sales details of each month will be analysed by the company to determine ups and downs in the profit margin. Achievable The company will make sure that the objectives are achievable. As Beauclaire has an already established market in Egypt with a high rate of turnover and profit margin, it would be easy for the company to invest in the artificial and antique jewellery market of United Sates. Realistic The company needs to ensure that the goals set are feasible in nature. This can be done only after proper survey of the market. For this purpose, Beauclaire shall carry out a market survey of the jewellery sector of United States. The competitors present in the market are very few in number as there are hardly any existing player producing Egyptian style jewellery. Time targeted The company wants to be the market leader within a year and a popular brand within the next three years in U.S. Beauclaire also desires to become the top online seller of artificial Egyptian style of jewellery in U.S within a span of 2 years. 3) Analysis of the External environment The external industry environment of Beauclaire can be evaluated through PEST analysis. The analysis of political, economical, social and environmental aspects will help the organisation to attain greater market share in the concerned market. The analysis will enable Beauclaire to be more competitive and employ a pro-active approach in bringing about the necessary changes in business processes and production (Shukla 42-44). Figure: 1- PEST Analysis (Source: Reading 10-12) Political The political factors that affect the U.S. artificial jewellery industry, are stringent tax patterns, government intervention, patent and labour laws. The changes in labour and tax laws can directly affect growth structure and revenue of this industry. Trade regulations of the U.S. government for import and export of goods are not quite rigid and hence it will not be difficult for the company to enter this market (Reading 10-12). Economic The economic factors of Beauclaire can be attributed to the purchasing power of individuals in Brazil. It is the seventh largest country in the world in terms of nominal GDP and parity in the purchasing power. U.S. is a developed country and boasts of an economy that is largest in the world. The GDP of the country for 2013 was $16.7 trillion, which is the sixth highest in the world (Kirk 11-12). It is the largest manufacturer in the world with highest household income and average wage. The standard of living and level of employment of people of United States are considerably high. Therefore, scope of the artificial jewellery business will be wide for Beauclaire in Brazil. The absence of fashion jewellery companies will help Beauclaire to operate with more flexibility and expand faster. Social There was a sharp increase in demand for fashion jewellery during the period of 2003-2008. Number of people purchasing gold, silver and diamond jewelleries appears to be higher in United States. This can be attributed to the financial ability of residing individuals to purchase expensive jewelleries as well as the lack of antique and innovative fashion jewellery stores within the country (Frey 54-59). On the contrary, there are also a number of people who are interested in purchasing antique jewellery with a variety of designs. The craze for fashion jewellery is increasing all over the world. The growth of this industry can also effective boost the employment rate. Therefore, this industry can equally help in social growth. Technology The government of U.S. provides greater support to real jewellery industry as compared to the artificial counterpart. This is detrimental for growth of the latter sector. The tax charged by the government from artificial sector is also quite high. The government also fails to provide enough support for the Research and Development (R&D) activities, which is required for expansion of this industry (Franco 77-79). Technological imports for designing these jewelleries can be improved; this in turn will enhance flow of work and reduce costs. Environment Every industry should contribute positively towards the surrounding environment. So, it is important to follow practices that do not cause environmental damages. Beauclaire will ensure that waste emission is minimal and hazardous substances are not dumped in nearby water bodies; otherwise, this will majorly affect the surrounding ecology. Thus, the fashion jewellery industry has to abide by regulations set by the government (Wood 33-35). Legal The artificial jewellery market of U.S has to face stringent laws. The government of U. S. has recently developed standards at the federal and state level regarding lead content in fashion jewelleries. The new legislation enacted at the state level is Health & Safety Code Section 25214.1. The federal level law passed by the United States government is Consumer Products Safety Improvement Act (CPSIA) (Dutta 45-54). These laws are developed for setting a definite standard for lead content present in industry-related products. The traders who fail to abide by these laws are subject to strict punishment. 4) Analysis of Internal aspects The internal aspects of this company, Beauclaire, can be explained through Porter’s five forces (Tanner 82-84). This helps to underline strengths and overcome weaknesses of any business. This model also increases competitive efficiency of any business. Figure: 2- Porter’s five forces (Source: Reading 10-12) Substitute products There can be no substitute for jewelleries. So, growth of jewellery industry can never be restrained through this aspect (Throsby 12-17). The jewelleries of Beauclaire would be designed by experienced artists from Egypt, thereby building greater appeal for customers. The company expects to replace usage of traditional gold and silver jewelleries with that of its unique Egyptian style of jewelleries (Blacwell 320-329). The price range of the jewelleries will also be competitively set. New Entrants The designs offered will be continuously upgraded with changing trends. Beauclaire will also maintain quality of services provided to customers. The company will not compromise with profitability. Hence, it would maintain economies of scale in production processes (Jain 44-45). Unnecessary operating costs will be eliminated. Beauclaire is an established company with the right amount of market sensibilities for continuing a profitable business at least cost. So, it would tough for new entrants to compete with this company. Among thousands of artisans in Egypt, the renowned ones will be given the contract to design and distribute products to shops of the company (Caves10-19). Besides that, there will also be few in-house artisans. It will be difficult for new entrants to imitate and match up to the product design and quality of Beauclaire. Competitive rivalry There are very few competitors present in the artificial jewellery market of U.S., who sell Egyptian style of jewelleries (Tomal 58-70). Even if there are competitors in the jewellery market, Beauclaire will overcome competition by offering world class designs of earnings, necklaces, anklets, bracelets, and rings. The company will ensure that the lead content of the jewelleries are within the standard prescribed by U.S legislations (Abrams 42-50). Beauclaire will diversify the business and export the products to different parts of the world. It will place the products in different galleries and also maintain a website for sale of products. Furthermore, rise in amount of production will help to reduce cost and improve revenue. This will make it tough for the competitors to take away the market of Beauclaire. Bargaining Power of Suppliers The company will get the supplies from multiple suppliers or artisans as a single supplier of materials means the bargaining power of that supplier will be high (Currid 18-27). The company will ensure that suppliers are not the price maker. At the same time, it will maintain healthy relation with suppliers and often provide them with discounts. Bargaining Power of Consumers The young generation will be target customers of the company. Beauclaire will attract customers with a variety of designs, price range and efficient services provided (Wells 8-10). The consumers will be given heavy discounts online and in physical shops. Free shipments of goods will be offered if the product is purchased online. The competitors present in this industry will face a tough competition from Beauclaire owing to high quality of their goods and services along with calm ambience in the stores (Brady 45-50). Hence, it will be difficult for consumers of Beauclaire to switch over their loyalties to other jewellery companies. Risks faced The key risk faced by the business is to retain the artisans, who are also suppliers and distributors of the company. With passage of time, it is becoming hard to find good and authentic artisans in Egypt. This can also reduce bargaining power of the company with the suppliers. Building Trust The organisation can build trust in itself, team and product by maintaining quality of their products and services; fostering loyalty towards employees and customers; and giving discounts to customers more often. At the first year of business, the main motive of Beauclaire should be to penetrate the new market of U.S and not make unnatural profit (Stutely 37-39). Ownership and Legal Structure Beauclaire is a Limited Liability Company. The legal structure of the company is hybrid, where features of a limited liability corporation are coupled with operating flexibility and tax efficiency of a partnership business (Boothroyd 22-35). Owners of Beauclaire are considered as the members. There are more than three owners of the company. So, similar to other corporations, Beauclaire is not considered as a separate legal entity. The profit and losses of the business are passed on to each of the members of Beauclaire. The members of this LLC shall report all profit and loss amounts on their individual regional tax return statements, like a partnership business (Barrow 105-108). Key stakeholders The company intends to expand and further diversify the business. Co The key stakeholders of this company in Egypt and U.S are the artisans who are also the suppliers as well as existing and new customers of the company in Egypt and U.S. respectively. The company with their suitable quality of products and services will satisfy needs of people in U.S as it has done in Egypt (Finch 27-39). The artisans who are also distributor and supplier of the products are always given high importance by the company. 5) Sales and Marketing STP Concept (Segmentation, Targeting, Positioning) The STP concept will help Beauclaire to understand the buying behaviour of customers more efficiently (Alexander 99-100). Segmentation The segmentation process of Beauclaire can provides the following results: The potential customers of the company are individuals across all age groups, classes and specially, the fashion conscious young generation of U.S. The actual target market of the company would be rich and middle class sections of U.S., consisting more of young female groups. The competitors present in the fashion and artistic jewellery business of U.S are few in number and hardly any of them produces jewellery inspired by the Egyptian style. Targeting After selecting the most attractive segments, the next step to be followed by the company is to target all these segments. The sub-activities of targeting can be described as follows: Beauclaire has sufficient resources and ability to enter this market. As the company is already established in Egypt, it would be easier for Beauclaire to start business in U.S with the right amount of start-up capital and other funds. The abilities of the company with the given resources are greater than competitors. Beauclaire sells artificial Egyptian style jewelleries designed by top artisans from Egypt. The concept is quite unique and designers are also experienced with adequate knowledge about right mix of metals and innovative product designs Positioning The company should advertise the products through websites, leaflets and other such modes. It will also be fruitful for the company to distribute leaflets in college areas and houses in U.S. This will help to position products more suitably and act as an advantage to Beauclaire. 6) Financial forecasts and requirements Sales Forecast From analysis of the sales forecast, it can be said that demand vary as per different products. The percentage of sales is considered to be increasing at the rate of 10% in the second year and 11% in the third year. The increase in sales can be attributed to high quality, competitive design and price of the product. The amount of sales and demand for different types of jewellery is reflected in the sales forecast data (Appendix-1). Cash-Flow Statement From analysis of the cash flow statement, it can be inferred that cash outflow from operating and financing activities are comparatively high, which should be reduced. The company for the purpose of long-term profit need to lower advertising, rent, promotion and miscellaneous expenses. For reducing cash outflow from financing activities, Beauclaire should pay back all loans and other debts at a faster rate. Although cash inflow of the company is more than the outflow, it should still reduce all costs to increase the profit margin (Appendix-2). Projected Profit and Loss Statement The analysis of this financial statement shows that net profit of the company is going to increase even after payment of all taxes in next two years. The net profit for the forecasted years 2014, 2015 and 2016 are $7501362.60, $8243515.56, $9249195.31, respectively. This implies a rise in the net profit (after payment of tax). The rate of increase in sales is more than that of operating expenses and cost of sales. All these important facts and figures indicate that Beauclaire will handle finances efficiently in the forecasted year 2014-2016. The business is, thus, expected to move forward in a positive manner. The investment strategy that the company should follow is business expansion into new markets and purchase of advanced machineries for production processes. The key financial risks are rise in wages of the labour, increased business expenses during inflations and government taxes. These risks can hamper performance of Beauclaire. The company aims to increase investment by 25% for future expansions, if revenue earned from the business in U.S is adequate (Appendix-4). 7) The Future: Challenges and Opportunities Core Challenge The states of economic affairs are highly volatile in the contemporary era. The products, on which the company would be trading in U.S. and other markets, are luxury items. In future due to higher ambiguity in the market or a recession, the discretionary spending of the consumers in U.S and other economies might fall In short, over time multinational organizations are exposed to higher degree of uncertainty from the external environment, and this exposure might be a challenge for the company’s commercial expansion (Abrams 102-107). Key Events However, the above core challenge or risk that the company might face in the long run can be strategically tackled through some key turning points in business. If the company implements cooperative intelligence then it can encourage adaptive strategies by virtue of which it would be able to shape up the upcoming ambiguity in the business world. With the help of some strategic marketing activity, the company can capture large amount of economic prosperity in the near future. Like, it can get a chance to advertise its jewellery in some popular commercial movie. Decisions However, it should be noted that the upcoming challenges and opportunities in business can only be focussed and tacked by the company with the essence of strategic entrepreneurial guidance. The leaders of the organization should be charismatic personalities who should possess strong forecasting powers and should be capable enough to undertake correct decisions in crisis situations (Griswold 50-51). Works Cited Abrams, R. The successful business plan: Secrets and strategies. California: The Planning shop, 2003. Print. Alexander, V. Sociology of the Arts: Exploring Fine and Popular Forms. Oxford: Blackwell Publishing, 2003. Print. Barrow, C. Starting a business for dummies. New Jersey: John Wiley & Sons, 2011. Print. Blacwell, E. How to prepare a business plan. London: Kogan Page Limited, 2011. Print. Boothroyd, A. Setting up a successful jewellery business. Edinburgh: A&C Black, 2012. Print. Brady, D. Essentials of international marketing. Armonk: M.E. Sharpe, 2008. Print. 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Appendices Appendix-1 Sales Forecast Appendix-2 Projected Cash flow Statement Appendix-3 Projected Profit and Loss Statement Read More