Date: October 27, 2011

Student Name:

Instruction Name: Professor James Young

Course/Class: BUS100096VA016-1118-001

Assignment #1: Urban Outfitters Continuing Case Study Part 2: Creating a Business

1. Setting up a business can be a very challenging job. Having a beautiful dream thinking about the business while sitting in your nice office with all the amenities is not enough. It is great to have an idea, but you have to make that idea work. There are lots of challenges that face their owners when setting up a business. It could take years for a business to produce enough profits for the owners to be able to enjoy. Most businesses start small and in time, with experience, goodwill, and success, they can grow into bigger businesses. Here are three challenges that new business face:

➢ Idea/Concept: Many entrepreneurs face risks to create their own business because they do not have the right idea or concept. Sometime ideas and concepts are good but if customers will not buy what they are offering, the business will fail. Richard Hayne and his wife Judy along with an old college roommate, Scott Belair had a great idea. They wanted to open a small shop filled with unique objects that they could sell. The basically sold used second hand clothes, bohemian knickknacks, and “found objects”. Their customers would come for the unique “found objects” and were willing to pay what they were being sold for.

Entrepreneurs- people who risk their time, money and other resources to start and manage business-business basics chapter 1 page 3

➢ Sale and marketing entry: Selecting the right location is very important. The location of your business can be very critical to its success. Getting your name out there by advertising in very important in trying to get new customers. Owners need to do their homework and research so that they advertise in the right places. Writing down the names of people you know, personally telling them about your business, handing out business cards and flyers, letting others know about your business are all various methods and ways of letting others know. People will remember their conversations. You hope is that they make referrals to their friends. The best advertising in the business is “word of mouth”. These people get to know your business by name and reputation. Urban Outfitters were originally located near colleges and universities. Today, Urban Outfitters has stores around the U.S. and around the world. These entrepreneurs even brought Urban Outfitters to the upscale market level by selling different design products to different people.

Satisfied customers can become advocates for a business, spreading the word with more speed and creditability tan even the best promotional campaign – Chapter1 page 5, The Relationship Era

➢ Conducting a competitive analysis: is an important part of the job. It shows you how your business is different and how it is unique compared to other companies. Finding new and better ways of doing business is necessary to keep your competitive edge. Improving the concept of a product or service that already exists can make a business successful. Urban Outfitters kept their original unique idea being in a wide marketing with only small amount of demand.

2. A “niche” product by defined as a product that is made and marketed for use in a small and specialized and profitable market (1). Niche products are aimed at wide demographic (2) audiences which result in lowering the price of the product. The thing that makes a niche product so good is that people are already actively interested in the product and are researching for more information about the product. Buying products through the internet and watching for information from news reports on popular products keeps these people informed. Here are three samples of niche products:

❖ Purell – created the hand sanitizer product

❖ Rembrandt - created the tooth whitening product

❖ Redbox - created DVD rental using a new way of vending machine.

Niche (1) definition by dictionary.com and demographics (2) is the measureable characteristics of a population-Chapter 1 page 10

3. Why a niche company might have an advantage in a market? Would price necessarily be an advantage? Why and why not?

A niche company has an advantage in a market because it is unique and has a limited range of products to be sold to a very specific group of consumers. Another advantage is that they can focus their marketing on a specific clientele; those customers more likely to remember them and their products and services. However, a niche company will be working in more than one niche at a time to increase income generated by their efforts such as “mass production”.

A niche company has an advantage in their pricing because many competitors are selling difference products; monopolistic competition. Since theirs is unique and is a different product, people are willing to pay based on the value that producers offer. However, monopolistic can also be bad since there is nothing forcing the monopoly to make any investments or hold down fees or provide better service.

Monopolistic competition is a market structure with many competitors selling differentiated products. Barriers to entry are low-chapter 2, page 18

4. Identify and explain three reason why customers would pay more for exclusivity

Many customers are willing to pay more for a product or service that they believe has unique, higher quality value, and customer service.

✓ Unique products that are rare are also appealing to individuals who want to stand out from others. For example, a woman may want to buy a dress from the only shop that carries that dress just so that she makes sure other woman has the same dress.

✓ High quality products are expected. For example, no one cares about owning a physical CD anymore. Customers can get high quality music for their iPods now.

✓ People will pay more for good customer service. For example, I used to go to certain oil change place because they would vacuum out my car out and also run it through their car wash for free. It costs $5 more than Jiffy Lube but I am willing to pay for someone to vacuum out my car and then put it through the car wash.

5. Explain how a niche player “chips away” at a larger competitor’s base. Give three examples of retailers who have done this.

Niche competitors in a market are successful because they offer the consumer a different choice that is more attractive to them. Here are three examples of retailers who have done this.

a. Redbox is a company that specializes in the rental DVDs, Blu-ray Discs and Video games. It was founded in 2002. They are located across the United States at grocery stores, convenience stores, and fast food restaurants. Customers can order and pay for the movies online and then can pick them up at specified locations. It takes away business from Blockbuster because it costs between $1 and $1.50 per nightly new- release rental and the customer is not committed to having a membership.

b. Geek Squad experts in technical support field. They are a perfect solution for home and residential business. No matter what product or brand the customer has, they can fix it. They typically are just a phone call away with fast same day service. Geek Squad helps small businesses reduce their IT costs plus these businesses know that everything is under control.

c. Peapod is an online grocery delivery services in various cities in the United States. They have improved customer’s lives by bringing on-line shopping to a broad consumer market. Customers can shop online at anytime. Peapod then hand picks the best items that the customer chooses and delivers then to the customer. They are the world’s leading provider of interacting grocery online shopping. Peapod has taken business away from other larger competitors such as Shopper Food Warehouse, Blooms, and H-Mart International Market.

It is not easy to start up a business and have that business become successful. There are many entrepreneurs that start their own business but fail. Only a small number of entrepreneurs are really successful enough to expand their business.

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