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The lifestyle apparel and skating industry is highly competitive and it calls for the entrance of new products and services every other day. The surfing product will be introduced under a chain of stores called The Hype. The chains’ headquarters is in San Jose around the de Monsul Beach as the target customers are more likely to look for the product from nearby stores. The main aim of the chain is to introduce new surfing wear to the Californian community as various surveys conducted in the area showed that there is lack of large scale supply and production of the surf product. The market demand for surf wear is on the rise as more people embrace the activity and continuously participate in it. Over the last decade, there has been a rise in the demand for the product, but there is no exclusive company or store that focuses on production and supply of gear specifically for these purposes. Therefore, the business idea to come up with a chain that specializes in the production of wear that will only serve these three purposes arose. The main target market for the product will be the youth of San Jose as well as tourists who come to visit the beach. Considering that the youth are attracted to doing activities the associate with ‘coolness’, it is highly probable that this is a good venture to focus on. The provision of products that will address the need by these groups of people to get what they need without wasting a lot of time in stores with all kinds of sportswear will be the primary concern of the venture. Therefore, there is a need to define the product, understand the market and environmental structure as well as the financial, information, technological and promotion aspects of developing the new product and its introduction into the market (Putsis, 2009).
The surf products will be worn by sports persons as well as youths and adults who have a passion for surfing. The product will differ in texture, color, material and size to meet the different demands of the customers. The products will be used by surf lovers during their leisure times. The product will be trendy and well designed in order to meet the demands and the needs of the youth. Therefore, the product will not just be plain sportswear, but will be trendy and will possess a fashionable edge that will make it different from other products under the same category. The fact that many people already own one or more of these gear calls for the need to come up with a unique product that serves the needs of the clients as well as appeal to their fashion tastes (Putsis, 2009).
The pricing of the products will be flexible depending on the quality and the material used to create it. The designs will help in distinguishing between prices of different outfits. The gender will also be a factor to take into consideration when it comes to determining the prices of the products in the different stores. However, the prices will be attractive considering that the company is a new entrant and high prices will most possibly result in less or no clients.
Market analysis and demand
Market Size and Competition
The active lifestyle of the youth and their passion for trend products increases the demand for products in the surfing market. There has been a steady increase in the market demand for the product is increasing making it a lucrative venture for the chain. For example, research shows that the market share dominated by surfing wear accounts for more than $13 billion in sales annually. Therefore, with this huge market share, the products offered by the organization will possibly get a big share of the increasing annual sales in the market. The products offered will aim at attracting approximately as many customers as possible within California and other regions who come to the state as tourists.
Introduction of a product to the market is not simple. There is a need to blend in different issues that come into play in regards to the development and introduction of the product to the market. There is a need, therefore, to work on identifying and evaluating the target customers in the area of operation. The process was done using a number of guidelines that would oversee the successful venture of the company into the new market. The first step was finding clarity on the customers that would want the product most based on their age, their hobbies, likes, dislikes and how they spend their leisure time. In order to successfully accomplish this, there was the need for a critical analysis of the market in an effort to understand who could possibly utilize the product more and how and where to reach them. The other key feature that also called for consideration was the need to understand the correct way to the target market to love and want to utilize the product through creation of appealing marketing and advertisement strategies. In order to further understand the target customers and the market demand, there was a need to design different marketing strategies that would not only reach the target customers, but appeal to the diverse demands present (Chi-Feng,Li-Yu & Shao-Chi, 2009).
The other factor taken into consideration in identifying the target customers was coming up with a clear distinction between customers who would purchase the products once and those who would possibly become regular customers due to their passion for surfing products. This would allow for a profiling of the customer needs that would act as guidance in the ordering of supplies from the suppliers. From the utilization of the above guidelines, it became clear that the target customers for the Hype products would be the youth. Surfing is something that is becoming a trend among the youth in America and other parts of the world as they embrace the trend and participate in it every chance they get. The target customers for the product are the young people of California who live a small distance from the beach. Therefore, there will be a continuous demand, not only from the local people, but also from tourists who are always on the lookout for new ways to spend their time away from work. Also, in order to ensure a continuous demand for the surfing products, there will be free weekly surfing lessons aimed at increasing the market demand for the products. In this regard, the main aim is to increase demand among the older people who are slowly becoming part of the surfing community.
The surfing industry has recorded a steady growth in the recent years as compared to its growth rate evident in the previous century and the early years of this century. From a market research conducted previously, it is evident that there is continuous gain in the surfing industry with the trend expected to continue its positive upward trend in the near future (Chi-Feng, Li-Yu & Shao-Chi, 2009). The success of the market that is seen now can be attributed to the presence of surfing lovers who are always on the run to the beach to spend their time. There is also an increasing trend in the formation of associations that make it easy for people to join and become passionate with surfing and approachable markers. Surfing equipment is also easy to find and are relatively cheap making the surfing an affordable and enjoyable hobby for many residence who live along the beach. The presence of key players in the market from suppliers, manufacturers, associations and distributors has also contributed immensely to the increase in the trend of surfing among the youth.
In the current market, a household good or product becomes a trend in the American or other market across the world. This is evident in how people tend to go for something they term as fashionable or cool. Fortunately, surfing has been a household name in the American market with the youth and teenagers wanting to learn how to surf every other day. This has increased the demand of the different goods and services required for surfing. The young generation is highly attached to surfing and this has resulted in an increase in the demand for the products in the market. In the recent years, there has been an increasing trend competition in surfing and skating. The youth derive a lot of fun and adrenaline rush just from riding a wave. There is also a new trend in the surfing industry as more people associate the sport with relaxation as well as exercise. This has seen an increase in the number of older people participating in the activity. Most of the people born and raised and along the beaches across America and across the globe have a passion for surfing and the thrill also spills to the tourists who want to enjoy the sport when they can. Demographically, there is an increasing attraction from female and the older to the sport that was lacking in the previous years. The sport was mostly associated with young men and teenagers who found a lot of fun b taking part in surfing. However, in the recent years, females and older adults have also learnt to embrace the sport of surfing and are enjoying it. This can be attributed to the change in attitudes among the older adults as well as the females. The sport is no longer seen as a teen or youth affiliation, but something that can be enjoyed by people from different age groups (Chi-Feng, Li-Yu & Shao-Chi, 2009).
The ease of learning surfing is also one of the reasons why there is an increasing trend in the industry. The fact that the sport is highly associated with new trend among the youth of ‘coolness’ increases the drives most of the teens and youth to learn how to skate and surf. This was further boosted by the increasing number of surfing schools being opened up at different locations across the country. There are many facilities that offer surfing lessons where people go for lessons for varied lengths of time. However, it is not all positive growth in the industry as it is marked with seasonal fluctuations as the market is highly trend driven. There are different factors that impact the surfing and skating markets. One of them is the level of disposable income among the American families. The target customers for the product include tourists. In this case, the amount of disposable income in the families will determine whether they can afford to go for a vacation or not. Therefore, when there is a high presence of disposable income in most families, then there will be an increase in the number of surfers and skaters in the beach as compared to the lack of disposable income. The other factor is the economic factors. In the recent years, the recession affected the economy greatly leading a decrease in the number of and indulgence of leisure activities by families (Xavier & Mitchell, 2008). The cost of travel as well as other expenses incurred by the customers became too much curtailing the indulgence of the customers in some of these activities. During the hit of recession, the number of surfers and skaters decreased significantly, and this led to a decrease in the trend in surfing and skating that had been recorded in the previous years. However, in the past three years, there has been a steady increase in the trend as the economy picks up and people are beginning to adapt to the changing economic times and budgeting well to afford them vacations where they spend time skating and surfing. These economic issues result in a slow consumption of surfing products that lead to a slow growth rate. Factors have in turn slowed the surfing industry, and the growth rate has slowed down compared to the growth rate in the past. Retail market have suffered greatly and its calls for caution in the need to venture into the market especially after the 2008 recession. However, the good times for the retailers are picking up as the recession impact on the economy is decreasing and consumption of leisure goods and services are on the rise again after a slow season experienced during the worst economic times.
The positive future expected of the economy is proving to be a positive factor as compared to the past few years. Since the hit of the recession, there is was a decreasing trend in the economy and consumption of luxury products and this negatively affected the surfing industry. However, with the increasing economic trend, spending is becoming more accommodating of the investment in the industry as compared to the notion of entrance during and immediately after the recession. Research shows that the global market revenues come from Europe and America and results in increased consumption when the economic times are favorable. This is a good factor for the market of the product especially in regards to the need to increase sales and not make a market entry that will stagnate and lead to losses. The need for growth is paramount, and this can only be possible only and when the economy and demographic factors are favorable for the business to be undertaken. The need for a guaranteed market is paramount and is one of the main reasons why a certain product will be introduced to a certain market segment and not the other.
The method used to research the current market structure, target customers and the product to be produced was done using a qualitative research method using surveys, questionnaires and the use of search engines on the internet. The data was collected and analyzed from the different sources to help determine the status of the market as well as understand the needs of the potential customers. In this case, the questionnaires helped put into focus the different needs of the surfers, skaters and dancers who were interviewed. A market survey was also conducted to determine the demand, the environment and other factors that were key in determining the best product to focus on in the organization. On the other hand, the internet searches mainly used search engines and key words to collect data on different aspects of production, distribution and e-commerce (Otero-Neira, José Varela & Garcia, 2012).
In order to understand the environment well, a SWOT analysis was undertaken on the market and the different factors that come into play.
Strengths: The product offered by the chain is unique. Unlike its competitors who provide a wide range of sportswear, the company is working on providing products that are specific to surfing. Therefore, the customers coming to purchase the products will easily find what they want unlike when they go to stores that have general sportswear and the possibility of finding what they need is limited. The other strength of the product is that most of the products under sale have been endorsed by different persons well known to the surf lovers and this is a good marketing and advertisement strategy considering that consumers place a high value of products appreciated by famous people like sportsmen (Chi-Feng, Li-Yu, Shao-Chi, 2009).
Weaknesses: The weakness of the product offered is on the competitive market. The company is a new entrant to the market, and it will take time before it becomes and household name. Before it picks up its customers, the products may stay on the shelves for a while. The other weakness of the product is that it is not something that will be worn every other day. Therefore, there is the possibility that sales to the same customers will not happen daily or weekly. One may need three to five pieces of the product, unlike other wear products like undergarments where one needs as many as one can get.
Opportunities: The opportunity of the product lies on its appeal to youth. Therefore, the product has a high potential in the e-commerce market. The youth are major consumers of online services and products, and if the products are marketed and advertised through online platforms, then there is a high chance that it will reach many youths. The changing technology is providing a good opportunity for the exploration of internet sale of the product. The other opportunity present for the product is in the high possibility of support from non-profit organization and other sports organizations like Adidas and Nike who have a stake in the surf industry. There is a high possibility that they will want some of their products to be under display in the different chain stores; hence, they will play a role in the success of the product in the new market. The creation of a brand is also another opportunity for the products though the pans are still underway on the creation of a brand that will be connected with the organization.
Threats: The threat facing the launch of the product in the market is lack of finances to fully oversee the distribution of the products. The organization is a new entrant in the market, and the startup capital cost is high.
Internal business environment
The internal environment of the business is well defined starting from management, human resource and finances. In regards to management, the products will be managed by a highly experienced team who has a fast experience in the sports industry. The composition of the management team is unique in order to ensure that the products offered to the customers meet their needs and demands. Therefore, the management of the business comprises mainly of young people who are innovative and have a passion for surfing and skating. It would be weird to have people managing a product who do not understand what the different needs and wants of the customers are or how to use them. Part of the management teams are also former sportsmen who can relate to the customers and appeal to them to become loyal customers to the products offered by The Hype.
External business environment
In the United States, there are many skating parks and surfing parks, but interestingly, the number of surfing facilities to offer different surfing products are very few in California and its environs despite the presence of a beach that increases the demand of surfing products. Therefore, at the present, the number of direct competitors are limited as most of the suppliers of the products, do not specialize in surfing wear, but also in different clothing lines. However, there are a number of specialty wear stores around that could possibly be a source of competition for the chains. One of them is the San Jose Skate Shop where it offers different sports gear including surfing products. The other one is the Circle-A Shop that focuses in different clothing products (Otero-Neira, José Varela & Garcia, 2012). The Ohana Board Shop as well as the Sharks Ice are also some of the possible competitors that may prove to be worthy adversaries for the target customers of the Hpe chain of stores. At San Jose, and San Jose Skate Sharpening and Profiling. Apparel shops are numerous, but even though they are competitors in the specialty stores business, they are not direct competitors to the ‘dance-skate & surf’ products that The Hype plans on offering. However, the Hype hopes to ensure that its product gets a good reception as well as attract loyal customers through proper pricing, customer satisfaction and adherence to customer demands (Xavier & Mitchell, 2008). There are a number of indirect competitors including large companies, but their target customers are different from that targeted by the product offered. In order to attract and retain customers, different strategies including developing trust, fostering professionalism and offering of superior customer services through quality provision will be adhered to (Chi-Feng, Li-Yu & Shao-Chi, 2009).
The products will be supplied by a manufacturing plant that specializes in different sports wear located in Colombia. The company focuses on production of different types of sports ware. However, the product supply will not rely only on one supplier incase technical problems occur and customers have placed their orders. To accomplish this, in-depth analysis of different manufacturers and suppliers of surfing, dancing and skating wears is required to determine the suppliers in an out of the country who can act as substitute to the Colombian supplier. Price is also an important factor that will determine the best supplier in this case. There are many suppliers of sportswear including major companies like Nike and Adidas. However, the main determinant of the supplier will be the customer demands. Customers are always right, and the first few months in the market will determine the customer preference making it easier to select the best suppliers who best meet the demands of the consumers.
Customers play a major role in determining the success or failure of a business venture. In this case, the target customers as stated earlier are the youth. Finding customers who can pay traction is hard as many organizations do not last long in the market due to stagnation and lack of customers. Therefore, the success of the product in the market is highly dependent on the target customers and their like or dislike of the products being offered by the organization.
The political environment is good considering that it is stable. This paves way for a good and stable business environment. The political environment pays a crucial role in determining the effect of the market on a product. In this case, the legislation on imports and exports are favorable especially because products from Columbia do not attract high tax. The political environment within the country is not the only factor as a favorable international political scene also plays a major role in shaping the import and export business. This impacts greatly on the success of the business and the products in the market more so due to the fact that it relies on supplies imported from a different country. There are different environments for the business, but mainly it is the social environment that carried more weight than the technical aspects. In the case of the surf products, the social environment plays an important role in shaping its success or failure in the market. The layers of environment crucial for the business include local, national and international layers. The local environment is important in shaping the demand for goods and services. The national level, on the other hand, shapes the demands, legislation, regulation and stability of the business. This arises due to the role of a country in determining the import/export regulations and costs, passing regulations on taxing and licensing and so on. Therefore, it is a crucial layer in the product focused on in the business. The international business layer is also vital especially since the product will be imported from Mexico. Whatever happens in the other country will directly or indirectly impact on the supply and distribution of the product (Otero-Neira, José Varela & Garcia, 2012).
There are different innovations in the lines of sportswear. Different businesses offer a variety of sportswear as well as equipment in their stores. However, the main focus on of the business is skating, dancing and surfing wear. The reason for this focus is on the need to attract customers who have a passion for this line of products. This calls for a sense of uniqueness that arises from focusing on a small range of products instead of offering a wide range. Innovation in the production of the product comes in during the design of the gears to be produced at different manufacturing spots. There is a need to have products in the different Hype stores to be unique and up to standards in the fashion sense. Therefore, highly innovative personnel work on different designs that are passed out to the manufacturers with whom an understanding has been reached to prevent sales of Hype’s designs to competitors (Xavier & Mitchell, 2008).
Role of Information
Information is crucial for any initiative in the world. Information goes a long way in helping a business venture determine key aspects of the market and help it determine its viability as a new entrant. Therefore, the crucial information for the venture ranges from the target customers, economic status, demographic changes, technological innovations and market fluctuations. The information about the target customers will be obtained through market research and surveys done periodically during different times of the year. This information is crucial in order to determine what to order from the supplier in order to avoid stagnation of the product once it is one the shelf. The economic and demographic changes are vital in determining how to increase or decrease demand of supplies (Putsis, 2009). The information will be obtained from constant reviews of findings of major stakeholders across the country and economic reviews. The information will be maintained through proper analysis and editing to fit the information needs of the organization. The information will be used continuously to determine trends in the market and predict future events that may impact the business operations and its overall effects of the products offered. Technology changes are vital for the business more so information technologies that increases access to information using the internet. In the case of the product and the business, there is a huge call for keeping up with the technological information due to its target customers. The youth are high consumers of IT and it is important to keep up with the changes in order to reach them. The information will be obtained continuously by keeping a close watch on the changes in the technological sector by utilizing the services of an IT professional who identifies the changes and can help the business come up with ways of integrating them into the daily operations of the organization (Johanson, Pahlberg & Thilenius, 2007).
Incorporation of New Technologies
Technological devices are important for any organization. There are many devices that could be useful in the case of the line of products in this case. One of them is the bar code readers. All the goods in the different stores owned by the company will be assigned different codes. Therefore, when the products come in from the different supply locations, each will be assigned codes that will help in identifying as well as pricing it. The bar code reader will be useful in the counter where payments will be made. The other technological devices that will be useful are handheld computers that will be used mainly by sale assistance. Not everyone will be given the hand held computer, but the heads of each section in the store. The handheld computer will have different details of the products in the different stores owned by the company. This will help in locating different products a customer may require and it is not available in the current store (Chen, Li, Kong, Hong & Xu, 2006).The other devices that will be useful in the initiative are CCTV cameras that will be installed on the different floors and section of the stores. They are vital in detecting and monitoring different activities taking place in the different sections of a store. The cameras will also be crucial in helping determine cases of insecurity as well as theft in case it occurs. The different footage can help in determining and solving different issues that may arise. It will also be helpful in detecting any issues that may happen during the course of the day.
The start capital for the Hype chain during its first year of operations is $400,000. The business has a total of five founders investing $40,000 and the other amount adding up to a total of $200,000 will come from other investors who have a stake in the chain. Mostly, the funding for the product will come from the support of family members who will each be given shares amounting to the amount of money they invested as the initial startup capital. The process of product development with cost a total of $200,000 including the cost of maintenance of inventory. The cost of Marketing, process of e-commerce and the creation of the website, and trade shows will cost a total of $30,000 from the initial money from the startup capital. The remaining costs funds will be put into operations processes, administration expenditures and trademark acquisitions. The money will also be put into the expenditures incurred in personnel and staffing acquisition and training, rent and leasing will also be part of the expenses, and other legal costs incurred during the course of the first year (Johanson, Pahlberg & Thilenius, 2007). The $400,000 raised from the initial capital will be adequate to gratify for all the operating costs incurred during the first financial year, before the plans for the next financial year are projected. It is expected that there will be a negative income recorded during the winter and the summer due to unfavorable weather conditions that always result in a decrease in the number of surfers going to the beach and the waters to surf. The use of internet and the website will be a key feature in maximizing profits the whole year especially during the winter and summer.
Production and Supply Strategy
The development of the product is underway with the design and the management team providing the designs to the manufacturing plant in Colombia. The number of products that will be made in the plant will be many, but it will depend on the customer demand and the number of sales recorded in the first few months of operation. The resources required to make the different wears in the line of production will range from cotton, dyes and designs from the different designers who will come up with new and interesting designs to suit the new demands in the market. There is immense competition across the country, but there is limited competition directly in the operations environment. The product will be competing with other sportswear vendors who have a wide range of products though they specialize in different sports wear gear and not on singular lines as done by the Hype. The fact that the focus is on dance, surf and skate makes it possible for the company to focus on being the fore-runner in the market. The focus will be on large scale production of the product with a time line being the key driving factor. The need to adhere to the time-scale is paramount especially in regards to supplying consumers. Distribution of the products to customers who order goods online will be done immediately. The Hype has different stores California and once a customer places an order online and makes the necessary payment or commits to pay upon delivery, then the goods are sent from the nearest store possible to the customer. This way, the customer will not have to wait for a couple of hours or day before a product is delivered. Time management is a key aspect when it comes to delivery of goods to consumers. It develops a trust in the ability of the organization to deliver goods; hence, increase the level of customer loyalty.
The strategy in promotion will utilize the development of a highly dynamic website that will act as the main marketing tool. This is an important aspect in the strategy for distribution of the product to the different customers. The website will play an important role in conducting online sales and also in the utilization of e-mail marketing that will be used by a majority of the market segment. The website will have different displays of information about the different wears present in the different stores with constant product updates. In order to ensure maximization of the online platform, web cam will be used to display different products in order to communicate properly with the target audience. It is also important to note that the website will act as one-point source for the information regarding the company, the products and news on different new features in the stores. The use of videos to display different products by a number of models will also be used as a way of promoting the products over the internet. Pictures taken during photo-sessions will also be posted regularly on the internet including those of surfers while surfing on the water. There will also be the use and application of viral marketing that will ensure that the products remain highly aggressive while maintaining a highly robust internet marketing campaign strategies.
The other considerations that should be taken into consideration are the e-market and evaluations of the progress of the product in the market.
Surfing has in the recent years recorded increase internet sales. As per the different internet sources, sales over the internet surpassed the $28 billion sales point and are still recording an upward trend. The increasing sales over the internet can be accorded to the easy access and affordability of internet services as well as phone and laptops allow for online purchases. Many business ventures are also embracing internet marketing and advertising that has also added immensely to the constant growth. Unlike in the past decade, the internet is now one of the major platforms for sales and purchasing and it is common to find organizations that do not have a physical location, but conduct all its businesses online. The youth are the most consumers of online services considering the time they spend online. Therefore, if the sales of the products offered by the Hype are to reach the target audience that is majorly comprised of the youth, then there is a need to embrace the use of e-marketing and e-commerce. This requires an active website that receives constant updates on available products. Promotions done online will create more focus on the target market especially the youth as well as the other consumers of online services. The trend in the distribution networks will be utilized as it is picking up is more ample and since our products are joined to the different service of surf product to be offered, focus will be placed on the e-marketing as it is proving to be the best platform to reach the target market.
The main evaluation of the product once it is in the market will be undertaken through a constant evaluation through the use of the SWOT analysis. Through the analysis, the management will be in a good position to determine how well the product is doing in the market or not. The strengths of the product will be maximized while its weaknesses will be worked in order to avoid them affecting the overall performance of the product in the market. The opportunities identified will be used as a platform to increase their exploitation and maximization in order to record more sales than before. On the other hand, the evaluation on the threats facing the product will be worked up by finding ways to gain a competitive edge in order to minimize the impacts of the threats. However, the use of the SWOT analysis as a means of evaluating the progress of the product may not be sufficient to understand the real situation of the product; hence, there will utilization of other tools to complement with the application of various strategic management tools, especially checklist (Chi-Feng, Li-Yu & Shao-Chi, 2009).The checklist will provide a good basis for understanding the trends and some of the wears that stay on display for long and those that move quickly. The other tool for evaluation will be the rating system coupled with the expert system. Other computer driven business simulation techniques such as the Marketplace that is also, called the business simulator will be applied. Its focus will be on the virtual environment and will be useful in providing decision-making content. It will also provide a platform for the evaluation of the effectiveness and efficiency levels during the different stages od product development. It will also focus on the quality management of the product as well as marketing and sales force management. The marketplace simulator will also be an important tool in the accounting process as well as the financial analysis (Chi-Feng, Li-Yu & Shao-Chi, 2009).
Chi-Feng, W., Li-Yu, Chen. & Shao-Chi, C. (2009). International diversifycation and the market value of new product introduction. Journal of International Management, 34(67), 89-99.
Johanson. J, Pahlberg, C. & Thilenius, P. (2007). Conflict and control in MNC new product introduction. Journal of Market-Focused Management, 4(56),67-78
Otero-Neira, C., José Varela. & Garcia, V. (2012). Competitive reaction to the introduction of a new product: an exploratory market signalling study. Journal of Strategic Marketing, 23(56), 67-90.
Putsis, W, P. (2009). Product diffusion, product differentiation and the timing of new product introduction the television and VCR market. Managerial and Decision Economics, 6(67), 1964-85
Xavier, M. & Mitchell, W. (2008). The influence of local search and performance heuristics on new design introduction in a new product market. Research Policy, 3(45), 90-95.
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