4. EXECUTIVE SUMMARY
As Krannert Center for the Performing Arts (Krannert) approached Illinois Business
Consulting with the problem of costume inventory taking up practice room space, our
primary investigation surrounded potential opportunities in the rental business to
determine feasibility of investing in a new facility. With investment we conducted a
property search and performed a Cost-Volume-Profit Analysis. Based on those results,
we determined a target growth rate for Krannert to break-even with the cost of a new
facility.
To reach target growth, we investigated the market the Krannert would need to reach
with an analysis of market feasibility. This included an analysis of the market size,
competitors, growth, and Krannert’s current operations. The outputs of the analysis
include the market size, Krannert’s target market segments, Krannert’s capability to
penetrate the target market, and an actionable plan of how Krannert should capture the
existing market share in its target market. As growth inhibitors may prevent Krannert
from capturing market share we also did a Cost-Volume-Profit analysis for the costs
associated with expansion. With our results, analyses, and plans, we also investigated
opportunities for Krannert associated with a long-term horizon.
Overall, we determined that Krannert currently does not have the capability to invest in a
new facility based on its current revenues of approximately $13,000 as a investment in a
minimum cost facility exceeds that. We then determined that Krannert would have to
grow its business approximately three times in order to afford a new facility. The market
provides future growth potential, as we determined that there is a target market for
Krannert within the Theatrical Production market. The target market consists of
scholastic theatres, opera production companies, and summertime festivals. The market is
approximately $570,358.20 in size. If Krannert utilized its competitive advantages in the
target market it could obtain the fourteen theatrical production customers, or seven
percent of that market that we believe that it would take for Krannert to grow its business
three times. However, with the costs of expansion we believe that obtaining these
customers in the target market, and ultimately obtaining a new facility will primarily take
5. investment in sales and marketing. Thus, ultimately the last portion of the whitepaper will
provide short-term and long-term recommendations.
INTRODUCTION
As Krannert currently has approximately $3,000,000 in costume inventory an issue was
identified that their costume inventory was taking up too much space and was not being
utilized effectively. Similarly, Krannert indicated that it wished to create a permanent
market presence and have long-term contracts. As Krannert was looking to not only
create space in their facility, but also grow their costume rental business, our initial
investigation involved whether or not Krannert could afford a rental facility that would
suit their needs. As a rental facility would require significant investment we needed to
determine whether or not Krannert could afford a rental facility that suited their logistical
needs. Thus, we initiated a property search to determine a facility that Krannert could
house its costume inventory in. With a relative facility cost in mind, we decided to utilize
a cost-volume-profit model to determine whether or not Krannert could break-even
within a certain amount of time if they invested in a new facility in order to solve their
initial stated problem. Based on our conclusions from that analysis, we also then decided
to investigate growth prospects for Krannert. As Krannert has an asset utilization rate of
approximately .43%, we believed that there was significant potential for them to utilize
their inventory for profit. The current stock involves approximately 50,000 pieces of
costume that could be utilized.
While investigating Krannert’s potential to grow its business using inventory we first
determined that Krannert needed to continue only in the rental area of the industry as
costumes are reused, and there is certain litigation associated with the university that
inhibits their ability to sell. To grow a business by renting out inventory, we first needed
to determine if there was a market for Krannert to rent out their inventory to. Thus, we
investigated Market Feasibility. Overall, this analysis determines whether or not there is a
market for Krannert’s costume rental business. Krannert’s assets are high-end period
theatrical wardrobe costumes. With the use of student labor, Krannert is able to
manufacture these costumes at a very low cost. Thus, Krannert has a competitive
6. advantage over relative competitors who have to pay workers for the intricate labor
required in manufacturing these costumes. Similarly, Krannert’s staff includes professors
who are very knowledgeable in the areas of design, time periods, and theatrical
productions. Thus, the costumes are of a very high quality and are specifically catered
towards being utilized in productions that require detail. Nicole Faurant, the Clinical
Assistant Professor of Theatre and Costume Rentals Manager has specific knowledge on
the costume pieces and how they can be utilized in a number of different products. She
also has a deep knowledge of the inventory and its location, as well as its specific needs
regarding its upkeep and alterations. Krannert has also begun manufacturing plus-sized
costumes.
Krannert’s current business involves Nicole renting out costumes to customers who have
contacted her for specific pieces. As they are currently understaffed with Rebecca
McBride, the main point of contact, working 60-70 hours a week, and Nicole working
part-time in costume rental and part-time as a professor, Krannert generally does not
reach out to customers to generate business. Thus, before we recommended Krannert
attempt to enter the market and pursue customers, we desired to determine whether or not
there was a market in which Krannert could capture customers.
In order to determine whether or not there was a market for Krannert’s inventory, we
decided to analyze what their actual market is, determine the size of the market,
determine competitors’ position in the market, and determine whether or not Krannert
could capture untapped market share within the identified market. In order to grow a
customer base it is likely that Krannert would have to alter its strategy from waiting for
and accepting requests, to instead pursuing business opportunities. Consequently, after
our investigation of whether or not a market existed, we investigated whether or not
Krannert had the logistical capabilities to gain customers. Ultimately, this leads to a
recommendation of how Krannert should try to capture market share if a market does
indeed exist.
7. COST-VOLUME-PROFIT DISCUSSION
A cost-volume-profit analysis was used to estimate a breakeven revenue requirement
needed to sustain the costs of expansions. Given the limited resources of its current rental
operation, Krannert must select between expanding to a new rental facility or expanding
the current workforce as the more appropriate method of expansion by assessing the cost
and benefit of either choice. This analysis shows that the costs of a new facility are
unsustainable given the current revenue stream, whereas building a workforce is
sustainable given current rental operations and will be more effective in growing future
revenues.
METHODOLOGY
The financial model [1] outputs the required breakeven revenue from the variable inputs
based upon assumptions that were refined with expert information from Krannert.
INPUTS
There are three main inputs to the model: start-up up options, space requirements, and
workforce requirements. The variability of the inputs are used to customize the model to
the exact needs of the client and compare various expansion scenarios. The start-up
options are one time fixed costs associated with scaling the business. These in include
inventory management (RFID or Barcode), new storage units, website development and
maintenance, and new facility renovation.
Space requirements are defined in square footage needed and cost per square foot. As
specified by the client, the ideal square footage for the client is 10,000 square feet. Cost
per square foot is dependent on which facility is chosen.
The workforce requirements are defined by hours per week, hourly compensation for
year-round student workers and allocated, and allocation to either a marketing and sales
or logistics team.
8. ASSUMPTIONS
The assumptions used in the model were assigned and refined with the assistance of our
client and research on market prices of necessary equipment, supplies, and services.
Assumptions include variable costs, fixed costs, pricing, product segmentation, sales mix,
and costs associated with various start-up options.
Krannert’s rental products were segmented as lower-end, average, and higher-end. Per
unit rental prices were estimated for each category as $60.00, $110.00, $300.00,
respectively. The corresponding sales mix is 35%, 50%, and 15%, respectively. Per unit
variable costs were estimated for each category as $11.50, $21.00, and $26.00
respectively. These costs include shipping, photography, packaging, and dry cleaning.
OUTPUTS
The key output of the financial model is the breakeven revenue required to sustain the
expansion costs. This revenue requirement is calculated using cost-volume profit analysis
using the user-defined inputs and assumptions.
NEW FACILITY
Expanding to a new facility was the initial method of expansion considered by Krannert.
Analysis from the model revealed that Krannert’s current revenues need to grow three to
ten times their current revenue in order to breakeven on a facility investment.
9. NEW FACILITY SEARCH
Table 1
A shortlist of properties in Krannert’s vicinity were added to a analyzed to obtain high
and low cost estimates for suitable new facilities. Three main facility selection criteria
were proximity to Krannert, loading zone, and location safety. The higher-end facilities
roughly averaged to $10.00 per square foot. The lower-end facilities roughly averaged to
$3.00 per square foot. Below is a table summarizing our facility search findings as well
justifying projected costs. The facilities most suitable for Krannert’s proposed expansion
are highlighted in yellow.
FINDINGS
The model was used to create breakeven revenue projections for both rental scenarios of
higher-end lower-end facilities at various square footages. This data is plotted against
current revenues in Figure 1. To sustain a lower-end facility, Krannert needs to grow
10. threefold to $41,890 [1]. To sustain a higher-end facility, Krannert needs to grow tenfold
to $124,340 [1].
Figure 1
WORKFORCE
Conclusions drawn from research throughout the engagement allowed for the
identification of a lack of a critical workforce as the limiting factor for growth. Analysis
from the model showed that showed that the cost of a workforce is in line with current
revenues.
FINDINGS
The model was used to create breakeven revenues for adding a marketing and sales
workforce in addition to a logistics workforce. Cost of the workforce was estimated at
$10 per hour year-round. The marketing and sales team would be allocated 15 hours per
week. The logistics team would be allocated 10 hours per week. The marketing, logistics,
or combined workforce would require $9,100, $6,340, and $15,100, respectively [1].
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$3 /ft2/YR $10 /ft2/YR
Revenue
Current
2,500 ft2
5,000 ft2
10,000 ft2
12. MARKET
TARGET MARKET AND SEGMENTATION
The costume rental industry was segmented into various markets and an in-depth analysis
was performed. Throughout this analysis, it is shown how each of the market segments
would benefit from Krannert’s comparative advantages. The different market segments
that are heavily served by Krannert’s comparable competitors were also taken into
account. In addition to secondary research on the market and comparable competitors, we
engaged in primary research by calling comparable competitors as well as customers to
identify demand a competitive positioning in these markets. In addition to market
research, we also called 31 potential customers and received excellent insight on the
different factors that result in success in the costume rental industry.
PRIMARY: PERFORMING ARTS
The performing arts segment is comprised of theatres, musicals, and opera, and has
shown significant growth as of late. This segment is projected to grow at an annual
compounded rate of 6% through 2017 [2], and the number of small companies is
projected to increase as well. This segment is also experiencing a decrease in government
and corporate support due to the recession, which means that companies will ultimately
have to deal with reduced costume budgets. Krannert provides a remedy for this through
its low cost of goods and high quality inventory.
Within the performing arts segment, opera and small theatrical companies can provide
the most benefit to Krannert. The number of small theatrical companies has increased
since last year and is expected to continue to increase [2]. In addition, the competitors
who have comparable inventory to Krannert are focused on servicing very large theatrical
companies. These smaller theatrical companies tend to rent a majority of their costume
needs due to the fact that they do not have the workforce to build everything they need.
Krannert has the ability to provide these companies with their high quality costume needs
at an affordable and competitive price. The next sub-segment, Opera, offers a unique
niche market for plus size costumes that is not easily accessible and has unmet demand.
Krannert’s large and diverse inventory gives them the ability to service such a market.
13. SECONDARY: SCHOLASTIC THEATRES
A very large and easily accessible segment of the costume rental market is the scholastic
theatres in universities and community colleges. These theaters have many productions
per year, as well as many types of productions, including but not limited to student
productions, period muses, and large school wide musicals with over 30 cast members.
The budgets of these productions vary greatly [3]. This segment can also benefit from
Krannert by taking advantage of the high-quality but low-cost and plus-size costumes
available.
Primary research indicated that a large deciding factor on where to rent costumes from is
the existence of a personal connection between the vendor and company renting it [4].
The University of Illinois’s College of Fine and Applied Arts has an exceedingly large
alumni base, which can be utilized to further penetrate this market segment.
TERTIARY: THEATRICAL FESTIVALS
The operating season of theatrical companies is usually from September through May [2].
This causes a significant decrease in revenues in June through August. A potential
solution to this problem is to reach out to various theatrical festivals. Theatrical festivals
provide a unique opportunity for seasonal revenue during the summer months when
theatrical production companies come to a halt. These festivals usually last for several
days or even weeks, and have a large number of different productions. In addition, many
of these festivals have different time period themes, which Krannert is in abundance of.
COMPETITORS
METHODOLOGY
A significant portion of our competitor research relies on secondary sources, ranging
from academic database, company's website and annual report, to Form 990 submitted to
the Internal Revenue Service. To determine the competitive landscape of the industry that
Krannert operates in, we researched 11 of Krannert's comparable competitors and 4 of its
high-end competitors. To determine the overall industry market size, we utilized
syndicated external secondary data from IBISWorld.
14. COMPETITIVE LANDSCAPE
Krannert operates in a fairly saturated monopolistic competitive market. We segmented
these competitors into four quadrants based on their quality of costumes and volume of
collection. As depicted on the graphic below, Krannert falls into the upper-left quadrant
under costume rental by theatre companies, which is characterized by high quality and
low volume. Many smaller size theatre companies occupy this quadrant.
Figure 4
We also segmented the competitive landscape by the market served. We identified three
differentiated markets in the industry: film/television/Broadway, theatre companies and
universities, and high school/churches/not-for-profits. The first segment,
film/television/Broadway demands high quality, customizable costumes. Competitors
who serve this market are mostly big high-end stores, such as Warner Bros, Malabar,
Western, The Costume Collection by Theatre Development Fund (TDF) and Costume
World Theatrical. These competitors offer a wide selection, and are able to charge
premium price due to the premium service they offer. The next segment is theatre
15. companies and universities. This segment also demand high quality costumes; however,
customers in this segment tend to have smaller costume budget than the
film/television/Broadway segment, therefore competitors serving this segment can only
demand standard pricing for their services. The major players in this segment are other
theatre companies, some high-end stores, as well as TDF. The last segment that
Krannert's competitors serve are high school, churches, and not-for-profits theatre
productions. This segment puts less emphasis on quality, and is willing to trade quality
costumes for a lower price. The major players in this segment are other theatre
companies, TDF, and big box costume stores. The versatility of Krannert's costume
collection, combined with the almost non-existent cost of goods sold allows Krannert to
serve all these segments that its competitors are currently serving.
Figure 5
16. COMPARABLE COMPETITOR'S REVENUE
In analyzing the competitive landscape where Krannert operates in, we also researched
Krannert's comparable competitor's revenue. We tracked the costume rental revenue that
comparable competitors reported on Form 990 to the Internal Revenue Service. From
2009 to 2010, the average revenue of 6 comparable companies fell by -13.12%. As the
economy recovers from the downturn, rental revenue inched up by 3.99% in the next
year.
Looking at competitor's revenue numbers, these are several takeaways to keep in mind:
We observed significant fluctuation in costume rental revenue for a company from year
to year. This volatility also applies to the whole industry. Rather than the whole industry
moving in a general direction, there is a wide variation of gains and losses between
companies. In addition, it is also observed that costume rental revenue on average
contributes to less than 1% of comparable competitor's total revenue.
17. Table 2
Name 2009 2010 2011
%
Change
(2010)
%
Change
(2011)
Guthrie Theatre &
Children`s Theatre
Company [5] [6]
$144,485.00 $145,663.00 $158,503.00 1% 9%
American Conservatory
Theatre [7]
$180,153.00 $201,530.00 12%
Spokane Civic Theatre [8] $3,020.00 $2,228.00 -26%
American Players Theatre
[9]
$60,205.00 $22,280.00 $28,015.00 -63% 26%
Opera San Jose [10] $93,593.00 $96,713.00 $74,437.00 3% -23%
Milwaukee Repertory
Theater [11]
$35,623.00 $37,895.00 $48,048.00 6% 27%
Theatre Development Fund
(Costumes Collection) [12]
$203,815.00 $304,461.00 $153,421.00 49% -50%
Oregon Shakespeare Festival
[13]
(15,949.00) $(1,507.00) $10,776.00 -91% 815%
Average w/o TDF & OSF -13% 4%
Average with TDF -1% -4%
HIGH-END COMPETITORS’ COMPETITIVE ADVANTAGES
To gain deeper insight on the market leaders in the industry and their competitive
advantages, we also researched Krannert’s high-end competitors.
Malabar, one of Krannert's high-end competitors based in Toronto and Ottawa, Canada,
has carved an established presence in the costume rental market since 1900 [14]. The
company also owns a separate online retail division that offers a variety of theatrical
production needs, ranging from theatrical costumes to dance wear, props and decor, as
well as theatrical make-up. These additional services offered provide a one-stop shop
experience for customers and diversify Malabar's revenue stream.
Western Costume Company, another high-end competitor based in Hollywood,
California, has also served the national costume rental demands, especially for film,
theatre and television customers since 1912. [15] Western's competitive advantage
18. mainly stems from its established presence in the Hollywood area. Unlike Malabar,
Western Costume does not have an e-commerce platform for its costume rental business.
The company's website only serves for display purposes. Western Costume, however,
offers Halloween costume store and fabric store online. The company also offers its
customers additional services, such as custom-made costumes and research library, which
gives Western a unique value-added differentiation from the rest of its competitors.
Costume World Theatrical, a relatively newly established high-end competitor of
Krannert's, boasts a vast collection of 1.2 million costume pieces. The company also
develops a competitive advantage through its niche in Broadway and Tony-award
winning costumes offerings. Costume World Theatrical's acquisition of Dodger Costume
in 2005 drives its growth to be one of the largest costume providers in the United States.
[16] The company exploits its competitive advantage by offering Broadway Collection
Tour, which does not only increase public exposure to the company's brand, but also
provides an additional source of revenue. Costume World Theatrical also provides
additional services to its customers through the detailed plot, photos, and videos. [17] Not
only does this assist costume designers determine the costumes they want, this plot and
photos section in the website also provides a channel for the company to up-sell its
products.
Krannert aspires to grow to the size of these big, well-established, high-end competitors.
In order to do so, Krannert must also develop key differentiating factors to build its
competitive advantage. Through our customer calls and surveys, we determined that one
of Krannert’s major competitive advantages is Krannert’s strong relationship with its
customers. Many customers express that they “love Nicole” and they are “satisfied” with
the customer services that Krannert has provided them. Krannert can utilize these strong
relationships as a starting point to build its competitive advantage among its competitors.
HIGH-END COMPETITORS’ BENCHMARK
The table below provides key comparison between Krannert and its high-end
competitors. An important point to highlight is that Krannert is currently utilizing
significantly less portion of its asset to generate its revenue (.43% dollar sales to dollar
value of assets ratio). On the other hand, Krannert's competitors, Western and Malabar,
19. are much more efficient in utilizing their inventory to generate sales, at 23% and 27%
respectively. This comparison indicates that Krannert has a significant potential to better
utilize its inventory and grow its business.
Table 3
Krannert Western Malabar
Sales $13,000 $9.3M $13.5M
Percentage of Sales
by Value of Assets
.43%
(13,000/3,000,000)
23% 27%
Rentals Per Year - 53,000 to 170,000 35,000 to 180,000
Warehouse Size
2.5K ft2
(Up to 10,000 ft)
40k ft2
(used for
inventory storage)
2 locations
COMPARABLE COMPETITOR'S STAFFING
We also discovered that as compared to its competitors, Krannert is significantly
understaffed. This poses an inhibiting factor for Krannert to expand its customer base and
increase revenue to the desired amount. The table below shows that comparable
competitors have at least a few hundred employees [18]. Even though only a small
percentage of these employees are involved in costume rental shop, Krannert's
competitors will still have slightly more manpower than what Krannert currently
possesses. This indicates that Krannert will need to hire a few more employees to assist in
the expansion of its customer base.
20. Table 4
Company Name Approximate # of Employees
Opera San Jose [19] 100
Oregon Shakespeare Festival [20] 350
American Players Theatre [21] 100-249
Santa Fe Opera [22] 80
Spokane Civic Theatre [23] 10 to 19
Guthrie Theatre Company [24] 250-499
MARKET SIZE
OVERALL INDUSTRY MARKET SIZE
Overall, the costume rental industry has witnessed a steady decline in revenue over the
past decade, from 2003-2012. The decline has amounted to an estimated 1.6% annual
decrease. This decline can be attributed to several factors, one of the main ones being the
shift of many companies and theatres deciding to buy or produce their costumes in-house.
Not only has the revenue been shrinking, but also the number of establishments has
shrunk by a massive 34% from 2003-2012. This consolidation has led to a slightly more
monopolistic and saturated market, making it tougher for average to smaller sized
establishments to maintain usual revenues. Thus, Krannert will have to become more
competitive in the market in hopes to expand and increase revenue. Given the fact that
costume rental only makes up 8% of the formal wear and costume rental market,
expansion could take a much more comprehensive effort on Krannert’s part. [25]
TARGET MARKET SIZE
To determine the target market size within this industry, we identified 107 theatre
companies as Krannert's potential customer in the Chicago area and obtained 31
responses. We conducted a surveyed of the minimum and maximum number of budget
per production, the number of productions per year, their rent frequency, as well as their
21. plus size interest. [26] From these surveys, we determined that on average, a theatre
company puts 4.34 productions per year, with an average costume expenditure of $2,846
per production. Extrapolating these numbers, this represents $1,271,878.91 total costume
expenditures for relevant theatre companies in Chicago area alone.
Next, we surveyed the rental frequency of these companies. As depicted in the graph
below, 46.88% of respondents indicated that they regularly rent costumes for their
theatrical productions. 43.75% indicated that they rarely rent costumes and tend to build
or purchase. Only 3.13% of companies rent all the time and 6.25% indicated that they
never rent costumes at all.
To determine rental market size in this region, we assigned arbitrary percentages for each
of these rental frequencies. These percentages represent the portion of a company's
costume expenditure that would be spent on costume rental. Category "Always" is
assigned 100%, as these companies will spend their entire costumes budget on rental
expenditure. Conversely, 0% is assigned for category "Never". We assumed that
companies who responded "Regularly" rent would spend 75% of their costume
expenditures on costume rental, while companies who responded that they "Rarely" rent
would only spend 15% of their costume expenditures on costume rental.
Multiplying these percentages with the rental frequency responses and the total costume
expenditures, we determined that the total costume rental budget for theatre companies in
47%
44%
3%
6%
Rental
Frequency,
n
=
32
Regularly,
75%
Rarely,
15%
Always,
100%
Never,
0%
Figure 6
22. Chicago area amounts to $570,358.20. This number alone represents a sizable market for
Krannert to target. With 3200 theatre production companies nationwide, Krannert could
potentially target a $17,000,000 market of costume rental for theatrical production
companies alone.
EXPANSION
EXPANSION TARGETS
As we identified the size of the market to be $570,358.20, we also identified that
Krannert needed to grow its business by approximately $40,000 to achieve desired
growth to invest in a new facility. Thus, we identified that Krannert needs to capture
approximately seven percent of the identified market.
To compute an expansion target, we multiplied the average budget of 11,875 we gathered
from our market survey by the fulfill amount, by the % 1st called, by the % supplied, and
added the % that Krannert is not the first called multiplied by the %of second called. The
equation below further describes and justifies our calculation.
Fulfill amount
(whether
Krannert’s
costumes are
appropriate for
their needs or
not)
% 1st called
(the chance
that they would
get called first
by the
business)
% Supplied
(the percentage
of the costume
needs that
Krannert can
fulfill)
% 2nd called (the chance that they would
get called second by the business)
% Later supplied (the percentage of the
second and later called costume needs
that Krannert can fulfill)
Average
Budget per
customer
23. This brings us to a number of approximately $2,852.88 per customer. Thus, in order to
grow three times and reach a revenue target of $40,000, Krannert would need about
fourteen new customers ($40,000/2,852.88) in the market that we identified.
METHODS OF EXPANSION
LIMITING FACTOR
Upon the identification of a target market that Krannert could penetrate, we decided that
before attempting to grow and expand its business Krannert needed to develop a strategy
in order to do so. To determine what Krannert needed to do in order to expand its
business we engaged in primary research by investigating and calling close competitors
to understand how they did business. We also called customers to gain an understanding
of why they do business, or would potentially do business with Krannert in the first place.
To begin, customers informed us that a personal relationship drives their specific desire
to rent from a company. Companies who serve and cater to their needs quickly and whom
they can really on in times of need or during late hours will sustain a competitive
advantage over customers who cannot get them specific pieces in time for their
productions. While many customers raved about Nicole and the personal service she
provides, other customers mentioned a lack of follow through.
We believe that the source of a lack of follow through is due to understaffing. In the
investigation of comparable competitors, we found that their approximate amounts of
employees are significantly higher. While not all employees are due to sales and
marketing, even a small percentage of employees dedicated to marketing and sales would
be higher than the number of zero that Krannert currently has. Thus, a lack of marketing
24. and sales personnel is currently inhibiting Krannert’s ability to gain new customers, and
Krannert needs to invest in sales and marketing to expand.
BUILDING A WORKFORCE
Krannert is advised to build a workforce with two primary functions to serve its needs: 1)
marketing and sales, 2) logistics. Workforce investment can be scaled with demand as the
costume rental business grows. Maintaining a capable year-round workforce is vital to
success in order to service customers at any time of the year.
SOURCING EMPLOYEES
Employees should be sourced part-time from the University of Illinois student body.
Student organizations affialiated with Krannert such as the Krannert Center Student
Association would be ideal targets for sourcing interested and motivated candidates.
An important note to make is that a successful workforce will need to develop a
specialized knowledge in costumes and theatre. As a result, management of the costume
rental operation will be required to invest time to impart this knowledge as needed to
allow the workforce to undertake more responsibility. As a result, it is important to
recruit candidates who are interested in staying with Krannert for the duration of their
time as students in order to retain as much knowledge as possible year-after-year.
MARKETING AND SALES
Recommended entry point for a marketing and sales team is 15 hours per week. Starting
with one employee is recommended possibly at 10 hours per week. As business
operations start growing, another employee can be added at 5 hours per week.
The scope of a marketing and sales workforce include increased outreach to current and
prospective customers to build long-term relationships and increase visibility of
Krannert’s operation to the various target markets. Calling potential customers and
increased interaction on relevant theatre web forums are examples of possible activites.
The marketing can also aid in the development of a professional website. Such a team can
also be useful with inventory management and general operations.
25. LOGISTICS
Recommended entry point for a logistics team is 10 hours per week with one employee,
which should be adjusted with need. An initial focus could be to assist with expediting
website development. In the future, website managment and maintenance could be the
responsibility of this team.
Another key focus would be implement an inventory management system. As business
grows, the number of transactions processed may increase as well as the number of
costumes in inventory. Investing in such systems will be crucial for ensuring high
operational effectiveness and need for a smaller workforce. Such a technology can also
benefit the Krannert’s theatre department as a whole in keeping an organized account for
all costumes that is easily accessible.
Competitors such as Western Costume Rentals have seen value in having inventory
management capability for their high-end costumes.
STUDENT ORGANIZATION AND EDUCATIONAL OPPORTUNITY
Another potential low-cost method of expanding a dedicated workforce could potentially
to create a student-based organization where senior student employees in the organization
can manage and mentor junior student workers. In this scenario, the main value
proposition to the student would be the ability gain experience in marketing and sales
with option of gaining experience in costume technology and theatre productions, in
addition to the opportunity to build contacts with professionals in the theatre industry.
Developing Krannert’s costume rental operation in such a manner also furthers its
mission by providing more educational and professional opportunities to students. In
return, Krannert may be able to source a student workforce with non-monetary
compensation such as course credit in addition to the opportunity to gain meaningful
experience.
ON-DEMAND COSTUMES
Building and renting on-demand costumes can potentially be a future expansion
opportuntity. The premise for this offering is that if Krannert can build customized
26. costumes to customer specifications, Krannert’s sales would not necessarily be limited to
its existing costume inventory. Such an operation would be able to provide students the
opportunity to gain experience in costume technology.
Furthermore, building on-demand costumes allows Krannert to play on its unique
advantage of being able to generate a high-quality, low-cost costume inventory through
educational programs.
SHORT-TERM RECOMMENDATIONS
As Krannert must grow its business three times in order to obtain a new facility and we
have determined that Krannert must gain new customers to grow its business three times,
we recommend that Krannert invest in logistical items necessary to obtain new customers
first before investing in anything else. Thus, we recommend that current resources should
be applied to growing the company via Sales and Marketing to match comparable
competitors according the plan mentioned in the prior Cost-Volume-Profit section. We
recommend that Krannert utilize Sales and Marketing to target the segments of Opera,
Small Theatre Production Companies, Summertime Festivals, and Scholastic Theatres to
penetrate those niche markets and capture those customers and ultimately establish its
position in the market and capture market share. Therefore, Krannert’s current actionable
items include investing in a workforce and seizing Operational Improvement
Opportunities. Hiring a student employee is an easy action that could be done in a very
short time horizon.
LONG-TERM RECOMMENDATIONS
In the long term, we would recommend that Krannert look into more low cost and
sustainable workforce plans. As managing 14 customer accounts would be very difficult
for one employee, and competitive advantage stems from good customer relationships,
we recommend that Krannert utilize university opportunities to reduce workforce costs.
We believe that Krannert could and should work with Student Organizations to develop
workforce plans. Similarly, Krannert could utilize university opportunities for a lower
cost facility. The completion of both of these actions could decrease the growth necessary
27. to obtain a new facility for Krannert and shorten the time horizon necessary for Krannert
to obtain a new facility. Finally, after growth targets have been obtained, Krannert could
and should look into the best possible type of facility for investment. As we have
provided potential opportunities, we recommend that Krannert further investigate
logistical capabilities associated with facilities and how they could best serve Krannert’s
inventory. Similarly, Krannert could develop an efficient logistics operation as well as
pricing plans for customers in order to fully penetrate the market. However, all of these
items would take a more-in depth analysis and research to implement thoroughly and
effectively.
CONCLUSION
Overall, upon investigating the feasibility of Krannert investing in a new facility in order
to move its inventory, we determined that Krannert needed to grow its business three
times in order to afford a facility suitable for their logistical needs. Upon further analysis,
we realized that Krannert currently does not have the potential to grow its business three
times. However, upon investigating the market Krannert is associated with, we
determined that there is a market for theatrical production rentals. We determined that by
targeting Operas, Summertime Festivals, the plus size niche, and the scholastic theaters
market segments that Krannert can penetrate the market and grow significantly. With
Krannert’s potential market existing at a size of $570,482.98, we believe that Krannert
can obtain the seven percent market share necessary in order for it to grow its operations
three times. After determining the average budget of potential customers via our market
survey, we realized that Krannert would only need to obtain fourteen new customers to
grow to the target we determined. However, in order to obtain the fourteen new
customers, due to understaffing and the importance of customer relationships in the
business, Krannert must primarily invest in Sales and Marketing in order to ensure that
they do obtain market share. By investing in Sales and Marketing via the plan provided
we believe that Krannert can obtain market share in the segments identified and grow
three times. Upon growth, we recommend that Krannert investigate the long-term growth
aspects we identified and pursue further expansion.
28.
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