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School of Architecture, Building and Design
Foundation of
Natural Built and Environments
Economics (Ecn30205)
ReportTitle:
A Comparative Analysis of 2 Businesses of Similar Industry in Different
Geographical Locations
GroupMembers:
Lu Siau Vay 0318567
Siong Jia Yii 0318239
Wah Yun Chen 0319115
Aaron Ngu Nguok Soon 0319396
Lecturer: Mr Chang Jau Ho
WordCount: 2155 words
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TableofContent
No. Content Page number
1. Key summary 3
2. Brief description of the businesses 4-5
3. Comparative Analysis of the Businesses’ Competitive
Traits
6-7
4. Recommendation 8
5. Appendices 9-10
6. References 11
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Key Summary
According to the brief of the assignment, we need to find a group with six members at
first. After that, we are required to do a comparative research about two same business industry
located in Klang Valley.
Our group has decided to choose hair styled salon as our target of research report. A
comparative research report had been done by conducting through primary and secondary
sources, such as asking permission to interview, organizing questionnaires, arranging the date
of interviewing, site observation and so on. Therefore, we have visited and interviewed two
hair salons which are ‘Tenze Hair Studio’ and ‘Stella’ to collect information and photos.
While we were doing the research about the hair studios, we found that ‘Tenze Hair
Studio’ is a commercialized hair studio that having 6 branches at different area while Stella is
a home-based hair salon that placed in Banting. Both of the salons are considered as famous
hair salons at their own area and have been operating for 10 years and above.
These two salons had been analysed, synthesized, compared and contrasted in several
aspects in terms of brief description, competitive traits, and recommendation to improve and
develop better in the same industry.
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Brief Description of the Businesses
https://www.youtube.com/watch?v=MJMgRDKiD0s&list=
Salon Name: STELLA
PLO0bO4HBqbYikj7jld65aYe7ERTOuiwJZ
HISTORY
In the early years, she owned a salon, named ‘Leaves’. ‘Leaves’ were actually belong
to another owner and Stella was working with the owner. Few years later, the owner sold the
shop to Stella Lim. Ms. Stella Lim mentioned that when she owned the shop during the early
years, the business was running very well because it was located at the main street of the town
and most of the residences of the town love her hair styling skills.
After a few years, she moved her shop location to another area but it was still in the
same town and she named it as ‘Stella’ because she wanted the salon to represent as her. The
business of ‘Stella’ was not as good as ‘Leaves’ because the location was not in the uptown,
but the old customers still came to her salon as they could not find a second best hair stylist
like her.
Founded Year 1989 (25 years)
Founder Stella Lim
Current Location Banting, Selangor
Motive for Starting Business To learn a technique, Interest
Main Services Hair cutting, perming
Estimated Number of Customers About 50 per day
Annual Revenue About 72K
Capital Needed for Starting the Business ‘Leaves’ – about RM 15,000
‘Stella’ – about RM 50,000
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During the year of 2013, she closed her shop and moved the business to her house
because she found that the competition nowadays is too strong but she want to maintain her
passion and interest. In addition, to take care of her family, so she still continue engaging her
business at her house.
Salon Name: Tenze Hair Studio Sdn. Bhd.
HISTORY
2002
Mr. Avier Ng started his first business in 2002, when the time was still not so competitive.
So he started the salon which more focus in hairdo services and make up for fashion show,
magazine and advertisement shooting and artist concert with his dream and passion
successfully during the time.
2004
After two years, he opened the second branch store in 2004.
2007
His third branch store has been started in 2007, it was three years after his second branch
store.
2007-2012
In 2007, he realized that the system of management was terrible. So he stopped opening
Founded Year 2002
Founder Mr. Avier Ng
Current Location Tenze Hair Studio Setia Alam
No.18-1-2, Jalan Setia Prima Q U13/Q, Setia Alam
Sek U13, 40170 Shah Alam.
Motive for Starting the Business Passion
Dream
Main
Services
1. Hairdo services and Make up for Fashion
Show
2. Magazine and Advertisement shooting
3. Artist Concerts
Estimated Customers About 60 per day
Annual Revenue About RM 2.5 million
Number of Branch Stores 6 branches.
Capital to Start his Business RM50k to RM1.5 million
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branches for that time and try to focus in setting up the system. After few years keeping
the system in a stable situation, finally in 2012 he decided to start training his team and
build branding of his stores so that his businesses will run more successfully in the future.
2013
He continued opened his fourth and fifth branch stores in 2013 after his businesses were
stabled.
2014
Since the system and the branding of his studio had stabled, so he continued his sixth
branch store in 2014. And he said that he believes it would not be difficult to continue
opening branches in the future.
Comparative analysis of the Businesses’ competitive traits
https://www.youtube.com/watch?v=2Y5opPT4n4&list=PLO0bO4HBqbYikj7jld65aYe7ERTOuiwJZ
As already been stated, we interviewed two type of business. The first one, Tenze Hair
Studio Sdn. Bhd. It is a commercialized business. In this business, they face a lot of competitors
in their market. So, we found that they have a least three competitors. The first competitor is
‘AX Hair Style Salon’, it is located at Jalan Prima C, Setia Alam, and it is just right beside
‘Tenze Hair Studio’. The shop is specialized in hair stylist, hair care and so on. The second
competitor is located in the same area, called ‘1986 Hair Studio’. This hair studio is different
because it provides a café, so that the customers can enjoy while waiting for their turn. The
third competitor ‘De Hair Salon’ also located in the same row with the Tenze Hair Studio.
“In 2015, what business does not face any competition?” Mr Avier Ng mentioned it.
He has never treated anyone as his competitors. It is because he thinks that he treats them as a
friend and share everything with them such as skill, technique and style. Moreover, he also
think that he has already won them by attitude. In his point, attitude is very important. In the
interview, he mentioned that a very important thing, “Divert the customer away from the
competitors to him will build up only enemies, instead of profit.” He thinks that they will use
another way to let him lose all the customers if he does so. Therefore, having more friend are
always better than having more enemies.
Another hair salon that we are doing is a salon located in Banting which is ‘Stella’.
‘Stella’ is a home based salon. We found that there are three competitors they are facing in the
town. One of the competitors is a salon that managed by a young people. His customers is
surrounded with young people as well because he knows the most trending hair style. His
salon’s name is ‘Pro’. The second competitor, named ‘Mei Hua’ is using the same strategies as
‘Stella’. Their hair styling skills are equally competitive as each other. In addition, they also
have a low price and good customer services. The third competitor, Kozo is located at the
uptown of Banting. They are competitive because they are more systematic among all of the
salons.
Even though she is facing those competitors but she would not want to compete with
her competitors because she trusts her customers’ loyalty. “People have their choices in
choosing which kind of salon they want”, Stella said. She provides good customer service, such
as good hair styling skills and comfortable hair washing. This is what we called ‘differentiated
products’ in economics. But what we heard from the founder, Stella, most of her customers
still coming to her for hair services even though she kept moving her shop. Up to here, we can
know that Stella is a kind and friendly person.
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Besides that, every businesses face obstacles while entering the market because
nowadays those businesses in the same industry has become more and more. So, there will be
a lot of competitors to fight with them. Secondly, they will probably be lack of customers
because customers have too much choices. In addition, lack of funding and insufficient cash
flow are one of the obstacles. It is very normal when a new business just started and did not
work in systematic. Other than that, businesses nowadays are also facing a human resources
problem. It is hard for them to recruit talented staffs and manage people. Nowadays, many
teenagers did not finish their degree program, some of them went to find a job after getting a
SPM certificate. What skills do they still have?
Pricing decision is also the one of the obstacles faced by new businesses who wish to
enter their markets nowadays. Why? It is because if they raise its price, they will lose significant
demand for their products because customers will choose their competitors instead. Therefore,
due to the intense competition and weak pricing power, most of the monopolistic competitive
firms make minimal profits over time in the market. It is difficult to overcome because there
are a lot of similar shops in this market even they can retain their customers by differentiating
their products.
‘Tenze Hair Studio’ and ‘Stella’ are both monopolistic competitive firms.
Monopolistic competitive firms have five characteristics. Firstly, the market is represented by
a fairly large number of firms, such as perfume industry and restaurant industry. The second
characteristic is the market is protected by weak barriers to entry, this also explain why new
firm can enter and exit the market easily. Since there are so many firms in the market, the
competition is very intense. Monopolistic competitive firms cannot charge any price they like
or the customers will choose their competitors. Therefore, monopolistic competitive firms have
weak pricing power, also known as ‘price taker’ in economics. To increase their pricing power
and protect their profit from competitors, those monopolistic competitive firms will strive to
differentiate their product or different package. Product differentiation results in customers
developing attachment for their products. When a firm has strong attachment, then it is harder
for competitors to divert away its customers. Furthermore, constantly advertising is necessary
because without advertisement, customers would not be aware of the firm’s product
differentiation.
Competitive Traits Stella Tenze Hair Studio
1. Number of Competitors 2- 10
2. Barrier to Entry Weak. Weak barrier to entry means that many competitors
can enter and exit the market easily.
3. Differentiated or
Standardized Products
Differentiated Products. For
example, good customer
service, convenient location.
Differentiated products.
They provide new package
every months and they
usually work in fashion
show and artist concert.
4. Pricing Power Price Taker. That means they have weak pricing power
because their competition is intense. So that they cannot
charge any price it likes.
5. Other Characteristics There many sellers in the market, but no more than 100
firms.
Firms are constantly advertising their differentiate
products.
6. Verdict Monopolistic Competitive Firm
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Based on the analysis above, ‘Tenze Hair Studio’ is more commercially successful
because they are more systematic. They have a well-managed business compared to ‘Stella’.
In addition, launching new package every months and working for other industry, like fashion
show and artist’s concert shows that they have differentiated their products. By differentiating
their products, consumers have more choices to spend what they prefer. Plus, ‘Tenze Hair
Studio’ advertise their products frequently. This enables to beat their competitors because new
customers get to know the information of their hair studio from advertisement. That is why
advertisement could attract customers to come over their salon.
Recommendation
Based on the analysis of the previous section, I am going to provide a few
recommendations on improving the competitiveness of each business with proper
justifications.
STELLA:
From the analysis of Stella’s salon, we can see that they use good customer service and
good hair styling skills with cheaper price to keep their customers. In our opinion, since they
have good hair styling skills, why not they higher their price a little bit? We think that they can
increase their price same as the normal market price in the town. For example, if their
competitors collect RM20 for a haircut, they could increase their price to RM20 as well.
Other than that, Stella does not have a well-managed salon. To improve the
competitiveness of their business, we think that they should manage their salon’s business in
systematically. They could consider about creating a website to advertise their company or sell
products like shampoo, conditioner, and hair mask online. Creating a web page is very easy
nowadays, you can create a web page on Facebook as well.
TENZE HAIR STUDIO:
To improve their business’s system, setting up a goal every months or every few months
will be a good idea. Write down the goal that is possible to achieve and think about strategies
to achieve the goal. We think that this hair studio can try to get a tutor to help you on developing
their business skills and achieve success earlier than they may have on their own.
Admittedly, improving their customer service can totally help them to earn more from
their existing customers and find new customers. Happy customers will refer their business to
others and providing you with free, favourable word-of-mouth advertising.
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StellaLim 0123092373(Founder)
Diff Ng 0169088358 (Hair stylist)
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