Essay: Business description

2 . BUSINESS DESCRIPTION

2.1 COMPANY NAME

Spot On Laundromat

2.2 COMPANY DESCRIPTION

Spot On Laundromat is a newly founded business offering a full-range service of washing, drying and optional ironing. Spot On is a non-coin operating laundry mat, focused primarily on tertiary students living in student residences, communes and flats in and around Vanderbijl Park but the service is not strictly restricted to the students; members of the community are also welcomed to make of our service.

2.3 COMPANY HISTORY

Reflecting back on our years of being students, we were always pressed for time and having to wash our laundry made matters worse as the lines at the laundry mat was long and the time it took to get our laundry done. This is when an idea to establish a laundry mat was expressed as we realised that that today’s students are still going through what we went through. We have identified a gap in the market and research results revealed that there’s no laundry mat in close proximity to them (student) and there’s a high demand for our service. Spot On Laundromat was open for trading in 2010, two years after graduation, and it’s financed by its founders and equipment supplier, Laundry Limited. We wish our company to evolve by branching out (franchising) and offering additional service-alternations, repairs and cloth maintenance.

2.4 VISION STATEMENT

Spot On Laundry Mat envisions to be recognised as the first choice in all dry cleaning and laundry-related needs in the community.

2.5 MISSION STATEMENT

Spot On Laundry Matt aspires to be the leading choice in laundry mats within the Vanderbijl Park community to distinctively cater to students and also the community. We aim to offer our services in a distinguishing manner to preserve the textures and fibres of our highly valued customers’ garments at a competitive price; hence we use the latest energy-efficient technology to continually improve our services. We believe that our achievements are built upon ethical models and on a relationship of goodwill between the business and our employees our consumers and our environment and to the community in which we operate.

2.6 VALUES AND BELIEFS

• Our customers will always be our main concern, as they are the only motive for our existence.
• We will stay a customer oriented and market oriented organisation, continually offering value added services maintained by the latest technological developments.
• All our staffs is prized team players and team leaders, they are our most valuable resource.
• Our organisation shall keep on having a corporate culture that is known for ethics, team work, comradeship and an organisation that is free of internal organisational politics.

2.7 PRODUCTS AND SERVICE

OUR OFFERING

Spot On Laundromat offers a service to wash, dry and optionally iron laundry of students. These services are provided by our highly trained personnel who know how to tag, pre-treat, wash, dry and iron the laundry in a safe way as to not damage them in any way. High quality, environmentally sound and technologically advanced machinery, and the best “go green” non-toxic detergents are for our customers’ laundry. Specialised machinery is also used to iron the laundry perfectly but not only to take out the wrinkles but also to preserve the texture and colours of the laundry. This service is rendered on a day-to-day basis from 07:30 until 20:00.

UNIQUENESS OF SERVICE

The uniqueness of our service lies within the time-saving we offer our distinctive customers. Unlike other laundry mats we have an element of dry cleaners, which is taking the laundry from the customers, wash, dry and optionally iron the laundry on their behalf. Ordinary laundry mats the customer does the laundry themselves but with Spot-On Laundromat we handle the laundry for you. Therefore no more lines and waiting for the laundry, our specialized machinery make our service efficient and effective.

MARKETPLACE POSITIONING OF SPOT ON LAUNDROMAT

We aim to position ourselves by making use of the cost-leadership strategy to position ourselves. Students are a cost-sensitive market, so we will offer our service at a relatively low price than our competitors. Standard laundry mats’ prices are directed to everyone who uses their service but we intend to attract students to our service by lower prices as we too understand to their level of affordability towards laundry services.

2.8 CURRENT STATUS

MILESTONES

The key milestones that have already been met:

• Conducted a feasibility analysis and analysed the results
• Selected and registered our company name
• Drafted and signed a partnership agreement
• Compiled a business plan
• Received a trade certificate
• Selected the location of the business

Pending milestones:

• Purchasing of machinery and direct materials
• Employment of personnel
• Promoting and advertising business

2.9 LEGAL STAUS AND OWNERSHIP

PARTNERS

Spot On Laundry Mat is legally owned by 5 partners, namely:

• Mr. Stefan Blom who’s the marketing manager, responsible for creating awareness about the company’s activities and services to students and the general public.
• Ms. Sive Hewu who’s the PRO of the company. She’s the representative of the company who attends to public-raised issues and deals with them but once the management of the business have discussed the issues and chose a mutual benefiting solution for all stakeholders involved. .
• Mr. Jaco Kriel, who’s the management manager. He foresees the administrative and the running of the business, so that it’s in limit with what is stated in the business plan.
• Ms. Matshidiso Mokoena, who’s the accountant. She records all the financial transaction of the business to ensure that company is financial stable.
• Ms. Dineo Raphuthing, who’s the HR manager. Her work entails that she motivates our employees, look after the welfare and foresees the selection, recruiting and dismal procedures.

TYPE OF ENTITY: GENERAL PROPRIETORSHIP

Reasons for the type of entity

• Start-up costs are relatively low
• The partners are liable for any loss
• Entity is not subjected to tax
• Partners are equal in control of management decisions

2.10 KEY PARTNERSHIP

Spot On Laundry Mat has a key partnership with Laundry, who’s our equipment supplier.

3 INDUSTRY ANALYSIS OF LAUNDRY SERVIVES

3.1INDUSTRY SIZE, GROWTH RATE AND SALE PROJECTIONS

INDUSTRY SIZE

The industry is relatively small but growing. The laundry and dry cleaning service industry has been one of the insignificant amongst others but recently, worldwide, people have started to give it recognition, realizing the potential of the industry to grow-actually it is growing. The graph below shows the share of the dry cleaning and laundry service as compared to others. According to BizStats (2010) the industry size of the dry cleaning and laundry service industry in South Africa:

BizStats Industry Markets Report	Yearly Industry Income (2006)
Sales	R 22,000,000
Industry Share in the services industry	4%

Although the industry size is determined by the combination of both laundry and dry cleaning services, the graph shows that the services occupies a significant share within the service industry and an educated guess can made on the industry size of laundry services relative to the dry cleaning’s. Though from 2006 until now, the industry has grown but in a medium pace and contributing a substantial amount to the country’s economy.

GROWTH RATE

The laundry care market has evolved over time. These changes have led to intensified competition among rival producers and gradual expansion in consumer choice. The market currently faces strategic challenges in consumer needs and preferences as well as any future rise in outsourcing and use of multi-purpose Laundromats and from emerging washing technologies.

We can see a clear positive growth within the dry cleaning and laundry service industry from 2007 up until 2009. This growth can be seen by industry sales of R20m in 2007 and a growth of R3m to R23m in 2009. This indicates a 7% growth figure over a period of 3 years, although this growth includes dry cleaning as well, an educated guess can be made, and one can conclude that the growth rate for the laundry service industry is also high as these two services are interrelated on some factors.

SALES PROJECTIONS

In the table below a sales projection is shown for the dry cleaning and laundry services industry:

	2010	2011	2012	2014	2015
Sales	R26,100,000	R 28,405,000	R 29,327,000	R 31,793,350	R 32,779,890

A steady growth for the dry cleaning and laundry business can be projected and seems to be a positive one, with rapid yet steady growth in the future.

3.2 INDUSTRY STRUCTURE

The industry structure is determined by probing into the attractiveness of the industry using Porter’s Competition model (1996):

THREATS OF SUBSTITUTES

There is not much promise in developing a substitute for our service. Laundry service and dry cleaners have in existence for more than 50 years and things have not changed for far, they basically are here to stay, though there are few things that can as substation threats. For instance, the technological advancements of machinery which is forever improving giving new entrants in the industry competitive advantage, threatening existing businesses who are currently using obsolete technology.

THREATS OF NEW ENTRANTS

The industry is not saturated and competition is not fierce making the level of entry into the market is high, potential competitors can easily enter the industry and make use of the methods of operation that already exist or even define better methods. The only barrier of entry to the industry is: obtaining capital to establish your own laundry service business. The machinery in this industry is expensive especially if one is considering the usage of environment friendly technology and detergents/fluids.

BARGAINING POWER OF BUYERS

The bargaining power of buyers is low as there are not many laundry mats to compete with, therefore buyers’ power to bargain are low. They would accept the prices that are offered, the service packages and specials. The industry is attractive.

BARGAINING POWER OF SUPPLIERS

The dry cleaning and laundry service industry is small but with many suppliers of the non-toxic detergent and washing fluids, and machinery to start-up a business. The suppliers are the concentrated side of the industry. The bargaining power of the suppliers is low, so business can negotiate prices with their suppliers or find another one who’ll offer the same products at a relatively lower price.

RIVALRY AMONG EXISTING FIRMS

The competition amongst is subtle as there are not many participants in the industry. Another aspect that contributes to competition being subtle is: the businesses are located far from each other and there are no or very little marketing activities in this industry that will lead to actual competition amongst business, hence the industry is attractive.

SUMMARY OF COMPETITIVE FORCE IN THE LAUNDRY SERVICE INDUSTRY

COMPETITVE FORCE	THREAT TO INDUSTRY			COMMENT
	LOW	MEDIUM	HIGH
THREAT OF SUBSTITUTES	X			INDUSTRY ATTRACTIVE
THREAT OF NEW ENTRANTS		X		INDUSTRY ATTRACTIVE
BARGAINING POWER OF BUYERS	X			INDUSTRY ATTRACTIVE
BARGAINING POWER OF SUPPLIERS	X			INDUSTRY ATTRACTIVE
RIVALRY AMONG EXISTING FIRMS	X			INDUSTRY ATTRACTIVE

TYPE OF INDUSTRY

Through the forces of Porter’s competitive model it’s evident that the laundry mat and dry cleaning service is attractive, leading to the type of industry this is. The industry has the combination of a maturing and fragmented industry. The various businesses in the industry are of equal size and power, yet the service demand is slow or no increases it just has a plentiful repeat customers and limited service/product innovation.

3.3 NATURE OF PARTICIPANTS

The nature of participant in this industry is ‘motionless’ as there is no or very little room for improvement. Things are still the same way they were years back with the exception of technology, though having a closer look at the participants in the industry they seem to satisfied with the way things are in the industry, they are not looking for opportunities and ceasing them, they are conservative. They can make use of backward integration strategy but they are still where their business was after five of operation.

3.4 KEY SUCCESS FACTORS

BUSINESS MANAGEMENT FACTORS

• Investment in the latest technological advancements
• Commit to protect the environment and show the community that the business is dedicated to conserving the environment
• Creating a goodwill between consumer and the firm
• Strategically and entrepreneurship skilled
• Understanding of the process and procedure behind the treating of garments and laundry

HUMAN RELATION FACTORS

• Customer service and customer satisfaction orientated
• Passion and patience for what you doing
• Socially and not economically orientated
• Good relation with employees

OTHERS

• Location: located near target market
• Convenience
• Environmental area of business: culture and ethics

3.5 INDUSTRY TRENDS

ENVIRONMENTAL TRENDS

• Technology

1. Laundry service businesses make use of technology more and more every day. Things such as computer tracking is used to identify, observe and manage theft and cash shrinkage as well as the performance of machines and the use thereof.

2. Others are also focused on technologies that provide them with logistics and effectiveness problems.

3. Internet laundry services is highlighted by Hoovers (2009) as the latest and a very nice technological trend, that make things more convenient for customers and also giving allowance for online payments.

• Environmentally sensitive techniques (Social responsibility factor)

1. The usage of more environmentally sensitive machinery for effectiveness, efficiency and energy conservation reasons

2. The usage of petroleum-based solvents, carbon dioxide liquids and also water based cleaning agents, are the new environmentally friendly liquids used for washing clothing and are also on the rise. The development of silicone liquid is also changing the face of laundry services even that of dry cleaning industries as they are moving toward a more ‘green’ industry.

• Economic

1. The more people are making use of the laundry despite the recession, bringing more money into the industry

2. New investors who are interested in the industry are investing in laundry and dry cleaning services saving the industry for recession hence the two points make the industry recession proof.

BUSINESS TRENDS

• Profit margins

The profit margin of the individual business in the industry fluctuates but the overall financial performance of the industry still lies in the same range as the previous financial period.

• Input cost

The input costs are all the costs of the direct and indirect products and services that are used in the laundry process. The costs in the industry have dropping because of the saturated suppliers, who gave the laundry and dry cleaning services owners the power to bargain.

3.6 LONG TERM PROSPECTS

There long term prospect in this industry is of technology. Individuals in this industry can engage in backward integration strategy of their machinery suppliers as the only prospect that exists is of technological advancements. The industry lacks room for innovation.

4.MARKET ANALYSIS

4.1 MARKET SEGMENTATION

CHOOSING A MARKET

After eliminating inappropriate markets, the student market have been identified as an appropriate market to serve.

APPLYING SEGMENTATION VARIABLES

Characteristics researched before segmenting using a user-based approach as highlighted by Wood (2004: 100) are as follow:

Demographic characteristics

-Age:

Students living in university residences -age averages are 16- 28 years old.

The minority MBA and PhD students live in hostels. The majority of them live in community households, and their age average varies from 32years and older.

-Gender: Both males and females (both in the community and students living in hostels)

Geographic characteristics

-Location:

The immediate geographic target is Vanderbijl Park with a population of 80,201 with a 233km² geographic area. We aim to render our services to students who live in university residences, student communes and flats around the Vanderbijl Park area.

-Income:

Students, whether they live in university residences or in private household within the community – the income range on average varies between R300.00 and R1 000.00 per month in allowances.

Lifestyle/personality characteristics

-Interests:

Our service will appeal mostly to time-pressured, academically focussed and socialising-type students.

SELECTION OF SEGMENTS

After the application of segment variables such as customer related variables which include demographic, socio-economic, geographical, and lifestyle factors, the customers within the market could be grouped into segments.

Segment A: Students living in hostels

Segment B: Students not living University residences and for that reason forms part of the community

4.2 SELECTION OF TARGET MARKET

RANKING SEGMENTS FOR MARKETING ACTIVITY

Ranking segments helps to identify opportunities and threats and set marketing priorities. The segment ranking for both segments A and B follows:

	Segment A	Segment B
Prospect	8	3
Location	7	4
Reach and response	7	5
Internal consideration	6	3
Interest	7	2
Total:	35	15

Weighted scores range from 1 (very unattractive) to 10 (very attractive

Source: Wood (2004: 106)

The segment which will be chosen to target is Segment A, as this segment has more favourable purchasing power in regard to Segment B, which makes use of laundry services very little, as they do their own washing with a personal household washing machine.

TARGET MARKET COVERAGE

A concentrated marketing strategy have been chosen so more interest can be provoked. The use concentrated marketing entails targeting one segment with one marketing mix. Because Spot On serves students, this strategy will help the business compete more effectively by tailoring to the needs of our consumers. The use of concentrated marketing can be a profitable coverage approach for Spot-on. These marketing activities entail the use of advertisements in local newspapers, handing out of flyers at University gates and student residences (Wood, 2004: 108).

4.3 BUYER BEHAVIOR

The buyers of the service are individuals from different cultural backgrounds, but tend to create their own culture when interaction takes place with one another. They create ‘the way of students’ lifestyle where socials, education and interacting with one another become an important part of their student lives. Thus, things such as doing their own laundry becomes a mundane and dull task in their minds, where they don’t have time to deal with it.

The following were discovered when researching the buyer behaviour of the targeted segment:

Ø Students need to have their laundry cleaned, but are unwilling to do it themselves as factors can play a role such as time pressures or convenience.

Ø Students prefer to be productive and want to focus more on academics.

To identify the buyer behaviour of our target market we serve. The first step was to identify the needs of our target market. We also took a look at how their needs are fulfilled by making purchases with regard to the buying process which they follow that shows their reaction to the marketing mix of a company, the purchase decision they have as well as their psychological outputs.

Our findings are that the buying behaviour of our target market can be classified as habitual buying behaviour. Habitual buying behaviour takes place when a consumer buys a product out of habit (Learn Marketing.net, n.d.). Seeing that laundry service would be made use of regularly, the consumer is so use to buying the service, daily, weekly or even monthly – which indicates a repetitive buy that highlights a buying behaviour which is habitual.

4.4 COMPETITOR ANALYSIS

DIRECT COMPETITORS

-CleanCorp Laundromat can be classified as a direct competitor of Spot On as they also offer a laundry service which is also non-coin operated and provide the same services to customers. This business is also located in the Vanderbijl Park area, and threatens the operations of Spot On.

INDIRECT COMPETITORS

-ExecuDry offers a dry cleaning service, which are a bit more expensive than just the ordinary laundry service which Spot On Laundromat offers. Their service can be considered a substitute for the service which Spot-on offers, although dry cleaning is more generally used for delicate garments.

-Laundro-King offers a coin-operated system where consumers do their own washing.

FUTURE COMPETITORS

-Coin operated businesses that can emerge into a company that provides both coin and non-coin services.

COMPETITIVE ANALYSIS GRID FOR SPOT ON LAUNDROMAT

Competitive Factors	Laundro-King	ExecuDry	CleanCorp
Service Features	Disadvantage	Disadvantage	Disadvantage
Quality of work	Disadvantage	Disadvantage	Disadvantage
Price	Advantage	Disadvantage	Advantage
Cleaning Methods & Techniques	Disadvantage	Disadvantage	Disadvantage
Customer Service	Disadvantage	Even	Disadvantage
Payment Methods	Disadvantage	Even	Disadvantage
Control/organisation over garments	Advantage	Even	Even

Source: Barringer and Ireland (2010: 189).

The competitive Analysis Grid above gives a clear indication of Spot-on’s competitors in regard to the advantages they have over Spot-On as well as the advantages Spot-on has over them. It also indicates when both Spot-on and its competitors are equal. This grid helps Spot-on to show how it stacks up against its competitors, and shows where competitors may have a competitive advantage.

COMPETITIVE PROFILE MATRIX

		Laundro-King .		ExecuDry		CleanCorp
Critical Success Factors	WEIGHT	RATING	SCORE	RATING	SCORE	RATING	SCORE
Advertising	0.20	1	0.20	1	0.20	4	0.80
Location	0.15	4	0.60	1	0.15	4	0.60
Price Competitiveness	0.05	3	0.15	1	0.05	2	0.10
Management	0.15	4	0.60	1	0.15	1	0.15
Financial Position	0.05	4	0.20	2	0.20	4	0.20
Customer Loyalty	0.10	4	0.40	1	0.10	4	0.40
Technology	0.05	1	0.05	3	0.15	3	0.15
Market share	0.25	4	1.00	2	0.50	3	0.75
Total	1.00		3.20		1.50		3.15

Source: David (2009: 127).

According to David (2009:127), the rating values are as follow:

1. Major weakness
2. Minor weakness
3. Minor strength
4. Major strength

As we can see with the Competitive Profile Matrix, ExecuDry is the weakest competitor for Spot On. And the strongest competitor is Laundro King.

STRENTHS OF COMPETITORS

-Laundro-King, ExecuDry, and Clean Corp has an already loyal customer base

-Competitors has experience, and knows the ins and outs of the industry

WEAKNESSES OF COMPETITORS

-Obsolete technology

-Weak locations

-Economically driven

-Time consuming waiting periods for consumers

STRENGTHS OF SPOT ON

-Technologically advanced

-Perfect location (next to student residences)

-Qualified personnel to manage the business

-Customer oriented, socially driven

-Competitive pricing

WEAKNESSES OF SPOT ON

-Inexperience in the industry, but well informed of the current trends and issues