Global Plan QB House- Expansion to the United States of America Global Plan QB House- Expansion to the United States of America 8/21/2011 BUS548 – International Business Table of Contents Phase One: Planning the Global Business Enterprise A. Identifying Global Business Opportunities………………………………….. 3 B. Analyzing International Competitors………………………………………… 4 C. Assessing the Economic-Geographic Environment…………………………. 5 D. Assessing the Social-Cultural Environment…………………………………. 7 E. Assessing the Political-Legal Environment………………………………….. 8 Phase Two: Organizing for International Business Activities
A. Selecting a Global Company Structure………………………………………9 B. Financing Sources for Global Business Operations…………………………. 10 C. Creating a Global Management Information System………………………… 12 D. Identifying Human Resources for Global Business Activities………………. 13 E. Managing the International, Financial, and Business Risks………………….. 14 Phase Three: Implementing the Global Marketing Plan A. Product and Target Market Planning for Foreign Markets…………………… 16 B. Designing a Global Distribution Strategy……………………………………. 17 C. Planning a Global Promotion Strategy………………………………………. 18 D.
Selecting an International Pricing Strategy………………………………….. 21 Phase Four: Controlling Global Business Activities A. Determining Financial Results………………………………………………. 22 B. Measuring International Business Success…………………………………… 23 APPENDIX 1- Cultural Dimensions……………………………………………………………… 26 APPENDIX 2- Global Company Structure Chart…………………………………………. 26 APPENDIX 3- US Consumers Who Own a Smart Phone……………………………….. 27 APPENDIX 4- QB House Survey………………………………………………….. 27 Identifying Global Business Opportunities
When it comes to identifying global business opportunities Quick Beauty House, also known as QB House, would be best suited in metropolitan areas with very large populations, but more specifically in areas where people are looking for quick service. Kazutaka Iwai, the boss of QB House says he always tells his staff that the barbershop chain’s product is “not a haircut, but a shorter period of time”. In the United State a haircut for a man can range anywhere from $8-$50. A typical Tokyo hairdresser charges ? 5,000 ($43) for men; and a karisuma (charisma) biyoshi may charge easily double that.
However, these men are not paying a premium price just for a haircut; the majority of the charge goes towards the biyoshi’s wardrobe and modish premises. Much of the rest goes in the ritual: the wrapping in shrouds, the “consultation”, the endless hot flannels and the shoulder rub. QB House offers a simple ? 1,000-haircut, no shampoo, no warm towels; just a simple hair cut in ten minutes or less. Efficiency and convenience is the key here. It appears that QB House would thrive in the United States in areas with large metropolitan areas. Narrowing down ten cities in the United States for QB House expansion; the list includes: 1. 2.
New York, NY 3. Los Angeles, CA 4. Chicago, IL 5. Houston, TX 6. Phoenix, AZ 7. Atlanta, GA 8. Dallas, TX 9. San Diego, CA 10. Fort Worth, TX 11. Boston, MA These cities are chosen based mostly on their 2009 estimated population size. QB House combines the latest technology with well trained and polished stylists that enable them to complete a haircut in just 10 minutes. Just as they are in Japan, QB House’ stores should be located in airports, railroad stations, and in corporate buildings; deliberately placed next to public lavatories in densely populated areas. All of this is to increase public demand and create brand awareness.
Analyzing International Competitors The QB House falls into the Consumer Discretionary Industry of the United States economy. Using the traditional ten industries and twenty-four industry groups that comprise the Standard and Poor’s 500 Index obtained from the Global Industry Classification Standard, GICS, effective as of June 30, 2010. The Standard and Poor’s 500 index is generally the leading benchmark index for companies. Within that industry in particular, because QB House offers a specific service, they would be classified as a Specialty Store in the United States market.
This specialty stores classification is for those specialty retail services not listed in other retail categories such as department stores, general merchandise, apparel retail, computer and electronics stores, and more according to information obtained in the standardandpoors. com website. So QB House’s International competition is specialty stores that provide haircuts, general barbershops, retail hair salons, and independent beauty salons. Their major international competitors are listed here. 1. Regis Corporation: The global leader in beauty salons according to their corporate Website address.
They offer affordable haircuts in the United States under their corporate and franchise operations stores. With information obtained from the Regis’ Corporate Website; here listed below are their stores in their Family Affordable category with their company slogan if applicable. 1. * Great Clips: Relax. You’re at Great Clips. * Supercuts Get In. Get Confident. * MasterCuts: Life. Experiences. Every Day. * Regis Salons. * SmartStyle Family Hair Salon. * Borics Hair Care. * Cool Cuts 4 Kids. * Haircrafters: With us it’s personal. * Cost Cutters Family Hair Salon. * Best Cuts. * Saturday’s Hair Salon. Holiday Hair. * TGF Hair Salon. * Head Start Hair Care. * Famous Hair. * Style America Hair Care. * First Choice Hair Cutters. * Great Expectations Precision Haircutters: With us it’s personal. * We care Hair: Personal Care. Practically Priced. 2. Sharkey’s Cuts for Kids: Where haircuts are cool and fun rules. This is according to their corporate website. 3. Barbershops. There are over 48,000 Barbers listed in the United States. They are located in all fifty two States. For example New York State has 3,710, Texas 3,543, Florida 2,959, California 4,964, and Ohio 2,172 according to manta. om website. (Manta Media, Inc. , 2011) So in going global, QB house will operate within a competitive environment. “A company’s situation may differ among countries by its competitive ranking; the competitors it faces” (Daniels, Radebaugh, and Sullivan, 2011). So the largest international competition for QB House is the Regis Corporation companies and independently owned and operated barbershops. The Regis Corporation has almost 9,500 North American salons that provide services such as haircuts, styling, and coloring according to the corporate website.
Although each independently owned barbershop is a little different in the United States, many have some very similar attributes and styles. Also, barbershops are a mainstay in the United States and part of the culture. Assessing the Economic-Geographic Environment Since the US economic fallout in 2008 that has left the global economy reeling, the American market has begun a slow, yet painful recovery process. Many states are starting to show positive growth of state-level gross domestic product, GDP; thus reflecting the upward trend in the national GDP, however there are still several states with shrinking GDP’s.
One of states (Economist, 2011) is Nevada. Of major concern is the high national unemployment rate, which in June 2011 was standing at just over 9%. The best performing growth states, which are evidenced in the Northeast, are also showing signs of unemployment improvement, as many of these states are below the national average in this category. While the economic situation is improving slightly, the United States is still the global economic powerhouse. The U. S. GDP is higher than any other country, and more than twice its closest competitor. (worldbank. org, 2010) The capitalist economy that the U. S. perates in breads entrepreneurship and new business opportunities. This is much more so than other QB House expansion options, such as China, where government intervention can hamper extensive growth and increasing market share. As such, the socio-economic climate of the country lends itself to help new businesses pursue their financial agendas through healthy non-monopolistic competition, where companies can garner increasing market shares in their industry by implementing sound business strategies. The U. S. corporate tax rate presently stands at 39. 2%, while Japan’s is at 39. 5%; thus the taxation effects for the U.
S. subsidiary of QB House will be minimal. As a further benefit to an American expansion, the U. S. -Japan Tax Treaty helps to reduce double taxation on funds returning to Japan from the U. S. (KPMG, 2010) The massive size of the physical landscape of the U. S. can be both a boon and a burden for QB House’s expansion. Much of the U. S. population is densely congregated along the Pacific and Atlantic Coasts in major cities such as New York, Boston, Los Angeles, and San Francisco; which can help to spread the brand regionally, but can be troublesome when seeking to increase exposure nationwide.
With many large metropolitan cities spread throughout the Midwest as well, including Dallas, Chicago, Minneapolis, and Denver, selecting a core region or area to focus initial growth on will take careful analysis. As such, geo-targeting a select set of metropolitan areas will be the best method for garnering regional and national exposure for the QB House brand; particularly when a thorough and complete national marketing plan is set in place to build the brand in multiple regions. Assessing the Social –Cultural Environment QB House must exhibit cultural awareness upon entrance into the United States.
Social-cultural environments consist of the behaviors and relationships in which individuals engage in their personal lives. Values, attitudes, lifestyles, and relationships are all characteristics that create cultural diversity (Weatherly, Page 123). Cultural differences are prevalent from one country to the next. Every country has its own daily routines and rules, codes of social relations, language, and display of emotions (Daniels, pg. 50). The United States is unique, as it is culturally diverse and includes an international appeal.
The United States provides a variety of sociocultural differences due to a great variety of ethnic cultures, and religious beliefs. An assessment of American social – culture involves a comparison to Japanese culture. QB House has thrived in the Pacific Rim countries of Japan, Singapore, and Hong Kong. It is necessary to understand the cultural differences and assess what QB House must do to appeal to American consumers. A study was conducted by Robert House, of the University of Pennsylvania, with regard to understanding, from a large scale perspective, what managers’ perception was of cultural practices and values in their own countries.
The study was called the Global Leadership and Organizational Behavior Effectiveness (GLOBE) project. 150 researchers collected data from more than 17,000 managers from 62 different cultures. This study produced worldwide cultural results. For the purpose of evaluating the social – cultural similarities and differences of Japan and the United States the Cultural Dimensions chart, in APPENDIX 1 provides the comparative results of cultural dimension with regard to how the two countries compare (Ivancevich, pg. 38).
An assessment of the GLOBE information provides QB House with an awareness that an increase in sensitivity toward the following cultural dimensions; power distance, in-group collectivism, uncertainty avoidance, and performance orientation will need to be addressed. It will be necessary for QB House to understand the social – cultural differences they must face upon entrance into the American market. Assessing the Political-Legal Environment It is important for QB House to gain a complete understanding of the legal ystem in the United States. “Countries like the United States have a very litigious environment that allows people to sue company management. Countries with a strong legal tradition, such as most developing countries, must have corporate governance practices put into law to ensure that companies will follow best practices”(Daniels, 2011, p. 697). Corporate governance is the external and internal mechanisms put in place to safeguard the company’s assets and protect rights of the shareholders.
QB House currently operates out of the Pacific Rim, and though these countries are considered to be modern and developed countries, there can be legal system deltas which need to be addressed for QB House to succeed in the United States. “Many countries, especially developing countries, have an underdeveloped and poorly functioning legal system that pays scant attention to corporate governance”(Daniels, 2011, p. 697). Therefore, understanding any differences in the legal systems is vital for QB House to succeed with international expansion into the United States.
Further, a rapidly growing political issue in the United States is energy policy. “President Obama has vowed to put the country on a new economic development strategy based on clean energy” (Koons, 2009). There are various federal and state tax incentives for businesses in the United States which invest in projects that conserve energy. Two major credits that exist are the electricity production credit and the energy property credit. QB House needs to assess these tax incentives and determine how the company can take advantage of the tax benefits while deploying their new facilities throughout the United States. New federal tax incentives and state energy grants are making these projects more affordable by lowering the up-front cost with tax credits, grants and accelerated 50% bonus depreciation write-offs. The project can pay for itself with energy cost savings over a much less number of years” (DaLomba, 2011). As QB House positions itself for expansion into the United States, they will be looking at locations and facilities in their areas of interest. This is an opportune time to incorporate these political aspects of business in the United States with the expansion strategy.
With a thorough understanding of the energy policy and initiatives in the United States, QB House can capitalize on the incentives while gaining a favourable reputation as a business which understands and embraces the United States position on energy. Selecting a Global Company Structure A good company structure consists of activities such as task allocation, coordination and supervision that are directed towards the achievement of organizational aims, which tend to be to increase the shareholders value. QB House has mastered the quick beauty industry overseas with a very simple company structure, typical of lean Japanese firms.
They currently have Yasuo Kitano as CEO, and four Directors: Haruo Suzuki, Tsunenori Kanou, Hiroshi Ozawa, and Masashi Nanamori; Osamu Matsumoto is also the Managing Director for the Hong Kong division. The individual locations do not have office managers, receptionists, customer service, or cashiers- everything is done electronically, however this strategy may not translate smoothly in the United States. US consumers are big on customer service – expecting phone calls to be answered and to be greeted at businesses by company representatives.
In the United States, because the free market economy allows for so many vast options when it comes to purchasing goods and services, customer service and price are what set businesses apart. Businesses can be structured in many different ways, depending on their objectives. The structure of the business will determine the modes in which it operates and performs. Refer to the Global Company Structure Chart, in APPENDIX 2 for the suggested global company structure for QB House. Financing Sources for Global Business Operations
With the present global financial crisis holding strong, financing a global business operation can be even more difficult now. Many well-known large banks are just getting financially stable again. For domestic companies like QB House, looking for financing their global business operations can be difficult and complex. It can be done through following many different avenues to obtain enough capital to grow exponentially. Below are several financing sources for QB House to fund their US expansion. Presented first will be a look at some traditional financing sources, followed by non-traditional avenues.
Traditional Sources 1. Offshore Financing. This type of financing option is mostly available worldwide and does have specific guidelines for companies like a code of conduct, which was established more for the large Multi-National Enterprises, MNEs. Offshore financing is “the provision of financial services by banks and other agents to non-residents” (Daniels, Radebaugh, and Sullivan, 2011). There are financial centers for offshore financing, which are located in key areas of the world, including Hong Kong, London, New York, Singapore, and Switzerland. With New York being in the U. S. his could be a viable option for QB House. Also, according to QB House’s company website they have stores located in Hong Kong and Singapore, so it’s possible those financial center locations could be possible lending targets considering the business relationships that have previously been established. 2. The United States Small Business Administration. The Small Business Administration, SBA, does not grant loans to businesses exclusively. The SBA partners with US government, and backs a certain percentage of the SBA loan. The SBA has small loans called Micro-loans and large loans.
Such loans are an appealing option for start-up firms, domestic companies looking to expand, and also for foreign companies looking to enter and grow in the U. S. market such that of QB House. The currency will be U. S. dollars. Obtaining an SBA loan is easier to qualify for because the United States government is backing part of the business loan, thereby the U. S. bank is taking on less risk. The SBA loan can be a better option for QB House than just a traditional bank loan, because it is easier to qualify for, and the funds are usually available because they are coming from the U. S. government. . Debt Financing. Borrowing with equity financing and debt financing depends on where the home country is located on which method it may use. Each country has its own mix in percentage terms “because companies tend to follow financing practices that predominate in their own countries” (Daniels, Radebaugh, and Sullivan, 2011). For example, U. S. firms use 36% of equity financing and 64% of debt financing. QB House could use debt financing to finance its global business expansion. “Companies can use local and international debt markets to raise funds” (Daniels, Radebaugh, and Sullivan, 2011).
QB House could follow the example of another Japanese company, Nissan. According to Nissan’s annual report they borrowed bonds in Japanese yen using U. S. dollars and Mexican pesos. Non-Traditional Sources 1. Selling Licensing Rights. QB House could sell licensing rights to investors and companies. “Some entrepreneurs obtain financing for growth and expansion through franchising or licensing” (Inc. Magazine, 2010). Basically, QB House could get funds for global expansion by selling the rights of their unique business and its systems. Experts recommend using non-traditional financing to start a business or provide funds during periods of rapid growth, but emphasize that small business owners should consider it a temporary arrangement” (Inc. Magazine, 2010). 2. Franchising. Another form of non-traditional source of financing for a global business operation. QB House could sell franchising rights to independent owners. For example, much in the same way of American companies such as McDonald’s and Pizza Hut do. This could be a very lucrative financing source, especially if the QB House brand becomes popular in America.
Further, franchising reduces some of the financial risk associated with international expansions, as it shifts such risk to the investors. Global Management Information System Establishing an international management information system will be key for QB House to analyze, manage, and plan current and future US operations. With so much of the QB House business plan relying on technology, including sensor-driven barber chairs to estimate wait times and automated payment machines, a wealth of data is being collected whenever a location is open for business.
All of this data can be deconstructed and analyzed to ensure customer satisfaction in wait times, plans for expansion of new locations, increased training for barbers to speed up haircuts, and a myriad of other categories. Harkening back to the mantra of the company, the product is not just a haircut, but rather, a shorter period of time, thus, such quantitative data is imperative to maintain operations in both the US and QB House’s other locales.
By establishing a global information system, data from QB House locations in Japan, Singapore, Hong Kong, and the US can be combined to reformulate best practices, decipher data trends in sales, and refine measures for opening new locations. While the data is country specific, analysts at the home office will be able to spot trends that can be generalized across the company model to improve operations globally. Using a traditional JIT production system, all relevant front-line data from daily transactions, to wait times, to haircut times, are all instrumental in aintaining lean production and efficiency. Thus, as more international data is collected and warehoused, higher level decision makers can use decision analytics tools to make company-wide practices more standard and efficient. In terms of the marketing data, leveraging the tech-savvy US consumers through the introduction of mobile apps and the ability to purchase their haircut ticket online, it will yield an incredibly diverse amount of data that can help expand Asian operations through technological advances as well.
Such marketing data will aide US strategists and marketing executives by conceptualizing the various ways consumers are purchasing the product (in-store purchases via the automated ticketing machine, purchasing online via the QB House website, or from their smart-phone via the QB House mobile app). The overarching use of technology combined with the goals of efficient production, leave QB House with a plethora of data that can help company executives analyze each aspect of the sales/production process globally. Identifying Human Resources for Global Business Operations
QB House will face a competitive environment upon entrance into the United States markets. Human resources include activities necessary to staff an organization. Environmental differences and challenges are prevalent for domestic business start-up (Patton, Week 8 lecture). International business start-up brings varying elements that can only be faced with effective leadership and the correct labor force. Human resources are key in implementing the labor force with the ability to help a new international company transition into a new economic position.
Human resource requirements include planning the needs necessary to do business internationally, finding people to meet those needs, motivating the people chosen to work effectively and efficiently, and continually training individuals to progress and help the company succeed. An international setting brings new elements to business start-up that requires extra effort from the human resource experts. QB House will meet differing political, cultural, legal, and economic ideas as they venture into the United States (Daniels, pg. 50). Individuals chosen to operate the business in America, whether they are natives, expatriates, or third-country nationals, will each require adequate training from management. An approach QB House should take is to mix management with ethnocentric and polycentric leadership (Patton, Week 8 Lecture). This will allow for an effective management mix of home-country and host-country nationals. The identification of effective human resource management by QB House will affect their performance first hand.
It’s critical that the operation implement high standards aligned with an international strategy founded upon QB House values that began in Japan. An international focus on human resource management with high standards will sustain high productivity, competitive advantage, and value creation (Daniels, Pg. 751). Managing the International, Financial and Business Risks International expansion presents new challenges and can lead to the company being exposed to risks that they normally would not encounter in the traditional domestic market.
In order to be successful in the international expansion into the United States, QB House must properly manage the international, financial, and business risks. A comprehensive risk management plan shall be used to proactively manage all risks of the international expansion into the United States. Risk will be tracked and reported on to senior management as part of the overall risk management process. Active risk management will be vital to the overall success of the expansion. A complete review will be performed with all of the stakeholders of the expansion.
The international, financial, and business risks will be identified at this time and handling plans will be developed and put in place for each risk. The plans will identify and document the steps required for the company to mitigate, avoid, accept, or transfer the risk. Understanding the region and marketplace will be a key component in understanding potential risks. “The first steps in developing an international plan are to determine which markets to enter and the most effective way to reach these markets.
Before deciding upon your target and strategy, it is essential to know what kind of competition you potentially will be facing. This will usually be a combination of competitors you face at home, local champions with a strong domestic market position, and companies from other countries. Understanding the strength and structure of the competition as well as your unique value proposition and key differentiators are critical in determining your market entry strategy and the resources you will allocate”(Konsmo, 2011). A complete analysis of competitors and their pricing in the United States will be conducted and evaluated.
This will enable QB House to gain an understanding of the current market conditions in the United States and allow them to align their business objectives so minimal risk is introduced upon expansion. QB House has an already proven concept which has been successful in the Pacific Rim. They understand their core competencies and key strengths which support their concept’s success. Adapting and implementing these same core competencies into the United States business model will be important in minimizing overall risk to the United States expansion. Any international expansion will result in certain imposed risks.
Risks that can be foreseen are able to be effectively managed. There will also be those risks that are not foreseen. A “living” and maintained risk management plan will allow the company to identify these risks at the earliest onset and initiate proper planning to handle them. The company’s ability to properly manage risks will be a key to their success in international expansion. Product and Target Market Planning for Foreign Markets The leaders at QB House have been thinking about increasing their product offerings for a while now and an expansion into the United States just might be the perfect time to test out new products and services.
Upper management feels that the ideology behind quick cheap haircuts can be extended further to other services including: massages, manicures and even instant loans. In the summer of 2006, QB House’s retired founder sold 74% of the parent company to Orix, a Japanese financial-services firm. He envisioned offering customers up to ? 1m (roughly $8,736 USD) in financing via banking services that are accessible from mobile phones. AMTA, the American Massage Therapy Association, estimates that in 2009, massage therapy was a $16-20 billion industry. According to the U. S.
Department of Labor employment for massage therapists is expected to increase 20 percent from 2006 to 2016, faster than average for all occupations. (2010 Massage Therapy Industry Fact Sheet, 2010) Between July 2008 and July 2009, roughly 48 million adult Americans (22 percent) had a massage at least once, so this would be a great service to offer in American QB Houses- $10, for a 10 minute deep tissue, Swedish, trigger point or sports massage. The targeted area for a QB House location offering massages would be ideal in a spa, an office, a healthcare setting, health club/athletic facilities and all major transit locations.
The manicuring industry, which is a $20 billion a year, has transformed from a business that once was an indulgence for the pampered and wealthy, and has turned it into an affordable American routine. In the 1970s, manicures cost up to $60, in today’s society you can now get manicures and pedicures for as little as $15. This would also be another great service to introduce in American QB Houses. All women and some men, from a student to a busy CEO can benefit from quick cheap manicures and pedicures. Lastly, the instant loan aspect of the business would offer financing via banking services that are accessible from mobile phones.
The American QB Houses would not be the ideal market to launch this product offering. Americans already have so many options for instant loans including, Title Max, My Pay Day, Instant Loans, and OnlineLoan24. com to name a few. The majority of Americans will also be really skeptical to initiate loans with a Japanese Barber Shop! Designing a Global Distribution Strategy Businesses generally place their product or service in places where consumers can buy them or use their service. By doing this a company can develop strategic advantages.
It’s important for managers to be aware of every element of the marketing mix of “product, price, promotion, brand, and distribution. ” (Daniels, Radebaugh, and Sullivan, 2011) Distribution is specific aspect of the marketing mix that companies like QB House need to recognize upon entering the U. S. market. “Distribution is the course, physical path or legal title that goods take between production and consumption. ” (Daniels, Radebaugh, and Sullivan, 2011) For a foreign company going into an international market it is possible to follow the current distribution channel that its competitors use. A company wanting to use existing distribution channels may need to analyze competitive conditions carefully to offer effective incentives for the distributors to handle the product… ” or service. (Daniels, Radebaugh, and Sullivan, 2011) Following existing distribution channels would prove to be a marketing mistake for QB House. Following existing competitors, such as retail salons and barbershops would over saturate the market and financially impact QB House. This would further reduce QB House’s initial minimum market share. Furthermore, many of these specific types of public places have expensive monthly lease rates.
Moreover, one of QB Houses’ direct competitors the Regis Corporation’s family of companies uses these retail stores that are typically located in large shopping malls and some in small strip malls throughout the United States. Specifically, QB House must place their shops in strategic locations. Using the ten cities identified previously in the Global Business Opportunities section, QB House can open storefronts in strategic locations in these ten cities: * New York, NY; Los Angeles, CA; Chicago, IL; Houston, TX; Phoenix, AZ; Atlanta, GA; Dallas, TX; San Diego, CA; Fort Worth, TX; and Boston, MA.
In addition, these locations in the United States market are similar to the locations QB House uses in Japan. Specifically, QB House can open small storefronts in airports, subways stations, and railroad stations to capitalize on high potential traffic. Moreover, QB House will attempt to secure small storefronts next to public restrooms where available. Planning a Global Promotional Strategy QB House’s global promotion strategy will include an array of measures that are both standardized for global use, yet also a customized aspect that reflects the values and culture of American society.
Utilizing standardized promotional tools such as the QB House logo, store layouts, and value offerings (time saving, sanitary, and quality) will help to cut down on promotional costs by implementing already-proven tactics. However, each QB House market is unique and has different perceptions and reactions given various promotional tools, thus individualized promotional activities will need to be undertaken to allow the QB House model to mesh with the cultural values of the US market.
Following the lead of the Singapore-based stores, will be a strong starting point for US operations, as Singapore’s “western” flavor lends itself to the higher-income urban centers that QB House is focusing on. QB House has prided itself on its incorporation of technology into the haircutting experience to create greater efficiencies. This will bode well for the American market that is increasingly becoming more tech-savvy, and places a much higher reliance on the internet and smart phones than other parts of the world.
QB House is a traditional brick-and-mortar business that has multiple technology improvements that allow them to create value and reduce costs. Of particular note is the ticket system used to purchase a haircut ticket, in which a customer purchases their pass via a vending type machine. To improve ease of use and increase efficiencies from the consumer standpoint, QB House should shift some of the actual ‘purchasing’ focus towards digital sources – e-commerce via company website and smart phone apps.
North America has the highest penetration rate of internet users per capita in the world, with the United States having nearly 250,000 internet users (Internet World Stats, 2011). As such, QB House’s web presence needs to be strong for low-cost organic growth that can not only convey the company’s value proposition, but also help to more efficiently sell their products. As such, the e-commerce division of US operations must maintain a strong web presence through effective SEO management, social media management, and selective internet advertising options.
Similarly, coining a QB House mobile phone app will again help ease of use and purchasing efficiency for consumers, but also helps to maintain the company’s brand image as a technology focused operation. With 42% of the US population using smart phones (Dolan, 2010) and that number constantly on the rise (See APPENDIX 3), also, many of these users are in the younger demographic which is more suited for the QB House product, the brand will be much more relevant and appealing with an app presence.
Such an app will focus on being able to purchase haircut tickets via a consumer’s smart phone, but will also be an extension of the company website as well, yielding information on various locations’ waiting times, the haircut process, the AirWash system, and the sanitary features of the model. While the extra features add substance to the app, the true value of the product will be making it even easier for consumers to make their purchase. With the product itself being a transformed from a drawn out process, down to a 10 minute impulse purchase, the easier it is for a consumer to buy, the more sales that will be created.
Having a social media presence will also help to become more relevant and memorable in the daily lives of QB House’s customer base. A presence on Twitter, Facebook, Yelp! , and other similar sites, is a must for business in American society, as online social interaction is an inexpensive way to spread the word about a business. However, “at least so far, marketers can’t predict or measure the impact of their campaigns with anything near the precision they’re used to elsewhere online” (Manjoo, 2011).
For QB House, and its traditionally quantitative Japanese business model, simply throwing money into an un-traceable, un-measurable, and in reality, unknown, marketing activity does not fit well. As such, a social media presence is a given, however, the growth needs to be organic online through true viral marketing, and also channelled through the traceable e-commerce technology investments (website and mobile app). Yelp! could possibly be a very strong tool in terms of influencing consumer perceptions.
Customers will have an easy outlet to voice their opinions, and if these opinions are similar to the throngs that have had positive experiences in QB House’s Asian operations, Yelp! reviews many be a key cog in terms of building brand identity and influencing new users to try the product. The overall goal of the US promotional strategy is not to pour exorbitant amounts of money into expensive corporate branding activities, but rather into smaller localized advertising and promotional mediums that center around QB House retail locations.
With the locations being in various high traffic destinations of major metropolitan cities, creating a local core customer base can be achieved through marketing activities that focus on the daily lives of the people that frequent that specific area. For example, a small retail shop in the subway station in Manhattan’s financial district could gain huge traction from daily walk by traffic, but also by targeting specific branding campaigns in the station itself (wall graphics, restroom signage, ect. ), and branching out to surrounding buildings and street level advertising.
Further, by working with larger companies in the immediate area, partnerships can be formed to possibly offer free haircuts (sampling), volume discounts, or even having employee haircuts paid for by the company as a bonus. Whatever the means, the model itself, is proven, thus, the initial promotional strategy needs to focus on getting traffic in the door, once this happens, the speed, quality, value, and convenience of QB House will build loyalty and increased purchase frequency. Selecting an International Pricing Strategy The QB House pricing strategy will create awareness for consumers in select markets in the United States.
Concentration on metro cities and prime locations for high consumer flow will create an opportunity for QB House to implement a similar strategic pricing position used in Japan, Singapore and Hong Kong. The innovative concept, combined with the latest technology and well trained and polished stylists, enables the completion of a haircut in just 10 minutes for Singapore Dollars (SGD) $10 (US $8. 23) or Hong Kong Dollars (HKD) $50 (US $6. 40). (QB House, 2011) Pricing tactics taken by QB House due to a saturated market and high competition in the United States will allow minimal discretion in setting prices.
The strategy taken must set prices low enough to gain sales, but high enough to guarantee the flow of funds required to cover such expenses as location, technology, and labor. Resources will only become available for QB House as they implement an effective pricing strategy. Implementation of a pricing strategy in a new country is not an easy process. A complete analysis of QB House services’ perceived benefits in relation to the benefits competitors are providing is necessary. Pricing is a nothing more than the reflection of the perceived value of the service offered (Kucher, 1996).
The challenge QB House faces is promoting services that will increase the consumer perception of the services provided. A market penetration strategy introduces a new service at a low price to induce a maximum number of consumers to try it (Daniels, 2011). A market penetration strategy will most effectively provide high consumer influx and awareness. QB House must also be aware that although a penetration strategy best fits the objective, a price set too low creates a perception that the service is low quality and this would impact QB House’s image.
Determining Financial Results International expansion is a company’s decision to expand their operations beyond their current market and is a growth strategy with the intent of increasing financial performance (Capar and Kotabe, 2003). Market expansion allows companies to capture benefits which they are not able to access in their current market. QB House will determine financial results through achieving increased profitability. Profitability is the ability of the company to generate earnings or profit on their investment.
There are various benefits resulting from expansion into the United States that should increase profitability. Expanding into the United States offers QB House the opportunity, to gain cost advantage through strategically choosing locations for maximized value. Choosing locations which maximize value can also offset lower profitability locations in countries such as Singapore which have higher costs and lower profitability. This enables QB House to achieve a net increase in overall profitability. Entering the United States also allows QB House to further exploit economies of scale. Firms operating internationally that have managed to realize synergies or economies of scope or scale, or that possess the capability to innovate, are often able to achieve higher profitability”(Chiao and Yang, 2010) With an expanded market area, QB House is able to spread overhead costs out over more locations, thus decreasing the allocation per location and increasing profitability of all locations. The entrance into a new market affords QB House the opportunity to learn and develop existing capabilities and competencies. “By stretching core competencies into international markets, firms are able to enhance profitability. (Chiao and Yang, 2010) Learning from the different geographic locations enables QB House the opportunity to adopt and integrate any applicable best practices. This will allow QB House to increase efficiency, lower costs, and result in increased overall profitability. Profitability is the key metric which will be used to determine financial results from expansion into the United States. Profit is the difference between cost and sales. The various reasons discussed explain how the expansion should result in increased profitability.
If increased profitability is not achieved, it will not have been a successful expansion. Measuring International Business Success The goal of any enterprise going global is to get customers and then keep those customers coming back to frequent their business. This is especially true of QB House as it provides a service to its customers that they may use frequently. Most men in the United States get haircuts pretty often, anywhere from every two to six weeks. It really is a personal choice as there is no real defining cultural norm in the United States for a man’s hair style or hair length.
So to measure QB House’s international business success we will use sales as the main measurement of success. “Although the principles for selling abroad are the same as those for selling domestically, the international businessperson must deal with a less familiar environment” (Daniels, Radebaugh, and Sullivan, 2011). So in the ten markets identified in the sections Global Business Opportunities and Designing a Global Distribution Strategy will can measure QB House’s international business success by tracking its sales in the ten storefronts.
Specifically, we can track and monitor the weekly and monthly sales results in the ten cities of New York, NY; Los Angeles, CA; Chicago, IL; Houston, TX; Phoenix, AZ; Atlanta, GA; Dallas, TX; San Diego, CA; Fort Worth, TX; and Boston, MA. After six months of tracking sales at QB House’s new United States stores we will have a very good indication of which cities are the most successful based on sales volume. We define sales volume quantitatively as the number of customers receiving a haircut in a store per week.
After six months of sales results at these QB House stores we will know which cities are most successful based on sales volume, which stores have average sales and need improving, and finally which stores have below average sales results and may be in need of complete revamping or a store closing. For an ongoing measurement of QB House’s international business success we will use quality. We will measure the quality of QB House’s stores. Quality is defined as, “meeting or exceeding the expectations of a customer” (Daniels, Radebaugh, and Sullivan, 2011).
Moreover, it is the deliverance of value or of the customer’s perceptions of receiving value. We can measure the value delivered by QB House to its customers by simply asking the customer to complete a survey. A customer survey is a great way to get feedback on a company’s product or service. Using one month as length of time to obtain customer surveys in order to ascertain if value is being delivered; as customer’s frequent QB House’s stores in the aforementioned ten cities, employees can ask the customer if they would like to complete a short and optional customer survey (See APPENDIX 4).
In addition there are a few qualitative ways to measure international success. A company’s reputation is very valuable. So monitoring QB House’s company reputation in the ten U. S. cities identified is important. In the domestic and international business environment, “Reputation matters. It influences the attitudes and behaviors not only of existing and potential investors, customers, employees, and suppliers, but also those of regulators and the voice of local communities, pressure groups and media” (Adams, Kennerley, and Neely, 2002).
Finally, another important qualitative measurement of international business success is the organization’s relationship with its stakeholders. Moreover, “the best way for organisations – for profit or not for profit – to survive and prosper in the long term will be to think about the wants and needs of all of their stakeholders and endeavour to deliver appropriate value to each of them” (Adams, Kennerley, and Neely, 2002). QB House’s management needs to be aware of and augment the organization’s relationship with its stakeholders. APPENDIX 1 Cultural Dimensions| United States| Japan|
Power Distance – The extent to which a society accepts unequal distribution of power,| Medium – High| High| In-Group Collectivism – The degree to which individuals express loyalty, pride, and cohesiveness in their organizations and families. | Medium| High| Uncertainty Avoidance – The degree to which members of a society or organization use rules, regulations, and social norms to avaid uncertainty or unpredictable future events. | Medium| Medium – High| Future Orientation – The extent to which individuals in a society plan, invest in the future, and delay immediate gratification. Medium| Medium| Gender Egalitariansim – The extent to which an organization avoids gender discrimination and role inequities. | Medium – Low| Medium – Low| Assertiveness – The degree to which members of organizations are aggressive and confrontational in social relationships. | Medium| Medium| Humane Orientation – The degree to which individuals in an organization are rewarded for being friendly, altruisitc, fair, caring, and kind to others. | Medium| Medium| Performance Orientation – the degree to which individuals in a society are rewarded for performance improvement and excellence. Medium| Medium – High| (Ivancevich, pg. 39) APPENDIX 2 Global Company Structure Chart APPENDIX 3 APPENDIX 4 | | QB HouseCustomer SurveyHow can we improve? | Please take a moment to help us improve your experience at QB House. When you’re done, please leave the questionnaire at the front of the store. Service Quality How often do you come to QB House? Once A MonthOnce Every Two MonthsOnce Every Three MonthsFirst time| How would you rate our service? Consistent high qualityGenerally goodService varies dailyPoor | Will you frequent our store again?
YesNo| How would you rate our store’s cleanliness? Consistently very cleanGenerally goodCleanliness varies dailyPoor | Service and Environment How long did you wait for your haircut? Immediate serviceLess than 1 minute1 to 3 minutesMore than 3 minutes| Was the store difficult to find? YesNo| How would you rate the staff? Friendly and helpfulAverageVaries on each visitPoor service| Was the store neat and inviting? YesNo| Additional Comments Thank you for your participation! References * 2010 Massage Therapy Industry Fact Sheet, American Massage Therapy Association® (AMTA®). ttp://www. amtamassage. org/uploads/cms/documents/2010%20Massage%20Therapy%20Industry%20Fact%20Sheet%202010. pdf * Adams, Chris, Kennerley, Mike, and Neely, Andy. The Performance Prism: The Scorecard for Measuring and Managing Business Success. Pearson Education. 2002. Retrieved from http://210. 55. 20. 100/news/Events/Tertiary%20Services%20Conference/Tertiary%20Conference/PDF’s/2009/General%20Papers/NM%20Performance%2520Prism. pdf * Capar, N. , and Kotabe, M. (2003). The relationship between international diversification and performance in service Firms.
Journal of International Business Studies, 34(4), 345. * Chiao, Y. , and Yang, K. (2011) Internationalization, intangible assets and Taiwanese SME’s performance:Evidence of an Asian newly-industrialized economy. African Journals of Business Management Vol. 5(3), pp 641-655. * DaLomba, L. (2011). New Tax Legislation Promotes Renewable Energy Initiatives. Retrieved from http://www. kahnlitwin. com/pdf/Renewable%20Energy%20Initiatives%20-%20Businesses. pdf * Daniels, John D. , Radebaugh, Lee H. , and Sullivan, Daniel P.