It is an applied marketing case.

The Case Structure: Your case analysis must consist of the following four sections:

Problem (or Task) Statement (choose one)

Situation Analysis

Analysis of Alternatives

Recommendation

Use subheadings throughout your case study. The total length is likely to be between 5 and 10 typed, double-spaced pages, not including Appendices. Use Appendices for graphics which do not fit easily into your text: graphs, tables, illustrations, other exhibits.

Busi 2231: Application Case - Susie's Boutique The following case was prepared by Karen Blotnicky as an example of a typical case and a reasonable case analysis. This case is fictitious. Any similarity to a company, existing or obsolete, is purely coincidental. This case may be used for educational purposes provided full credit is given to the author and the website is given as the source. (Copyright: K. Blotnicky, 2020.) Susie's Boutique Introduction Susan Murphy sat back in a comfy wicker chair on her back patio overlooking the river on her property. She had just accepted an early retirement package from a bank where she had worked for the last 35 years. She was happy and enjoying her comfortable country home. But she was also very bored. She was surprised at how quickly retirement became tedious and unexciting. Without having a job to go to she found the days slipped by so quickly and half the time she didn't even know what day of the week it was. It had been fun for the first two months, but then the novelty began to wear off. She worried that she shouldn't have retired at the age of 58. She should have waited until 65 years or older. She knew she had to do something. Susan had dreamed of owning her own store ever since she was ten years old. Her Aunt Sarah owned a women's dress shop and Susan loved to visit the store with her mother. The dresses were lovely and very expensive. The shop was exclusive and located in the city on a street full of unique and high-end retail outlets and restaurants. But when she went to university, Susan decided to pursue do a solid and practical business degree. Accounting was what she decided to do. Her BBA led to an MBA and eventually a highly paid position as a bank executive. She enjoyed her career and never looked back. Her dreams of owning her own shop took a back seat and evaporated sometime between high school graduation and retirement. And now here she sat. Comfortable, but also bored and a little confused about where to go from here. Her early retirement package consisted of one full year of salary and bonuses, totally $225,000. She also had full pension from the bank and her retirement income was guaranteed with her other investments. But she also about $500,000 in cash that she could use to invest in an income opportunity. She had thought of investing it in bank stock, which is typically low risk, but she realized that she could use that to invest in a business opportunity as well. This was an exciting option, but it was also scary because if she invested that money and lost it in a bad business deal, she probably would never earn it back. But she also knew her retirement income was secure so it would not leave her destitute if she lost that investment. After careful consideration, Susan decided to seriously consider her business options. Susan's Aunt Sarah had sold her shop years ago and she now lived in a community of independent seniors. She was surprised to see her niece, Susan, on her doorstep. After catching up on family and friends, Susan finally told her Aunt Sarah why she had surprised her with a visit. Sarah looked very surprised when Susan told her she would like to own her boutique that carried women's clothing and accessories. Expensive ones that could target high end female shoppers who were not price sensitive and willing to pay more for good quality brands. Sarah's response surprised Susan. "Are you sure that is wise?" she asked. "Well, Auntie," Susan responded." I really think I want to have a boutique. Your shop was very successful. I think if I could sort of copy your business approach, it would work out just fine." Her Aunt Sarah smiled. Susan, aren't you forgetting something?" "I don't think so," Susan responded. Her Aunt Sarah frowned slightly. "The market has changed in the last two decades. The high end market has contracted a bit and there is a tremendous amount of competition from across the globe. Online retailers can manufacture and sell from anywhere to everywhere. You need to do your homework!" Susan knew that her elderly aunt was correct. Times change - especially in retail. "You know what you need to do, Susan," Sarah prodded. Susan nodded. "I need to research the market before I can make a decision," she admitted. Sarah nodded. "Good - you should do that. But first, let's have lunch!" Susan's Aunt Sarah was very helpful. She pointed out trade publications and government statistics that provided feedback on the retail women's clothing industry. She also gave her the name of Douglas Hughes, a market researcher and fashion retail expert. Before long, Susan was sending Hughes an email introducing herself with greetings from her Aunt Sarah. Soon after Susan received an email with links to many online resources and the results of a panel survey that Hughes had recently commissioned. She decided it was time to sort through these materials to determine if there were hidden gems market opportunities - for her to pursue. The Research The following exhibits contain excerpts from information that Hughes sent to Susan. She spend hours reading and making notes as she tried to uncover and begin to visualize her opportunities. These exhibits include: A: Retailer Times Industry Survey Forecast for Women's Retail - an industry publication providing an overview of industry growth for the next three years B: Panel Survey Results - Summary tables from the panel survey commissioned by Douglas Hughes related to target market, brand preferences and price sensitivity. C: Susan's hand-written financial analysis from the industry stats and the survey results including growth rates, product life cycle stage, inflationary risk, market share goals, net profit percent, and potential return on investment. The Decision As Susan reviewed her hand-written notes from the industry research and the panel survey, she was both excited and a bit nervous. At least two of the three options seemed to offer business potential. She was aware that she was trying to capture a childhood memory by trying to bring back some semblance of her Aunt Sarah's dress shop. She knew that that was not realistic or reasonable. She needed to find her own niche. And she also knew from her years in banking that just because something looked like a good idea, it didn't mean you had to do it! Maybe she was having cold feet. Should she open the dress shop or not? She also realized that for the first time since her early retirement she felt really excited about what lay ahead. Case Exhibits Exhibit A: Retailer Times Industry Survey Retailer Times Industry Survey Industry Growth Rates & Inflation Industry trends in the clothing sector are relatively strong, particularly for moderately priced fashion. The mid-range price market has a growth rate of 5% year-to-year, but it has been hit with some inflation. The bargain/discount market has experienced little or no growth and this is anticipated to continue. The high-end garment industry experienced growth of 3% annually and it is relatively robust against inflation. Given that inflation is expected to run 1.5% to 2.0% per year this market may be insulated against inflationary trends. This is particularly true in the women's clothing sector. Price sensitivity is expected to affect results in both mid-range and discount segments. All of the markets are competitive, but competition is particularly strong in the bargain price segment. Competition is moderate in the mid-range price segment. The high-end garment market consists of some well established brands with room for growth. Projected Profit/Loss Projected profits are limited in the mid-range price clothing market with net profit estimates of 2.0% of gross sales. Cost of goods sold in the mid-range clothing market ranges from 65% to 82% with an overall industry average of 72%. Projected profits are limited in the bargain/discount price clothing market with net profit estimates of 1.0% of gross sales. Cost of goods sold in the mid-range clothing market ranges from 70% to 80% with an overall industry average of 75%. Projected profits are limited in the high-end clothing market with net profit estimates from 4% of gross sales. Cost of goods sold in the mid-range clothing market ranges from 55% to 65% with an overall industry average of 60%. Exhibit B: Fashion Panel Survey Results - Women's Fashion Breakout Segment Breakouts for Female Clothing Shoppers Bargain/Discount Mid-Range High-End 500 500 500 6 4 1 Survey Sample size: Approximate number in market (millions) Age 45% 40% 0% 0% 0% 15 100% 25% 10% 15% 20% 20% 10% 100% 5% 10% 15% 30% 20% 20% 100% 35% 40% 25% 100% 20% 50% 30% 100% 15% 65% 20% 100% 18 to 25 26 to 35 36 to 45 46 to 55 56 to 65 Over 65 Total Marital Status Single Married/Common Other Total Income Level Under $50,000 $50,000 to under $75,000 $75,000 to under $100,000 $100,000 to under $150,000 $150,000 and Over Total Education Less than Grade 12 High school graduation Some university/college Bachelor's degree Master's or doctorate degree Total Amount spent annually on own clothing Low High Average expenditure Relative price sensitivity Insensitive Somewhat sensitive Very sensitive Total 25% 45% 20% 10% 0% 100% 15% 25% 40% 10% 10% 100% 5% 10% 10% 45% 30% 100% 5% 25% 35% 15% 35% 30% 15% 5% 100% 2% 15% 20% 30% 33% 100% 25% 10% 100% $100 $250 $200 $350 $600 $375 $800 $3,000 $1,200 5% 20% 75% 20% 55% 25% 100% 80% 20% 0% 100% 100% Exhibit C: Susan's Financial Analysis Financial Analysis of the Three Retail Opportunities (Industry-wide Estimates) Bargain/Discount Mid-Range High-End Annual growth rate/year D' 570 370 Market consumers 6,000,000 4,000,000 1,000,000 Gross revenue projection/vear 1 $ 1,200,000,000 $ 1,500,000,000 $ 1,200,000,000 Net profit estimate (7) 170 270 470 Profit Year 1 $ 12,000,000 $ 30,000,000 $ 48,000,000 Gross revenue projection/year 2 $ 1.200,000,000 $ 1,575,000,000 $1,236,000,000 Net profit estimate (7) 27 470 Profit Year 2 $ 12,000,000 $ 31,500,000 $ 49,440,000 Gross revenue projection/year 3 $ 1,200,000,000 $ 1.653,750,000 $1,273,080,000 Net profit estimate (7) 170 270 47 Profit Year 3$ 12,000,000 $ 33,075,000 $ 50,923,200 170 Estimated Net Profit with Market Share Goals for My Own Business Bargain/Discount Mid-Range High-End My potential market share estimate Years 1 to 3 0.27 0.2% 0.276 Net profit estimate year 1 $ 18,000 $ 45,000$ 72,000 Not profit estimate year 2 $ 18,000 47,250 $ 74,160 Net profit estimate year 3 $ 18,000 $ 49,613 76,385 Projected ROI for My Own Business Initial Investment of $500,000 Bargain/Discount Mid-Range High-End RI Year 1 470 970 147 BI V 2 470 970 1570 BOI V er 2 4070 10% 1570 147 to 15% Summary 47 annually 9% to 10% annually annually My Initial Industry Risk Analysis Segment Bargain/Discount Mid-Range High-End Product Life Cycle Mature Mid-Growth Early Growth Inflationary Risk High Medium Low Notes to self- Keep market share goals really low! - Beware of a soft/messy PLC - Watch out for inflation because it can break a consumer market business opportunity - And if it sounds too good to be true, it probably is! Busi 2231: Application Case - Susie's Boutique The following case was prepared by Karen Blotnicky as an example of a typical case and a reasonable case analysis. This case is fictitious. Any similarity to a company, existing or obsolete, is purely coincidental. This case may be used for educational purposes provided full credit is given to the author and the website is given as the source. (Copyright: K. Blotnicky, 2020.) Susie's Boutique Introduction Susan Murphy sat back in a comfy wicker chair on her back patio overlooking the river on her property. She had just accepted an early retirement package from a bank where she had worked for the last 35 years. She was happy and enjoying her comfortable country home. But she was also very bored. She was surprised at how quickly retirement became tedious and unexciting. Without having a job to go to she found the days slipped by so quickly and half the time she didn't even know what day of the week it was. It had been fun for the first two months, but then the novelty began to wear off. She worried that she shouldn't have retired at the age of 58. She should have waited until 65 years or older. She knew she had to do something. Susan had dreamed of owning her own store ever since she was ten years old. Her Aunt Sarah owned a women's dress shop and Susan loved to visit the store with her mother. The dresses were lovely and very expensive. The shop was exclusive and located in the city on a street full of unique and high-end retail outlets and restaurants. But when she went to university, Susan decided to pursue do a solid and practical business degree. Accounting was what she decided to do. Her BBA led to an MBA and eventually a highly paid position as a bank executive. She enjoyed her career and never looked back. Her dreams of owning her own shop took a back seat and evaporated sometime between high school graduation and retirement. And now here she sat. Comfortable, but also bored and a little confused about where to go from here. Her early retirement package consisted of one full year of salary and bonuses, totally $225,000. She also had full pension from the bank and her retirement income was guaranteed with her other investments. But she also about $500,000 in cash that she could use to invest in an income opportunity. She had thought of investing it in bank stock, which is typically low risk, but she realized that she could use that to invest in a business opportunity as well. This was an exciting option, but it was also scary because if she invested that money and lost it in a bad business deal, she probably would never earn it back. But she also knew her retirement income was secure so it would not leave her destitute if she lost that investment. After careful consideration, Susan decided to seriously consider her business options. Susan's Aunt Sarah had sold her shop years ago and she now lived in a community of independent seniors. She was surprised to see her niece, Susan, on her doorstep. After catching up on family and friends, Susan finally told her Aunt Sarah why she had surprised her with a visit. Sarah looked very surprised when Susan told her she would like to own her boutique that carried women's clothing and accessories. Expensive ones that could target high end female shoppers who were not price sensitive and willing to pay more for good quality brands. Sarah's response surprised Susan. "Are you sure that is wise?" she asked. "Well, Auntie," Susan responded." I really think I want to have a boutique. Your shop was very successful. I think if I could sort of copy your business approach, it would work out just fine." Her Aunt Sarah smiled. Susan, aren't you forgetting something?" "I don't think so," Susan responded. Her Aunt Sarah frowned slightly. "The market has changed in the last two decades. The high end market has contracted a bit and there is a tremendous amount of competition from across the globe. Online retailers can manufacture and sell from anywhere to everywhere. You need to do your homework!" Susan knew that her elderly aunt was correct. Times change - especially in retail. "You know what you need to do, Susan," Sarah prodded. Susan nodded. "I need to research the market before I can make a decision," she admitted. Sarah nodded. "Good - you should do that. But first, let's have lunch!" Susan's Aunt Sarah was very helpful. She pointed out trade publications and government statistics that provided feedback on the retail women's clothing industry. She also gave her the name of Douglas Hughes, a market researcher and fashion retail expert. Before long, Susan was sending Hughes an email introducing herself with greetings from her Aunt Sarah. Soon after Susan received an email with links to many online resources and the results of a panel survey that Hughes had recently commissioned. She decided it was time to sort through these materials to determine if there were hidden gems market opportunities - for her to pursue. The Research The following exhibits contain excerpts from information that Hughes sent to Susan. She spend hours reading and making notes as she tried to uncover and begin to visualize her opportunities. These exhibits include: A: Retailer Times Industry Survey Forecast for Women's Retail - an industry publication providing an overview of industry growth for the next three years B: Panel Survey Results - Summary tables from the panel survey commissioned by Douglas Hughes related to target market, brand preferences and price sensitivity. C: Susan's hand-written financial analysis from the industry stats and the survey results including growth rates, product life cycle stage, inflationary risk, market share goals, net profit percent, and potential return on investment. The Decision As Susan reviewed her hand-written notes from the industry research and the panel survey, she was both excited and a bit nervous. At least two of the three options seemed to offer business potential. She was aware that she was trying to capture a childhood memory by trying to bring back some semblance of her Aunt Sarah's dress shop. She knew that that was not realistic or reasonable. She needed to find her own niche. And she also knew from her years in banking that just because something looked like a good idea, it didn't mean you had to do it! Maybe she was having cold feet. Should she open the dress shop or not? She also realized that for the first time since her early retirement she felt really excited about what lay ahead. Case Exhibits Exhibit A: Retailer Times Industry Survey Retailer Times Industry Survey Industry Growth Rates & Inflation Industry trends in the clothing sector are relatively strong, particularly for moderately priced fashion. The mid-range price market has a growth rate of 5% year-to-year, but it has been hit with some inflation. The bargain/discount market has experienced little or no growth and this is anticipated to continue. The high-end garment industry experienced growth of 3% annually and it is relatively robust against inflation. Given that inflation is expected to run 1.5% to 2.0% per year this market may be insulated against inflationary trends. This is particularly true in the women's clothing sector. Price sensitivity is expected to affect results in both mid-range and discount segments. All of the markets are competitive, but competition is particularly strong in the bargain price segment. Competition is moderate in the mid-range price segment. The high-end garment market consists of some well established brands with room for growth. Projected Profit/Loss Projected profits are limited in the mid-range price clothing market with net profit estimates of 2.0% of gross sales. Cost of goods sold in the mid-range clothing market ranges from 65% to 82% with an overall industry average of 72%. Projected profits are limited in the bargain/discount price clothing market with net profit estimates of 1.0% of gross sales. Cost of goods sold in the mid-range clothing market ranges from 70% to 80% with an overall industry average of 75%. Projected profits are limited in the high-end clothing market with net profit estimates from 4% of gross sales. Cost of goods sold in the mid-range clothing market ranges from 55% to 65% with an overall industry average of 60%. Exhibit B: Fashion Panel Survey Results - Women's Fashion Breakout Segment Breakouts for Female Clothing Shoppers Bargain/Discount Mid-Range High-End 500 500 500 6 4 1 Survey Sample size: Approximate number in market (millions) Age 45% 40% 0% 0% 0% 15 100% 25% 10% 15% 20% 20% 10% 100% 5% 10% 15% 30% 20% 20% 100% 35% 40% 25% 100% 20% 50% 30% 100% 15% 65% 20% 100% 18 to 25 26 to 35 36 to 45 46 to 55 56 to 65 Over 65 Total Marital Status Single Married/Common Other Total Income Level Under $50,000 $50,000 to under $75,000 $75,000 to under $100,000 $100,000 to under $150,000 $150,000 and Over Total Education Less than Grade 12 High school graduation Some university/college Bachelor's degree Master's or doctorate degree Total Amount spent annually on own clothing Low High Average expenditure Relative price sensitivity Insensitive Somewhat sensitive Very sensitive Total 25% 45% 20% 10% 0% 100% 15% 25% 40% 10% 10% 100% 5% 10% 10% 45% 30% 100% 5% 25% 35% 15% 35% 30% 15% 5% 100% 2% 15% 20% 30% 33% 100% 25% 10% 100% $100 $250 $200 $350 $600 $375 $800 $3,000 $1,200 5% 20% 75% 20% 55% 25% 100% 80% 20% 0% 100% 100% Exhibit C: Susan's Financial Analysis Financial Analysis of the Three Retail Opportunities (Industry-wide Estimates) Bargain/Discount Mid-Range High-End Annual growth rate/year D' 570 370 Market consumers 6,000,000 4,000,000 1,000,000 Gross revenue projection/vear 1 $ 1,200,000,000 $ 1,500,000,000 $ 1,200,000,000 Net profit estimate (7) 170 270 470 Profit Year 1 $ 12,000,000 $ 30,000,000 $ 48,000,000 Gross revenue projection/year 2 $ 1.200,000,000 $ 1,575,000,000 $1,236,000,000 Net profit estimate (7) 27 470 Profit Year 2 $ 12,000,000 $ 31,500,000 $ 49,440,000 Gross revenue projection/year 3 $ 1,200,000,000 $ 1.653,750,000 $1,273,080,000 Net profit estimate (7) 170 270 47 Profit Year 3$ 12,000,000 $ 33,075,000 $ 50,923,200 170 Estimated Net Profit with Market Share Goals for My Own Business Bargain/Discount Mid-Range High-End My potential market share estimate Years 1 to 3 0.27 0.2% 0.276 Net profit estimate year 1 $ 18,000 $ 45,000$ 72,000 Not profit estimate year 2 $ 18,000 47,250 $ 74,160 Net profit estimate year 3 $ 18,000 $ 49,613 76,385 Projected ROI for My Own Business Initial Investment of $500,000 Bargain/Discount Mid-Range High-End RI Year 1 470 970 147 BI V 2 470 970 1570 BOI V er 2 4070 10% 1570 147 to 15% Summary 47 annually 9% to 10% annually annually My Initial Industry Risk Analysis Segment Bargain/Discount Mid-Range High-End Product Life Cycle Mature Mid-Growth Early Growth Inflationary Risk High Medium Low Notes to self- Keep market share goals really low! - Beware of a soft/messy PLC - Watch out for inflation because it can break a consumer market business opportunity - And if it sounds too good to be true, it probably is