Question

NOTHING UNIQUE TO OFFER During the past four months, George Vazquez has been putting together his plan for a new venture. George wants to open a pizzeria near the local university. The area has three pizza enterprises, but George is convinced that demand is sufficient to support a fourth. The major competitor is a large national franchise unit that—in addition to its regular foodservice menu of pizzas, salads, soft drinks, and desserts—offers door-to-door delivery. This delivery service is very popular with the university students and has helped the franchise unit capture approximately 40 percent of the student market. The second competitor is a “pizza wagon” that carries precooked pizzas. The driver circles the university area and sells pizzas on a first-come, first-served basis. The pizza wagon starts the evening with 50 pizzas of all varieties and sizes and usually sells 45 of them at full price. The last 5 are sold for whatever they will bring. It generally takes the wagon all evening to sell the 50 pizzas, but the profit markup is much higher than that obtained from the typical pizza sales at the franchise unit. The other competitor offers only in-house services, but it is well known for the quality of its food. George does not believe that it is possible to offer anything unique. However, he does believe that a combination of door-to-door delivery and high-quality, in-house service can help him win 15 to 20 percent of the local market. “Once the customers begin to realize that ‘pizza is pizza,’” George told his partner, “we’ll begin to get more business. After all, if there is no difference between one pizza place and another, they might just as well eat at our place.” Before finalizing his plans, George would like to bring in one more partner. “You can never have too much initial capital,” he said. “You never know when you’ll have unexpected expenses.” But the individual whom George would like as a partner is reluctant to invest in the venture. “You really don’t have anything unique to offer the market,” he told George. “You’re just another ‘me too’ pizzeria, and you’re not going to survive.” George hopes he will be able to change the potential investor’s mind, but if he is not, George believes he can find someone else. “I have 90 days before I intend to open the business, and that’s more than enough time to line up the third partner and get the venture under way,” he told his wife yesterday.

QUESTION

In addition to the uniqueness feature, what other critical factors is George overlooking? Identify and describe three, and give your recommendations for what to do about them.

Answer 1

Solution

George is overlooking other critical factors :

1.He is overlooking at the amount of capital that one would require to open the store.

2.He thinks that if he provides the service that is the combination of Unique Selling Proposition (USP) of all the remaining three competitors he would be able to capture 15-20 % of the market share.But he failed to realize that to offer this kind of service really demands higher amount of investment than it's competitors.

3.In order to realize proper return on their investments they have to increase the price of the pizza (or) they have to bear huge losses in the initial period till the business picks up.

4.Since George's Pizza shop is just a single outlet,he needs to invest a lot in the beginning to promote & build his brand.

5.Once George starts his business,there is a high probability that the other competitors may reduce their prizes in order to compete against George's Firm,then George's Firm being new will face huge losses due to low customers,higher expenses (as they are offering a combination of USPs)

Suggestion : I would suggest George to NOT FOCUS ON OFFERING all the USPs i.e., Door-to-door delivery,high-quality and in-house service as

(i) It would cost him very high.

(ii) As all the 3 competitors have their respective USP's they are specialized in them and they will flourish accordingly.It will be difficult for George to compete with them if he chooses to offer all those to his customers.

Solution: Option 1 : George can choose a SINGLE USP among the 3 available USP's (preferably In-house / high quality) as his business offering.

Option 2 : If George wants to offer all,he should price the pizza differently according to the different service it is falling under. i.e., Different prize for in-house dining and delivery respectively (with an option to maintain high quality)

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