Knitting Factory Barcelona

Strategic Plan For Knitting Factory Barcelona

This paper sets out a strategic plan for Knitting Factory Barcelona. It reviews Porter’s five forces model; presents a series of statements relating to Knitting Factory’s Barcelona vision, mission, values and objectives; and sets out its proposed strategies and goals.

Five Forces:

1. Threat of Substitute Products-

Opening up a club like Knitting Factory poses a huge threat for substitute products. There is a very high elasticity of demand, meaning as prices go up, consumers will generally find somewhere else to go and there are plenty of places to do that. The buyer switching costs associated with this issue is generally not monetary but more mental. For example lets say our club must raise its drink prices and entry fee. This may cause one of our customers to become disgruntled and want to go somewhere else. However, if our venue is popular enough we will have a huge and loyal crowd so if this customer wants to go someplace else because of the price issue, his switching cost would be the effort of telling all of his friends who frequent our bar to go somewhere else, which may not be easy as price increases effect all consumers differently. Some have higher thresholds for increases than others do. Our company can mitigate these circumstances by distinguishing our product and focusing on a target market, this would be known as product differentiation. By engaging in this we may avoid the loss of customers by price increases because the product we offer is so superior that it would offset any minor price increase we will inevitably have to do. Our distinguished product would be the use of record labels, a comfortable environment that many find familiar, and being that unique sort of club like the Knitting Factory.

2. Threat of New Entrants -

The threat of new entrants in the Barcelona nightlife industry is always a very real threat that we must be aware of. The barriers to entry are very low as many people have the ability to open up their own club or bar. However, access to capital may be difficult as is the planning process and execution of what you want to do. I would suggest our company focus more on differentiation and being different from the current competitors rather than securing a position and worrying about who will enter next. If we can establish strong brand equity like the Knitting Factory and keep innovating and improving than the threat of new entrants should remain low because no one will match our unique brand equity. Of course there will always be new bars and clubs coming to Barcelona but this does not mean that our customers will flock to them. We plan on creating a sort of customer loyalty that would keep our people coming back and have a deep appreciation and nostalgia for our business.

3. Intensity of Competitive Rivalry -

This is one of the biggest challenges of our industry. As you will see in our competitor’s section there are tons. There may not be too many that have record labels, which is to our advantage because that is what we want to build our brand equity on, but there is a countless number of bars and clubs in Barcelona. Right now the industry could be considered saturated or at overcapacity because wherever you look there is a bar or club. As there is such intense competition the barriers to exit may not be too bad. Unless our business is longstanding and we have a large number of employees as well, we will not have a problem closing business and selling because there is a high demand for space to be used.

4. Bargaining Power of Customers -

Buyer power is what dictates Barcelona nightlife. They decide where the hotspots are and what places are good. And of course a large group of people will attract even more people. Buyer switching costs are virtually zero relative to firm switching costs. Buyers have no problem packing it up for the night and saying, “Well this place is no fun let’s try another.” Firms have no choice; they cannot hold buyers there because they are all virtually the same kind of venue. They all serve alcohol, have dancing, etc. We are trying to make our business stand out by being unique so this may bring us some kind of sense of firm bargaining power. If we have a business that offers a product that not many other places offer than the customers will have little options as to where else to go. Buyer price sensitivity also plays into this issue as fluctuations in drink prices may alter their tastes. For example, they may like seeing the unique type of live music at our club but if our drinks are too much money it may not be worth it.

5. Bargaining Power of Suppliers -

It seems as though this depends on the type of alcohol and the given situation. For example if, Estrella Damm sells beer directly to our business then there is a lot of supplier bargaining power. Estrella is the biggest beer distributor in the Barcelona area and their mere size outweighs our small business by a ton. However, if Estrella sells to some kind of middleman and then to our business, the supplier power is less and that is to our advantage. In the case of liquor, it depends on what type we elect to use. If we use top quality vodka like Grey Goose, the supplier will have high bargaining power because we have no other options. Grey Goose is very popular and established vodka that is world re-known. There is also no possibility for backward or forward integration as our company will not be powerful enough to have its own liquor or beer line. This simply would never exist.

Vision

Our vision of Knitting Factory Barcelona in 3-4 year's time is:

Knitting Factory Barcelona will be operating from a 600 sq. meter unit in Barri GÐ"Іtic, Barcelona. It will have an operating profit of € 50,000 and be profitable. It will employ 15 people mainly engaged in A & R, marketing, support and admin and another 20 - 25 people engaged in the Club work. Knitting Factory Barcelona will offer three core products (Live music, Drinks and Event Location) and provide added-value services to a large customer base throughout the music market segments and with the brand equity of Knitting Factory New York and Los Angeles overseas and the online music store as POS, as well as the store-in-store system of our own small record/ merchandise store.

Corporate Strategy/ Mission Statement

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