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.

QUESTIONS

1.      Is there any truth to the potential investor’s comment? Is the lack of uniqueness going to hurt George’s chances of success? Explain.

2.      If George were going to make his business venture unique, what steps might he take? Be complete in your answer.

3.      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

1. Yes, the investor is right. George is not offering any special service to the students which will thus not make them attracted towards his pizzas. In a time when markets are facing cut throat competition, lack of uniqueness will kill chances of survival for George.

2. He can offer discounted prices, early bird offers, monthly plans and coupons and other schemes and offers along with introducing different types of pizzas.

3. George is overlooking three following factors:

(A) Limited demand since there are already three competitors

(B) Opportunity cost of investment

(C) Direct costs of investment and other license costs