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MARKETING OF INTERIOR DECORATOR AND INFRASTRUCTURE
DEVELOPMENT IN 91-STUDIO INTERIORS PVT.LTD.
INTERNSHIP REPORT
Submitted by
Mr. R.ANAND
Reg. No. 098001135001
in partial fulfillment for the award of the degree
of
MASTER OF BUSINESS ADMINISTRATION
DEPARTMENT OF MANAGEMENT STUDIES
KALAIGNAR KARUNANIDHI INSTITUTE OF TECHNOLOGY
COIMBATORE641 402.
AUGUST 2010
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KALAIGNAR KARUNANIDHI INSTITUTE OF TECHNOLOGY
DEPARTMENT OF MANAGEMENT STUDIES
PROJECT WORK
AUGUST 2010
This is to certify that the project entitled
MARKETING OF INTERIOR DECORATOR AND INFRASTRUCTURE
DEVELOPMENT IN 91-STUDIO INTERIORS PVT.LTD.
is the bonafide record of project work done by
Mr.R.ANAND
Reg.No. 098001135001
of
MASTER OF BUSINESS ADMINISTRATION
2010 - 2011
___________ _______________________
Project Guide Head of the Department
Submitted for the Project Viva-Voce examination held on _________
----------------------------- --------------------------
Internal Examiner 1 Internal Examiner 2
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DECLARATION
I affirm that the project work titled MARKETING OF INTERIOR
DECORATOR AND INFRASTRUCTURE DEVELOPMENT IN 91-STUDIO
INTERIORS PVT.LTD. being submitted in partial fulfillment for the award of
MASTER OF BUSINESSADMINISTRATION in MARKETING &HUMAN
RESOURCE is the original work carried out by me. It has not formed the part of
any other project work submitted for award of any degree or diploma, either in this
or any other University.
R.ANAND
Reg.No. 098001135001
I certify that the declaration made above by the candidate is true
Signature of the Guide,
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ACKNOWLEDGEMENT
The success of any project is the co-operative effort of the people around an
individual. For all efforts, behind this successful project, I am highly intended to the following
personalities without whom this project would ever be completed. I find no words to express my
gratitude towards those who were constantly involved with me throughout development process.
I wish to express my sincere thanks and deep sense of gratitude to
Dr.P.ANBALAGAN, DIRECTOR, KALAIGNAR KARUNANIDHI INSTITUTE OF
TECHNOLOGY for providing the necessary facilities to carry out this project work successfully.
I wish to express my sincere thanks and deep sense of gratitude to
Dr.N.MALMURUGAN, PRINCIPAL, KALAIGNAR KARUNANIDHI INSTITUTE OF
TECHNOLOGY for providing the necessary facilities to carry out this project work successfully.
I am thankful to Prof.P.KRISHNA RAO, Director, Department of Management
Studies, KALAIGNAR KARUNANIDHI INSTITUTE OF TECHNOLOGY and the faculty
members in the department for having helped in this report I am appreciative to my project guide
P.REVATHI giving me good supervision and support during my training period .
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CONTENTS
S.NO
DESCRIPTION
PAGE NO.
1. INTRODUCTION 12. OBJECTIVES OF STUDY 4
3. OVERVIEW OF THE ORGANIZATION
Brief History
Nature of the organization
Business Volume
Product Line
6
7
8
10
17
4. ORGANIZATIONAL STRUCTURE
Main offices
18
28
5. STRUCTURE OF MARKETING DEPARTMENT 29
6. FUNCTION OF MARKETING DEPARTMENT
Marketing strategy
Pricing strategies
32
34
39
7. Success and failure of different products of the
organization in the market along with reasons
Major competitors of the organization
Future prospects of the organization
44
51
58
8. CONCLUSION 63
9. BIBLOGRAPHY 64
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INTERIOR DECORATION
1.INTRODUCTION
Interior decoration is the art of personalizing and transforming interiors to create a beautiful
interior. Interior decoration is used in homes, institutions and commercial spaces as well. To
study interior decoration is quite extensive, requiring many hours of study and hands-on
experience under an expert teacher, there are some basics to help an aspiring professional decide
if this is the right career. These basics will also be helpful to the notice to start in the right
direction for doing personal home interior decoration.
PURPOSE:
Room Use
1. What will the room be used for? Start with the basics in each room you intend to decorate.
Consider what basic furniture will be kept and what will be replaced. Create a room map on
graph paper and cut out furniture pieces, moving them around to find their best location.
Color
2. The interior decorators best friend is the color wheel. There are three terms to determine how
colors affect a room's dcor. First, complementary colors are colors opposite on the color
wheel. The colors will deepen and strengthen each other. Second, triad colors uses three
colors based on a triangle across the color wheel. The colors play off of each other without
matching. Third, analogous colors are three colors next to each other on the color wheel.Monochromatic means hues all within the same color.
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Choosing a Style
3. Furniture you decide to keep in a room when decoration may decide the style of the area. If
you are choosing a new style, there are basic categories with many subcategories. For
example under a country decoration style, there are sub categories of Shaker style, Amish
style, cottage style, shabby chic and English country style. Basic styles include
modern/contemporary, formal, country, traditional and casual.
Line of the Room
4. Choosing the direction of the lines you emphasize in a room sets its mood. Vertical lines are
balancing and formal while horizontal lines are more casual and restful, diagonal lines lead a
person's eye as they come in the room, while curved lines put softness and femininity into the
room.
Texture
5. Texture gives added dimension and interest to a room. Rougher textures work better with
more casual styles, while smoother textures work with formal or modern looks. However,
you should use varying textures within a room without going from one extreme to the other.
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History of Interior Decoration
1. Interior design dates back to ancient times, as people have decorated as long as they have had
houses. The first signs of purposeful interior design were evidenced in the lavishly decorated.
also carefully arranged their rooms based on the function of the room and the time of year. In
the summer they used rooms that took advantage and different rooms in the winter that gave
extra protection from the cold.
2. During the wealthy people became interested in the arts and began to commission artists to
work in their homes. Function, form and decadence were the major themes in the palaces of
the wealthy.
Industrial Revolution
3. The dawn of industry made interior decoration available to the multitudes. Cheaper home
goods and decoration items such as wallpaper, household paint and fabrics caused middle-
income families to be more interested in interior design.
Modern Times
4. Interior decoration today is available to people of every income rate and level of skill.
Decoration shows on television teach people how do decorate on their own and interior
decorators cater to middle income and the rich. Modern decoration styles encompass parts of
all of the previous decoration periods.
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2. OBJECTIVES OF STUDY
Communication, transparency and cultural alignment are some of the key attributes that
need to be well laid out while designing the organization structure. Other areas like talent
retention, and clearly defined goals and vision are also dealt with.
Based on varied interactions with important stakeholders, we map challenges and
constraints across the set-up and analyze its intensity across the system, to be able to come up
with best solutions. We provide suggestion and recommendations for top level restructuring,
improving specific business processes and organizational change.
Our organization design services include:
Understanding objectives of change and the environment in which it will take place
Understanding activities like business processes, interface between the company and vendors,
volume of activities and levels of resources
Advising development of This service helps customers tackle key challenges faced and perceived
by organizations at various levels. The results, post our analysis and study are presented in a
matrix form thereby focusing on the impact on organization.
In totality, a top-down approach is adopted by taking into consideration all challenges that could
be faced and thereby putting forth strategies beforehand to tackle and create a fail proof design.
This robust methodology comprises of the following steps:
Detailed discussion with stakeholders thereby identifying the goals and vision for the project
Identifying key challenges faced and opportunities to be explored
Recognizing key parameters for designing the organization structure
Benchmarking the structure with industry best practices
The concept of interior design is seen all throughout history, and its influence can be
appreciated in many cultures of the world. The idea of interior design allows for creativity to be
expressed in the interior spaces; however, when the idea originated is subject to speculation. We
are told ancient Egyptians unknowingly fostered the birth of this concept by building elaborate
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columns, intricate tombs, and exotic furniture. Perhaps this was the eve of a new day when one
could openly display their ideologies through the concept ofinterior decoration. In these times,
decoration was only seen in the palaces of the wealthy and royal, as many of the artistic elements
used were not cost effective for the working middle class.
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3. OVERVIEW OF THE ORGANIZATION
Company Summary
91-studio Interiors is a start-up business that will offer comprehensive interior design
services for home and office. This business will assist those that want to have guidance and
council in developing a basic design concept of their project, to the person that desires someone
to take it from concept to complete implementation.91-studio Interiors will offer the ability for
clients to purchase new and antique furniture, art work, decorator fabric, and home
accessories. The website www.kitkichaninteriors.com will be used as another way to
communicate the services available and provide a portfolio of the work accomplished. The
business will begin as a home-based business and is expected to remain in this structure through
at least the first three years.
Company Ownership
91-studio Interiors, located in Coimbatore, Tamilnadu is registered in the State of
Tamilnadu as a sole proprietorship owned and operated by Maruchallam Interiors.
Company Locations and Facilities
91-studio Interiors is operated from a home office located in Coimbatore, tamilnadu . A
room is dedicated to support a work area, a client contact work center, and display samples of
design concepts, products, and past work.
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3.1Brief History
91-studio Interiors is a start-up business in the year 1998, company specializing in the
interior design services for home and office. Maruchallam has grown in stature and today
command a strong presence in the industry. Maruchallam is, in fact, the largest selling brand in
India with over 20000 installations and counting.
Year of Establishment : 1998
Nature of Business : Manufacturer, Wholesaler
Major Markets : Indian Subcontinent,
Interior decoration is the art of personalizing and transforming interiors to create a beautiful
interior.. The areas of application include:
Individual residential and apartment buildings
Restaurants and canteens
Guest houses, lodges, hotels and hostels
Hospitals and nursing homes
Pharmaceutical, chemical and fertilizer industries
Textile industry
Food processing industry
Food processing industry
ISI Approved & Certified International Systems - ISO 9001
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3.2Nature of the organization
Interior designers draw upon many disciplines to enhance the function, safety, and
aesthetics of interior spaces. Their main concerns are with how different colors, textures,
furniture, lighting, and space work together to meet the needs of a building's occupants.
Designers plan interior spaces of almost every type of building, including offices, airport
terminals, theaters, shopping malls, restaurants, hotels, schools, hospitals, and private residences.
Good design can boost office productivity, increase sales, attract a more affluent clientele,
provide a more relaxing hospital stay, or increase a building's market value.
Traditionally, most interior designers focused on decorationchoosing a style and color
palette and then selecting appropriate furniture, floor and window coverings, artwork, and
lighting. However, an increasing number of designers are becoming involved in architectural
detailing, such as crown molding and built-in bookshelves, and in planning layouts of buildings
undergoing renovation, including helping to determine the location of windows, stairways,
escalators, and walkways.
Interior designers must be able to read blueprints, understand building and fire codes, and
know how to make space accessible to people who are disabled. Designers frequently collaborate
with architects, electricians, and building contractors to ensure that designs are safe and meet
construction requirements.
Whatever space they are working on, almost all designers follow the same process. Thefirst step, known as programming, is to determine the client's needs and wishes. The designer
usually meets face-to-face with the client to find out how the space will be used and to get an
idea of the client's preferences and budget. For example, the designer might inquire about a
family's cooking habits if the family is remodeling a kitchen or ask about a store or restaurant's
target customer to pick an appropriate motif. The designer also will visit the space to take
inventory of existing furniture and equipment and identify positive attributes of the space and
potential problems.
After collecting this information, the designer formulates a design plan and estimates
costs. Today, designs often are created with the use of computer-aided design (CAD) software,
which provides more detail and easier corrections than sketches made by hand. Upon completing
the design plan, the designer will present it to the client and make revisions based on the client's
input.
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When the design concept is finalized, the designer will begin specifying the materials,
finishes, and furnishings required, such as furniture, lighting, flooring, wall covering, and
artwork. Depending on the complexity of the project, the designer also might submit drawings
for approval by a construction inspector to ensure that the design meets building codes. If a
project requires structural work, the designer works with an architect or engineer for that part of
the project. Most designs also require the hiring of contractors to do technical work, such as
lighting, plumbing, and electrical wiring. Often designers choose contractors and write work
contracts.
Finally, the designer develops a timeline for the project, coordinates contractor work
schedules, and makes sure work is completed on time. The designer oversees the installation of
the design elements, and after the project is complete, the designer, together with the client, pay
follow-up visits to the building site to ensure that the client is satisfied. If the client is not
satisfied, the designer makes corrections.
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3.3Business Volume
If you make your living as an interior designer or decorator the current economy has got to be
hurting your business. When the economy is slow, many people who might otherwise hire an
interior designer or decorator are forced to move such a non-essential service to the bottom of
their priority list. If you havent felt the pinch yet, brace yourself as your business could take a
drastic nose-dive during an economic recession. Nobody really needs interior design services,
especially in have-not times.
Theres also the fact that so many of your days are spent on the business-side of design;
negotiating with contractors, waiting for deliveries to arrive, billing, gathering quotes, and so on.
This is all time that doesnt directly generate revenue for your interior design or decoration
business, and when client billings are already meager, this can really hurt your financial
situation.
Maybe youre one of the many trained interior decorators who have ended up working in retail
for a 100% commission. If the economy gets worse and youre working purely on commission,
where does that leave you? Even in good times, if you work for 100% commission you might as
well be your own boss and have the freedom to market yourself to new clients rather than being
tied to anyone store.
When I decided to take the reigns of my life back and do something that would allow me to
profit from my creativity, I considered a career in interior design. I struggled with that option
countless times across a 20 year period when I was unsatisfied in my work. I researched, and
even interviewed, many interior design schools in my former life but for some reason I never
took the step to enroll. I decided with my BA, MBA and a couple decades of experience in
business, being in a classroom for two to four years with kids 20 years my junior was not
Something I wanted to do.
Never mind tuition costs and the tremendous loss of income while youre a student. Then who
knows how many years of working experience as a designer or decorator would be needed after
graduation to really start earning money. I wanted to unleash my creativity and love for
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decoration, but I definitely needed to start making money as soon as possible. So, I started my
Own home staging company.
As soon as my business was launched, the money was coming in. Within my second year
as a home stager I was making up to 10,000 per month. Compare that to the median annual
salary of 36,150 a year for an Interior Designer according to Salary.com this year. Im very
happy I Trusted my instincts!
If youre an interior designer or decorator and you arent making enough money, consider adding
Home Staging to your service mix or switching to a more profitable career as a Home Stager
altogether.
Here a few ways a home staging business can be more profitable than an interior design
business:
As a home stager you get the opportunity to work with different types of people than you
would as an interior designer. Generally, only very high income individuals hire interior
designers, which limits your target market. Home stagers work mostly with clients in the middle
to upper income level which gives you a much larger percentage of the population to market to,
And increases the number of projects available for you to work on.
Home stagers enjoy a higher volume of projects than interior designers because each one is so
short in nature. One interior design project might take months to complete (especially when you
factor in the wait times to have upholstery done, or furniture delivered), but the average home
staging project takes only a few hours or days. Theres no way I could have decorated hundreds
of homes within a couple of years as a new interior designer, the way I did as a new home stager.
With such quick projects, a home stager is able to complete (and get paid for) a significantly
higher number of projects per year than an interior designer who often has client work on hold
through no fault of their own.
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When the economy is slow, people eliminate the non-essentials. Interior design or decoration
isnt really high on the essential items list especially when choices need to be made about what
to give up, and theres no real deadline to redecorate or renovate a room. In uncertain times,
interior design moves way down on the priority list, while home staging move up. No matter
how slow the economy is or how much the real estate market has declined, there will always be
people who absolutely have to sell and move by a certain date. Divorce, job relocation, job loss,
mounting debts, a death in the family or a birth often get people to put their house on the market
even if it isnt the best time to sell. When a homeowner is desperate to sell their house, a home
stager will often be involved since the seller stands to make a handsome profit from their
services. When people have less time, less money or less equity in their house, they need a home
stager so they can get whatever they can out of the sale of their home! As a home stager, your
creativity and talent for decoration will serve you well in slow economic times and slow real
estate markets.
I especially love the amount of creative freedom I get as a home stager. Because my
clients know Im decoration their home to sell and not for them to live in, I am able to execute
my creative vision without their interference or taking their taste into consideration. I cant
imagine wasting hours sitting with a client who cant decide which color they want for their
bathroom, or which fabric to pick for their drapes. My clients dont care what I choose as long as
their house will sell quicker because of it. Besides that, my home staging business is extremely
profitable which every entrepreneur wants.
If your interior design business isnt doing as well as you hoped, its not too late to make
a change towards living a more creatively fulfilling career that is also more profitable. Do some
research into the home staging field. Its a career that is virtually recession-proof.
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Monthly Operating Expenses
For the first six months, both partners will not take a salary out of the company. After this
period, they will each split a 35% share of the net profits each month.
1. Office Rental 90,000 monthly
2. Telephone 750 monthly
3. Office Equipment 50,000 (for book value only; owner invested)
4. Software 25,000 (for book value only; owner invested)
5. Postage 500
6. Special Tools 26,000 (for book value only; owner invested)
7. Advertising 60,000
8. Company VanGas, Repair and Maintain 5000 monthly
Company VanBoth owners transferred ownership of their vans to the business. Both
are free and clear of any debt and are valued at 1,20,000 & 1,60,000 according to the local
bank book.
We will develop strategic alliances with local builders, realtors and home improvement
firms. This will allow us to have a several lines of revenue into our company.
Here is a breakdown of the revenue sources we will have.
1. Retail Clientswalkin or phone quotes
2. Realtorfor their clients' homes
3. Home Improvement Companies
4. Commercial builders of office and home complexes
5. Home builders associations
6. Furniture stores
7. Paint and wall paper stores
8. Flower shops
9. Architects and developers
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10.We will also develop a weekly advice column in the local newspaper and try to set up a
talktype show on the local cable 10 channels. This channel is free to use as long as the
information provided is key to the public's interest.
Pricing Structure
Fee structures vary widely, depending on the designer, complexity of the project,
geographical location and a host of other factors. Some of the ways interior designer's charges
for their services include:
Fixed fee (or flat fee)The designer identifies a specific sum to cover costs, exclusive of
reimbursement for expenses. One total fee applies to the complete range of services, from
conceptual development through layouts, specifications and final installation.
Hourly feeSome designers charge based on the actual time spent on a project or
specific service, with fees ranging from 550 to 1500 per hour, based on the required
detail and other professionals who may need to be consulted.
Percentage feeCompensation is computed as a percentage of construction/project costs.
Cost plusA designer purchases materials, furnishings and services (e.g., carpentry,
drapery workrooms, picture framing, etc.) at cost and sells to the client at the designer's
cost plus a specified percentage agreed to by the client. The service charge is often put at2030 percent.
RetailOthers charge their clients the retail price of furnishings, furniture and all other
goods they get wholesale, keeping the difference as designer's fee and services. Retail
establishments offering design services commonly use this method. With this method,
clients get the designers services at a price no greater than he or she would have paid for
the products at retail.
Per square footOften used for large commercial properties, the charge is based on the
area of the project.
Our staff designers require a retainer fee before the start of a design project. A retainer is
an amount of money paid by the client to the designer and applied to the balance due at the
termination of the project.
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Income Potential
What is unique about the interior design business is that you never do the same job twice.
It will be hard to place a specific price on individual projects. What you will earn from a job that
requires redecoration of an entire room from the carpet, wallpaper to upholstery will be different
from a job that requires you to put up drapes to ten windows.
According to Industry statistics, on the Design Business, an interior designer earns an
average of 883 per job. If you are working at four jobs per month, you can expect monthly
sales of 40,415 per month. Yearly income for designers can expect to earn about 5,20,980,
for great designers with solid track record, this will be the take home pay of our designer staff,
and our % will be 1.5 times this per designer or 79,470 per year per each staff member.
Our goal is to have 5 designers on staff; this will make our first year gross profit of
397,350 and gross revenue of 662,250.
The goal over time will be to increase the number of clients per designer per month. This
will result in increase revenues. This will happen once we get better known for our services.
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Training, Other Qualifications, and Advancement
The reason we put this in our business plan is to always be reminded of the fact that our
staff and our training will be the key to our success in the designers business. We will continue
to follow the guide we listed below, as well make amendments to it as we require.
Creativity is crucial in all design occupations. People in this field must have a strong
sense of the aesthetican eye for color and detail, a sense of balance and proportion, and an
appreciation for beauty. Sketching ability is helpful for most designers, but it is especially
important for fashion designers. A good portfolioa collection of examples of a person's best
workis often the deciding factor in getting a job. Except for floral design, formal preparation
in design is necessary.
Educational requirements for entrylevel positions vary. Some design occupations,
notably industrial design, require a bachelor's degree. Interior designers normally need a college
education, in part because few clientsespecially commercial clientsare willing to entrust
responsibility for designing living and working space to a designer with no formal credentials.
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3.4 Product Line
Products and Services
91-studio Interiors focuses on providing interior design consulting. This iscomplemented by specially purchased furniture, art pieces, decorator fabric, and accessories for
the home and office. The sales process will begin with interior design consulting services, and
then progress on to offer specially selected components to complement the design theme.
Products available through 91-studio Interiors include:
Furniture available through special purchase arrangements with Thomasville, Drexel
Heritage, and Henredon and local craftsman. A line of drapery hardware called purchased through Dept. of the Interior Decorator Fabrics
in Eugene, Oregon found.
Accessory and art pieces available through wholesale shows.
Hunter Douglas window treatment products including a variety of hard window coverings.
Antiques acquired for specific client needs through an arrangement with a local antique
buyer and through direct purchases through other sources.
Product and Service Description
Our primary points of differentiation offer these qualities:
A unique client experience from a trained and professional interior designer that is qualified
and capable of meeting the needs of discerning clients with high expectations.
Access to a wide and unique selection of new and antique furniture, accessories, and
special-order decorator fabrics.
Personal assistance from a complementary product offering, including hard-covering
window treatment, hardware, and home accessories that fit the look and objectives of each
project.
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4.ORGANIZATIONAL STRUCTURE
Executive Summary
91-studio Interiors is a proposed venture that will offer comprehensive interior design
services for homes and offices in the 91-studio Interiors also will provide access to products to
complement the design consulting services including furniture, both new and antique, decorator
fabric, and home and office accessories. This venture offers the personalized services the target
market desires and can afford in a way that is unique from concept to implementation.
Recent market research indicates a specific and growing need in the area for the interior
design consulting services and products 91-studio Interiors offers the market it will serve. The
market strategy will be based on a cost effective approach to reach this clearly defined target
market. Although the population of Boulder is under 100,000, the market has a significant
quantity of relatively wealthy households that are conscious of the appearance and feel of their
home and offices.
The approach to promote 91-studio Interiors with be through establishing relationships
with key people in the community and then through referral activities once a significant client
base is established. 91-studio Interiors will focus on developing solid and loyal client
relationships offering design solutions based on the client's taste, budget, use, and goals for the
space. The additional selection, accessibility of product, design services, and value-based
pricing will differentiate 91-studio Interiors from the other options in the area.
Total revenues in the first year are projected to exceed 46,000 with a loss. The venture
will show increasing profits in year two and three, with revenues projected to increase to almost
80,000. This interior design business plan outlines the concept and implementation and details
regarding the first three years of this venture.
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Objectives
1. Realize an average of 3,870 of sales each business month for the first year 5,720 for the
second, and 6,600 for the third year.
2. Generate a minimum of 45% of revenues from product sales versus consulting billing.
3. Establish a commercial revenue client base accounting for 10% of total revenues.
Mission
91-studio Interiors is an interior design service for discerning, quality-conscious clients
that seek assistance in their design choices for their primary residences, vacation homes, and
businesses. This experience offers personal attention through the design process and also
provides design resources and products to its clients through special purchases of furniture,
fabric, and accessories. The total experience is provided in a way to inform, inspire, and
assist people through the process of transforming their home or business environment to
become a unique and personalized expression of themselves and add to their enjoyment of that
interior space.
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Keys to Success
The primary keys to success for 91-studio Interiors will be based on the following
factors:
Provide the highest quality interior design consulting experience possible.
Sell specially selected products to these clients to further meet their interior design needs.
Communicate with our client base through the website and personalized communication
techniques.
Retain clients to generate repeat purchases and initiate referrals.
Market Analysis Summary
91-studio Interiors has a defined target market client that will be the basis of building this
business. This client is identical for both the residence and office spaces, but the target market
is identical based on her different roles for each of those spaces.
Effective marketing combined with an optimal product offering is critical to the 91-studio
Interiors' success and future profitability. The owner possesses solid information about
the market and knows a great deal about the common attributes of those that are expected to
be prized and loyal clients. This information will be leveraged to better understand who 91-studio Interiors will serve, their specific needs, and how to better communicate with them.
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Market Segmentation
The profile of the 91-studio Interior client consists of the following geographic,
demographic, psychographic, and behavior factors:
Geographics
The geographic market is the affluent sector within the Boulder, Colorado area with a
population of 94,673. (Based on the 2000 Census data.)
A 20-mile geographic area is in need of the products and services offered and do not intend
to pursue the market at this time.
The total target market population is estimated at 24,000 based on the following
demographics.
Demographics
Female, married and have attended college.
Have children, but they are not necessarily at home.
A combined household annual income greater than 100,000.
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Age range of 35 to 55 years, with a median age of 42.
Owns their home, townhouse and/or condominium valued at over 425,000.
They and/or their spouse work in a professional setting and may have interior design
requirements for their office space as well as their homes.
Belong to one or more business, service, and/or athletic organization including:
o Boulder Country Club.
o Junior League of Boulder.
o American Business Women's Association.
o American Auxiliary of University Women.
o Doctor's Wives Auxiliary.
Competitive Comparison
Our competition is primarily from other interior designers. Looking at a broader picture,
there is also competition from the "do-it-yourself" resource providers that have retail stores and
websites that include the following:
The list of competitors for home accessory competition includes Pier 1 and local
competitors that provide an entire list of other furniture, accessory and gift stores.
Web sales of furniture, fabric and other interior design-oriented products has expandeddramatically and in many cases is easily available.
Psychographics
The appearance of her home is a priority.
Entertaining and showing her home is important.
She perceives herself as creative, tasteful and able, but seeks validation and support
regarding her decoration ideas and choices.
She reads one or more of the following magazines:
o Martha Stewart Living.
o Country Living.
o Home.
o House Beautiful.
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o Country Home.
o Metropolitan Home.
o Traditional Homes.
o Victoria.
o Elle Decor.
If she does seek out television as an information source for home decoration that is most
likely to be "Martha Stewart" and, on a lesser basis, "Interior Motives."
Behaviors
She takes pride in having an active role in decoration their home.
Her home is a form of communicating "who she is" to others.
Comparison positioning and stature within social groups are made on an ongoing basis, but
rarely discussed.
91-studio Interiors is providing its clients the opportunity to create a home environment
to express who they are. They seek design assistance and have the resources to accomplish their
goals. They desire their home to be personal, unique, and tasteful as it communicates a message
about what is important to them. 91-studio Interiors will seek to fulfill the following benefits that
are important to our clients.
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Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Country Club Women 12% 34,400 38,528 43,151 48,329 54,128 12.00%
Boomers in Transition 9% 12,000 13,080 14,257 15,540 16,939 9.00%
Professional
Youngsters8% 8,000 8,640 9,331 10,077 10,883 8.00%
Home Builders 5% 8,000 8,400 8,820 9,261 9,724 5.00%
Other 0% 0 0 0 0 0 0.00%
Total 10.09% 62,400 68,648 75,559 83,207 91,674 10.09%
Target Market Segment Strategy
Our marketing strategy will create awareness, interest, and appeal from our target market
for what 91-studio Interiors offers its clients. The target markets are separated into four
segments; "Country Club Women," "Boomers in Transition," "Professional Youngsters," and
"Home Builders." The primary marketing opportunity is selling to these well defined and
accessible target market segments that focuses on investing discretionary income in these areas:
Country Club Women - The most dominant segment of the four is comprised of women
in the age range of 35 to 50. They are married, have a household income greater than 100,000,
own at least one home or condominium, and are socially active at and away from home. They are
members of the Boulder Country Club, Junior League of Boulder, Boomers in Transition - This
group, typically ranging in age from 50 to 65, is going through a positive and planned life
transition. They are changing homes (either building or moving) or remodeling due to empty
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nest syndrome, retirement plans, general downsizing desires, or to just get closer to the golf
course. Their surprisingly high level of discretionary income is first spent on travel, with
decoration their home a close second. This is what makes this segment so attractive. The
woman of the couple is the decision maker, and often does not always include the husband in the
selection or purchase process.
Professional Youngsters - Couples between the ages of 25 and 35 establishing their first
"adult" household fall into this group. They both work, earn in excess of 80,000 annually, and
now want to invest in their home. They seek to enjoy their home and communicate a
"successful" image and message to their contemporaries. They buy big when they have received
a promotion, a bonus, or an inheritance.
Home Builders - People in the home building process, typically ranging in age from 40 to
55, are prime candidates for 91-studio Interiors. This applies to both primary residences and
vacations and secondary homes.
Market Needs
91-studio Interiors will provide its clients the opportunity to create a home environment
to express who they are. They have the choice to actively participate in the design, look, and feel
of their home. They desire their home to be personal, unique, and tasteful as well as
communicate a message about what is important to them. 91-studio Interiors seek to fulfill the
following benefits that we know are important to our clients.
Service Business Analysis
The industry continues to be competitive with a "commodity" concern with "designers"
of all skill and background levels available throughout the market.
Potential Competitors: There are many other interior designers in the Boulder area and
these competitors range from those that provide simple-focused services, such as draperies
only, to a more full-service interior design approach similar to 91-studio Interiors.
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Power of Suppliers: Moderately high in most anyone that has a business license can have
access to wholesale purchase of furniture, fabrics and accessories.
Power of Buyers: Very low as buyers work within the financial terms and product
availability offered through the suppliers that specify the terms and conditions.
Substitute Products: High as many people refer to themselves as interior designers
regardless of background, training, or certification. Substitute products are also high in the
area of window treatment as hard covering solutions have become available and
increasingly affordable. This includes blinds, shutters, and other "manufactured"
treatments. Substitute products are not as prevalent in the area of antiques and art pieces.
Rivalry: Moderately low with the "territorial" structure that the industry experiences and
moderately low exit barriers. The easy entry is accompanied with an easy exit and people
get out when it is not working.
With the slow, but steady, growth of the past few years, the industry is now experiencing
a "cautious optimism" regarding the future. Growth and expansion activities for most areas of the
interior design industry appear to be carefully considered. Many in the industry continues to
decide what to do and buy as the economy has experienced a slowdown and increased
uncertainty from the more economically confident 2000'n.
Distributing a Service
Our primary method of distribution will be on a direct sales basis for each individual
client.
Competition and Buying Patterns
Competition in the area is strong, with designers ranging from the home-based, no formal
training individuals to the more formalized store front, Association of Interior Designers (ASID)
certified designers that have close relationships with prestigious architects. In most cases, clients
make the provider decision on the basis of three criteria in this order with these percent
influences indicated after each:
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1. Referrals and relationship with other professionals, particularly architects (55%).
2. Personality and "expected relationship" with the designer (25% ).
3. Past work (15%).
4. ASID certification (5%).
Understanding the influence of these factors on the prospective client will be key in the
marketing strategy.
Main Competitors
Current local competition includes the following:
Interior Designers: There are 37 interior designers listed in the Boulder Yellow Pages (Year2000-2001 issue) that offer fabric as a part of their services. Interior designers make profit
off mark-up of fabric in addition to their hourly services charges. Their costs per yard are
typically higher since they do not benefit from retail or volume discounts. Therefore, their
costs to their client is often two to four times higher than the price per yard from 91-studio
Interiors.
House of Fabrics: Nationwide recognition and buying power of numerous types of dated
fabric with strong product availability. This store has experienced financial difficulty in
recent years and has closed several locations throughout the country.
Warehouse Fabrics: Locally owned, offering low-cost products with a wide selection of
discontinued fabrics and only a limited number of "current" fabrics. This warehouse concept
offers marginal client service with what many "upper end" clients consider to be an
"undesirable" shopping environment.
Website Providers: Fabric sales over the Web are limited at this time, and this will be a
source of competition for the future to watch. Currently, there is no measurable impact on
our market through competitive websites.
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4.1 Main offices
Coimbatore-Head Office
Madurai
Salem
Trichy
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5. STRUCTURE OF MARKETING DEPARTMENT
Marketing Management is a business discipline which is focused on the practical
application of marketing techniques and the management of a firm's marketing resources and
activities. Rapidly emerging forces of globalization have compelled firms to market beyond the
borders of their home country making international marketing highly significant and an integral
part of a firm's marketing strategy.
Marketing managers are often responsible for influencing the level, timing, and
composition of customer demand accepted definition of the term. In part, this is because the role
of a marketing manager can vary significantly based on a business' size, corporate culture, and
industry context. For example, in a large consumer products company, the marketing manager
may act as the overall general manager of his or her assigned product to create an effective, cost-
efficient marketing management strategy; firms must possess a detailed, objective understanding
of their own business and the market in which they operate. In analyzing these issues, the
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discipline of marketing management often overlaps with the related discipline of strategic
planning.
Structure
Traditionally, marketing analysis was structured into three areas: customer analysis,
company analysis, and Competitor analysis (so-called "3Cs" analysis). More recently, it has
become fashionable in some marketing circles to divide these further into certain five "Cs":
Customer analysis, Company analysis, Collaborator analysis, Competitor analysis, and analysis
of the industry Context.
In economics, market structure (also known as the number of firms producing identical
products.)
Monopolistic competition, also called competitive market, where there are a small
number of dependent firms which each have a very large proportion of the market share
and products from different companies are different.
Oligopoly, in which a market is dominated by a large number of firms which own more
than 40% of the market share.
Oligopoly, a market, where many sellers can be present but meet only a few buyers.
Monopoly, where there is only one provider of a product or service.
Natural monopoly, a monopoly in which economies of scale cause efficiency to increase
continuously with the size of the firm. A firm is a natural monopoly if it is able to serve
the entire market demand at a lower cost than any combination of two or more smaller,
more specialized firms.
Monophony, when there is only one buyer in a market.
Department analysis is to develop a schematic diagram for market segmentation,
breaking down the market into various constituent groups of customers, which are called
customer segments or market segmentations. Marketing managers work to develop detailed
profiles of each segment, focusing on any number of variables that may differ among the
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segments: demographic, psychographic, geographic, behavioral, needs-benefit, and other factors
may all be examined. Marketers also attempt to track these segments' perceptions of the various
products in the market using tools such as perceptual mapping.
In company analysis, marketers focus on understanding the company's cost structure and
cost position relative to competitors, as well as working to identify a firm's core competencies
and other competitively distinct company resources. Marketing managers may also work with
the accounting department to analyze the profits the firm is generating from various product lines
and customer accounts. The company may also conduct periodic brand audits to assess the
strength of its brands and sources of brand equity.
The firm's collaborators may also be profiled, which may include various suppliers,
distributors and other channel partners, joint venture partners, and others. An analysis of
complementary products may also be performed if such products exist.
Marketing management employs various tools from economics and competitive strategy
to analyze the industry context in which the firm operates.
These include Porters five forces, analysis of strategic groups of competitors, value chain
analysis and others. Depending on the industry, the regulatory context may also be important to
examine in detail.
In Competitor analysis, marketers build detailed profiles of each competitor in the
market, focusing especially on their relative competitive strengths and weaknesses using SWOT
analysis. Marketing managers will examine each competitor's cost structure, sources of profits,
resources and competencies, competitive positioning and product differentiation, degree of
vertical integration, historical responses to industry developments, and other factors.
Marketing management often finds it necessary to invest in research to collect the data
required to perform accurate marketing analysis.
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6. FUNCTION OF MARKETING DEPARTMENT
Marketing is defined as the process of determining the needs and wants of Consumers
and being able to deliver products that satisfy those needs and wants. Marketing includes all of
the activities necessary to move a product from the producer to the consumer. Think of
marketing as a bridge from the producer to the consumer
Marketing starts with market research, a learning process in which marketers get to know
everything they can about the needs and wants of consumers, and it ends when somebody buys
something. Many companies feel that services provided to customers after the purchase also are
an important part of marketing. All of these enterprises -- production, advertising, transportation,
processing, packaging, and selling -- are included in the marketing process.
THE NINE FUNCTIONS OF MARKETING
In order for the marketing bridge to work correctly -- providing consumers with
opportunities to purchase the products and services they need -- the marketing process must
accomplish nine important functions.
The functions are:
Buying - people have the opportunity to buy products that they want.
Selling - producers function within a free market to sell products to consumers.
Financing - banks and other financial institutions provide money for the production
and marketing of products.
Storage - products must be stored and protect end until they are needed. This function
is especially important for perishable products such as fruits and vegetables.
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Transportation -products must be physically relocated to the locations where Consumers can
buy them. This is a very important function. Transportation includes rail road, ship, airplane,
truck, and telecommunications for non-tangible products such as market information.
Processing - processing involves turning a raw product, like wheat; into something the consumer
can use
Risk-Taking - insurance companies provide coverage to protect producers and marketers from
loss due to fire, theft, or natural disasters.
Market Information - information from around the world about market conditions,
weather, price movements, and political changes, can affect the marketing process. Market
information is provided by all forms of telecommunication, such as television, the internet, and
phone.
Grading and Standardizing - Many products are graded in order to conform to
Previously determined standards of quality
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6.1 Marketing strategy
Marketing Strategy
Our marketing strategy is based on becoming the resource of choice for people lookingfor decorator fabrics, do-it-yourself, and buy-it-yourself resources to create a look in their home.
Our marketing strategy is based on superior performance in the following areas:
Product selection.
Product quality.
Customer service.
Our marketing strategy will create awareness, interest, and appeal from our target marketfor what Interior Views offers our customers.
Mission
Interior Views LLC is a store for discerning, quality-conscious buyers of decorator
fabrics and complementary home accessories and furniture. The store celebrates the home
through the color and texture of fabric. The experience informs, inspires, and shows people how
to transform their home into a unique and personalized expression of themselves. Interior Views
seeks to encourage people to imagine what can be, and help make their vision a reality.
Marketing Objectives
1. Maintain a gross margin of 45% each month.
2. Generate an average of 1,000 of sales each business day each month.
3. Experience a 5,000 increase in quarterly sales with each newsletter.
4. Realize an annual growth rate of approximately 25% in the year 2000.
Financial Objectives
1. A growth rate in sales of 12% for the year 2000, to total in excess of 341,200 in total
revenues.
2. An average sales per business day (305 days per year) in excess of 1,000.
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3. Reduce the existing credit line by a minimum of 26,400.
Target Markets
The target markets are separated into four segments; "Country Club Women," "Boomersin Transition," "Professional Youngsters" and "Home Builders." The primary marketing
opportunity is selling to these well defined and accessible target market segments that focuses on
investing discretionary income in these areas:
Home Builders -- People in the building process, typically ranging in age from 40 to 60, are
prime candidates for Interior Views.
Positioning
For the person creating a personalized and unique impression of her home, Interior Views
is the best local source for selection and price points of the fabric, customer-oriented design
services, and a variety of other home accessory and furniture products. Customers will be
impressed with, and return for, the great in-stock selection, value-oriented pricing, and excellent
customer service. Unlike Joanns, Warehouse Fabric, or catalogs, Interior Views is a pleasant
and tasteful resource that encourages everyone in the process of decoration their home. Unlike
employing an interior decorator, Interior Views allows the individual to participate in their
design choices to the extent they choose, and realize greater value for the dollars they invest.
Strategies
The single objective is to position Interior Views as the premier source for home
decorator fabrics in the Greater Boise area, commanding a majority of the market share within
three years. The marketing strategy will seek to first create customer awareness regarding the
products and services offered, develop that customer base, establish connections with targeted
markets and work toward building customer loyalty and referrals.
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Interior Views' four main marketing strategies are:
1. Incr eased awareness and image.
2. Leveraging existing customer base.
3.
Cross selling.
4. New home construction promotion.
Strategy
INCREASED AWARENESS and IMAGE - Informing those not yet aware of what Interior
Views offers.
Strategy
LEVERAGING EXISTING CUSTOMER BASE - Our best sales in the future will come from
our current customer base.
Strategy
CROSS SELLING - Increasing the average dollar amount per transaction.
Strategy
NEW HOME CONSTRUCTION PROMOTION - Connecting with people involved in the
building process.
Marketing Mix
In brief, our marketing mix is comprised of these approaches to pricing, distribution,
advertising and promotion, and customer service.
Pricing -- A keystone pricing formula plus 3.00 will be applied for most fabrics. The goal is to
have price points within 5% of the list price of Calico Corners' retail prices. This insurescompetitive pricing and strong margins.
Distribution -- All product is distributed through the retail store. The store does receive phone
orders from established customers and we will be developing a website.
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Customer Service -- Excellent, personalized, fun, one-of-a-kind customer service is essential.
This is perhaps the only attribute that cannot be duplicated by any competitor.
Product Marketing
Our products enable our customers to experience support, gather ideas and options, and
accomplish their decoration goals. They will be able to create a look that is truly unique to their
home. They will not be able to do this in the same way through any other resource.
Price
Product pricing is based on offering high value to our customers compared to most price
points in the market. Value is determined based on the best quality available, convenience, andtimeliness in acquiring the product. We will consistently be below the price points offered
through interior designers and consistently above prices offered through the warehouse/seconds
retail stores, but we will offer better quality and selection.
Promotion
The most successful advertising and promotion has been through the following:
Newspaper Advertisements - Boise Herald.
Television Advertisements - "Martha Stewart" and "Interior Motives" television shows.
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Quarterly Newsletter and Postcard - A direct mail, 4-page newsletter distributed to the
customer mailing list generated from people completing the "register" sign up in the
store. The mailing list now totals more than 4,300 people.
In Store Classes - "How to" classes, most of which are free, have been successful
because of the traffic and sales they generate after the class. Typically 90 minutes in
length and most held on Saturday, these are the most popular classes:
o "Pillow Talk" - Pillow fabrication.
o "Speaking of Slip Covers" - Slip cover presentation and discussion.
o "Shades of the Season" - Window treatment options with fabric.
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6.2Pricing strategies
Competition-based pricing
Setting the price based upon prices of the similar competitor products.
Competitive pricing is based on three types of competitive product:
Products have lasting distinctiveness from competitor's product. Here we can assume
o The product has low price elasticity.
o The product has low cross elasticity.
o The demand of the product will rise.
Products have perishable distinctiveness from competitor's product, assuming the product
features are medium distinctiveness.
Products have little distinctiveness from competitor's product. assuming that:
o The product has high price elasticity.
o The product has some cross elasticity.
o No expectation that demand of the product will rise.
Cost-plus pricing
Cost-plus pricing is the simplest pricing method. The firm calculates the cost of
producing the product and adds on a percentage (profit) to that price to give the selling price.
This method although simple has two flaws; it takes no account of demand and there is no way
of determining if potential customers will purchase the product at the calculated price.
This appears in 2 forms, Full cost pricing which takes into consideration both variable
and fixed costs and adds a % markup. The other is Direct cost pricing which is variable costs
plus a % markup, the latter is only used in periods of high competition as this method usually
leads to a loss in the long run.
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Limit pricing
A limit price is the price set by a monopolist to discourage economic entry into a market,
and is illegal in many countries. The limit price is the price that the entrant would face upon
entering as long as the incumbent firm did not decrease output. The limit price is often lower
than the average cost of production or just low enough to make entering not profitable. The
quantity produced by the incumbent firm to act as a deterrent to entry is usually larger than
would be optimal for a monopolist, but might still produce higher economic profits than would
be earned under perfect competition. The problem with limit pricing as strategic behavior is that
once the entrant has entered the market, the quantity used as a threat to deter entry is no longer
the incumbent firm's best response. This means that for limit pricing to be an effective deterrent
to entry, the threat must in some way be made credible. A way to achieve this is for theincumbent firm to constrain itself to produce a certain quantity whether entry occurs or not. An
example of this would be if the firm signed a union contract to employ a certain (high) level of
labor for a long period of time.
Market-oriented pricing
Setting a price based upon analysis and research compiled from the targeted market.
Penetration pricing
The price is deliberately set at low level to gain customer's interest and establishing a
foot-hold in the market.
Price discrimination
Setting a different price for the same product in different segments to the market. For
example, this can be for different ages or for different opening times, such as cinema tickets.
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Premium pricing
Premium pricing is the practice of keeping the price of a product or service artificially
high in order to encourage favorable perceptions among buyers, based solely on the price. The
practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that
expensive items enjoy an exceptional reputation or represent exceptional quality and distinction.
Predatory pricing
Aggressive pricing intended to drive out competitors from a market. It is illegal in some
places.
Contribution margin-based pricing
Contribution margin-based pricing maximizes the profit derived from an individual
product, based on the difference between the product's price and variable costs (the product's
contribution margin per unit), and on ones assumptions regarding the relationship between the
products price and the number of units that can be sold at that price. The product's contribution
to total firm profit (i.e., to operating income) is maximized when a price is chosen that
maximizes the following: (contribution margin per unit)X(number of units sold).
Psychological pricing
Pricing designed to have a positive psychological impact. For example, selling a product
at 3.95 or 3.99, rather than 4.
Dynamic pricing
A flexible pricing mechanism made possible by advances in information technology, and
employed mostly by Internet based companies. By responding to market fluctuations or large
amounts of data gathered from customers - ranging from where they live to what they buy to
how much they have spent on past purchases - dynamic pricing allows online companies to
adjust the prices of identical goods to correspond to a customers willingness to pay. The airline
industry is often cited as a dynamic pricing success story. In fact, it employs the technique so
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artfully that most of the passengers on any given airplane have paid different ticket prices for the
same flight.
Price leadership
An observation made of oligopic business behavior in which one company, usually the
dominant competitor among several, leads the way in determining prices, the others soon
following.
Target pricing
Pricing method whereby the selling price of a product is calculated to produce a
particular rate of return on investment for a specific volume of production. The target pricingmethod is used most often by public utilities, like electric and gas companies, and companies
whose capital investment is high, like automobile manufacturers.
Target pricing is not useful for companies whose capital investment is low because,
according to this formula, the selling price will be understated. Also the target pricing method is
not keyed to the demand for the product, and if the entire volume is not sold, a company might
sustain an overall budgetary loss on the product.
Absorption pricing
Method of pricing in which all costs are recovered. The price of the product includes the
variable cost of each item plus a proportionate amount of the fixed costs. A form of cost plus
pricing
High-low pricing
Method of pricing for and organization where the goods or services offered by the
organization are regularly priced high in market comparison, but through promotions,
advertisements, and or coupons, lower prices are offered. The lower promotional prices are
targeted to bring customers to the organization where the customer is offered the promotional
product as well as the regular higher priced products.
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Marginal-cost pricing
In business, the practice of setting the price of a product to equal the extra cost of
producing an extra unit of output. By this policy, a producer charges, for each product unit sold,
only the addition to total cost resulting from materials and direct labor. Businesses often set
prices close to marginal cost during periods of poor sales. If, for example, an item has a marginal
cost of 1.00 and a normal selling price is 2.00, the firm selling the item might wish to lower
the price to 1.10 if demand has waned. The business would choose this approach because the
incremental profit of 10 cents from the transaction is better than no sale at all
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7.Success and failure of different products of the organization in the market
along with reasons
Innovation is a change in the thought process for doing something or "new stuff that is
made useful". It may refer to an incremental emergent or radical and revolutionary changes inthinking, products, processes, or organizations. Following Schumpeter (1998), contributors to the
scholarly literature on innovation typically distinguish between invention, an idea made
manifest, and innovation, ideas applied successfully in practice.In economics the change must
increase value, customer value, or producer value. The goal of innovation is positive change, to
make someone or something better. Innovation leading to increased productivity is the
fundamental source of increasing wealth in an economy.
Innovation is an important topic in the study of economics,business, entrepreneurship,
design, technology, sociology, and engineering. Colloquially, the word "innovation" is often
synonymous with the output of the process. However, economists tend to focus on the process
itself, from the origination of an idea to its transformation into something useful, to its
implementation; and on the system within which the process of innovation unfolds. Since
innovation is also considered a major driver of the economy, especially when it leads to new
product categories or increasing productivity, the factors that lead to innovation are also
considered to be critical to policy makers. In particular, followers ofinnovation economics stress
using public policy to spur innovation and growth.
Those who are directly responsible for application of the innovation are often called
pioneers in their field, whether they are individuals or organizations.
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Introduction
Theneutrality of this section is disputed. Please see the discussion on the talk page.
Please do not remove this message until the dispute is resolved. (May 2008)
In the organizational context, innovation may be linked to performance and growth
through improvements in efficiency, productivity, quality, competitive positioning, market share,
etc. All organizations can innovate, including for example hospitals, universities, and local
governments.
While innovation typically adds value, innovation may also have a negative or
destructive effect as new developments clear away or change old organizational forms and
practices. Organizations that do not innovate effectively may be destroyed by those that do.
Hence innovation typically involves risk. A key challenge in innovation is maintaining a balance
between process and product innovations where process innovations tend to involve a business
model which may develop shareholder satisfaction through improved efficiencies while product
innovations develop customer support however at the risk of costly R&D that can erode
shareholder return. Innovation can be described as the result of some amount of time and effort
into researching an idea, plus some larger amount of time and effort into developing this idea,
plus some very large amount of time and effort into commercializing this idea into a market
place with customers.
Innovation has been studied in a variety of contexts, including in relation to technology,
commerce, social systems, economic development, and policy construction. There are, therefore,
naturally a wide range of approaches to conceptualizing innovation in the scholarly literature.
Distinguishing from invention
Invention is the embodiment of something new. While both invention and innovation
have "uniqueness" implications, innovation also carries an undertone of profitability and market
performance expectation.
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An improvement on an existing form or embodiment, composition or processes might be an
invention, an innovation, both or neither if it is not substantial enough. According to certain
business literature , an idea, a change or an improvement is only an innovation when it is put to
use and effectively causes a social or commercial reorganization.
In business, innovation can be easily distinguished from invention. Invention is the conversion of
cash into ideas. Innovation is the conversion of ideas into cash. This is best described by
comparing Thomas Edison with Nikola Tesla. Thomas Edison was an innovator because he
made money from his ideas. Nikola Tesla was an inventor. Tesla spent money to create his
inventions but was unable to monetize them. Innovators produce, market and profit from their
innovations. Inventors may or may not profit from their work.
In organizations
A convenient definition of innovation from an organizational perspective is given by Lucke and
Katz (2003), who wrote:
"Innovation . . . is generally understood as the successful introduction of a new thing or method .
. . Innovation is the embodiment, combination, or synthesis of knowledge in original, relevant,
valued new products, processes, or services.
A content analysis on the term "innovation" carried out by Baregheh et al. (2009) within the
organizational context, defines innovation as:
"Innovation is the multi-stage process whereby organizations transform ideas into new/improved
products, service or processes, in order to advance, compete and differentiate themselves
successfully in their marketplace.
Innovation typically involves creativity, but is not identical to it: innovation involves acting on
the creative ideas to make some specific and tangible difference in the domain in which the
innovation occurs. For example, Amabile et al. (1996) propose:
"All innovation begins with creative ideas . . . We define innovation as the successful
implementation of creative ideas within an organization. In this view, creativity by individuals
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and teams is a starting point for innovation; the first is necessary but not sufficient condition for
the second".
For innovation to occur, something more than the generation of a creative idea or insight is
required: the insight must be put into action to make a genuine difference, resulting for example
in new or altered business processes within the organization, or changes in the products and
services provided.
"Innovation, like many business functions, is a management process that requires specific tools,
rules, and discipline."
From this point of view emphasis is moved from the introduction of specific novel and useful
ideas to the general organizational processes and procedures for generating, considering, and
acting on such insights leading to significant organizational improvements in terms of improved
or new business products, services, or internal processes.
Through these varieties of viewpoints, creativity is typically seen as the basis for innovation, and
innovation as the successful implementation of creative ideas within an organization.
It should be noted, however, that the term 'innovation' is used by many authors rather
interchangeably with the term 'creativity' when discussing individual and organizational creative
activity.
Economic conceptions
Joseph Schumpeter defined economic innovation in "Theorie der Wirtschaftlichen Entwicklung"
(1912). (The Theory of Economic Development, 1934, Harvard University Press, Boston.)
1.
The introduction of a new good that is one with which consumers are not yet familiaror of a new quality of a good.
2. The introduction of a new method of production, which need by no means be founded
upon a discovery scientifically new, and can also exist in a new way of handling a
commodity commercially.
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3. The opening of a new market, that is a market into which the particular branch of
manufacture of the country in question has not previously entered, whether or not this
market has existed before.
4. The conquest of a new source of supply of raw materials or half-manufactured goods,
again irrespective of whether this source already exists or whether it has first to be
created.
5. The carrying out of the new organization of any industry, like the creation of a monopoly
position (for example through trustification) or the breaking up of a monopoly position
Schumpeter's focus on innovation is reflected in Neo-Schumpeterian economics, developed by
such scholars as Christopher Freeman and Giovanni Dosi.
Innovation is also studied by economists in a variety of other contexts, for example in theories of
entrepreneurship or in Paul Romer's New Growth Theory. In network theory, innovation can be
seen as "a new element introduced in the network which changes, even if momentarily, the costs
of transactions between at least two actors, elements or nodes, in the network".
Market outcome
Market outcome from innovation can be studied from different lenses. The industrial
organizational approach of market characterization according to the degree of competitive
pressure and the consequent modelling of firm behavior often using sophisticated game theoretic
tools, while permitting mathematical modelling, has shifted the ground away from the usual
understanding of markets. The earlier visual framework in economics, of market demand and
supply along price and quantity dimensions, has given way to powerful mathematical models
which though intellectually satisfying has led policy makers and managers groping for more
intuitive and less theoretical analyses to which they can relate to at a practical level.
In the management (strategy) From an academic point of view, there is often a divorce between
industrial organisation theory and strategic management models. While many economists view
management models as being too simplistic, strategic management consultants perceive
academic economists as being too theoretical, and the analytical tools that they devise as too
complex for managers to understand.
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Innovation literature while rich in typologies and descriptions of innovation dynamics is mostly
technology focused. Most research on innovation has been devoted to the process (technological)
of innovation, or has otherwise taken a how to (innovate) approach.
Goals
This section does not cite any references or sources. Please help improve this article by
adding citations to reliable sources. Unsourced material may be challenged and removed.(May
2010) Programs of organizational innovation are typically tightly linked to organizational goals
and objectives, to the business plan, and to market competitive positioning. One driver for
innovation programs in corporations is to achieve growth objectives. As Davila et al. (2006)
note,
"Companies cannot grow through cost reduction and reengineering alone... Innovation isthe key element in providing aggressive top-line growth, and for increasing bottom-line
results"
In general, business organisations spend a significant amount of their turnover on
innovation, such as making changes to their established products, processes and services. The
amount of investment can vary from as low as a half a percent of turnover for organisations with
a low rate of change to anything over twenty percent of turnover for organisations with a high
rate of change.
The average in