Dunes Inc.

1- What are key strengths and weaknesses of the partners?

Strengths: no doubt Walden would require some convincing since no facility of this type had
ever before been permitted on campus. With 60,000$ in partnership equity 30,000$ each) and
40,000$ in debt financing available, the partners wanted to ensure that their investment would be
secure and that sufficient profit could be generated to cover the anticipated debt repayment. In
addition, Joffe wondered if the partners would be able to sell the business for a profit once their
education at UWO was complete a few years from now.

Weaknesses: during the mid-1990s, many people touted tanning salons as safe alternatives to
tanning outdoors frequently claiming no burning no drying, and no sun damage, however, as
evidence of damaged mounted, consumers became aware that damage-free tanning indoors or
out was simply not possible. They expected tanning revenues to drop significantly in the summer
season. As the majority of students moved away from campus during the summer months.

2- What are the strength and weaknesses of the business in each of the functional areas?

Strength: London, Ontario, home of the University of Western Ontario (UWO), was particularly
well serviced by a number of salons, though none were located within walking distance of the
university.

Weaknesses: London had a population of 330,000$. The University of Western Ontario was
located at the north end of the city and brought roughly 28,000 students to that area of the city
during the school year.

3- Perform a detailed customer, competitor and market analysis:

Customer: they estimated that about 70 percent of their clients would be woman aged 18 to 22,
and most would be dealing with tight budget constraints. The partners believed that the
remaining 30 percent of their clients would be divided among males on campus, and non-
students clients. Joffe concluded that, of the 28,000 students on campus, only about 30 percent
would be interested in the service. Of this, he knew many already had established tanning
patterns with Dunes competition and he knew that changing consumer behavior would be
difficult. Then, to be conservative, the patterns projected only 25 percent of the relevant target
market would be interested in switching to dunes:

Competitor: food and vitamins

-GNC, pharmacies, running room, department stores, variety stores.

Mediterranean products:

-Crabtree and Evelyn, the body shop, drug and variety stores

Other merchandise:

-other tanning salons, major department stores, drug and variety stores

4- Project a detailed income statement for the fiscal year ending 2000.

As he sat to finalize his presentation with his partner, Joffe reflected on the security of their
combined 60,000$ investment. Would projected profits for fiscal 2000 be enough to cover the 10
percent interest payments on the 40,000$ line of credit and leave enough to reward the partners
financially for their effort and time? Finally, if the partners left the London area upon graduation
in two years, would projected increases of 10 percent per year in profits be enough to entice
potential buyers to take on the business through to the end of the lease?

5- Determine a fair selling price for Dunes Inc. assuming the partners graduate at the end fiscal
2001.

In a effort to encourage first-time customers, the partners planned to initially undercut the
competition’s average tanning price of 7.00$ per 12 minute session. Once a solid client base was
established and because of the salon’s ideal location to the target market, the partners planned to
match competitor’s prices. While all beds would eventually be connected to a central computer
system to ensure correct billing and accurate record keeping, such precise sales data would not
be available until the business was up and established. Considering the survey results and
recognizing that many students would visit Dunes more frequently due to its location, joffe
estimated that a frequency of eight 12-minute visits per client per year could be used in
projecting financial sales figures.
6- As, joffe what would you do and why?

As joff, I will prepare the plan and continue with the business because it’s a small business with
a very professional and new idea, it is targeting students on campus , unique in the region and
with a good cost and affordable prices.