Final Paper Jamar Perry MGT 450/ Deborah Lomas Feb 11, 2013

The hookah pipe dates back centuries to the Indian and Arabic regions of the world and is used as a social tool in most parts for people to get together at the end of a long day and relax, its popularity is growing in certain areas of the united states and has the potential to become a profitable business. With the proper strategy plan and research establishing a hookah lounge is one the easiest ways to make a profit with less effort than the typical restaurant or bar. Because this type of business is less common in the states there is significantly less competition to go up against, the main goal would be to establish a strong customer base so that when other hookah lounges eventually try to establish they are not as successful as your business. A great strategy would be to own a percentage of share in each establishing lounge. The book states “Involves buying another company to take full control of it (anywhere from a majority 51% stake to an outright 100% ownership). “(Abraham, 2012) Often using this strategy ensures your original business concept grows and has little chance to be pushed out of business due to competition, there can be huge benefits by working together the resources are cheaper because both parties pay an amount of the cost. One of the most important things that must be understood about establishing a business is that in order to maintain you must be able to make changes at the right time in order to continue to be successful in what you do. Having as many alternative options as possible can be the difference between being bankrupt or making it big, This is widely called a contingency plan, in the book it states “Murphy's Law states, "If anything can go wrong, it will." An extension of this is that it always seems to happen at the worst possible time. It is a good idea to contemplate what could go potentially wrong in the future, which is termed a trigger, and what the company would do differently were that to happen, referred to as a contingency.” (Abraham, 2012). What can be expected is a possible change in the economy, meaning if the region the hookah lounge is in becomes more likely to save money rather than go out to socialize this could be a real problem for the business. This would be a great time to resort to an emergent strategy, in my case I would most likely need to look for alternative prices and activities to incorporate with smoking hookah and spending money. I would try to have specialty nights like “karaoke night” or “ladies night” and possibly “ alumni night” if I was located near a college area. Having specific events could attract many different types of customers and depending on the quality service and pleasure gotten from their time in my establishment word of mouth could bring more business.

When conducting my SWOT analysis for the hookah lounge I found the following interesting in each of the categories and attempted to resolve any of the issues I found, also I wanted to compare what I have found to a hookah lounge that I have been to on the East Coast of the United States. We will call my store “Store 1” and the actual store visited “Store 2”.

STORE 1 -STRENGHTS:
The best location for the hookah lounge is going to be near a college because it is a social establishment similar to a coffee shop when students can talk with other students about classes and relax. The strategy is convenience because most students are taking multiple classes so if the hookah lounge is within walking distance they are more likely to frequent the hookah lounge more than once if only just to buy a snack or coffee. In time the hookah lounge would gain popularity becoming the “hang out “ area for the students, possibly the venue for hosting many organized gatherings. Having special incentives for frequent customers would not be difficult because the price of the product is not expensive in itself and often over priced in America in general. Because my target customer base would be college students, who are for the majority computer savvy it would be appropriate to have a legitimate web site the students could access and even update for events. In that way marketing your business would cost next to nothing due to the Internet.

-WEAKNESSES: One of the two major flaws I have come across in doing research is because the college area there may be organizations who are against the use of tobacco and would possibly encourage other students of the unhealthy habits and benefits to alternative activities, this could take profit and customer loyalty down if effective. The other issue is some states have a ban on tobacco use in establishments, this means even if the hookah lounge is based on smoking it is still not allowed to be used to smoke inside, customers would then have to smoke out side where there is a potential to be less comfortable depending on the weather. Particularly in the East coast where there are basically 4 major seasons, if customers were only allowed out side to smoke the only time of year suited for the activity would be spring and fall. The other seasons would drastically affect cost. Making sure the location of the hookah lounge does not violate that law. As of January 2, 2010, restaurants and bars in North Carolina and many lodging establishments were required to be smoke-free, thanks to S.L 2009-27 (G. S. 130A-496), otherwise known as North Carolina’s Smoke-Free Restaurants and Bars Law.

-OPPORTUINITIES:
The hookah lounge is relatively easy to manage, and more than likely an ideal job for a college student because the hours can vary and it is not stressful or demanding. College students often need money to pay for books and class fees so they are willing to work in a low-key establishment often for the minimum wage. There will always be a student in the area looking for a job due to the “come and go” atmosphere of college, so you never have to worry about making raises for employees that stay for years because it is most likely they are not there for long.

-THREATS:
Although the hookah industry is gaining popularity there will always be a potential of “the next big thing” to come along and take the interest away. College students are very easily influenced so all it would take is a strong encouragement movement that is against tobacco to change enough students’ minds. Even other bars or nightclubs in the area could take away business for the establishment.

STORE 2

-STRENGTHS:
This particular hookah lounge is located in the city away from colleges and other hookah lounges, the customers it attracts are the young business professionals getting off of work or gathering with co workers to discuss future business plans. The difference between this establishment and the hookah lounges located near colleges is the customers are willing to pay more for quality because they make enough money to have that luxury. The hookah lounge in the city is used as a social took to make more money not to simply socialize and study for exams. The sale of alcohol is more prominent in the city establishment due to the adult clientele. The location of the hookah lounge in the city is blocks away from all major businesses in the city so the customers do not need to re park their cars in order to reach the location.

-WEAKNESSES:
The current employees in the city establishment are willing to work for less pay because their knowledge of the hookah culture is not up to standard. Hookah lounge employees should be very knowledgeable about all aspects of the establishment from the menu to the techniques of adjusting the hookah pipe. Because the hookah lounge is located in the city it will be significantly more expensive to pay the rent, all process of everything being sold there could be more expensive as a result, the only customers willing to pay for that would be the business individuals who are well paid.

-OPPORTUINITIES:
There is a winery in a near by building that sells a very popular brand of wine, the hookah lounge could capitalize on this by getting the wine for a lot less or even expanding businesses together with the winery because the combination of wine and hookah are complementary, there would be two establishments. Being very close to other small businesses means they could all help to promote each other’s products. The business customers that come to discuss business in the hookah lounges could introduce potential customers who are interested in exporting creating the opportunity to establish another hookah lounge in another city or area.

-THREATS:

Small businesses in the downtown atmosphere often get bought out or fail to change with the businesses around it. There is a potential that the location desired one year by the hookah lounge could be a key area and be a ghost town the next year. Another hookah lounge could establish in the city in a closer location taking away customers so they would have to lower the price in order to keep up with he other hookah lounge.

Once my hookah lounge has been established I would have to record all yearly profits and events of interest to see how I can capitalize on those changes in the next years. Being able to spot changes in developments of the area would help to understand if and when there would be a good time to sell the business or continue to make a profit. At least once a month I would have a meeting with all employees and managers to discuss any issues or input for improvement, finding out what would make the job more satisfying the my employees is important because even if they are being paid less they are more likely to stick around as long as possible if they are satisfied and feel apart of the team. I would hand out surveys to customers in order to get their opinion on what it takes to better serve the needs of the customer or to identify any of my employees that are not up to standard in serving or knowledge in the hookah lounge. There would be a lot of research involved in making the right connections as far as importing products to ensure my hookah lounge is selling the highest quality products for the best price. I would take the time to go over the goals of the business so that each employee understands what the vision and mission is in establishing the business. I would encourage ideas such as guerrilla marketing,” which is defined as “an unconventional way of performing marketing activities on a very low budget.”” Guerrilla marketing is quite different from traditional marketing efforts. Guerrilla marketing means going after the conventional goals of profits, sales and growth but doing it by using unconventional means, such as expanding offerings during gloomy economic days to inspire customers to increase the size of each purchase. Instead of asking that you invest money, guerrilla marketing suggests you invest time, energy, imagination and knowledge instead. It puts profits, not sales, as the main yardstick.”(Entrepreneur media, 2013) In order to market the business in the lowest cost; this would enable the hookah lounge to maintain low prices on the product. I would make it a point to also find out the price of every competitor and maintain a guarantee that we will have the lowest prices with the highest quality service possible to keep customer loyalty.

Reference:

Abraham, S. C. (2012). Strategic Management for Organizations. San Diego, CA: Bridgepoint Education, Inc.

http://tobaccopreventionandcontrol.ncdhhs.gov/smokefreenc/faq.htm#exceptions

http://www.entrepreneur.com/encyclopedia/term/82168.html