Business Law: An Evaluation of the Strategic Issues
Introduction
This paper entails an evaluation of the strategic issues
that will be considered in the establishment of a
business entity. The strategic aspects considered relate
to the nature of the business, the legal and licensing
requirements, and risk management aspects.
Business Description
Excel West Salon will operate in the US beauty services
industry. The salon will be strategically located in
Oregon, US, and will specialize in the provision of hair
care and styling services. The core hair design services
will include the application of chemical hair treatments
such as permanent waves, dyeing, and coloring. The
firm’s mission is to enhance the customer’s physical
beauty. Excel West Salon will focus on creating and
offering its clients a unique salon experience. This goal
will be achieved by providing its clients a VIP
experience hence improving their mental relaxation,
emotional and physical balance. The firm’s approach to
creating this experience will be based on the concept of
personalization. All operations within Excel West
Salon will be customer-centric. The concept of
personalization will aid in underlining the firm’s
appreciation of the divergent customer tastes and
preferences. Therefore, the enterprise will succeed in
creating a strong bond with the target customers.
To deliver a unique client experience successfully, the
firm will employ qualified stylists. Thus, it will be
possible for the enterprise to ensure that the hair care
services are professionally delivered. Furthermore,
Excel West Salon will ensure that the hairstylists are in
a position to deliver beautiful and modern results. The
stylists’ expertise will enable the firm to adjust its
products successfully hence aligning with changing
customer attitudes. Besides, the salon’s capability to
attain gorgeous results will be enhanced by using
premium hair care products from leading beauty
product companies such as L’Oreal.
The firm will target high-end and beauty-conscious
customers. The core customer category will be
comprised of youthful and affluent customers below 45
years of age. The selection of this customer group is
informed by their high spending on beauty. The firm
expects to grow its customer base substantially. Excel
West Salon projects to position itself as a beauty and
well-being destination in Oregon within the first year
of its operation. This goal will be attained due to its
commitment to creating a sense of fulfillment and
relaxation amongst its clients.
Business organization
Excel West Salon will operate as a limited liability
company. The entrepreneur will own the company and
serve as the entity’s manager. Thus, the entrepreneur
will be actively involved in the businesses management
process (Mancuso 7). Furthermore, the limited liability
company structure is adopted because of the allied legal
status. First, the business owners face a limited liability,
which means that their assets will not be endangered in
the event of loss or another negative financial outcome
(Mancuso 7).
Based on the limited liability structure, the entity will
be taxed at individual rates. Mancuso states that the
Internal Revenue Service recognizes LLCs as ‘pass-
through’ tax entities (7). Thus, the company will greatly
benefit from the tax advantage associated with such a
business structure. Bevans underlines the tax advantage
of LLC by stating that if “a limited liability company
suffers an economic loss, the loss can be reflected in the
individual member’s income tax returns” (130). The
losses made by the business are not reported separately
hence eliminating the element of taxation (Mancuso 7).
Therefore, the owner’s tax liability will be reduced
considerably. Moreover, this business structure will
ensure flexibility concerning profit and loss allocation
and the firm’s management. Mancuso states that the
law does not restrict LLCs on how to share profits and
losses unlike in corporations (8). A workforce of six
hairstylists will facilitate the firm’s operations.
Licensing and regulatory requirements
The licensing and regulatory requirements in the US
cosmetology industry vary across states. Therefore, to
establish its successful operations in Oregon, Excel
West Salon will be required to obtain the relevant
approvals, permits, and licenses from the relevant
federal, state, and local authorities. Information on the
requisite licensing and regulatory requirements was
obtained by undertaking extensive research from the
Oregon State Government.
Excel West Salon will be required to seek a license from
the State Board of Barbering and Cosmetology in
Oregon. The State Board of Barbering and
Cosmetology regulates the safety and health standard
of all beauty salons in Oregon hence protecting the
customers. The safety and health standards are
stipulated by the Oregon Health Licensing Agency.
First, the practitioner will be required to establish
operations in a licensed facility. Moreover, the State
Board of Barbering and Cosmetology reviews the
complaints from clients hence taking the requisite
actions on firms that do not comply with the stipulated
industry standards and laws. One of the fundamental
regulatory requirements entails compliance with the set
training hours. The State of Oregon requires individuals
intending to establish cosmetology firms such as beauty
salons to attend a training course for a minimum
number of hours from a recognized and licensed school
(“Beauty Schools Directory” par.4).
The State of Oregon has set 1,450 hours as the requisite
number of training hours for hairstylists. The
practitioner is further required to complete and pass the
state’s cosmetology board exams. The firm will also be
required to pay all the applicable fees under ORS
676.592. A license fee of $ 110 and an application fee
of $100 will be paid. In 2015, the Oregon Board of
Cosmetology announced its decision to impose new
rules such as imposing a high fine to firms that
repeatedly do not comply with the rules and regulations
such as safety and health standards. The Board may
further revoke the license for firms that repeatedly
violate the laws.
To establish the business successfully, the firm will
ensure that the requisite documents such as the article
of the organization, Oregon Business Identification
Forms are duly completed and submitted to the relevant
regulatory agencies. Subsequently, the firm will
minimize the likelihood of incurring penalties and
fines.
Risk management, insurance, employees, and other
matters
Risk management
The firm’s operations will not be free from risks
emanating from the internal and external environments.
The risks might affect the firm’s ability to attain the
desired level of profitability directly or indirectly. The
core risk categories that will be encountered entail
strategic, financial, compliance, reputational, and
operational risks. The strategic risks might occur due to
changes in consumer tastes and preferences.
Competition within the local industry might result in
the emergence of new hairstyles and other salon
services. The strategic risks might originate from the
integration of new salon technologies amongst the
competitors.
To minimize the negative effect of strategic risks, Excel
West Salon will ensure that its operations are based on
the concept of continuous improvement and new
product development. To achieve this goal, the firm
will solicit and leverage market feedback. Thus, it will
be possible to measure the degree to which customers
are satisfied. Additionally, new product development
and continuous improvement will increase the
likelihood of attracting customers. The two strategic
approaches will minimize the chance of customers
shifting to competitors’ services.
Excel West Salon might further encounter compliance
risks due to bureaucratic rules and regulations imposed
by different government agencies such as the
Environmental Protection Agency [EPA] and the
Occupational Safety and Health Administration. The
firm’s operation might be negatively affected due to
failure to comply with the rules and regulations
stipulated by the different government agencies might.
For example, the firm might incur high fines and
penalties from the respective agencies. To overcome
this challenge, Excel West Salon will undertake a
comprehensive analysis of all the legal requirements
before its establishment. This goal will be attained by
outsourcing the services of reputable legal experts.
Thus, the firm will succeed in avoiding the applicable
fines and penalties due to non-compliance.
The firm might further encounter operational risks due
to internal and external failures. Internal failures might
arise from a lack of commitment amongst the
hairstylists. Thus, the firm’s quest to deliver a VIP salon
experience amongst its clients might be limited.
Alternatively, the firm’s operational efficiency might
be affected by a breakdown in the distribution system.
For example, the suppliers’ failure to deliver the
requisite beauty products might affect the firm’s
efficiency in addressing the client’s hair care needs.
To overcome such operational risks, the firm will
undertake some measures. First, the firm will ensure
that employees are well motivated through the adoption
of an effective reward system. This approach will aid in
ensuring that the hairstylists are remunerated fairly and
equitably. Moreover, the hair stylists will be retrained
periodically on different areas in cosmetology. This
will improve their expertise in serving and creating the
intended customer experience. Alternatively, the firm
will maintain a strong business and contractual
relationship with the suppliers. This will serve in
minimizing breakdowns within the supply chain.
Excel West Salon may also encounter reputational risk
due to the lawsuit arising from product failure. Such
occurrences might culminate in negative publicity.
Excel West Salon will mitigate reputational risk by
sourcing its products from reputable suppliers.
Moreover, the reputational risk will further be managed
by interacting with customers hence understanding
their opinion regarding the firm’s products and
services.
Insurance requirements
The firm will register for general liability insurance
from a reputable insurance company. This will
safeguard the firm against liability arising from the
nature of the environment in which the firm operates.
For example, the slick product residue and water from
the operational activities make the salon’s floor
hazardous. The firm might be sued for negligence in the
event of a customer suffering bodily harm because of
the slippery floor. Secondly, the firm will further obtain
the product liability insurance policy to caution itself
against any bodily harm that a customer might
experience from a product purchased from the salon.
The third category of insurance policy that the firm will
seek will involve safeguarding the firm against
personal injury such as non-physical or emotional
injury arising from embarrassment due to issues such
as a bad haircut. The firm might incur a significant
financial cost because of a lawsuit due to personal
injury. The firm will safeguard itself against such
financial costs by seeking professional liability
insurance. Thus, costs arising from personal damage
because of negligence by the stylists will be adequately
covered.
In addition to the above categories of insurance covers,
the salon will also integrate the workers’ compensation
insurance. The rationale of this insurance cover is to
ensure that the hairstylists and designers are covered
against loss of wage because of injury suffered in the
workplace. Moreover, the workers’ compensation
policy will further ensure that the employees’ medical
costs are sufficiently covered.
Intellectual property protection
Excel West Salon intends to attain a high competitive
edge in the beauty industry. Through its innovative
capacity, the firm will develop new hair care products
aimed at improving the level of customer satisfaction.
To benefit from its innovation, the firm will seek
intellectual property protection. By seeking intellectual
property rights, the firm will caution itself against
losses originating from the existence of counterfeit
products.
Bonding requirements
The firm will incorporate the concept of bonding
insurance to protect itself against losses originating
from theft, internal fraud, embezzlement, or forgery.
The need for bonding insurance arises from the
appreciation of the fact that the firm is not guaranteed
of whether the employees will be honest or not (Daniels
109). The firm might incur substantial financial costs in
the event of the employees misappropriating or stealing
the firm’s property.
Posting requirements
The Oregon state has outlined several posting
requirements that small enterprises such as Excel West
Salon must adhere to. The organization will further
ensure that it complies with the requisite posting
requirements. The core postings relate to Oregon state
minimum wage, Occupational Safety, and Health
Administration, posting on Equal Employment
Opportunity, Federal Minimum Wage poster, and the
Employee Polygraph Protection Act [EPPA] (“United
States Department of Labor” par.1). These posters will
aid in creating a sense of security amongst the
incumbent and potential employees. Moreover, these
posters will be strategically located within the salon to
provide the incumbent and potential employees an
opportunity to read and understand (“Oregon.Gov”
par.4).
Conclusion
Excel West Salon projects to commence business
operations within the next two months. The firm’
expects to attract and retain a substantial customer base
by offering a unique salon experience. This goal will be
achieved by integrating professionalism in the delivery
of different beauty services. The firm intends to meet
and exceed the customers’ beauty expectations
continuously. Therefore, the firm will invest in
continuous and new product development. Through
this approach, the firm’s capacity to attract new
customers will be enhanced remarkably.
The enterprise’s adoption of the limited liability
corporation as the organization structure will improve
the entity’s operation efficiency in the long term. The
firm will benefit from the tax advantage associated with
LLCs. Compliance with the licensing and regulatory
requirements will promote the firm’s smooth operation.
Moreover, the firm’s operations will be improved by
the incorporation of effective risk management
practices. This goal will be achieved through a holistic
approach to risk management. Consideration of the
different risk categories will ensure that the firm is
cautioned against financial losses. Additionally, risk
management will be fostered through the integration of
different insurance policies.
Works Cited
Beauty Schools Directory: Oregon State Board of
Cosmetology license Requirements 2015. Web.
Bevans, Neal. Business organizations and corporate
law, Clifton Park: Thomson Learning, 2007. Print.
Daniels, Owen. The small business guide [US], New
York: The Small Business Zone, 2011. Print.
Oregon.Gov: Oregon posting requirements 2015. Web.
Mancuso, Anthony. Form your own limited liability
company, Berkeley: Nolo, 2015. Print.
United States Department of Labor: Office of Labor
Management Standards 2015. Web.
