RUNNING HEAD: CASE STUDY

RUNNING HEAD: CASE STUDY

A Case Study of Virginia’s Yarn Shop

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9^th April, 2011

A Case Study of Virginia’s Yarn Shop

Virginia ‘s Yarn shop which was started as a home based business from a den by Virginia Reed who was fifty years old and also a married woman after all her three children were already grown up and had moved out was established in October 22, 1986. She established it in the town of Paragould in Arkansas to provide good quality yarn as well as close in the neighborhood where they were easily accessible by her students whom she gave knitting classes and who had to go to either Jonesboro or Memphis to purchase the yarn.

She stocked high quality yarn to make sure that the end product of her customers after they knit sweaters or Afghans was of good results. Besides the yarn she was also involved in the provision of knitting and crotchet needles, supplies and also pattern books.

One of the major challenges experienced by the shop was the project to expand the town where other competitive stores for example, Wal-Mart were established. This is because they are well established and sell goods at a lower price with less discounted to the customers. For example the sugar and Cream brand which contained 100 percent cotton yarn was sold at $1.68 for 2.5 ounces. Despite this challenge, Virginia’s Yarn shop still had customers buying from all over the town. Besides, hand knitting takes more time.

The other problem as concerns competition was how the knitting classes were charged differently. For instance at Hancock’s yarns although the pricing of the yarn that were of similar quality to Virginia’s was not discounted and was hence almost similar to what they charged their knitting classes fee at $20 for four sessions which amounted to $5 per session. This was $1 less than that offered at Virginia’s.

Another challenge is lack of enough capital. In business, money is used to make money; that is profit. The more capital one has, the more likely that their profit will be more.

Other stores such as those located in Memphis offered very high quality and specialty hence expensive yarns whereas others sold these high quality yarns at a slightly discounted price. However, due to their proximity for example St. Louis in Memphis, they did not pose much of competition to Virginia’s Yarn Shop.

It seemed to be the biggest problem as the Wal-Mart store stocked the same kind of supplies as Virginia’s Yarn Shop although with a wider variety of colors. However the only difference was the stocking of few variety of yarn which was considered to be of poorer quality by the customers hence an advantage. The business is worth as it is making more on the profits than it is using on expenditure. The students, in addition are paying a lucrative amount of $3 per hour. This is represented by the growth of the shop from a merchandise inventory where goods were sold at wholesale with a worth of $2300 to the yarn and knitting supplies worth $ 8500 therefore making a growth of $6200.

In order to beat this type of competition, Virginia has to come up with certain ways so as to maintain her customers as well as increase her sales. These include strategies such as advertising, increase of stock, attracting more customers and also finding ways to retain the already existing ones.

The availability of yarn from the distributors within a week is an advantage since it ensures that the shop is continuously well stocked with a variety of yarn. Besides these, the shop is worth all the efforts put in it since it shows some signs of improvement and potential according to Virginia. From the income statement at the end of the year depicted by exhibit 1, it is clear that the shop makes a substantial sale that is $ 10, 075 although with a lot of expenses that result in a net yearly income of $ 3,027. This is despite the fact that it is currently making very little as she expresses on how she hates it if people would know how little the business is making.

She needs to adapt to the change in technology due to the fact that hand knitting takes more time. Once she buys a couple of knitting machines, her production will increase thus, more profit. In addition to this, she will need to hire more workers to help her run the business as it expands.

Another possible venture is that Virginia can open more shops in various locations to reach those customers wh.............