Dragonfly Case Study Solution
Situational Overview
This case illustrates the success story of Georgie Yam, who practiced his creative skills in different fields from the start of his career. Starting his career with fashion designing, Yam switched to Hairdressing schools and practiced it in Singapore, after couple of years spent in Hairstyling and analyzing the fragmentation and coping of business model, Yam joined a consultant company as a consultant for hair-care product in shanghai.
Georgia went to Shanghai in2001 for selling and making business development, where he quickly analyzed the market gap in Spa industry. The gap was between the two extremes spa markets, one very luxurious with pools, saunas and Jacuzzi while one very low class with no ambiance and convenience and even privacy.
Yam quickly identified the gap of developing a product (spa) that caters the middle range class, who lurks luxury but at an affordable rate. Yam joined hands with Zhou, a resident of China to establish the business in the country.
In 2005, Dragonfly (spa) gained a lot of reputation and goodwill on the basis of its ambiance, products and services and environment, which was clean without any doubtful activities, which made dragonfly a safe, legal place to take massages.
The business structure of dragonfly concentrated on focusing the mix flux of customer base, incorporating local Chinese and foreign tourists. The services of dragonfly were curtailed according to the demands of the customer while keeping the element of uniqueness in it. Only after 4 years of its establishment, dragonfly made a visible position in market and opened 20 local branches by establishing partnership.
However, the issue which dragonfly is facing is in keeping the uniformity of the service and quality across the branches, the expansion plan and strategies that will keep the realessence and brand identity uniform, and its operations and functions in oversea branches. The other challenge was also the expansion strategy entailing whether to expand locally or to take steps to establish in international markets.
Key Issues& Central Problem
Emergence of Health standards
After SARS, the company faced anemic sales and customer flux, due to reduced number of foreigners and tourists visiting the spa. It made dragonfly to think out of the box on maintaining the health standards. But initially, it remains a problem for dragonfly in pursuit of its business strategy.
Regulation and Laws
China has very strict rules regarding establishing a business and it takes a long time for entities to get the business certification .Dragonfly owners ,Zhou and Yam, followed the government official for three months to get the certification. Moreover, another intervention from Chinese Government is the snap checking of spas even if they are legal. This was another issue for dragonfly to deal with.
Maintenance of Quality
Dragonfly grew on tremendous rate in China and even overseas with 3 branches. Yam took the approach of developing the partnership at some percentage like 40-60 partnership to run the spa with their name, however, the strategy shoat a big issue, which is the maintenance of quality and standards that the parent dragonfly has made and delivered. With the growing number of stores (spas) the span of control indi luting which is threatening the brand identity and quality standards bench marked by the parent Dragonfly.
Maintenance of Competitive Advantage
The markets of China Spa indicated an increase of customer base, demanding good spas at good rates with exquisite services and ambiance.The rise gave opportunities to many players to enter into the Chinese markets, and among them Banyan tree was the key competitor of Dragonfly, which keenly tapped the Chinese markets with its offering containing the element of luxury. At this point, the creation and maintenance of competitive advantage is the key element for DARAGONFLY in order to sustain and withhold the market share. However, Dragonfly is facing complications in curtail ingits offerings in a way that has become the competitive advantage of unique selling proposition.
Finding the Right Partner
The operations and business activities were expanding due to effective market penetration strategy and product development through establishing partnership, however, the main issue was the selection of the right partner that could carry the same business identity of dragonfly .It included the alignment of vision, business strategy, services and training of staff. Therefore, it has become a key factor for Yam and Zhou to analyze in order to maintain the brand promise throughout the business web.
Central Problem
The central problem developed in the case is the delivery of service uniformly in each business unit/spa, maintaining the same quality standards and the delivery of exquisite service by adding more products in the product. Another secondary issue is the expansion plan, whether the dragonfly should go global or focus on, and market development within China. With the passing time, the Chinese market is emerging and a lot of growth is speculated in the region thus, it is the critical time for the company to decide whether to target the new customer base with the new offerings or whether to plan to go global with same business strategy. Both options have their risks and returns.
Based on the discussion above and identification of the core issues, there are certain alternatives that Dragonfly shall take in account to take the next step.
Alternative: 1- Move Globally
The company should move globally by opening branches in Singapore, Malaysia and Thailand, by carrying the same brand identity, store ambiance, product offerings and business strategy. This will help the company target new markets and build a brand value and brand image through international platform
Alternative: 2- Stay in china
The Chinese market is an emerging market, as after WW-II, China also opened gates for international business, which helped the economy of China to overcome the economic downturn. With passing time, the disposable income of the Chinese population is increasing indicating the growth in every sector, especially healthcare. Dragonfly has already established its mallet and brand image in Chinese market so it is a big opportunity for the company to diversify its business activities within the same market by offering new product line, maybe a spa with water pools to enhance the brand experience and value.
Dragonfly Harvard Case Solution & Analysis
CENTRAL RECOMMENDATION
Through analyzing both alternatives keenly, dragonfly should take the the second alternative to pursue the expansion strategy. In adopting the the second alternative, the company needs to maintain its uniformity of quality and service across its stores/spas. This will be easier for the company to expand within the domain of same country to maintain and exert great control over the functions and operations of its units than expanding outside shanghai, which will totally dilute the control of parent company......................
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