Business Law: An Evaluation of the Strategic Issues Term Paper

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 Requirements2015. 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.