Benefitting from beauty school dropouts (and graduates)

It’s always nice when a discussion from my classes quickly gets tested in the ‘real world’.

A few weeks ago, as part of a discussion of diversification, I asked my students to identify related industries to various products and services. One of the services I mentioned was hairdressing, and among the suggestions was training schools for hairdressers, stylists etc.  We had a debate about whether this would also constitute vertical integration as it would serve to provide a supply of labour for firms in the industry.

In my old age, I’d forgotten an earlier blog post of mine on the diversification of Aussie make-up magnate Napoleon Perdis.

Well, Perdis popped up again in the news recently with a much more explicit discussion of the benefits to the firm’s salon franchising ambitions of also running ‘beauty schools’:

“The company should have a natural advantage in its franchising push thanks to the beauty training schools it operates. While these schools provide the company with direct source of staff and a strong network of brand advocates, they should also provide a steady stream of potential franchisees well-versed in the company’s processes and products.

“One of the biggest assets of the Academy in that it is a machine that does generate brand advocates. And it feeds itself, because the brand advocates pay to come and do courses, they purchase products and they go out there, advocating and indoctrinating others with the same fervour and passions and beliefs,” [said] Perdis…”

It really is a neat example of utilising corporate strategy to build an advantage beyond direct market-seeking.  The market for potential franchisees is tough.  Having such an effective mechanism to promote the firm (and screen franchisees) is a real boon for Perdis.

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