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Category: Business and Industry
Date Submitted: 09/03/2015 01:48 AM
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Growth and Profitability: A Tale of Two
Competitive Industries 1
B. Peter Pashigian
University of Chicago
G
eorge Bailey had to make an important business decision. Should he quit his
job with a food processing company and go into business himself by starting a
chain of bagel shops? After graduating in 1991 with an undergraduate
business degree with a minor in economics, he had joined a food processing company
and spent two years learning the business of selling a product line of bakery goods to
supermarkets and small bakery shops in the Madison and Green Bay, Wisconsin
markets.
As 1993 drew to a close, George noticed that a few of his accounts were beginning
to carry bagels as a takeout item. Not only did George like to eat bagels, he began to
think that bagels had the potential to become a mass-market item penetrating the
breakfast and lunch trade. He thought that he could make profits by opening several
bagel stores in and around the Madison, Wisconsin metropolitan area. He talked to
several of his close business associates about his proposed venture. Some didn’t know
what he was talking about, not being familiar with bagels, and others thought that
bagel idea had limited potential outside of New York City and a few other East Coast
markets. They couldn’t see a market for bagels developing in the Madison area, or for
that matter, in the more conservative Midwest and thought that bagels would always
remain an ethnic food with limited potential. Many of his friends thought that George
was foolhardy to start a chain of bagel stores. They argued that the bagel industry was
an easy entry industry and anyone could come into the market. As one of his closest
college friends warned him, “You’ll never make profits in an easy to enter market.
You’re better off staying with your current employer until a better business prospect
comes along.”
George came from a family of entrepreneurs. His father had...