E-Business Assessed Group work

Bradford University School of Management Full Time MBA 2009-2010

UB No. : 09019665 08007548 09022244 09022634 09020215 09019093 09021573

Module Module Leader Module Code

: E-business :Dr. Rana Tassabehji :MAN4077M

Declaration:-

We certify that this assignment is the result of my own work and does not exceed the word count noted below,

Total number of words: 1495 (Excluding Table of contents, Executive summary, Bibliography, References, Tables and Figures )

Signature

Date

: 14/06/2010

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Table of Contents
1 2 3 Executive Summary ................................ ................................ ................................ ...... 3 Products and Services................................ ................................ ................................ .... 3 Competitive analysis ................................ ................................ ................................ ..... 6 3.1 3.2 4 4.1 4.2 4.3 4.4 5 5.1 5.2 6 7 6.1 7.1 7.2 7.3 7.4 8 9 Porters five forces to analyse micro environment ................................ ................... 6 Competitor analysis ................................ ................................ ......................... 7 SWOT ANALYSIS ................................ ................................ ................................ 8 Product ................................ ................................ ................................ ................... 8 Price ................................ ................................ ................................ ....................... 9 Place ................................ ................................ ................................ ....................... 9 Promotion ................................ ................................ ................................ ............... 9 Business Model Building Blocks ................................ ................................ .......... 11 Business Strategy ................................ ................................ ................................ .. 12 Management and Organisation................................ ................................ .............. 14 Estimated Start-up Expense ................................ ................................ .................. 15 Projected Break Even Analysis ................................ ................................ ............. 16 Projected Profit and Loss ................................ ................................ ...................... 16 Projected Balance Sheet ................................ ................................ ........................ 17 3.1.1

Marketing mix................................ ................................ ................................ ............... 8

Business model ................................ ................................ ................................ ........... 10

Operational plan ................................ ................................ ................................ .......... 13 Financial plan................................ ................................ ................................ .............. 15

Conclusion ................................ ................................ ................................ .................. 17 Appendix ................................ ................................ ................................ .................... 18 9.1 9.2 Appendix A ................................ ................................ ................................ .......... 18 Appendix B ................................ ................................ ................................ .......... 18

10

References ................................ ................................ ................................ .................. 21

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1 Executive Summary
Car Galaxy is a start up multi brand car dealer firm which links second life to Real Life (RL). The business mission of the Car Galaxy is to encourage car enthusiasts in the SL to get the experience of our unique services; to promote the RL car brands in SL and direct the prospective buyers to RL.

Car Galaxy plans to enter into strategic alliance with various car brands to promote and sell the brands. Customers visiting Car galaxy in SL can avail the following benefits
y

The interested SL customers are directed to the relevant car manufacturers in RL. On each purchase through SL exclusive discount offered along with value added service

y y

Higher discount can be availed by the customers through referral programme Facility to customise and buy the car to drive within the SL

Market analysis is carried out to evaluate the strength and weakness of Car Galaxy. Opportunity is identified and the marketing mix proposed. Value added services such as car insurance and servicing; Rating reports and information for purchase decision; discounting through referral programme; promotional strategies are devised to position the firm. Subsequently business model is designed and eventually strategy formulated.

The revenue generation is from the following sources:

y y y

The commission from RL car manufactures when customers buy the cars through SL Sales of the scripted cars in SL The advertising revenues obtained from RL car manufacturers

Products and Services

In the influences of E-commerce on the industry value chain, Disintermediation and Reintermediation (Chircu and Kauffman 2000) is an important issue. The role of intermediary has to transform into an organization providing value -added services, especially automobile is a highinvolved product; customers need plenty of information to make purchase decisions. Car Galaxy based on the interaction platform- SL, as a reliable third-party with objective evaluation and control system, helps customers in comparison shopping from multiple car brands.

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In the S Car Galaxy offers potential customers with varied services and information on range of real cars with fantasy virtual infrastructure Such as the news of latest trend, new debut models, car ratings, and real price comparison. The 3 model of the cars is demonstrated in a car gallery, and is supported by a real time sales representative. Customers can avail discounting facility. The Re-e uip Factory also offers a variety of options for customization. Members interested in the real products can go to real dealers to experience test drive in RL and get souvenirs. Other value proposition is car insurance service, discounts and car servicing.
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From the Customer s view, Car Galaxy provides 1. Well-designed and customized cars. 2. Benefits from promotion for real cars and 3 car models in SL 3. Information centre for all branded cars
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The serv ces prov ded by Car Galaxy are divided into the Real life and Second life shown in Figure 1
 



 

  

e 1 The Se v ces & Produc s of the Car Galaxy Group

 

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On the other hand, Car Galaxy offers manufacturers 1. Car Galaxy is the platform for manufacturers to exhibits adverts and new products 2. Customers feedback on the design of the car. 3. Customers request for product design

Figure 2: The basic structure and players in virtual marketplaces Source: Kollmann (2001). Measuring the Acceptance of Electronic Marketplaces

Car Galaxy plays a role of virtual marketplace operator between manufacturers and customers (See figure 2 above). It collects information in an objective platform facilitating transactions and CRM. The profit stream includes profits of customized 3D options, commission on routing customers to purchase RL cars, advertising pages in car gallery. With Timmers (1999) view of e -business model assessment, Car Galaxy can perform well by its win-win marketing strategy.

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3 Competitive analysis

3.1 Porter s five forces to analyse micro environment

Threat of new entrants -Low entry barrier -Highly imitable Strong Power of suppliers -Challenging to get all manufacturers on the network -Manufacturers using alternative channel to reach end users Moderate Power of buyers -Several shops provide 3D cars model in SL

Competitive rivalry  -Katani -HaruMotors

Threat of substitutes: -Presence of other car brand showrooms in SL Weak

Moderate

From Porter s five forces, we detect only a very few competitors have the same business similar to us in current position. However, the threat from new entrants is high to low entry barriers and imitability. The power of suppliers (RL car manufacturers) is moderately high due their limited numbers and the alternate channels available to them to reach the users.

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3.1.1

Competitor analysis

Company Value-add service Customised car facilities Car info centre Range of brands Link to real life Pricing : Strongly achieved : Moderate achieved : Failing

Car Galaxy

Katani

HaruMotors

Comparing to the rivalries we have in SL, we provide distinctive services unlike others. Some shops overlap part of our 3D car model business, yet the range of brands relatively weak. Apart from that our unique service gives us a strong position in competition.

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3 2 SWOT ANALYSIS
C

Stren ths -First mover -One stop shop - all brands in one place
P

Weakness Uncertainty about active visitors Less awareness among customer

SWOT
Opportunities Expected growth inSL population Expect popularity of customised car Threats High imitability risk low entry barriers ifficulity in creating tie up with car producers
Q

aving done the SWOT analysis for our business, the 4 P s in the marketing mix is determined as

follows

4 Marketin mix
F E

4.1

rodu t

The 3 models of latest cars will be displayed in gallery. The models will be obtained from the real life manufacturers on a fre uent basis. We will offer value added services when RL cars purchased via our platform such as y y One year free Car insurance Two year free servicing
H G

This will be done based on creating strategic alliance with RL car sellers. A re-e uip factory will be created which will allow the customers to customise the car models in SL and purchase it for driving within SL. An Information centre on car industry will be setup in SL which will provide the following y Car ratings
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y y

Driving reports Latest developments

4.2 Price
 

Referral Discount facility to the prospective buyers placing order to RL. Competitive pricing for purchasing customised car in SL. Pricing details explained in the start up expenses and capitalisation section.

4.3 Place
The Car Galaxy group will located in the heart of city which is frequented by a lot of people. Being next to the club Highflyers gives the shop high visibility.

4.4 Promotion
The services provided by Car Galaxy group will be strategically advertised in order to be competitive in the virtual marketplace. Keeping the targeted customers in mind, the medium of promotion would be an important aspect in SL. The table below shows different promotional methods in SL.

Source: Second life Exchange Street (www.xstreetsl.com), Future labs (www.futurelab.net)

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As a part of its promotional strategy Car Galaxy group intends to set up an advertising campaign with RezAds. With a Grid-Wide reach of networked billboards located only in high traffic areas, RezAds can get the message out to thousands of potential customers.

5 Business model
i

As per Mahadevan (2000 a business model is composed of three streams

h

1. Value stream: value proposition for the buyer, sellers and market makers. 2. Revenue stream: identifies the ways in which the organization will earn revenue. 3. Logistics stream: concerned with the supply chain issues of the organization. The three components come together to create the competitive advantage which is our business aiming for.

Source: Tassabehji (2003)

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E-Business Assessed Group work

Our business model pursues to create and add value to our services. A business value stream is the potential benefit for various business stakeholder of offering something distinctive from their competitor (Tassabehji, 2003)

From B2C perspective, we provide a one stop shop for customers to enjoy their shopping just in one store. From B2B perspective, the shop creates a platform for RL car manufacturers and SL dealers to hunt their customers easily.

5.1 Business Model Building Blocks

The building blocks based on the above business model for Car Galaxy group are as follows:
Value Streams irtual Communities e duction in Transaction Costs
v s r q q

community comprises of users from different geographical region providing global reach e duced search costs for buyers and producer benefits from wider accessible client base
t

Gain from n formation symmetry alue added services

u p

The product mix offers free services like car insurance car finance and servicing to add value limination of 'brick and mortar' operation leading to disintermediation of supply chain eliminating dealer's role the net effect is increase in margin aried brands of cars available which helps in price comparision and it also leads to downward pressure on price which attracts customers
x p s

Revenue Stream limination of rick and mortar operations ricing e feral rogramme dvertising
y x

The customers benefitted from referal scheme customer the price associated

ith each converted

acility to host banner ads source of revenue generation

Logistical Streams isintermediation hrink supply chain by removing intermediary like dealers improved responsiveness and reduced cost
s s

n fomediation

dding value by acting as infomediaries Car catalogues best price price comparison ratings and reports
s

p u

alue created by providing customi e d and personali e d cars and act as infomediaries for various brands to match the offers

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5.2 Business Strategy

Str tegies f r Business

I

del
II

Hi h
f h g

Imit bility

III

Complement ry Assets

S urce: Afu h nd Tucci (2003

Based on the business model and other analysis our strategy is to focus on capturing the value and build competitive advantage. Car Galaxy group lies in cell 1 due to easy imitability and unimportant complementary assets. The firm needs to pursue a run strategy, i.e. since easily imitable the firm should keep innovating. The group is in the process of moving to cell II as our value proposition distinguishes us from the competition and we are creating alliance with established players to strengthen our complementary asset

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Ti htl H ld nd I p rt nt

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rt ith b th t hn l nd ss ts r ith b r inin p r k s n

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H ld r f pl nt r ss ts k s n

IV

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6 Operational plan
The Operational Chart shows the flow of the operations supported by the system. The chart also provides the direction of cash inflow and outflow within the organisation.

Link to real life Car manufacturer 3 D Car Customize Order

R&D Funding

Purchase Second life 3D model

Welcome desk
Car Galaxy Finance

Maintenance & Expansion

Inflow from car sale Discount inflow and commission

Car Gallery

KEY Cash Inflow Cash outflow

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6.1 Management and Organisation

The management is responsible for the coordination of activities according to the policies and the defined objectives of the company. The strength of the management board lies in its ability to oversee the functions of the different departments as well as providing an outstanding business strategy for the company.

The management team consists of experts and professionals with different education background and experience.

CEO Anand

Coordinate activities in the organisation. Experience in Operations management, Marketing and Business Strategy.

Customer service/ Finance

Winters

Marketing Saurabh

Operations Seun

R&D Eric

HR Meenal

IT Michael

We decided to split the different business functions within ourselves based on our individual strengths and weakness. maintain this new venture From an operational perspective we need the following to setup and

Staff - Real time Customer service assistant who will respond to customers visiting our gallery . Winters himself will perform this role

IT Database to store the following

y y

3d model specifications of the cars obtained from car manufacturers SL User customised car specifications ,so it can be given as feedback to RL car manufacturers on customer needs.
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SL Scripting solution
y y

To make models of car in SL based on the specifications. To make the software to allow customisation of model cars.

A database will be leased for the setting the IT system to store and maintain the data. Michael will lead this area. Initially we will avail services of SL scripting solution providers (Bluepill and Cranial Tap, Inc.)to setup platform and model cars. An R&D function is proposed where our team will work on to develop the skills in scripting language, so that in future we move away from the solution provider to develop the objects ourselves. The marketing function led by Saurabh will primarily

deal with creating and maintaining strategic alliance with RL car manufacturers. The finance function is responsible for financial functions and activities ranging from budget preparation and allocation, preparation of financial statement and providing advice based on the analysis of the company financial performance. The finance department is also involved in risk management to prevent incidents such as bankruptcy. It is the function of the IT and R&D functions to develop communication link between the real life and the second life. The Operations function is involved in the maintenance of the company s database by collaborating with IT solution provider and the RL car manufacturers.

7 Financial plan
Details of Expenses and Capitalisation are given in Appendix A.

7.1 Estimated Start-up Expense

Estimated Start-up Expense

Land Structures Staff in SL Marketing campaign Registration Total cost
Currency Linden

4,000 15,000 4,000 2,000 5,000 30,000

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7.2 Projected Break Even Analysis

Projected Break Even Analysis

 Revenues 3D cars sales

Price per Unit

Unit sold  2,000

   800

Adverts revenues Total revenues Variable cost Cost of goods sold Commission for Sales Marketing expense Total Variable cost Fixed cost Land use fee IT system Marketing Campaign Total Fixed cost Total cost

100 10
     

Total value   53 106,000 8,000  114,000    53 42,400 53 5,300 530 53 48,230   49,860   13,850 2,000  65,710  113,940 

Profit
Currency Linden

60

7.3 Projected Profit and Loss

Projected Profit and Loss

 Revenues Commission of real cars sales 3D cars sales 3D customized cars sales Adverts revenues Total revenues Variable cost Cost of 3D and customized cars sold Commission for real cars sales (5%) Commission for 3D cars sales (5%) Marketing expense Total Variable cost Fixed cost Land use fee

Price per Unit

Unit sold Total value    41,600 20 832,000 2,000 200 400,000 3,000 10 30,000 8,000   1,270,000      800 210 168,000 2,080 20 41,600 100 210 21,000 10 210 2,100 232,700    49,860  
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IT system Marketing Total Fixed cost Total cost

   

   

13,850 2,000 65,710 298,410

Profit
Currency Linden

971,590

7.4 Projected Balance Sheet

Projected Balance Sheet

Asset Cash Land Structures
            

Liability 1,052,590 LT-note payable 4,000  15,000 Total

Capital Capital Retained Earning 

       

50,000


50,000


50,000 971,590


Total Asset
Currency Linden

1,071,590 Total Cap& Liability

1,071,590

Important assumption: Interest rate and exchange rate are stable in SL, for residents in SL don t need to work for living. Therefore we assume interest rate is zero and the current exchange rate will remain the same level for one year. Interest Rate : 0 % Best Buying Rate : L$ 260/ US$ 1 Best Selling Rate : L$ 277/ US$ 1 Car Galaxy Group is assumption to run more than one year, therefore all the expenses and revenues are calculated on an annual basis.

8 Conclusion
The SL environment is a buoyant economy at present with steady growth of population making it a place of opportunity. It presents a good market for selling virtual products and for promotion of RL brands. We believe that the concept of allowing the customisation of branded cars, along with an attractive offer such as referral discount on RL car purchase will definitely attract lot of customers and will make this business plan successful.

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However, we realise that the challenge is to create and maintain strategic alliance with RL car manufacturers as we are only a start up company, but we are confident to start off well and to finish this successfully.

9 Appendix
9.1 Appendix A
Analysis of Second Life

SL is one of the effective ways to reach and engage with customers. This virtual world ha added s outlets into the marketing mix for marketers and this provides companies the opportunity to establish their brand footprint or level of impact.

Since Second Life introduced to the public in 2003, it has grown explosively and has more than 19 million sing-up record in 2010 (Second Life Wiki 2009). Some businesses, such as IBM, Dell, and Toyota have already built their promotion islands in SL.

By creating pioneering new ways of communicating, interacting and remotely collaborating through the internet, Second Life enables businesses using such a platform to provide better services (New Business Horizons 2009). In addition, reduced layers of value chain help business increasing efficiency, responsiveness and reducing cost (Tassabehji 2003). Using the benefits of SL could create more value both for our business and customers.

9.2 Appendix B


Financing plan:

There will be 2 way of financing. L$ 50,000 will be provided by the founders of Car Galaxy. Dr. Rana Tassabehji would offer Car Galaxy the loan of L$ 50,000

Capitalization:

Car Galaxy Group net worth start-up of L$ 50,000

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Start-up Expense:

Total Start-up cost of running our business will be nearly L$ 30,000.

Land and structures: A land of 2024 sqm in mainland costs L$ 4,000. A show room, a standard racing track and re-equip factory from existing builder Xstreet SL or OnRez cost L$ 15,000

Staff in SL: We will create a customer service assistant for real time car promotion Cost for staff is L$ 4,000

Marketing and Registration: Registration fee for our business in SL cost L$ 5,000 Hiring Rezads to set up a campaign costs L$ 2,000 Detail market strategies are included in above section.

IT system: We can run our IT setup and maintenance. However we need a online space for storing our 3D models and custom data from sales representatives. IT service for one year is nearly US$50 = L$ 13,850

Projected profit and Loss

Profit streams:

1.

Sales on real cars, the average price per car is US$ 20,000. We predict there will be 20 cars bought through us in the first year. Commission from group purchase of real cars will depends on the type of the car, but the average commission from the car will be 8%.The commission will be US$ 20,000*20*8%* L$ 260 = L$ 8,320,000

2.

Sales on 3D cars original models and customized models

 

Price for original type is L$ 2,000 Price for customized type is L$ 3,000

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We predict there will be 200 3D cars and 10 customized cars orders in the first year. L$ 2,000*200 + L$ 3,000*10 = L$ 400,000 + L$ 30,000 = L$ 430,000

3. Advertise revenues is about L$8,000 a year.

Expenses

1. Lands use fee is a monthly payment to Linden lad. Monthly land use fee to Linden Lab is US$ 15 = L$ 4,155 one year = L$ 4,155* 12 months = L$ 49,860

2. Cost of 3D cars sales is 40% per unit. The 40% will go to the car manufacturers of 3D car model.

3. According to the marketing campaign held by Rezads, Marketing expense will be L$ 10 per useful customer click. We assume there will be 200 useful clicks In the future, the expenses will be less on marketing part for our partnership mostly are famous car manufacturers. Once people know Car Galaxy, we don t have to spend that much on marketing. Marketing expense is L$ 2,000

Cash flow:

Cash flow projections are significant to our success. We deal all transaction on cash basis rather than on credit basis as we don t have huge capital to sustain our business.

Projected Break-even Analysis:

We focus on the sales of virtual car, because if we calculate the commission of real car deal would make Break-Even Analysis pointless. For example if we sell one real car for US$ 20,000 and the commission in terms of Linden dollars would be L$ 416,000. Our operating expense for the first year is L$ 65,710, which means Car Galaxy would run for 6.3 year without any other revenues. Therefore in this analysis, our total estimated operating expense would be covered by the sales of the virtual cars. We expect to reach our break-even within few months into the business operation, as we don t need huge amount of fixed cost.

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10 References
Afuah, A., Tucci, C., (2001). Internet Business Models and Strategies, New York: McGraw-Hill.

Kollmann, T. (2001). Measuring the Acceptance of Electronic Marketplaces: A Study Based on a Used-car Trading Site. http://jcmc.indiana.edu/vol6/issue2/kollmann.html [Accessed on: 29-May2010]

Mahadevan, B., (2000). Business models for internet based ecommerce: An anatomy , California Management Review, vol. 42, NO. 4, SUMMER 2000, P55 P69.

New Business Horizons (2009), How Your Business Can Benefit From Second Life One of the most significant technology breakthroughs in history , http://www.nbhorizons.com/ 11.06.2010 Access on

Palmer, A., McCole, P. (1999), THE VIRTUAL RE-INTERMEDIATION OF TRAVEL SERVICES: A CONCEPTUAL FRAMEWORK AND EMPIRICAL INVESTIGATION , Journal of Vacation Marketing, http://www.apalmer.com/jvm99.htm [Accessed on: 27-May-2010]

Second Life Wiki (2009), Live data feed, http://wiki.secondlife.com/wiki/Live_Data_Feeds Access on 11.06.2010

Tassabehji, R., (2003). Applying E-Commerce in Business, London: SAGE

Tassabehji, R. (2003) E-Business Models. Applying E-Commerce in Business. SAGE Publication, London, UK., pp. 194.

Timmers, P. (1999). Electronic Commerce: Strategies and Models for Business -to-Business Trading. Wiley.

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