E - business

Assignment

Name:

ID No:

Total Number of Words (Excluding Contents, Appendix and

References): 2985
 CONTENTS

INTRODUCTION.............................................................................................................2
EXECUTIVE SUMMARY...............................................................................................2
BUSINESS INDUSTRY....................................................................................................3
MISSION STATEMENT..................................................................................................3
GOALS OF BUSINESS PLAN.........................................................................................4
CUSTOMER SATISFACTION...................................................................................4
Statement of Purpose..................................................................................................4
OBJECTIVES............................................................................................................4
MARKET LEADER..........................................................................................................5
Statement of Purpose..................................................................................................5
OBJECTIVES………………………………………………………………………5
REVENUE GROWTH..................................................................................................5
Statement of Purpose................................................................................................. 6
OBJECTIVES………………………………………………………………………6
BRAND IMGAE............................................................................................................6
Statement of Purpose………………………………………………………………..6
OBJECTIVES………………………………………………………………………6
VALUE PROPOSTISON..................................................................................................7
BUSINESS MODEL..........................................................................................................7
MARKET ANALYSIS......................................................................................................8
Age group........................................................................................................................8
Customer preference.......................................................................................................8
Competitors.....................................................................................................................8
OPERATIONS...................................................................................................................9
Domain Name.................................................................................................................9
CONCLUSION................................................................................................................10
APPENDIX I – INCOME/EXPENSE STATEMENT..................................................11
Summary.......................................................................................................................11
APPENDIX II - BALANCE SHEET.............................................................................12
Summary.......................................................................................................................12
APPENDIX III - CASH FLOW STATEMENT...........................................................13
Summary.......................................................................................................................13
APPENDIX IV - FINANCIAL RATIOS.......................................................................14
Summary.......................................................................................................................14
REFERENCES................................................................................................................15

1
INTRODUCTION

The revolution caused in communication methods by dotcom boom has had major impact
on every facet of business. One path that almost all business organizations have grasped
with both hands is the e-business concept. Gone are days of industrial age where
customer waits for days and sometime months for products (Jackson, 2003). The IT
revolution has shrunk the communication gap between customer and vendor to arms
length.

One business that has used this largely is online shopping. This essay will explore this
concept of e-business and analyze the possibility of its use in this industry that is rapidly
growing.

EXECUTIVE SUMMARY

The basic business of online shopping mall is to address customers who might not have
time to go out to a shopping mall, in other words for customers who are time poor and
money rich. The prospect of placing before these customers a wide range of products
opens up a new area of unexplored opportunities. The ease with which products required
can be procured under one roof, and the new experience for customers to not go through
the physical process of selection by shop hopping augurs very well for a new business
plan, which could be executed.

The growth of telecommunication and increasing power of people to spend on various

products means the business opportunity presents a one-stop shop for every customer.
The investment required will for establishing an online portal from which customers
could access via internet.

The next step will be to explore possibilities of having alliances and collaboration with
other such online portals, or going into partnerships with various other business
organization that manufacture products, thereby cutting down on middlemen expenses.

This collaboration with product manufacturers will provide us two options. One that we
can sell products to individual customers in low numbers and second, we can use our e-
business platform to sell products in wholesale. A strong collaboration with
manufacturers can also give additional advantage of maintaining fewer inventories and
procure products from manufactures on short notice.

As mentioned earlier products like clothing, entertainment materials, stationery items,

grocery substances in bulk, sporting equipments, apparels and accessories cold be our
potential product line as these are fast moving consumer goods. Once we establish our
base and gain market share we can slowly move to selling luxury products also.

The competitive advantage, which our competitors might lack, is the strong supply chain
and collaboration we will establish with our partners. This will help in reducing

2
inventories being held and thereby help in freeing up capital, which can be used for
expanding our business.

This business plan does come with a caveat though. The platform with which we will
establish our business must be competitive and how we penetrate the market initially is a
risk we cannot neglect. Our investment in advertisement should be very high and will
take a major chunk of our initial capital. The major assumption or risk we will be taking
here is how successfully we can make an initial penetration into the market, after which
we should take it on from there.

The major advantage we can gain from starting this business is that we can get very close
to customers compared to manufactures. As we can establish very close relations with
manufacturers and customers, we become a very vital link in the value stream and can
use it to leverage our future expansion plans.

BUSINESS INDUSTRY

The e - business service being provided is in itself an industry. The core of this is
supported by the IT which will be provided and form a critical part of the business. It will
not be appropriate to restrict the business to one particular industry like manufacturing or
services. The products that will be provided by this business plan are all tangible products
and hence will obviously have a relation to manufacturing industry in one form or other.

However, there is a ceiling for various parameters the business will focus on. For
example, products like automobiles or heavy machineries will not be sold. Product line
will be restricted to easily transportable products and consumable goods like ones
mentioned earlier.

MISSION STATEMENT

Mission statement is to define the purpose of existence of the organization itself, what
products or services they intend to sell, which market to target and how they intend to do
it. Hence, a ideal mission statement would be

“To bring a one-stop solution for quality products at affordable prices and in easily
accessible manner to your doorstep by using modern Information Technology and
consistently striving to add more value to all our stakeholders and customers”

The whole idea is to make sure, products that are used in normal life and that are fast
moving consumer goods be brought under one roof which can be sold to customers at a
price that is both competitive and profitable. The use of internet as a tool and take
advantage of the ever growing interest in online shopping is what is going to give the
business an edge over other similar methods of selling the products.

As the business cannot remain stagnant and has to continuously strive to improve it is
necessary to try to add more value to the customers. To stay ahead in competition, it is

3
imperative to ensure that by using methods of price, product or segment differentiation
the business model, strategies and services are consistently ahead of those of its
competitors (Porter, 1985).

GOALS OF BUSINESS PLAN

CUSTOMER SATISFACTION

The success of business depends on its ability to consistently outperform its competitors
and satisfy customers in all aspects ranging from pricing, quality of products and services
to enhancing customer relationship. This new business plan is not different.

Statement of Purpose

The importance of having very customer satisfaction is because of the nature of contact
we will have with customers. As the shopping experience is going to be online, and hence
there will be no direct contact with customers, the business will be evaluated via product
quality and service provided as there is no other way in which we can influence
customers to choose us over our competitors.

OBJECTIVES

Short Lead-Time

The advantage customers’ gain from using our online shopping facility is that they do not
have to venture out to shopping malls and spend their time moving from one shop to
another. However, this advantage could have a positive impact only as long as we deliver
products quicker than what customers are used to. If we can guarantee product delivery in
less than 24 to 36 hours then this could help us in increasing customer satisfaction.

Product Quality

When customers go to shopping mall even though brand name might promise quality,
customers might not be aware of actual product quality. This is true in case of electronic
items, or other complex engineering items, which they buy on experience. If we as a
business can guarantee them product quality on top of what is provided by manufactures
this can enhance customer satisfaction.

Complimentary Services

Some of the products, which we intend to sell, require substantial after sales service and
other complimentary services that may not be offered by manufactures if items are
imported. If we can venture into this unexplored domain and offer after sales services
then this could be the first step in the correct direction to improve customer satisfaction.

4
MARKET LEADER

This industry even though at an adolescence stage is bound to grow very rapidly in
future. To remain in the market and stay ahead of our competitors we have to possess a
very challenging vision and set ourselves realistic and achievable targets. As any new
entrant or business venture, we should also set ourselves the target of becoming the
market leader in realistic time.

Statement of Purpose

As we plan to start this new business, we should also set our sights on where we want to
be in future. As mentioned earlier the sooner we build a brand value for ourselves we can
leverage it to venture in to other business also. This can be achieved only if we are strong
both as a brand and financially.

OBJECTIVE

Enhanced Collaboration

As we are starting our business, it is difficult to have high customer loyalty from the
outset. Hence, by collaborating with leaders in product manufacturing we could gain
necessary mileage to kick-start our business. This if managed correctly could help us
improve our business and propel us as market leaders.

Price Differentiation

One-business strategy as suggested by Porter is use of price differentiation to increase

market penetration. The supply chain and closer collaboration we have with our partners
should help us reduce prices compared to our competitors. This will fetch us higher
market share and increased revenues, which can indirectly help us, climb market
leadership ladder.

Customization

The online shopping experience we offer must not be generalized above a certain point.
As customer tastes vary widely these services offered will also have to be customized to
their tastes. This can be done by tracking regular customers and adding more flexibility in
the system to help increase market share and hence achieve market leadership.

REVENUE GROWTH

The investment required initially will have to come in the form of capital and for further
growth and development, it is imperative to have good revenue growth.

5
Statement of Purpose

The objective of any business will be increase profits. With future growth in target, it is
necessary to ensure that consistent revenue growth is achieved in order to enable business
to sustain high competition and ensure customer satisfaction.

OBJECTIVES

Competitive Prices

By offering prices that are competitive enough and providing regular discounts during
various occasions which competitors might not identify better revenue growth can be
achieved.

Bundle of Products

Products that are offered uniquely by our business should be bundled with related
products in a manner by which it becomes necessary for customers to buy multiple
products instead of buying single products.

Enhanced Product Quality

There is a growing consensus among various sections of customer to have products that
are of very high quality and reliability. By offering products of better quality with the
help of a better supply chain, we can achieve increase revenue growth.

BRAND IMGAE

As mentioned earlier the initial stages of our business should concentrate on establishing
our business as industry beginners. For future growth, it is necessary to enhance brand
image

Statement of Purpose

If brand image is built this can be used to make a foray into other business area where
there is scope for us. This brand should address various sections of society in order to
enhance brand value.

OBJECTIVES

Customer Loyalty

The improved customer loyalty could enhance our customer base, which could make our
brand more popular. Customer loyalty can be increased by enabling various long-term
loyalty benefits and better treatment of customers.

6
Advertisements

One method, which most brands use to improve brand image, is to use better modes of
advertising. This is done by using celebrities to promote their brand or using more
powerful modes of advertisements, which can help improve brand image.

Encouraging Honest Customer Feedback

Customer feedback methods are a very powerful tool by which organizations can gauge
the attachment customers have to the brand. By encouraging such feedbacks, it helps in
building a more reliable brand image, which customers can trust.

VALUE PROPOSTISON

The growing demand for better quality products that can be offered to customers without
them having to spend much time on issues like product quality and reliability is
increasing. In order to take advantage of this online shopping e - business is a move in the
appropriate direction.

The benefits offered to customers using this facility are the short span of item in which
they can choose from a wide array of products, which they will need in their daily lives.
Also as products can be customized by collaboration with our partners even more value is
added to customers. As all this comes at a price, which is competitive enough for the
product quality being offered it is a very good value addition to customers.

This is important for customers because as mentioned earlier this caters to people who are
time poor and money rich. However, this does not mean products sold are expensive and
lower segments of people cannot afford it. It is the short amount of time spent for such
high quality products in an affordable price, which could be the USP for the e – business.

BUSINESS MODEL

Business models of a type share certain common characteristics. The model is nothing
but a description of the business’ basic components and how these are used to answer one
final question – how does the business earn revenue? (Brahm, 2006)

The business being analyzed is a format in which products are bought from
manufacturers and are sold to customers or to retailers depending on their needs. The
immediate customers could be either individual customers or wholesale retailers. Thus,
the model will be a B2C model where retailers are also dealt in the same way as
customers, only difference being the size of orders placed.

This model is ideally suited for the business as business concentrates on factors like
customer satisfaction, also the fact that the model will aim to establish long term
relationships with the customers and intend to provide round the clock service and
facility for customer makes this model ideally suited for the business plan (William, 2010).

7
This business can also be identified as portal e-business model (Brahm, 2006). As the
business uses an internet portal, which acts as a gateway for the entire business
foundation and most of the business, is being carried out using internet portal.

As this portal forms the link between customer and business and adds the value
proposition to customers, the business plans can be classified as portal e – business
model.

The revenue being generated is also through the above-mentioned two models where
B2C and portal models’ characteristics are the source of revenue for the business. The
customer value or value proposition in the business is also from these models thereby
making these models describe the business plan accurately.

MARKET ANALYSIS

As mentioned earlier one of Porter’s three generic strategies, of price differentiation

another of his strategies is segmentation of market. By segmenting market in a manner by
which you can cater to different consumer tastes, there is a potential benefit of creating
stronger customer loyalty.

Age group

By segmenting market by age group, we can cater to tastes of different generations. Their
tastes will vary depending on their needs. Facilities like discounts for students, additional
facilities for working professional like delivery on weekends or after they return from
work and any additional facilities for aged people like better assistance in using the
online facilities could help address needs of different market segments.

Customer preference

As the tastes of customers vary widely even among the same group like preference for
luxury products, some might prefer cheaper products with a slightly lesser price. By
tracking their requirement, we can regularly contact them regarding various offers that
they might get for products of their choice.

Competitors

As this is a start up business to identify the market leaders as competitors will not be
appropriate. The initial competition will be the mid segment organizations.

Online shopping portals like The Dixons, Debenhams, Empire Stores, and IWOOT will
be some of our potential competitors. The ideal ranking of our competitors will be in the
following order

 The Dixons

8
  Debenhams
 Empire Stores
 IWOOT

The reason for identifying them as our competitors is that they have relatively narrow
customer focus and their product range is not very wide. Also their lead–time is around
one week from order date. Hence, in our initial stages these organizations will be our
competitors.

OPERATIONS

The development and feasibility of the portal will not be a big hurdle as it is more of
software related issue. The hindrance will be mainly from the financial side. The cost is
divided in to two.

One, being the cost for registering the domain name using the host’s internet space and
second, being the cost of creating the website itself. The first cost is nominal for an
organization but the second cost could vary depending on the facilities being installed.
Also there is the other cost of regularly maintaining the website, making the website
being listed high in search engines

As this is a startup business all four costs become essential and will be around 1000
pounds (Toucher, 2001) for a portal with minimal facilities. As the business grows, we
can add more facilities in the website.

The experience of company staff will not be sufficient for us to design and maintain a
website. Hence, it would be prudent to collaborate with web design companies for
website construction, designing and maintenance.

Domain Name

The domain chosen should be both attractive and comfortable for shoppers of all ages and
segments to remember and access. The name should also not be similar to ones in
existence and be different from what our competitors have. A combination of simple
words will help us achieve this purpose. Keeping this in mind an ideal domain name
would be www.customersarefirst.org

As we intend to put customers at the forefront of our business, we should evince that to
them in our identity itself. By using attractive offers and targeting correct customer
segment, the business could be profitable in the fast growing business environment.

9
CONCLUSION

The business plan that is being thought about has bright prospect in future, especially
with a growing internet and IT field. With customers becoming more interested in getting
things done at the click of a button, this makes the business plan even more alluring.

However, all business plans depends on how well it is implemented. There will definitely
be hurdles in the way, which will have to be countered in a manner to ensure successful
execution is accomplished to gain a sustainable competitive advantage.

10
APPENDIX I – INCOME EXPENSE STATEMENT

INCOME/EXPENSE STATEMENT

Income Statement for the year ended 30 JUNE 2010 2011 2012
£’s £’s £’s

Revenue 10000 12000 13000

Cost of Sales 4500 4000 4200
Gross Profit 5500 8000 8800
Other Expenses (Advertisement) 3000 2500 2200
Operating Profit 2500 5500 6600
Profit before Tax 2500 5500 6600
Tax 500 1100 1320
Profit for the period 2000 4400 5280

Summary

The income statement is the amount of capital that is available with the company from
past transactions or existing business. The revenue is assumed to have come a previous
business similar to the on being planned now but at a much less sophisticated level. All
the corresponding expenses are assumed and tax of around 20% of total profit is
calculated at £ 500.

As you can see, the amount of expenses for advertising is very high. This is mainly to
give the upcoming business opportunity adequate exposure in the public domain so that
once the business is started no time is wasted on publicity thereby saving valuable time.

11
APPENDIX II - BALANCE SHEET

BALANCE SHEET

BALANCE SHEET AS ON 30 JUNE 2010

ASSETS 2009 2010 2011

£’s £’s £’s
Non-Current Assets

Property, and Land 7500 10000 11500

Current Assets

Held Inventories 7000 5000 4500

Receivables 100 500 400
Cash 1000 3000 3800

Total Assets 15600 18500 19800

Liabilities

Payables 2500 2000 1800

Net Assets 13100 16500 18000

Equity

Shares 4100 6500 7200

Retained Earning 9000 10000 10800
Total Equity 13100 16500 18000

Summary

The balance sheet shows the amount of transactions that has taken place between the
mentioned times. As you can see the amount of property and land has increased during
the time due to appreciation. The amount of receivables and has increased due to the
business activity taking place. However, the cash reserve has decreased due to the
investment activities for the new business venture in property and other equipments.

The company is assumed to be a public limited company and has issued shares during the
time to raise adequate capital for the new venture. As can be seen the retained earnings
amount has increased due to improved business activity.

12
APPENDIX III - CASH FLOW STATEMENT

CASH FLOW STATEMENT

CASH FLOW STATEMENT FOR THE YEARS 2010, 2011 AND 2012

2010 2011 2012

£’s £’s £’s
Cash flows from operating activities

Profit before Taxation 4500 5200 5750

Adjustments for
Depreciation 250 300 300
Operating Profit 4750 4900 5450
Receivables 200 300 250
Payables (100) (150) (100)
Cash Generated 4650 4750 5300
Tax paid 930 950 1060
Net cash from operating activities 3720 3800 4240

Cash flow from investments

Purchase of assets (500) - -
Sales of assets - 500 -
Net cash from investment activities (500) 500 -

Cash flow from financing activities

Share issues 1000 800 400
Dividends paid 220 300 200
Net cash flow from financing activities 1220 1100 600

Net Increase in cash 2000 3200 3640

Summary

The cash flow statement shows the net cash flow that has taken place at the said time.
Three-year projections have been given based on the assumption that profits will increase
steadily as the business progresses.

Assets have been purchased in the first year for business expansion plans, and some part
of those assets have been sold at profit in the following year as some assets have become
redundant.

The amount of receivables or payables have been maintained steadily indicating that
unnecessary capital is locked on either side of the transactions.

13
APPENDIX IV - FINANCIAL RATIOS

FINANCIAL RATIOS

Investment Ratios
2010 2011 2012
Return on Capital Employed (ROCE) =
Profit before Interest____________ 0.19 0.33 0.36
Assets Employed or (Total Assets – Current Liabilities)

Profitability Ratios

Net Profit margin = Net Profit

Sales 0.55 1.37 1.57

Liquidity ratio

Current Ratio = Current Assets__ 3.24 4.25 4.83

Current Liabilities

Summary

As can be seen all the ratios show healthy numbers. The ROCE is increasing steadily and
the Net profit margin due to better business activity in the forthcoming years will show
very strong numbers. The current ratios is very high showing the fact that our liabilities
are very low when compared to our assets thereby giving us enough financial leverage to
expand our business in to new areas in the future.

14
REFERENCES

Brahm Canzer (2006) , E-Business – Strategic Thinking and Practice, Houghton – Mifflin
Company, USA, pg 93, 101-104

Michael. E Porter (1985), Competitive Advantage: creating and sustaining superior

performance, The Free press, USA, pg 28-53

Paul J. Jackson, Lisa Harris, Peter M. Eckersley (2003), E-Business Fundamentals,

Routeledge, USA, pg 1

Toucher Web Design (2001)

Available: http://www.toucher.co.uk/fixedprice_websites.htm
Last Accessed on 07 June 2010

William M. Pride, Robert J. Hughes, Jack R. Kapoor (2010), Business, South-Western

Cengage Learning, USA, pg 483

15