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ELECTRONIC VILLAGE.COM
Term Paper ID:29796
Essay Subject:
A business proposal for the company.... More...
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Paper Abstract:
A business proposal for the company. Marketing of Microsoft Windows-based Personal Computers (PC's) directly to consumers. Primary focus on rapid delivery to meet consumer needs. Marketing strategy focus on Internet-based sales through business to consumer (B2C) model. Market competition. Business goals & strategies. Financial planning. Proforma income statement, balance sheet, cash flow.
Paper Introduction:
ELECTRONIC VILLAGE.COM: BUSINESS PROPOSAL
Introduction
Electronic Village.com is new company focusing on the marketing of Microsoft Windows-based personal computers (PCs) directly to consumers. The company acquires products from computer hardware and software manufacturers, and configures complete systems to meet consumer needs. While the company offers stock configured systems for almost instant delivery, the primary marketing focus of the company is on the rapid assembly and delivery of custom configured PC systems to meet specific consumer needs.
The marketing strategy of Electronic Village.com focuses on Internet-based sales through a business-to-consumer (B2C) model. B2C information technology makes it possible for organizations to communica
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The Gateway Web site makes it possible for customers to purchase GatewayComputer products through the Web site store, as well as providing resellerlocations and contacts to customers who desire to purchase computers inbrick and mortar stores. Both delivery speed anddelivery reliability are high. Thus, while each company providesdirect competition for Electronic Village.com, the Dell operation hasgreater similarity to that of Electronic Village.com than does the Compaqoperation. |3 . D Days Sales in Acct Rec ........ 3.3% Return on Equity .............. Gateway Computer continues to sell and deliver 65percent of its computers via mail order, with an additional 1 percent soldvia the Internet, and 25 percent sold and delivered through the company'sretail storefronts under the name "Country Store". The market leader in B2C PC marketing is Dell Computer. B2C informationtechnology makes it possible for organizations to communicate directly withconsumers. |8. The B2C model does not necessarily mean that communicationsbetween and organizations and their customers are interactive, althoughmany for-profit organizations with B2C operations do offer consumers thefacility to purchase products through their Web sites. The presentations include the following: > Pro forma income statement > Pro forma balance sheet > Pro forma cash flow > Pro forma competitive comparison Pro Forma Income Statement [One-Year]|Item |$ ( ) |% (rev) ||Revenue |$5 . ||Total Equity |9 . % ||Non Operating Expenses | 2.5 | .5% ||Income Before Taxes | 37.5 |7.5% ||Income Taxes | 1 . * Opportunities > Exploit sales opportunities in e-commerce, where computer sales are faring better than in strip-mall retail stores > Exploit analyst ratings indicating that some PC models offer consumers power-price ratios > Promote market share increase through focusing on the convenience of reliability of an effective and efficient B2C marketing strategy > Increase market share and profitability with a strategy that develops an optimal balance between stock configured PC systems and custom configured PC systems > Expand software and peripheral revenues by offering these products through the company's B2B Web site > Gain market share with an aggressive pricing strategy * Threats > A collapse in the demand for personal computers in the United States > A weak economy in the United States that may heading into the second part of a double-dip recession > Loss of market share to Dell Computer and other large competitors Business Goals & Strategies Electronic Village.com's mission is to provide high-quality personalcomputers to business and home computer users through a direct marketingstrategy that focuses on the B2C model. % ||Depreciation | 2.5 | .5% ||Operating Income | 4 . Agreements and coalitions with other companies which are upstream ordownstream in the value chain have the objective of creating economies ofscale and learning economies, allowing access to technology, reducing risksand modifying the competitive environment. Other majorplayers in the B2C PC market are Gateway Computer and Compaq Computer (adivision of Hewlett-Packard).Dell Computer & Compaq Computer Compaq produces a full line of computers from high-end servers to low-end desktops and hand-held computers. % ||Cost of Goods Sold | 4 7.5 |81.5% ||Gross Profit | 92.5 |18.5% ||SG&A Expense | 5 . Compaq emphasizes low price in eachproduct group and builds its market position by under-pricing competitors.Dell also produces a full line of computers. Compaq produces to stock and maintains strategically placed warehousesto assure product availability to resellers. ||Total Assets |3 . % ||Net Income After Taxes |$ 27.5 |5.5% |Pro Forma Balance Sheet|Item |$ ( ) |% ||Cash |9 . ||Total Liabilities |21 . A higher degree of verticalintegration involves fewer risks when it occurs through agreements andcoalitions than it does when it occurs through acquisitions or theutilization of internal resources. |3 . ||Other Current Liabilities |15. 2.3X Total Debt/Equity Ratio ....... 9.2% ..... 2 .4% ..... The marketing strategy of Electronic Village.com focuses on Internet-based sales through a business-to-consumer (B2C) model. Gateway operates retail outlets under the name "Gateway ComputerCountry Store". While Electronic Village.com may notfocusing on the marketing of goods to customers located outside of theSouthern California region, the company, of necessity, must compete againstall other B2C information technology product marketers who target consumersin the Southern California region, regardless of where the physicallocations of these other B2C information technology product marketers maybe. 1.8X ..... Thebuild-to-order business model at Dell eases the problem of coping withchanges in demand. Thetime which is necessary to create the minimum threshold of experiencewithin a firm is greater than the time which is required if a coalition isformed. An important element of the company's mission is to deliver highquality PC systems, with a high level of customer service, at competitiveprices. ||Total Current Liabilities |165. ||Total Current Assets |18 . ||Net Fixed Assets |9 . Dellis a low innovation company, while Compaq is a high innovation company.Electronic Village.com does not control product innovation. Again, Electronic Village.comfollows the Dell model. 1.1X ..... |1 . |1 . Both Dell and Compaq emphasize product quality. |3 . Through coalitions, a company'srepositioning occurs more quickly than through internal development. 4. ||Inventories |3 . The Web site also provides productinformation for corporate user; however, the company does not emphasizethis service for corporate customers. Gateway makes good use of technology to allow customers to designcomputer systems to meet their specific needs. Compaq depends on computer resellers and channel partnersto provide product support and repairs, while Dell offers both telephoneand Web-based technical support. The company's CountryStore chain is not a separate profit-center within the Gateway ComputerCompany.Electronic Village.com Electronic Village.com also has a clean, uncluttered Web site. ||Other Noncurrent Assets |3 . Dell markets itsproducts directly to computer only. 29.2D Current Ratio ................. |6 . Dell, however, emphasizesquality and reliability instead of low price. The build-to-order business model followed by Dell alsomakes the company more flexible than Compaq. 3 .5% ..... 19.2% Net Profit Margin ............. 12.8% Inventory Turnover ............ Again, the approach of Electronic Village.comhas greater similarity to that of Dell than to that of Compaq. electronic village.com: business proposal Introduction Electronic Village.com is new company focusing on the marketing ofMicrosoft Windows-based personal computers (PCs) directly to consumers.The company acquires products from computer hardware and softwaremanufacturers, and configures complete systems to meet consumer needs.While the company offers stock configured systems for almost instantdelivery, the primary marketing focus of the company is on the rapidassembly and delivery of custom configured PC systems to meet specificconsumer needs. ||Stock Equity |9 . |4 . Electronic Village.com focuses on outbound logistics anddirect sales to customers at its B2C Web site.The PC Market Since November 2 , the opportunities for PC marketers have been thinon the ground, while new threats seem to appear daily. Electronic Village.com targets home computer users, small businessusers, and home office users through the company's B2C Web site. Compaq has a superior research and development program to Dell. |15. 5.5% ..... |1 . Industry Gross Profit Margin ........... |5. |1 . Thecompany does not target corporate customers. This outcome can occur in the case of rapid technologicalinnovation. Nevertheless,opportunities exist for inveterate optimists and fools in all environments. 1.5X Conclusion This document presented a business proposal for ElectronicVillage.com. ||Accounts Payable |12 . 14.2% Return on Assets .............. .5X ..... ||Total Liabilities & Equity |3 . ||Net Receivables |45. .9X ..... Such is the case ofElectronic Village.com, whose Web site is characterized by shopping cartmanagement tools, such as product catalogs and credit card processing fororder payment. |Pro Forma Cash Flow The entrepreneur will contribute $9 , in equity capital. The Country Store business model is an alternative product-delivery strategy. The marketing and financial data presented in the proposalindicate that the venture can be successful. |1 . For product repair, however, Dell relieson third-party contractors. ||Long-Term Debt |45. The "Welcome"page highlights current product promotions, provides a highly visible andeasy to use search function, and provides easy location and access tomarketing and service areas on the Web site. The company alsouses technology to its advantage by retaining customer configurations andequipment serial numbers in a database that customers can access easilyfrom the company's B2C Web site. 1.4X Quick Ratio ................... Each activity and function identified in a valuechain involves associated costs. Rather, thecompany depends on computer hardware manufacturers to develop and makeavailable product innovations. An analysis of the costs associated with the activities and functionsin a company's value chain, together with a comparison of the company'scosts by activity and function with the comparable costs of competitorsprovides a basis for the development of strategies that can either createor preserve a competitive advantage for a company. Electronic Village.com makes good use of technology to allow customersto design computer systems to meet their specific needs. 26.8D ..... Operating from a more traditional business model, Compaq encountersmore difficulties in coping with changes in demand than does Dell. Dell, in contrast, produces to order andships the finished product directly to purchasers. Financial Planning The financial planning data prepared for this business proposalinclude pro forma financial statements and pro forma comparison withcompetitors. The company also usestechnology to its advantage by retaining customer configurations andequipment serial numbers in a database that customers can access easilyfrom the Web site. An important facet toproduct quality (technical support) is a point of differentiation betweenDell and Compaq. |5. |15. 32.8D ..... ||Short-Term Debt |3 . 16.7X ..... Gateway targets home computer users, small business users, and homeoffice users through the Web site. Long-termloans from family members will provide an additional $45, in capital.The first year of operation will generate an additional $27,5 in profits,of which approximately $15, will be retained in the form of cash.Pro Forma Comparative Comparison Measure ....................... 82.3X Days CoGS in Inventory ........ The remainder of this document further develops the business proposalfor Electronic Village.com. The sum of the costs of all activitiesand functions involved in the creation of a product and movement of aproduct to the customer represents the total cost of the product to thecustomer. The three essential elements ofthe company's strategy in pursuit of this mission are as follows: > Minimize inventory [emphasize build to customer order, with a less emphasized alternative of stock configured PCs] > Obtain information directly from customers and heed customers' desires > Do not sell indirectly [e.g., the company will not assemble PCs for distribution through other resellers] Electronic Village.com strives to treat all customers as if they arethe company's best customer. Compaq markets its productsdirectly to consumers and through retail distributors. |3 . Dell derives a competitive advantage over Compaq through its build-to-order business model. |2. The"Home" page provides a visible and effective link to the "Products andServices" page which highlights current product promotions, and whichprovides easy location and access to other useful areas on the Web site.The Electronic Village.com Web site makes it possible for a customer topurchase PC systems in either stock configurations or custom configurationsthrough the company's Web site store. ||Other Current Assets |15. Delivery reliability atDell is high, but delivery speed depended in part on order volume.Electronic Village.com generally follows the Dell model. |7 . With respect toCompaq, Electronic Village.com offers Compaq PCs as a reseller incompetition with Compaq's B2C marketing effort. To serve clients more efficiently, thecompany developed a job-control system to monitor the progress of customerprojects and to communicate to customers any changes in delivery dates orbillings. The major issues addressed in the remainder ofthe document are (1) market competition, (2) business goals and strategies,and (3) financial planning. Because of the effectiveness of this business model,Dell minimizes inventory costs (eliminates the finished goods inventory).Thus, while Compaq has a competitive advantage over Dell at the grossmargin level of manufacturing, Dell has an even greater competitiveadvantage over Compaq at both the operating margin level and the net marginlevel. The Web site also provideslinks to software downloads and product upgrades available on the Web site. Electronic Village.com will function at a comparative advantagelevel at a point between Dell and Compaq, as Electronic Village.com willmaintain some stock configured PC systems in finished goods inventories.Gateway Computer Gateway Computer has a clean, uncluttered Web site. The value chain for a company identifies the separate activities andfunctions involved in the creation of a product and the movement of thatproduct to the end user. Company ..... Because of the B2C marketing strategy followed by the company,however, Electronic Village.com operates in a competitive arena that fartranscends Orange County, California. |55. |1 . 18.5% ..... Market Competition The physical location of Electronic Village.com is in Santa Ana,California. |1 . 1.2X Leverage Ratio ................ 6.1% Return on Total Capital .......
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