case study entrepreneurship

1. FACULTY OF BUSINESS, ECONOMICS AND ACCOUNTANCY
MASTER OF BUSINESS ADMINISTRATION
SECTION 2
SEMESTER 1 2017/2018
BM6063 ENTREPRENEURSHIP
LECTURER: DR. SALMAH TOPIMIN
GROUP CASE STUDY 1
COMMUNITEEWEB.COM - AN INTERNET FIRM’S EFFORT TO
SURVIVE.
NAME MATRIC NUMBER
MOHD SHAFIQ MARICAN BIN ARIFFIN MB1712400T
MOHD TAUFIQ SAADUDIN BIN JAUDIN MB1712401T
RACHEL ANAK NOEID MB1712411T
SHERLEEN ELEANORE CHRISTIANUS NG MB1712421T

2. PART 1 - BACKGROUND OF THE CASE STUDY
This case study is about a web-based company named CommuniteeWeb,
experienced hard time establishing during economic crisis. Dan Pale, the Founder and
Chief Executive Officer (CEO) of the company and Jim Mack the co-founder,
additionally the Chief Operating Officer (COO) of the company spent $1.6 million start-
up capital for over than one-year operation. Interestingly, Dan Pale had discussed and
explored the idea of localized internet portal for many months. Thus, in the year of
1999, Pale went to Mack and discussed the business that he wanted to venture. After
three meetings, Mack agreed to join the venture with the basic idea behind the
business concept that is, to localize the internet.
Dan Pale recruited and hired a talented, young team for the company. Pale and
Mack planned to take their concept of localized internet utilization to market through
franchising. Jim Mack and Dan Pale at first estimated that the company would require
$2 million in start-up equity. However, there was a heavy issue that Jim Mack never
registered the distribution of equities for private placement with the Securities and
Exchange Commission (SEC).
Apparently, the founder of this company, Mr. Pale was a businessman
background, started his career in business at age 23 when he established a clothing
store that rapidly grew to more than $1.2 million in annual sales. The co-founder, Jim
Mack was a certified financial planner and registered financial consultant. The other
members of the management team were very young and energetic and most of them
were college graduates.

3. From the year of 1999 to 2001, the internet grew a significant impact towards
the global business. Nevertheless, the economic conditions during 2001, made it
difficult for growing businesses, especially the Internet-based, to obtain funding. By
June 2001, Community Web faced so many competitors such as DigitalCity.com,
Citysearch.com, move.com and others. Yet, CommuniteeWeb did not look at these as
major threats because they believed that none of those companies can truly provide
local information like what they can. The CommuniteeWeb.com website was officially
launched on January 28, 2001. At the first few months in 2001, CommuniteeWeb
established partnerships and alliances with several strong companies such as AT&T,
Infospace.com, and Hargiss Communication. CommuniteeWeb continued struggling to
improve their business to the extend that they were forced to generate positive cash
flow within the next two to three months.
In April 2001, the company running short of funds, so they imposed major
cutbacks, leaving only 15 key employees and a monthly expenditure of only about
$75,000. This is the only way to keep the company alive because there were no
incoming revenue but mounting debt. Abandoning the company original business plan,
they focused on selling website tools to Internet Service Providers (ISPs). However,
the URL database faced technical errors that reduced both the effectiveness and size
of the database that forced the company to cancel their plan. To generate additional
income, CommuniteeWeb introduced web development division to its business and
the company became the ISP itself. Dan Pale and Jim Mack know their financial crisis
and they only had few months left to get positive cash flow. Other than the financial
pressures, there were also conflicts appeared between Mack and the other employees.
The conflict between Mack and Pale also started to emerge.

4. In May 2001, due to such conflicts, Dan Pale appointed by the board of directors
as the CEO and chairman of the board to replace Jim Mack. Mack would remain on
the board of directors and still maintained his role in raising revenue for the company.
On June 2001, Pale has to make a decision to sign a funding agreement with Wall
Street Venture Capital. Jim Mack and Dan Pale investigate the viability of this New
York-based venture capital company. However, after almost two months of
investigate, they unable to find out whether or not Wall Street Venture Capital had a
proven track record with multimillion-dollar start-up investing. Any information about
the company was very hard to obtain. As the CEO of CommuniteeWeb, Dan Pale faces
his toughest decision. He considering entering the agreement with Wall Street Venture
Capital.
The entrepreneurial venture highlighted within this case study is about two
ambitious men enduring many setbacks along their way to soar upward in the era of
internet because they spent a lot of money to start their business. The initial purposes
or goals of the business was to generate promising profits by using the technology
which is the internet. Their business generally about providing online community
service by localizing the internet.
One of the reasonable ways when they start-up their business was, hiring
young and talented college graduates which had suitable fields and qualifications.
Because these fresh college graduates were energetic and savvy in Information,
Communication, and Technology (ICT), as they believed.
Even though the company faced difficulties during the economic crisis, they still
proceeded their plan and established their website. CommuniteeWeb had so many

5. competitors but that not the major threats to them. What they focused was to have
the positive cash flow for their company to survive. Among the venture that they did
were to do cutbacks on the number of employees and expenditures. Other than that,
they selling website tools to ISPs and became ISP themselves.
Because of the conflicts that occurred between them, the board of directors
rearranging the position to avoid the bigger problem from happening. Last but not
least, to sign the funding agreement with Wall Street Venture Capital was the most
important decision the CEO of the company had to decide. This is why both Mack and
Pale seeking the information about Wall Street Venture Capital.

6. PART 2 – ISSUES / PROBLEMS OF THE CASE STUDY
Community Web was having problems taking its business model to the market due
to:
1. Initial estimation are not converted into reality.
Dan Pale and Jim Mack trusted that CommuniteeWeb had just a couple of months
to set up a positive income. Mack intended to keep raising assets from his customers
and individual system, while Pale and his staff hotly advertised their new plan of action
to ISPs, yet capital markets had turned out to be more tightly and Mack apparently
had depleted his own assets. Before the finish of April the two men depended on
"bootstrapping" for here and now financing by pushing their own charge cards as far
as possible, deferring installments to the vast majority of CommuniteeWeb's loan
bosses, and falling behind by more than $200,000 in dispatching finance duties and
workers' salary assess withholding to the Internal Revenue Service (Exhibit 3
demonstrated the organization's asset report). Pale and Mack's own obligation now
surpassed $300,000. Representatives felt the squeeze as Community Web's paychecks
regularly were deferred by as much as a month.
2. Low cash flow in the company opening months
In the midst of these budgetary weights, individual clashes emerged amongst Mack
and representatives. On account of Mack's steady changing of the plan of action,
representatives grumbled that they once in a while knew "the most recent" heading
of the organization. A lot of financial liability namely focusing on tax liability which the
company owed the IRS=$200,000 and Indiana state $20000 payment agreement with
the state, trends that has been affecting the industry which involved downturn of the

7. economic scene, where consumers desired to spend was less to save more. Poor
industry structure that forced the company to perform a lot of “cutback” which define
retrenchment of workers. Strategic failure on facing high fierce competition based on
territory expansion by revenue counted $300,000. Employees also started to feel the
pinch of the firm’s cash flow problems as issuance of paycheck
3. Misconduct in organization
The organization's essential idea was to localize the Internet through the website
which could enabled clients to localized data found on the Web to a specific area. The
webpage would create promotions particular to every client's neighborhood. Pale's
thought was to obtain these abilities inside one national Web webpage at
http://www.CommunityWeb.com. The site additionally would empower clients to
cooperate with the site and each other by posting stories about neighborhood
brandishing and news occasions. Dan Pale enlisted a youthful group to construct
Community Web. For a while they utilized as a part of house programming to find,
catch, and sort a broad database of URLs and manufactured a model for taking their
item to showcase. Mack and Pale intended to establishment the restrictive rights to
offer http://CommunityWeb.com promoting a standard fly up advertisements and
email showcasing in domains populated by roughly 100,000 individuals, while holding
for the organization the rights to the 50 biggest metropolitan markets in the United
States. Mack and Pale would utilize the establishment charges ($35,000 per region)
to finance the organization's further development.

8. 4. Legality Issues
In the year of 2001, CommuniteeWeb abandoned its original business model
and focused instead on selling its web sites tool to ISP (Internet Services Providers).
Critical mistakes made by CommuniteeWeb perhaps not building a business model
that would work. The company thought that only competition was newspaper and
local media, not other local IP source companies. Ethical and legal concerns in this
matter because the firm’s historical financial statement had not been audited,
communication with potential institutional investor and venture capitalists was
difficult. There was also another issue that Jim Mack never registered the distribution
of equities for private placement with Securities and Exchange Commission (SEC).
Therefore the legality of these securities could be question.

9. PART 3 – EVALUATION OF THE ENTREPRENEURSHIP OPPORTUNITY
Before we make a conclusion on whether to pursue or not to pursue this
entrepreneurial opportunity, we first list down the SWOT analysis. SWOT stands for,
strengths, weaknesses, opportunities, and threats. It is a powerful tool to help you to
understand your company more, and help to distinguish your company from
competitors. This allows you to compete with your competitors to capture the market
shares.
a) Strengths
First and foremost, CommuniteeWeb’s strengths are, the company hired a
group of young and energetic people who just graduated from college and university.
Here, the company’s intention was to hire young and energetic who just graduated
from university because, the founders hope that they will provide lots of ideas for the
sake of the company’s future. The second strength is, they localized the internet and
generate advertisements specifically to the geographic area from which the user
generated from. For the third strength, they did what others never did before. So this
is definitely their strength too.
b) Weaknesses
As for the weaknesses, they did not dare to give it a try. An example, when the
Wall Street Venture Capital offers them a help, the company rejected them after a
while. As it is because they do not know much about the company’s background. Due
to this concern, the golden opportunity disappeared just like that. Another weakness
from the Community Web is the company only managed to sell two franchises since
the company operate.

10. c) Opportunities
The strengths of the company eventually lead to opportunities. The
opportunities that can be spotted are, from hiring a group of young and energetic
people who just graduated from university, they are able to provide the company with
some valuable ideas, and will be very passionate in doing their new job. From the
second strength, the opportunity that the company will get is, they are able to capture
more market share, as they localized the internet, meaning to say people outside from
the city too able to surf the internet to know more about the outside world.
d) Threads
Last but not least, the threats. As for the threats, there are quite a numbers of
it. First, in 2001, the economy downturn occurred impacting most internet based
companies, caused some of them to shut down or they went back to the traditional
way to market their products, even worse to those internet based companies who just
started to operate. Because of such situation, big companies are not willing to invest
for companies who are still at the start up stage. Furthermore, since operation, the
company only managed to sell 2 franchises, and even though managed to sell 2
franchises, the company still face lack in cash flow and mounting debt. Furthermore,
they partnered up with the wrong partners too, as the partners do not fit into their
vision. The mismanagement from one of the director too, Jim Mack, who constantly
changing the business model, caused the employees barely knew about the latest
direction of the company.
To recap everything in order to decide whether to pursue this entrepreneurial
opportunity or not, first and foremost, we know that the Community Web company

11. consists of a team of young and energetic people, who have just graduated college,
sure is a good thing. Dream of making the company a huge success is everyone’s
dream in that company. The one mistake that they made was, they do not believe the
Wall Street Venture Capital’s offer. The reason why they gave up the opportunity was
because of during that time there were not much information about Wall Street
Venture Capital.
The company’s finance was in a really bad shape too, further collaborated with
unreliable company had made their situations even worse. Besides that, they also
faced a number of competitors, for an example web site such as yellow pages web
sites, local newspapers and radio. Luck was not on their side too, especially in 2001,
the economic conditions were not good, and the internet based companies affected
the most. A lot of the internet based companies made a major cutbacks. And since
the Community Web just started, they do really feel the effect of the bad economic
situation. This situation further made them hard to obtain any funding, because
investors during that time only wanted to invest those stable companies. Developed a
partnership with those well establish companies too ended up dissolved, because
Community Web couldn’t meet the demand as mentioned in the contract.
Therefore in my opinion, as an entrepreneur, to pursue this opportunity is a big
no. The threats that the company faced are way too much. Things that are supposed
to be opportunities did not turn out well. Furthermore, since the company is in a really
bad shape, and need a huge capital to save it. The things that they can take into
consideration in order to save the whole company are, first and foremost, to file for
bankruptcy, or another option is to sell the company off to other people, where they
can still at least earn some.

12. REFERENCES
1. Kuratko. 2014. Entrepreneurship: Theory, Process, Practice. 8th ed. Nelson
Education, Ltd and Cengage Learning Publishers.