Develop a Strategy


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Develop a Strategy

  1. 1. Situation Recommendation ImplementationPrimer: Developing a StrategyJoyce CHIN, Vincy IP, Ray YIP
  2. 2. Situation Recommendation Implementation 1Situation Recommendation Implementation181111 Primer: Developing a Strategy Topic: Develop A Strategy Context: Internal Strategic Meeting Audience: Management Team of the Company * Company Profile can be found in Appendix
  3. 3. Situation Recommendation Implementation 2Situation Recommendation Implementation181111 Primer: Developing a StrategySteadily decreasing no. of users sends strong warning signal to needfor strategic changeSituation Recommendation ImplementationSource: Team Analysis0200004000060000800001000001200001400002008 2009 2010No. of e-Marketing Services UsersDecreasing at an Average Rate of 11%
  4. 4. Situation Recommendation Implementation 3Situation Recommendation ImplementationDecreasing profit margin threatens the future profitability andfinancial health of the company0%10%20%30%40%50%60%70%80%90%2008 2009 2010Profit Margin of e-Marketing Services181111 Primer: Developing a StrategySituation Recommendation ImplementationSource: Team Analysis
  5. 5. Situation Recommendation Implementation 4Situation Recommendation ImplementationE-marketing services is currently a cash cow with slow growth buthigh market shareRelative Market ShareHigh LowStar Question MarkCash Cow DogE-marketing ServicesMarketGrowth RateHighLow181111 Primer: Developing a StrategySituation Recommendation ImplementationSource: Team Analysis
  6. 6. Situation Recommendation Implementation 5Situation Recommendation ImplementationBut within 5 years, e-marketing services will evolve into anunattractive market with very low profitabilityRelative Market ShareHigh LowStar Question MarkCash Cow DogE-marketing ServicesMarketGrowth RateHighLow181111 Primer: Developing a StrategySituation Recommendation ImplementationSource: Team Analysis
  7. 7. Situation Recommendation Implementation 6Situation Recommendation ImplementationHow to develop a strategythat can sustain our profitability at level of $12Mwithin the next 5 years?Source: Team Analysis181111 Primer: Developing a Strategy
  8. 8. Situation Recommendation Implementation 7Situation Recommendation ImplementationExtension to online B2B services is the best possible alternativewith high profitability and less keen competition7Alternatives Extension to OnlineB2B ServicesStrengthened e-Marketing ServicesAdvertisingProfitabilityLess FierceCompetitionMarket SizeFit with CurrentCapabilityLow development CostOverall181111 Primer: Developing a StrategySituation Recommendation Implementation= The Most
  9. 9. Situation Recommendation Implementation 8Situation Recommendation ImplementationThreat of Entry• High upfront costs• Large & Long R&DThreat of SubstitutePorter’s 5 Forces Model shows B2B market is high attractiveSupplier Power Buyer PowerRivalry• Hard to copy search enginetechnology• Considerable differentiationamong current marketofferings• Medium switching cost• Driven by popularity of B2Bwebsites• Many server providers• Self-owned technology• Increasingly popular• Moderately efficient means oflooking for business opportunitiesMichael Porter’s Five ForcesLowMediumHighKey181111 Primer: Developing a Strategy 8Situation Recommendation ImplementationSource: Team Analysis
  10. 10. Situation Recommendation Implementation 9Situation Recommendation Implementation181111 Primer: Developing a StrategyRevenue from solely B2B services will grow at rate of 228% toreach HK$28m by 2016-5051015202530352012 2013 2014 2015 2016RevenueNet Profit10.99Situation Recommendation ImplementationHK$mRevenue CAGR = 228%Revenue = 28mSource: Team Analysis
  11. 11. Situation Recommendation Implementation 10Situation Recommendation Implementation181111 Primer: Developing a StrategySituation Recommendation Implementation
  12. 12. Situation Recommendation Implementation 11Situation Recommendation ImplementationWe have tremendous strengths in delivering the best B2B onlineservicesPriorityListingUnorganizedResultsUnverified &OutdatedAccountProblemsArtificial IntelligenceTechnologySolutionsCompetenceCustomized Search Results3rd PartyAuthenticationTo exceed our competitors To match our competitors181111 Primer: Developing a StrategySituation Recommendation ImplementationLack of e-MarketingServicesE-MarketingServicese-MarketingPlatform andReputation
  13. 13. Situation Recommendation Implementation 12Situation Recommendation ImplementationCase study shows SME is a high potential market for B2B servicesCloth Manufacturing SMERevenue: HKD$2M15 Deals per yearDifficult to find B2B Businesses181111 Primer: Developing a StrategySituation Recommendation Implementation
  14. 14. Situation Recommendation Implementation 13Situation Recommendation ImplementationTarget customer is the SMEs in Mainland China and Hong Kong of2.7M181111 Primer: Developing a Strategy of SMETotal No. of SME in Mainland China and Hong KongMainland ChinaHong KongSource: Team AnalysisSituation Recommendation Implementation
  15. 15. Situation Recommendation Implementation 14Situation Recommendation Implementation181111 Primer: Developing a StrategyWe expect similar strong users growth rate in future as ourcompetitors did in past 3 years0%10%20%30%40%50%60%2009 2010 2011Growth Rate of Active Users of AlibabaSource: Alibaba Financial Report Situation Recommendation Implementation
  16. 16. Situation Recommendation Implementation 15Situation Recommendation will reach a total of more than 2000 users ataverage growth rate of 120% per year181111 Primer: Developing a Strategy 15Key assumptions: 1. $13300 Annual Return per User2. 1 Deal in every 2 days (per salesperson)Source: Team AnalysisSituation Recommendation Implementation050001000015000200002500030000350004000045000500002012E 2013E 2014E 2015E 2016ENo. of Users
  17. 17. Situation Recommendation Implementation 16Situation Recommendation will obtain a market share of 18% by 2016E181111 Primer: Developing a Strategy 16Key assumptions: 1. B2B SME market grows at a steady rate of 5%2. Other competitors is assumed to carry on with the same average growth rate of past 5 yearsSource: Team AnalysisSituation Recommendation Implementation0%2%4%6%8%10%12%14%16%18%20%2012E 2013E 2014E 2015E 2016EMarket Share (in no. of users)
  18. 18. Situation Recommendation Implementation 17Situation Recommendation ImplementationA total spending of 80%, equivalent to HKD$8.5M, is on B2B onlineservices, while the rest is on existing e-Marketing services0%10%20%30%40%50%60%70%80%90%100%CapitalB2BOnline Servicese-MarketingServices(HKD$8.5M)1. System Development2. Sales Operations3. Promotion(HKD$10.7M)1. Further Expansion to New Services2. Increased Quality on Existing Services181111 Primer: Developing a Strategy 17Situation Recommendation ImplementationSource: Team Analysis
  19. 19. Situation Recommendation Implementation 18Situation Recommendation ImplementationCapital expenditure is mainly invested in first 3 years ontechnology development, promotion and sales operations32.51.50.1 0.1 0.100.511.522.533.52011 2012 2013 2014 2015 2016HKD (in M)181111 Primer: Developing a Strategy 18Situation Recommendation ImplementationSource: Team Analysis
  20. 20. Situation Recommendation Implementation 19Situation Recommendation ImplementationOur top priority strategic initiatives are to recruit senior sales inB2B industry and patent the AI search technologyHigh ImpactLow ImpactEasyHardImpact / Ease of Change Matrix2. Patent the AI Search Technology1.Recruit Senior Sales in B2B Industry3. Strengthen Existing e-Marketing Services4. Carry Out Heavy Promotion6. Initiate a Price War to win over users181111 Primer: Developing a Strategy 19Situation Recommendation ImplementationSource: Team Analysis5. Reduce Investment on Developing e-Marketing Services
  21. 21. Situation Recommendation Implementation 20Situation Recommendation ImplementationTo excel in the market, we have to develop a number ofcapabilities along with our current strengths20High Reputationas OnlineServices ProviderMost AdvancedAI SearchTechnologyExtensiveExperience inProviding OnlineServicesCurrentThird-PartyAuthenticationLarge CustomerBaseAwareness in B2BMarketTo BeDeveloped181111 Primer: Developing a Strategy 20Situation Recommendation ImplementationSource: Team Analysis
  22. 22. Situation Recommendation Implementation 21Situation Recommendation ImplementationThere are a number of strategic key performance indicators tomeasure our progress181111 Primer: Developing a Strategy 21Situation Recommendation ImplementationSource: Team Analysis• Evaluate the synergy between e-marketing and B2B servicesNo. of Integrated Accounts (User of Both e-Marketing and B2B)• Evaluate the acceptance of the marketCustomer Growth Rate / Market Share Growth Rate• Measure the value of our services to customersAnnual Return Per User• Measure the quality of our services compared to competitorsCustomers Retention Rate
  23. 23. Situation Recommendation Implementation 22Situation Recommendation ImplementationBut we also foresee a number of implementation challenges ahead181111 Primer: Developing a Strategy 22Sales at initial stageHeavy capital expenditure in initial stageAttention of usersScattered SMEs in ChinaSituation Recommendation ImplementationSource: Team Analysis
  24. 24. Situation Recommendation Implementation 23Situation Recommendation ImplementationWe will provide discount to existing e-Marketing services users toopen an integrated account with B2B online services181111 Primer: Developing a Strategy 23Integrated Accounts• First-hand experience of our services• Basic authentication check to ensure quality• Word-of-mouth effect• Discount as incentives• Leverage on own reputationSituation Recommendation ImplementationSource: Team Analysis
  25. 25. Situation Recommendation Implementation 24Situation Recommendation ImplementationNet profit of a total of 31M from existing e-Marketing services cansupport the initial capital expenditure on B2B online services024681012142012E 2013E 2014E 2015E 2016ENet Profit of e-Marketing Services181111 Primer: Developing a StrategySituation Recommendation ImplementationSource: Team Analysis
  26. 26. Situation Recommendation Implementation 25Situation Recommendation ImplementationWe can reach a large group of users through different commercechambers181111 Primer: Developing a Strategy 25• Over 100,000 members• Host of buyer conferences every 2 monthsHong Kong SME Association• Over 1,000,000 SME members• Host of regular SME luncheon gatherings inGuangdong province• Release of e-newsletter every monthChina Commerce ChamberSituation Recommendation ImplementationSource: Team Analysis
  27. 27. Situation Recommendation Implementation 26Situation Recommendation ImplementationWe should first focus on marketing and sales efforts withinGuangdong Province181111 Primer: Developing a Strategy 26Dongguan:- 1.6M SME- High demand forB2B servicesShantou:- 0.3M SME- 60% growth rateSituation Recommendation ImplementationSource: Team Analysis
  28. 28. Situation Recommendation Implementation 27Situation Recommendation Implementation181111 Primer: Developing a StrategyThe operation forecast will be impacted by lower adoption rate in2012 and lower customer growth rate (2012-16)Lower adoption rate than expectedSales team headhunted by other firmsAI development takes more time than expectedPossible entry barrier imposed by large players27Situation Recommendation ImplementationSource: Team Analysis
  29. 29. Situation Recommendation Implementation 28Situation Recommendation ImplementationBase Optimistic PessimisticAnnual Return (onaverage)+55% +125% -17%2016 Net Profit (HK$m) 10.9 35.1 1.3Payback Period (years) 4 3 8AssumptionsUser adoption rate (2012) 40% 60% 20%User growth rate 40% 60% 20%181111 Primer: Developing a StrategyIt is estimated to recoup the investment in 4 years with annualreturn of 55%28Source: Team AnalysisSituation Recommendation Implementation
  30. 30. Situation Recommendation Implementation 29Situation Recommendation Implementation181111 Primer: Developing a StrategyThe 3 take-away of todayExpansion to B2B Online ServicesUtilization of Proprietary AI Search TechnologyMost Comprehensive Platform1. e-Marketing Services2. B2B Online Services
  31. 31. Situation Recommendation Implementation 30Situation Recommendation Implementation181111 Primer: Developing a (Hong Kong) I.T. Co. LtdIndustry Online Marketing Services ProvidersTarget Customers SMEsMarket Size: HKD$26.7M (in sales revenue)Share: 30%Services 1. Website Production2. Video Production3. Photo Editing ServicesFinancials Revenue: HKD$8MProfit: HKD$6.4MRelevant News Recent Acquisition of a B2B Search Engine Provider( – online marketing services provider
  32. 32. Situation Recommendation Implementation 31Situation Recommendation Implementation181111 Primer: Developing a StrategySituation Recommendation Implementation31SupBuyerSellers BuyersFreeRegistrationfor half yearAttractPaymentfor listingin database- Best Matches- AI Scoring System- Third-party authentication- Listing on database-Add-on services-> Multimedia production-> Market Analytics ReportLink bothparties to dobusinessesSource: Team AnalysisAppendix: Business model of B2B online services
  33. 33. Situation Recommendation Implementation 32Situation Recommendation ImplementationAppendix: First target group would be currently unsatisfied, case-study-like B2B users of 0.5M181111 Primer: Developing a Strategy 320.5M Current B2B Users18%Source: Team AnalysisSituation Recommendation Implementation
  34. 34. Situation Recommendation Implementation 33Situation Recommendation ImplementationAppendix: Second target group would be unexploited, non-servedSMEs of 2.2M181111 Primer: Developing a Strategy 33Current B2B Users18%Non B2B Users82%2.2MSource: Team AnalysisSituation Recommendation Implementation
  35. 35. Situation Recommendation Implementation 34Situation Recommendation Implementation181111 Primer: Developing a StrategyAppendix: Users will rise at 192%, mainly credited to expansioninto PRC160 22467213002177050010001500200025002012 2013 2014 2015 201634Situation Recommendation ImplementationRevenue CAGR = 192%Expansionto PRCSource: Team Analysis
  36. 36. Situation Recommendation Implementation 35Situation Recommendation ImplementationAppendix: AI Scoring system accounts for both buyer and sellerbehaviorsAIScoringMin Order #Past Production ExpBuyers’ FeedbackPurchasing PowerPast Purchase Pattern181111 Primer: Developing a StrategySituation Recommendation Implementation35Buyers Sellers
  37. 37. Situation Recommendation Implementation 36Situation Recommendation ImplementationAppendix: AI Scoring system benefits both buyers and sellersAIScoringIncreased ContactsQualityMore BusinessOpportunitiesTime-saving BrowsingHigher Search Relevance181111 Primer: Developing a StrategySituation Recommendation Implementation36Buyers SellersAuthenti-cationLess Hassle to GetCredentialsCredible Supplier Network
  38. 38. Situation Recommendation Implementation 37Situation Recommendation Implementation181111 Primer: Developing a StrategyAppendix: Alternative uses of AI technology are not as attractive asB2B search engine37Source: Team AnalysisOnline Fitting forBoutique shopsB2C OnlineStoresOnline RestaurantGuideB2B ServiceSearchMarket SizeCompetitionProfitabilityNeed ofTechnologySituation Recommendation Implementation
  39. 39. Situation Recommendation Implementation 38Situation Recommendation ImplementationAppendix: Past Milestones20112009181111 Primer: Developing a StrategySituation Recommendation Implementation38Oct’09Admitted as HK Science &Technology Parks IncubateeFeb’11Admitted as HKUST EntrepreneurshipCenter Partner CompanyPartnershipMar’11Completed AI Development Phase 1Oct’11Acquired major clientsGenerated 1st revenueR & DOperations
  40. 40. Situation Recommendation Implementation 39Situation Recommendation ImplementationAppendix: Majority of SME is in PRC and the manufacturing/EXIMindustry181111 Primer: Developing a StrategySituation Recommendation Implementation390. HK Total Other IndustriesManufacturing/ Export&Importmil
  41. 41. Situation Recommendation Implementation 40Situation Recommendation ImplementationAppendix: Competitors are providing 3rd-party authenticationservices181111 Primer: Developing a StrategySituation Recommendation Implementation40
  42. 42. Situation Recommendation Implementation 41Situation Recommendation ImplementationAppendix: We should first penetrate gift industry because of greatfamiliarity and also financial constraints181111 Primer: Developing a Strategy 41• 20 years of experience in gifts industry• Honorary chairman of Gifts Association• Past clients include CocaCola, Panasonic, Microsoft, etc.Dr Jiang Jun(CEO)Situation Recommendation ImplementationSource: Team Analysis
  43. 43. Situation Recommendation Implementation 42Situation Recommendation Implementation181111 Primer: Developing a StrategyAppendix: We should also look into providing more services to alarger group of customers if business exceeds expectationPatent the AI technology to license to non-B2B businessConsider expansion to other emerging marketsProvide industry research reports based on database data42Situation Recommendation ImplementationWidenclient baseBroadenProductSpectrumSource: Team Analysis