New e-business venture strategies and implementation

¶ … business plan for Ivy Discover Software Limited. The company is a new business organization dedicated to develop and market software product for businesses, households and government use. The company will be operating under software publishing industry. The industry is one of the most innovative industries in the United States because firms within the industry always engage in R&D to produce high quality product. The company will differentiate itself within the industry by offering high quality products at fair price which will be below the industry price. To reach large percentage of potential customers, the company will employ e-business strategy and will develop an attractive website to launch its e-business, and the company market strategy is by developing high innovative and quality products to beat its competitors.

Introduction

Ivy Discover Software Limited is a new business organization dedicated in designing and manufacturing different software for business organizations and households use. Ivy Discover is established to design custom-made software for organizations tailored to their special requirements. The company will utilize a state-of-art technology and pool of skilled workforce to design the high quality and impressive software products for customers. Ivy Discover is an ambitious and achievable company that will attempt to increase the sales by 35% yearly and maintain the market shares of 15% annually. Ivy Discover will implement aggressive marketing strategy to achieve these business objectives. The company key goals will focus on customer satisfaction, market power, and right management. The company will adhere to these key business objectives to achieve business success.

Industry Overview

The industry that Ivy Discover Software will be operating is a software publishing industry. In the United States, Software Publishing industry enjoys a strong growth rate since more businesses are using computer technology to improve efficiency. Since 2000, software industry is enjoying continuous market demand. The revenue generated within the industry is approximately $183 billion and the industry is enjoying the annual growth rate of 4.5%. However, within the industry, there is low level of concentration where four largest companies command about 36.4% of the market shares. Typically, the industry is largely dominated by IBM, Microsoft, Oracle, HP, and Symantec (See Table 1).

Firms within the industry design and manufacture system software and application software. The system software accounts for the 31.6% of the revenue generated by the industry, and this equivalent to approximate $54.8 billion in 2008. The system software is further categorized into operating software, network software, database management software and programming language. In 2008, operating systems software provided $19.3 billion revenue for the industry. However, network software publishing generated $15.4 billion revenue for the industry and database management software provided $10.7 billion revenue, for the industry. The industry also generated about $3.2 billion revenue from the programming languages. (See fig 1).(IBISWorld, 2010).

Fig 1: Revenue Contribution of different Segments within the Software Publishing

Industry

Similarly, application software generated approximately $51.0 billion revenue for the industry in 2008, and these contributions accounted for 34% of the industry revenue. (See Fig 1). Application publishing software is further broken down into home-use applications publishing, utilities application publishing software; cross-industry application publishing, software and other applications publishing software. All these products generate significant revenue for the industry. In 2010, the revenue recorded in the global software industry was $235 billion. Typically, the largest software companies in the world account for the $220 million of industry revenue where Microsoft alone recorded $54.3 billion in 2008. (IBISWorld 2012).

1.2: Industry Growth Rate

Between 2006 and 2008, Software publishing industry enjoyed average annual growth rate of 5.3%. However, between 2009 and 2010, the industry suffered the decline in the growth rate because the industry recorded the -3.5% decline in the growth rate. The major factor leading to the decline in the industry growth rate has been attributed to the global economic crisis that affected many companies during the period. Since business organizations form the major bulk of the market for the software products, the economic crisis that affected many business organizations also affected the software industry. Despite the decline in the industry performance between 2009 and 2010, industry recovered in 2011 and 2012. A market research provided by IBISWorld (2012) reveals that the software publishing industry is recording revenue of $183 billion with annual growth rate of 4.7%. Kooten (2009) also argued that the economic crisis that affected many companies did not affect the top 100 software firms in the industry because virtually all of them enjoyed high growth rate between 2008 and 2009. The author argued that 85% of the top 100 companies in the industry enjoyed high growth rate between 2008 and 2009, and only 15% of the top 100-software publishing recorded a decline in the growth rate during the period. Typically, 32 out of the 100 top firms in the industry could boast of the revenue of more than $1 billion.

Table 1: Top 5 Largest Software Company

Rank

Company

Revenues

1

Microsoft

49,090

2

IBM

21,396

3

Oracle

18,582

4

HP

6,183

5

Symantec

5,565

1.3: Market Segments

Software publishing industry is one of the most dynamic innovative sectors in the United States. The increase in the use of different software for business purpose has contributed to the growth of software publishing industry. The market for the software industry consists of business, government, and households. However, business organization forms the bulk of market for the industry with business accounting for the 82% of industry market (See Fig 2). Business applies for application software and operating software to boost productivity as well as catering for the specific industry need. Most businesses also require software for the protection of business data against unauthorized penetrators

Fig 2: Market Segment for the Industry

Large businesses are increasingly using ERP (Enterprise Resource Planning), database management software and CRM (Customer Relationship Management) to achieve varieties of management objectives. Business demand for computer software has added to the growth of business activity in the United States, which in turn affects the business profitability. For example, information and service sector relatively depend on software to function effectively, and the continuous demand for the software from this sector has an impact on the growth of software publishing industry in the United States.

Households demand also contributes to the 10% of the market demand for the computer software. Many households in the United States have realized the importance of software package for computer protection. Typically, bulk of the software being demanded by households in the United States is anti-virus software packages and computer games. Government demand for software is relatively increasing, and government contributes 8% of overall demand for the software. Declining prices of the computer hardware and computer software has contributed to the overall growth of software publishing industry. Many businesses and households who could not afford to pay computer hardware and software 10 years ago are now able to afford the software package for business and personal purpose. More importantly, many businesses have now realized that information technology (it) has become a potent tool to achieve competitive advantages. Businesses have realized that it is critical to integrate it system to remain in business.

2. Company mission, Goals, and Business strategy

This section discusses company mission, business strategy and business goals. The paper discuses business strategy to achieve the company business goals.

2.1: Company Mission

Ivy Discover Software Limited will design, publish, and market software for the business purpose and households use. The company will make its products accessible to millions of business users who have little experience in the use of the software packages. The company will also establish rewarding environment for employees and fair returns for business owners. The company will provide superior customer support to enhance market advantages.

2.2: Business Goals

The company business goals are as follows:

To achieve company market shares within the first year of operation by 10%

To double the company revenue within 2 years

To become one of the top 100 software publishers within 2 years

To become one of the top 50 software publishers within 5 years

To become one of the top 10 software publishers with 10 years.

To increase the return for investors yearly.

To double the returns paid to investors yearly.

2.2: Business strategy

Ivy Discover Software will employ different business strategies to achieve its business goals. The company will focus on million of home offices and small offices, professional offices and schools. The small office and home office is one fastest growing segment in the United States. The growing need of software in this area will favor our business. The company will employ e-business strategy to reach its potential customers, and the company will categorically focus on Business-to-Business (B2B) to achieve its goals. Globally, the online spending has reached more than $103 billion, and B2B has risen to more than $1.3 trillions. The company will also target adults, male and female with wide range of computer skills. The company will target smart, well educated in small business setting to achieve market advantages. The company will also target business schools and students, and the company will develop software tailored to the need of different business schools and students focusing on business degree. The market analysis is provided in Table 2.

Table 2: Market Analysis

2012

2013

2014

2015

2016

Potential Customers

Growth

CAGR

Home Office

2%

22,000

22,440

22,889

23,347

23,814

2.00%

Small Office

5%

15,000

15,750

16,538

17,365

18,233

5.00%

Professionals

8%

10,000

10,800

11,664

12,597

13,605

8.00%

Academic

0%

12,000

12,000

12,000

12,000

12,000

0.00%

Other

0%

10,000

10,000

10,000

10,000

10,000

0.00%

Total

15.00%

69,000

70,990

73,091

75,309

77,652

15.00%

The company will also use different market strategy to achieve its business goals. Ivy Discover will run a very attractive advertising banner on different websites, which are constantly being visited by target customers, and the business will use several different form of promotion to attract potential customers. The promotion strategy will include discounted package deal. The sale process will include several criteria such as product presentation, relationship building, customer requirements, or needs. The company will build technical products that are more effective than the products of the competitors. The company will provide value for its customers by developing high quality products. The marketing strategy that the company will employ is to use the company website for the marketing promotion. The company will submit the company website into highly ranked search engines such as Google, Yahoo, and other top ranked search engine. The company will ensure that the company website is listed at the top five when customers search for the software product on the search engine. Through this approach, customer will have easy access to company website. The delivery channel for the company products will be based on the integrated marketing model using mixed communication media. The marketing program will be designed to increase the company brand recognition to attract potential and new customers. The company will use wide range of marketing communication, which includes:

Internet: The company will use internet as a primary marketing tool, which will be designed for:

Easy access of different pages within the site

Use of the state-of -- the art graphics

A menu that will include easy product purchase

Use of the state-of-art trading execution platform

Secured online transaction payment form.

To enhance wide exposure of the company website, Ivy Discover Software will develop more than two websites. The company will also use print media for the marketing campaign. The marketing campaign through print media will be weekly magazine advert and daily newspaper advert. The company will also use broadcast media such as television, radio, cable advertising to reach potential customers. The company will also send message to target customers through email, and the message will be in form of newsletter for customers who have already established active accounts with the company

The company will also use sale strategy to achieve its goals. The sales strategy will include direct sales forces, direct marketing, subcontractor, and internet marketing to reach wide range of potential customers. The pricing strategy will be below industry price to attract large percentages of potential customers, and the pricing will be 30% below the market price.

3. Industry and Business Environment background

Software publishing industry is highly competitive. While the industry is highly competitive, large companies such as Microsoft and IBM dominate the market by having large percentages of marketing shares. On several occasions, Microsoft has been accused of using its monopoly position to dominate the market. The plan provides the critical analysis of external environment using SLEPT analysis.

3.1: SLEPT Analysis

SLEPT is an external environmental factor, which includes social, legal, economic, political, and technological factor, affecting a firm within industry.

Social: Social factor is one of the environmental factors affecting the company financial performances. Social factor includes age distribution, population growth, career attitudes, and culture. An increase in the aging population within a country will imply smaller willing workforce. The United States has largest number of higher educational institutions in the world. Thus, the company will be able to attract large pool of qualified skilled labor to work within the company. However, the company will need to pay for the cost of highly skilled labor to retain highly qualified workers. The culture is also among the social factor affecting the company performances. However, U.S. population increasingly understands the importance of computer and software for human development, and many businesses are now integrating culture of technology into their business strategy.

Legal: All companies must adhere to the rules and regulations guiding the sector the company are operating, and there are several laws that are affecting a company business process. One of the effective regulations that the company must comply is the issue of taxation. Although, there is no specific-income tax levied on the software publishing industry, however, the company tax on R&D is very important because there is high level of R&D undertaking within the industry. There is also Federal copyright law that stipulates the unauthorized reproduction, distribution, or display of copyright protected work. The copyright law is one of the most important laws within the industry. Large firms have potential to claim the damages from small or medium enterprises in the case of unlawful infringement. Ivy Discover Software Limited needs to protect its intellectual properties against unlawful copying and distribution. The company must also respect this law to remain in the market. Since Ivy Discover will need to offer its products in the international markets, the company must also observe the law of the countries that the company will be operating. Typically, the copyright law in the United States may not be applicable in the foreign market; the company should protect its product from authorized copying in the foreign market. The company must also observe all the foreign laws affecting the company business process. The company should also observe that the U.S. is among the signatory of "Berne Convention for the Protection of Literary and Artistic Works" (IBIS World, 2000 P. 20) that protects the works of the businesses operating in the member states. Additionally, the U.S. is a member World Intellectual Property Organization (WIPO) that implements copyright law for the member states. The company should understand that infringement of copyright law outside the United States could affect the company business process and since United States is a signatory member of some other conventions protecting the intellectual property.

Economical: The level of a country economic growth could affect company market performances. The level of a country GDP and economy performances always affect the market performances of a company. Between 2000 and 2008, the U.S. economy enjoyed a boom leading to high market performances of several companies in the United States. Data in Fig 3 reveal that the U.S. enjoyed economic boom from the year 2000 to year 2008, however in 2009, the country recorded a decline in the economy growth. For example, the U.S. recorded 13.2 trillion in the GDP in 2008 however, the country GDP declined to 12.7 trillion in 2009. (See Fig 3). The economy situation of the U.S. also affects the U.S. software publishing industry.

Fig 3: U.S. Real GDP Chart

Source Chantrill, C. (2012).

Between 2006 and 2008, the software industry enjoyed a significant growth because of the boom in the U.S. economy. However, in 2009, the software publishing industry recorded a decline in the industry revenue as being revealed in Table 3.

Table 3: Industry Statistics ($Million)

2006

2007

2008

2009

2010

Industry Revenue

141,760.19

150,588.61

156,640.79

147,242.40

145,769.89

Industry Gross Product

89,025.39

94,419.10

98,057.10

92,026.49

90,960.41

Number of Establishments (Units)

8,741

8,626

8,342

8,091

8,011

Number of Enterprises (Units)

6,334

6,106

6,045

5,863

5,805

Fluctuation in the exchange rate is also another economic factor that will affect the business performances. A decline in the performances of dollars against foreign currencies could affect the company revenue especially if the company is engaging in the international business. The fluctuation in the interest rate could also affect the company financial performance. With high level of interest rate, volatility and this could affect ability of the company to source for loan from the banks and loan repayment since the company will pay higher denominated debts when there is an increase in the interest rates.

Political

United States is operating capitalist economy where the government does not intervene in the business activity. Nevertheless, the government intervenes in areas such as provision of tax law, labor law, tariffs, trade restriction, and environmental law. Some of the political interference may affect the business performances of a company. In many emerging and developing market, the government intervention is very high in these economies. Government may nationalize a company property or make outright ban on the importation of certain products because these governments are always suspicious of foreign companies. Thus, Ivy Discover Software should analyze the level of government intervention in a given economy before introducing its products into that economy.

Technological: United States is the most advanced country in the world, and the country is endowed with the high level of technological development. Typically, the level of the country technology is very high and the software is characterized by the rapid technological changes. With the high level of U.S. technology, the software company should always produce high quality products. To remain competitive in the market, Ivy Discover should implement effective research and development to produce innovative product. It is essential to realize that high quality and innovative software products in other country might be consider a low quality product in the United States because of rapid changes in technology. With fierce competition within the industry, software-publishing industry spends large amount of money on R&D. Consequently, large companies always introduce new innovative products in the market (Oxford University 2007).

3.2: Porter Five

This section provides the Porter 5 to assess the potential threats the company is facing and opportunities that the company stands to enjoy within the software publishing industry. Porter 5 is used to assess the competitive environment that the company will be operating. According to Porter (2008), likelihood of company to enjoy profitability depends on the following factors:

Likelihood of New Entry: Porter (2008) argues that the likelihood of entry to the market will be lower if the costs of entering into the market are high and government regulation prevents entry into the market. With reference to the software publishing industry, the entry into the market is not easy because the company will require pool of highly skilled labor to develop high quality and innovative software. Moreover, the new company will need to invest aggressively in the R & D. To produce high quality and innovative products. The difficulties in entering the industry makes few companies such as Microsoft, Oracle, and IBM to dominate the market.

Power of buyers: Power of buyers depends on the ability of buyers to switch from one product to the other. Within the software industry, there are some products that customers could easily switch its preference. However, there are products, which is not easy to switch the products preference. Microsoft has collaborated with the many computer manufacturers to install Microsoft window on the computer. In the software industry, a buyer may not have power to switch to other products if the product is of high quality and its substitutes are very few in the market. Example is Microsoft window. However, there is still several application software where buyers have power. For example, there is several anti-virus software in the market being manufactured by different software companies.

Power of suppliers: Power of suppliers is low within the software industry because the skills of labor within the company are only needed to develop new software.

Degree of Rivalry: There is a high degree of rivalry within the industry. While there are many software companies operating in the industry, there are still companies dominating the market. Microsoft is enjoying 25% of the market share followed by the Oracle Corporation enjoying 8% of the market shares. (See Fig 4)

Fig 4: Software Market Shares

Source: IBIS Word (2010).

The substitute threat: Availability of substitute within the industry will determine the level of profitability of a company. In the software industry, there are varieties of substitutes for some application products. However, it may not be possible to switch from one software product to the other if the switching costs are very high.

"Enterprise resource planning (ERP) software is an example of a product with very high switching costs. Once a company has installed SAP's ERP system, for example, the costs of moving to a new vendor are astronomical because of embedded data, the fact that internal processes have been adapted to SAP, major retraining needs, and the mission-critical nature of the applications." (Porter. 2008 P5).

4: Value Proposition

Ivy Discover Software will employ highly qualified and skilled labor to develop high quality and innovative software. The company will differentiate itself by providing high quality products at fair price compared to the company competitors who prefer to offer quality products at high price. The company will focus on the application software and operating software. Many of the company products will be business products. The company product will empower the technological expertise of users, and the company will develop software to provide high level of benefits for users. All the company products will be easy-to-use and there would be a systematic interface to assist users for the easy use of the software. There would also be an integration of full of guidance, glossaries, and help.