2. Situation Recommendation Implementation 1
Situation Recommendation Implementation
181111 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. Situation Recommendation Implementation 2
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
Steadily decreasing no. of users sends strong warning signal to need
for strategic change
Situation Recommendation ImplementationSource: Team Analysis
0
20000
40000
60000
80000
100000
120000
140000
2008 2009 2010
No. of e-Marketing Services Users
Decreasing at an Average Rate of 11%
4. Situation Recommendation Implementation 3
Situation Recommendation Implementation
Decreasing profit margin threatens the future profitability and
financial health of the company
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2008 2009 2010
Profit Margin of e-Marketing Services
181111 Primer: Developing a Strategy
Situation Recommendation ImplementationSource: Team Analysis
5. Situation Recommendation Implementation 4
Situation Recommendation Implementation
E-marketing services is currently a cash cow with slow growth but
high market share
Relative Market Share
High Low
Star Question Mark
Cash Cow Dog
E-marketing Services
Market
Growth Rate
High
Low
181111 Primer: Developing a Strategy
Situation Recommendation ImplementationSource: Team Analysis
6. Situation Recommendation Implementation 5
Situation Recommendation Implementation
But within 5 years, e-marketing services will evolve into an
unattractive market with very low profitability
Relative Market Share
High Low
Star Question Mark
Cash Cow Dog
E-marketing Services
Market
Growth Rate
High
Low
181111 Primer: Developing a Strategy
Situation Recommendation ImplementationSource: Team Analysis
7. Situation Recommendation Implementation 6
Situation Recommendation Implementation
How to develop a strategy
that can sustain our profitability at level of $12M
within the next 5 years?
Source: Team Analysis
181111 Primer: Developing a Strategy
8. Situation Recommendation Implementation 7
Situation Recommendation Implementation
Extension to online B2B services is the best possible alternative
with high profitability and less keen competition
7
Alternatives Extension to Online
B2B Services
Strengthened e-
Marketing Services
Advertising
Profitability
Less Fierce
Competition
Market Size
Fit with Current
Capability
Low development Cost
Overall
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
= The Most
9. Situation Recommendation Implementation 8
Situation Recommendation Implementation
Threat of Entry
• High upfront costs
• Large & Long R&D
Threat of Substitute
Porter’s 5 Forces Model shows B2B market is high attractive
Supplier Power Buyer PowerRivalry
• Hard to copy search engine
technology
• Considerable differentiation
among current market
offerings
• Medium switching cost
• Driven by popularity of B2B
websites
• Many server providers
• Self-owned technology
• Increasingly popular
• Moderately efficient means of
looking for business opportunities
Michael Porter’s Five Forces
Low
Medium
High
Key
181111 Primer: Developing a Strategy 8
Situation Recommendation ImplementationSource: Team Analysis
10. Situation Recommendation Implementation 9
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
Revenue from solely B2B services will grow at rate of 228% to
reach HK$28m by 2016
-5
0
5
10
15
20
25
30
35
2012 2013 2014 2015 2016
Revenue
Net Profit
10.9
9
Situation Recommendation Implementation
HK$m
Revenue CAGR = 228%
Revenue = 28m
Source: Team Analysis
12. Situation Recommendation Implementation 11
Situation Recommendation Implementation
We have tremendous strengths in delivering the best B2B online
services
Priority
Listing
Unorganized
Results
Unverified &
Outdated
Account
Problems
Artificial Intelligence
Technology
Solutions
Competence
Customized Search Results
3rd Party
Authentication
To exceed our competitors To match our competitors
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
Lack of e-
Marketing
Services
E-Marketing
Services
e-Marketing
Platform and
Reputation
13. Situation Recommendation Implementation 12
Situation Recommendation Implementation
Case study shows SME is a high potential market for B2B services
Cloth Manufacturing SME
Revenue: HKD$2M
15 Deals per year
Difficult to find B2B Businesses
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
14. Situation Recommendation Implementation 13
Situation Recommendation Implementation
Target customer is the SMEs in Mainland China and Hong Kong of
2.7M
181111 Primer: Developing a Strategy 13
0.0
0.5
1.0
1.5
2.0
2.5
3.0
No. of SME
Total No. of SME in Mainland China and Hong Kong
Mainland China
Hong Kong
Source: Team Analysis
Situation Recommendation Implementation
15. Situation Recommendation Implementation 14
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
We expect similar strong users growth rate in future as our
competitors did in past 3 years
0%
10%
20%
30%
40%
50%
60%
2009 2010 2011
Growth Rate of Active Users of Alibaba
Source: Alibaba Financial Report Situation Recommendation Implementation
16. Situation Recommendation Implementation 15
Situation Recommendation Implementation
e-Marketing.com will reach a total of more than 2000 users at
average growth rate of 120% per year
181111 Primer: Developing a Strategy 15
Key assumptions: 1. $13300 Annual Return per User
2. 1 Deal in every 2 days (per salesperson)
Source: Team Analysis
Situation Recommendation Implementation
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2012E 2013E 2014E 2015E 2016E
No. of Users
17. Situation Recommendation Implementation 16
Situation Recommendation Implementation
e-Marketing.com will obtain a market share of 18% by 2016E
181111 Primer: Developing a Strategy 16
Key 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 years
Source: Team Analysis
Situation Recommendation Implementation
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2012E 2013E 2014E 2015E 2016E
Market Share (in no. of users)
18. Situation Recommendation Implementation 17
Situation Recommendation Implementation
A total spending of 80%, equivalent to HKD$8.5M, is on B2B online
services, while the rest is on existing e-Marketing services
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Capital
B2B
Online Services
e-Marketing
Services
(HKD$8.5M)
1. System Development
2. Sales Operations
3. Promotion
(HKD$10.7M)
1. Further Expansion to New Services
2. Increased Quality on Existing Services
181111 Primer: Developing a Strategy 17
Situation Recommendation ImplementationSource: Team Analysis
19. Situation Recommendation Implementation 18
Situation Recommendation Implementation
Capital expenditure is mainly invested in first 3 years on
technology development, promotion and sales operations
3
2.5
1.5
0.1 0.1 0.1
0
0.5
1
1.5
2
2.5
3
3.5
2011 2012 2013 2014 2015 2016
HKD (in M)
181111 Primer: Developing a Strategy 18
Situation Recommendation ImplementationSource: Team Analysis
20. Situation Recommendation Implementation 19
Situation Recommendation Implementation
Our top priority strategic initiatives are to recruit senior sales in
B2B industry and patent the AI search technology
High Impact
Low Impact
EasyHard
Impact / Ease of Change Matrix
2. Patent the AI Search Technology
1.Recruit Senior Sales in B2B Industry
3. Strengthen Existing e-Marketing Services
4. Carry Out Heavy Promotion
6. Initiate a Price War to win over users
181111 Primer: Developing a Strategy 19
Situation Recommendation ImplementationSource: Team Analysis
5. Reduce Investment on Developing e-Marketing Services
21. Situation Recommendation Implementation 20
Situation Recommendation Implementation
To excel in the market, we have to develop a number of
capabilities along with our current strengths
20
High Reputation
as Online
Services Provider
Most Advanced
AI Search
Technology
Extensive
Experience in
Providing Online
Services
Current
Third-Party
Authentication
Large Customer
Base
Awareness in B2B
Market
To Be
Developed
181111 Primer: Developing a Strategy 20
Situation Recommendation ImplementationSource: Team Analysis
22. Situation Recommendation Implementation 21
Situation Recommendation Implementation
There are a number of strategic key performance indicators to
measure our progress
181111 Primer: Developing a Strategy 21
Situation Recommendation ImplementationSource: Team Analysis
• Evaluate the synergy between e-marketing and B2B services
No. of Integrated Accounts (User of Both e-Marketing and B2B)
• Evaluate the acceptance of the market
Customer Growth Rate / Market Share Growth Rate
• Measure the value of our services to customers
Annual Return Per User
• Measure the quality of our services compared to competitors
Customers Retention Rate
23. Situation Recommendation Implementation 22
Situation Recommendation Implementation
But we also foresee a number of implementation challenges ahead
181111 Primer: Developing a Strategy 22
Sales at initial stage
Heavy capital expenditure in initial stage
Attention of users
Scattered SMEs in China
Situation Recommendation ImplementationSource: Team Analysis
24. Situation Recommendation Implementation 23
Situation Recommendation Implementation
We will provide discount to existing e-Marketing services users to
open an integrated account with B2B online services
181111 Primer: Developing a Strategy 23
Integrated Accounts
• First-hand experience of our services
• Basic authentication check to ensure quality
• Word-of-mouth effect
• Discount as incentives
• Leverage on own reputation
Situation Recommendation ImplementationSource: Team Analysis
25. Situation Recommendation Implementation 24
Situation Recommendation Implementation
Net profit of a total of 31M from existing e-Marketing services can
support the initial capital expenditure on B2B online services
0
2
4
6
8
10
12
14
2012E 2013E 2014E 2015E 2016E
Net Profit of e-Marketing Services
181111 Primer: Developing a Strategy
Situation Recommendation ImplementationSource: Team Analysis
26. Situation Recommendation Implementation 25
Situation Recommendation Implementation
We can reach a large group of users through different commerce
chambers
181111 Primer: Developing a Strategy 25
• Over 100,000 members
• Host of buyer conferences every 2 months
Hong Kong SME Association
• Over 1,000,000 SME members
• Host of regular SME luncheon gatherings in
Guangdong province
• Release of e-newsletter every month
China Commerce Chamber
Situation Recommendation ImplementationSource: Team Analysis
27. Situation Recommendation Implementation 26
Situation Recommendation Implementation
We should first focus on marketing and sales efforts within
Guangdong Province
181111 Primer: Developing a Strategy 26
Dongguan:
- 1.6M SME
- High demand for
B2B services
Shantou:
- 0.3M SME
- 60% growth rate
Situation Recommendation ImplementationSource: Team Analysis
28. Situation Recommendation Implementation 27
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
The operation forecast will be impacted by lower adoption rate in
2012 and lower customer growth rate (2012-16)
Lower adoption rate than expected
Sales team headhunted by other firms
AI development takes more time than expected
Possible entry barrier imposed by large players
27
Situation Recommendation ImplementationSource: Team Analysis
29. Situation Recommendation Implementation 28
Situation Recommendation Implementation
Base Optimistic Pessimistic
Annual Return (on
average)
+55% +125% -17%
2016 Net Profit (HK$m) 10.9 35.1 1.3
Payback Period (years) 4 3 8
Assumptions
User adoption rate (2012) 40% 60% 20%
User growth rate 40% 60% 20%
181111 Primer: Developing a Strategy
It is estimated to recoup the investment in 4 years with annual
return of 55%
28
Source: Team Analysis
Situation Recommendation Implementation
30. Situation Recommendation Implementation 29
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
The 3 take-away of today
Expansion to B2B Online Services
Utilization of Proprietary AI Search Technology
Most Comprehensive Platform
1. e-Marketing Services
2. B2B Online Services
31. Situation Recommendation Implementation 30
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
e-Marketing.com (Hong Kong) I.T. Co. Ltd
Industry Online Marketing Services Providers
Target Customers SMEs
Market Size: HKD$26.7M (in sales revenue)
Share: 30%
Services 1. Website Production
2. Video Production
3. Photo Editing Services
Financials Revenue: HKD$8M
Profit: HKD$6.4M
Relevant News Recent Acquisition of a B2B Search Engine Provider
(SupBuyer.com)
Appendix: e-Marketing.com – online marketing services provider
32. Situation Recommendation Implementation 31
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
31
SupBuyer
Sellers Buyers
Free
Registration
for half year
Attract
Payment
for listing
in database
- Best Matches
- AI Scoring System
- Third-party authentication
- Listing on database
-Add-on services
-> Multimedia production
-> Market Analytics Report
Link both
parties to do
businesses
Source: Team Analysis
Appendix: Business model of B2B online services
33. Situation Recommendation Implementation 32
Situation Recommendation Implementation
Appendix: First target group would be currently unsatisfied, case-
study-like B2B users of 0.5M
181111 Primer: Developing a Strategy 32
0.5M Current B2B Users18%
Source: Team Analysis
Situation Recommendation Implementation
34. Situation Recommendation Implementation 33
Situation Recommendation Implementation
Appendix: Second target group would be unexploited, non-served
SMEs of 2.2M
181111 Primer: Developing a Strategy 33
Current B2B Users18%
Non B2B Users82%2.2M
Source: Team Analysis
Situation Recommendation Implementation
35. Situation Recommendation Implementation 34
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
Appendix: Users will rise at 192%, mainly credited to expansion
into PRC
160 224
672
1300
2177
0
500
1000
1500
2000
2500
2012 2013 2014 2015 2016
34
Situation Recommendation Implementation
Revenue CAGR = 192%
Expansion
to PRC
Source: Team Analysis
36. Situation Recommendation Implementation 35
Situation Recommendation Implementation
Appendix: AI Scoring system accounts for both buyer and seller
behaviors
AI
Scoring
Min Order #
Past Production Exp
Buyers’ Feedback
Purchasing Power
Past Purchase Pattern
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
35
Buyers Sellers
37. Situation Recommendation Implementation 36
Situation Recommendation Implementation
Appendix: AI Scoring system benefits both buyers and sellers
AI
Scoring
Increased Contacts
Quality
More Business
Opportunities
Time-saving Browsing
Higher Search Relevance
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
36
Buyers Sellers
Authenti-
cation
Less Hassle to Get
Credentials
Credible Supplier Network
38. Situation Recommendation Implementation 37
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
Appendix: Alternative uses of AI technology are not as attractive as
B2B search engine
37
Source: Team Analysis
Online Fitting for
Boutique shops
B2C Online
Stores
Online Restaurant
Guide
B2B Service
Search
Market Size
Competition
Profitability
Need of
Technology
Situation Recommendation Implementation
39. Situation Recommendation Implementation 38
Situation Recommendation Implementation
Appendix: Past Milestones
20112009
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
38
Oct’09
Admitted as HK Science &
Technology Parks Incubatee
Feb’11
Admitted as HKUST Entrepreneurship
Center Partner Company
Partnership
Mar’11
Completed AI Development Phase 1
Oct’11
Acquired major clients
Generated 1st revenue
R & D
Operations
40. Situation Recommendation Implementation 39
Situation Recommendation Implementation
Appendix: Majority of SME is in PRC and the manufacturing/EXIM
industry
181111 Primer: Developing a Strategy
Situation Recommendation Implementation
39
0.0
0.5
1.0
1.5
2.0
2.5
3.0
PRC HK Total Other IndustriesManufacturing/ Export&Import
mil
42. Situation Recommendation Implementation 41
Situation Recommendation Implementation
Appendix: We should first penetrate gift industry because of great
familiarity and also financial constraints
181111 Primer: Developing a Strategy 41
• 20 years of experience in gifts industry
• Honorary chairman of Gifts Association
• Past clients include Coca
Cola, Panasonic, Microsoft, etc.
Dr Jiang Jun
(CEO)
Situation Recommendation ImplementationSource: Team Analysis
43. Situation Recommendation Implementation 42
Situation Recommendation Implementation
181111 Primer: Developing a Strategy
Appendix: We should also look into providing more services to a
larger group of customers if business exceeds expectation
Patent the AI technology to license to non-B2B business
Consider expansion to other emerging markets
Provide industry research reports based on database data
42
Situation Recommendation Implementation
Widen
client base
Broaden
Product
Spectrum
Source: Team Analysis