11. Appendix

This appendix to the e-Business Plan Tutorial is a compilation of the 20 assignments introduced in the various lessons in the tutorial. Links to the relevant lesson are included.

In completing any assignment, the student should consult with the instructor to determine if the assignment is required or optional, if there are any changes to the assignment as written here, and whether the output from any assignment is to be submitted, presented, or saved.

Executive Summary:
Assignment 1: After you have written the competitor analysis, draft a 1-2 page executive summary (you will be reminded of this at the end of that lesson). Then review and finalize the executive summary at the end of the tutorial (a reminder will be included at the end of the last lesson).

Business Description:
Assignment 2: Identify the industry within which your e-business will operate and write an industry analysis.

Assignment 3: Draft a mission statement for your e-business. Include a paragraph or two that explains or justifies the mission statement. This mission statement may change slightly as you continue to develop your business idea, but it should also be complete and accurate enough to guide the formation of goals and the value proposition.

Assignment 4: Write at least six goals for your business. Each goal should include both a clear statement of purpose and a brief explanation.

Assignment 5: Write at least three SMART objectives for each of the business goals you developed in assignment 4. The best way to present these objectives in your plan is to make them part of the goal they relate to. That is, following each goal statement, list three or more objectives that contribute to the achievement of the goal.

Assignment 6: Formulate and write the value proposition of your e-business. This should be a paragraph or two that clearly states the benefits your business will offer to customers and justifies why this is an important proposition for customers and in the marketplace.

Assignment 7: Select one or two (rarely three or more) business model(s) that accurately describe your proposed business activities. For each model, identify it and briefly describe the model as it applies to your business idea. Include the value proposition (from assignment 6) and the revenue model in your description.

Assignment 8: Write a products and services section for your e-business.

Market Analysis:
Assignment 9: Identify and briefly describe at least two and no more than three target markets for your e-business. Make sure your markets are scoped correctly -- not too broad and not too narrow. Your description should include as many demographic, geographical, psychographic, and consumer characteristics as possible.

Assignment 10: Complete your description of your target markets by adding objective, quantitative data to the general description you completed in assignment 9. Based on your market research, you may have to make minor adjustments in your target markets.

Competitor Analysis:
Assignment 11: Find, list, and rank 7-10 direct competitors, or fewer if less than seven major competitors can be found. Find, list, and rank 3-5 indirect competitors and 3-5 future competitors for your e-business.

Assignment 12: From the lists you complied in assignment 11, complete the competitor analysis grid for 2-3 direct competitors, 1 indirect competitor, and 1 future competitor for your e-business.

Assignment 13: Write up the results of your competitor search and analysis for inclusion in your e-business plan.

Assignment 14: Identify 1-3 competitors who are popular with your target markets. Conduct a critique of their Web sites using resources such as those listed above.

Assignment 15: Use one or both of the approaches described above to identify at least one (hopefully more) sources of competitive advantage for your business. Write this up so a reader of your e-business plan will understand how you expect to use these to achieve commercial success.

Operations:
Assignment 16: Based on your intended Web site host requirements, select one of the options listed above and investigate the feasibility and cost for hosting a Web site for your e-business (the cost information will be used in the financial statements). As part of your operations plan, briefly explain and justify your decision.

Assignment 17: Based on your intended Web site requirements and the considerations listed above, select (a) internal development, (b) external development, or (c) partnering for your (a) start-up site construction and (b) ongoing site maintenance.

Assignment 18: Find an available domain name (one currently available at the time you investigated it) for your e-business and write a brief paragraph to explain and justify it.

Financial Statements:
Assignment 19: Beginning with the draft spreadsheets, create a start-up budget, income and expense statement, balance sheet, and cash flow statement for your e-business. As appropriate, make all projections three years into the future. Write up a summary of these statements (at least one paragraph per statement) that highlights key points of interest to prospective investors (e.g., when the business becomes profitable, how much invested capital is required, where the capital will come from). Also include a list of key assumptions that support the numbers in the statements. Optionally, include a table of key financial ratios and/or supplemental statements such as an investment schedule.

Making an Effective Business Plan Presentation:
Assignment 20: Following guidance from your instructor about length, scope, target audience, etc, prepare a professional presentation of your business plan following the instructions provided above.

10. Making an Effective Business Plan Presentation

Many business plans are not only written, they are also presented. For example, if an investment decision has to be made by a bank loan committee or consortium of venture capitalists, it is more efficient to ask the business owner to make a presentation to the group, rather than have each member read the plan. Presentations also allow an opportunity for interactive questions and answers and for the investors to "size up" the person to whom they are loaning money. This last point is not an inconsequential consideration for both the investor and business owner.

We cannot, in this lesson, make you a great presenter. That takes knowledge of the subject, confidence, and experience. However this lesson does start you on the path to being a better presenter.

If a presentation is required as part of your course assignment, your instructor will give you some guidance about length of presentation, proper format, target audience, and so on. As emphasized below, this is critical information for making an effective presentation.

The lesson outline is:
Fundamentals of Presenting
Suggestions to Make a GREAT Presentation
--Content suggestions
--Presentation suggestions
Additional Resources for Preparing and Delivering an Effective Presentation

Fundamentals of Presenting

Making an effective presentation isn't that difficult. The process begins with a few fundamentals.

Know your target audience: As you did for the business plan itself, prepare your presentation with the information needs, expectations, attitudes, and knowledge levels of your intended audience in mind. Think about questions such as:

* Who are they (professional positions, ages, backgrounds, roles in this meeting)?
* What do they already know (knowledge of your industry, knowledge of technical terms, have they read the plan already)?
* What's in it for them (expected benefits, learning outcomes, decisions to be made)?

For example, assume the target audience for your business plan presentation is a bank loan committee. In this context, the presentation should give the committee an overview of your plans and expectations, knowing that the detail is in the business plan. The focus should not be on just marketing or just financials, and certainly not on what the Web site will look like. Instead the presentation should present an overview of the business, sell the business idea, and conclude with financials and your specific request for funds.

Timing counts: Your course instructor will determine how long the presentation should be, including sufficient time for questions and answers. In a "real" presentation this counts too. Clarify in advance how much time you will have and be sure to leave time for questions and still conclude on time.

How many presenters?: You may have completed this business plan as a group. So does everyone present? Or just one person? In your in-class presentation as well as a formal business presentation a lot of considerations impact on this decision. If it is a short presentation, one person making the presentation is probably the best choice. Any presentation over 15 minutes long should probably have more than one presenter, perhaps 10-15 minutes per presenter. Why? Because it is unlikely that all expertise is invested in just one person, a presentation is more interesting to the listeners when there is a change in presenters, and multiple presenters shows there is a depth of knowledge about the business that is distributed in the group.

A useful presentation hint is that when it is time for questions, all members of the group stand up and be prepared to answer questions in their area. This reinforces that this was a group effort and avoids putting the final speaker on the spot if a question is asked that he/she cannot answer.

Print your presentation: Always have paper copies of your presentation available for your audience, printed either three or six slides per page. Whether to distribute these copies before or after the presentation is a presenter's decision, but most listeners prefer to have the copies in advance so they can follow along more easily and take notes. However, the members of the audience sometimes focus on the handouts and don't pay close attention to what the speaker is saying. Also, if there are big surprises in the presentation, they can be spoiled by listeners who read ahead. However, because most listeners prefer copies in advance that is usually the best decision.

Suggestions to Make a GREAT Presentation

Many students enrolled in an e-business course will already have had a course in business communications and/or other opportunities to become an experienced presenter. However, just in case, here are some suggestions or reminders how to make a great presentation:

Content suggestions: The following suggestions are offered to improve the content of the presentation, or what you say.

* First tell them what you are going to tell them, then tell them, finally tell them what you told them. These three make up the introduction, body, and conclusion of any great presentation.
* start with a title slide that includes the title of the presentation, who the presentation is for (the audience), who is presenting (you), and the date.
* the next slide is an overview or agenda (i.e., "tell them what you are going to tell them"); introduce the presenters at the same time
* advise the audience whether questions should be asked during the presentation or at the end
* if appropriate, start with a powerful presentation opener — a startling statistic, a poem, a dramatic quotation, a confession, a surprising entry, meaningful humor, etc.
* in the presentation, consider the expertise of your audience (e.g., explain technical terms if necessary, avoid TLAs (three letter acronyms))
* use graphics, but make sure they are appropriate graphics and do not distract from the presentation or the content (e.g., avoid animation graphics which attract the audience's attention to the graphic and away from you)
* use humor, but make absolutely sure it is appropriate humor
* at the end, summarize the highpoints (i.e., "tell them what you told them")
* during question time, repeat questions from soft-spoken people or people in the front of the room so the audience know what is the question before you give the answer
* if you aren't sure of an answer to a question, don't be afraid to say "I don't know" and, if appropriate, promise to get back to them with an answer
* finish on time (if necessary, ask for "last question please")
* thank the audience for their time and attention

Presentation suggestions: The following suggestions are made to improve the presentation of the presentation, or how you say it.

* use large fonts, 22 point is minimum size for text; a title should be 32 point or larger
* use a sans serif font such as Helvetica or Arial for normal text; use a serif font such as Times Roman or Book Antiqua in titles to show good contrast
* for emphasis, use bold, italic or all caps, but never more than one at the same time
* use no more than 36 words per slide
* use bullet points as "talking points" and avoid paragraphs
* try to use 3-6 points per slide
* be consistent and correct in capitalization
* as with any writing, use proper grammar, phrases or sentences must make sense, no misspelled words
* avoid bright colors; consider using light colors (e.g., white, yellow) on a dark background (e.g., dark blue)
* don't use primary colors (red, green, blue) together (e.g., red text on blue background)
* when finished preparing the presentation, save two copies of the file (current version + earlier version) to two disks (working + backup) that are carried separately to the presentation
* leave as much room light on as possible (people fall asleep in the dark)
* don't read your material from the slide
* don't read from notes (having notes is okay, just don't read from them)
* don't talk to the screen, talk to the audience with only occasional glances at the screen
* don't use stick pointers (they focus your attention on the screen and can make you look like Zorro)
* use a laser pointer selectively, and put it down when it isn't being used
* establish eye contact with areas of your audience on a regular basis
* if appropriate and as time permits, involve the audience in the presentation (e.g., ask them a question, conduct an interactive exercise, conduct a lottery to give away a product sample)
* move around to keep the audience's attention, but don't move too fast or too far
* dress appropriately, to meet the audience's expectations, and slightly more formal than them
* don't hold objects in your hands, but do use your hands and arms for gestures; do not put your hands in your pockets
* take clues from your audience (watch for "eyes glazed over" or "eyes shut") and take action to correct
* if the presentation is longer than 45 minutes, give your audience a stretch break
* conclude on time

Finally, the most important three things to know about making a GREAT presentation are: practice, practice, and practice!

(The presentation suggestions in this lesson are (c) Dennis Viehland, 2003.)

Assignment 20: Following guidance from your instructor about length, scope, target audience, etc, prepare a professional presentation of your business plan following the instructions provided above. Follow the guidance provided by your instructor to submit or present this PowerPoint presentation.

Additional Resources for Preparing and Delivering an Effective Presentation

The Presentations Magazine Web site contains original and reprinted articles in the areas of presentation creation, delivery, and technology. Most articles tend to cover specific issues and be for more advanced and professional presenters (i.e., not much general information here).

Jeff Radal’s Effective Presentations page delivers on-line tutorials on (a) oral presentations, (b) visual aids for presentations, and (c) effective poster presentations, but with slow and awkward navigation.

The Virtual Presentation Assistant is a similar tutorial from the University of Kansas Department of Communication Studies.

Presenters University offers short articles ("courses") about making presentations, a bulletin board for asking questions ("ask the professor"), and PowerPoint templates ("multimedia downloads").

Other collections of PowerPoint templates that can add unique and highly relevant backgrounds to a presentation include powerpointbackgrounds.com, PixelMill, and The Presentation Business.

Small, concise books such as Presentation Skills For Managers focus on presentation techniques and are best for beginner presenters. Longer, in-depth books such as Knockout Presentations: How to Deliver Your Message with Power, Punch, and Pizzazz cover a wider range of presentation skills in including presentations, public speaking, and audience participation and control. Rather than recommend any of the dozens of how-to-make-a-presentation books out there, we recommend you visit your university library or local bookstore to find a book that suits your needs.

Other small articles that offer advice to novice presenters include:
Designing Presentation Visuals
Making Effective Oral Presentations
10 Tips for Designing Effective Visual Presentations

9. e-Business Plan: Financial Statements

"Money is the lifeblood of business." This truism points out the importance of the financial statements section of the business plan. The financial statements (or the "financial plan") is one of the most closely scrutinized sections of any business plan. Investors have been known to go from the executive summary straight to the financial statements to judge the merit of a business plan. Your business plan must address the financial issues of cash flow, start-up capital and, of course, profit.

However, this is not an accounting or finance tutorial. Furthermore, if you are a business student it is likely you have taken, or are taking, an accounting course. We don't propose to duplicate all that content here. Therefore, some knowledge of accounting principles and financial statements is assumed. The purpose of this lesson is to describe the fundamental requirements for a financial plan in an e-business plan and outline the financial statements that are required, without defining every accounting term that is used.

For each of the financial statements, an Excel spreadsheet template has been developed and can be downloaded by clicking on the related link. You will need to add, delete, and change the items in the spreadsheet to meet the requirements of your individual business plan.

This lesson concludes with some suggestions how to put all the e-business plan pieces together into a coherent plan.

The lesson outline is:
What is a Financial Plan?
The Financial Statements
--Start-up budget
--Income and expense statement
--Balance sheet
--Cash flow statement
Putting it All Together

What is a Financial Plan?

The previous sections of the business plan define what the business intends to produce and how it will do so. The financial plan estimates the monetary resources and flows that will be required to carry out the business plan. The financial plan also indicates when and by how much the business intends to be profitable. Finally the financial statements tell a lot about the entrepreneur in terms of business commitment and financial wherewithal to make the business a profitable success.

In addition to the financial statements, a financial plan includes a list of assumptions upon which the financial statements are based. Clearly stating your financial assumptions serves two purposes: it allows investors to know what is behind the numbers and it helps you to know the financial impact when the basis of your assumptions changes.

Assumptions are most important in "soft numbers" such as projected sales and interest rate projections. "Hard numbers" such as rent, computers, and Web site hosting costs can be estimated with some certainty after a reasonable amount of research. The trick to creating realistic, credible financial statements is to make reasonable and conservative projections of the soft numbers and to understand the assumptions upon which they are based.

A financial plan should also contain a set of key financial ratios. Financial numbers aren't always enough to convince an investor that the business is a viable firm. Investors will want to compare your financial projections with those from other companies that have succeeded or failed. However, companies differ in size and it is difficult to make comparisons when one company is small and the other is large.

To solve this problem investors use financial ratios. When you divide one number by another, the resulting ratio or percentage makes it easier to compare similar businesses of different sizes. An accounting or finance textbook will provide a comprehensive list of ratios, but a few of the most important in assessing business plans are:

• Debt-to-equity ratio: long-term liabilities / owner's equity
• Net profit margin: net profit / gross revenue on sales
• Return on investment: net profit / total assets
• Return on equity: net profit / equity

Credibility can be added to your financial ratios if you provide the potential investor with comparative data from successful companies in the industry in which the business will compete. Financial data services such as Standard and Poor's, FISonline, and Dun & Bradstreet publish this data. A limited amount of free data may be available on-line, more detailed data are published in reports found in most university libraries or purchased from the firm.

The Financial Statements

The financial statements section begins with a start-up budget that details expected investment before the business starts to operate (i.e., before the first sale is made). Next, a series of financial statements -- income and expense statement, balance sheet, cash flow statement -- that project the financial future of the company for the first 3-5 years after start-up are presented. Depending on the nature of the business, supplemental statements (not included here) may also be required: a production schedule, income summary statement (income and expenses at a glance), and, especially if the business is seeking a large amount of funds from different sources, an investment schedule.

Start-up budget: If the business is a new one, you will need to prepare a budget that defines the expenses required to start the business, before it can begin to generate revenue through sales. For almost every business this includes items such as office furnishings, legal fees, product development, manufacturing equipment, and vehicles. For an e-business, a start-up budget will also include computers, software, Web site development costs, and provision of Internet service. A draft start-up budget template has been developed for your use. It will have to be modified to accommodate your business requirements.

Income and expense statement: An income and expense statement is an accounting term for what most people call a budget. The I&E statement includes income items such as revenue from sales and interest income. It also includes all anticipated expense items, usually grouped into logical categories such as cost of goods sold, administration expenses, interest, and taxes. The statement concludes with various profit figures -- operating profit, profit before taxes, and net profit.

The income and expense statement shows these figures over a period of time, annually in most business plans (e.g., income and expenses for the period January - December 2003) and projected several years into the future (e.g., 2003-2005 for a three-year projection).

A draft income and expense statement template has been developed for your use. It will have to be modified to accommodate your business requirements.

Balance sheet: The balance sheet is a statement of the business's assets (what it owns), liabilities (what it owes), and owner's equity (what it is worth).

Whereas the income and expense statement shows financial results for a period of time (e.g., year ending 31 December 2003), the balance sheet is a snapshot of financial results at a single moment in time (e.g., as of 31 December 2003). In established businesses, a current balance sheet usually presents previous year data too, for comparison purposes.

A draft balance sheet template has been developed for your use. It will have to be modified to accommodate your business requirements.

Cash flow statement: Even if the income and expense statement shows profits and the balance sheet shows positive owner's equity, you may still not have a viable business. Why not? Because a business needs cash on hand in order to pay bills. The purpose of the cash flow statement is to monitor changes in the cash position of a business over a period of time.

The top portion of the cash flow statement records cash coming in (inflow) and the bottom portion records expenses for cash going out (outflow). The categories are similar to those that appear in the income and expense statement, but the numbers are more "honest" because income is recorded only when it is deposited and expenses are recorded when the check (or e-payment) is made.

The "bottom line" here is the ending cash balance. If this number is negative for two consecutive periods, warning bells are likely to go off in the investor's mind.

A draft cash flow statement template has been developed for your use. It will have to be modified to accommodate your business requirements.

Assignment 19: Beginning with the draft spreadsheets, create a start-up budget, income and expense statement, balance sheet, and cash flow statement for your e-business. As appropriate, make all projections three years into the future. Write up a summary of these statements (at least one paragraph per statement) that highlights key points of interest to prospective investors (e.g., when the business becomes profitable, how much invested capital is required, where the capital will come from). Also include a list of key assumptions that support the numbers in the statements. Optionally, include a table of key financial ratios and/or supplemental statements such as an investment schedule. Follow the guidance provided by your instructor to submit, present, or save these financial statements and analyses.

Putting it All Together

Congratulations! You are done! The plan is finished! Well, almost. . . .

At the conclusion of this lesson you have all the major pieces you need to finish your e-business plan. However you are not done. You still have to:

• Finish the executive summary: You drafted an executive summary in the middle (after the Competitor Analysis lesson) and it is now time to finish it. When nearly finished doing so, double check the Executive Summary lesson to be sure you have done everything correctly.
• Write a conclusion: end the business plan with a short, upbeat, and informative summary of what you are proposing to do and what you are expecting from the reader of the plan.
• Put all the parts together in a single document and check for inconsistencies and duplication.
• Do all the formatting, spell-checking, etc. that was discussed in the Writing a Read Right Plan lesson.
• Give the plan to a friend or classmate to read and suggest changes. No matter how often you read the plan, you are likely to miss mistakes because you are "too close" to the material. A pair of "fresh eyes" will catch mistakes you have made.

Finally, your course assignment may include a presentation of your business plan. If so, the next, and final, lesson gives you some instructions on how to make a proper presentation of your business plan.

8. e-Business Plan: Operations

Beginning with the operations section, the scope of the business plan changes. Previous sections of the business plan, especially mission statement, value proposition, target markets, and competitive positioning, mostly focused on the strategic aspects of developing your business and writing the business plan. Although we couldn't do the hard work of writing the business plan itself, previous lessons have provided specific guidelines and assignments to help you do so.

In the operations section and financial statements section that follows, the scope of the business plan changes from the strategic to the operational. This change makes it more difficult to specify exactly what needs to be included in the operations section (or "operations plan") because many of the operational details depend on the nature of the business itself. For example:

• Will the company be business-to-consumer or business-to-business?
• Will the business manufacture a product, deliver a service, broker information, offer goods for sale, or distribute goods for others?
• Will the business offer one product or service, or a range of products and services?
• Will the company have a bricks-and-mortar presence, or sell strictly over the Web?
• Will the firm be a large company, a medium-sized enterprise, or a small business?

All these factors, and more, directly impact the specification of the operations plan. In fact, one how-to-write-a-business-plan book lists 198 questions companies should consider in business location, operating facilities, purchasing procedures, inventory management, quality control, customer service, organizational structure, and personnel. It is beyond the scope of this lesson to attempt to list, much less answer, those 198 questions for you.

Accordingly, the first part of this lesson moves away from a step-by-step approach of writing a business plan. Instead a more general, descriptive approach is taken of what should be in the operations section, leaving it up to you to use the resources in the Top Ten Resources for Writing an e-Business Plan and guidance from your instructor to develop an operations plan with the detail required for your course assignment.

The second part of the lesson, establishing a Web presence, returns to the standard lesson format. Instructions are provided for considering three operational aspects that each e-business will have to face: Web site hosting, Web site development, and selecting a domain name.

The lesson outline is:
Writing an Operations Plan
--What is operations?
--Should operations be in a business plan?
Content of the Operations Plan
--Business location
--Operating facilities and equipment
--Production and operating procedures
--Purchasing procedures
--Inventory management procedures
--Quality control procedures
--Customer service procedures
--Organization structure
--Management plan
Establishing a Web Presence
--Web site hosts
--Web site development
--Selecting a domain name

Writing an Operations Plan

What is operations? Formally, operations is the process through which resource inputs are converted into useful outputs. Inputs include raw materials, capital facilities, equipment, labor, and management talent. Outputs include manufactured products, services, information, and anything else the customer values. The operations function creates what the business will sell and the operations section of the business plan describes the inputs, processes, procedures, and activities required to do so.

Operations cannot be dismissed as the 21st century equivalent of "factory work". Operations plays a critical role in the success of the organization because operations is where value is produced. While the business description section defines the product and its value proposition, the operations section describes how that value is efficiently produced.

Should operations be in a business plan? We ask this question because some business plan books and software do not include operations as part of a business plan. Maybe they do this because it is a difficult section to prescribe (see discussion above) or because they don't consider it appropriate for a business plan.

The majority of business plan readers are most interested in the viability, feasibility, and profitability of the business. The previous sections, especially the value proposition and competitor analysis, should have presented a convincing argument for viability. The profitability question is addressed in the financial statements section that follows. That leaves the feasibility question, which is addressed in the operations section. The business plan reader will want to understand the process that creates the value proposition and how this process contributes to the success of the business. Therefore, most business plans should include an operations section and your plan should too.

However, with that argument in mind, we rush to add that it is essential that the operations section be written selectively and concisely. Simple or obvious operational details do not need to be meticulously described, if at all. What is presented should be written succinctly, and always with the needs of the business plan reader in mind. A good rule to follow in writing the operations section is "when in doubt, don't include it", and don't be afraid to use the phrase "more details are available upon request" in this section too. A short, concisely written section that shows you have put considerable thought into how your business will create value will be interesting to the reader and demonstrate that you are a capable businessperson.

Content of the Operations Plan

The following paragraphs present a menu of subsections that can be included in the operations plan. Not every one of these sections will need to be in your business plan, it depends on the nature of the business. For example, inventory management is a negligible factor in a service-oriented business so it may be treated briefly or not at all. Similarly, the organization structure and management plan for a small business are likely to be simple and self-evident, so they would barely get a mention here or be included in the business description section, as suggested earlier. The operations activities that describe the value your product delivers to customers are critical to understanding the business are the sections that should get full attention in your operations section.

Business location: As an on-line business, the primary location of your business is the Internet, and various aspects of establishing and maintaining your location in Cyberspace will be discussed in the Web presence section below. However, every e-business will also have a physical presence, even if it is in the entrepreneur's home. If your e-business sells product out of a physical storefront, stores product in a warehouse, ships product from a distribution depot, or services customers from a call center, those location-specific aspects of your business should be identified here. If location is an important consideration for business success, then be sure to highlight that here. For example, Amazon.com located its warehouses in small population states such as Delaware and Nevada so it can ship books into the large East Coast and California markets without charging sales tax, giving it a competitive price advantage over local bookstores.

Operating facilities and equipment: Concurrent with the discussion of location, or immediately following, is a description of the operating assets the business will require, including buildings, equipment, fixtures, vehicles, and software. Again, the information that is provided should be brief and focus on facilities that contribute to the value proposition (e.g., an equipment patent or software application that allows unique or highly efficient production techniques).

Production and operating procedures: This subsection outlines the day-to-day operating procedures that describe how the value sold to customers is created. It is easy to "over describe" in this section. A business plan reader generally will not want to know the nitty-gritty details about steps in the production process, how many service representatives per customer are required, production volumes, contribution margins, and so on (there is an exception -- see Business Case Box 6). Only operating procedures and policies that are unique or special should be highlighted here. For example, if the business will use new technology to speed work flow and achieve new efficiencies in information or product handling, say so here.

Business Case Box 6 Because the business case is being written for senior management, they will know much of what is normally included in the operations section. The subsection likely to be of most interest to them is the operating procedures section. The policies and procedures necessary to produce the product or service should be in sufficient detail to allow employees and supervisors to know what will be expected of them. Similarly, significant changes in normally accepted work procedures and processes must also be highlighted.

Purchasing procedures: If operations is about converting inputs into outputs, then purchasing inputs should be considered for inclusion in the operations plan. The nature of these inputs will largely depend on the business -- raw materials for manufacturers, components for assemblers, finished products for retailers, equipment and supplies for service providers. Highlight any major purchasing considerations, such as e-procurement or participation in a digital exchange, that will give the business increased efficiencies over competitors.

Inventory management procedures: Efficiently managing both incoming inventory and finished goods is critical to companies that hold any material or product for a significant length of time. For these companies inventory represents a substantial investment of funds and the ability to effectively control inventory levels is a management quality that the business plan reader will be looking for.

Quality control procedures: Total quality management (TQM) experts define quality as meeting or exceeding the customer's expectations first time, every time. Before TQM, quality control was something that was done after product manufacture or service delivery. Today quality control procedures begin with product design and are monitored throughout the production and delivery process. Quality control also has moved out of the factory, into the service industries.

Quality control is an important part of business plans when the business will operate in a highly competitive market and the nature of the product or customer implies quality will be a major factor in the purchase decision. One key selling point in quality control is to investigate the feasibility of obtaining a quality control certification for your industrial sector (e.g., ISO 9000).

Customer service procedures: Of all the subsections of the operations plan, customer service policies and procedures is the one most likely to be included in an e-business plan. Why? Not just because every e-business has customers, but because one of the best ways for an e-business to distinguish itself in the on-line marketspace is to be passionate about customer service.

Questions that might be addressed in this section include:

• How are customer expectations about service determined?
• What procedures are in place to correctly handle customer inquiries, from initial inquiry to post-delivery follow-up?
• What is being done to minimize delivery time from the time the order is placed until delivery?
• What procedures and policies are in place to guarantee efficiency in customer service operations?
• How is the business helping customers serve themselves?
• What standards (metrics) for measuring customer service will be used?
• What unique or competitive advantage is the customer service program providing?

Organization structure: For tax and legal purposes, most countries require an organization to declare a legal form of ownership. In the United States the general choices are sole proprietorship, partnership, and corporation. Similar options exist in most other countries, with slight variations in meaning and names. In the United Kingdom and most Commonwealth countries, for example, a corporation is known as a limited company (here "limited" means the owners are only responsible for a certain level of company debt, as in a "limited liability company").

If the business is a medium-sized or large company, then a business plan reader will be interested to know how the business intends to organize itself to achieve the goals set out the business plan. This organization design or structure defines the formal lines of authority that exist between managers in order to coordinate the efforts of each department so that the firm operates as a whole. The usual way to present this is in an organization chart that shows all major divisions (e.g., marketing and sales, production, customer service, information technology) with reporting relationships. Explain the organization chart with comments on management issues such as delegation of authority, managerial hierarchy, and span of control.

Management plan: Complementing the organization structure section is information about the background, skills, and expected contributions of each of the principals of the business. If senior management personnel have been recruited their qualifications for the positions they hold can be included in the management plan or in an appendix.

Establishing a Web Presence

One operations requirement that all e-businesses have is a Web site. In this portion of the Operations lesson we return to our step-by-step approach to describe what is required to establish a Web presence.

Web site hosts: As suggested in the business location discussion above, an obvious operational decision that needs to be made is where you intend to locate your Web site. Chapter 16 in Electronic Commerce 2004: A Managerial Perspective describes the four hosting options, and variations, in considerable detail. Students using Introduction to Electronic Commerce should consult EC 2004 for this material.

Briefly, the Web site hosting options, from most simple and inexpensive to most complex and expensive, are:

• A storebuilder service such as Yahoo! Store, GeoCities, and Homestead offers small and micro business owners tools to build the site and disk space to store the Web pages that make up the site. Using a storebuilder service to build an on-line store is quick, easy, and inexpensive, but the store's identity and functionality is limited. Generally, business owners serious enough about doing e-business to write a business plan are unlikely to exercise this option.
• Most Internet service providers can host Web sites and offer additional services (e.g., more storage space, simple site statistics, backup) for the equivalent price as a storebuilder service. The major difference is that with an ISP the Web site design becomes the responsibility of the business owner. The owner, or a hired Web designer, must use a Web site construction tool (e.g., Website Builder, ibuilt.net) or a Web page editor (e.g., Dreamweaver, FrontPage) to create the Web site. Usually this is not a problem because most e-businesses will want to build their own site anyway.
  
  Although a Web site can be hosted anywhere in the world, most e-business owners host their Web site locally. Why? Because it is useful to be able to easily get telephone or face-to-face assistance if problems arise. If this suits your needs, start your search for a ISP hosting service with the local Yellow Pages and consult local businesses for ISP recommendations.
  
  If you want to host your site in another location for cost-saving or customer-location purposes, then lists of Internet service providers can be found at The List of ISPs, Providers of Commercial Internet Access, and Yahoo's list of Internet service providers.
• A dedicated Web hosting service such as Opsware, Hostway, and Dellhost offer the widest range of services and functionality such as database integration, shopping carts, shipping and tax calculators, site search engines, and comprehensive site statistics.
• Self-hosting means your company purchases the necessary hardware, software, and dedicated telecommunications services to set up your own Web site. This should only be considered if your company intends to have a significant Web presence or some other critical reason (e.g., maximum data security, protection of intellectual property). The Web hosting options listed above allow the host companies to amortize the set-up and running costs across hundreds or thousands of customers. Your company will have to bear these costs alone. Internet-savvy business plan readers will question a self-hosting Web presence unless it is clearly justified in the plan.

Assignment 16: Based on your intended Web site host requirements, select one of the options listed above and investigate the feasibility and cost for hosting a Web site for your e-business (the cost information will be used in the financial statements). As part of your operations plan, briefly explain and justify your decision. Follow the guidance provided by your instructor to submit, present, or save this analysis.

Web site development: Concurrent with your investigation of Web site hosting options, consider the requirements and options for constructing your Web site. Web site development is really about three options -- internal development, outsourcing, or partnering -- spread over two time periods -- start-up construction and ongoing maintenance. Students using Electronic Commerce 2004: A Managerial Perspective will find these options fully discussed in Chapter 16. Students using Introduction to Electronic Commerce should consult EC 2004 or an information management textbook for this background information.

The basic three Web site development options are:

Internal development is the do-it-yourself option, building and maintaining the Web site with company employees. Companies that develop Web sites internally mostly do so because they wish to make Web site management part of their company's skill set. Another reason for internal development is that a business wants tighter control and faster responsiveness for problem resolution, content management, and ongoing development.

External development or outsourcing implies the business hires another firm to build and/or manage the Web site. Factors that tend to favor external development include faster speed to market and better access to special expertise, especially in the Web site construction phase. Small companies especially may also decide "its not our thing" and leave this important job to experts.

The internal-or-external decision does not need to be all one way or the other, some form of partnering development may be the best option. Depending on the nature of the site and the skills required, a mixture of internal and external development is possible and may be desirable.

Web site development occurs over two distinct time periods:

Web site construction consists of the initial design, construction, installation, and testing phases of a Web site's development. As suggested above, this is likely to require a variety of expert skills only rarely available inside the company (e.g., information architecture, Web page design, database integration, programming, search engine optimization). Unless the Web site is small and limited or one of the factors favoring internal development is especially compelling, most businesses decide on external development or partnering as the best option for Web site construction.

Web site maintenance begins when construction ends. Building a Web site is one process, maintaining it is another. Once the initial Web site has been constructed, the on-going incremental development and maintenance can be managed internally, externally, or in a partnership arrangement.

Assignment 17: Based on your intended Web site requirements and the considerations listed above, select (a) internal development, (b) external development, or (c) partnering for your (a) start-up site construction and (b) ongoing site maintenance. Follow the guidance provided by your instructor to submit, present, or save this analysis.

Selecting a domain name: A marketing and operational consideration is selection of the company's domain name. The domain name will be the business' on-line identity, its Web address, and it is an opportunity to create branding. So for the highest level of e-commerce positioning, you need a domain name that distinguishes your site from all others.

A full discussion of selecting a domain name is in Chapter 16 of Electronic Commerce 2004: A Managerial Perspective (see especially the list of suggestions for selecting a good domain name). Students using Introduction to Electronic Commerce should consult EC 2004 or make extensive use of the domain name resources listed below.

Although domain name assignment is under the authority of the Internet Corporation for Assigned Names and Numbers most e-business owners purchase their domain name from one of ICANN's registrars.

An on-line business that wishes to purchase a domain name in one of the global top level domains (e.g., .com, .biz, .info, .net, .org) should purchase it through one of the ICANN-accredited registrars. An e-business that wishes to purchase a domain name in a country-code top level domain (e.g., .uk for United Kingdom, .au for Australia, .jp for Japan) should consult the appropriate ICANN-appointed regional Internet registry.

Registrars don't only sell domain names, most of them also provide tools to assist prospective buyers to select a domain name. For example, if the preferred domain name is not available, most registrar sites will automatically generate a list of similar names that are available for purchase. Most registrars also link to a whois databases of registered domain names. This database contains contact details of the current owner of a domain name. Expect an established business to be reluctant to give up a domain name, but if the domain name is reserved but not in use the owner may be willing to sell it for a reasonable price.

In addition to using resources at the registrars' sites, there are a number of Web sites that can assist with the process of selecting a domain name. Here are a few suggestions:

• About Domains says it offers "guides and resources for successful Internet presence". These resources include a domain names glossary, a registration FAQ file, and "horror stories" from domain name owners who have had bad experiences with registrars.
• Domain Guru is a smaller library of articles that assist businesses in selecting a domain name.
• Nameboy is one of the most popular domain name wizards -- a tool that suggests domain names based on user-supplied preferences. Name boy accepts a key word or two the owner wishes to be in the domain name, plus parameters such as no hypens or words that rhyme, to generate a list of available domain names in the general top level domains.

Assignment 18: Find an available domain name (one currently available at the time you investigated it) for your e-business and write a brief paragraph to explain and justify it. Follow the guidance provided by your instructor to submit, present, or save this name and explanation.

7. e-Business Plan: Competitor Analysis

Every business has competition and prospective business owners ignore competitors at their peril. Unless a business has an absolute monopoly on a life-essential product, there will be competitors offering alternative and substitute products and services. That level of competition is revealed in the competitor analysis section of your e-business plan.

A competitor analysis is an important requirement in any business plan because it (a) reveals the firm's competitive position in the "marketspace" (on-line marketplace), (b) assists you to develop strategies to be competitive, and (c) investors and other readers of the business plan will expect it. If you ignore or minimize the impact competition will have on your business prospects, then you have an unrealistic business plan.

After giving some background about the type of competitors your business will face this lesson helps you identify and analyze your major competitors -- those most likely to impact on the success of your business. The analysis uses a variation of SWOT, a popular strategic planning tool, to help you identify strengths and weaknesses of competitors, and then opportunities and threats for your business. The lesson concludes with a statement of your company's sources of competitive advantage in the e-commerce marketplace.

The lesson outline is:
Who is Your Competition?
--Identifying your competitors
--Finding your competitors
Analyzing Your Competition
--Creating a competitor analysis grid
--Writing up the results of your analysis
--Web site critiques
Defining Your Competitive Position

Who is Your Competition?

Identifying your competitors: The first step in conducting a competitor analysis is to identify your competitors. Begin this process by considering the range of competition in your marketspace because not all competition is the same, there are different types of competitors your business will face.

Direct competitors are businesses that are offering identical or similar products or services as your business. These are companies that customers can easily buy from instead of from you, so these companies represent your most intense competition. Additionally, they have some degree of first-mover advantage that you will have to confront. For example, Purma Top Gifts will be competing with other retailers who are already on the Web selling handicrafts, artwork, and similar products either made in Purma or about Purma.

Indirect competitors are businesses that are offering products and services that are close substitutes. These competitors are probably targeting your markets with a same or similar value proposition, but delivering a different product. A classic example is a survey General Motors conducted of new Corvette car buyers. When asked what products the buyers considered instead of a Corvette, the usual sports cars were on the list, but so was the Sea Ray, a sleek, fast boat. The Sea Ray was fulfilling the same basic need as a Corvette -- a sporty vehicle that made the buyer feel young and would impress friends, especially of the opposite sex. Similarly, television and the Internet itself are Amazon.com's indirect competitors because each product competes for attention in a consumer's leisure time.

Future competitors are existing companies that are not yet in the marketplace that you intend to occupy, but could move there at any time. For Purma Top Gifts, a future competitor is an existing bricks-and-mortar gift shop in Purma that decides to start selling products on-line. One obvious source of future competition is an indirect competitor. As soon as an indirect competitor sees you having success in their area with a different product, they may try to duplicate your offerings and so they become a direct, perhaps formidable, competitor.

Identifying all existing and potential sources of competition is an impossible task, indirect and future competitors can number in the tens, hundreds, or even thousands. Instead, you will have to draw the line somewhere when it comes to identifying major competitors -- the ones that are going to have a real impact on your business over time.

While the nature of competition in your industry will determine the number of major competitors you must consider in the competitor analysis, we recommend you identify 7-10 direct competitors (if you can) and 3-5 indirect and future competitors. From this list, 2-3 direct competitors and 1 indirect and 1 future competitor should be analyzed in depth. The number of competitors you analyze is not as important as their competitive positioning and the depth of your analysis. A comprehensive analysis will convince a potential investor that your strategy is soundly based.

Finding your competitors: Who are your competitors? How do you find them? Because you are developing an e-business, the Internet is the perfect place to seek out your competition. Not only are there advanced search tools available to assist you in finding competitors, but their motivation to have a high profile on the Internet makes it impossible for competitors to hide from your searching efforts. So, the most logical and best place to start looking for competitors is on the World Wide Web.

Currently the world's most popular search engine is Google, but other highly recommended ones are Alta Vista, Lycos, and Hotbot. The main problem with search engines may not be finding enough competitors, but finding too many (e.g., "Results 1 - 10 of about 7,222"). If you are frustrated with too many "hits" in your searches and want to be more effective in your search strategy, explore the underlying tools and options most search engines offer. For example, in Google, increase the keywords you use in the "search within results" box and/or use Google's advanced search feature. You should already know other search engine basics such as using quote marks to search for specific phrases (i.e., words adjacent to each other). If not, spend some time exploring the help or "hints and tips" pages of your favorite search engine.

Another useful Internet search tool is Yahoo!. Because Yahoo! is a directory, not a search engine, it may already have, in one nicely organized list, a directory of competitors in your industry. Once you have used a search engine to find one or two major competitors, enter these into the Yahoo! search box. If you are lucky, the results will point you to a page of competitors. The WWW Virtual Library and About the Human Internet are also popular directories of Web sites.

Want to learn more about search engines? A good tutorial to learn more about searching the Internet is the University of California-Berkeley Library Internet Guide. The single best site for information about search engines is Search Engine Watch. An excellent article about the use of search engines is Web Search Engines FAQs: Questions, Answers, and Issues by Gary Price.

You should not stop your competitor search here. Some of the resources you used in your industry analysis and market analysis research will prove useful here too. For example, visit the Web sites or published directories of trade and professional associations in your industry. Especially, future competitors that currently are not on the Web may be found in these resources. You may want to complete your search for competitors in Internet chat rooms and in other communications with prospective customers.

In your explorations, look for and remember where these competitors appear on the Web. For example, which category in Yahoo! lists your competitors? What competitor ranks highest in search engines? This information is useful because in a short time your business will want to be there too.

In conducting these searches, what keywords or search terms should you be using? Consider the exercises you conducted when you wrote your mission statement. You were asked to conduct brainstorming exercises to list words and phrases that describe your business and your company's ideal image from a customer's point-of-view. The keywords of most importance here are those that reflect the customer's point-of-view because in the competitive marketspace the customer perspective comes first. With this in mind, refine this initial list by considering:

• List words and phrases that describe your product or service from a customer's perspective. Be specific and include level of service or product. For example, Purma Top Gifts intends to offer a variety of wool garments, so wool would be included in the list.
• List words and phrases that describe your target customers and their needs.

As each competitor is identified, visit their Web site and form some initial impressions about how much of a major competitor they are. Your focus here is on same or similar target markets, products, and value propositions; don't let a flashy Web site convince you that this is a major competitor when the value proposition is all wrong.

Sort competitors into three groups -- direct, indirect, or future. Within each group, develop a "quick and dirty" ranking scheme (e.g., rate on a scale of 1-10, how similar are their target markets, products and services, and value proposition to yours). Your goal in this first step is to produce a ranked short list of major competitors.

Assignment 11: Find, list, and rank 7-10 direct competitors, or fewer if less than seven major competitors can be found. Find, list, and rank 3-5 indirect competitors and 3-5 future competitors for your e-business. Follow the guidance provided by your instructor to submit, present, or save these lists.

Analyzing Your Competition

Creating a competitor analysis grid: With a list of competitors in hand, the next step is to conduct a methodical analysis of their strengths and weaknesses. Why is this important? It is a widely-accepted fact that a company achieves success through the assets, skills, and competitive advantages that it brings into the marketplace. An analysis of successful competitors should reveal these sources of prosperity and assist you in structuring your business idea. Searching for weaknesses not only provides insight into what others may be doing wrong, but reveals where opportunities for success may lie.

A competitor analysis grid is a valuable tool to compare competitors from a number of perspectives -- company information, product/service information, customer information, and sources of competitive advantage.

Basically, a competitor analysis grid is a large table. In the first column of the table is a list of criteria used to identify differences and similarities in competitors, everything from directory information such as the URL to competitive strategy information such as how the business locks in suppliers or customers. In each of the other columns is the corresponding information about each of the competitors you are analyzing.

Next, designate one of the columns for your business and put in your company's information, as best is known at this time. This provides a useful comparison between your e-business and your competitors, telling you where your business is positioned in relation to other firms competing in your industry.

A competitor analysis grid template has been prepared for your use in this analysis. You should add, delete, and change the items in this grid as necessary to fit the requirements of your competitor analysis and your course assignment (i.e., consult with your instructor if necessary). To use this grid, fill in each cell in the grid as completely and accurately as possible, even if you have to make a conjecture because the answer isn't obvious.

How many competitors should you analyze? This is a difficult question to answer because so much depends on your business and the competitive marketspace in which your business will operate. As a general rule of thumb, attempt to complete the analysis for 2-3 direct competitors,1 indirect competitor, and 1 future competitor.

Where do you get the data to complete the grid? The principal source of this information is the competitor's Web site. Other sources of information include:

• Annual report: If your competitor is a publicly-listed company, they will have issued an annual report that may be available in your university's library, downloadable from the company's Web site, or provided to you by the company upon request.
• Securities firms: Every major securities firm has a research division that collects, compiles, and analyzes data in the various industrial sectors. This may be just the data you need, but to obtain it you will have to pay for it or become a highly-valued client/investor.
• US government: The Security and Exchange Commission, Department of Commerce, Federal Trade Commission, and other regulatory (Food and Drug Administration) and support (Small Business Administration) agencies may hold information about your competitors.
• The Internet: In addition to the company's Web site, you should also use Google or another search engine to find media articles, product reviews, or other sources of information that reveal insight into your competitors.

Assignment 12: From the lists you complied in assignment 11, complete the competitor analysis grid for 2-3 direct competitors, 1 indirect competitor, and 1 future competitor for your e-business. Follow the guidance provided by your instructor to submit, present, or save this competitor analysis grid.

Writing up the results of your analysis: Should these analyses appear in the main text of your e-business plan? The answer to this question is "probably not". The grid tables will fill more than a few pages and the e-business plan readers are unlikely to be interested in all of the results. Instead:

• Save the full grid tables for future reference or include them in the plan as an appendix.
• Write up, in text format, the most important information in the grid table. Remember, the definition of what is "most important" should be from the perspective of the business plan reader. An effective way to present key points from your analysis is to include a "mini-grid" table that analyzes the top 1-2 direct competitors and your e-business on a few of the most important criteria.
• Do more than report the grid-based results, provide some insight for the reader about what this means. For example, if there are large numbers of competitors, acknowledge that the market is crowded and suggest how your business intends to establish and grow market share in line with your competitive positioning statement (see below). As another example, if there are few competitors, is it because you have discovered an untapped niche market (great news!) or because others have tried and not been successful (not-so-great news!).
• Include a list or brief table of the major competitors you identified in assignment 11. This shows the reader that you have done a comprehensive competitor search and adds credibility to this section.

Assignment 13: Write up the results of your competitor search and analysis for inclusion in your e-business plan. Follow the guidance provided by your instructor to submit, present, or save this competitor analysis.

Web site critiques: Another form of competitor analysis that is both informative and fun is to critique a competitor's Web site. The competitive analysis grid offers more substantial information for determining your own position vis-a-vis competitors, but critiquing a competitor's Web site reveals strengths and weaknesses in the way a competitor presents itself to customers and can give a new business a baseline for developing their own Web site. This exercise becomes more important if, as part of your course assignment, you must build a Web site for your new business.

Which sites are you going to critique? At first thought, the Web sites of your most significant direct competitors seems like a logical choice. However another option is to critique sites that have the most popular appeal to your target markets, even if this includes an indirect competitor. Why? If your primary objective is to learn what site features and design appeal to your target market, it makes sense to critique the sites that have been the most successful at this.

How do you determine which sites are most popular with your target markets? Direct evidence such as surveys or clickstream data is best. Otherwise indirect evidence is the ranking of the Web sites in the Google search engine. This is because Google ranks sites according to link popularity (e.g., the more pages that link to the site, the higher the ranking). To the extent that link popularity correlates with target market popularity, this is a criterion to consider in site selection.

In completing this task you are interested in:

• What is good, bad, and ugly about the Web site? Evaluate each site by using one of many Web site evaluation tools, such as Sixty Ticks for a Good Website or the Web Site Scorecard.
• Look at the information architecture too. Are the sites laid out on an hierarchical basis, or linear, or circular? How are Web pages grouped together? What Web pages are included? Site mapping tools such as PowerMapper and nSite are useful aids in conducting this analysis of the information architecture.
• Use this critique to begin to plan the architecture, content, and features of your Web site. If you find a site with a particularly useful feature, a well-written privacy policy, a useful keyword searchable archive, or a great looking site map, note this for future reference. You won't be able to copy this content exactly because of copyright provisions, but these can be good idea-starters for your Web site. Especially, look for good ideas that you can do better!

Because a critique of competitors' Web sites is not of interest to an investor or most other business plan readers you would rarely, if ever, include this critique in the e-business plan. Accordingly, this exercise is optional (i.e., you may want to do a Web site critique for reasons other than inclusion in the e-business plan). Consider the requirements of your course assignment (e.g., do you have to build a prototype Web site?) and seek guidance from your instructor about whether you should complete assignment 14.

Assignment 14: Identify 1-3 competitors who are popular with your target markets. Conduct a critique of their Web sites using resources such as those listed above. Follow the guidance provided by your instructor to submit, present, or save this critique.

Defining Your Competitive Position

The competitor analysis is necessary background research for what the business plan reader regards as the most important outcome of the competitor analysis section -- a description of your sources of endurable competitive advantage. In this final portion of the competitor analysis your focus turns away from competitors to your business. Specifically, what factors will set your product or service apart from your competitors?

By the time you reach this part of the tutorial many of the potential sources of competitive advantage have been highlighted in previous lessons (e.g., writing a mission statement, conducting the market analysis, determining the value proposition) and in the competitor analysis above. Your primary task here is to examine this material closely, formalize the sources of competitive advantage, and write the position statement in a convincing and easily understood manner.

There are at least two approaches available for you to explain your sources of competitive advantage.

Opportunities and threats: The competitor analysis grid reveals the strengths and weaknesses of your competitors. The other half of a SWOT analysis is to look for opportunities and threats that your company can use. For example, a weakness-opportunity strategy would create an opportunity for your business based on a weakness found in competitors. Or a strength-threat strategy focuses on risk avoidance by initiating a strategy that minimizes a threat caused by a competitor's strength. More information about this SWOT analysis approach can be found in most strategic management textbooks.

Tell the reader specifically what will give your business a competitive edge in contrast to other competitors. For example, your business will provide a full range of products, competitors A and C don't. Or your business will provide after-purchase customer service, something only competitor C does. Or your merchandise will be of a higher quality and include a money-back guarantee, something no other competitor does. Or competitors B and C sell the best widgets, but your site will sell the best gadgets.

Competitive strategies: A classic approach to thinking about and writing this section is to use the competitive strategies found in the strategic management literature. For example, look at your product, pricing, promotion, distribution, and service and ask the following questions (adapted from the competitor analysis grid):

• Cost leadership: Can you be a low-cost producer and sell equivalent or better goods in the marketplace for less?
• Differentiation: How can you distinguish your product in the marketplace?
• Innovation: Is there opportunity to create a new way of doing business, perhaps one that changes the nature of the industry?
• Growth: Are there opportunities to expand production, sell into new markets, introduce new products?
• Alliance: Can current or prospective production, promotion, and distribution be improved through partnerships with suppliers, distributors, and others?
• Time: Can your business reduce product cycle time? Offer express customer service? Use time in other ways that your competitors are not doing?

There may also be opportunities for you to:

• Lock in customers and suppliers
• Create switching costs for customers and/or suppliers
• Improve business processes
• Raise entry barriers for rivals and substitute products
• Create a strategic information system or strategic information base

The answers to these questions might reveal sources of competitive advantage such as patents, branding (e.g., a marketable domain name such as plumber.com), innovative product sales techniques, better and/or cheaper sources of supply than competitors, more entrepreneurial management, and superior customer relationship management strategies.

Whether you use the opportunities-and-threats approach, competitive strategies approach, or a combination, you will find that a company's competitive positioning strategy is affected by a variety of factors that are related to the motivations and requirements of the consumers in the target market, as well as the offerings and positioning strategies of competitors.

The resulting positioning statement does not have to be lengthy or pretentious, as long as it points out exactly how your product or service will be perceived by customers as different, and better, than what is offered by your competitors. State this in a way the reader understands not only what your competitive strategy is, but also why your strategy will work.

Assignment 15: Use one or both of the approaches described above to identify at least one (hopefully more) sources of competitive advantage for your business. Write this up so a reader of your e-business plan will understand how you expect to use these to achieve commercial success. Follow the guidance provided by your instructor to submit, present, or save this analysis.

The completion of this lesson is an appropriate time for you to begin writing the executive summary. A reminder: in the Executive Summary lesson we suggested you begin writing the executive summary in the middle of the business plan writing process, and then finish it last. Before proceeding to the next lesson, take some time to write a draft executive summary and then continue to make improvements on it as you finish writing the business plan.

6. e-Business Plan: Market Analysis

The market analysis section of your e-business plan demonstrates that you know your customers -- who they are, their characteristics, and why they are likely to buy from your business. The process of writing the market analysis requires you to define your target markets and analyze how you will position your product or service to arouse and fulfill their needs in order to maximize sales.

In a full-scale business plan the market analysis is part of the marketing plan section, which includes:

• Market analysis: a definition and description of prospective customers, including target markets, size and structure of the customer base, and growth prospects.
• Pricing strategy: setting the price of the product or service based on methods such as cost-plus pricing, demand pricing, and competitive pricing; and the use of innovative pricing strategies such as penetration pricing, flexible pricing, and market skimming.
• Promotion plan: the communication channels you will use to make the customer aware of your product/service and convince them to purchase (e.g., advertising, on-line demonstration videos, packaging). Promotion also includes tracking your customers (e.g., confirming who are your customers and how did they hear about you) and encouraging them to purchase again.
• Distribution plan: the distribution channel you will use to move the product or service to the customer (e.g., direct sales, wholesale distributors, brokers) and, if necessary, back again (e.g., returns).
• Demand forecast: estimates of product or service sales, based on the market analysis and assumptions about the effectiveness of the pricing, promotion, and distribution strategies.

A business plan tutorial for a marketing course would cover all these areas in considerable detail. However, the most important section for e-commerce professionals is the market analysis, so that is the focus of this lesson. If the scope of your business plan assignment includes the other aspects of marketing planning, then your instructor will provide additional instructions and resources to do so.

The lesson outline is:
e-Business Target Markets
--What are the target markets?
--Identifying target markets
Target Market Research

e-Business Target Markets

What are the target markets? The first step in conducting a market analysis is to define your primary, secondary, and, perhaps, tertiary target markets. Your target markets are based on segmentation characteristics within the total addressable market. The segmentation is based on:

• Demographic characteristics: specific, objective factors such as age, gender, race/ethnicity, education, occupation, and income.
• Geographic characteristics: location-based factors such as country, state, city, mobile workers, and lifestyle setting (e.g., rural versus urban).
• Psychographic characteristics: personality traits such as attitudes, beliefs, life experiences, needs, and desires.
• Consumer characteristics: customer-based factors such as loyalty, shopping frequency, and willingness to purchase from the Internet.

Determining the proper scope of the target markets is critical. If the definition of a target market is too broad, it will be hard to identify their information needs and you will waste money on promotion that won't get the results you want. If the target market is too narrowly defined, it will be difficult to find and generate a customer base that is profitable. This "market focusing" process is evident in the way marketers approach market analysis, working from the general (potential market) to the specific (market share), as described in the following paragraphs.

The potential market is the total number of people who could buy from your business. For example, if you are selling solely over the Web and only accepting credit cards for payment the potential market would be everyone in the world who owns a credit card and has access to the Internet. Obviously, this is a huge, but illusory, market.

The addressable market is the group of individuals in the potential market who are likely to have an interest in what your business has to offer. For example, for Purma Top Gifts the addressable market is people who have an interest in Purma, perhaps because they live there, want to visit or live there, or have visited or lived there in the past. This is close to being an appropriate target market if the business intended to be a Purma portal, but it is too large and unrealistic for Purma Top Gifts.

The target market is the group(s) of individuals in the addressable market that are likely to buy from your Web site, based on the segmentation factors listed above. In other words, who will buy your product or service provided consumer-environment conditions are perfect and there is no competition. This market, or markets, is the focus of this Market Analysis lesson.

Of course not everyone in your target market will buy from you because other factors strongly influence the share of the target market a business can reasonably obtain. For example, perhaps individuals in this market don't have a need for your specific product, your product costs too much, the customers never find your site, they don't have enough information or trust to buy from you, or because they find a better deal from a competitor.

The market share is the individuals in the target market who can be expected to make a purchase from your business. Your market share is affected by the structure of the industry, the impact of competition, strategies for market penetration, and the amount of capital the business is willing to spend in order to increase its market share. Market share is estimated in the demand forecast section of the marketing plan, which is beyond the scope of this lesson.

Identifying Target Markets: With this background and market-definition description in mind, it is time to identify your primary, secondary, and, if necessary, tertiary markets.

The primary market is the group of individuals in the addressable market most likely to buy your product or service. Think of the primary market as your "premium customer" or "who is most likely to find my site and buy something from it" or "who is chiefly interested in what I have to sell". Identifying the primary target market requires you to consider the potential and addressable markets, as well as the value proposition you wrote earlier. Conclude this process by describing this market using the segmentation factors outlined above.

For example, the primary target market for Purma Top Gifts is individuals in middle and upper socioeconomic classes living outside Purma who have visited Purma and retain an ongoing interest in the country. This tends to exclude (a) people who live in Purma, (b) tourists who have with little or no ongoing interest in Purma, and (c) low-income backpackers who have visited Purma. While Purma Top Gifts will gladly sell to anyone in these groups, for various reasons they are unlikely to make a purchase from the Purma Top Gifts Web site in large numbers. Similarly, a primary market such as "anyone who has ever visited Purma" is too broad, unrealistic, and it is difficult to define their information needs and justify promotion strategies that will reach them effectively.

The secondary market is another class of individuals who are "second most" likely to buy your product or service. In other words, look for another distinct group in the addressable market with different segmentation factors from the primary target market. For Purma Top Gifts, this group is Purmaians who are living abroad. These individuals may want to buy something from their home country for themselves or their friends, or they may want to buy a gift to send to a relative or friend living in Purma (e.g., a Mother's Day gift). These individuals will have similar shopping and information needs as the primary market, but different needs as well (e.g., differential shipping rates for in-Purma delivery, gift wrapping).

Occasionally there may be a tertiary market for your e-business (another class of individuals who are "third most" likely to buy your product or service) but the more target markets you identify the more difficult is to distinguish them from the primary and secondary markets. Unless you can think of a compelling, distinctly different, third target market, identify only primary and secondary target markets.

Assignment 9: Identify and briefly describe at least two and no more than three target markets for your e-business. Make sure your markets are scoped correctly -- not too broad and not too narrow. Your description should include as many demographic, geographical, psychographic, and consumer characteristics as possible. Follow the guidance provided by your instructor to submit, present, or save this description of your target markets.

Target Market Research

With 1-3 target markets identified, the next step is to conduct market research to provide some concrete data about them. In this section you are seeking answers to questions such as: What are the specific demographics (age, education, income, etc.) of these markets? How many individuals are in the target market? Do they use the Internet? Do they buy on-line? Are these markets growing? stable? declining?

Where will you find these data? We can't provide a specific answer to that question because it depends on the target markets you have identified and the information sources available to you. However, here are some suggestions:

• Trade, professional, and social associations and groups: People with common interests tend to organize themselves into groups that may match one of your target markets. For example, if you are selling a product or service of interest to people who fly, ask the Air Travelers Association for information about their members.
• Government sources: In the United States, the federal government's Census Bureau collects an immense amount of data in the decennial census and numerous smaller surveys every year. Government sources will be even more important if your business is in the B2B e-business market. (A reminder: Many sources of US government data are available at the FedStats Web site.)
• Libraries: Your university library is an easily accessible source of business periodicals and books, industry newsletters, and digital business articles and databases.
• University professors: In addition to your library, don't dismiss the possibility that the exact data you need is sitting in a research report on an academic shelf. Talk to professors who have an academic interest in your e-business industry. If they don't have the data you need, ask them if they know of colleagues and academic conferences where this data might be available. For example, the owners of Purma Top Gifts might visit professors in the Tourism Studies Department at the University of Purma, looking for research data about Purma tourists.
• EC market analysis firms: Companies such as Jupiter Research, International Data Corporation, and eMarketer collect and publish data about on-line consumers. Unfortunately, while general results and trends are published free, the detailed data you require is likely to be expensive to acquire.
• Direct data collection: If feasible, go directly to representatives of the target market. If there is a relevant e-mail list directed at a target market, ask list members to fill out an on-line survey (offer them something too for their time and effort, such as be in the draw for a $50 gift certificate at your site). Interviews with opinion leaders in the target market, focus groups, and face-to-face interviews will all yield valuable data and insight about your target markets, but with considerable cost in time and effort. In writing a business case, access to target market data is likely to be much easier and produce extremely valuable results (see Business Case Box 5).
• The Internet: We have deliberately saved the best for last. The world's largest library can be a rich source of primary and secondary data about your target market. Nua Internet Surveys is an excellent resource for researching target markets. Other Internet surveys are at Yahoo's Internet Statistics and Demographics Surveys page.

Business Case Box 5 In conducting research about target markets, the business case writer has a big advantage over the business plan writer. Unless the company is proposing to launch out into an entirely new industry or business area, it is likely that the market knowledge contained in customer databases, existing focus groups, and the marketing department will be available to conduct a complete and accurate market analysis.

Don't be surprised to find a lack of data about the specific target markets you have identified. Sometimes you have to make an estimation to find the data you need (e.g., data about middle- and upper-class Purma tourists with an ongoing interest in Purma may not be available, but data about Purma tourists by socioeconomic class, adjusted for Purma interest, will be an adequate substitute).

A final point: Don't conduct this research in isolation of the other data you are going to need. Later in this tutorial you will have to gather data about competitors to conduct a competitor analysis and financial data that are used in financial projections. So, think and plan ahead to make your research time most efficient.

Assignment 10: Complete your description of your target markets by adding objective, quantitative data to the general description you completed in assignment 9. Based on your market research, you may have to make minor adjustments in your target markets. Follow the guidance provided by your instructor to submit, present, or save this market research data.

5.3 e-Business Plan: Project Objectives

As noted in the business description lesson, most business plans don't include project objectives. However, there are exceptions. In a business case the target audience -- senior management -- will want to know specifically how the proposed project's mission and goals will be accomplished. Adding credibility to a small business plan and the need to demonstrate feasibility for a plan are two other good reasons to include project objectives. For whatever reason, if you need to write project objectives for your business plan, then this lesson will assist you.

The lesson outline is:
What is a Project Objective?
How to Write Project Objectives

What is a Project Objective?

Even more than how goals define a mission statement, objectives define a goal. In fact some people refer to an objective as a subgoal. Formally then, an objective is a statement, derived from a business goal, that describes a short-term, specific, verifiable condition that must exist to fulfill the affiliated goal.

As its name implies, project objectives are linked to a project. Goals don't just happen. To carry out the tasks inherent in a goal statement one or more projects are started. The outcomes or deliverables of a project are its objectives.

If a mission statement expresses what is to be done and goals state how the promise of the mission statement is to be fulfilled, then project objectives state when, where, who, and by how much.

How to Write Project Objectives

A popular rule for writing good objectives is that they be SMART objectives. The characteristics of a SMART objective are:

• Specific: The objective tells exactly what, where, and how the problem or need is to be addressed.
• Measurable: The objective tells exactly how much, how many, and how well the problem/need will be resolved.
• Action-oriented: The objective uses "activity indicators" to insure that something will be done. As with goal-setting, use action-oriented verbs such as deliver, implement, establish, and supply.
• Realistic: The objective is a result that can be achieved in the time allowed.
• Time-bound: The objective includes a specific date for it's achievement.

To illustrate the objective writing process, consider the Purma Top Gifts goal "Create a well-designed Web site that is fast, easy to navigate, responsive, and gives visitors the information they need." Some illustrative objectives for this goal are:

• A prototype Web site with 90% of all planned features and information will be available for testing 20 days before the launch date.
• The Purma Top Gifts site will be hosted by an external provider and be available to customers 99.5 percent of the time.
• Any page on the Purma Top Gifts site will download in 12 seconds or less using a 56kbps modem in America on 90 percent of all tests. All pages will download in 17 seconds or less in 100 percent of all tests.
• In a customer focus group, 80 percent of Purma Top Gifts customers will rate the site 45 or better on the Web site scorecard.
• Any information on the Purma Top Gifts site will be available within three mouse clicks from the home page.
• A standard navigation menu at the bottom of each page will list each second level Web page.
• A comments e-mail link will be included at the bottom of each page. A visitor who submits a comment via this link will receive a personal reply within one working day.

You now have all you need to write some project objectives, as required in assignment 5 in the Business Description lesson.