The Business Idea - Full of Joys - Case Study Example

New Business Idea Name: Tutor: Subject: Date: FULL OF JOYS’ 1. The Business Idea: Full of Joys’ “Full of Joys”’ is a food app that features all the delicious and nutritious cuisines from all over the world. It is also a tour guide that uses the GPS to locate the name, location and direction of a restaurant that is nearest to the user no matter where they are in the world. The name “Full of Joys’” comes from the feeling of satisfaction and adventure after taking a delicious alien cuisine in a different part of the world; the cuisine makes you feel satisfied and happy. The business idea Full of Joys’ came from my love of food and travelling. I love travelling and every time that I go to a foreign country, I love trying out the local cuisine. The amazing thing about this is that every time I think I have had the most delicious meal; that no meal could ever compare to, I get yet another tantalizing, delicious, unforgettable meal in another part of the world. Food and mobile apps are currently the most profitable aspects in the market. The tourism industry is also catching up to these two. “Full of Joys’” works as a kind of food assistant and tour guide. This app will be useful to everyone, but most especially tourists, adventurers, those who love to travel and try new things and food lovers. This is how it works: You are new or a tourist in a foreign Country, “What will you eat?” you want to try the local cuisine; a meal that is healthy and at the same time delicious and you can’t decide on what to take. This app will solve the problem for you. It will not only provide a list of the locals’ favorite cuisine, the recipe, nutritional facts of the recipe and the mode of preparation, it will also give you the name and directions to the nearest restaurant from your location that prepares the cuisine using the GPS system. Just go to the app, select the name of the country and then the location that you are in and your work is done! The app will give you the response in just a few seconds: A list of names of the local’s favorite cuisines. After selection of the specific food that you want to try out, it will give you the food preparation method, recipe and nutritional facts of the required recipe The list of nearest restaurants that make the cuisine. The directions on how to get to the nearest restaurant from your location. The amount you have to pay at the different restaurants for a meal. This idea came from my passion for travel and good food. Every time I travel, I get confused and I can’t decide what to eat, not only because I can’t understand the names of the meals that sound delicious on the menu, but also because I do not know the nutritional value and the mode of preparation of the meals. Sometimes when I get back home, after my tours, I get a craving for a tantalizing cuisine that I took in a thatched roof restaurant in Victoria Falls, Zimbabweor a cuisine that I took in a small classic restaurant with beamed ceiling and stone arches in Rome, Italy. These cravings and getting spoilt for choice of food made me come up with the idea of an app that can not only provide the recipes for local cuisines of different parts of the world, but also provide the location and directions to the restaurants that prepare the cuisines for tourists (Longenecker et al, 2013). My goal is to sell this app for free on either Apple App store or Google play with the app that has the features that I have listed main favorite and local recipes and the directions to the restaurants. Revenue will be collected from advertisements that will be done on my app by other companies and from an extended version for which users have to pay a certain fee; in-app purchase. Using the in-app purchase, users can buy recipes from the best chefs all over the world; Africa, Asia, Antarctica, Europe, Australia, North and South America. 2. MARKET ANALYSIS Market Size and Trends In this section, I seek to discuss the market trends in an effort to understand the customers’ desires. This will enable me to satisfy them. This section seeks to understand: consumer smart phone habits around the world, App users and App downloads and revenue. Consumer smart phone habits around the world Predictions by an Ericson mobility report that was done in November 2013 showed that the smart phone subscriptions would reach 1.9 billion by the end of 2013 and were expected to grow to 5.6 billion by 2019. One of the reasons for this is a notable increase in the Middle East, Africa and Asia Pacific subscriptions as people will be more likely to swap their mobile phones for smart phones. There will be more Smartphone subscriptions than the basic phones globally in the year 2016. Currently, Smartphone are used for: a. Access local information- 88% b. Search for information- 82% c. Participate in social media- 76% d. Read news and entertainment- 75% e. Find local services- 74% f. Research product and services- 62% g. Research travel destination- 41% h. Other- 10% App users Mobile consumers are now uploading Apps more than ever before. The average number of applications owned by a smartphone user has gone up to 41 a 21% rise from 32 Apps last year. Apps are a global phenomenon with massive consumer appeal. 85% of users currently prefer mobile Apps over mobile websites because they are perceived to be faster, easier to browse and more convenient. Most consumers link Apps with productivity. They can shop, bank, make travel arrangements, pay bills, make hotel reservations while staying connected with both home and office and staying productive. Worldwide, App users have grown from 1.2 billion in 2012 to 1.6 billion in 2013 and are expected to reach 4.4 billion in 2017. A greater percentage of usage comes from Asia; with 0.5 billion users in 2013 and a projected 1.98 billion users in 2017. Asia is closely followed with Europe, who had 0.5 billion users in 2013 and has a projection of 0.92 billion users by the year 2017. App downloads and revenues The revenue generated by the app market was approximated to be $20 billion in 2013. This value is expected to triple by the year 3017. In the year 2009, the sum number of app's downloads was 7 billion globally. In 2012, the sum number of app downloads was expected to grow at 92% Compound Annual Growth Rate to nearly 50 billion downloads in a year. The revenue figure for 2009 was above $ 4.1 billion, with a growth rate of 62%Compound Annual Growth Rate to $17.5 billion in 2012. North America had the highest amount of app revenue accounting for over 50% of the total revenue. In 2013, the revenue was estimated to be $20 billion and predicted to triple in 2017. Conventionally, apps publishers are required to consider other alternatives to making money like through in-app purchasing or through advertisement; this is because users are progressively unwilling to pay for downloading apps. However, recent research that was done by Simon-Kutcher and partners (2013) showed that even though traditional wisdom shows that Apps cannot be priced beyond $0.99 or $1.99, $ 2 or higher in a month is the price that is acceptable by customers. A study done by Zwass (2014), shows that In-app downloads will increase to 30% in 2016 from 5% that was observed in 2011. The revenue is, therefore, expected to grow to an astonishing 41% in 2016 from 10% that was seen in 2011. Five Force Analyses The Threat of New Entrants- HIGH The threat for a new entrant in the market is high. Many companies and developers are currently coming into the market and they will still come in even in the future. Therefore, App market is among the widest in relation to individual developers and firms that are joining the app market. Research shows that consumers are more interested apps that are interesting and efficient, and if a developer comes up with an app that has these two characteristics, then he will reach great levels of success. For this reason, brand reputation is less important in the field of developing apps compared to other fields. The Bargaining Power of Suppliers-Low The bargaining power of suppliers is low. There are no raw materials required in the development of this app. The only thing that one will require in order to have this is a personal computer, a server and maybe a printer. The printers are currently readily available and one can buy these from any supplier at a fair price. The Bargaining Power of Buyers-HIGH Buyers have a high bargaining power. They have many alternative options that they can choose from in the market. There are many apps that are presently in the market that offer Restaurant locations and the basic pay for each meal. There are also those that give recipes for food. Customers can, therefore, opt to have both apps for their use. Threat of Substitutes-MEDIUM The threat of substitutes in this market is medium. I am considering substitutes like those that offer recipes for different foods and apps that give information about restaurants and the directions to them. My app has an advantage over these because it combines both aspects of the aforementioned apps and it also provides specific recipes, that is, recipes for locals’ favorite meals. This is, therefore, an advantage for my app. The Competitive Rivalry-HIGH This app will face higher competition from the environment. One of the reasons for this is that there are an increase in smart phone ownership and usage and there are several companies and individual developers that are currently offering the same service. The differences come in the mechanism and working on the app, the price of the app, the efficiency of the app and a variety of service being provided by the app. To conclude my market analysis, an app that is specially designed to provide the local favorite food recipes, nutritional content of the recipe, the name, direction and location to the nearest restaurant that prepares the cuisine is an interesting market considering that the threat for a substitute is medium, the bargaining power of the suppliers is low, the threat for a new entrant is high, bargaining power of buyers is high and the competitive rivalry is high. This will make the business highly competitive and, therefore, a successful business. Competitor Analysis I came up with a list of several competitors around the world, but none who combined the services that I am offering. Urbanspoon Urbanspoon puts eating on a map. This app is a tour guide for hungry city goers. It generates restaurants that one can go to. It also provides search by location of restaurant's options that are near to the user’s location, the cuisine and prices. It also has a feature that one can use to compare restaurant picks with friends and read reviews by newspaper. This app is currently free in the market. Foodspotting Foodspotting is a visual app. It emphasizes on specific foods and documents the food experience. Photos of the best rated dishes that are near to the user can be seen. Users can also search for a specific food or can even look for a restaurant and find out the particular dishes that are good and served in the restaurant. Locavore Locavore allows users to eat locally. This app is free and it informs the users of which foods are in season and which ones are not. It also gives users the location of local farmers markets and information on where they can buy the in season foods from farmers who are currently harvesting them. Users can find recipes using local and in season foods and can share the information on Facebook. This app also has features that inform the users on the number of days left to buy in season vegetables and fruits. GrubHub GrubHub is a free application for takeout food. The app has features that can find a local meal option for takeout based on one’s location and the delivery in all major cities of the world. Users place their orders and delivery and have the food delivered to their homes. Epicurious This app is free. It is also very comprehensive when it comes to cooking meals. It has thousands of recipe collections. One just has to search by keyword. Once the choice has been made on which recipes to use, one can create a shopping list and share it on the social media sites like Facebook and Twitter. The recipes contained in the app have step by step instructions and professional photos. FoodGawker FoodGawker is a free app that has visually stunning photos of dishes from all over the world. Food bloggers from all over the world submit photos and recipes. Users can visually browse images and find something appealing accompanied by its recipe or blog post that was submitted to it. 3. Marketing Plan In the following section, I discuss the marketing plan that I have for “Full of Joys” app. I describe the product and its competitive advantage, promotions, place and distribution of the app and the entry strategy to the market and the product’s positioning. Product and competitive advantage My product is an app. It is a food app that shows the recipes for the local favorite cuisines that are nutritious and delicious, the nutritional value for the recipes and which also uses the GPS to show the location and direction to the nearest restaurant that makes the cuisine depending on the location of the user. The food app can be used by anyone in any part of the world who wants to try out new foods from different parts of the world because the app will contain a feature with recipes from different parts of the world. It will be most useful for businessmen and tourists who travel to various countries as it will give them not only the names of the locals favorite cuisine; depending on the location of the user, it will also provide them with the name, location and direction to the nearest restaurant from the user that makes the delicacy. The competitive advantage of this app compared to others that are presently in the market is that it: i. It combines two features; food and travel. This app not only gives the recipes and nutritional value of recipes, it also gives the name, location and direction on where to find a restaurant that has the cuisine. ii. The app also provides names of cuisines and recipes of the local favorite dishes. This gives the user a chance to learn and explore the different traditional recipes from different parts of the world. iii. This app also acts as a tour guide. It can be used to get directions to a certain restaurant; hence using the restaurant as a focal point. This can allow foreigners to explore without fear of getting lost. Promotions Due to the fact that this app will be new to the market and could be influenced by trends in the app market, I put up certain steps to ensure its success. The first step is to make sure that everyone is talking about it. This will be done by word of mouth. I intend to propose this app to experts so that they can start talking about it. The next step is to advertise through the social networks and websites. Through these people will be able to get information on the app and how it works. During the initial phase of the business, however, banners will be used because it is a cheaper method of advertisement. This will entail inserting the app advertisement into a web page. This mode of advertisement links the website of the advertiser. The newspapers, television and flyers, will also be considered as a mode of advertisement. Place and Distribution My product is an app and I do not have to find a specific area to penetrate. From the competition analysis of “Full of Joys," I think that my app has a good chance of penetrating the market really fast. It is an app that can be used by the tourism industry; tourism department in the many different parts of the world on top of usage by any other person in the world. My client base will, therefore, be big. Due to this factor, I am opting to use either Google Play or Apple devices which have the highest number of downloads as my main platform and as the stores that I want to exploit. Another reason for choosing these two devices is because they have many customers. I intend to have my app in a place like Europe, broaden my base to the USA before expanding my market to the rest of the world. This is because I think this app will be at its best in these two locations. Entry Strategy and Positioning I will start with a niche of business men; they travel and students who can use it as a learning material. The aim is to position Full of Joys’ as a modern and revolutionary food and travel app. I intend to have it grow from just having these two features to more features in the future. This app can be used from day to day life by anyone who owns a smart phone anywhere in the world. This is not only because of the fact that it will contain recipes from all corners of the world, but also because of its efficiency and simplicity. The app can also be used by foreigners and tour guides to find directions. Product Improvements and New Products This app is going to be improved constantly. An IT team will improve the services constantly. I will also apply new smart phone protocols and software programming to keep the service up to date, efficient, quicker, faster and user friendly. I might look into creating new services for other platforms other than Google and Apple. This will however be the next step after establishing my service 4. Financial Plan Funding This is a cost that I will incur in my project; $21,000. I broke it down to this: Legal 1000 Social Capital 1000 License to Develop 3500 Patent 1000 Pre-sale Advertisement 2500 App Development 5000 Long-term assets 7000 Miscellaneous 500 Total 21500 Since I intend to have my platform in Google or Apple, I will have to first get a license for this. This is the most important aspect of the business. I am going to employ someone who will develop an app for me. This will, however, be on a one term basis so that I can leave the room for any complications that may arise. This is a risky business and that is the reason why I will not employ the software developer permanently. However, if the business goes well, then I will hire him permanently. The total sum for starting this web will be $ 21500. This is how I will finance it: i. Bank Loan- $13500 ii. Personal savings- $8000 Income Statement i. Revenues The revenues will come from advertisements and the in-app. I expect the advertisements to start coming in by the 6th month from the launch of the app. The in-app purchase is expected to begin as early as 2 weeks from the launch of the app. Since the app will be for free, I expect that there will be many downloads. I, therefore, hypothesize a figure of 20,000 to 50,000 downloads per month in the first phase of the business, which is one year. According to Zwass (2014), a second classified app is usually downloaded 25,000 per day. This brings the total of 750,000 downloads per month. The hypothesized figure is, therefore, feasible even if my product is still new in the market. I estimate an average total of 420,000 downloads. Upgrading the app will have a fee of $ 0.99 per upgrade. This price is observed as a reasonable price. During the first year, I will have an average of 35,000 downloads. This makes the total revenue after upgrades by the users for the phase $ 34,650; $0.99*35,000. I expect that the total number of upgrades will double in the Second year and triple in the third year. Below is a table that shows the summary of what I expect the revenue to be after the first 3 years; 3 phases: Phase 1 Phase 2 Phase 3 Upgrades sold 35000 70000 105000 Cost per Upgrade 0.99 0.99 0.99 Total Revenue 34650 69300 103950 I will use the two ways of advertising to earn more revenue; Traditional banners and affiliation banners. Traditional banners work on the cost per click basis. Customers that want to have banners in my app will have to pay a calculated amount of $0.02 to $0.03 per click. This amount differs depending on the industry. In industries where there is high compensation, the amount can go as high as $ 1 per click. Affiliation banners are postulated to companies that sell products on the net. Such companies pay me an annual fee depending on the total number of downloads that my app has reached. I hypothesize to have advertising revenues as follows: a. Traditional banners According to a study done by Chesbrough (2013), an app that has 100,000 downloads in a month usually produces 1,000 clicks. Based on this, I am estimating that I will have 20,000 downloads per month and, therefore, forecast that my website will have around 200clicks. If the average earning is $0.2 per click, then the total revenue that will be collected from traditional banners in the first year will be 200* $0.2*12 months = $480. Traditional banners will be stopped in the second year because it is less profitable. b. Affiliation banners Due to the low cost of affiliation; $50, I require at least 20-25 partnerships. So I expect to get $ 1750 from an annual fee and 7% share on the sale of products. If 1000 clicks generate 10 products sold and the average price per product is $100, then the total revenue that will be generated in one month will be 10*100*0.1=$100. In one year, this will become, $100*12=$1200 yearly. Phase 1 Phase 2 Phase 3 Number of affiliation 35 52 78 Fee 50 150 150 Average product sold per month 10 10 10 Average price per product 100 100 100 % revenue 10% 15% 15% Total revenue 2950 9600 13500 The total revenue generated in the first phase is therefore expected to be; 34650+480+1750+1200=$ 38080. This will come from upgrades, traditional banners and affiliation banner. Below is a table that forecasts the projected revenue: Phase 1 Phase 2 Phase 3 Upgrades 34650 69300 103950 Traditional banners 480 0 0 Affiliation banners (fee) 1750 7800 11700 Affiliation banner (share) 1200 1800 1800 Total sale 38080 78900 117450 Expenses The expenses are expected to be as follows: a. Office Rent-$1500 per month= 1500*12= $18,000 b. Software developer and web designer- 1500=1500*12=1800 c. Utilities-450*12= $ 5400 d. Insurance- 500*12=6000 e. Cleaning- 500*12= $6000 f. Miscellaneous in 3 years-$ 2300 The tax rates are 27.5 from IRES, and 3.9% from IRAP. 5. Future Perspective Future Project After launching this app, I will develop and set up other apps and release them in the market. There will also be more release of this app in the market. My end goal is to be able to revolutionize the food and tourism industry by the contribution of this app and many others that I am yet to develop. I want to become an important firm in the world market that specializes in the above mentioned sectors. Exit Strategy Considering all possible alternatives, I think that I can either sell the patent of this app to Apple or Google, that is, everything including the idea. Or I can sell my company after it has made some profit and it has stabilized in the industry, that is, after 5-6 years. After all is said and done, I am hoping that I will not develop just this one app, in order to make an impact in the food and tourism industry, I am aiming at developing several other apps. After all is said and done, if “Full of Joys’” succeeds, developing many other software will be the best option for me. This apps I hope will change the food and tourism sector in the entire world. References Chesbrough, H. (2013). Open business models: How to thrive in the new innovation landscape. Harvard Business Press. Curley, M., & Formica, P. (2013). Introduction. In The Experimental Nature of New Venture Creation (pp. 1-9). Springer International Publishing. Longenecker, J., Petty, J., Palich, L., & Hoy, F. (2013). Small business management. Cengage Learning. Zwass, V. (2014). The Framework and the Big Ideas of e-Business. InHandbook of Strategic e-Business Management (pp. 3-14). Springer Berlin Heidelberg. Read More