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DCU School of Computing DCU School of Business
M.Sc. Electronic Commerce (Business) 2010
DCU School of Computing
M.Sc. Business Management 2010
DCU School of Business
Student Mobile Services Business Plan
July 2010 (2010-2013)
Darren Norris
59211072 MECB
Nessa Farrell
56549047 MSBM
Stephen Murphy
59211054 MECB
Stephen Rooney
59211669 MECB
I
hereby
certify
that
this
material,
which
I
submit
for
assessment
on the programme of study leading to the award of M.Sc. in Electronic Commerce
is entirely my own work and has not been taken from the work of others save and
to the extent that such work has been cited and acknowledged within the text of
my work.
Darren Norris
59211072 MECB
Nessa Farrell
56549047 MSBM
Stephen Murphy
59211054 MECB
Stephen Rooney
59211669 MECB
www.studentmobileserivces.com
2
Contents
1
Executive Summary
6
2
Market and Industry Overview
8
3
4
5
6
2.1
Industry Overview
8
2.2
Market Overview
12
2.2.1
The Mobile Market
12
2.2.2
The Education market
14
Products & Services
3.1
QuickRoll
21
3.2
Updates
21
3.3
Feedback
22
Competitor analysis
23
4.1.1
Electronic Polling:
23
4.1.2
Attendance services:
24
4.1.3
Learning Management Updates
25
Business Strategy
26
5.1
Vision
26
5.2
Mission
26
5.3
Strategic Model
26
5.3.1
Adapting to changing technology
27
5.3.2
Growth
28
5.4
Contingency planning & sensitivity analysis
28
5.5
New Product Development
28
Sales and Marketing Strategy
6.1
Marketing Strategy
30
30
6.1.1
Target Market
30
6.1.2
Advertising
30
6.2
7
21
Sales
31
6.2.1
Current products
31
6.2.2
The sales process
31
Technology Reports
33
7.1
SMS and SMS gateways
33
7.2
Bluetooth technology
35
7.3
Technology Roadmap
36
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3
8
Management and Staff
8.1
Company ownership:
38
38
8.1.1
Managing Director (CEO) and Financial Director: Darren Norris
38
8.1.2
Marketing Director: Stephen Rooney
38
8.1.3
Technical Director: Stephen Murphy
38
8.1.4
Sales Director: Nessa Farrell
38
8.2
Organisation Structure:
39
8.3
Training and professional development
40
9
Logistics, Operations and Supply Chain
42
9.1
Stock Management
42
9.2
Supplier Analysis
43
9.3
Strategic Relationships
45
10
Financial Overview
46
10.1
Financial Projections
46
10.2
Financial Performance
47
10.2.1
10.3
11
Forecasted ratios:
48
Funding Requirements
48
Bibliography
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51
4
Index of Figures
Figure 2.1 - The mobile eco system
8
Figure 2.2 - Total Revenue from mobile entertainment applications:
9
Figure 2.3 - European Mobile Penetration
12
Figure 2.4 – US Smartphone Penetration and Projections
13
Figure 2.5 - Number of schools/institutions in Ireland and the United Kingdom
16
Figure 2.6 – Education spending per student for Ireland and the U.K.
17
Figure 2.7 – A typical United States school structure
19
Figure 7.1 – SMS Gateway schema
33
Figure 7.2 – sMs Update conceptual architecture
35
Figure 9.1 – Devices stock management timeline
43
Figure 10.1 – Sales Breakdown Years 1 & 2
46
Figure 10.2 – Sales, Gross Profit and Net Profit
47
Index of Tables
Table 2.1 - Top Smartphone Platforms
10
Table 2.2 - Worldwide Mobile Terminal Sales to End Users in 1Q10 (Thousands of Units) 11
Table 2.3 - Company shares by value.
12
Table 2.4 - Student numbers for 2009 in Ireland and the U.K.
16
Table 7.1 - Technology Roadmap
36
Table 9.1 – Annual order quantities
42
Table 10.1 – sMs Financial performance information
47
Table 10.2 – Annual accounts summary
50
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1
Executive Summary
Global Mobile handset sales have grown by 17% in the past year, with smart phone sales
growing by nearly 49%. The Irish mobile phone penetration rate is currently 120% and the
market is the most valuable in Europe in terms of average spend per user.
Following our analysis of the mobile ecosystem and its dependent tiers we have identified
that the application and aggregator tiers are the most lucrative and have the lowest barriers to
entry.
Recognising the potential of these tiers within the mobile ecosystem and the ubiquity of
mobile devices, sMs have developed a set of services which will initially be targeted at the
education sector. Targeting this market would mean a potential user base of almost 1 million
in Ireland alone. There are however applications in several other sectors which sMs are
currently considering.
The three concepts currently in development are
QuickRoll – A Bluetooth enabled roll call which automatically detects the students present
for the appropriate class.
Updates – A notification service that collates updated documents on the schools learning
management system and pushes it to the appropriate students via SMS
FeedBack – A Bluetooth enabled in-class polling system which allows the student to interact
with class quizzes and forums.
These products provide solutions that could be applied to any environment with a basic ICT
infrastructure. sMs’s vision is to be the global leader in mobile service provision to the
education market and this enacts our mission which is to provide adaptive mobile solutions
that are highly scalable and interoperable.
Several ICT companies offer similar services to those above but do not offer the flexibility
and low cost model which sMs will provide. To be specific, sMs will grow sales and market
share by
•
•
•
•
Offering high value products at a competitive price
offering its services on a pay by use basis
allowing the educational institutions to share costs with their users
requiring minimal technical expertise to operate
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6
•
developing highly robust products that make use of mass market infrastructure
sMs will win run a low cost and highly engaging social media marketing campaign to gain
brand recognition and win market share. Building on scale, we hope to form strong
relationships with our customers, using their input to develop further products and services
based on mobile technologies.
Over the past year, sMs has formed a strong executive team with diverse skill sets in
Technology, Sales, Marketing, New Product Development and Finance. We are extremely
confident in our ability to innovate and coordinate operations as outlined in our detailed
accompanying reports.
sMs financial requirements and projections are to begin with capital sourced from the
shareholders, namely the four key staff, grant aid of a similar value and a long term SME
Focused loan. By the end of Year 2, SMS aims to be in a positive cash flow situation, and
profitable in Year 3. sMs aims to expand internationally by the end of year 3 either through
licensing or partnering and have already built up some considerable interest in our product in
Ireland and internationally.
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2
Market and Industry Overview
2.1 Industry Overview
With the growth in smart phone sales, the release of developer kits for mobile operating
systems and the investment in 3G networks, the mobile ecosystem has grown ever more
complex since its inception in the mid 1980’s.
In Figure 2.1 we can see the mobile eco system as it has emerged over the last decade.
Although there may appear to be many opportunities to innovate, competitive rivalry in the
value chain is intense at all levels and barriers to entry can be extremely high for levels such
as carriers and operating systems.
Figure 2.1 - The mobile eco system
Content
In the early 00’s content took the form of ringtones and logos but now with 3G and mobile
web infrastructure, services such as Google maps and iTunes can provide their content to
users directly through their handset.
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Applications
Applications (apps) were originally developed by OEM’s but now we have an abundance of
apps developed for various operating systems (e.g. iOS or Android) by large and small
independent developers. The value of the mobile applications market, including games,
sports, music and other entertainment applications is estimated to reach USD$77 billion by
2011. The Asia-Pacific region currently has the biggest market for mobile applications
followed closely by Europe. The barriers to entry at this level are considerably low with most
operating systems making a free or low cost developer toolkit available and an relatively
open market place for the applications to be distributed. The lack of standards at this level of
the value chain however has lead to fairly closed application development tailored to each
unique operating system (OS). The total OS users will dictate the applications market size
and thus it’s potential to generate revenue.
Figure 2.2 - Total Revenue from mobile entertainment applications:
Regional split percentage
North America
South America
Europe
Asia Pacific
Rest of World
(Source: www.juniperresearch.com)
Aggregators
Aggregator usually refers to an intermediary between the carrier and another party in the
value chain e.g. SMS gateways where ringtone companies can receive payment by SMS from
their subscribers on different networks. The role of aggregators will become increasingly
significant as high value services need to be provided to the varying standards at the carrier,
hardware and OS levels. Nearfield card transaction (NFC) for example is an aggregator
service that will allow users to pay for goods by installing payment technology in handsets. In
2009, there were $861 million NFC transactions globally but IE market research expect this
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to rise to $35.6 billion in transactions by 2014 as it becomes standard across handsets.
Another example is location based services that use the GPRS standard. Revenue derived
from location based services is expected to rise to $13.4 bn dollars in 2014 (IE market
research, 2010).
Operating Systems
Although in early handset development Symbian was the only OS worth developing on to
reach a mass market. Now; iOS, Android, Windows mobile and Samsung’s Bada are all
viable options for developers. The lack of standardisation in the OS is what stratifies the
market and reduces the potential scale economies for products and services that are OS
dependant. Below are the top platforms for the EU5 nations.
Table 2.1 - Top Smartphone Platforms
3 Month average ending Jan. 2010 - Total EU5 (UK, DE, FR, ES and IT), Age 13+
Share (%) of Smartphone Subscribers
EU5
UK
DE
FR
ES
IT
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Symbian
60.9%
46.9%
55.1%
40.7%
73.5%
75.7%
Apple
14.5%
20.5%
15.3%
29.9%
6.5%
7.7%
Microsoft
14.1%
10.7%
19.9%
20.0%
12.8%
11.4%
RIM
8.3%
18.7%
6.8%
5.4%
5.2%
4.7%
Google
2.0%
3.0%
2.2%
3.7%
1.8%
0.4%
Total
Smartphone
Subscribers
(comScore, 2010)
Hardware
Hardware parts can now be sourced very cheaply in China and most standard and smart
phone developers alike outsource manufacturing to massive production companies. One of
which is Foxxconn who employ 300,000 workers in just one of their manufacturing campuses
in Shenzhen. There is also rampant counterfeiting, imitation and some genuine innovation
emerging from China. Coupled with Moore’s law the price and power of mobile devices are
ever moving in opposite directions. According to a Gartner report “To compete in such a
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crowded market, manufacturers need to tightly integrate hardware, user interface, and cloud
and social networking services if their solutions are to appeal to users” (Gartner, 2010)
Table 2.2 - Worldwide Mobile Terminal Sales to End Users in 1Q10 (Thousands of Units)
Company
1Q10
1Q10 Market Share (%) 1Q09
Units
Units
1Q09 Market Share (%)
Nokia
110,105.6
35.0
97,398.2
36.2
Samsung
64,897.1
20.6
51,385.4
19.1
LG
27,190.1
8.6
26,546.9
9.9
RIM
10,552.5
3.4
7,233.5
2.7
Sony Ericsson 9,865.6
3.1
14,470.3
5.4
Motorola
9,574.5
3.0
16,587.3
6.2
Apple
8,359.7
2.7
3,938.8
1.5
ZTE
5,375.4
1.7
3,369.6
1.3
G-Five
4,345.0
1.4
Huawei
3,970.0
1.3
3,217.9
1.2
Others
60,418.1
19.2
44,972.2
16.5
Total
314,653.50 100.0
269,120.10 100.0
Source: Gartner (May 2010)
Carriers
Although in the early days of mobile networks carriers could hold customers to ransom, the
liberalisation of licenses and spectrums have lead to fierce competition in the market with
mobile virtual networks operators piggy backing larger networks’ infrastructures. Companies
like carphone warehouse also offer an unbiased retail alternative to carrier storefronts.
Therefore it is no longer good enough to offer coverage, carriers need to offer value add
services just to differentiate themselves which has lead to marketing budgets and partnerships
becoming central to their strategies.
Despite this mobile carriers and retailers have experienced strong growth as is shown in a
selection of share prices below
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Table 2.3 - Company shares by value.
Company
2005
2006
2007
2008
2009
Vodafone
3.5
4.5
5.6
6.1
7.4
Carphone
3.9
4.1
4.1
7.1
8.7
O2
3.0
3.9
4.8
5.7
6.7
Source: http://www.portal.euromonitor.com.remote.library.dcu.ie/Portal/
2.2 Market Overview
2.2.1
The Mobile Market
The European mobile industry was valued at between €135 and €145 billion in 2007, (Paul
Budde Communication, 2009). In Ireland the mobile penetration at 120% which is still 6%
below the European average (Figure 2.3).
Figure 2.3 - European Mobile Penetration
Europeran Mobile Penetration, (March, 2010)
160
Subscribers/Population
140
120
100
80
60
40
20
0
Pop. (Millions)
Finland
U.K
150
129
EU
Average
126
Ireland
Belgium
France
120
114
93
(Source: Yankee group, 2010)
Mobile is also one of the most widely adopted digital technologies. It is joint top with digital
T.V. with 89% proportion of individuals subscribing to its services, (Ofcom 2009). Current
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Irish mobile subscriptions are at 5.35 million, (Comreg, 2010) and U.K. subscriptions are at
76.8 million, (Ofcom, 2009).
The average number of SMS messages sent per connection per month in Ireland was 192 in
quarter 1 2010, an annual increase of 3.7%, (Comreg, 2010). In the U.K. it has increased by
29% to an average of 99 messages sent per month, (Ofcom, 2009).
The handset market is also experiencing strong growth according to Gartner; ‘worldwide
mobile phone sales to end users totalled 314.7 million units in the first quarter of 2010, a 17
per cent increase from the same period in 2009...Smartphone sales to end users reached 54.3
million units, an increase of 48.7 per cent from the first quarter of 2009’ It must be noted
however that white box 1 products in emerging markets like India have helped contribute to
this substantial growth in handset sales.
Smartphone sales in particular are expected to rise dramatically going forward with Nielson
(2010) market research forecasting that sales will overtake feature phone sales in the U.S. by
2011 (Figure 2.4).
Figure 2.4 – US Smartphone Penetration and Projections
% of Population
U.S Mobile Phones Projections, 2010
90
80
70
60
50
40
30
20
10
0
2008 Q2
2009 Q4
Smart Phones
21
31
Feature Phones
81
66
2011 Q3
Smart Phones2
31
45
Feature Phones2
66
51
(Source: Neilson Company 2010)
1
Cheaper devices often only sold to OEMS who will then engage in packaging, branding and marketing the
device
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In the U.K., smart phones totalled 15.6% of all handset sales in 2009. By March 2010 the
amount of smart phones subscribers in the U.K. had grown at annual rate of 70% to 11
million (ComScore, 2010).
As identified in the qualitative interview with Samsung (Appendix 3), the Irish 12-18 year
old market has huge potential for smart phone manufacturers once apps can be paid for
through phone credit. When Samsung and other handset manufacturers have their pay by
credit app stores up and running we will see another sudden spike in demand for these
powerful devices.
It must also be mentioned that the monthly average revenue per user (ARPU) in the Irish
mobile market is the highest in Europe at €35.23 with the E.U. average being €22.07 this
makes it an extremely attractive market for mobile services
Finally, with such a high penetration rate it is important to recognise the potential of any
aggregated services that can be embedded in mobile technology. For example the global
market for GPS navigation and Location Based Services (LBS) is set to rise to $13.4 billion
in 2014, a compound annual growth rate (CAGR) of 51.3%. Total spend in the LBS market
in Ireland is predicted to rise to $82.3 million in 2014 and. $719.3 million in the U.K (IE
Market Research, 2010). As GPRS can be aggregated across all mobile devices there are vast
revenue opportunities.
2.2.2
The Education market
Although current sMs offerings can be adapted to serve many markets, the initial application
focus is on the education market.
In
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Figure 2.5 we can see the number of educational institutions by level, with primary schools
being the largest in both the U.K. and Ireland
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15
Figure 2.5 - Number of schools/institutions in Ireland and the United Kingdom
25000
20000
Numbers of
institutions
15000
England
10000
Ireland
5000
0
Primary
Secondary
Higher Ed
Levels
(Source: http://www.portal.euromonitor.com.remote.library.dcu.ie/Portal. 2009)
Table 2.4 - Student numbers for 2009 in Ireland and the U.K.
Students (‘000s)
2009
Ireland
Third Level (full
Primary
Secondary
490.8
338.7
148.0
N/A
164.8
148.0
68.6
.7
4,704.0
3,780.0
1,897.1
621.5
& part time)
Independent
Northern
Ireland
U.K.
(Ex.
N.
Ireland)
(CSO 2009 and DCSF 2009)
2.2.2.1 Expenditure
€6.4 billion was allocated in current expenditure in 2009 to Irish primary and secondary
levels, €311 m to further education and €1.8 billion to third level (DEO, 2009).
On the 28th of July 2010 the government announced that it would create 70,000 additional
permanent places in primary schools and 15,000 permanent places in new post-primary
schools by 2016. It also announced that €250 million would be invested in ICT in schools
(Kennedy, 2010). This follows the Irish government’s previous commitment of €150 million
to ensure a laptop and digital projector for every school in Ireland.
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Staying with ICT, the National Centre for Technology in Education (NCTE) have recently
completed a school broadband network which provides broadband and support for 99% of
Irish schools. Research completed as part of this report, a similar education infrastructure of
school broadband and classroom laptops/desktops for teachers has developed across several
other nations in Western Europe, North America and certain regions of the developing world.
The table below indicates the expenditure 2 per student in Purchasing power parity terms for
the U.K. and Ireland.
Figure 2.6 – Education spending per student for Ireland and the U.K.
Spending Per Student for the U.K. and
Ireland
Monetary Value
30000
25000
20000
15000
10000
5000
0
United Kingdom ( Millions £ )
Ireland ( Millions £ )
Primary Ed.
6000
5000
Secondary
6000
Ed.
8500
Higher Ed.
14500
11000
(Source: http://www.portal.euromonitor.com.remote.library.dcu.ie/Portal/ResultsList.aspx)
2.2.2.2 ICT importance
The NCCA 3 as well as the Irish Education Minister’ strategy group have published reports
outlining the roles of schools and the need for them to encourage ICT. In order to sustain the
2
Expenditure includes all salaries and benefits for teachers and all educational staff as well as current supplies
such as books and materials. Expenditure comes from both public (government) and private sources both current
and capital. Exp per student is got by dividing the total expenditures for all institutions by the corresponding
equivalent enrolment.
3
National Council of Curriculum and Assesment
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growth within our economy it has become important to embrace emerging technologies in the
classroom and prepare students for the IT rich next generation.
In the U.K. however, primary school ICT budgets are expected to drop by 2.2 % in 2009-10
with secondary school budgets dropping by 1%. This equates to a reduction of £9.8m.” (The
guardian, 2009)
2.2.2.3 Technology Trends
In 2009 Simba information conducted important research into the technology trends in the
education market. Some key discoveries were made
•
Pricing and available funding had the most significant impact on schools’ ICT
purchasing decisions
•
Almost 70% of schools were using learning management systems
•
Mobile phones were the most sighted device to be purchased for instructional use in
the next 2-5 years
In our primary research it was discovered that K-12 schools also struggle to find reliable, cost
effective ICT support and support can often be a major barrier to schools purchasing ICT
equipment and services.
From further primary and secondary research it was clear that the emerging trend of
institution spending is ‘low cost high gain’. Schools are increasingly looking for value for
money in ICT, choosing technologies that can have a significant impact on their delivery of
teaching and learning at a relatively low cost.
Despite the global economic situation reports have proven that the demand for education is as
high as ever. People are more concerned about their future and the quality of their education
at present. (Richardson, 2010)
It is clear from this analysis that the finances available and the vast numbers of students in the
education system makes it a viable target market. What is also evident however is the need
for low cost reliable ICT services in a time of fiscal uncertainty.
2.2.2.4 Hierarchy and purchase influencers
In Ireland the board of management have the overall say in how K-12 schools are run and
they must sign off any large current expenditure. The school principal however, focuses on
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the day to day administration of the school and much of the marketing activity would be
aimed at influencing his/her purchasing decisions for this reason. There are also several other
interest groups that need to be considered for those selling ICT goods and services into
schools. These include
•
The ICT co-ordinator
•
the parent teachers association
•
Students
•
Parents
•
the education department
•
Other governing and influencing committees.
Figure 2.7 details a typical national education hierarchical structure
Figure 2.7 – A typical United States school structure
Board of
Education
School District
Attorney
Auditor
Board
appointed
committees
Principals and
Administrators
Curriculum
coordinator
Technology
Coordinator
Teachers
Students and
Parents
Facilities
management
Director of
special
education
Counsellors,
Secretaries and
assistants
(Source:http://www.google.ie/search?hl=en&source=hp&q=education+system+chain+of+co
mmand&aq=f&aqi=&aql=&oq=&gs_rfai=)
Universities are primarily run by a board of trustees who delegate most of the Ruling to the
president of the college. Colleges for the most part are split into different departments
depending on the courses taught in the establishment. The influence of ICT purchasing could
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come from these trustees, the CEO, the heads of schools, the ICT administration services or
even individual lecturers.
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3
Products & Services
sMs will aim to offer three products from the outset:
•
QuickRoll
•
Updates
•
And Feedback
The first two products, QuickRoll and Updates will be built to prototype stage and will be
supported by a technical delivery product. Feedback will be fully specified and described in
detail to be built during Year 1 of operations.
3.1 QuickRoll
The objective of QuickRoll is to provide an immediate attendance collection and
management solution to any environment, with an initial focus on the education sector.
QuickRoll will be powered by Bluetooth technology which scans a room and retrieve’s any
Bluetooth devices it finds. It will then reconcile this data against a pre-stored class list and
return a list of absent persons. An actor, such as a teacher can then edit the records to give a
valid reason for an absence or note when a Bluetooth device is missing. Data is to be
collected, once, twice or up to eight times per day depending on the requirements of the
school, and billing arrangement. Data is stored for one year, with further storage possible for
an additional fee.
In schools where there are policies preventing students from bringing their mobile phones
into the classroom and therefore where the Bluetooth attendance system may not suit, sMs
will provide a low cost device to every student. The devices will also have optional extras
such as lanyards for students to wear around their neck in order to prevent un-authorised use
during class. For schools that wish to store the devices in the classroom, a secure case can be
provided at a once off cost.
3.2 Updates
When a change is made to a school Learning Management System (LMS), or the school
wishes to update all parents or students of some news the Updates service can be used.
Updates will use an SMS gateway to communicate with the entire school or a small segment
such as a class. By centrally purchasing SMS messages Updates offers a low-cost solution to
notify students of updated class notes, homework or other information on a daily basis.
Updates will ensure that students are made aware of changes made to the LMS outside school
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hours, or alternatively messages will be postponed from during the school day. The
QuickRoll system can be linked to Updates to notify parents when their children have been
marked as absent from the school for a particular day, or class.
3.3 Feedback
Intended as an in-class polling and communication tool, Feedback will be a Bluetooth
powered mobile solution. A teacher will be able to create a poll or a discussion in-class on a
LMS such as Blackboard, Moodle or Sharepoint. Students for that particular class will be
immediately notified of the new poll, have the opportunity to respond and results will be
displayed once collected. This approach to in class teaching has been found to be very
effective in increasing the participation rate as well as retaining students’ attention,
(Reference).
In class discussions and questioning facilities will also be provided for. It has been noted in a
number of examples where students take part to a greater extent in text based discussions inclass where previously very few or nobody participated in a vocal discussion.
Further products will be investigated and developed throughout Year 2 and Year 3 as
information from our customers feeds back and improvements can be made. The three
products will be built in a format that allows for maximum expansion in the future and ease
of change. A results module for example can fit in with QuickRoll and Updates, allowing a
seamless results and attendance reporting system for schools which can be immediately
highlighted with parents. The integration of attendance and results reporting is an essential
aspect of both systems for schools, as noted by an interview with Donal O’Mahony, (See
Appendix 3).
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4
Competitor analysis
This segment of the document will look at the major competitors in the market currently. The
report is broken down into looking at each competitor in terms of the services that sMs offer.
However in the appendix 12 an analysis of the two main competitors to sMs
•
Serco (ePortal)
•
MSDN (Dataset)
4.1.1
Electronic Polling:
There is a large number of company’s offering polling services for education sectors online at
present. The majority of these come from the US but still present a threat to us as their
presence online is evident and they deal with clients on an international front also.
The biggest of these would include iRespond a wireless e Systems which is located in Florida
and is a recognised leader in real time Radio Frequency. They have taken their expertise in
the RF technology front and have applied it to the education training market. They provide
consistent consumer support and training. But nevertheless this may not work as a sales
advantage on their behalf when competing with the Irish and UK markets where ongoing
support will be difficult as call outs will be virtually impossible.
ATS Conference is a UK based company that provide voting systems that allow you to create
presentations and power points that the audience can respond to; it also provides instant
feedback after each response. The response keypads run on a unique frequency that will not
interfere with other wireless applications or software.
Reply Team talk is also a company that provide portable electronic voting and interactive
systems. They are leaders in the provision of Audience response and Keypad voting systems
in the UK. They also provide ongoing support for their clients in the form of YouTube
demonstrations and a contact around the clock to professional sales teams.
Even though these competitors have testimonies from well known corporate sector clients it
is clear that polling hasn’t yet managed to fully break into and penetrate the education
market.
Their target markets include companies holding business conferences, aspects of focus group
research, and public consultation meetings. These potential competitors highlight the benefits
of their unique polling devices. But nevertheless they come at a high cost. We can argue that
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not all schools throughout Ireland would have the funds to cover such high costs. Prices can
vary between systems and on the number of handsets. Studies from the department of
education show that the average class size is approximately 24.3 students. This will result in a
total cost of between 900-2000 pounds or approximately 1084-2410 euro in order to provide
a handset per student in a typical class.
Based on our analysis no competitors currently offer student participation and voting using
the student’s mobile phone through Bluetooth.
4.1.2
Attendance services:
There are a vast number of companies providing solutions for attendance within schools.
These involve various methods from key cards swiping to finger prints and face recognition.
These systems take the onus off the teacher as students are responsible for their own
attendance. The most popular system that has influenced the education market would be the
use of a swipe card. From the main attendance solutions offered by business.com over five
have swipe card solutions accessible in Ireland. No company analysed so far has yet to
provide a multi function card system. We are unique as in we offer three services allocated to
one device this will limit the installation costs and time and also will provide a more IT
enrich environment for students.
Examples of online attendance companies:
•
Time Clock Plus - http://www.timeclockplus.com/default.aspx
•
T Data - http://www.t-data.co.uk/?gclid=CKiGup7ni6MCFRM-lAodTl3SZw
•
NorthGate Arinso http://www.northgatearinso.ie/time_and_attendance?gclid=CP2vxq7ni6MCFRQ9lAo
djg7icw
•
Time Force - http://www.mytimeforce.com/
•
Advance Systems Ireland - http://www.asi.ie/ie/solutions/time.html
Fame indicated that there are approx 24 main education services throughout Ireland and the
UK that deal with services varying from online technical support to computers and training.
Most of the listed companies were affiliated to certain schools this will pose a major mode of
competition for us as we try and penetrate the education services market.
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4.1.3
Learning Management Updates
Although learning management systems update currently do not offer SMS updates
companies like Moodle and Black board continue to present a threat to our development.
Reputable businesses like these have been around for some time and have managed to operate
in not just Universities and Colleges but secondary schools also. Moodle has a large and
diverse community and is available in over 212 countries worldwide and has close to
1,000,000 registered users. It has penetrated the education services market through its
applications as regards forums, Moodle docs and calendars. Blackboard also prides
themselves in teaching and learning. They are focused on helping institutions drive education
through their online services. Similar to Moodle they have forums and a range of online
support, downloads and services.
(Source: Euromonitor, 2010)
We would also see the mobile phone industry as a major market threat to us. Phone
Company’s in Ireland and the UK could affect the sales of our hand held devices because of
promotions and lower prices due to the scale of their enterprises. Carphone warehouse would
be the biggest threat with a 26% holding of all mobile phone outlets in Ireland. Vodafone are
in a close second with 24%. There share continues to grow due to decline in sales by
independent sellers. (Euromonitor) Best Buy Europe also presents itself as an ongoing threat.
Major expansion plans in 2009 present the firm in a stronger position than ever. They plan to
open a further 200 stores by the end of this year which will broaden their target market and
overall market saturation. Revenues were £794m this quarter (FT, 2010).
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5
Business Strategy
5.1 Vision
To be the global leader in mobile service provision to the education market
5.2 Mission
To provide adaptive mobile solutions that are highly scalable and interoperable.
5.3 Strategic Model
Based on our analysis of the mobile industry sMs sees an opportunity in developing
applications which can be aggregated across all devices and networks. This strategy stems
from the analysis that interoperable services can generate enormous revenues by leveraging
the total size of the market, while application development has the lowest barrier to entry and
allows the developer to solve specific identifiable problems that the target market is facing.
As detailed in our market analysis, the penetration of mobile devices in Ireland and the U.K.
is significant with steady growth being forecasted for the mobile sector over the next 4 years.
At a time of tightened fiscal expenditure, the growth and innovation of the mobile industry
will have an important role to play in augmenting the education sector with ICT. The
increasing complexity and processing power of these devices as well as their pervasiveness
and the continuous improvement in network infrastructures makes mobile a compelling
market to invest in.
Our strategy is to offer products that require minimal technical expertise, have immediate
impact on the institutions processes and which are made available on a pay per use, low cost
pricing model.
As innovation in technology changes so rapidly in the external market but at a much slower
pace in the education market, this strategy can gain quick access to the education sector as it
offers established, trusted technology. Once this is achieved sMs will be ideally placed to
influence new purchasing decisions while continuing to develop services based on customer
feedback and our strong connections with purchase influencers.
Since we sMs will provide standardised technologies that will make use of existing ICT
infrastructure and hardware (see new product development) institutions and users will have to
incur little setup or capital costs which is a key selling point in the industry.
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We will offer products that are simple for students, teachers and parents to operate sighting
ease of use and accessibility as one of our key differentiators.
sMs will drive initial sales and growth by
•
Offering high value products at a competitive price: For example our attendance
system saves time in the classroom, reduces administrative overheads and is priced
roughly 20% cheaper than the dominant attendance management system in the
market.
•
Offering its services on a pay by use basis. sMs will provide a flexible pricing and
billing model which means schools only pay for what they use.
•
Allowing the educational institutions to share costs with their users. Through our
update system we will be servicing the need of parents to be involved in the learning
process while they subsidise a service which is convenient for them.
•
Requiring minimal technical expertise to operate. As mentioned in the market
analysis a major concern of schools currently considering ICT implementation is the
inability to find or fund support and training. Being O.S. independent, shifting
hardware configuration onto the experienced user (student) and operating a software
as a service model, sMs will avoid many technical issues
•
Developing highly robust products that make use of mass market infrastructure.
Using technologies such as Bluetooth and SMS will allow us to apply our
technologies internationally while licensing to and partnering with key parties in
related and unrelated industries (See International testimonies)
5.3.1
Adapting to changing technology
As noted in our market analysis mobile broadband is fast approaching although due to
bandwidth and infrastructural concerns it is still uncertain whether the future network pricing
models will accommodate students’ need for continuous internet access (The Economist,
2010). If students can’t afford such access schools will need to invest in high bandwidth WiFi infrastructure. Deploying campus wide infrastructure will be a schools responsibility and it
will incur high setup and maintenance costs.
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Forming a strong relationship with schools and administrators is imperative to address the
emerging concerns of schools in relation to ICT. Having such a relationship will allow sMs to
quickly feed information into product development to meet the changing needs of schools.
To date we have secured a stand at the Irish teaching and learning festival and will be
presenting our products to the Joint Managerial Body’s 4 National ICT Advisory Group.
As the technological infrastructure changes in the critical mass of schools and/or society sMs
will use this development policy to offer further highly scalable products as add-ons to
existing customers
5.3.2
Growth
Since sMs services will not be tied to any particular curriculum or educational setting, our
services will target the entire education market, with further new market developments
detailed in the sales and marketing strategy section of this document. Our medium term
growth strategy is to build on scale and expand internationally through licensing and reselling
which will also allow us to make maximum return on investment for product development.
Targeting the technology lag in developing nations, our services and products can be adapted
to any international market and therefore can continue generating revenue long after the
service life cycle ends in developed nations. In India for example there were 584 million
mobile subscribers by March 2010 and based on its then growth rate it is likely to pass 750
million by year-end with the market currently expanding at an annual rate of 40%. (Paul
Buddie Communications, 2010)
5.4 Contingency planning & sensitivity analysis
Sensitivity analysis has been conducted in Section 10.2 in the form of financial ratios. The
financial results included in this report represent the least optimistic results and are for a
modest growth rate.
5.5 New Product Development
sMs’s NPD philosophy will be to develop simple robust and standardised technologies that
are highly scalable and add significant value.
4
JMB is the main decision-making and negotiating body for the management authorities of over 400 voluntary
secondary schools
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In terms of developing mobile services for education we felt it was important to review the
literature from a teaching and learning perspective, (See Appendix 1). Upon completing this
review there were a clear set of areas in which mobile technology can impact on teaching and
learning
•
Used as a stimulus and response system
•
Situated learning where material is presented based on the unique location and
context of the learner
•
Collaborative learning where knowledge is created by groups and through
conversations
•
Lifelong learning where material is provided outside of a dedicated curriculum and
learning environment
•
Teaching and learning support where mobile devices can be used for administrative
or operational efficiency within teaching (Naismith et al, 2005)
In their research Patten et al (2006) note that data collection; location aware and
collaborative applications are particularly powerful in an educational setting.
Initially sMs will focus on the application areas of
•
data collection,
•
location aware
•
collaboration
We will also maintain strong considerations for development opportunities in the areas
identified by Naismith, 2005.
As identified in our business strategy and social media campaign, sMs hope to become part of
the fabric of the educational sector by building a strong relationship with key innovators,
thinkers and influencers. NPD will be customer centred and customer feedback will take a
central role in our NPD process. Meeting with the target market on a regular basis with allow
us to develop products which are also tailored to the national ICT infrastructure.
All product development will be carefully considered based on its merits to reach or exceed
our ROI expectations.
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6
Sales and Marketing Strategy
6.1 Marketing Strategy
Marketing activities will be centred on customer engagement at professional events, social
media networking and promotion (See social media strategy appendix 4), and presentations at
relevant boards and associations.
We will place strong emphasis on branding with all devices and peripherals bearing the sMs
logo as well as strict customer interaction policies in relation to branding which are detailed
in our sales document.
6.1.1
Target Market
It is evident from our market analysis that the biggest section in the market (in terms of total
expenditure and institutions) would be primary schools. Initially we see the primary and
secondary school streams as the most important for our attendance services for example but
we will be targeting conferences, third level and private education also. A full explanation of
the target market for each service and their needs analysis is detailed in our sales strategy
document (appendix 6). Our 5 customer segments are as follows
Segment 1: Primary Schools
Segment 2: Secondary Schools
Segment 3: Third-level institutions
Segment 4: Private education institutions
Segment 5: Conferences
6.1.2
Advertising
Most advertising will be done by using social media email and presentations as they require
minimum cash outflows. A general budget of €100 per month has been allocated for the first
year which will include activities such as presentations at events and advertising in teacher’s
magazines. We aim to have gained some brand recognition with 10% of the target decision
makers by the end of year 1. The campaigns will be constantly monitored and tweaked and
customer feedback will be sought. Full details of our advertising campaign can be seen in
Appendix 7
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6.2 Sales
6.2.1
Current products
Although mobile phones alone can have an impact on education, when connected to a more
sophisticated ICT infrastructure their uses and benefits can be significantly improved
(McAfee, 2006). Our initial suite of services is based on current school infrastructure. These
services will allow sMs to serve all education environments with the following resources:
•
a classroom PC/laptop
•
an internet connection and/or local network
•
students with personal mobile devices
The suite of services are:
QuickRoll – A Bluetooth enabled roll call which automatically detects the students present
for the appropriate class.
Updates – A notification service that collates updated documents on the schools learning
management system and pushes it to the appropriate students via SMS
Feedback – A Bluetooth enabled in-class polling system which allows the student to interact
with class quizzes and forums.
6.2.1.1 Further sales opportunities for existing products
•
Public sector contracts
o FAS training courses where transfer payment are linked to attendance
o Expensed meeting attendance
•
Retail
o Customer tracking
•
Services
o Staff deployment
6.2.2
The sales process
This will involve four stages
1. Initiation
2. Evaluation
3. Proposal Creation
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4. Closing and post sales support
The details of each stage can be seen in our sales strategy document. Sales staff will be paid a
sales bonus that is split by 65% revenue generation and 35% sales profitability. This will
ensure that sales staff focus on the long term profitability of the customer and not just
focussing on top line revenue.
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7
Technology Reports
7.1 SMS and SMS gateways
‘According to statistics put out by the Mobile Message Analyst 5 the revenue from standard
and premium rated SMS messaging was $82 billion in 2008. This mobile messaging revenue
is forecasted to grow and reach $110 billion by 2013’, (BulkSMS, 2010). The market has now
become extremely competitive and is well developed in terms of technology. Several
protocols that operate on a free to use or paid for basis are now available to transmit data e.g.
iSMS or network provider’s email to SMS gateway. A popular service that is emerging is
third party SMS gateways who offer SMS distribution through an API connection with their
gateway.
Below is an example from hosting Ireland’s SMS gateway of how simple an interaction with
an SMS gateway can now be.
Figure 7.1 – SMS Gateway schema
<html>
<head>
<title>SMS Sender</title>
</head>
<body>
<p>
<form action=https://sms.hostingireland.ie method=get>
<table border=0>
<tr>
<td>To:</td>
<input type=hidden name=username value=USERNAME>
<input type=hidden name=password value=PASSWORD>
<td><input type=text name=to></td>
</tr>
<tr>
<td>Message:</td>
<td>
<textarea name=message width=25 height=5>Test Message.
</textarea>
</td>
</tr>
<tr>
<td></td>
<td>
<input type=submit value=Send>
</td>
5
an Informa Telecoms & Media research service
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33
</tr>
</form>
</p>
</body>
</html>
http://textmessage.ie/blog/
These gateways operate on a credit system where one credit may be equal to more than or
less than the amount needed to send an SMS through the gateway. Many also operate on a
national level offering delivery to all national network providers with some select
international networks. There is strong competition in the SMS gateway market and once a
straightforward interaction with the gateway is required (e.g. http with no replies); the main
concerns should be price and reliability of service (Mehta, 2008).
Mehta (2008) also details several other important factors when selecting a gateway

Network reliability

Volume discounts

Hidden costs

minimum purchase commitments

Validity period

What ways can you connect to the gateway? HTTP, SMPP or XML

Support - Are the APIs well documented

Reports and stats

Call-back service

Is it easy to send bulk SMS?

Is two-way messaging supported?

Availability and cost of short codes
Mehta (2008) also notes that one can use multiple SMS gateways so depending on the feature
required or the network, you can queue your messages on any of them.
Based on the selection recommendations above we have selected Clickatell as it meets all our
requirements now and those that may arise with added services and international expansion.
Figure 7.2 below is an overview of how the sMs update system will work.
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Figure 7.2 – sMs Update conceptual architecture
(Adapted from: Mehta, 2008)
7.2 Bluetooth technology
In two of the three sMs products; QuickRoll and Feedback, there is a need to communicate
information to and from mobile devices. The communication will take place over Bluetooth
technology; it can be defined as “a wireless communications system intended to replace the
cables
connecting
portable
and/or
fixed
electronic
devices.
The
key
features
of Bluetooth wireless technology are robustness, low power, and low cost.”, (Bluetooth.com,
2010).
The data required for QuickRoll about each mobile device with Bluetooth within a room will
be collected using a piece of Java code. It will scan the room for active Bluetooth devices and
reconcile the unique identification number against pre-stored student details. The Bluetooth
device which has a range of up to 100 meters communicates with Java over a Bluetooth Stack
and Java/Bluetooth Application Programming Interface (API). The technology that supports
this communication is JSR82 which provides the link between Java code and Bluetooth
technology. One notable company which has developed extensive solutions on the JSR82
platform is Irish technology company Rococo software.
When the QuickRoll system is implemented in a school, a Java file is installed on each
required computer or laptop, configured to be used with the in-built Bluetooth device or sMs
provided Bluetooth dongle, and finally prepared to transmit information to the sMs website.
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Data can be stored on the school network or fully transmitted to the sMs website, depending
on school preferences.
In the Feedback product, a teacher or lecturer will be able to create a discussion or poll on
their local Learning Management System (LMS) which will automatically be pushed to every
Bluetooth device in the class. Students can then send back a response, either in the form of a
poll answer or a short piece of text for discussion or answers to questions to the teacher
through Bluetooth. The sMs software will then automatically take the responses and feed
them back into the LMS for instant feedback. Each of these actions will make use of standard
Bluetooth file transfer protocols, and the previously discussed Java/Bluetooth API. In Years 1
and 2 development of the Feedback product will be continued and launched once adequate
integration has been achieved with the local school learning management system.
7.3 Technology Roadmap
The planned product development and improvement process is detailed for Year 1 in Table
7.1 below.
Table 7.1 - Technology Roadmap
Timeline
Milestone
Description
April-June 2010
Formalise products
Bring together the mission and vision of the company
and supporting products for the first three years
July 2010
Develop
technical The detail of each product is completed and a use case
specifications & First specification for the first product is created. Initial
prototypes
work is started on the architecture and development
process for the prototype.
August 2010
September
October 2010
Complete
The Java
Java/Bluetooth
implemented and tested with the Bluetooth dongles,
implementation
and configured to work with the prototype website.
– Testing
code
that
has
been
completed
is
and The first testing will take place in advance of product
implementation
rollout which commences in November. During this
period on-going consultation will take place with
target schools to ensure a swift implementation
period.
November 2010 – Product
March 2010
placement, Feedback
feedback
improvement
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on-site
implementations
and
and operations, as well as bug reports and issues will be
consolidated and improved as the need arises. Further
36
refinements are noted and planned for the annual postimplementation period during the summer months.
April
2010
August 2010
– Product
Any major overhauls to the QuickRoll system that
improvement
and was not possible during the school year will take
development
place from June onwards. From April and May the
work on the Feedback system will take place for a
potential launch in September for the new year.
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8
Management and Staff
8.1 Company ownership:
sMs will be created as a Private Limited Company, with a registered office at DCU Invent,
Glasnevin, Dublin 9. The ownership structure will be split by four equal sharing stakeholders,
Darren Norris, Stephen Rooney, Stephen Murphy and Nessa Farrell.
8.1.1
Managing Director (CEO) and Financial Director: Darren Norris
Darren has had extensive customer care and sales experience in the retail sales industry, as
well as distribution and logistics planning in a major Fast Moving Consumer Goods (FMCG)
retailer. Darren, who holds a B.Sc. in Logistics and Supply Chain Management, will have
responsibility over the operations and the daily financial management of sMs. In his first year
he will be involved in the supply chain management of the company.
8.1.2
Marketing Director: Stephen Rooney
Stephen will be responsible for all the advertising campaigns of the sMs product lines. With
experience of both consumer markets in Ireland and Germany, where he spent some time
studying, Stephen is very much in-touch with consumer and business focused marketing.
Having previously studied Business Economics and Social Studies where he gained hands on
experience in New Product Development (NPD), he will be responsible for establishing the
NPD functions in the first year of operations.
8.1.3
Technical Director: Stephen Murphy
Stephen will be in control of setup in the various schools in the country, his role will involve
him working on the road travelling from school to school setting up the devices. Having
experience in a previous technology start up and his Masters in Electronic Commerce, he is
well capable of undertaking the technical role in the company. Stephen who has also studied
Logistics and Supply Chain Management knows what is involved for effective customer care.
He will also be responsible for customer support and will respond to any queries of problems
that may occur.
8.1.4
Sales Director: Nessa Farrell
Nessa will be responsible for the sales end of the company. This will involve promoting the
product to various schools around the country. A graduate of St. Patricks Institute with a
Bachelor of Education, she is an experienced primary school teacher, who will act as a direct
link from the business to the school. She is particularly aware of teachers and students needs
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and could relate well to the problems and issues that may arise for schools. Nessa has built on
her educational experience and branched into business management through a master’s
programme at the Dublin City University.
8.2 Organisation Structure:
YEAR 1 – 4 Staff
CEO and
Financial
Director
Marketing
Director
Sales Director
Set up Director
YEAR 2 – 6 Staff
CEO and Financial
Director
Marketing Director
Sales Assistant *
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Sales Director
Set up Director
Sales Assistant *
Set up & customer
care assistant
39
* The additional sales assistant in Year 2 will spend the first four months promoting the
products and selling to schools. But for the remainder of the year they will be involved in
new product development due to their knowledge and feedback from dealing with customers
one to one.
YEAR 3 – 7 Staff
CEO and Financial
Director
Marketing Director
Sales Director
Set up Director
Sales Assistant *
Set up & customer
care assistant
Set up *
* The third person employed for set up in year three will be based on a four month
contract from September to December. This is when we see the bulk of our set up and
business being done.
8.3 Training and professional development
Each sMs staff member will have an opportunity to continue their education and training to
ensure they have the right skills and abilities to complete their duties. As the company
develops through Year 2 and into Year 3, technical staff will move over from implementation
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into new product development. Suitable courses will be identified and made available to staff
to ensure they are effective in their new roles.
Membership of the Chartered Institute of Logistics and Transport (CILT) will be pursued for
Darren Norris so he may develop his contacts and further support the supply chain operations
of the company with the strategic partners. The four key senior staff has achieved a master’s
level qualification and will be suitably qualified for their future roles.
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9
Logistics, Operations and Supply Chain
Based on market share targets for Years 1 through to Year 3, a selection of suppliers based in
China, and an entry into a strategic relationship with Doyle distribution, the ordering
quantities per year are described in Table 9.1. Each order quantity has been optimised around
the minimum order quantity, annual demand, ordering costs and the maximum quantity per
euro pallet. It is expected that sMs will require a maximum of four euro pallets per shipment
over the three year period, sharing the remaining space in each 20ft container with Doyle
distribution to save costs.
Products will be ordered 8-12 weeks in advance from Suppliers A, B and C. All will be
delivered under the terms of Free On Board (FOB) to Shenzhen port within one week of
ordering and loaded into the Doyle distribution / sMs container. Delivery will be expected to
take 42-62 days depending on shipping times. On arrival at Dublin port, McConville Norris
transport will collect the container and drop it to our storage facility at Need More Space off
the old airport road in Santry.
In Year 1, due to the small order quantities the storage will be at the sMs offices on DCU
grounds in the Invent building. As larger orders arrive from the suppliers in Year 2, the move
to Need More Space will take place. The final delivery from storage to each school will be
made by the technology setup staff.
Table 9.1 – Annual order quantities
Year 1
Year 2
Year 3
Devices
1,000
2,300
4,600
Dongles
200
500
500
Lanyards
8,000
8,000
24,000
9.1 Stock Management
The three year cycle for stock management of devices is demonstrated in Figure 9.1. Stock
ordering points and refill periods are clearly displayed, along with their impact on the overall
stock level. In order to balance the cost of ordering, there are single order points in Year 1
and 2 but two order points in Year 3. The additional order point in Year 3 is to spread the
delivery of dongles, lanyards and devices to ensure a constant supply without incurring large
cash outflows.
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Figure 9.1 – Devices stock management timeline
2500
2000
1500
1000
500
Aug
Sept
Oct
Nov
Dec
Jan
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
March
April
May
June
July
0
Supply In
Consumption Out
Remaining Stock
9.2 Supplier Analysis
sMs conducted several supplier analysis and comparison in order to study and choose the
right partners for the firm to work with in the long term. This is a crucial stage in setting up
the firm as the suppliers used must have several key characteristics sMs needs in order for
them to be chosen. This segment of the report will look at each of the company’s main
suppliers in the first three years. THE key performance indicators used are highlighted below
which were used to choose the suppliers selected. The KPI’s the suppliers were ranked on
include:
•
Financial stability
•
Good Communication Networks
•
Strong Public Image
•
Ethical work practices
•
Efficient supply chain
•
Competitive pricing models
Realex: Realex is an online money transfer company based in Ireland that will be used to
handle all sMs’s online transactions with the customers. The company has a strong focus on
corporate management and is tailored to handle any volume of sales in any amount. The
company works with a flat rate fee of €29 a month for a set amount of transactions with a
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€0.12 fee on each transaction afterwards. The company works with E.U regulators to manage
and combat fraud and has a very strong reputation.
Jing Yi Lanyard Factory: Jing Yi is a Chinese manufacturing firm specialising in
manufacturing a vast range of lanyards for the global market and are based in Shenzhen.
They offer dedicated production lines for sMs with our company logo attached with no major
add on costs. They offer FOB (Free on board) deals and have an excellent pricing strategy
along with good supply chain lead times. The company will handle all distribution costs until
they leave the free trade region and through Chinese customs.
Shenzhen Hongtaidingye Electronics Co., Ltd: This electronics firm based in Shenzhen
also is a company that specialises in the production of Bluetooth dongles for the international
market. They have a strong reputation within the E.U and offer FOB terms and conditions
along with competitive prices.
Qiao Lin Technology Co., Ltd: This is a mobile device firm also based in Shenzhen in
China that produces and distributes digital mobile devices globally. They operate with very
flexible terms and conditions which will suit sMs with small order quantities in the first two
years and have a strong reputation on mainland china. They are also located in a strategic
location near the free trade zone of Shenzhen port.
McConville/Norris Transport: This small independent Irish firm operates a 3rd party
logistics service in the Dublin and Metropolitan region at competitive prices with flexible
terms and conditions. They have a strong reputation dealing with large multinationals such as
Avery Denison for over twenty years and will provide a link from customs in Dublin Port to
our base in Santry for the storage of our products when needed.
Need More Space: Need More Space is the leading provider of self storage in Ireland since
1989. They offer secure and flexible storage solutions to firms at competitive prices. The self
storage units provide customers with private rooms for the storage of almost all materials
including business stock and our excess stock. Also it is in a strategic location based off the
M1 and M50 intersections near the Dublin Port tunnel and Dublin International Airport. It is
also convenient for sMs being less than four kilometres from sMs offices in DCU.
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Allied Irish Bank (AIB): AIB are an Irish Banking institution who offers competitive rates
for small start up firms. They have recently passed stress tests from the European Central
Bank and have a good reputation with corporate firms. They will supply sMs with a business
loan in year two with APR of 4.2%.
9.3 Strategic Relationships
Due to the small size of our firm we will be operating a strategic relationship with the
following two firms:
•
John Doyle Distributors Ltd. (Irish wholesaler and distributers based in Ballycoolin
Industrial estate Dublin).
•
Avant Air & Sea (Avant are leading providers of forwarding and logistics services,
specializing in intercontinental air freight and ocean freight shipments and associated
freight management solutions).
Due to the small size and limited funding of sMs, two potential relationships have been
negotiated with the above firms in order to reduce costs in the supply chain. Due to the fact
Doyle distribution uses the Trade zone in Shenzhen, sMs will tender and sort orders out to
lower costs for both firms with all deliveries here before being sent to Ireland. This will lower
costs by over 70%. Avant Air and Sea who are a global fright firm operating from Shenzhen
will merge the two orders to limit costs from China to Ireland and enable ordering to become
more efficient.
A potential strategic relationship still in negotiation is with the government education
authority NCTE, this firm supplies schools in Ireland with Broadband and training and may
help sMs pending further meeting and government approval to train in teachers with sMs’s
devices.
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10 Financial Overview
10.1 Financial Projections
The financial reports included in Appendix 11 outline the month by month financial
statements for Year 1 – 3. The sales are broken down in Figure 10.1 where it can be clearly
seen that from Year 1 to Year 2 the proportion of sales coming from updates drastically
increases. The nature of the payment, where parents pay a single fee for a full year’s usage
creates a significant cash inflow at the start of the year, and when each school brings the sMs
products on board. This offsets the costs incurred when ordering devices for the year ahead.
In Year 2, sMs aim to have credit terms in place with Chinese suppliers to have a positive
cash to cash cycle with respect to payment for devices and receipt of payment from schools.
Figure 10.1 – Sales Breakdown Years 1 & 2
Year 1
Year 2
33%
45%
55%
67%
QuickRoll
Updates
QuickRoll
Updates
During Years 1 and 2, sMs will be posting annualised losses despite having some short
periods of month by month profitability. sMs will be in a cash positive situation by Month
18, January 2012. As will be outlined in Section 10.3, there will be funding in place to cover
the expected financial losses, as well as additional capital during any unforeseen
circumstances. In an effort to keep costs low in the first year of operations, there will be no
salaries paid. The bill for wages and salaries will be further reduced also by utilising the
employers PRSI exemption scheme, announced in Budget 2009 which is currently on offer.
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Figure 10.2 – Sales, Gross Profit and Net Profit
€700,000.00
€600,000.00
€500,000.00
€400,000.00
Sales
Gross Profit
€300,000.00
Net profit
€200,000.00
€100,000.00
€Year 1
Year 2
Year 3
-€100,000.00
10.2 Financial Performance
The below table (Table 10.1) lists a number of performance indicators for sMs for each year,
additional commentary is given below the table on how the performance is relative to
international standards.
Table 10.1 – sMs Financial performance information
Ratio
Year 1
Year 2
Year 3
€,000
€,000
€,000
ROCE
-16.4%
-1.46%
1.4%
Gross profit margin
-40%
56%
56%
Net profit turnover
-114%
-11%
17.8%
Asset turnover
8 times
13 times
14 times
Efficiency
Stock turnover period
3 times
6 times
15 times
Liquidity
Current ratio
0.18:1
0.33:1
0.34:1
Gearing
Gearing
125%
104%
103%
Profitability
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10.2.1 Forecasted ratios:
Profitability
•
sMs ROCE is still relatively low in year three. But never the less has increased
significantly from year one. This will make the firm more attractive to investors in the
years to come.
•
Both gross profit and net profit margins have increased greatly over the three year
periods. This would be as a result of increased sales entering each new year as the
company gains a better reputation and increases its client base.
•
Asset turnover has increased significantly, which can be attributed to the increase in
sales which will result in us getting rid of stock on a more frequent basis.
Efficiency
•
sMs Stock Turnover is marginally faster indicating that stock in not increasing at a
faster rate than sales. This signifies good management of stock, as there is not
unnecessary storage of stock due to ordering more than is being sold.
Liquidity
•
The current ratio is a long way from the ideal 2:1. But this is larger die to the loan that
was taken out in order to start up the business. We must also take into account that we
do not know the cash that may be available to sMs at this time. The low rate of the
ratio may initially spark some call from concern but the continuous increase from one
year to the next proves very promising for sMs.
Gearing
•
Gearing has reduced marginally over the three year period. It still remains quite high
which shows that sMs is dependent on its loans to keep the company going. This is
risky as we will have to incur high repayments on loans. But the reduction in the
gearing presents a positive outlook for the future.
10.3 Funding Requirements
sMs will have a varied requirement for funding throughout the first three years. The biggest
considerations are for ordering devices for schools that require them in time for the new
academic year, while balancing demand against the costs and requirements when ordering.
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In Year 1 there will be €20,000 put forward in capital by the four key staff of the company,
the figure will aimed to be matched by €20,000 in grant aid from one of a number of sources
depending on availability. The sources include; Dublin City Enterprise Board, Enterprise
Ireland, or Fingal Enterprise Board. Funding availability is very limited and so the target of
sMs is to secure in advance sufficient capital to see through the next 12 months. Due to
ordering cycles, the grant aid may be postponed until month 12 without an adverse effect on
operations. Long term finance will come from Allied Irish Banks (AIB) who provide an SME
growth loan of up to €100,000 at 4.15%. sMs will take out a €50,000 loan from AIB under
this scheme for 3 years.
In year one there will be capital reserves of between €48,000 and €85,000. Greater
investment in stock, and focus on working capital management will be important in year two
as the business begins to scale and grow. In month 24 a loan to cover working capital costs
for the academic year ahead will consist of €100,000 at approximately 7% APR. The duration
of this loan will only be 2-3 months, and may be significantly reduced if 30-60 days credit
terms can be negotiated with the suppliers. By the end of year three, all investment can be
repaid and cash reserves will still be in place into year four. At any one time, the sMs capital
reserves will have a minimum level of €11,500 which can be adjusted with further loan
finance or grant aid depending on the environment at the time.
As the business reaches year four, a further application for grant aid will be made to
Enterprise Ireland to further grow the business, particularly under the target of selling the
sMs services internationally.
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Table 10.2 – Annual accounts summary
Projected Profit and Loss Account
Sales
Notes
Year 1
Year 2
Year 3
1
Quick Roll
Updates
9,794
84,419
186,453
11,775
168,740
420,480
-
-
-
Total Sales
21,569
253,159
606,933
30,189
110,660
269,378
30,189
110,660
269,378
Cost of sales
3
Gross Profit
(8,621)
Gross Margin
142,499
-
337,555
-
-
Expenditure
Salaries
4
-
135,600
Employers PRSI
5
-
14,238
184,800
19,404
-
149,838
204,204
Rent, Rates and Insurance
6
6,600
7,200
7,920
Other Office Costs
7
1,536
2,534
3,252
Professional Fees
8
1,350
4,000
6,000
Marketing
9
5,400
5,400
5,400
10
-
-
1,200
Depreciation
NPD Resources
-
500
1,088
1,307
1,307
15,974
170,779
229,283
Period P & L
(24,595)
(28,280)
108,272
Cumulative P & L
(24,595)
(52,875)
55,397
Bank Interest and Charges
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