Aware Of Intellectual Property Theft And Its Consequences Marketing Essay
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This report analyse the feasibility of launching of "allentertainment.com", business of online downloading in Australia. This report includes an overview of the company profile and market background. That shows that how to launch the downloading site which can fulfil all the Australian laws and regulation, as consumer is aware of intellectual property theft and its consequences.
This report is based on secondary data based on online music downloading market and with the help of that data we prepared an action plan, financial strategy (budget) and exit strategy. And the market entry mode used by our company is joint venture with Pay Pal and Greenfield entry mode to minimize the risk. This report includes time plan in which we are giving are overview of seven years after launching the site. And we also discussed the five defensive strategies and what risks we can face after few years of launching of website and how we face them. All the data of the report is secondary data from journal articles, books, online documents and relevant websites.
Table of Contents
Profile.
1.1 Team
Industry and Company Background.
1.3 What product are we offering?
Target market
Australian Market back ground
What make 'US' different?
3.1 Key Opportunity.
Funding.
4.1 Financial performance analysis
4.2 Breakeven point
Market Entry Mode.
Marketing strategy.
Time line
Contingency
Market Exit mode.
Five Defensive Strategies of Allentertainment.com
9. Bibliography
Product Profile
"allentertainment.com.au", we are an online music product sales company with our own download software and relevant customer registration allocation. The market we are looking at is Australia and we make our service country wide accessible. We provide downloading for many intangible products, like music, software, movies, etc. The technology we use resembles bit torrent - "Peer to Peer" type download, with the difference that it is legally approved. Means our site is fulfilling all the requirements according to Australian laws and regulations. As we already have one important example of Napster. And one of our major business plans is to make our products objectively un-downloadable through technology development, unless you paid for them or use our software. The approach for doing so is to establish our own R&D centre and invest in information technology research. Our plan is just not to provide the music online but to provide all the possible entertainments at one place as the name says itself "allentertainment.com", it includes music, movies, television series, games, software and digital database for songs and singers, actors, actress. Means we are providing the music and other entertainments as well as we are also creating the digital database so that at least consumer browses our site because of the database.
1.1 BOARD OF DIRECTOR:
The members of the company are:
1. Aviral Jain (CEO): He does the work of setting general direction and business plan. He also carefully manages relationship with shareholders by looking at their benefit according to our performance, so as to maintain their investment and attract more, for financial and budget
2. Jignesh Jhanjaria (CFO): we have Jignesh as our CFO. He is responsible for giving report to the stakeholder and holds meeting for board of directors regularly.
3. Yingzhou Zhu (Vice president): As Vice president Yingzhou Zhu is in charge of practical operation like market analysis/entry, sales and value chain management. He organizes the reality and seeks opportunity to give sponsorship and advertisement.
1.2 Industries and Company Overview
Generally speaking Music industry is not as profitable as it used to be. Its primary age is late 1990s and beginning of 2000s, but as the digitalization went on through the past decade, it is in decrease in sales. However, although people gradually become much less preferable to buy CDs, record discs, cassettes. etc., there is still other way for music companies to make money, that is through digital sales - the mp3 or other format selling of music.
There is historical revenue from 2002-2007 for the overall download music market and develops forecasts for the market for online and mobile music downloads related services and products from 2008 to 2013. Rapid evolution of the downloading music market, with an emphasis on the impact of the digital technology and this is changing the way of purchasing music.
In 2005 the total physical sales revenue in the 20 major music markets was USD 12.379 billion and the whole world's market is around 40 billion. (RIAA - Recording Industry Association of America).
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On the other hand the digital market grew very rapidly and in 2007 the units sold digitally outdid that physically for first time. ITunes as the largest legal digital seller, made quite considerable revenue making a milestone as over 10 billion songs have now been downloaded from the online music store. Here are the approximate revenues made by Apple over the past few years from its iTunes store: 2006 - $895 million, 2007 - $1.20 billion, 2008 - $1.59 billion, 2009 - $1.80 billion.(Anand 2010 Apple iTunes Store Revenue, Tech Crunchies,(http://gorumors.com/crunchies/apple-itunes-revenue/viewed)
What we are trying to do is establishing new game rules. Right now there is only a few legal source dealing with digital music products, e.g. iTunes (products of the famous and mainstream tech. company Apple Inc.) and Nokia Music Store, and most online sources are download-free and illegal. If the industry can be filled with a multiplayer competition mode with legal sites providing charged downloading service, rather than mono- or duopoly, being open up enough and stimulated, subsequently it will attract more customers as well as creating a good atmosphere in this field. The obstacle for doing so is legal constrain and technology development. By legal we mean if we can make all mp3 free-download-sites illegal and make use of music product of any sense copyright payable regarding the company it belongs to. We will aim to work hand-in-hand with government to make out policies. By technology for this issue, we mean if there can be a way that all digital music products can be objectively undownloadable through technology, unless you paid for them or use specific software that the sites sell. We will establish our own R&D centre and invest in scientific research.
1.3 What product are we offering?
As mentioned above, we aim to offer music products using technology like Bit torrents. We require membership and customers register and pay for them, using our sole eligible software. Basically, it's about creating a Website; we name it "www.allentertainment.com"
it is for downloading many intangible products, like music, software, movies, etc.
Like bitorrent, providing "Peer to Peer" download services, but it is legally approved. We are targeting the Australian market. We are planning to make the service countrywide accessed for the finance part, it is going to use the one in ecommerce system, we will let customer register and make payment by credit card. We'll also borrow the idea of pay pall as is working successful in eBay
2. Target market: we are targeting Australian market as the population is more interested in online shopping rather than going to the physical shops and because of this reason our company is more attracted towards Australian market.
2.1 Australian Market overview
The main question why we choosing Australia as now a day's every company is more attracted towards Asian market but why our company is choosing Australia as a potential market we have lots of reasons for choosing Australia. As Australia is now more emphasis on restricting illegal downloads, so we don't have to face competition from illegal downloading websites. The internet industry association (IIA) has prepared the following guide to assists Australian internet users Australia's co regulatory framework for online content. The internet industry association (IIA) announced its new code of practice for online and mobile service content providers effective from 16th July 2008. And current data and information shows that it is expected that Australian online shopping will be increase by four percentages in near future. 79% of Australian internet users said that they made an online purchase in last 12 months and the key driver for Australian online shopping is cost related and we are providing out services at very low costs. So we can fit into Australian market.
Source: e- commerce report sep 2009
Source: e-commerce report sep 2009
3. What make 'US' different?
What we are different at is that we aim to fight at both legal and technology fields. Once there is no support for illegal downloading both in legislative and technological way, we will be distinguishable as we set a good image for ourselves and also can attract customers in a proper and compulsory way, because we are the first one in Australia doing so, and working exactly with Australia government, thus the situation could very probably be that the laws are set exactly for us, and we will be the sole eligible one in Australia - at least within a not short time.
We will put effort on music sharing sites. Working hand-in-hand with relevant government sections will be written in our business objective. In the desirable future the unauthorized sharing of music will be totally abandoned. We believe that since we begin our campaign against peer-to-peer file-sharing, we will compensate the losses incurred per download range from negligible in the past decade and at the moment, to substantial in the future. We will invest on working with government to make high profile lawsuits against file sharing service providers. We will also commence lawsuits against individuals suspected of file sharing, like college students and parents of file sharing children.
On the technology sense we will develop our own software for download so as to make illegal objectively and technologically impossible. We will establish our R&D centre and invest on it from our dividends and success of attracting investment through advertisement and sponsorship. We will also design our own register system a bit like PayPal used in ecommerce websites like eBay - the buyer give credit to PayPal, after he/she received the products and if he/she is content with it, the PayPal will be informed to transit credit to the sellers. The difference is that eBay is for selling of physical goods, but we are for digital but it also will be working well.
3.1 Key Opportunity
Our opportunity as mention above, that is becoming the sole one in Australia with legal protection and technology guarantee for a membership mode to provide chargeable music products, as we are the first one to do so and we cooperate with Australian government. Australia is 7th largest music market in the world despite its small 20 million population, which means people's consumption ability is very high. The society atmosphere/ethics is good and the infrastructure is perfect. People are wealthy in this country, and the lifestyle is very 'laid back' people love music.
4. Funding
A Financial plan is very crucial for our specific business plan. We give some detailed analysis into the cash flow, income and some other conditions.
Some basic assumptions
There are some employees working as operators, about 10 people, operating on different servers (if business is successful and service gets expanded, we will set servers across the countries and so employ more). salary is about AUD 2000 per month
Fixed cost include office rent, domain name registration and server procurement.
We assume that each music (or movie) unit is sold for AUD1.5, and for the first year there will be 100 units sold for every hour. And this number increases by 8% for every year.
We assume that we cover the cost in 5th year, 2015. After that, as the time goes on the company is going to generate profit.
We assume that customers would pay for membership and so enjoy download service, which will be our main income source, and we also seek advertisement.
There is almost none cost of sales, since the product we sell is digital.
4.1 Financial performance analysis
Fixed cost (initial capital)
Procumbent of equipments
AU$800,000
Domain name registration
20,000
Land rent
18,000
Other small issue
1,000
Total
AU$839,000
Assumed Income statement for first 5 years
2011
2012
2013
2014
2015
Total
Revenue
AU$1,296,000
1,399,680
1,511,654
1,632,586
1,763,193
7,603,113
Revenue increase
8%
8%
8%
8%
8%
Ads. bidding income
N/A
N/A
50,000
70,000
100,000
220,000
Salary and operation expenses:
240,000
240,000
300,000
300,000
300,000
1,380,000
Product procurement (authorization fee)
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
5,000,000
Land rent
50,000
50,000
50,000
50,000
50,000
250,000
Equipment
800,000
0
0
0
0
Registration fee
20,000
0
0
0
0
Net profit (loss)
(814,000)
109,680
211,654
352,586
473,193
333,113
4.2 Breakeven Point
The breakeven is where the total revenue just started to surpass the total cost (mainly to cover the 'big chunk' of fixed cost). From the table above we can see that the breakeven will be happening soon after entering the 5th year, and at that year the revenue is AU$ 1,863,193 including bidding income.
5. Market Entry Mode.
The marketing strategy of the company is the most important strategy for entering into the local and the international market with out which the local's cant gets through the mission of the company and the reasons to use it. The Following two entry strategy with we will be using to penetrate the Australia Market which is totally demand Supply of the product .As we already discuss the complexity of the Australia market previously in the report. After the careful consideration of the Australian market and its demand we can conclude the following two entry mode will be the more suitable for the Australian market and this process will be run simultaneously:
(1). Greenfield Entry Mode: According to the World Report 2003-2005 of FDI, we get the fact that before 1980s; majority of multinational and the local companies entered the host country or local market by the way of Greenfield. In this entry mode the company will enter in market as wholly owned subsidiary by building a subsidiary from the ground up, the so-called green-field strategy. Which is supported by conducting the event such as Village Roads how cinemas, Westfield shopping malls, Direct Factory Outlet (DFO) and the all the other major spot including Airports and most of the shopping centres to make the local aware about the company and its product. This will help the company to create the brand name and expand in future.
(2). Joint Venture: Between the period 1987 to 2000, Merger &Acquisition had increased for 14 years continuously but the sudden fallback of the MNC'S and the different organization in the last global financial Crises have put the resume to this entry mode of the company in the market due to its high risk. To overcome this risk we will the joining the local firm and the organization which deal in the same product line for that we have chosen the Video Ezy Australasia Pty Ltd which had opened its first store in Hurstville, Sydney, in 1983 then quickly expanded and soon became Australia's number one choice in home entertainment and now boasts 430 stores nationwide. Which will be on the ground of keeping the promotional coupons and the selling the online voucher, which will be used, online to redeem the download of any kind including the movies, songs and the other downloadable media.
6. Marketing strategy
The organization is targeting all the age group between 16-30 specially all the Internet uses and to divert there online download from other illegal site to the trusted our site. For this the marketing will be direct and indirect marketing which include the online advertising, events in shopping centre and others hot spots of the Melbourne, pamphlet distribution and reward programs with the collaboration of the Vedioezy so over all there won't be a single strategy of marketing it will be the total use of marketing mix with have four P's which are Product, Price, Place and Promotion.
(Source: Net MBA, Marketing Mix, and http://www.netmba.com/marketing/mix/)
7. Time line
What will be happening after we set up our business?
We are setting the site in 2011 and we give a 7-year overlook into the future.
We aim to cover the cost in the 5th year, as in the digital industry there is really noting high-costly, the only cost we pay is the domain name registration for the website setup through ICANN (Internet Corporation for Assigned Names and Numbers) and the copyright fee we pay to music/movie companies while we buy their authorization. Below is timetable we made with tasks and difficulty assessment.
table
And here is our payback analyse table in financial budget. We set up at cost of AUD15, 000 and of course with no profit the first year. We will hit the payback at the middle between 2014 and 2015.
Payback
8. Contingency
What risk do we have?
·The risk of consumer resistance
Customers are raised up being told the intangible products should be shared and free, in most regions the reorganization or cognition of intellectual right is not high.
·The risk of attack
We may be attacked, either prank act or from competitor.
·The risk of losing market share
When the market is enough stimulated there would be fiercer competition. Who knows what will be happening after 10 years?
What to do after we closed
We move to other market where setting-up cost is even lower and technology environment is mature e.g. China or Thailand. And convert to other industries: e.g. mobile phone software market.
8.1. Market Exit mode
The market exit strategy refer to the responsible withdraw of the organization from market, as every aspiring business starting new enterprise with dreams of success and growth, it's wise to know how the company's ownership story may end before it begin. When and how to plan a exit can make a big difference in how to manage your new company throughout its life .So for our company exist strategy we will look for the big giants which can take over our company for merger or acquisition so that we can work under their organization and uses there resources. Example the Company like Bit torrent or iTunes take over to over company and give them their name that will help the company to grow internally and win.
8.2. Five Defensive Strategies of Allentertainment.com
1. Not a Destroyer we are creator: We are not going to threaten or destroying old/ physical market by promoting the new one. We are just following the market.
2. Strong control of rights: the majors will routinely set up contracts that include on line distribution rights and internet domain names, and also encode security protection to limit unauthorised use.
3. Identification of potential partners: Try to find out potential partners such as phone companies, and cable and satellite network. Acting collectively as the industry has tried to seek control of the new means of distribution by exploring strategic alliance in setting up a controlled infrastructure like telephone companies. E.g. Warner has merged with the Internet service provider, America online.
4. Own procedural model: we develop our own procedural competencies in the new technology e.g. on line delivery, websites and digital data bases.
5. Create a brand name: Create the brand name as the music navigator of the online environment. The idea is that the record company itself will become the promoter for music provision, using its own brand name to reassure the customers of a trusted sales environment, and signed a contract with new upcoming singers so that they can promote our site without investing a huge amount.
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