49583374 web development company feasibility report

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E-WORLD

Market Feasibility ReportE-World Web Design Company

12/7/2010

This market feasibility report will present many aspects of system and businessfor web design company E-World. Report will examine the market, operational, andfinancial feasibility as well as internal and external analyzes.0



Table of ContentsExecutive Summary ................................................................................................................................. 2 Market Feasibility Idea ............................................................................................................................. 3 Description .............................................................................................................................................. 3 Uniqueness ..........

................................................................................

................................................... 3 External Analysis: Applicable Strengths And Weaknesses ....................................................................... 4 PEST Analysis ..................................................................................................................................... 4 SWOT Analysis ....................................................................................................................................5 Strengths ............................................................................................................................................ 5 Weaknesses ........................................................................................................................................ 5 Opportunities .................................................................................

..................................................... 6 Threats ................................................................................................

.............................................. 6 External Analysis: Feasibilityof the Idea .................................................................................................. 6 Industry Analysis .................................................................................................................................. 6 Five Porter Forces: ........................................................................................................................... 6 Competitor Analysis ............................................................................................................................. 8 Current Market for Services .................................................................................................................. 9 Customer Analysis...............................................................................

................................................ 9 External Analysis: Needed forImplementation ....................................................................................... 10 Managerial Structure:............................................................................................................................. 10 Financial Feasibility ............................................................................................................................... 12 Break Even Analysis: ......................................................................................................................... 12 Projected Sales: ................................................................................................................................. 13 Income Statement: ............................................................................................................................. 13 Cash Flow Statement: ........................................................................................................................ 15 Balance Sheet: ................................................................................................................................... 17 Possible funding options: .................................................................................................................... 18 References: ........................................................................................................................................... 19

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Executive Summary E-World is a small venture found in the commercial area of Klaipeda, Lithuania. Company offers Internet and Web-based services to small businesses in the city of Klaipeda. The services E-World offers consist of website development and design, hosting, maintenance and marketing. With an experience andknowledge in Web development and business-to-business sales, E-World believes that it can provide a unique and better service to small businesses, in contrast to the services being offered in the market. The growth rate and demand for the w

eb design, development and promotion for the small businesses is high all the time, and according to the statistics does not show any evidence of decline. Furthermore, it is an amazing fact that only a small number of web design companies have taken an advantage of this opportunity, because there is no leading companyin this big market. E-World believes that this phenomenon of unoccupied market happened due to the high project cost. Our company created a web design system that reduces the cost of the projects. Thus, the E-World will offer same high-endweb design services at much lower costs. This market feasibility report will present many aspects of system and business for web design company E-World. Reportwill examine the market, operational, and financial feasibility as well as internal and external analyzes.

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Market Feasibility Idea My idea for market feasibility study is start up web page creation and hosting company with future development opportunity to social network and mail domain creation and maintenance. Description The main area of activity is the creation and promotion of Internet sites that can be used as sales tool or tackle other tasks entrusted to it. Creation of web sites for commercialsubjects (creation of corporate websites) and promotion is one of the most competitive industries in the field of Internet sites development. Therefore developm

ent team is required to have a developed marketing skills and practical experience. We commit ourselves to the task of creating technically ready to move in search engine site, with a competent design, which will increase the recognition ofthe company and attract new customers. Therefore, we consider the development and manufacturing site, as the first stage of its successful promotion. Quality of design can also greatly enhance the popularity of the company. At the creationstage we offer our customers three different design models from which he/she can choose one that he/she likes and it will be developed further. Manufacturing Web sites in our studio involves the whole cycle of works from domain registration to hosting a site as well as providing graphic design. Uniqueness Our motto is"The sites that work", and they work not only in a technical sense, but also ineconomic terms. We will use an individual approach to each client, unlike the t

emplate, it will give us solutions that will allow us to create sites that meetthe requirements of both customers and their potential clients. The "Completed Work" will allow customers to fully sense the style and quality of developed sites. We believe that the factor determining the success of our company will be thequality of work performed, evidenced by the feedback from our customers. Createa site can many, but to make an effective tool in the market of Internet spacecan only few.

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External Analysis: Applicable Strengths And Weaknesses

PEST AnalysisPolitical factors Strengths Lithuania became independent and began the privatization process. After joining the EU, began to promote competition, support for small and medium-sized businesses to reduce the influence of monopolies and oligopolies in markets (in accordance with the laws of the Republic of Lithuania, the

entity is considered dominant if its market share is not less than 40 percent).The State and the EU is making efforts in order to further reduce the number ofstate-owned enterprises and monopolies, and increased surveillance. Lithuanian law is enforced racial, cultural and religious equality, which encourages foreignprofessionals to work in web design industry in Lithuania. Lithuania is a member of the EU, the World Trade Organization and other smaller regulating trade organizations. These unions protect intellectual property, which is crucial to webdesign industry. Weaknesses Lithuania is a relatively young country, which is still only 16 years old. Frequent changes of government (now 14th, although in theory should be changed every four years), political instability affects not onlygovernment actions, but the country and the economic environment complicates theestablishment of a business and its development. Seimas of the Lithuanian Gover

nment approved the draft laws. They often form their outright change in policy,laws and fees are regulated by their calculating procedures, company formation,accounting and control rules. These changes negatively impact the industry of web design and software, which is closely related.

Economic Factors Strengths Rapid GDP growth during 2006 has risen by 6.9 percent. Although now it is forecasted that GDP growth rate will slow down, but it should remain high in the future (the Ministry of Finance forecasts - about 5 per cent. Per annum 2010). Average monthly gross wages and salaries in the public sector increased by 19.1 percent and amounted to 1,802 LT and the private sector grew 20.7 percent and amounted to 1,687 LT in year 2010 compared to 2009. Weaknesses 1. Lithuania has noticeably higher the inflation rate than in other EU countries. 2. Slow pace of the middle layer formation. 3. Lack of state support for SME

development. 4. Lithuania does not meet the Maastricht inflation criterion.

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Opportunitiesy y y

Threatsy y

Partaking in a rapidly growing market. High variety of sales opportunities as te

chnology advances. Niche for selling templates

y

Future competition from authorized web design firms. Substantial leaps in computer technology makes computers a lot easier to use, decreasing the demand for developing web pages. A substantial increase in client's computer proficiency leadsto selfmade web sites.

External Analysis: Feasibility of the Idea

Industry Analysis

Internet industry is one of the most dynamic sectors of modern business. And, therefore, is an area that provides opportunities for career growth and rising living standards for talented professionals. At the moment we are seeing consistentdevelopment of the Lithuanian Internet and projected growth of an Industry forthis year is 20%1. A significant proportion of the advertising market is movingfrom off-line to on-line, which entails increasing segment of the Internet market. Web site from a simple web-based tool of communication turned into a powerfulindustry that allows conducting business around the world. Internet gives basicbut sufficient advantage for a business: y This is an opportunity to have business partners in every corner of the globe. y Promote products, regardless of distance and language skills. y Conduct business remotely. y Receive information quickly and on time. Five Porter Forces: According to online encyclopedia Investopedia.com the Five Porter Forces for Internet Industry are: 1. Threat of New Entr

ants. You do not need to look far to realize that the cost of entry has fallen fast. It used to costs an arm and a leg to launch a portal. The price of computersoftware and servers and network bandwidth - of which portals consume a substantial amount - was enormous. Yet costs are falling fast, as off-the shelf systemscan now do what only customized technologies could do just a few of years ago and at a fraction of the price. At the same1

Kiran C., Web Development 2010 6



time, brainy web developers, which were scarce at the height of the internet market boom, are now much easier for new entrants to find and have become more affordable keep. However, the apparent success of companies like Amazon, is not based on their low entry cost into book retailing, but the very large sums of moneyspent on promotion and growing their business. Entering a new market with a newbrand still calls for deep pockets. 2. Power of Suppliers. Portals generally have little power over suppliers. Basically, this is because they don't actually ow

n much. Most of the information and services they deliver to users is supplied by outside companies Â± stock brokerages, new magazines and the like. Expect contentsuppliers to enjoy growing power, especially considering portals will not able to give content away forever. At the same time, internet portals rely on telecomnetwork operators for a steady diet of internet bandwidth. Granted, the telecombandwidth business is getting increasingly competitive and prices are falling fast. But once systems are hooked up to telecom operator networks, it can be awfully difficult to switch to a new supplier.

3. Power of Buyers. Internet portals have two sets of buyers: visitors and advertisers. Both enjoy considerable power over portals. Competing sites are just a click away; URL bookmarking makes the job of switching to other sites even easier

for users. In fact, portals are in constant danger of a mass desertion of usersto other sites because in most cases, customers make no financial commitment tothe service. Portals' heavy reliance on advertising dollars means that ad spenders can squeeze increasingly better terms for banner space. 4. Availability of Substitutes. Internet portals must defend themselves from a raft of substitutes.The most obvious are other websites that offer the same, or similar, informationand services. Most portals do little more than aggregate information and services that already exists on the internet; original content suppliers represent a readily available set of substitutes. In most cases, they are just a click away.There are more, less obvious substitutes as well, such as television and magazines. Television's clear, moving images never suffer slow connections; magazines can be rolled up and carried on the bus. Don't forget that the good old telephonedirectories - both white and yellow pages - are still very convenient business

search tools. 5. Competitive Rivalry. Feeble barriers to entry, a slew of substitutes and steadily increasingly buyer power combine to create a disturbing impact: fierce competition and industry rivalry.7



Portal competitors now must lure customers with lower prices and heavy investment in more exciting content services. All of this tends to drive industry profitability down, threatening the survival of players who can't compete.2

Competitor AnalysisCurrently in Klaipeda there are only four web sitesÂ¶ creating companies. They and their areas of activities are presented in table below.

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WebMod company : Web site development services

Competitor Name Edit Studija4: MMarius Company5: Emotion Company6: Web development Web Design Web development E-commerce

Web site promotion

Content Management System (CMS) Web Design Three-dimensional graphics (3D) Online Advertising

Internet AdvertisingWeb development

Website Support

Internet Advertising

Internet Marketing

y photo pages Flash/animation Services y Translation pages y name and online hosting

Create corporate Photography style Additional Services: Other Web N/A Solutions

N/A

Lt

Starting from 400lt*

Prices: Starting from 490lt*

Starting from 490 lt*

Starting from 400 lt*

*with minimum tools and widgets included (basic level websites)

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All information about Five Porter Forces was taken from the online encyclopediawww.investopedia.com Information about the services was taken from http://www.webmod.lt/lt/paslaugos_svetainiu_kurimas_web_dizainas 4 Information about the services was taken from http://www.e-dit.lt/#Paslaugos 5 Information about the services was taken from http://www.mmarius.lt/ 6 Information about the services was taken from http://www.emotion.lt/paslaugos3

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External Analysis: Needed for Implementation At first, most of the work will fall on the individual entrepreneur, as well as the second office employee. These people can perform any services offered by our company, other than typing. Set oftexts will be given to the contractor. To this reason, the firm can hire peopleof any age and gender, education also has no value. The only requirement is a good typing speed, responsible approach to work and the possibility of long-termaccess to a computer. In order to ensure the normal operation of the company, en

trepreneur must keep in mind workers in amount several times more than needed. This approach is driven by the need of nonstop operation of the company, as wellas the fact that it does not require to pay wages for contract workers if they do not work. Furthermore, additional contract workers can be involved in performing other services (for example: to repair, maintain, and modernize equipment; set up and create software products). Unlike in the case of type writers, above mentioned services require qualified professionals who unlikely will want to workon the contract for a fairly reasonable wage. However, the problem is easily solved. You can hire senior students with appropriate specialties. The main requirement for them is to have a good knowledge of the subject area and responsible attitude toward work. It is driven by the desire of many students to find a smallsalary in his/her spare time; we can safely assume that the problems with lack o

f staff at the E-World will not have. The wage that an individual entrepreneur earns is withdrawn from the profits of the firm. Employees who are working underthe contract for each job receive an amount determined by the individual entrepreneurs and specified in the work contract. Also additional reward for contractors for good employment rates and innovations aimed at increasing the firm's profits are available. In the future (at the end of the year) the second office worker will be transferred to a permanent position. Also on similar terms will be hired one or two technicians. The E-World is not going to abandon the workers on contract, because they are more beneficial to firmÂ¶s performance for the aperiodic jobs. The distribution of jobs and control over the execution of all works will becarried out directly by an individual entrepreneur, who is the sole owner of the company. Talking about hardware, company will need 4 PCÂ¶s, one stable server andone mirroring server, plus wide optical internet access point. For creation and

maintenance, company will need certain software packages.

Managerial Structure: As a strategy for selecting components of information-analytical system, the E-World company bases on the principle of "Best-of-breed" - to deploy best-in-class solution for each functional area. Principles for selection of the following criteria: y y y The system must be able to handle large volumes of data, up to the transactional data The system must provide hundreds of users, including users in the central office and shops Ability to use sophisticated analytical techniques required for solving the problems of retail business10



To construct the data warehouse was selected database Sybase IQ, specifically designed for analytic data warehousing; and as a means of data integration - Oracle Data Integrator (Oracle Sunopsis), representing a relatively new class of tools load data - ELT (Extract Load Transform). For reporting and data analysis platform was chosen MicroStrategy, allowing solving such important problems for the retail business, as ABC analysis, market basket analysis (market basket analysis), etc. Company E-World has a system of corporate reporting and data analysis,

which has become a source of complete, consistent and reliable information about the company, the opportunity for regular monitoring of the company, as well asanalysis of the effectiveness of the company from different angles, levels, andnon-financial indicators. In particular: y y y y Added the corporate reportingsystem, replacing several legacy systems accessible through the Web shopping Increased speed of data acquisition employees. If earlier to obtain the necessary data analyst had to wait hours, but now it is time seconds Users can create theirown reports without IT services, based on a single directory business terms Youcan easily handle more complex tasks

Business Intelligence solution allows employees to E-World to track key performance indicators of the company, as well as solve complex analytical problems by i

dentifying relationships between its products, optimize product assortment, theanalysis of marketing, sales on credit, on discount cards, with additional services, with sets, etc.

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Financial Feasibility

Break Even Analysis:Break Even Report Units 0 1 2 3 4 5 6 7 8 9 Fixed Costs $700.00 $700.00 $700.00$700.00 $700.00 $700.00 $700.00 $700.00 $700.00 $700.00 Total Costs $700.00 $750.00 $800.00 $850.00 $900.00 $950.00 $1,000.00 $1,050.00 $1,100.00 $1,150.00 Total Revenue $0.00 $350.00 $700.00 $1,050.00 $1,400.00 $1,750.00 $2,100.00 $2,450.0

0 $2,800.00 $3,150.00 Profit ($700.00) ($400.00) ($100.00) $200.00 $500.00 $800.00 $1,100.00 $1,400.00 $1,700.00 $2,000.00

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Projected Sales:Sales Forecast Sales Website Development Result-based Marketing Maintenance Hosting Total Sales Year 1 15.000 Lt 19.000 Lt 14.000 Lt 10.000 Lt 58.000 Lt Year 219.000 Lt 20.000 Lt 16.000 Lt 12.000 Lt 67.000 Lt

Direct Cost of Sales Website Development Result-based Marketing Maintenance Hosting Total Direct Cost of Sales

Year 1 0 Lt 1.000 Lt 0 Lt 3.000 Lt 4.000 Lt

Year 2 0 Lt 1.500 Lt 0 Lt 5.000 Lt 6.500 Lt

Income Statement:

Income StatementRevenue Gross sales Less sales returns and allowances Net sales Cost of Sales Beginning inventory Plus goods purchased/manufactured Total goods available Less ending inventory Total cost of goods sold Gross profit (loss)

E-World 2010 % of Amount Sales $58.000 0 $58.000 100% 2010 % of Amount Sales $00% 4.000 $4.000 0 $4.000 $54.000 7% 7% 0% 7% 93%

2011 % of Amount Sales $67.000 0 $67.000 100% 2011 % of Amount Sales $0 0% 6.500$6.500 0 $6.500 $60.500 10% 10% 0% 10% 90%

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Operating ExpensesSelling

2010 % of Amount Sales $0 $0 $1.800 $0 $1.800 $30.000 $1.200 $0 $0 $0 $0 $320 $0$100 $0 $0 $0 $31.620 $33.420 $20.580 $4.528 $16.052 $0 $0 $16.052 0% 0% 3% 0%3% 52% 2% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 0% 55% 58% 35% 8% 28% 0% 0% 28%

2011 % of Amount Sales $0 $0 $2.500 $2.000 $4.500 $30.000 $1.200 $0 $0 $0 $2.000$320 $0 $100 $0 $0 $0 $33.620 $38.120 $22.380 $4.924 $17.456 $0 $0 $17.456 0% 0% 4% 3% 7% 45% 2% 0% 0% 0% 0% 3% 0% 0% 0% 0% 0% 0% 50% 57% 33% 7% 26% 0% 0% 26%

Salaries and wages Commissions Advertising Depreciation Total selling expensesGeneral/Administrative

Salaries and wages Employee benefits Payroll taxes Insurance Rent Utilities Depreciation and amortization Office supplies Travel and entertainment Postage Equipment maintenance and rental Interest Furniture and equipment Total General/Administrative expenses Total operating expenses Net income before taxes Taxes on income Net income after taxes Extraordinary gain or loss Income tax on extraordinar

y gain Net Income (Loss)14



Loan repayments Tax payments Capital purchases Other Total Payments Cashflow Surplus/Deficit (-) Opening Cash Balance Closing Cash Balance 24.714 Lt 12.286 Lt 0Lt 27.286 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

1.000 Lt

12.000 Lt 0 Lt 0 Lt 0 Lt

4.440 Lt 160 Lt 27.286 Lt 27.446 Lt

3.730 Lt 970 Lt 27.446 Lt 28.416 Lt

4.140 Lt 560 Lt 28.416 Lt 28.976 Lt

3.780 Lt 920 Lt 28.976 Lt 29.896 Lt

4.140 Lt 860 Lt 29.896 Lt 30.756 Lt

3.780 Lt 920 Lt 30.756 Lt 31.676 Lt

4.090 Lt 610 Lt 31.676 Lt 32.286 Lt

4.180 Lt 1.020 Lt 32.286 Lt 33.306 Lt

4.090 Lt 2.110 Lt 33.306 Lt 35.416 Lt

3.780 Lt 1.920 Lt 35.416 Lt 37.336 Lt

4.090 Lt 1.110 Lt 37.336 Lt 38.446 Lt

4.290 Lt 2.910 Lt 38.446 Lt 41.356 Lt

61.244 Lt 41.356 Lt

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Balance Sheet:E-World Balance Sheet [December 30, 2010]AssetsCurrent Assets: Cash Accounts Receivable Less: Reserve for Bad Debts MerchandiseInventory Prepaid Expenses Notes Receivable Total Current Assets Fixed Assets:Vehicles Less: Accumulated Depreciation 0 0 3500 0 15000 0 0 0 0 41356 2400 0 2400 614 12714 0 57.084

Furniture and Fixtures Less: Accumulated Depreciation Equipment Less: BuildingsLess: Land Total Fixed Assets Other Assets: Goodwill Total Other Assets

3500

Accumulated Depreciation

15000

Accumulated Depreciation

0 0 18.5000 0 75.584 Lt

Total Assets Liabilities and CapitalCurrent Liabilities: Accounts Payable Sales Taxes Payable Payroll Taxes PayableAccrued Wages Payable Unearned Revenues 0 0 0 0 0

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References:

"The Industry Handbook: The Internet Industry." Investopedia.com - Your Source For Investing Education. N.p., n.d. Web. 30 Oct. 2010. <http://www.investopedia.com/features/industryhandbook/internet.asp>.

Informacin s Visuomen s Pl tros Komitetas - Statistika. (n.d.). Informacin s Vis

uomen s Pl tros Komitetas Â± Prad ia. Retrieved November 1, 2010, from http://www.ivpk.lt/main-stat.php?cat=62&n=21 Kiran, C. (n.d.). Web Development. Articler. Retrieved October 30, 2010, from www.articler.com/23205/The-Web-Development-Industry-Is-Expected-To-Grow-Over20-By-2010.html

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49583374 web development company feasibility report

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