Provision of Cash on Delivery in an E-Commerce Business
Our organization operates an e-commerce business that specializes in the sale of consumer electronic goods. Accordingly, most of our sales are smartphones, tablets, laptops, desktop computers, and cameras. Noteworthy, all our products are usually new and sealed, which makes the buyer the first person to open the item. Further, these products usually have a manufacturer’s warranty, which allows us to accept returned goods for problems covered under the warranty.
Despite the establishment of a reasonably efficient e-commerce model, the business has been facing various challenges, especially complaints from customers about the services that we provide. In particular, some customer claim that there are mismatches between the type of items ordered and what they receive. Elderly buyers, on the other hand, are always not comfortable in making payments on the online e-commerce platform. Due to these challenges, the business will modify the model of its e-commerce business to allow its buyers to make cash on delivery payment for the products that they order from our e-commerce platform. The importance of this change is that customers will be able first to check if the item they order is the actual product that has been delivered to them before they complete the transaction. Additionally, this model will enhance the elderly individuals’ confidence in purchasing items from the company’s e-commerce platform.
Vision and Mission Statement
To enable people to shop from the comfort of their homes.
To facilitate affordable seamless shopping using e-commerce.
Porter’s Five Forces Model
Bargaining Power of Suppliers
The company’s suppliers have a small supplier power since the business purchases its products from many dealers. Therefore, none of the company’s suppliers can suddenly increase the price of the commodities that he/she supplies to the company (Hahn, 2014). In case any supplier attempts to increase the cost of his/her supplies unfairly, the business can simply order its inventories from other suppliers with minimal shifting costs.
Bargaining Power of Buyers
The company has large buyer power since it purchases a large volume of smartphones from its suppliers, which enables it to receive large quantity discounts and offers from its suppliers (Bateman & Snell, 2014). Currently, it is one of the leading online sellers of smartphones and tablets in the United Arab Emirates. However, the company’s customers have a low buyer power since they are many and they buy few items, maybe one smartphone or one tablet.
Threat of Entry
There is a limited threat of new entrants in the company’s e-commerce business. Usually, companies are required to have a huge capital and a big brand for them to operate an online business. The huge capital is for the large quantities of inventories. Further, customers always prefer shopping from reputable brands (Nicholas & Steyn, 2017). In this regard, it is difficult for new businesses to participate in our organization’s e-commerce business competitively.
Threat of Substitute
There is minimal threat of substitution for the company. Notably, customers in this market are always interested in the brand of the seller and not only the product being sold. Therefore, the business operates in a monopolistic market (Hahn, 2014). As a result, there is minimal threat of substitution since customers will always consider its brand when making purchases.
The e-commerce business is highly competitive. Additionally, most online customers are techno-savvy and look at the prices and terms offered by the many sellers before making purchasing decisions (Bateman & Snell, 2014). As a result, the profit margins for businesses in this industry are usually low.
Value Chain Analysis
From a value chain analysis perspective, the company has a cost advantage over its competitors. In this case, it aims at selling electronic consumer products at the lowest prices to its customers. In this regard, the value chain analysis of the firm has the following steps:
Table 1: Value Chain Analysis
|Value Chain Analysis for E-Commerce Business|
|Step 1: Firms’ Primary Activities|
|Ordering of inventories||Receiving of inventories||Storing of inventories in the warehouse||Marketing of the electronics||Processing of customers’ orders||Shipping of items||After sale support|
|Step 2: Importance of Each Activity in Total Cost of the Products|
|Ensuring Correct order is placed||Allowing business to inspect all supplier’s deliveries.||Ensuring safe storage of purchases||Creating customer awareness||Ensuring correct processing of orders||Facilitating delivery of orders||Providing user support to customers.|
|Step 3: Cost Drivers for Each Activity|
|Ordering cost||Inspection costs||Storage and handling costs||Advertisement costs||Order processing costs||Transport cost||Salaries for customer care personnel|
|Step 4: Links Between Each Activity|
|1. Proper ordering ensured that the customer has the items needed by its customers
2. Proper receiving, inspection, and storage of items ensure that the business has the right quality of items to sell to its clients.
3. The marketing processing makes customers’ aware of the existence of products, in turn, making them place an order.
4. The proper processing of orders ensures the delivery of the exact commodities ordered by the customers.
5. Proper customer care service encourages clients to place orders in the future.
|Step 5: Opportunities for Reducing Costs|
|1. Automation of the ordering process to reduce the need for many employees.
2. Automation of the warehouse to reduce the number of personnel.
3. Use of just in time purchasing model to reduce the number of goods stored in the warehouse.
4. The automation of the customers’ order processing.
Table 2: SWOT Analysis
|· The company’s management is experienced in the United Arab Emirates market.
· The company has a lot of capital, which it can use to expand its online presence through aggressive marketing.
· The business has a buyer’s power, which enables it to get huge discounts from its suppliers.
|· The company has a huge staff turnover, which affects its customer care service.
· The company does not have many physical offices where its customers can go to inquire about various issues.
|· The United Arab Emirates has a huge population of young adults who prefer making online purchases.
· Most online sellers have not targeted the older population, which is therefore largely underserved.
|· Too much scrutiny on internet usage by the United Arab Emirates threatens the success of e-commerce in the country.
· There is a lot of competition both from local and international sellers such as Amazon and Alibaba on the county’s e-commerce business.
Business Model Canvas
|The Business Model Canvas||Designed for:||Designed by:||Date||Version|
The key partners for the business are Apple, Samsung, Huawei, Lenovo, HTC, Nokia
The business will get its supplies from Axiom Telecom, Jumbo Distributors, Intelligent Professional Network Solutions LLC.
The main benefit of the partnership is that it will help the business to get credit purchases, it will also have an opportunity of introducing latest products into the United Arab Emirates.
The partners will help the business by branding, marketing, training, and in offering advice.
The business is motivated by the partnership since it provides an opportunity for enhancing its performance, getting products on credit, and also enjoying discounts and offers.
For the business to be successful in its activities, it requires having low operating costs to ensure competitive pricing of its products.
It should also have a timely delivery of customer’s orders.
Also, there should be a proper inspection of supplies to ensure only quality items are delivered and later resold to customers.
On its distribution channels, the business should have competent drivers to enable timely and safe delivery of items.
Additionally, its drivers should be knowledgeable of United Arab Emirates transport network.
The business should establish that it has good relations with workers by ensuring its customer care officers are friendly and knowledgeable about all company processes.
The customer care officers must also be good in English and Arabic to easily communicate with customers.
The business can also be guaranteed of having consistent revenue streams by using appropriate marketing tactics such as having online, billboard, and social media advertisements.
The business provides high-quality electronics to customers at low prices. Importantly, it enables customers to shop from the convenience of their homes, which enables them to save their shopping time.
The business will provide a friendly work environment where customers can inquire about various products. Additionally, the business will also deliver the ordered items to their premises after the make an order through the company’s e-commerce platform.
The automated e-commerce system is affordable for the business since it has made the company to hire few employees. Importantly, it easily integrates with other programs in the company, which enables the business to have an automated order processing.
The company is currently targeting the mass market. Currently, most individuals in the United Arab Emirates have access to the internet through various means of communication, including the use of phones. Accordingly, the business strategies are aimed at making its e-commerce process simple, fast, and cheap so that it can attract all persons who have access to the internet.
The key resources for the success in the company’s value proposition, distribution channels, revenues, and customer relationships are:
Its physical structures such as warehouses and office space. The company’s human capital is essential to decision making and marketing. The business also needs finances for its daily operations and the purchase of inventories. Finally, the company’s brand is essential to its success.
The business is using various mediums to reach its target customers including the social media, search engines, and billboards. It is also selling high-quality items at affordable rates.
One major innovation in the company’s e-commerce is enabling individuals to make payment on delivery to ensure they verify that they are paying for what they ordered.
The business will also deliver all its ordered to customers premises, which will enable the buyers to shop for their homes.
The business will also provide various customer care services such as delivering orders and guiding them on various issues affecting the items they have bought from the company.
The most important cost inherent in the business is the inspection by the quality control team. This process ensures that the company has the type of products needed by its customers.
The most expensive resources for the business are the inventories and the business warehouse, offices, and e-commerce platform
The most expensive critical activities for the business are warehouse maintenance costs (handling costs), administrative expenses, and transport costs.
The business customers’ are willing to make payment to the company for its fast delivery of high-quality items.
The customers’ are also willing to make an extra payment for the delivery charges of the electronic products they purchase from the company.
Importantly, the deliveries enable these individuals to shop from the comfort of their home.
Currently, the customers’ payment is cash on delivery. In this case, they make direct payment to the company’s delivery personnel. Alternatively, they can make payment using their MasterCard or VISA card by simply swiping these cards on the point of sale machine carried by our delivery personnel.
The business has only one revenue stream, the sale of consumable electronics. This stream is expected to deliver revenue of $257,500 per annum.
The business will use online advertisements, billboards, and public media (television and radio) to market its products. These promotions will be done as follows:
The online business promotions will be done on major search engines such as Google and Yahoo and social media services, which will be Facebook, Twitter, and YouTube. In Google and Yahoo, the customer will pay these companies to advertise its website. Accordingly, internet users in the United Arab Emirates will always be recommended to make purchases from it. In social media websites, the company will advertise its websites and products that it sells by posting videos and offers of its products. The individual will also be requested to like the company’s page, which will enable me to update them on the items and offers being provided by the company.
The use of billboards for marketing will enable the company to reach to most individuals who use public transports or are always driving. The company will display catchy images on its billboards indicating various offers. Importantly, the billboards will be placed in strategic places where there is a huge traffic so that they can reach a large audience.
Public Media (Television and Radio)
The company will also use popular public media to promote its products. In this case, the company will pay for media house companies to promote its products, and especially the company’s e-commerce website, during prime time hours. Such as during the evening news hour. Since, most people listen to radios and television, especially during prime times, this marketing tactic will enable the business to reach most of its potential customers.
Team and Organization
The company’s team of personnel will be established based on its core processes. In this case, the organization of the company’s activities will inform it of the team’s needed. In this regard, the processes for the items sold by the company will be ordering of items from suppliers, which will be followed by the inspection of the delivered products. There will then be storage of the inspected items in the company’s warehouse. For the items to leave the warehouse, there will be the processing of customer’s orders for various items. There will then be the delivery of the processed orders to their respective customers. Finally, the company will continue providing various assistance to the customer on various issues with regards to his/her order. In sum, the organization of the company’s processes can be illustrated as:
Ordering: then Inspection of deliveries: then Storage inventories: then Processing of customers local purchase order: the Shipping and Delivery: the provision of Customer care.
Based on the company’s organization, its teams will be:
- Procurement department
- Quality control department
- Stores department
- Sales and marketing department
- Logistics department
- Support (Accounts, finance, customer care, and human resource department)
The procurement department will be charged with the duty of raising orders for various items to be purchased by the company. Notably, this department will liaise with the finance, stores, and marketing department. The marketing department will inform it of the items demanded by customers. The store’s department will inform the procurement department of the availability of these items in the company’s warehouse, while the finance team will provide the needed finances.
The quality control department will inspect all the delivered items. This process will ensure that the supplies are according to the company’s local purchase order. The store’s department will have the duty of safely keeping the company’s inventories so that they are not stolen or damaged. The sales and marketing team will promote the company’s items to its target clients. It will also inform the management of the items demanded by customers. Logistics department will ensure that all ordered items are safely and promptly delivered to customers. Finally, the support departments will assist other departments. In this case, the customer care will assist customers by informing them when to expect their purchased items or any other appropriate assistance. The finance department will provide finances for various activities in the company. The human resource department will ensure that all the company’s departments have competent employees to provide it with appropriate services. Finally, the accounts department will ensure there is a proper use of the company’s resources.
Business Development Timelines
The business will break even after 18 months. Since the business will operate as an e-commerce business, it will avoid incurring many establishment costs, which will enable it to breakeven quickly.
The business will take seven months to gain awareness. The company will use an aggressive marketing campaign by using public media (television and radio), billboards, and social media. This strategy will enable the company’s target clients to become aware of it easily. The process of the company gaining awareness quickly will also be assisted by the fact that most of its target clients are knowledgeable in e-commerce. Therefore, they will not have a challenge in embracing the firm’s business model.
After the company’s customers become aware of its existence, the business will enjoy a fast growth for about 36 months till it reaches maturity. At this stage, it will have minimal growth. On the overall, it will have constant sales level. Since most individuals in the United Arab Emirates are young and techno-savvy, they will be quick in embracing the company’s e-commerce. Their quick adoption of online shopping is what will lead to a fast growth, which will result in only 36 months before the business reaches maturity.
Table 3: Preliminary Budget
|Warehouse Lease (1 year)||$12,000|
|Warehouse partitioning placement of shelves||$5,000|
|Office Lease (1 year)||$8,400|
|Employees’ Salaries (1 year)||$30,000|
|Electricity and Water (1 year)||$3,000|
|Sales and Marketing (1 year)||$20,000|
Constraints and Limitations
The major challenge that the business will face, especially during its formative stage is in finance. In this case, the business will have to raise a huge initial capital of $153,400 for it to start its operations. Since this is a new business, most banks will not be willing to offer the company a loan. As a result, the business will mostly rely on my financing to start and run the business.
The United Arab Emirates usually has a lot hot and sunny days. As a result, it has a harsh environment for people who spend most of their days outside. Additionally, most people live in major cities that are located in different parts of the country. Since the business will also be delivering its items to the customer’s location, the hot and sunny environment coupled with long travel distances will result in a significant challenge to the success of the company’s operations.
The company’s website will have to be published in Arabic. Additionally, most of the company’s personnel will have to be fluent in both spoken and written Arabic language. Since some of the company’s personnel are from foreign countries, language barrier will be a significant constraint to the success of the business (Bateman & Snell, 2014).
One primary constraint for the success of the business will be finding employees. This problem will be mostly due to lack of individuals with appropriate skills. Although e-commerce has been present in the United Arab Emirates for some time, there are few individuals competent in the provision of information technology services. As a result, the company will have a challenge of finding employees who will provide it with appropriate support for its information technology systems. Additionally, since the average income levels of native United Arab Emirates citizens is high, the company will have to rely on the services of foreigners for its low-paying work. The primary challenge with the use of foreigners is their lack of knowledge in Arabic, which can result in significant limitations in the provision of the company’s services.
Validation of the Business Model
The main value that this business model will provide to customers is the opportunity to conveniently purchase various electronic goods from the comfort of their homes. Additionally, the electronic products will be delivered promptly. The delivery of the items will give the customers the opportunity to do some of their activities instead of making long trips to make purchases (Hahn, 2014). Finally, the validation of the purchased items before making final payments will enable the customers to be sure they have received the item which they ordered.
The business model will also be important in creating employment for its workers. In particular, it will employ quality control inspectors, warehouse management staff, accountants, marketers, drivers, customer care officers, among other employees to its many departments. Besides employment, the work in the company will provide the employees with essential skills that they will use in both their professional activities.
The central importance of this business to the government is that it will provide a great source of revenue for the country. The business will pay all appropriate duties and licenses needed for its operations.
The business model will be of great value to the shareholders since it will enable them to earn dividends from the company’s profits. Since the shareholders are the owners of the company, they will have the right of deciding whether they will receive all the profits as dividends or they will plough back part of it into the business.
Bateman, T., & Snell, S. (2014). Management: Leading & collaborating in a competitive world (11th Ed.). New York, NY: McGraw-Hill Education.
Hahn, E. (2014). Bayesian methods for management and business: Pragmatic solutions for real problems (1st Ed.). Hoboken, NJ: Wiley.
Nicholas, J. & Steyn, H. (2017). Project management for engineering, business, and technology (5th Ed.). New York, NY: Routledge.