MACE, Designing a Business.
1. Summarise the course and our group works.
We have participated in the Designing a Business for two terms. The course aimed to build a company and a product, sale the product and get profit during the period. At the beginning, we started from the group brand storming, trying to find out the creative and innovative product which is possible to be made by ourselves and be accepted by our target consumers. Finally, we created Memoby, a memorial box for storing memories. This idea was inspired by one of our group member’s personal story, she wished there were a fine product that can store the letters and some small treasures from her pass away family since she was little. From the very beginning, we targeted new born babies and their parents as our target consumers due to through our research, we found that the recent parents are willing to keep memorable things for their baby since they get pregnant.
We decided to customise the product for customers, customers can select the colours they want on the box. They can choose to have soften fabric inside the box. They can also decide the figure they want to be on the lid of the box, it depends on the picture or photo they provided. Overall, we offer our customers the chance to build their own memorial box. Each products are made by hand from the foundational protecting process such as polishing and varnishing to the customising process including painting the colour and scanning the picture outline on the lid. We design and create the outline picture for each customers and use the scan machine to print it on the lid.
Finally, after receiving several inquiries from our non-target customers, we extended our target market to people who want to store memories and have the need to create a customise product, instead of only focusing on new born babies and parents.
We had attended several presentations and two trade fairs, one was at Kingston town centre, another is at Kingston Business school. We build up social medias such as Facebook, Instergram and Twitter to broadcasting and marketing our products. We also created a one minute advertising and released it on Youtube.
Overall, we had practiced the theories about pricing, marketing and developed new product by analysing the competitors and the market environment the through the whole process. Basically, if company considered these fundamental knowledge when they are running the business or developing the new product, they would exactly know which direction should their company go.
Digital photos have become the standard media for individual photo taking (Shneiderman, Bederson and Drucker, 2006). Moreover, cloud storage has become an integral part of our modern, mobile lives. Services including Google Drive, iCloud, Dropbox, OneDrive and Box are provided to hold our vital date (Casserly, 2014). We can say that people are enjoying the convenience that digital methods have given.
Although people are now facing the digital revolution, everything has started digitalising, and storing online, our company is trying to deliver the importance of storing valuable memories that can be touched and be felt; moreover, the family members can sharing the physical memories during some important family events.
2. Porter five forces analysis
According to Michael E. Porter (1979), the essence of strategy formulation is dealing with competition. Five forces model describes and analyses five main competitive forces that shape a industry and find out it’s weakness and strength. In order to understand industry competition and profitability, basic structure of industry should be analyse through five forces (Porter, 2008).
Figure 1. Porter five forces model (Myers, 2013).
a. Threat of new entrants: High threat.
This market of storing memory productis not difficult to enter, the barriers is low since there is no proprietary technology in this market. The customer switching costs is also low. We should try to build up customer’s loyalty for overcoming this disadvantage. Erdoğmuş and Çiçek (2012) concludes that social media is the most significant driver to stimulate brand loyalty. Since our company had built several social networking, this threat might be possible to overcome.
b. Bargaining power of suppliers: Medium threat.
Due to the fact that we take part in the overall producing process. There are various material suppliers we can select. However, in terms of scan machine, we have used the machine in Knight’s park campus for free so far; if we wanted to maintain our long-term performance, we should definitely search for another supplier and keep the cost as low as possible. We cannot keep using the machine for free in long-term in Knight park campus. This is the reason that the threat of bargaining power of supplier is medium.
c. Bargaining power of customers: Low threat.
The amount of product for each customer in single purchase is small. For the customer who has special need for customise memorial storage product, they have low price sensitivity. As a result, the bargaining power of customers is low.
d. Threat of substitute products or services: Medium threat.
In the digital age, our substitute products can be those things which can be used in data storage. For example, electronic gadgets such as PC and mobile phone, and the software, applications and social medias including instagram, facebook and the cloud. Therefore, Memoby aims to transport the meaning of “the importance of tangible heritage for the whole family”. People may forget their account password, their account might be hacked, their mobiles might crash and the data may be gone. There are many possibilities to prove that the internet or digital world is not safe enough for keeping an important memory. Besides, it is more heart-warming for family members to share the memories by touching these memories and tell the stories together. As a result, customers loves our emotional, heart-moving product more than those digital products.
e. Rivalry and jockeying among existing competitors: Medium threat.
Every boxes which people can store thinks in are all our competitors in the existing market. These boxes can easily be found in many shops and . Customers can put everything they want into these boxes. However, few of them target both parents and the new-born babies at the same time like Memoby or offer hundred percent of customise product.
We had analysed our disadvantages and advantages by considering five forces model, it helps us to understand our weakness and improve the product.
3. Pricing Strategy
For new product, there are three types of pricing strategy: skimming, penetration, and experience curve pricing (Noble and Gruca, 1999).
Skimming pricing strategy is to set a high price at the beginning, and to give discount systematically with the passage of time. It aims to distinguish between customers who are not price insensitive since their special needs. After the segment is saturated, in order to increase the attraction of product, the price is lowered. This strategy is suitable for a market with high product differentiation (Dean, 1950 cited in Noble and Gruca, 1999, p.441).
By contrast, penetration and experience curve pricing strategy contain setting a low initial price. The company that has cost advantages can use penetration strategy. The purpose of experience curve pricing is to set low price at first for building cumulative volume speedily and decreasing the unit cost (Noble and Gruca, 1999).
We priced our products separately and differently due to we offer different customise boxes which depends on customers’ need. The customise box is ￡22 for each, with basic protecting process, calendar attaching, fabric inside the box, optional colour on the box and the photo or picture from the customers inside the lid; most important there will be customise outlining picture on the lid scanned by the scan machine . Overall, our price is slightly lower than other competitors that already exist in the market. However, there were still some people suggested us to reduce the price as well as some potential customers say our price is a bit higher than their expectation.
We do not have the ability to keep the cost down due to the high producing cost and high human resource cost of our customise product. Our company does not need to own a large market share; in other words, it is unnecessary to keep the price down in order to gain the market share. Furthermore, one of our advantage is high level of product differentiation. We have no fear to price our product in a price that higher than some people’s expectation. Because we focus on the customer who has that special need.
4. Promoting and Marketing by using Social medias.
The development of social networking media has created a chance for business marketer to communicate with plenty and various of customers about their
products, and to broadcast the companies and its core idea. Moreover, the influence of consumer to consumer communications has been extremely increased in the business environment. As a result, offer customers networking platforms and fully utilize tools such as blogs and social media tools for promotion is crucial for today’s businesses (Mangold and Faulds, 2009).
The evidence shows that consumers are more frequently to use different types of social media for searching the information of products and making buying decisions. Consumers tend to require immediate and direct information transmission. Compare to the traditional advertising, social medias provide consumers more flexibility to access information what they really need at their convenience (Vollmer and Precourt, 2008 cited in Mangold and Faulds, 2009, p.360). Moreover, consumers regard social media as a more reliable information resource instead of usual corporate-sponsored communicational transmission (Foux, 2006 cited in Mangold and Faulds, 2009, p.360 ).
Internet-based social media like Facebook, Twitter and YouTube have transformed the way people communicate (Cox and Park, 2014). In terms of Facebook, Cox and Park (2014) conclude that Facebook page is a beneficial and valuable tool for marketing.
According to Hanna, et al. (2011), using social media strategy does not request elaborate and plenty of budgets. Business can established the platform to communicate and the strategy that reach customers and involve them in base on the use of social media. It does not require high spends and creative development.
As a result, we decided to built a various of social media networking, including Facebook, youtube and Twitter. We have released the information about our product and recent performance of our company via these tools, customers can also place the orders and describe what type of customisation do they want. Overall, these tools are platforms for our company to communicate with customers. Furthermore, due to the limited budget, we considered that using social media is the easiest way to run the company long-term.
In order to broadcasting our company, we encouraged customers to follow us during the trade fair, and boost them to retweet Memoby. The one who retweet most may gain a free Memoby box.
As a financial manager in our company, the most important thing I learn from this project is the financing skills. Although I have learnt accounting from IBM courses, such as how to create financial statements and count the costs and profits, the real practice experience is crucial. It helps me to develop the practised skill in the real business environment.
Furthermore, to forecast the future profit and company activities is more important than I though. This is a valuable experience that we had practiced and used those theories such as marketing and pricing through this two terms process. This project gives the chance to understand the importance of using social media. After experience the advantage such as low cost, wide transmissibility and the convenience of communicate with customers, I will definitely concentrate on developing the social network if we wanted to found a real business. Overall, this experience will help us to build up a enterprise or develop a new product in our future career.
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