Business Description
E-commerce is increasingly becoming popular in the United Arab Emirates, and this has motivated many firms to start operating in the online market. A mini market research revealed that although many retailers have made their products available in the market, the electronic segment of the market is yet to be populated in major cities of Dubai and Abu Dhabi.
The new e-business will target this market segment to address the market gap. The company will be known as Arab Online Inc. It will specifically focus on delivering various electronic products to clients in the city of Dubai and Abu Dhabi, with prospects of expanding to the entire country and the rest of Arab countries in the near future.
Industry Analysis
When developing a strategic business plan it is always important to critically analyze the industry’s attractiveness to determine the ways in which its opportunities can be tapped. After describing the business, this section now focuses on the specific industries that Arab Online Inc is operating in to determine its forces that may affect the firm’s competitiveness. Porters’ Five Forces is very useful at this stage.
The first factor that the marketing manager must focus on when analyzing this industry is the competitive rivalry within it. As Gerber notes, the level of competitive rivalry will always determine the right strategies that a firm can take in order to remain successful (78). In the electronic market, Arab Online Inc will have to be ready to face stiff competition in the market.
Most of the electronic products in the country are readily available in the supermarkets and a few specialty shops operating in the cities of Dubai and Abu Dhabi. Inasmuch as most of these supermarkets are operating in brick-and-mortar markets, some of them are in the process of going online. This means that the competitive rivalry in the market is expected to get stiff in the near future.
There are already a few specialty shops that are selling their products online. These will be direct competitors of this new firm. The management of this firm will have to come up with effective ways of managing the expected competition in the market.
Threat of substitute products, according to Guo, is always another issue that a firm has to put into consideration when developing the marketing strategies to boost its competitiveness (78). An industry that offers numerous substitute products is as dangerous as an industry that has numerous players. In the electronic market, this threat is relatively high. Some of the products that will be offered by this firm have numerous substitutes, some of which will not be available in its online stores.
A threat of new entrants is real in all the industries where this firm operates. Technology is transforming the world and it is also creating innovators and inventors across the world. The emerging technology makes the market highly unpredictable, and this means that this company must always be ready to deal with threats of new entrants in the market. The firm will have to remain very innovative and flexible in all that it does in the market.
Bargaining power of buyers in the market may sometimes be considered a challenge, especially if clients have the power to dictate the prices of the products in the market. It is a fact that the market where this firm operates is highly competitive (Siau and Erickson 118).
However, the bargaining power of the clients has remained low, especially given the fact that the products are delivered to the customer’s desired destinations. This is an important factor that should inform the marketing strategies that Arab Online Inc will use. For instance, the bargaining power of the buyers is always eliminated when they are offered a product that exceeds their expectations.
When customers realize that the products they are buying have features that are incomparable to what others offer in the market, they always tend to be willing to pay more for the products. It means that this company will find a way of delivering unique value to all the products it has in the market.
Finally, it will be important to look at the bargaining power of the suppliers when conducting industry analysis (Siau and Erickson 93). According to Palmer, when suppliers have a greater power to dictate the terms of trade, then this may affect the profitability of a firm because the suppliers would always want terms of trade that are highly beneficial to them (57).
In the online electronic market, this problem is real given that some of the products sold in this website have to be imported from other parts of the world. This firm will need to form a strategic alliance with all its suppliers in order to reduce or even eliminate this threat in the market.
Mission statement
According to Guo, when developing a plan for a new business unit, it is very critical to come up with an effective mission statement that will guide its operations in the market (46). Mission statement clearly defines how a given set of objectives shall be accomplished. They help in determining the path that will be taken towards achieving long-term goals. The following is the mission statement for Arab Online Inc.
To offer high quality services to online electronic shoppers in the United Arab Emirates and MENA region
The mission statement helps in understanding the path that this firm intends to take in the electronic market. This firm has an intention of expanding its operations to the entire country after a few years of operating in Dubai and Abu Dhabi. This aim is clearly captured in the mission statement. The statement informs all the stakeholders that although the firm is currently operating in these two cities as at now, its primary aim is to expand to the entire market in the United Arab Emirates.
After dominating the national market, this online retail shop will make an attempt to spread its operations to the regional MENA (Middle East and North Africa) market. The firm has a bigger vision of expanding its operations to the regional markets. To achieve these strategic objectives, the mission statement identifies what it must do. It states that the firm will offer high quality services to its online clients. The firm will come up with unique ways of delivering its products in the market that will outperform the approaches used by the existing competitors.
Strategic goals for business
According to Kajan, the electronic market is becoming one of the most lucrative markets in many countries around the world (36). Teenagers and young adults are increasingly becoming empowered, and most of their expenses are always in the electronic market (Palmer 72).
This has made this industry highly competitive as firms struggle to tap into the opportunities offered in this market. To achieve success, Arab Online Inc will need to develop strategic goals that will enable it to achieve success. The following are the primary goals that will define the operations of this firm.
To successfully enter the online electronic market in the United Arab Emirates
This firm is yet to make an entry into the online electronic market in the United Arab Emirates. The idea is yet to be commercialized. It means that for any other goal to be achieved, this firm must start by making a successful entry into the market. That is why this objective is coming at the top of all other objectives.
The entrepreneur and his team will have to ensure that they develop systems and structures that will enable the firm to make a successful market entry. If this is achieved, then other goals may also be realistically achieved. This goal will be eliminated soon after the company has gained success in the local market.
To achieve financial success in the market through successful market operations
After making a successful entry into the market, the next important task will be to achieve financial success. The electronic market is very competitive and it will force Arab Online Inc to develop unique marketing strategies that will enable it to manage competition.
It will have to embrace regular market research and promote innovation. It will also have to hire and retain a team of highly skilled employees, especially in the field of online marketing. To meet these needs, this firm will need financial strength. This can only be achieved if its operations in the market bring financial success to the firm.
To be the leading online retail store for electronic products in the United Arab Emirates
After gaining financial success, the next step will be to gain dominance in the market. This means that the firm will make concerted efforts to capture as much of the national market as it possibly can. The United Arab Emirates’ market is the home market for this firm. For it to achieve success in any other market outside the country, this firm will find it necessary to dominate the local market first.
Such dominance will give it full control of this industry, making it easy for it to manipulate the local forces to its favor. This also helps it to gain financial muscle that is very important when it will be making an entry into the regional markets in MENA.
To be the leading online retail store for electronic products in the MENA region
The ultimate goal of Arab Online Inc is to become the leading online retail store for electronic products in MENA region. This is a very ambitious goal given that the firm is yet to start its operations. This goal can only be realized after achieving the first three goals set above. This goal will give this firm dominance over a very wide market.
This will also open new opportunities into markets outside MENA region in case this may be relevant in future. According to Palmer, it is always important for a firm to be flexible when trying to achieve the set strategic goals because of the dynamic forces in the environment (41). The above objectives may be reviewed at a future date in case that may be necessary. This firm will always be flexible to changes in the environment.
SMART objectives
To achieve the above goals, it is important to come up with specific the objectives that will define how each goal will be realized. The first goal focuses on how to successfully enter the online electronic market in the United Arab Emirates. The following are the specific objectives that will help us achieve this goal.
- The firm will start by hiring a team of highly dedicated employees who understand online retail market in the United Arab Emirates before starting the operations.
- The company will use social and mass media marketing strategies to create awareness about this firm and the products it offers in the market as soon as it starts its operations.
- The firm will offer high quality products to its online clients to attract and retain them as customers of this firm at all times.
The second goal for this firm focuses on how to achieve financial success in the market through successful market operations. The following are some of the specific objectives that will help it realize this goal.
- The company will sell its products at a discount to increase the sales revenue and profitability within the first six months.
- Sales volume will also be increased through effective marketing of the firm’s product and its brand in the market that will be done frequently.
- The management of the company will make an effort to eliminate unnecessary expenses in the firm to increase its financial wealth at all times.
The third objective for this new company focuses on how the firm can be the leading online retail store for electronic products in the United Arab Emirates. The following objectives can help in realization of this goal.
- The firm will purchase more vans to be stationed strategically in major cities and towns to deliver products to the clients all over the country as soon as it starts operating.
- The management will hire more employees to undertake various tasks of delivering products to the clients on a regular basis.
- The company will use various promotional campaigns to promote the firm’s brand in the country on a regular basis.
The fourth objective states the firm’s need to be the leading online retail store for electronic products in the MENA region. This is not an easy goal to achieve given the environmental challenges that may be common in such markets. The objectives stated below will help the firm to achieve this goal.
- This firm will acquire established online retail firms in the regional market as a way of expanding its operations outside the parent country after four years of operation.
- The company will enter into strategic alliances with other firms operating in similar or related markets in its fifth year of operation.
- The company will have its own infrastructure in some of the regional markets on the sixth year of starting its operations.
Value proposition of the company
According to Kajan, defining value proposition is important for a new company because it is an indication that the new firm understands its target market and is ready to offer them the value that they desire (82). Arab Online Inc seeks to give a unique experience to online electronic retailers by offering them the opportunity to understand the exact specification of the products they buy and the experience they offer.
This is an experience that is very important, and most of the firms currently operating in the market do not offer it. Electronic products such as laptops, Smartphone, television sets, cameras, music systems, fridges, cookers, and many more come in various specifications. Clients always prefer going to the physical stores to examine their specific features before buying them because online retailers rarely give them the opportunity to examine this products. The website of Arab Online Inc will be 3-D enabled.
This means that its clients will be able to examine every angle of the product they are purchasing in this website. This will be accompanied by a detailed description of the product features and its experience to the customers. It will completely eliminate the need for the clients to visit the brick-and mortar stores to understand these features. This uniqueness of the website is expected to give this firm a competitive edge over its expected market rivals.
Business model
A research by Guo found out that firms that had clearly defined business models were almost twice more likely to achieve success in the market because they know their strategy in the market and strengths and weaknesses of such strategies (52). Arab Online Inc is a new firm that is getting into an industry that already has dominant players.
There are numerous supermarkets and specialty stores in Dubai and Abu Dhabi which are already offering electronic products to online clients. This company must come up with effective strategies that will enable it to achieve competitive edge over its market rivals. The firm intends to use Add-On model. The choice of this model was made after taking into consideration two very important factors.
The first factor was the need to avoid price wars. Arab Online Inc is going to be a new player with limited financial strength in the market. It cannot withstand price wars with the dominant players who are leading this industry. This strategy will enable it to be attractive without eliciting price wars in the market. The second factor was the value proposition of the company discussed above. This firm will try to offer unique experience to its customers as a way of gaining a pool of loyal customers.
Under this business model, this firm will advertise its primary products putting emphasis on their low prices. For instance, this firm may charge its Smartphone a bare minimum price. When delivering the product to the customer, the sales representative will be expected to convince the client to buy a uniquely designed casing for the phone to protect it from wear and tear.
The casing will be priced above the market average to help recover the discount that was given on the phone. It is important to note that the client never ordered for the casing. However, the fact that the phone was priced below average will convince them that the casing is also priced fairly.
They will be happy to pay for the additional product because the primary product they wanted was priced fairly. When selling laptops, the sales representatives will try to sell software to these clients at the same time. This strategy helps to increase sales volume and loyalty with the clients.
Market Analysis
E-commerce is very different from brick-and-mortar business model. Most of the shops and supermarkets always benefit a lot from impulse buying, something that is very rare in e-commerce. This means that a firm operating in the online market must clearly define its target market in order to come up with strategies of reaching out for them. Arab Online Inc has a clearly defined the target market for its e-business.
The first target will have young adults aged 17-24 years. They will include male and female members of the Emirati society who have the capacity to buy mobile phones, tables, and personal computers. The firm will have a variety of these products that will meet the needs of those from affluent families, middle income families, and lower upper income families.
Most of the people in this target group will be high-school and college graduates. This target market is very impulsive when it comes to purchasing electronic products. Members of this group are always obsessed with the issue of fashion. They buy electronic products quite often to keep up with the changing fashion.
Even those who are from lower income families are always keen to keep trendy to gain a sense of belonging. One may even spend his entire monthly salary on a Smartphone just to give an image that he or she is keeping up with the fashion. Based on a report by Mursi, this population is estimated to be about 1.2 million people in the entire country (28).
The second target market will be young adults aged 24-36 years who are in the middle class. Gerber says that the middle class are always keen on making a point that they do not belong to the lower social classes (25). The only way of doing this is to furnish their houses with relatively expensive items and carry with them attractive electronic gadgets such as tablets and Smartphone.
This target group will be appropriate for the television sets, music systems, cameras, fridges and freezers, cookers, and many other electronic home appliances. Most of them will be college graduates who are either planning to marry or those who are newly married. According to a research by Mursi, this population is estimated to be about 0.9 million people in this country (28). These two market segments will be the primary focus of this company.
Competitor Analysis
In this section, the researcher will analyze the current and future competitors of this new firm in order to help it understand what to expect in the market. Competitor analysis will be done in three different categories. The first category will be the direct competitors the second category will be the indirect competitors, while the third category will be the future competitors.
The direct competitors
In the local Emirati market, Arab Online Inc will be directly competing against established firms. The list below shows the top competitors ranked in order of their market size.
- Cabone
- JadoPado
- Souq.com
- Crazy Deals
- Namshi
The indirect competitors
There are also the indirect competitors in this market. These are firms that offer a wide variety of products in the online market, but do not heavily focus on electronic products. The list below shows the top indirect competitors, ranked based on their market size.
- Supermart
- Aido
- Mumzworld
The future competitors
Currently, there are some leading supermarkets that have online presence but have not started selling in the online platforms. However, they have plans to enter the online market. This means that they are potential competitors in a near future. The list below shows top supermarkets that may soon become Arab Online Inc competitors, ranked based on their size.
- Lulu Hypermarket
- Fathima Group of Companies
- Aswaaq LLC
Competitor analysis grid for direct, indirect, and competitors
Results of the competitor analysis
The competitor analysis done in the sections above has revealed a number of insights that must be included in this plan. First, it is clear that the market segment that Arab Online Inc targets is already dominated by firms such as Cabone and Jadopado which have been in operation for a number of years. These firms already have the experience of the dynamics of the online markets, challenges that it brings with it, and how these challenges can be managed.
There are numerous other firms which are not included in this list which are also operating in this market. Inasmuch as this may be a cause of concern for this firm in terms of competitive rivalry in the industry, it is also a good sign for this new firm. As Gerber says, firms only flood a market that has a huge potential (45). It means that there is a potential that this firm can tap on if it comes up with effective marketing strategies.
The analysis of the competitors also reveals that the retail industry in the United Arab Emirates is still dominated by brick-and-mortar stores. The online retail stores are yet to gain popularity among the Emiratis. This is evident by looking at the market share of the competitors.
The supermarkets have very high market shares, something that the online retail stores are lacking. This is another positive factor that Arab Online Inc should take advantage of in the market. It is clear that its direct competitors lack the financial strength that they can use to outmuscle it from the market.
Source of competitive advantage for the business
According to Kajan, a firm can only take advantage of the opportunities in the market if it has a competitive advantage over its market rivals (90). Based on the opportunities-and-threats analysis of this new entity, there are a number of sources of strengths that this firm can use to gain competitive edge over its rival.
Its comprehensive understanding of the market in terms of size, trends, and competitiveness means that it is able to come up with specific products that will meet the needs of the clients in the best way possible. Its small size is another competitive advantage for this firm because this means that it will be very flexible. It will be able to change with the changes in the external environment.
Operations
Investigating the feasibility and cost of hosting a website for the e-business
The operations of this firm will be entirely based on the online platform. It is very important to develop a feasibility analysis and cost of hosting the website for the e-business. This firm will use dedicated hosting service because of its reliability and expertise in service delivery. As a new start-up, using dedicated hosting services will be appropriate as the firm develops its own infrastructure.
There are a number of vendors that carry this product from which this firm can choose. This firm will use Contabo Webhosting because of the uniqueness and desirability of their products. It will cost this firm € 119.99 per month which will translate to € 1439.88. This is an affordable cost. It will not constrain the financials of this firm.
Start-up site construction and ongoing site maintenance
The start-up site construction and maintenance will be done through a partnering approach. The firm will need a professional to do this job, but it will also be necessary to have its direct input in the construction process. That is why it will be necessary to use this strategy.
Available domain name
The domain name that is very appropriate and already available is arabon.com. This domain name is appropriate for this firm because it reflects the chosen name for the firm. It is also very cheap, online going for € 11. The name is simple and can easily be remembered by the clients in the market.
Works Cited
Gerber, Michael. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. New York: Harper Business, 2013. Print.
Guo, Yimeei. Research on Selected China’s Legal Issues of E-Business. New York: Cengage, 2014. Print.
Kajan, Ejub. Handbook of Research on E-Business Standards and Protocols: Documents, Data, and Advanced Web Technologies. Hershey: Business Science Reference, 2012. Print.
Mursi, Mohammed. How to invest, start and run profitable business in the united Arab emirates guide. New York: Intl Business Pubns, 2014. Print.
Palmer, Daniel. Ethical Issues in E-Business: Models and Frameworks. Hershey: Business Science Reference, 2010. Print.
Siau, Keng, and John Erickson. Principle Advancements in Database Management Technologies: New Applications and Frameworks. Hershey: Information Science Reference, 2010. Print.