doc3500_10 w17 Boo -[print]
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3500_10 w17 Boo -[print]
eBusiness Planning From intent to action [print] ! Strategic implementation: Planning! CORP3500! eBusiness! John Powell! ! ! ! !2010–2011! !Chaffeyʼs generic strategy process model! – Mintzberg! ! Boo.com case! – Business plan! 1. Strategic analysis! 2. Strategic objectives! • Web interface! for detailed reference list see! www.economicstoolbox.com! CORP3500 eBusiness • 2010-2011 ! Intended vs Realised vs Unrealised strategy or why poor planning can lead to failure! ! Conclusions: Lessons from failure! 1 Mintzberg on strategy [print] CORP3500 eBusiness • 2010-2011 2 CORP3500 eBusiness • 2010-2011 CORP3500 eBusiness • 2010-2011 ! Boo – the movie “A short film about boo.com handed out to staff on VHS tape in 1999”! Intended Strategy! Boo.com mission statement:! ! “The Vision: To become the worldʼs largest online fashion and sportswear retailer! ! The Vehicle: A cutting edge Web site staffed by a team of dynamic individuals, hand-picked from the worlds of fashion, new media, marketing, business, technology and finance! ! The Outcome: An awesome virtual shopping experience that surpasses anything that exists on the Web” (Baldwin, 2003)! CORP3500 eBusiness • 2010-2011 7 CORP3500 eBusiness • 2010-2011 Boo.com: Business Plan Boo.com: Business Plan [print] Boo.com – the Launch ! Target launch date: May 1999! ! Initially to launch in US and five European countries, but expanded to 18 countries! ! Develop system to handle 100 million concurrent web visitors! ! Heavy offline advertising to promote site prior to launch and immediately after launch, including an independent fashion magazine (Laudon and Laudon, 2004)! ! “They reckoned they would need £20m, 30 people and three months to launch” (Wray, 2005) … but, in practice …! ! Business model: sell at full retail price to “cash rich, time-poor” target market! ! Raised finance from Bernard Arnault (LVMH Moet Hennessy), JP Morgan & Co, Benetton family, Goldman Sachs and others! CORP3500 eBusiness • 2010-2011 CORP3500 eBusiness • 2010-2011 9 4 Boo.com: Business Plan – produced by Nille Leander, sister of co-founder Kajsa Leander! 5 4. Strategic implementation! Case study in planning: Boo.com ! Intention does not guarantee outcome! Mintzberg (1987)! 3. Strategic definition! Chaffey (2007:210)! – Launch! – Costs and revenue! – Failure! – After the fall…! !eBusiness Planning! 8 – Persuaded by “55% gross margins and profitability within two years” (Laudon and Laudon, 2004; see also Carr, 2008:145-6)! ! Web interface! ! Raised $108m – at that time = largest first-round financing of any net start up! ! Committed £25m to advertising! ! Hired several hundred people in Munich, Paris, New York, Amsterdam to take orders (Baldwin, 2003; Laudon and Laudon, 2004)! (Laudon and Laudon, 2004)! 10 CORP3500 eBusiness • 2010-2011 15 Boo.com – the Launch [print] Boo.com – the Launch [print] Boo.com – Costs and Revenue [print] Technical development! ! The demo that persuaded investors was a flashbased mock-up on CD! ! Actual site and infrastructure development was difficult and lagged behind schedule: ! Eventually, site went live in 6 countries in November, 1999 – six months behind schedule! ! Site was “slow, cumbersome and inaccessible to Apple users” (Cassidy, 2002) + see Nielsen! ! Underlying costs were high eg $200 to photograph each product for 3D = monthly cost > $500,000 (Chaffey, 2007:253)! ! Conversion rates and sales were low! – 50,000 unique visitors when site went live, but only 4/1000 placed orders (=0.25% conversion rate) (Loudan and Loudan, 2004)! – 228,848 visits by end of week 1 – (Chaffey, 2007:254)! – Sales in first three months were $____________, but expenses were > $__________ per month ! – (Loudan and Loudan, 2004)! – – – CORP3500 eBusiness • 2010-2011 17 CORP3500 eBusiness • 2010-2011 18 CORP3500 eBusiness • 2010-2011 20 Boo.com – Costs and Revenue Boo.com – the Fall [print] Boo.com – the Fall [print] ! Boo had predicted sales of $37m in the first seven months but managed less than a tenth of this – “Booʼs founders had wildly over-estimated the market size, their ability to penetrate it, or both” (Jelassi and Enders, 2005:22)! ! Mori research showed Booʼs brand recognition at 13.2% amongst internet users, and only 1.4% of non-user, despite millions spent on marketing (Wray, 2005)! ! Started laying people off in January 2000! ! JP Morgan resigned as financial advisor (Baldwin, 2003; Laudon and Laudon, 2004)! The end …! ! Boo sought a further $30m from Arnoult in early May 2000… he turned them down! ! Liquidators (KPMG) called in by mid-May 2000 (Baldwin, 2003)! Changes in direction: Emergent or Unrealised ?! CORP3500 eBusiness • 2010-2011 CORP3500 eBusiness • 2010-2011 – launched a low bandwidth version in March 2000! – Changed ʻno discountʼ policy by introducing 40% discounts across all merchandise! – Proposed closing international offices as costsaving measure (Baldwin, 2003)! ! ! (Laudon and Laudon, 2004) ! 22 Boo.com – After the fall … Conclusions: Lessons from failure ! KPMG eventually sold Booʼs back-end software to UK internet company BrightWorks for $374,900 – less than 1% of what Boo paid to develop it (Baldwin, 2003)! ! This eventually re-emerged as Venda.com – a B2B service provider of ecommerce solutions.! ! Wildly over-optimistic, both on sales and capability! ! Massive technological issues! ! Lack of financial oversight by board! ! Lack of effective planning and control! ! Ahead of its time ?! – By 2005, had 140 retailer customers and was profitable (Wray, 2005)! – Venda has just received $6m in second round investment (Techcrunch, 2009)! CORP3500 eBusiness • 2010-2011 23 CORP3500 eBusiness • 2010-2011 26 2011 – arguably asos.com pursues a similar marketing strategy and shares aspects of booʼs business model – and itʼs flourishing! 27 CORP3500 eBusiness • 2010-2011 30 CORP3500 eBusiness • 2010-2011 31
