E-business by Louise Jensen

COURSE: E-‐BUSINESS AND UNDERSTANDING BUSINESS -‐ F2011 TEACHER: ULRIK VILHELM FALKTOFT

WRITTEN BY Anne-‐Mette Teisen -‐ ante -‐ 010687 Camilla Overgaard Jönsson -‐ cojo -‐ 220185 Jeanette Boesen -‐ jebo -‐ 230586 Katrine L. N. Kristensen -‐ klnc -‐ 290980 Louise Jensen -‐ loje -‐ 060686 Maya Gürtler Lorentzen -‐ mglo -‐ 110685

CONTENT 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.2.1 2.2.2 3. 3.1 3.2 3.2.1 3.3 3.4 3.4.1 3.5 3.6 3.7 3.8 3.9 4. 4.1 4.1.1 4.1.2 4.2 4.3 5. 5.1 5.2 5.3 5.4 5.4.1 5.4.2 5.4.3 5.5 5.6 6. 7. 8. 9.

Project introduction Introduction Research questions Method & theory Limitations Concept description Vision & mission Concept description Concept model Virtual showroom as a type of business Business model Introduction Target group Segmentation Stakeholders Value proposition The flow of values Value chain Cost & revenue Channels Implementation & design Summary of business model Analysis of the environment External environment SLEPT-‐analysis Market research and competitor analysis Internal environment SWOT analysis Marketing strategy Situation analysis Objectives Strategy Tactics Customer relationship management Supply chain management The marketing mix Action Control Discussion Conclusion Literature Appendix

3 3 3 4 6 7 7 7 9 10 11 11 12 13 15 19 20 21 23 25 25 26 28 28 29 31 34 37 40 41 42 43 45 45 46 46 51 51 52 53 56 57

1. PROJECT INTRODUCTION 1.1 INTRODUCTION 90% of Danish Design companies are one man companies and very few ever grow in revenue and/or size. This indicates that these smaller companies do not have the capacity to solve larger and more complex assignments for larger business customers (Erhvervs-‐ og Bygdogestyrelsen, 2007). In a one man business there will be little room for diverse expertize and good designer will likely not have the time to be a good businessman. Furthermore the unemployment rate amongst designers is twice as high as for the rest of the Danish workforce, amongst the employed designers 25-‐50% do not work with design#. The area of interest for this business concept has been to support these designers in easing the process of having their industrial design ideas put into production. In order to reach this goal we have worked on an e-‐business concept we named Virtual Showroom. Virtual Showroom functions as an intermediary between the designer and the production. The business will make money on taking a commission on sold ideas (between designers and production companies). The main platform for the business will be a website, on which designers can upload their ideas. Other designers and site visitors can rate these different ideas. The highest rated idea will then be put into production by one of Virtual Showrooms production partners.

1.2 RESEARCH QUESTION To support this report that describes Virtual Showroom as a e-‐business concept, the following research question has been formulated: On the basis of our own analysis, can Virtual Showroom prove to be a sustainable concept on the Danish market?

1.3 METHOD & THEORY The report is divided into seven main chapters including project introduction, discussion and conclusion. The first chapter will be an introduction to the rapport followed by the second chapter, which will introduce the business concept. In chapter three we present our business model where we dive deeper into describing the business and consider the areas and aspects that are relevant to Virtual Showroom. Chapter four is an analysis of the internal and external environment of the business, which leads to ĐŚĂƉƚĞƌ ĨŝǀĞ ƚŚĂƚ ĚĞƐĐƌŝďĞƐ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƉŽƚĞŶƚŝĂů ŵĂƌŬĞƚŝŶŐ ƐƚƌĂƚĞŐǇ͘ dŚĞ rapport will end with a discussion (chapter six) and a conclusion (chapter seven) about whether the concept is sustainable and worth investing money in.

Figure 1: Project process map. This map is a model of our project process, and shows some of the interconnections between the chosen methods.

To explain the correlations between the analyses and models applied in this report, we have created a map of the project process (figure 1). The map is a graphical illustration that is meant to map how research and analytic work has been used in the process, and how they are connected. The map explains these interconnections and our process, both chronologically and methodically.

We are aware that in an analytic process like this, every method and analysis will influence each other to some extent. The findings from each method will most likely go back and change some factors in a previous or a following model or analysis. This is however not what we want to illustrate using this map, but we want to clarify how the findings from each method are important in order to continue towards the final step, the marketing strategy and a conclusion. The project process map is read vertically from the top and down, towards defining a marketing strategy. The starting point for the project is the vision and mission of the business. We chose this starting point because it decides what we are going to examine. The vision and mission leads to the development of a business model, mainly inspired by Chaffey (2009) and Osterwalder and Pigneur (2010). To complete the business model several considerations and analyses need to be conducted, which the map illustrates. This includes defining and analysing sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƚĂƌŐĞƚ ŐƌŽƵƉ͕ ǁŚŝĐŚ will be selected by doing a segmentation. We also define and analyse our stakeholders to ensure that the business concept stays interesting and lives up to the expectations from the most important stakeholders. After completing the business model we continue analysing the environment of the business. The investigation of the external environment will start with a market research. We analyse the existing market and similar businesses, in order to determine the competitive situation. This is relevant to, what strategies we chose in the end in order to differentiate from the potential competitors on the market. The investigation of the external environment will end up with a SLEPT analysis (Andersen et. al, 2007, p. ϭϯϳͿ͕ ĂƐ Ă ƉƌĞƉĂƌĂƚŝŽŶ ƚŽ ůďĞƌƚ ,ƵŵƉŚƌĞǇ͛Ɛ ^tKd-‐analysis (Chaffey, 2009, p.274). dŚĞ ŝŶƚĞƌŶĂů ĞŶǀŝƌŽŶŵĞŶƚ ĞǆƉůĂŝŶƐ ŚŽǁ ǁĞ ŝŵĂŐŝŶĞ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ŽƌŐĂŶŝǌĂƚŝŽŶĂů ƐƚƌƵĐƚƵƌĞ ĂƐ Ă gathered divisionalized form. The organizational structure is crucial for the working environment and the decision-‐making, whether our organization is decentralized or centralized. Afterwards, we will shortly mention the most important internal factors that exist within Virtual Showroom, which leads us to the SWOT analysis. The main theorists used in the environmental chapter are Chaffey (2009) and Mintzberg (1980). To sum up on the findings and relevant factors from all previous work, these results will be applied in a SWOT model that as well as defining external opportunities and threats, also identifies the internal strengths and weaknesses. Together, these factors will get analysed in order to continue with the marketing strategy of Virtual Showroom. Virtual Showrooms marketing strategy is developed on the basis of the SOSTAC model (Smith, 1999 cited in Chaffey, 2009, p. 418). The SOSTAC model helps revise the objectives and vision of the business, and helps develop strategies and initiatives, which aims at maximizing the strengths and opportunities from the SWOT analysis, as well as minimizing the weaknesses and threats. We go through the six steps ŝŶ ƚŚĞ ^K^d ŵŽĚĞů͕ ĂƉƉůǇŝŶŐ ZD ĐŽŶƐŝĚĞƌĂƚŝŽŶƐ͕ WŽƌƚĞƌ͛Ɛ 'ĞŶĞƌŝĐ ^ƚƌĂƚĞŐŝĞƐ ; ŶĚĞƌƐĞŶ͕ ϮϬϬϳͿ ĂŶĚ prepare a marketing mix with inspiration from Chaffey (2009, p.449). Altogether, ending up with a marketing plan that decides how to communicate and serve our target group and stakeholders to achieve the objectives of the e-‐business. 5

1.4 LIMITATIONS The resources available to our research and evaluation of the concept are restricted by the relatively limited project resources of a six person group. First off, given the fact that our concept is still in an early stage, we have not made a detailed economic strategy. To develop this, it would require more research and contact to one or more key players. When it comes to choice of target group and analysis of the environment, best case scenario would be to execute a market research and analyse customer data in order to evaluate and select the most profitable target segments (Chaffey, 2009, p. 437). It would be beneficial to gather customer data, conducted a demand analysis, and analyse current market size and value, future market size, potential revenue and ĐŽŵƉĞƚŝƚŽƌ͛Ɛ market share. We chose to make a segmentation based on estimations from our own online research. We are aware that the analysis will be based on weak data and that it will affect the final discussion (Kuniavsky, 2007)

2. CONCEPT DESCRIPTION The following section is dedicated to elaborate the concept; Virtual Showroom. In order to understand what our business model is built on, a vision and mission has been created. In the concept description a thorough description of the different aspect of the concept is provided. In addition to this a conceptual model has been created in order to understand the user experience of the concept. Finally we describe what kind of e-‐business Virtual Showroom is.

2.1 VISION & MISSION The vision is a long-‐term view, describing how Virtual Showroom would like to be in the world which it operates. The mission on the contrary, describes how Virtual Showroom is going to achieve its goal.

Vision Being the intermediary that enables designers to showcase their ideas, and potentially having them produced.

Mission Virtual Showroom seeks to make the vision possible by developing a platform with a design-‐upload functionality and additionally a rating-‐system that allows site-‐visitors to rate the best idea, so that the best industrial designs will be produced. In order to enable the manufacturing, the organisation behind Virtual Showroom, will convince potential investors to buy the legal rights to highest-‐rated designs. Finally the website contains a log-‐in and a community for both visitors and designers.

2.2 CONCEPT DESCRIPTION The Virtual Showroom concept aims to help people who have ideas within industrial design1, to get their ideas sold and put into production, by functioning as an intermediary between the designer and production and sales. Virtual Showroom will make money on taking a commission on sold ideas (between designers and production companies).

The main platform for the business will be a website, on which designers can upload their ideas for free. Other designers and site visitors can rate these different ideas. The highest rated idea, typically of the month, will then be put into production by one of our various production and business partners.

Production companies will then buy the right to the idea from the designer. The designer will not negotiate the price with the production company, but instead be faced with a fixed reward information provided by Virtual Showroom. Production will also handle where the product is to be sold and at what pricing. 1

For our concept development we define industrial design as arts and crafts, which can appear as anything from furniture to kitchen utensils and useful inventions

Virtual Showroom will take on the role of promoting and showcasing all the winning products on the website, where visitors and designers will be able to view or even follow the link to where the product is sold.

Furthermore there is an open online community on the website, in which the designers and visitors can interact with each other. This sphere will be the ĚĞƐŝŐŶĞƌ͛Ɛ meeting-‐place where they advise, critique and help each other. In order to upload ideas, comment and discuss, one needs to become a member on the website and create a profile.

Figure 2: Mock-‐up. This sketch shows how we imagine Virtual Showroom will look like.

Figure 2 is a mock-‐up of Virtual Showroom. The design is not based on any empirical data or user-‐needs and because of this it is not a design proposal, as this would take more design and development work. Instead the mock-‐up is meant to create a better understanding of the concept as the visualization shows the most important features.

2.2.1 CONCEPT MODEL

Figure 3: Concept model. This illustration describes how the designer experiences our concept.

In order to communicate the concept, we created a graphical concept model (see figure 3). The model describes the concept from the ƵƐĞƌ͛Ɛ point of view, and also shows which other parties are involved in the process. It clarifies what will happen in given situations, from a designer submitting a design idea, to a partner buying the idea. The white area represents what happens within the company, and everything outside this area is external. In the illustration the concept is divided into six steps: 1: The designer submits an idea to the website for free. 2: All ideas need to be evaluated and approved by Virtual Showroom before they are published. It is not up to Virtual Showroom to decide if an idea is good or bad, but to catch frivolous submissions. 3 and 4: Designers and site-‐visitors vote for ideas. The top rated idea will be presented to Virtual ^ŚŽǁƌŽŽŵ͛Ɛ ƉĂƌƚŶĞƌƐ -‐ the production and sales companies -‐ who have agreed to produce the most rated and popular item. 5: The production company pays the winning designer. Virtual Showroom charge a commission fee from the money the designer receives. 6: The site-‐visitors can view all winning products and can follow a link to the external web-‐shops. 9

2.2.2 VIRTUAL SHOWROOM AS A TYPE OF BUSINESS In order to narrow the scope of the following analysis of Virtual Showroom as a business this section aims to define Virtual Showroom as a type of business. Firstly Virtual Showroom is an e-‐business in the sense that it is a business that mainly operates online, in form of the website and communication between partners online. Secondly, in the sense that it will employ e-‐business strategies and overall operations (Chaffey, 2009, p. 13). The business will employee electronic tools in every day operations, it will realise strategies for its online presence e.g. the e-‐marketing strategy described later. The fact that contact between designers, visitors, production and Virtual Showroom is handled on the website as a primary chaŶŶĞů͘ dŚŝƐ ĂůƐŽ ĚĞƐĐƌŝďĞƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ĂƐ ĂŶ ͞/ŶƚĞƌŶĞƚ ƉƵƌĞƉůĂǇ͟ Žƌ ͞ĐůŝĐŬƐ ŽŶůǇ͟ business, as there is no retail distribution network (Chaffey, 2009, p. 88).

&ƌŽŵ ŚĂĨĨĞǇ͛Ɛ ĚŝƐĐƵƐƐŝŽŶ ŽĨ ƚŚĞ ĚŝĨĨĞƌĞŶƚ ŝŶƚĞƌƉƌĞƚĂƚŝŽŶƐ ŽĨ ƚŚĞ ƚĞƌŵƐ Ğ-‐business and e-‐commerce and the relationship between them, we consider e-‐commerce as a subset of e-‐business (figure 1.3c in Chaffey, 2009, p.14). A widespread view on the term e-‐commerce is an online based company like a web-‐shop, where all financial transactions are perforŵĞĚ ŽŶůŝŶĞ͘ &ƌŽŵ ŚĂĨĨĞǇ͛Ɛ definitions Virtual Showroom is also considered to be an e-‐ĐŽŵŵĞƌĐĞ͕ ĂƐ ŵĂŶǇ ŽĨ ƚŚĞ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ǀĂůƵĞ ŐĞŶĞƌĂƚŝŶŐ features utilize e-‐commerce elements. Most pre-‐ and post-‐sale activities are performed electronically. Pre-‐sale activities, like designers presenting their ideas and visitors voting for them. Post-‐sale activities, like feedback to visitors on the produced design (2009, p. 11). Virtual Showroom could be viewed as an e-‐commerce from a communicative perspective as described by Kalakota and Whinston (1997, cited in Chaffey p. 10).

Virtual Showroom can be defined as a virtual organization. According to Chaffey a virtual organization is ͞ĂŶ ŽƌŐĂŶŝǌĂƚŝŽŶ ǁŚŝĐŚ ƵƐĞƐ ŝŶĨŽƌŵĂƚŝŽŶ ĂŶĚ ĐŽŵŵƵŶŝĐĂƚŝŽŶƐ ƚĞĐŚŶŽůŽŐǇ ƚŽ ĂůůŽǁ ŝƚ ƚo operate without clearly defined physical boundaries between different functions. It provides customized services by ŽƵƚƐŽƵƌĐŝŶŐ ƉƌŽĚƵĐƚŝŽŶƐ ĂŶĚ ŽƚŚĞƌ ĨƵŶĐƚŝŽŶƐ ƚŽ ƚŚŝƌĚ ƉĂƌƚŝĞƐ͟ (2009, p. 354).

3. BUSINESS MODEL 3.1 INTRODUCTION The following chapƚĞƌ ŝƐ Ă ƉƌĞƐĞŶƚĂƚŝŽŶ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƐƚƌĂƚĞŐǇ ĨŽƌ ƐƵƌǀŝǀŝŶŐ ĂƐ Ă ďƵƐŝŶĞƐƐ ĂŶĚ organization. Since our business model is for a start-‐up company (in contrast to an already existing business becoming an e-‐business) this business model will be vital to provide funding from venture capitalists (Chaffey, 2009, p. 77). There exist quite a lot of definitions of what a business model is. We chose to work with the definitions ƚŚĂƚ ĚĞĨŝŶĞƐ ďƵƐŝŶĞƐƐ ŵŽĚĞůƐ ĂƐ͖ ͞The rationale of how an organization creates, delivers and captures value͟ ;KƐƚĞƌǁĂůĚĞƌ ĂŶĚ WŝŐŶĞƵƌ͕ ϮϬϭϬ͕ Ɖ͘ ϭϰͿ ĂŶĚ ͞A summary of how a company will generate revenue, identify its product offering, value-‐added services, revenue sources and target costumers͟ ; ŚĂĨĨĞǇ͕ 2009, p. 77). We made this choice afƚĞƌ ůŽŽŬŝŶŐ Ăƚ ŽƚŚĞƌ ďƵƐŝŶĞƐƐ ŵŽĚĞů ƚǇƉĞƐ ƉƌĞƐĞŶƚĞĚ ďǇ Žƚƚ͕ Ğƚ Ăů͛͘Ɛ research (2010) . dŚĞ ĨŝŶĂů ĐŚŽŝĐĞ ĨŽƌ ĐƌĞĂƚŝŶŐ ŽƵƌ ďƵƐŝŶĞƐƐ ŵŽĚĞů ǁĂƐ ůŽŽŬŝŶŐ Ăƚ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƚĂƌŐĞƚ ŐƌŽƵƉ͕ stakeholders, value proposition, cost & revenue and channels, to account for how we see the concept creating value on the market. What kind of business we are talking about is also very important to the business model. E-‐business is a thriving subcategory within business models and under this definition lays many types of models. Timmers (1999, cited in Chaffey, 2009, p. 78) have categorized different types of business models into 11 different types. In that terminology we would characterize Virtual Showroom as being a Collaboration platform2. The Zott research also gives aŶ ŽǀĞƌǀŝĞǁ ŽĨ ŽƚŚĞƌ ŶŽƚĂďůĞ ƚŚĞŽƌŝƐƚƐ͛ ĐĂƚĞŐŽƌŝǌĂƚŝŽŶƐ ŽĨ Ğ-‐business types that can be used to see Virtual Showroom in different lights. For example is the Virtual Showroom an ͚ ůůŝĂŶĐĞ͛ ǁŚĞŶ ůŽŽŬĞĚ ƵƉŽŶ ǁŝƚŚ dĂƉƐĐŽƚƚ͕ >ŽǁǇ͕ Θ dŝƐĐŽůŝ ;ϮϬϬϬ͕ ĐŝƚĞĚ ŝŶ Žƚƚ͕ et al. p. 12) and a ͚ĨŽĐƵƐĞĚ ĚŝƐƚƌŝďƵƚŽƌ͛ ĂĐĐŽƌĚŝŶŐ ƚŽ ƉƉůĞŐĂƚĞ ;ϮϬϬϭ͕ ĐŝƚĞĚ ŝŶ Žƚƚ͕ Ğƚ Ăů͘ Ɖ͘ ϭϮͿ͘ Throughout the whole report we define Virtual Showroom with a lot of labels trying to pin down the essence of the concept ʹ this can be faulty, especially when using theory that is not always up to date, with the Internet being in such a rapid development. We do not see Virtual Showroom as being labeled to one category of businesses, but instead we wish it to be looked at as a new player in a somewhat new ĨŝĞůĚ͕ ǁŚŝĐŚ ŚŽƉĞĨƵůůǇ ǁŝůů ĐŽŵĞ ĂĐƌŽƐƐ ŝŶ ŽƵƌ ƉƌĞƐĞŶƚĂƚŝŽŶ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ďƵƐŝŶĞƐƐ ŵŽĚĞů͘ hƐŝŶŐ KƐƚĞƌǁĂůĚĞƌ ĂŶĚ WŝŐŶĞƵƌ͛Ɛ ďƵƐŝŶĞƐƐ ŵŽĚĞů ĐĂŶǀĂƐ ;ϮϬϭϬͿ ĂƐ ĂŶ ŝŶƐƉŝƌĂƚŝŽŶ ǁĞ ĐƌĞĂƚĞĚ Ă ŐƌĂƉŚŝĐĂů model, see figure 4 to give an overview of Virtual ShŽǁƌŽŽŵ͛Ɛ ďƵƐŝŶĞƐƐ ŵŽĚĞů ƐƚƌĂƚĞŐǇ͘

͞ ŽůůĂďŽƌĂƚŝŽŶ ƉůĂƚĨŽƌŵƐ -‐ These enable collaboration between businesses or indŝǀŝĚƵĂůƐ͟ dŝŵŵĞƌƐ ;ϭϵϵϵ ĐŝƚĞĚ ďǇ Chaffey, 2009 p. 78).

Figure 4: Graphical overview of our business model. dŚŝƐ ŝůůƵƐƚƌĂƚŝŽŶ ĚĞƐĐƌŝďĞƐ ƚŚĞ ĞƐƐĞŶĐĞ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ business strategies. This model is an adaption of Osterwalder and Pigneur (2010, p. 44)

3.2 TARGET GROUP It is important for Virtual Showroom to build their business around the proper target group. Based on figure 5, it is necessary to start with identifying the market for different customer segments. Similar characteristic and needs are categorized to provide a overview of the potential of the market, and evaluate which segments will be most profitable. Afterwards Virtual Showroom should make an effort ƚŽ ƵŶĚĞƌƐƚĂŶĚ ƚŚĞŝƌ ĐƵƐƚŽŵĞƌƐ͛ ŶĞĞĚƐ͕ ŝŶ ŽƌĚĞƌ ƚŽ ŽĨĨĞƌ ƚŚĞ ƌŝŐŚƚ ƐĞƌǀŝĐĞ ƚŚĂƚ ŝŶ ƚŚĞ ĞŶĚ ŐĞŶĞƌĂƚĞ revenue. We took a conscious decision on which segments to target and which segments to ignore. To choose the right segment, see figure 5 step 2, one must group the potential customers into distinct segments with common needs so each can be evaluated. Once the decision of which target group to address was made, we carefully designed the business model around understanding that specific group ŽĨ ĐƵƐƚŽŵĞƌƐ͛ ŶĞĞĚƐ ;KƐƚĞƌǁĂůĚĞƌ Θ WŝŐŶĞƵƌ͕ ϮϬϭϬ͕ Ɖ͘ ϮϭͿ͘ /Ŷ ƚŚĞ ĐŽŵƉĞƚŝƚŽƌƐ ĂŶĂůǇƐŝƐ ĂŶĚ ŝŶƚĞƌŶĂů analysis, we will handle the positioning on the market (Step three), which should be taken into consideration when choosing a target group. When we have finished analysis on three steps, we are able to plan the proper marketing strategy, where we will figure out how we want to deploy our resources in order to achieve our plan (Step 4). The positioning and planning of the marketing strategy will be further discussed in marketing mix.

Figure 5: Target marketing model. This illustration shows the stages in target marketing strategy development, this model is an adaption from Chaffey (2009, p. 437)

3.2.1 SEGMENTATION Virtual Showroom is an intermediary website that targets people that are interested in designing ŝŶĚƵƐƚƌŝĂů ĚĞƐŝŐŶ͘ dŚĞƌĞĨŽƌĞ ƚŚĞ ƚĂƌŐĞƚ ŐƌŽƵƉ ŝƐ ĐĂůůĞĚ ͚ĚĞƐŝŐŶĞƌƐ͕͛ in that sense that everyone can design at different levels. Even though the designers do not necessarily have their own business, they do sell a service (a design idea) and are therefore categorized as businesses themselves. On that notion the main target group can be perceived as a business which makes Virtual Showroom a B2B (Chaffey, 2009, p.26).

The segmentation does not focus on specific demographics, since Virtual Showroom wants to target everyone interested in getting their designs produced. It could be the promising design student, the experienced carpenter, the stay-‐at-‐home mom interested in industrial design, or a homeless guy with a great idea and access to the Internet. The brilliant part is that everyone is a designer at Virtual Showroom; thereby targeting a broad audience within a niche market. Given that we do not want to exclude any potential users, there is no age, gender, geographic or life-‐cycle criteria. What is important is the attitudinal variable (Chaffey, 2009, p.438). As a designer on our website, there will be some risk attached to displaying unique design ideas to potential competitors (see SLEPT in section 4.1.1). Based on this; our concept targets designers who are willing to take some risks. 13

It was discussed whether it would be profitable for our business to be on the international, European or just Danish market. Given that we do not yet know where the break-‐even cost are, we will start will the Danish market. Since we believe that there is enough creative people in Denmark who wishes to have their ideas put into production, the Virtual Showroom should start with being a Danish service. If Virtual Showroom is a success it should rethink whether it should geographically expand this segment or not.

Figure 6: Segmentation model. This model illustrates the segmentation process. The model is an adoption from International markedsføring, Trojka (2007).

SELECTING SEGMENTS Based on estimations and on online market research (see 4.1.2 Market research and competitor analysis chapter) different segments has been selected, thereby making identification of the segment-‐ƵŶŝƚ͛Ɛ shared characteristics and needs possible. The different needs of the target group depend on design skills and where the individuals are in the process of creating and manufacturing design. The most common characteristics for all three segments, is that they all need capital for production, which is their main motivation for signing up. These are the selected segments:

Un-‐experienced: Designers with none or only a little design experience, who needs to show their ideas to others in order to make it real and start being a designer. They need this platform to develop their skills through feedback on their ideas.

Experienced: Experienced designers who have not had success yet. It is our thesis that experienced people that already have worked or is studying design is more likely to be interested in the service we provide.

Professional: Self-‐employed designers working in their own small business, who needs capital.

So to summarize; our target group is Danish people interested in industrial design with different levels of design skills, who are interested in getting their design ideas manufactured.

3.3 STAKEHOLDERS Osterwalder & Pigneur describes their building blŽĐŬ ͚ŬĞǇ ƉĂƌƚŶĞƌƐŚŝƉƐ͛ ĂƐ ͞ƚŚĞ ŶĞƚǁŽƌŬ ŽĨ ƐƵƉƉůŝĞƌƐ ĂŶĚ ƉĂƌƚŶĞƌƐ ƚŚĂƚ ŵĂŬĞ ƚŚĞ ďƵƐŝŶĞƐƐ ŵŽĚĞů ǁŽƌŬ͟ (2010, p. 38). The concept description of the Virtual Showroom shows that the business is dependent on quite a few key partnerships (see chapter 2 in particular concept model in figure 3). Due to the complexity of these relationships we have decided to elaborate the analysis of this block with a stakeholder analysis. A stakeholder analysis is a management tool that can be used to gain an overview of the stakeholders in a business, allowing management to manage and prioritize the attention that a given group should receive (Thomsen, 2009, p. 499). ͞^ƚĂŬĞŚŽůĚĞƌƐ ĂƌĞ ĚĞĨŝŶĞĚ ĂƐ Ăůů ƚŚĞ ŐƌŽƵƉƐ Žƌ ƉĞƌƐŽŶƐ ƚŚĂƚ ĐĂŶ ŝŶĨůƵĞŶĐĞ Žƌ ďĞ ŝŶĨůƵĞŶĐĞĚ ďǇ ƚŚĞ ďƵƐŝŶĞƐƐ͛ ĞĨĨŽƌƚƐ ƚŽ ƌĞĂĐŚ ŝƚƐ ŐŽĂůƐ͟ (Thomsen, 2009, p. 499). In this section the focus is on the primary stakeholders, they are defined as the groups whose participation is crucial for the survival of the company (Thomsen, 2009). The term primary stakeholders are used interchangeable with Osterwalder ĂŶĚ WŝŐŶĞƵƌ͛Ɛ ŬĞǇ ƉĂƌƚŶĞƌƐŚŝƉƐ͘ The target group for Virtual Showroom has previously been outlined as the designers; these are obvious external stakeholders in the business. Furthermore each of the parties mentioned in the concept model are stakeholders. Including these the following list of potential stakeholders has been identified: Designers Potential new designers to the Virtual Showroom Existing designers in the Virtual Showroom Visitors Potential visitors of the Virtual Showroom Re-‐visitors of the Virtual Showroom, these might migrate into buyers of the final product Production companies Potential new contacts Existing companies that has already used our service The employees of Virtual Showroom Competitors Advertisers Some of the groups have been divided in to existing and potential, obviously at start-‐up Virtual Showroom will only have potentials in each group, but from the get-‐go it is necessary to have a strategy on how to recruit new designers, visitors and production partners as well as on how to maintain existing in the future. For this reason these are described as separate stakeholder groups. The groups that have already associated themselves with our company and the ones that has not. All the stakeholder groups are analyzed according to interest versus power in the below sections. The mapping has been applied in a matrix as described by Mendelow (1991, cited in Olander, 2003, p. 60; Cornelissen , 2011, p. 49). Designers Existing: It is completely essential that Virtual Showroom takes care of the designers that use its service and that the business creates tangible value for them, as they will have little incentive to submit ideas again if their participation in Virtual Showroom does not generate any interest for their designs. As these 15

designers and their ideas are the main source of income for the Virtual Showroom, keeping these satisfied must have a high level of importance in any strategy. As described in the target group section above, (see 3.2 -‐ target group) the designers belong to several different groups; however there will likely be some degree of networking between designers. Having these existing designers advocate the website to other designers will likely be some of the best marketing the business can get in order to recruit additional designers. From such perspectives this group will have some amount of influence on the business. Once they are involved in the project they will have shown some interest in Virtual Showroom and if it generates business for them they will have high interest. In the power vs. interest matrix this will place this group somewhere between keep satisfied and key player. Potential: Turning the view to the designers that are not yet involved in Virtual Showroom are a important potential revenue for the business. Therefore, increasing the amount of designers will likely be an obvious goal and be a guide in the development of the business. For this reason this group does influence the decisions made within the company. As previously described in the target group section the designers targeted for Virtual Showroom are a very diverse group and it is possible that the different sub-‐segments of designers will have different levels of influence or power within the business. The fact that this group is not yet active contributors means that they either do not know that the Virtual Showroom exists or that they simply do not believe that it will provide a service that is interesting for them; hence they have a very low level of interest in the business. This group is placed in the minimal effort section of the power vs. interest matrix. Once they are aware of the concept exists their power will significantly increase and hopefully their interest along with the effort that is made to recruit them to Virtual Showroom. Visitors Re-‐visitors: The visitors of Virtual Showroom are an important component in the overall concept. They create value for the designers as they make their designs interesting for the producers. The showroom may also provide a type of testing ground for the designers to get feedback on their ideas. Therefore visitors will indirectly create value to the business and it is important to keep them satisfied so that they will return and keep rating design ideas and adding content. Furthermore these visitors are important to us as they may become ambassadors for the concept and recruit new visitors and designers. The interest that these users will have is likely to be on a leisure-‐level, but they will not have a personal or economic stake in the project, like the designers or productions companies. This group is placed somewhere between keep satisfied and keep informed in the power vs. interest matrix. Potential new visitors within the interesting segment: Like the potential new designers, these visitors either do not know of Virtual Showroom yet or do not believe that it is able to provide them with an interesting service. Therefore they have a low interest. They will obviously have good potential for the company as they may migrate into visitors, hence they will have some influence on any given business strategy on how to increase their numbers. In the power vs. interest matrix they are placed in the minimal effort section, but close to the keep informed. Production companies Existing: As it is in the contact and sales between the designers and the production companies that Virtual 16

Showroom will generate its primary income, these companies will obviously play an important part in the business concept. In some sense the product that Virtual Showroom offers to these companies is interest, interest that the ƐŝƚĞ͛Ɛ ǀŝƐŝƚŽƌƐ ŚĂǀĞ ƐŚŽǁŶ ŝŶ Ă ĐĞƌƚĂŝŶ ŝĚĞĂ͘ ŶǇ ŝŶƚĞƌĞƐƚ ƚŚĂƚ Ă ĐŽŵƉĂŶǇ ƚŚĂƚ ŚĂƐ ĂůƌĞĂĚǇ ƉƌŽĚƵĐĞĚ ŽŶĞ Žƌ ŵŽƌĞ ŽĨ ƚŚĞ ^ŚŽǁƌŽŽŵ͛Ɛ ŝĚĞĂƐ has will likely be dependent on the success of that given product. That success will likely be for a given product to generate good revenue for the company, but it is also possible that an association with up-‐and-‐coming and innovative designers may generate good marketing value for a given company. Hopefully the visitors of Virtual Showroom will help to ensure that only products that will generate good sales will be put into production, hence make it more likely for the production companies to use the service again. Virtual Showroom will also try to create value for the companies when displaying the final products on the website, with links to the production companies respective web-‐shops (see figure 2 -‐ mock-‐up). Existing production companies that choose to use Virtual Showroom again will likely have a high interest in the concept. The power that these companies have will likely be dependent on the number of production companies that uses Virtual Showroom. In the start-‐up phase the business will likely have very few, their power is likely to be very high; a start-‐up business will have great difficulty in ignoring their initial income sources. Further down the line the business will likely not be as dependent on single production companies and their power will decrease. This, places these companies somewhere between keep informed and key player in the power vs. interest matrix. Potential: As it was the case with potential designers and potential visitors, these will either not have heard of the concept yet or simply believe the Virtual Showroom does not provide a service that will generate any value for them. Therefore their interest in the company is low. Ɛ ŝƚ ŝƐ ƚŚĞ ƉƌŝŵĂƌǇ ŝŶƚĞƌĞƐƚ ŽĨ ƚŚĞ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƚĂƌŐĞƚ ŐƌŽƵƉ ƚŽ ŐĞƚ ƚŚĞŝƌ ŝĚĞĂƐ ƉƌŽĚƵĐĞĚ ĂŶĚ hopefully get a good price for the idea, increasing the competition between the production companies will generate value for the business. Increasing competition will logically happen when the numbers of the interested production companies increases. For this reason it is important to continuously be aware of recruiting more companies and this goal will have some influence in a given business strategy. This places the potential production companies in the minimal effort section of the power vs. interest matrix. The employees of the Virtual Showroom The employees of the business are the obvious internal stakeholders. They have a high interest in the ďƵƐŝŶĞƐƐ ŝŶ ƚŚĞ ƐĞŶƐĞ ƚŚĂƚ ƚŚĞǇ ŚĂǀĞ ĂŶ ŝŶƚĞƌĞƐƚ ŝŶ ŐĞŶĞƌĂƚŝŶŐ Ă ƐƵĐĐĞƐƐĨƵů ďƵƐŝŶĞƐƐ ƚŚĂƚ ůŝǀĞƐ ƵƉ ƚŽ ŝƚ͛Ɛ vision and that generates an appropriate profit. However they may have lower interest in the actual service that the Showroom provides. With relatively few employees (see 4.2.1 -‐ Organization structure) the power of the individual will be higher, the success and in the beginning the survival of the business will be dependant on the effort of the employees. This places the employees high in power and relatively high on interest in the key player section of the power vs. interest matrix. Competitors The competitors of the Virtual Showroom will be described in the below section on External factors (see 4.1.2 -‐ Market research and competitor analysis). Obviously the Virtual Showroom will in start up not represent any real threat to its potential competitors, as the success of the business hopefully increases 17

the interest of competitors will heighten. The power of competitors will equally increase as their numbers or success increases. Potential upcoming or existing competitors with very similar services will also influence the success of the Virtual Showroom, so changes in the market may greatly influence the level of power that the competitors have. This initially places competitors in the minimal effort section of the power vs. interest matrix. Advertisers It is possible that it over time will be interesting for the Virtual Showroom to use advertisers on the website. Should this be the case the interest of potential advertisers will likely be dependant on the number of visitors on the website. The power of the advertisers will be influenced by how dependent the business is on the additional income that the advertisements generate. However it is a likely assumption that if the business becomes highly dependant on the advertisers it is because it has little income on design ideas, likely because they will have few designers, following fewer visitors and finally fewer advertisers. In this case the power of the advertisers will be irrelevant as they will no longer have any interest in the business. Potential high interest and low power of the advertisers places them in the keep informed section of the power vs. interest matrix. POWER VS. INTEREST GRID The above allows for the following map of stakeholders.

Figure 7: Stakeholder analysis model. This model both illustrates how important and powerful the various stakeholders are. This map is built on a model of Mendelow (cited in Olander, 2003, p. 60)

It will be important for the company to keep regulating this map as it changes in size, revenue or the market around it changes. Initially the first designers, production companies and visitors that associate themselves with Virtual Showroom should receive a high level of interest. Furthermore the employees will be very important in this initial phase. The stakeholders as described above shows that the key players in particular are heavily dependent on each other. The interest and following the numbers of the companies is dependent on the visitors rating ideas. The interest of visitors is dependent on the design idea and the ĚĞƐŝŐŶĞƌ͛Ɛ interest will be dependent on the numbers of visitors and production companies. So in order to ensure success of the business it is necessary to satisfy and successfully recruit each group of stakeholders, and preferably all at once. This constitutes a significant challenge in the sustainability of the concept.

3.4 VALUE PROPOSITION The reason for conducting a value proposition is to try and identify all values Virtual Showroom can offer to the different stakeholders. Thereby Virtual Showroom can be able to make these visible through clever design and marketing. Also knowing what Virtual Showroom can offer makes it easier to evaluate and improve upon. Designers There is an obvious value for designers in selling their ideas for money, but also, Virtual Showroom believes that there is value for designers in being part of an online design community that enables them to speak their mind and interact with peers, in building a valid portfolio, in strengthening and expending their connections and network and in getting noticed in the design sphere. Virtual Showroom advertises for the winning products, in case they are put into production, from the website. This makes the value more tangible for the designers. Also through the community Virtual Showroom offers various amounts of user generated content and information. In comparison to rŝǀĂů ĐŽŵƉĂŶŝĞƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƉƌŝĐŝŶŐ͕ ďĞŝŶŐ ƚŚĞ ĐŽŵŵŝƐƐŝŽŶ ŝƐ ŶŽƚ ĂŝŵĞĚ Ăƚ being cheaper, though it is free of cost if the idea is not sold. Therefore Virtual Showroom will try to make the perceived quality/features better, offering more value. Visitors Website visitors, being designers or other users, can participate in the community equally. Virtual Showroom imagines that this will seem intriguing to users with an interest in design, or working within the field. People with interest in new designs would probably value the influence they get, when rating and commenting designs. All visitors can see the previously winning designs and if they want to and go the web-‐shops of the production companies where they can buy the products. Virtual Showroom may try to offer some sort of winnings to attract as many visitors as possible. Finally Virtual Showroom offers various amounts of user generated content and information through the community, which could be of value to visitors. Production companies The production companies could definitely benefit from new innovative designs. Choosing the highest rated idea could probably result in choosing something most customers would like, keeping in mind that this may differ, since the visitors on our website may not represent the costumers of the production companies or the general population. Furthermore they would benefit from the PR they would get by positioning themselves as a company willing to help out new designers. This would positively influence their brand. Again, we are aware that this may differ. It is not all companies that may benefit from this e.g. high end brands may be perceived less valuable being associated with new unknown designers. The production companies would also get costumers sent directly to their web-‐shops, through our direct links to their sites. This may, to some extent, increase their sales and SEO (Search Engine Optimization). Intermediacy -‐ Virtual Showroom Virtual Showroom would get a commission on the sold ideas, between designers and production companies. Second, Virtual Showroom could make money on advertisement for the production 19

companies and or other relevant ads. With a large community Virtual Showroom could receive value through user generated content.

3.4.1 THE FLOW OF VALUES

Figure 8: Value flow model. This is a model we created ourselves in order to show the flow of values. It both illustrates the flow and the character of the different values between the different stakeholders.

The designers submit their ideas and if it gets sold, as a consequence of receiving the most votes, they will earn money which Virtual Showroom will take a commission from. The organization Virtual Showroom, the designers, site visitors and the community all exchange various information and content through the website. Much of the content will be user generated, but ultimately the quality of the ĐŽŶƚĞŶƚ ĂŶĚ ĐŽŵŵƵŶŝƚǇ ǁŝůů ĚĞƉĞŶĚ ŽŶ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ĂďŝůŝƚǇ ƚŽ ďƵŝůĚ ĂŶĚ ĂĐĐŽŵŵŽĚĂƚĞ Ă ƉƌŽƉĞƌ community. Virtual Showroom feeds the production and sales companies with ideas and in return the production company buys some of these. Furthermore Virtual Showroom advertises for the companies on the website, and by linking to an external web-‐shop they will forward potential customers. In return Virtual Showroom, if offering ads, receives money. Virtual Showroom gives the production partners goodwill and PR, by presenting them as supporters of the design industry who wishes to encourage designers who do not have the capital themselves. In return Virtual Showroom might be presented on the production ƉĂƌƚŶĞƌ͛Ɛ websites, which would give Virtual Showroom PR and advertisement.

3.5 Value chain The next step in developing Virtual Showroom could have been to create a supply chain model. The supply chain could clarify the accusation of resources and the transformation into products and services which are then delivered to the costumers (Chaffey, 2009, p. 340). The model can give an overview, which ideally can result in revision of the supply chain to optimize efficiency at a lower cost. Due to lack of resources it has not been conducted yet. If we were to make this analysis, we would shape it according to our product character. Since Virtual Showroom offers a service, this would mean revising the analysis to some degree.

sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƐƵƉƉůǇ ĐŚĂŝŶ ŵŽĚĞů ǁŽƵůĚ ďĞ Ă ƉƵůů ƐƵƉƉly chain model. This means that the focus of the supply chain is to deliver value to customers who are actively involved in product and service specification. In practise this means that Virtual Showroom would try to base the product, and develop the product according to customer needs and demands, identified through market and costumer research, working in collaboration with costumers to develop and revise the service product. Whereas a push supply chain model would suit a company pushing their already developed product onto the market. (Chaffey, 2009, p.347)

VALUE CHAIN MODEL The main purpose of creating this model is to optimise the value for the users of Virtual Showroom and ƚŽ ůŽǁĞƌ ƚŚĞ ƵƐĞƌƐ͛ ĐŽƐƚƐ͘ dŚĞ ǀĂůƵĞ ĐŚĂŝŶ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ŝƐ ďĂƐĞĚ ŽŶ ƚŚĞ traditional value chain by Porter (Chaffey, 2009, p. 348) that shows different value adding activities, and clarifies where a product increases its value when it passes through the different activities in the chain. As the traditional value chain is most applicable to the manufacturing of physical products and Virtual Showroom offers a non-‐physical service, the model displayed in figure 9 has been revised. This is done in order to fit the intermediary function that Virtual Showroom has, and the fact that the business is an e-‐ business that primarily exists online, by Chaffey referred ƚŽ ĂƐ Ă ͞ĐůŝĐŬƐ ŽŶůǇ͟-‐company (Chaffey 2009, s.88). Activities such as production shown in the traditional model are not performed by Virtual Showroom. For this part an external value chain, highlighting the activities performed by Virtual Showrooms partners, could have been generated. (Chaffey, 2009, p. 348). Contrary to the traditional model we also consider the needs and requirements from the users, which is the starting point of our model.

Figure 9: Value chain. This model illustrates the different activities that Virtual Showroom is going through in order to deliver the value proposition to the customers. Adaption from Porter (1980, cited in Chaffey, 2009, p. 348)

Figure 9 shows the necessary activities between identifying the needs of the users and fulfilling these. The designers are characterized as the users, and they are the ones who need to be satisfied. The chain ŝůůƵƐƚƌĂƚĞƐ ƚŚĞ ƚǁŽ ŽǀĞƌĂůů ŝŶƚĞƌŶĂů ƉƌŽĐĞƐƐĞƐ͖ ͞ ĞǀĞůŽƉŵĞŶƚ ĂŶĚ ƉƌŽĚƵĐƚŝŽŶ͟ ĂŶĚ ͞ ĞůŝǀĞƌǇ ŽĨ ƐĞƌǀŝĐĞ 21

ĂŶĚ ^ĂůĞƐ͘͟ tŝƚŚ ƚŚŝƐ ŝŶƚĞƌƉƌĞƚĂƚŝŽŶ ŽĨ ƚŚĞ ǀĂůƵĞ ĐŚĂŝŶ ǁĞ ŵĞĂŶ ƚŽ ĐůĂƌŝĨǇ ǁŚĞƌĞ ĞǆĂĐƚůǇ sŝƌƚƵĂů Showroom creates value to its users.

The following is a description of each activity, and reveals what activities are most important in order to fulfil the needs of the users.

Market research Consists of investigating both users and existing companies. This way Virtual Showroom will know the needs and desires of the end-‐users and by being better at fulfilling these needs adding value to the services. Investigating the market, and following trying to differentiate from existing services, makes Virtual Showroom more valuable to the end-‐users.

Development and design of service Further investigation needs to be done in order to identify needs and requirements from the users, so Virtual Showroom (both web-‐design and service) ends up fulfilling these needs. The web design shall be user-‐friendly and reflect what Virtual Showroom stands for.

Implementation and design of website Design and programming of the website shall be an iterative activity and process, again in order to pay ƌĞŐĂƌĚ ƚŽ ƚŚĞ ĐƵƐƚŽŵĞƌƐ͛ ǁŝƐŚĞƐ͘ Ǉ ƌĞƉĞĂƚĞĚ ƵƐĞƌ ƚĞƐƚŝŶŐ ƚŚĞ ǁĞďƐŝƚĞ ǁŝůů ŝŶĐƌĞĂƐĞ ŝƚƐ ƵƐĂďŝůŝƚǇ͕ ŝƚƐ functions and visual expression, and hereby enhancing value for the costumers.

Establishment of partnerships It is important that this is an on-‐going activity. The collaboration with the partners is a great part of maintaining the business and making sure it is attractive for the designers to upload their designs. Without various partners that are willing to buy and produce the winning uploaded designs, the business cannot exist, since much of the value for the designers lies in getting their designs sold and produced. This activity creates great value for the users.

Deliver the service The service that Virtual Showroom provides is cost free for the designer until their idea is sold. This involves that the designers only needs to spend time and energy on uploading ideas, and have no initial financial risk. The delivery and the transaction of ideas and money should be done as smoothly as possible.

ŽŶĐůƵĚŝŶŐ͕ ƚŚŝƐ ŵĞĂŶƐ ƚŚĂƚ ŝŶ ŽƌĚĞƌ ƚŽ ŐĞŶĞƌĂƚĞ ŐƌĞĂƚ ǀĂůƵĞ ƚŽ ŝƚƐ ĐƵƐƚŽŵĞƌƐ͕ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ŵŽƐƚ important job is to obtain and maintain partner relationships. This activity needs to be in focus all the time, and maybe will need an employee to manage this job. Furthermore, from where Virtual Showroom stands right now (start-‐up phase) they need to invest in the development process in order to develop the website from the customer needs.

3.6 COSTS & REVENUE Looking at the financial possibilities of the concept, there is a lot of things to consider. Without putting ƚŽŽ ŵƵĐŚ ĨŽĐƵƐ ŽŶ ŚŽǁ ƚŚĞ ŽƌŐĂŶŝǌĂƚŝŽŶ͛Ɛ ĞĐŽŶŽŵǇ ǁŝůů ĨƵŶĐƚŝŽŶ ŝŶ ƚŚŝƐ ďƵƐŝŶĞƐs model, we will shortly address the main costs and revenues of Virtual Showroom.

Virtual Showroom focuses on being a fairly value-‐driven company. Its main objective is to help designers getting put into production, but also to earn money on this. Realizing that making a substantial profit only on selling designers ideas may be a harder task; shareholders should have some drive and interest in the field and the vision.

Obviously Virtual Showroom should have a larger revenue than its costs, to be able to stay in business, ƚŽ ƉĂǇ ƚŚĞ ĞŵƉůŽǇĞĞƐ͛ ƐĂůĂƌŝĞƐ ĂŶĚ ĚĞǀĞůŽƉŝŶŐ ƚŚĞ ĐŽŶĐĞƉƚ ĨƵƌƚŚĞƌ͘ Ŷ ĞƐƐĞŶƚŝĂů ŶĞǆƚ ƐƚĞƉ ǁŽƵůĚ ďĞ ƚŽ create a financial strategy for Virtual Showroom that would account for a detailed revenue map that would explore all the potential income possibilities and also a comprehensive cost analysis.

When that is said, stating that Virtual Showroom is a value-‐driven company is not as fitting when it comes to its cost structure. Virtual Showroom is neither cost-‐driven (always focusing on minimizing costs) or value-‐driven (not focusing on cost, but on value creation), but falls somewhere in between as most companies (Ostervalder and Pigneur, 2010, p. 41). Virtual Showroom would want to create value for their designers, but still maintaining a reasonable budget to achieve revenue.

ŵĂǇŽƌ ĞůĞŵĞŶƚ ƚŚĂƚ ĂĨĨĞĐƚƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ĞĐŽŶŽŵǇ ŝƐ ŽƵƌ ĚĞĐŝƐŝŽŶ ƚŽ ŵĂŬĞ ƉƌŽĚƵĐƚŝŽŶ ĞǆƚĞƌŶĂů͘ Although Virtual Showroom has outsourced the production activity, and thereby saves money on production, it will forfeit sales on produced items which potentially could be a large income. We made this decision so Virtual Showroom did not have to deal with needing technological knowledge of production, storage, needing a sales-‐department and more important, finding the funding.

Letting Virtual Showroom manufacture the products itself at a reasonable price would be hard, based on the classic supply-‐ĚĞŵĂŶĚ ƚŚĞŽƌǇ͕ ǁŚĞŶ ƚŚĞ ďƵƐŝŶĞƐƐ͛ ƉŽƐŝƚŝŽŶ ŝƐ ƐĞĞŶ ĂƐ ďĞŝŶŐ ŝŶ Ă ŶŝĐŚĞ ŵĂƌŬĞƚ͘ /Ŷ comparison, it is mostly bigger companies like Ikea, who produces their own products, because they can reach and sell in a mass-‐market.

COSTS To determinate the costs, it is important to look at the key activities that needs to be done (by employees and external help) to get the company up and running and maintained. We assessed the most important activities to be: ł Creating the website ł Finding and preserving partners ł Maintenance of the website and concept ł Marketing

Figure 10 is an early estimation of how we see our key-‐activities prioritized. The top pie-‐chart shows how we see the importance of the activity and the bottom pie-‐chart shows how costly the activity is. Both are in comparison to the other key-‐activities.

The charts show the difference between how important and how costly a key activity is perceived to be -‐ e.g.: finding new partners is very important, but we do not see it as being equally costly compared to the other key activities. We also find marketing important but it is more dominant in how costly it is. It is also notable that the creation of the website has a low percentage even though it is not possible to do the concept without the site, but in comparison to the other key activities, it is a onetime thing.

As said before the figure is only an early estimation, which purpose is to provide our thoughts on the subjects of cost. A later financial plan would be based on thorough research.

Figure 10: Cost & importance estimation of key activity. This model provides an early estimation of how important and expensive the key activities are.

REVENUE sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ŵĂŝŶ ƌĞǀĞŶƵĞ ĐŽŵĞƐ ĨƌŽŵ ƐĞůůŝŶŐ ƚŚĞ ĚĞƐŝŐŶĞƌ͛Ɛ ŝĚĞĂƐ͘ >ŽŽŬŝŶŐ Ăƚ ĂŶ ŽƌŐĂŶŝǌĂƚŝŽŶ͛Ɛ ƌĞǀĞŶƵĞ ŝƚ ŝƐ ĞƐƐĞŶƚŝĂů ƚŽ ůŽŽŬ Ăƚ ƚŚĞ ĐƵƐƚŽŵĞƌ ƐĞŐŵĞŶƚƐ͘ ĂĐŚ ƐĞŐŵĞŶƚ represents different revenues that can be optimized by targeting the particular segment.

dŚĞ ŝŶĐŽŵĞ ŽĨ ĞĂĐŚ ĚĞƐŝŐŶĞƌ͛Ɛ ƐĂůĞ ŝƐ ĚǇŶĂŵŝĐ͘ dŚĞ ƉƌŽĨŝƚ ƚŚĂƚ ďŽƚŚ ƚŚĞ ĚĞƐŝŐŶĞƌ ĂŶĚ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ gets, are made differently with our production partners based on parameters as the product category, cost of production etc..

Our revenue model is based on commission-‐based sales (Chaffey, 2009, p. 80) which means Virtual Showroom gets a commission for each sale. Another way of looking at Virtual Showrooms revenue ƐƚƌĞĂŵƐ ŝƐ͕ ĂƐ Ă ͚ďƌŽŬĞƌĂŐĞ ĨĞĞ͛ ;KƐƚĞƌǁĂůĚĞƌ ĂŶĚ WŝŐŶĞƵƌ͕ ϮϬ10, p.32), which is a intimidation service on behalf of two or more parties. To support our income, Virtual Showroom would also do advertising (e.g. banners) on the site. In regards to online advertising, having a collaboration with our partners would be preferable.

Another revenue the business could pursue would be funding from different funds and institutions that work with supporting the creative industry e.g. Kulturministeret and Center for Kultur-‐ og Oplevelsesøkonomi.

3.7 CHANNELS Channels describe how Virtual Showroom is going to reach its customers with its value proposition (Osterwalder and Pigneur, 2010, p.27).

As we will mention later under marketing mix in the place section (see section 5.4.3) there are certain channels Virtual Showroom must go through to deliver its intent. This section will establish the different channels whereas place will look channels form a marketing point of view.

Virtual Showroom main channel, is as mentioned before, the Virtual Showroom website. This is the hub of the entire concept and it is where designers upload their ideas and where the site-‐visitors decide which product they wish to see put into production. Another internal channel will be the employees at Virtual Showroom, who will make sure to the value proposition gets delivered thought different work tasks (e.g. making contact to production partners). However, having a website is not enough; Virtual Showroom also needs to attract the designers and viewers to our site, which is why it is important to develop a marketing plan concerning these details (see section 5.4 -‐ Tactics). Ɛ ĂŶ ĞǆƚĞƌŶĂů ĐŚĂŶŶĞů͕ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ǁŝůů ůŝŶŬ ƚŽ ƚŚĞŝƌ ƉĂƌƚŶĞƌƐ͛ ǁĞďƐŝƚĞƐ ƚŚƌŽƵŐŚ ƚŚĞ ƐŝƚĞƐ showcase of winning designs -‐ dŚŝƐ ǁŝůů ƉƌŽǀŝĚĞ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƉĂƌƚŶĞƌƐ ǁith potential customers. An additional external channel would be sale, which is managed by Virtual Showrooms production partners. Our distribution channels are indirect, since Virtual Showroom is an intermediary between the designer and the production, and all sales goes though partners channel (Osterwalder & Pigneur, 2010, p. 27).

We are aware of the possibility of a channel conflict between the production / sales department and Virtual Showroom. Why should the first mentioned go through Virtual Showroom in finding their designers? To shortly answer this is because Virtual Showroom can provide them with attention (by taking part in the concept), an audience who has expressed interest in a specific product (by voting) and legal right to the designs put into production. Another conflict could arise externally between production and sales. If a production company does not have a sales force it could be too much of a hassle to involving themselves in Virtual Showroom. A next step would be to analyse and identify the potential channel conflict that lies in the concept, and seek out to a solution that could be provided to stakeholders. Look deeper into the main channel, the website.

3.8 IMPLEMENTATION & DESIGN Looking at the e-‐concept from a technical aspect, there are certain things that need to be done to implement the concept. First thing to do is make a strategy for the implementation. This would feature a flowchart and a use-‐case, which illustrates and describes scenarios of how the user is going to interact with the website. Especially when the website includes a log-‐in system and user-‐uploads it is relevant to look more into and analyse these processes in order to make the navigation as user-‐friendly as possible. The use-‐case would also create an overview of what functions on the website that are necessary, and would function as a preparation to the programming phase. As earlier mentioned the website should feature: 25

ł ł ł ł ł

The ability to create a profile and log-‐in (both as a designer and a visitor) A voting-‐system A showcase gallery of ideas to vote + winning designs with external links to our partners web shops A community A way of easily uploading design ideas that without much redesign can be presented in the showcase gallery.

The technology for this is not ground-‐breaking but it can quickly be a costly affair, if needing to hire both a developer, a graphic/web designer and a usability expert . dŚĞ ĐŽŶĐĞƉƚ ĐĂŶ ďĞ ĐĂƚĞŐŽƌŝǌĞĚ ĂƐ Ă ǁĞď Ϯ͘Ϭ ƉƌŽĚƵĐƚŝŽŶ ŝŶ ƚŚĞ ĨĂĐƚ ƚŚĂƚ ƚŚĞ ĐŽŶĐĞƉƚ͛Ɛ ĞƐƐĞŶĐĞ ŝƐ ƵƐĞƌ-‐ generated content.

The optimal thing would be to do a demo of the concept before launching to the whole market, getting as much real-‐world input through usability test in an early stage, to be able to fix and manage problems and errors before launching to the whole market.

Mentioned in key activities under cost & revenue, developing the website is a one-‐time thing, and more comprehensive and prolonged task is maintenance of the site, making sure the concept functions works and that Virtual Showroom develoƉ ŝŶ ƚŚĞ ĚŝƌĞĐƚŝŽŶ ŽĨ ƚŚĞ ĐƵƐƚŽŵĞƌƐ͛ ŶĞĞĚƐ͘ To give an insight into our thoughts about the website, we created an early-‐stage mockup (see figure 2).

3.9 SUMMARY OF BUSINESS MODEL This section summarizes the main points of the Business Model chapter above, with particular focus on the conclusions that is brings us closer to answering the research question. &ŝƌƐƚůǇ ƚŚĞ ƚĂƌŐĞƚ ŐƌŽƵƉ ŚĂƐ ďĞĞŶ ŝĚĞŶƚŝĨŝĞĚ ĂƐ ͞ŽƵƌ ƚĂƌŐĞƚ ŐƌŽƵƉ ŝƐ ĂŶŝƐŚ ƉĞŽƉůĞ ŝŶƚĞƌĞƐƚĞĚ ŝŶ ŝŶĚƵƐƚƌŝĂů design with different levels of design skills, who are interested in getting their design ideas ŵĂŶƵĨĂĐƚƵƌĞĚ͕͟ ƚŚĞ ŐƌŽƵƉ ǁĂƐ ĨƵƌƚŚĞƌ ĚŝǀŝĚĞĚ ŝŶƚŽ ƚǁŽ ƐĞŐŵĞŶƚƐ͗ ĞǆƉĞƌŝĞŶĐĞĚ ĂŶĚ ŝŶĞǆƉĞƌŝĞŶĐĞĚ segments. This will allow for targeted marketing, maintenance of customer relations among others. Furthermore key partnerships/stakeholders has been identified and their importance for the company analysed. The analysis recommends focus on existing designers, production companies, re-‐visitors and employees of Virtual Showroom. The analysis also points to a potential risk in high interdependence between the key stakeholders. The stakeholder analysis is followed with a description of value proposition for each of these important stakeholders. Also a description of the value chain that outlined a set of activities that Virtual Showroom could do in order to improve value creation for them. The most important activity will be to obtain and maintain partner relationships. The next step of the model was an overview of some of the financial aspects of Virtual Showroom. A main point of this was to prioritize the importance and cost estimate the key activities that start-‐up and daily operations of Virtual Showroom should include. In reference to the conclusion of the value chain the most important activity will be to find and preserve partners. The most costly will likely be

ŵĂƌŬĞƚŝŶŐ ĂŶĚ ĚĂŝůǇ ŽƉĞƌĂƚŝŽŶƐ͘ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƉƌŝŵĂƌǇ ŝŶĐŽŵĞ ǁĂƐ ŝĚĞŶƚŝĨŝĞĚ ĂƐ ƚŚĞ ĚǇŶĂŵŝĐ commission on sold ideas. The section also concluded that this income alone likely would not be enough ƚŽ ƐƵƐƚĂŝŶ ƚŚĞ ďƵƐŝŶĞƐƐ͛ ĐŽƐƚ͘ Channels that Virtual Showroom should use to communicate with the different stakeholders has been identified, the most prominent of these is the website. It has also been established that there should be no technological hindrances to the completion of the business concept.

4. ANALYSIS OF THE ENVIRONMENT Various facts in the internal and external environment will affect the Virtual Showroom. It is therefore important to make a situation-‐analysis to understand the current and future environment in which the company operates in, with the aim that the strategic objectives are realistic in light of what is happening on the marketplace (Chaffey, 2009, p.420). Risk linked to the business, should be identified and either turned into possibilities or handled, so the consequences are minimized. At the same time possibilities should be identified and exploited. Therefore, there is a need for constant monitoring of the environment, also referred as environmental scanning, and afterwards managing the business in relation to this (Chaffey, 2009, p.52.). This ability to respond to these environmental opportunities and threats is commonly referred to as strategic agility (Chaffey, 2009, p.57). We seek to analyse the environment around Virtual Showroom, with the use of a traditional SWOT-‐ analysis. A SWOT analysis is a relatively simple, yet powerful tool that we use to analyse Virtual ^ŚŽǁƌŽŽŵ͛Ɛ ŝŶƚĞƌŶĂů ĨĂĐƚŽƌƐ ŝŶ ƚĞƌŵ ŽĨ ƐƚƌĞŶŐƚŚ ĂŶĚ ǁĞĂŬŶĞƐƐĞƐ ĂŶĚ ŵĂƚĐŚ ƚŚĞŵ ĂŐĂŝŶƐƚ ƚŚĞ ĞǆƚĞƌŶĂů environment in relation to opportunity and threats (Chaffey, 2009, p.274). Before compiling the SWOT-‐analysis, we have chosen to analyse the different external factors of the SLEPT-‐framework (Chaffey, 2009, p. 193). The SLEPT-‐analysis is often used in conjunction with a SWOT analysis to examine the situation of an individual business. If the Virtual Showroom strategically analyses the five factors in SLEPT, a good foundation for the opportunities and threats is provided for the SWOT (ibid). Competitors in one of the factors in the micro-‐environment and is therefore a important issue to take into consideration (ibid). The competitive situation and tendency's in the market, that Virtual Showroom is captivating, dictates the conditions for conquering market share and market growth. Based on this we have conducted a market and competitor analysis. In order to prepare thoroughly the internal factors to the internal part in SWOT, a organizational analysis is compiled. Simultaneous the SWOT analysis also focuses on other internal weaknesses and strengths in the internal environment. If Virtual Showroom is going to be implemented, it would be beneficial to also conduct a empirical demand analysis (Chaffey, 2009, p.421) and afterwards re-‐consider the marketing mix. This analysis is conducted as a foundation for the marketing mix to be built on. In addition to market research it would be useful to consult an e-‐consultancy that are specialized in providing reports compiled from the various research material such as Internet statistics compendium. Besides, there are various free services such as Alexa and paid services such as Hitwise, Netrating, Comscore, ABCD database, Forrester (Chaffey, 2009, p.63).

4.1 EXTERNAL ENVIRONMENT In order to make sure that the business model is built on a solid foundation, it is important to consider the external environment before planning the strategy. Factors in the external environment affect the Virtual Showroom and should therefore be carefully considered. For instance should high risks should be handled through a risk management analysis. In order to stay competitive and defend gained market 28

shares, it is important for Virtual Showroom to continue supervising the environment, in order to address future destructive factors. Besides identifying risk, it is also important to keep an eye on potential opportunities that could strengthen the business.

4.1.1 SLEPT-‐ANALYSIS There is various versions of the marketing environment models, such as PEEST, STEP, PESTEL, STEEPLE and SLEPT (Andersen et. al, 2007). From these we chose a SLEPT-‐model, since it fit the environmental situation of Virtual Showroom the most. The SLEPT-‐frame is an efficient analysing tool, used to evaluate the impact of factors in the macro environment; political, economic, social, technological and legal factors (Chaffey, 2009, p. 193). Since the analysis also reveals some opportunities within the frames, these opportunities will be applied in the SWOT-‐analysis later. When an overview of the position of the e-‐business is provided, it is easier to evaluate which directions that might be more profitable than others. The table below is listing the most relevant factors, that could have an significant impact on Virtual Showroom.

Figure 11: SLEPT model. This table illustrates influential macro-‐factors in the external environment.

A threat-‐ and opportunity matrix could be used to evaluate whether these factors are critical and 29

probable (Andersen et. al, 2007, p. 101). If this project had allocated more resources, we would have made use of this model. Instead we will discuss the most important factors in the section below.

Figure 12: Threat matrix. This table is an example of how probable and important some SLEPT-‐factors are.

Social factors Given that our business model is based on a trustful relationship between our designers and production companies, it has high priority that Virtual Showroom addresses social risks that may damage our relationships with them. The most important issues to address is that both designers and manufactures do not trust us with their ideas or do not see the value proposition or fears the unknown. Others factors would be fear of the unknown, cultural issues in communication and that the customers do not perceive our value proposition as relevant benefits.

Legal factors Legislation is one of the critical factors, which could have a substantial impact on Virtual Showroom. It should therefore be taken very seriously. The most significant legal issues that should be taking into considerations, is ƚŚĞ ůĂǁ ŽĨ ďƌĂŶĚ ĂŶĚ ƚƌĂĚĞŵĂƌŬ ƉƌŽƚĞĐƚŝŽŶ͕ ǁŚŝĐŚ ŝƐ ƌĞůĞǀĂŶƚ ŝŶ ƌĞůĂƚŝŽŶ ƚŽ ĚĞƐŝŐŶĞƌ͛Ɛ uploaded designs. When designers upload their design, legal protection of digital assets such as ĐŽƉǇƌŝŐŚƚ ŽŶ ĂƵĚŝŽ ĂŶĚ ŝŵĂŐĞƐ ƐŚŽƵůĚ ďĞ ƌĞƐƉĞĐƚĞĚ͘ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ĂƉproval-‐step in the uploading process should take care of the disability and discrimination law, so no provocative content will be published on our website. In reference to the following section on marketing mix, online advertising law is also taken into consideration. Finally when designers register their personal information, we need to handle their information according to the data protection and privacy law.

Economic factors As there is an on-‐going recession, production companies have less capital to invest in new designs, which is a significant challenge since our cost revenue model relies on this. Financial organisations have since the financial crisis been more cautious when approving loans to design entrepreneurs, and in combination designers with no capital who wants their designs produced, the finance crisis actually open up a possibility for Virtual Showroom to succeed.

Political factors ƚ ƚŚŝƐ ŵŽŵĞŶƚ ƚŚĞƌĞ ŝƐ ŶŽƚ ĂŶǇ ĚĞǀĂƐƚĂƚŝŶŐ ƉŽůŝƚŝĐĂů ĨĂĐƚŽƌƐ͕ ƚŚĂƚ ŵĂǇ ĐŚĂůůĞŶŐĞ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ existence. International trade restrictions and increased taxes will reduce the profit, but it is less likely that new rules will become effective. Since political decisions often are resolved over a longer period of time, Virtual Showroom will have time to respond to political factors.

Technological factors In relation to technological issues we do not regard it as a substantial issue. Users of the website should of course have access to computer and Internet, but since this is not an issue in Denmark, it is not factor that needs to be addressed. There is of course a variety of interface opportunities, e.g. being aware of usability is important.

The most influential risks will be taking into consideration in the discussion of the SWOT model.

4.1.2 MARKET RESEARCH AND COMPETITOR ANALYSIS The following section focuses on researching market trends and existing companies within Virtual ^ŚŽǁƌŽŽŵ͛Ɛ ĂƌĞĂ ŽĨ Ğ-‐business, with the purpose of identifying potential competitors. Virtual Showroom is a newly established company in a relatively new area of business, which deals with sharing and selling ideas and product designs online. Market trends are interesting in order to learn from existing companies. Furthermore, it is important to gain this knowledge about the market and to know our competitors in order to end up with the right differentiation strategy. The process of market research and identifying our potential competitors started with a review of existing and similar online services. In order to fit into the same business category as Virtual Showroom, the companies should provide a platform that makes it possible to sell ideas or designs online and that make it possible for the designers to get their ideas produced. REVIEW OF COMPETITORS An e-‐business that shows many similarities to Virtual Showroom is Quirky.com. The users of Quirky can upload their own industrial designs (technology-‐, kitchen-‐, kids-‐ and pets-‐stuff), and at the same time vote for the best designs of the week. The ideas with most votes will be put into production and end up ŝŶ ƚŚĞ ŽŶůŝŶĞ ƐŚŽƉ ŽŶ YƵŝƌŬǇ͛Ɛ ŽǁŶ ǁĞďƐŝƚĞ͘ It is challenging, risky and expensive to put an idea into production by the individual designers. Quirky.com is attractive to designers, because they have manufacturing relationships, and all the ƌĞƐŽƵƌĐĞƐ ƚŽ ŐĞƚ ƚŚĞ ĚĞƐŝŐŶĞƌƐ͛ ŝĚĞĂƐ ŝŶƚŽ ƉƌŽĚƵĐƚŝŽŶ͘ Ǉ ƵƐŝŶŐ YƵŝƌŬǇ͕ ƚŚĞ ĚĞƐŝŐŶĞƌƐ ĂǀŽŝĚ ůĂƌŐĞ ƌŝƐŬƐ and they earn money every time their product sells on the website. Even though Virtual Showroom does not directly sell physical products, the prize competition is worth considering. Quirky, who is our closest competition, is not a free platform. They differ from Virtual Showroom by charging 10 dollars from the designers who submit a design. Virtual Showroom only charges a fee if a designer succeeds in selling the design-‐idea, which becomes an advantage for the ĚĞƐŝŐŶĞƌƐ ĐŽŵƉĂƌĞĚ ƚŽ YƵŝƌŬǇ͛Ɛ ƵƐĞƌƐ͘ Similar to Quirky.com is Redesignme.com. They call their website a creative marketplace within the area of graphic design, marketing ideas and product design. Contrary to Quirky, Redesignme.com do not take on the role of producing anything. Instead they cooperate with many clients and create a business of being the intermediary between these clients and designers, and earn money by charging fees. The idea of being the intermediary between designers and producers is similar to the idea of Virtual Showroom. But it is a very different product and design category that Redesignme.com deals with, and therefore Redesignme.com is not direct competitors. Another aspect on Redesignme.com, which is considered a strength is that the clients create ͞ĐŚĂůůĞŶŐĞƐ͟ ŽŶ ƚŚĞ ǁĞďƐŝƚĞ͕ ǁŚŝĐŚ ŝƐ Ă ĐƌĞĂƚŝǀĞ ũŽď ƚŚĞǇ ǁĂŶƚ ƐŽůǀĞĚ͘ dŚĞ ƵƐĞƌƐ ƵƉůŽĂĚ ƐŽůƵƚŝŽŶƐ ƚŽ ƚŚĞ 31

challenges, and the company then chooses and rewards the best design with points or cash. The idea of challenges works well, because the designer actually answers a real assignment. This is a strength compared to Virtual Showroom where users submit ideas, which they do not really know if any company is interested in. A challenge functions as a great motivational factor. Redesignme.com differs from the rest of the websites by not giving their users a voice. Only the clients decide the best designs, there is no possibility of voting, which give the customers no influence, and could be a weakness. The business Threadless.com is simple and more niche than the two previous businesses. It is the same principle as Quirkly.com by being a community-‐based site where the users are able to upload and vote for t-‐shirt designs that Threadless puts into production and sells on the website. Again it is a strength that Threadless have their own production and web shop. It is also noticeable that the users have very high influence. They play a central role throughout the whole process from design to production. The users are responsible for designs and for deciding the best designs. They have a lot of power, because without the users there would be no business. Threadless.com rewards the winning designers, and makes money on selling the t-‐shirts. Another kind of community based idea sharing and -‐selling business is Kickstarter.com. This platform is intended for communicating ideas for creative projects within many different categories. <ŝĐŬƐƚĂƌƚĞƌ͘ĐŽŵ ĚĞƐĐƌŝďĞƐ ƚŚĞ ĐŽŶĐĞƉƚ ĂƐ ͟A way for creative people to fund their ideas and projects. And ďƌŝŶŐ ƚŚĞŵ ƚŽ ůŝĨĞ͘͟ ;ŬŝĐŬƐƚĂƌƚĞƌ͘ĐŽŵ͕ ϮϬϬϵͿ This concept is very different from Virtual Showroom, but it is interesting to look at the power of the users and the community part of this website, which is a strong aspect of the concept. A project creator starts a funding (uploads an idea for a private project), and decides how much money that are needed to complete the project. The community needs to support project and place money. Only if a project has met its funding goal, the creator receives the fund. What ŝƐ ŝŶƚĞƌĞƐƚŝŶŐ ŝƐ ƚŚĞŝƌ ͟Ăůů-‐or-‐ŶŽƚŚŝŶŐ͟ ĨƵŶĚŝŶŐ ŵĞƚŚŽĚ ǁŚĞƌĞ ŝĚĞĂƐ ĨŽƌ ƉƌŽũĞĐƚƐ ŵƵƐƚ ďĞ ĨƵůůǇ ĨƵŶĚĞĚ Žƌ no money changes hands, which can be compared to the idea of Virtual Showroom; if the design is not popular within the community, it is not put into production. This also means that risks that are normally placed by both creators and donors/producers are minimized. The producers get a design that are popular and has potential. The project creators produce all projects themselves and keep 100% ownership and control over their work, which is different from the previous sites and could be attractive to the users. Another strength is that it is free to upload a project on the site, and Kickstarter.com earns money by charging fees but only if a project is successfully funded. The concept of web-‐users posting their own ideas online is also being exploited by large international companies who are embracing this idea and are implementing it as sub-‐websites on their own company website. Two examples are Dell and Starbucks, where the users of their online community are able to upload ideas for new products and services and get to vote on which ideas to be realized. Ğůů͛Ɛ ideastorm.com ŚĂƐ ƚŚĞ ƐůŽŐĂŶ ͞DĂŬĞ ĂŶ ŝŵƉĂĐƚ͊͟ ĂŶĚ ŚĂƐ ĂůƌĞĂĚǇ ŝŵƉůĞŵĞŶƚĞĚ ŽǀĞƌ ϰϬϬ ŽĨ ƚŚĞ ƵƐĞƌ͛Ɛ ideas with the best ratings (Dell, 2010). Dell describes the concept as a way to talk directly to their customers. The same tendency is shown at Starbucks mystarbucksidea.com with the slogaŶ ͞Your Ideas. zŽƵƌ ^ƚĂƌďƵĐŬƐ͟ ĂŶĚ ͞dŽŐĞƚŚĞƌ͕ ǁĞ ǁŝůů ƐŚĂƉĞ ƚŚĞ ĨƵƚƵƌĞ ŽĨ ^ƚĂƌďƵĐŬƐ͟ (Starbucks Cooperation, 2010). The two examples show that there is much focus on user influence through voting systems. Though, neither Dell nor Starbucks will assure that the ideas with most votes will be implemented. The winning idea is chosen by a combination of decision makers within the companies and the most popular idea. Neither will the users be compensated or rewarded if their ideas are chosen. Despite that there are no 32

guarantees or rewards many users upload their ideas and comment on each other, which prove the strength of online communities. OTHER COMPETITION Lastly, it is also necessary to be aware of competition from distributors and producing companies. The designers and users of Virtual Showroom have the opportunity to negotiate directly with these companies without the help from Virtual Showroom. Some of the designers will also be able to pay for their production of their ideas themselves; these will not make use of a place like Virtual Showroom. Consequently, in order to make Virtual Showroom attractive to designers, they need to establish good arrangements with clients who want to invest in designs from the users. ANALYSIS None of the reviewed businesses are direct competitors to Virtual Showroom, but they are all in the same category of business. They are all platforms that enable the users to show and sell ideas and designs online. This indicates to us, that there is a market, and that Virtual Showroom could potentially succeed. A difference between Virtual Showroom and most of the reviewed business though, is that most of the businesses are taking on the role of manufacturing the submitted designs themselves, and are also selling the products on their website. This is a huge strength because the competitors can assure the users that their designs will get into production. Virtual Showroom on the contrary is dependent on partners and clients. Like Redesignme.com, Virtual Showroom is primary functioning as an intermediary between designers and producers. As the name indicates, it is simply a showroom, which is a strength since it helps the designers get business connections that could continue. Businesses that contain a web shop have the advantage that they can prove to new designers that many users actually succeed with their designs on the website. The shop thereby becomes a great motivational factor. Virtual Showroom on the other hand does not contain a concrete web shop since they do not own or sell the products. However, all products that have been bought and produced by the partners can be viewed on a sub-‐website with a link where to buy it, which is both a motivational factor for the designers, and it creates value for the clients who get their website-‐link as publicity on Virtual Showroom. A common characteristic of the competitors, is that they are all community based, and they focus a lot on user influence and co-‐determination. A commonly recurring and highly motivational factor in all the businesses is the voting system, which gives users of the community a voice, and makes them feel like a part of the production process. This kind of involvement will at best create more buyers in the end. To Virtual Showroom, user involvement is important even though the products are not for sale on the website. Generally, the community part of the reviewed websites seems to play a large role, and becomes a value to the users. The communication between user and user, typically in a forum, makes it possible to discuss and share thoughts and experiences and get competent feedback on ideas. This forum creates value to the designer even if they succeed in selling their ideas or not, and is a feature that Virtual Showroom should embrace. Another noticeable feature on most websites is the Blog, which enables direct communication between the company and its users. Through the blog posts the companies shows that they are present. This creates the feeling of personal contact, which builds trust. As mentioned in the SLEPT, trust is important because the designers leave their ideas in the hands of people they do not know. It is important to Virtual Showroom that they succeed in appearing loyal and trustworthy. This could be by communicating through a blog. 33

Virtual Showroom has chosen one kind of economic business model, but the competitor analysis shows that there are various possibilities of revenue stream models. Virtual Showroom contains many of the aspects which we have identified from competitors and existing concepts. This indicates that Virtual Showroom as a new concept on the online market is competitive. The threats from existing businesses at the moment do not seem significantly large, since no one offers exactly the same product. Virtual Showroom is clearly a niche, which can be our advantage, provided that we are able to gain enough users and collaborating clients. The Danish market is a small market, but it makes us present and it also means that the designers do not need to compete internationally. Thereby we can exploit this challenge. We have only identified one direct competitor, Quirky.com, which is the only business that operates within the same product area as Virtual Showroom. Quirky is the only competitor that offers close to the exact service and can be a substitute for Virtual Showroom. Of this reason we do not find it relevant in this context to perform any benchmarking of the competition.

4.2 INTERNAL ENVIRONMENT After discussing the external environment, the internal environment is analyzed below. The choice of the organizational structure affects the Virtual Showrooms internal environment and will therefore be a vital part of the analysis of the internal environment. Since the structure of business influences the working process, it is essential to a business how the organization is composed. We worked out an analysis of how we imagined that the organization would be composed. This was conducted in order to enlighten which organizational possibilities and disadvantages Virtual Showroom would possess. In order to identify internal strengths and weaknesses that are not already discussed in the business model, SLEPT-‐analysis, market research, competitor analysis and the organizational structure, a SWOT analysis is put into use in order to enlighten these aspects. In addition, the external opportunities and treats are also discussed in the SWOT. As mentioned before SWOT is also used as a model that reflects a compiled overview of important environmental factors, which the Marketing strategy is based on. 4.2.1

ORGANIZATION STRUCTURE ANALYSIS The organization structure reflects the internal environment within a company, and its working division. &Žƌ ƚŚŝƐ ĚŝƐĐƵƐƐŝŽŶ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ŽƌŐĂŶŝǌĂƚŝŽŶĂů ƐƚƌƵĐƚƵƌŝŶŐ ǁĞ ƵƐĞ ͞^ƚƌƵĐƚƵƌĞƐ ŝŶ &ŝǀĞƐ͟ ďǇ Henry Mintzberg (1980), who suggests a typology of five basic coordinating mechanisms/five types of decentralization; simple structure, machine bureaucracy, divisionalized form and the adhocracy. (Mintzberg, 1980, p. 322)

Figure 13: Organizational structure. OƵƌ ŽǁŶ ŵŽĚĞů ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ͞ĚŝǀŝƐŝŽŶĂůŝǌĞĚ͖͟ ǁŝƚŚ ĚĞƐŝŐŶĞƌƐ ĂƐ simple structure, us/intermediaries at VS as adhocracy, and the production department as machine bureaucracy.

Shortly, to enumerate the basic parts of the organization, there is the operating core, which counts all the different parts of the processes from design, validating to production. Though one cannot get their products produced without making it through the keyhole on the online platform. The actual operating core is within the area of designers and producers. The strategic apex consists of the general managers and the personal staff -‐ this will only count our own team as the intermediaries. Further one can talk about the middle line, those who are in-‐between the strategic apex and the operating core. But because of the small size of this organization (e.g. five persons) there will be nobody assumed as middle line, because these decisions often will be considered among the strategic apex. Considering the technostructure, this often consists of analysts, who apply analytic techniques to the design and to the maintenance of the structure and the environment. But this part will also be found among both the operating core and the strategic apex, since Virtual Showroom will be divisionalized into ͞ƚŚƌĞĞ͟ ƉĂƌƚƐ͘ ŐĂŝŶ ƚŚĞ ĂŶĂůǇƐƚƐ ĐĂŶ ďĞ ƚŚĞ ƐĂŵĞ ƉĞƌƐŽŶ͕ ĂƐ ƚŚĞ ŽŶĞ ĚĞĐŝĚŝŶŐ ƚŚĞ ŽǀĞƌĂůů ĚĞĐŝƐŝŽŶ ĂŵŽŶŐ ͞ƚŚĞ ŝŶƚĞƌŵĞĚŝĂƌŝĞƐͬƵƐ͘͟ ;DŝŶƚǌďĞƌŐ͕ ϭϵϴϬ͕ Ɖ͘ ϯϮϯͿ The overall process that takes place seems to be a divisionalized form, which has to coordinate the working processes for respectively individual designers, Virtual Showroom and the production team. But in each step where a coordinating process is taking place, there will be a dominating organizational structure. In our case, the majority of the structures will even be a mixture of some of the other methods, in order to create a harmony within its environment. The overall working process, the divisionalized form, is known for its limited vertical decentralization, which means that the power therefore flows outside the line of authority and the power instead is delegated in parallel to managers of divisions. This kind of structure is very market-‐based with a central headquarters overseeing a set of divisions with serving more or less each their own markets. Hence, it is a challenge to find a mechanism to coordinate work across our three specific departments. The divisionalised structure is often found as fashionable among industries. (Mintzberg, 1980, p. 327+335) Virtual Showroom Further we would describe the Virtual Showroom as an individual organization. Employees at Virtuel 35

Showroom will consider themselves as an adhocracy organization. This is known by little formalization of behavior, and least of the classical principles of management. There is obviously a blurring line between staff and management. The environment can both seem complex and dynamic. Further the employees at Virtual Showroom would be a part of an administrative adhocracy, when the innovation is ĐĂƌƌŝĞĚ ŽƵƚ ĨƌŽŵ ƚŚĞ ƵƐĞƌ͛Ɛ ƉĂrt, but finally examined by Virtual Showroom. In general adhocracy is popular within its field. (Mintzberg, 1980, p. 336-‐337) The users of Virtual Showroom Among the designers there will be no such structure to find, therefore a very simple structure is used. EŽ ĞůĂďŽƌĂƚŝŽŶ ƚĂŬĞƐ ƉůĂĐĞ͕ ĂŶĚ ĐŽŽƌĚŝŶĂƚŝŽŶ ĐŽŵĞƐ ĚŝƌĞĐƚůǇ ĨƌŽŵ ƚŚĞ ͞sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ dĞĂŵ͟ ĂƐ power is centralized, after which the designers never will make the rules themselves. This is an organic structure and dynamic environment, which seems not to be predicted after which, the management of Virtual Showroom cannot predict their work tasks on forehand. (Mintzberg, 1980, p. 331) Production -‐ firms that agree with cooperation This part of the organization is known as machine bureaucracy as structure. This is typical for the production part of a firm. In our situation a larger organization outside Virtual Showroom will probably cooperate for a certain period of time, and will mainly be responsible of producing the products that our designers/customers have invented. The machine bureaucracy is highly specialized and depends on routines and standardization for the operation to some extent. Power of decision making is often centralized and placed externally from the actual production. Further this kind of coordination is known within mass-‐production firms, that contains simple and stable environments. In the concrete situation of Virtual Showroom, we imagine there will be certain uncertainties regarding to working tasks, compared to a normal mass production. (Mintzberg, 1980, p. 332-‐333) In general we cannot look upon the whole organization within its suppliers and define an exact organization structure; therefore the above section is a guess of how it could be. It applies most modern companies today to use a combination of several organizational structures.

SUMMARY OF INVIRONMENT Additionally, Virtual Showrooms is strongly affected by its internal strengths and weaknesses according ƚŚĞ ŽǀĞƌĂůů ŝŶƚĞƌŶĂů ĞŶǀŝƌŽŶŵĞŶƚ͘ /ƚ͛Ɛ ŽďǀŝŽƵƐ ƚŚĂƚ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ has a Unique Selling Point (Andersen, 2007, p. 374-‐375) in that way that it is a good stepping stone for new designers within the industry of industrial design. When we are only engaged by this area, we are able to contribute with high competencies and guidance especially for this type of design. Furthermore we cooperate, as written above, with strong external business partners who take care of the production part. For obvious reasons it is a weakness that Virtual Showroom is very dependent of a huge group of designers to come up with ideas, and further it needs a huge group of users to rank the ideas. It is also a weakness that designers have to trust Virtual Showroom. Technology and usability of the production depends of the external production companies, which makes Virtual Showroom very dependent on the quality of their work, because their job reflects back at our popularity in the end.

4.3 SWOT ANALYSIS The investigation of external and internal factors of Virtual Showroom constitutes a good foundation for making a SWOT analysis. This strong strategic planning tool is used with two goals in mind: it is of great value when used to analyse the current situation and as a tool to formulate strategies (Chaffey, 2009, Ɖ͘ϮϳϰͿ͘ ^tKd ƉƌŽǀŝĚĞƐ ĂŶ ŽǀĞƌǀŝĞǁ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ŵĂŝŶ ŝŶƚĞƌŶĂů ƐƚƌĞŶŐƚŚƐ ĂŶĚ ǁĞĂŬŶĞƐƐĞƐ͕ ĂŶĚ as a base for strategic decisions when planning the marketing strategy in the next part of the report. In extension, external opportunities and threats are identified.

The in previous SLEPT-‐analysis, we mentioned macro-‐factors that might have an influence on Virtual Showroom. In order to get a overview of the most influential factors, it is only the most critical factors that are mentioned in the SWOT-‐model.

Influential factors, which either can be optimized or exploited, will be analysed in the Situation Analysis in the SOSTAC-‐model (See section 5.1.).

Figure 14: The SWOT analysis. This model illustrates the internal strengths and weaknesses, and the external opportunities and threats.

STRENGTHS Cooperating with producers and displaying produced producƚƐ ǁŝƚŚ ůŝŶŬ ƚŽ ƚŚĞ ĐŽŵƉĂŶŝĞƐ͛ ǁĞď-‐shop, ĞŶĨŽƌĐĞƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƉƌŽǀĞŶ ĐƌĞĚŝďŝůŝƚǇ͘ WƌŽǀĞŶ ĐŽŶƐƵŵĞƌ ŝŶƚĞƌĞƐƚ ĂŶĚ ƉƌŽĨŝƚ ƌĞƐƵůƚƐ ŝŶ ĨŽƌŵ ŽĨ exposition of winning-‐ and produced designs and customer base e.g. that 1200 customers want a particular product will enforce credibility. However, this could also be a weakness if Virtual Showroom does not succeed in attracting both customers and investors.

As mentioned in the competition and market analysis (see section 4.1.2.) it is an internal strength that Virtual Showroom differentiates itself from competitors by involving viewers in the design process (they choose what should be produced), having a communication forum and is a free service. Virtual Showroom consists of an organization which besides generating profit, is a value-‐driven company, which most likely will strengthen the brand and good will of investors and business partners.

WEAKNESSES As mentioned in the business model (Section 3.6), the revenue stream in Virtual Showroom is built on convincing production companies to manufacture the highest rated products. Therefore, the business depends strongly on investors, since Virtual Showroom otherwise would have to pay for getting the ĚĞƐŝŐŶĞƌƐ͛ ƉƌŽĚƵĐƚƐ ŵĂŶƵĨĂĐƚƵƌĞĚ͘ dŚŝƐ ǁĞĂŬŶĞƐƐ ŝƐ ĨƵƌƚŚĞƌ ĞŶĨŽƌĐĞĚ ďy the fact that the value proposition to production companies is not very strong and should be strengthened. The challenge for ƉƌŽĚƵĐƚŝŽŶ ĐŽŵƉĂŶŝĞƐ ŝƐ ƚŚĂƚ ŝĨ ƚŚĞǇ ďƵǇ ƚŚĞ ĚĞƐŝŐŶƐ͕ ŝƚ ŵŝŐŚƚ ŶŽƚ Ĩŝƚ ƉƌĞĐŝŽƵƐůǇ ĐƵƐƚŽŵĞƌƐ͛ ŶĞĞĚƐ Žƌ desires. The product is based on an actual problem but uses the thesis that the designer knows what ƵƐĞƌƐ ĚĞƐŝƌĞ͘ dŚŝƐ ŝŶĚƵƐƚƌǇ ŝƐ ĂůƐŽ ĚŽŵŝŶĂƚĞĚ ďǇ ŚŝŐŚ ĐŽŵƉĞƚŝƚŝŽŶ͕ ǁŚŝĐŚ ŵĂŬĞƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ĐƵƐƚŽŵĞƌƐ͛ ĚĞƐŝŐŶ ůĞƐƐ ĂƚƚƌĂĐƚŝǀĞ͘ &ŝŶĂůůǇ ŝƚ ŵĂǇ ũƵƐƚ ďĞ ĞĂƐŝĞƌ ĨŽƌ Ă ĐŽŵƉĂŶǇ ƚŽ ĂƐŬ a designer to design a particular product that fits into the remaining product selection.

If Virtual Showroom is not able to make an agreement with any production companies, plan B could be to invest ourselves, which will bring Virtual Showroom in a financial very risky position. Since production and sales is outsourced there will be less financial capital on stake. On the contrary this involves less control in these parts of the external value chain. Therefore Virtual Showroom cannot guarantee that the ideas are actually put into production, when the production companies buy an idea and the right for it. As mentioned in the cost & revenue stream (see section 3.6), it is likely that the revenue stream is week in the first stages.

OPPORTUNITIES In the modern society being entrepreneur has a special high social status, which it is very likely that the customer segment would like to be associated with. We believe that getting success in the design industry do not only rely on good design competences and luck3. Knowing the right kind of people is almost just as important. In our communications forum both production companies and designers have the opportunity to network. With this lies a variety of opportunities for connecting designers with their desired network.

As mentioned in SLEPT-‐analysis the recession influences e-‐business, but also our customer segment. It is only a limited amount of banks that will lend broke designers money, on merely a paper sketch, and without capital, designers would not go very far. This opens up an opportunity for Virtual Showroom since it means the increased criteria to get a loan and makes the offer on getting a product produced more attracting (if the win the competition). Center for kultur og oplevelse økonomi 4 have a financial pool from which they give subvention to new and innovative entrepreneur. For instance a 3D household showroom has just received a large financial subvention in 20115. Virtual Showroom should obviously apply since there are good changes that they 3

http://www.lederne.dk/KommendeLedere/Talogtendenser/boeger/netvaerkdigtilsucces.htm English: Center for experience economy 5 http://www.cko.dk/gruppe/robinhus-‐design-‐experience 4

might get a subvention.

As mentioned in the stakeholder analysis it would be beneficial to recruit users as super users and ambassadors for Virtual Showroom. Additionally, It is not always enough for the designers to have good design. Often it is necessary takes a broad network and knowing the right people. It could both be good connections to investors, manufactures or journalists. This need for network could be exploited by promoting the opportunity for connecting with the industry.

THREATS As mention in the competitor-‐ ĂŶĚ ŵĂƌŬĞƚ ĂŶĂůǇƐŝƐ͕ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ŐƌĞĂƚĞƐƚ ĐŽŵƉĞƚŝƚŽƌ ŝƐ YƵŝƌŬǇ͕ which has a similar value proposition as ours. It is unavoidable that we will lose some market shares to this operator. Additionally given low entry barrier, market growth and technological possibilities that make it easy for new e-‐businesses evolve quickly, entail that it is very likely that a new un-‐identified competition, will appear in the future. Since our revenue stream is built on interest from investors, it would be crucial if no producers perceive Virtual Showroom as a potential profit-‐generator. In relation to this, given culture differences and different agendas, it is possible that Virtual Showroom will conflict with its supplier. Worst case would be if the producers withdraw their offer.

In the segmentation (See section 3.2.1) we selected Denmark as the primary target country. Since Denmark is small country and Virtual Showroom is targeting a niche customer segment, it is possible that there is not enough of Danish designers who would like to bring their design intro production. As analysed in the SLEPT-‐analysis there are various social and technological factors that might reduce the customer interest for contribute with designs at Virtual Showroom. It will have fatal consequences if Virtual Showroom is not able to attract a large customer base, in spite of a well prepared and executed use of the marketing mix (See section 5.4.3). Without a large and active customer base, there is no designs, no rating (and thereby interest for the potential produced goods) and in the end there is no enticement for production companies to produce goods.

SUMMARY OF SWOT Even though Virtual Showroom is similar to Quirky (e.g. proven consumers interest and profit), Virtual Showroom has various internal strengths which reinforces the customer value proposition. Being the value-‐driven e-‐business with user involvement and possibility for networking, Virtual Showroom have a better good will towards customers and investors, which could be exploited. It is though crucial that sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƌĞǀĞŶƵĞ ƐƚƌĞĂŵ ĂŶĚ ĐŽƐƚ ƐƚƌƵĐƚƵƌĞ ŝƐ ǀĞƌǇ ĚĞƉĞŶĚŝŶŐ ŽŶ ƉƌŽĚƵĐĞƌƐ ĂŶĚ ĚŽ ŶŽƚ ŚĂǀĞ any control of sold designs in the production and sales. When counterbalance the threats towards the opportunities, there is certainly more opportunities than threats. Competition and conflicts can all be solved through damage control risk management and the right marketing strategy, which will be handled in the following SOSTAC. Virtual Showroom should without a doubt, exploiting the benefit of having user ambassadors, apply for a CKO-‐subvention and exploit possibilities for branding users as creative entrepreneurs, since it has a high social status.

Before Virtual Showroom is implemented, all mentioned risks should be further handled in a detailed risk management analysis build on research data. Otherwise the outcome might be fatal to the concept if not handled properly (Von Stamm, 2008, p. 388).

5. MARKETING STRATEGY It will be in the interest of Virtual Showroom to ensure that future decisions and actions regarding the organization and its marketing, are planned carefully in order to optimise the success rate. Spending time and resources on planning the marketing strategy will benefit in the long run, since it tends to reduce frequency of risks and mistakes. Thereby possible and unpredictable costs and time waste are ƌĞĚƵĐĞĚ͘ tŝƚŚ Ă ƐƚƌĂƚĞŐǇ ĂŶĚ Ă ĐŽŶĐƌĞƚĞ ŵĂƌŬĞƚŝŶŐ ƉůĂŶ͕ ǁĞ ĚĞĨŝŶĞ ƚŚĞ ďƵƐŝŶĞƐƐ͛ ĐƵƌƌĞŶƚ ƐŝƚƵĂƚŝŽŶ ĂŶĚ revise the specific business objectives, and then it is possibility to plan how to get there, and what to do to achieve these goals.

SOSTAC ƌĞĂƚŝŶŐ ƚŚĞ ŵĂƌŬĞƚŝŶŐ ƉůĂŶ͕ ^ŵŝƚŚ͛Ɛ ^K^d ŵŽĚĞů ŝƐ ĂƉƉůŝĞĚ ; ŚĂĨĨĞǇ͕ ϮϬϬϵ͕ Ɖ͘ϰϭϵͿ͘ dŚĞ ŵŽĚĞů ŝƐ Ă marketing planning system that systematically goes through the most relevant elements of a business. According to Chaffey, the model contains the six main issues to consider within a digital marketing strategy shown in figure 15. In the following section, our marketing plan will be defined by going through the six stages of the SOSTAC model.

Many of the issues to consider in the following have already been addressed in the previous sections of the report. The findings from these previous analyses are used as a foundation for much of the decision making and will be implemented in the SOSTAC model and the marketing plan. Furthermore, new methods are introduced during the next chapter.

Figure 15: The SOSTAC model This model is a marketing planning system that systematically goes through the most relevant elements to consider when planning a marketing strategy.

5.1 SITUATION ANALYSIS We have already done research on the current situation of Virtual Showroom, when analysing both external and internal factors of the Virtual showroom. Therefore this section will focus on the most importance results from the previously sections that involved situation analysis and analyse how to handle these.

TOWS MATRIX Both Chaffey (2009, p. 422) and Andersen et. al (2007, p.102), suggest that it will be a beneficial for organizations to extend the SWOT-‐analysis with a TOWS-‐matrix. The difference between SWOT and TOWS is that when SWOT focus on identifying strengths/weakness and threats/opportunities, TOWS has the purpose to force the organisation to generate marketing initiative based on the SWOT (Andersen et. al., 2007, p.102). The elements in the TOWS is similar to the SWOT, but is instead constructed as a matrix. The content of the TOWS-‐analysis consist of 4 squares: ł SO strategies is defined as an attacking strategy. ł ST strategies is defined as a defensive strategy. ł WO strategies is defined as a build strength to attack strategy. ł WT strategies is defined as a build strength for defensive strategy.

Which strategy a business focus on depends on which situation that they are in. Given that Virtual Showroom is un-‐implemented business, this TOWS-‐ analysis can be used to found the business model and marketing mix since there is still time to fix unsatisfying elements in the concept.

Figure 16 [The TOWS Matrix] This model is an operational planning tool, that forces organization to develop marketing initiatives based on findings form the SWOT-‐analysis.

The SO strategies focus on how Virtual showroom can use its strengths to take advantage of the opportunities (Andersen et al., 2007, p.104). Virtual Showroom is entering a new market and should always focus on using its strengths in exploiting opportunities. One of them is using our communications 41

forum to e.g. create a self-‐presentation of the designers that position them as creative and innovative entrepreneur, which has a high social value. Since we found that the customer segment desire to expand their network into influential and important key players in the design industry, it would be beneficial to combine the personal account with either a Linked-‐In sign-‐in or a functionality with similar features to Link-‐in. Additional, if Virtual Showroom could convince CKO to donate a submission by using the argument that we are a value-‐ĚƌŝǀĞŶ ĐŽŵƉĂŶǇ͕ ŝƚ ǁŽƵůĚ ďŽƚŚ ďĞ Ă ƐĞĂů ŽĨ ĂƉƉƌŽǀĂů ĂŶĚ ŝŶĐƌĞĂƐĞĚ ĚĞƐŝŐŶĞƌƐ͛ ĚĞƐŝƌĞ ƚŽ be a part of it because of the social status. Obviously another SO-‐strategy would be to use the competitive advantage, that viewers are involved in the design process with the User-‐ambassador opportunity. The ST strategies ŝŶǀŽůǀĞĚ ƚĂŬŝŶŐ ĂĚǀĂŶƚĂŐĞ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƐƚƌĞŶŐƚŚƐ ŝŶ ŽƌĚĞr to to avoid ĐƵƌƌĞŶƚ ĂŶĚ ƉŽƚĞŶƚŝĂů ƚŚƌĞĂƚƐ ;ŝďŝĚͿ͘ ^ŝĐŬ ŽĨ ƚƌƵƐƚ ŝƐ ŽŶĞ ŽĨ ƚŚĞ ŬĞǇ ŝƐƐƵĞƐ ĂŶĚ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ strengths is that we have a close collaborations with both designers and producers; this should be embraced by using Customer Relationship Management (See section 5.4.1.). Virtual Showroom should of course also point out our competitive advantages compared to Quirky. Since it is irrelevant and against the competition legislation, Virtual Showroom would never mention that we are better than Quirky because of this and this. It should be handled delicately. One of the most important initiatives is attracting new business partners. Besides from emphasizing that there is proven interest on particular products, Virtual Showroom should display how profitable it has been for other business to produce different products, e.g. with turnover reports and purchase statistics. Finally if Denmark is a too ƐŵĂůů ĐŽƵŶƚƌǇ ƚŚĞŶ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƐĞƌǀŝĐĞ ŝƐ ďŽƚŚ ĨƌĞĞ ĂŶĚ 'ůŽďĂů͕ ŝƚ would be easy to make this service global. The WO strategies concerns using opportunities to overcome the weaknesses Virtual Showrooms will experience (ibid). Besides using a potential CKO submission, to make the cost revenue less exposed, the opportunity we found in SWOT is not in comparable with the Weaknesses. If we looked deeper into financial opportunities we might find, aspects to look deeper into which WO strategies could be built on.

The WT strategies explore how Virtual Showroom can minimize weaknesses and avoid threats (ibid). With the right marketing mix, the chance of winning more market shares than un-‐identified competition and Quirky would be within reach. Potential producers should always be nursed and given a imperatively value proposition which they can so no to. This is done through Supplier relation management, where supplier conflicts and trust issues also are handled (section 5.4.2.). If Virtual Showroom experience that it is a too big of problem that the revenue streams depend on producers and lack of control within production and sales, a new mission should be though out. Alternative founders should invest their own capital.

5.2 OBJECTIVES Since the first original vision was formulated and the analysis of Virtual Showroom that has been conducted, substantial risks attached to the concept has not been located (see 4.2.2 SWOT). However the original vision was made more precise and adequate. Additionally, in the previous SWOT-‐TOWS 42

analysis, various solutions were found to embrace possibilities and address threats. The vision for Virtual Showroom is therefore still the same. We have based our entire analysis on vision and mission and in the conclusion, we will validate whether it is likely that this vision will lead to a profitable business or not. However, if Virtual Showroom was implemented, the vision should be re-‐considered in the longer run.

5.3 STRATEGY /Ŷ ƚŚŝƐ ƐƵďƐĞĐƚŝŽŶ ŽĨ ^K^d ͕ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ĚŝĨĨĞƌĞŶƚŝĂƚŝŽŶ ƐƚƌĂƚĞŐǇ ŝƐ ĚĞĨŝŶĞĚ͘ This makes it possible to place Virtual Showroom at the right position on the market. In relation to this, it is important to consider strategy to compete against other similar businesses, primarily because Virtual Showroom targets a smaller segment. In the segmentation the target group of Virtual Showroom was identified, which is crucial in order to design a strategy that is based on a target group. Besides this we discussed how Virtual Showroom could serve its customers compared to its competitors, which also will be taken into consideration when planning the strategy.

&ŝŐƵƌĞ ϭϳ͗ WŽƌƚĞƌ͛Ɛ 'ĞŶĞƌŝĐ ^ƚƌĂƚĞŐŝĞƐ. This models shows the four different competitive strategies, where Virtual Showroom is placed among Differentiation Focus. (Andersen, 2007, p. 105)

Porter suggests that a business can be sure to differentiate themselves on the market, if they serve their segments better than the competitors. According to Porter, Virtual Showroom must offer their customers more value than the similar businesses (Andersen, 2005, p. 105) (Chaffey, 2009, p. 281). tĞ ĐŚŽƐĞ WŽƌƚĞƌ͛Ɛ ŐĞŶĞric strategies by Michael Porter (Andersen, 2007, p. 105). This model matches ƚŚĞ ĐƌŝƚĞƌŝĂ ǁŚŝĐŚ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ŝƐ ĐŽŵƉŽƐŝŶŐ ŝƚ͛Ɛ ƐƚƌĂƚĞŐǇ ĂĨƚĞƌ͘ dŚŝƐ ŵŽĚĞů ĐŽŶƚĂŝŶƐ ƚŚĞ ĨŽƵƌ following strategies, each of which describes a specific competition strategy: Cost Leadership Cost Focus Differentiation Differentiation Focus 43

The four strategies are divided between Competitive Advantage and Competitive Scope. Competitive Advantage involves two things: one is to distribute at very low cost, the other that the business is able to offer a unique product. If we distribute at low cost, it can take place through e.g. standard products, effective distribution and economies of scale. However if a company offers a unique product, it occurs through e.g. functions, design, performance, brand and service (Andersen, 2007, p. 106).The purpose of offering a unique product is to build up a strong preference and loyalty towards the product or service offered. This makes the company stand even stronger among competitors. According to Porter, companies that offer unique services or products are often prepared to generate stable and financial surplus. The other part of the strategy is Competitive Scope, this refers to the market. Competitive Scope require that a business plans and bĞůŝĞǀĞƐ ƚŚĂƚ ŝƐ ĂďůĞ ƚŽ ƚĂŬĞ ŽǀĞƌ ƚŚĞ ŵĂũŽƌŝƚǇ ŽĨ ƚŚĞ ŵĂƌŬĞƚ ǁŝƚŚŝŶ ŝƚ͛Ɛ particular service. Further it is necessary to consider what exactly is to be offered (e.g. service or product), what geographical segment the business wishes to address as well as which distribution-‐ channels there may be considered. When we are combining those two factors Competitive Scope and Competitive Advantage you get the matrix of the four above-‐mentioned strategies. (Andersen, 2007, p. 106) Cost Leadership represents that a company will cover a great amount of people within their segment to a regular price, at the same time the competitive strategy is produced from low costs of purchase, production and distribution. (Andersen, 2007, p. 107) Cost Focus involves strategic cost-‐focus which means that is still focus on low costs, but the companies serve a smaller segment compared to Cost Leadership. Differentiation focuses purely on differentiation by offering a unique product which the competitors can measure themselves with, at the same time this strategy addresses a broad segment, which seems as a very secure strategy. (Andersen, 2007, p. 108) ĐĐŽƌĚŝŶŐ ƚŽ WŽƌƚĞƌ͛Ɛ ƐƚƌĂƚĞŐǇ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ůĞĂŶƐ ĂŐĂŝŶƐƚ ƚŚĞ ƐƚƌĂƚĞŐǇ ĐĂůůĞĚ Differentiation Focus, because we offer a unique sĞƌǀŝĐĞ ǁŚĞŶ ŵĞĚŝĂƚŝŶŐ ŽƵƌ ĐƵƐƚŽŵĞƌƐ͛ ŝĚĞĂƐ ƚŽ ƉƌŽĚƵĐĞƌƐ ĂŶĚ ĚŝƐƚƌŝďƵƚŽƌƐ͘ Industrial design is in some way luxurious, especially because the distributed products could be ĐĂƚĞŐŽƌŝǌĞĚ ĂƐ Ă ͞ƵŶŝƋƵĞ͟ ƚǇƉĞ ŽĨ ƉƌŽĚƵĐƚƐ͘ This does not mean that they necessarily will be more expensive than normal, but the buyer would likely be one within the segment of design-‐interested. Furthermore it is extremely important that we make sure, through our value proposition, to serve our customers better than our competitors, so that we will be the preferred among our segment of users. (Andersen, 2007, p. 108) tĞ ĂƌĞ ĂǁĂƌĞ ŽĨ ƚŚĞ ĨĂĐƚ ƚŚĂƚ WŽƌƚĞƌ͛Ɛ 'ĞŶĞƌŝĐ ^ƚƌĂƚĞŐŝĞƐ ŵƵƐƚ ďĞ ƚĂŬĞŶ ǁŝƚŚ ŐƌĂŝŶ ŽĨ ƐĂůƚ ďĞĐĂƵƐĞ ǁĞ think the model over time has become obsoleted to an extent. Since the World Wide Web has grown within its influence and revolutionises ĐŽŵƉĂŶŝĞƐ͛ ĐŽŵƉĞƚŝƚŝŽŶ ƐƚƌĂƚĞŐŝĞƐ͘ tĞ ĐĂŶ͛ƚ ĐŚŽŽƐĞ ŽŶůǇ ƚŽ Ğ͘Ő͘ ďĞ ĐŚĞĂƉ ǁŝƚŚŝŶ ŽƵƌ ƉƌŽĚƵĐƚ ĂŶĚ ĚŝĨĨĞƌĞŶƚŝĂƚĞ ŽƵƌƐĞůǀĞƐ͕ ŝƚ ƚĂŬĞƐ ŵŽƌĞ ƚŚĂŶ ƚŚĂƚ͘ ^ƚŝůů͕ WŽƌƚĞƌ͛Ɛ 'ĞŶĞƌŝĐ Strategies contain a good overview of how four distinctive strategies look like, and we can place ourselves among mostly one of the four. With help from a row of other strategies it makes up stand strong in the market.

5.4 TACTICS The marketing tactics concern how Virtual showroom is going to implement the strategy by using the marketing mix and CRM. The marketing mix is used as an essential part of the implementing marketing strategy by many practitioners, because it is both a very powerful planning tool and a simple framework ƚŽ ŝŶĨůƵĞŶĐĞ ƚŚĞ ĚĞŵĂŶĚ ŽĨ ƚŚĞ ŐŝǀĞŶ ƉƌŽĚƵĐƚ͘ dŚĞ ĨĂŵŽƵƐ ϰW͛Ɛ ŚĂƐ ďĞĞŶ ĞǆƚĞŶĚĞĚ ƚŽ ƚŚĞ ϳW͛Ɛ ďǇ including three further elements that better reflect service delivery as Virtual Showroom does. These are people, processes and physical evidence (Booms and Bitner, 1981 in Chaffey, 2009, p.449).

/ƚ ŝƐ ǁŽƌƚŚ ŵĞŶƚŝŽŶ ƚŚĂƚ ƚŚĞ ŵĂƌŬĞƚŝŶŐ ŵŝǆ͕ ǁŚŝĐŚ ǁĂƐ ĚĞǀĞůŽƉĞĚ ŝŶ ƚŚĞ ϭϵϲϬ͛Ɛ͕ ŝƐ ƐǇŵƉƚŽŵĂƚŝĐ ŽĨ Ă push strategy to marketing and does not recognize the needs of the consumers. For this reason it is important that the marketing mix is back up by detailed knowledge of customer behaviour through market research and afterwards adjusted according to this.

Given lack of resources we have not conducted our own empirical field study, which we recommend is executed before Virtual Showroom gets implemented. However our Marketing Mix is based on the knowledge from value proposition, stakeholder analysis, SWOT-‐analysis, SLEPT-‐analysis, competitor and market analysis, in the marketing mix we have tried to take into consideratŝŽŶ ƚŚĞ ϰ ͛Ɛ ĚĞǀĞůŽƉĞĚ ďǇ Lautenborn (Lautenborn, 1990 in Chaffey, 2009, p. 449).

By conduction a marketing strategy Virtual Showroom would hope to achieve better: ł Customer acquisition: Attracting visitors (Could be done by SEO (Search engine optimization), PPC (pay-‐per-‐click), Partnerships, Online ads, email marketing, online PR, online campaigns, presence on design forums, blogs, SNS (Social network sites) etc.) ł Customer conversation: Engaging visitors to achieve the wanted outcome (by satisfactory customer experience, content creation, content management, merchandising, usability, accessibility, design and customer service etc.) ł Customer retention and growth: Encouraging repeat usage and sales (by outbound communications, email marketing, customer management, loyalty programs, personalisation etc.) (Chaffey, 2009, p. 482-‐483)

5.4.1 CUSTOMER RELATIONSHIP MANAGEMENT Relation Management is a close dialogue between the ĐŽŵƉĂŶŝĞƐ͛ ƐƵƉƉůŝĞƌƐ ĂŶĚ ƚŚĞ ĐŽŵƉĂŶǇ͛Ɛ customers. Both are very important relations which needs to be managed, maintained and optimized (Andersen, 2007, p. 23, p. 210). When talking about Customer Relationship Management it is important to know the customers behaviour and be able to predict how to cover their needs and wishes, to achieve good and satisfied customer relationships. This means that we need to establish a persistent process of interaction with our customers. Often this is seen as electronic systems that manage to do this, but also interpersonal communication could optimize the Customer Relationship Management. (Chaffey, 2009, p. 482)

The Marketing strategy we have worked on is targeted at the primary customers, being the designers selling their ideas to the production companies through the web service. Another marketing strategy would need to be developed to target new production companies, and this strategy would on several aspects be rather different.

The relationship between Virtual Showroom and the designers (called costumers in the following) is not 45

specifically personal, since it is mediated through a website, but Virtual Showroom still deals directly with their customers, and not through any other company. Also we offer costumer support by phone making the contact more personal. Virtual Showroom will participate in building up the online community that supports direct communication between designers, peers, experts etc.

Further we could serve our customers with optimizing the personal service called Mass customization (Chaffey, 2009, p. 486). This could either be done through emails with service messages about Virtual ^ŚŽǁƌŽŽŵ͛Ɛ ƐƚĂƚƵƐĞƐ͕ ŶĞǁƐ͕ and review ĨƌŽŵ ďĞƐƚ ƌĂƚĞĚ ŝĚĞĂƐ Žƌ ƚŚĞ ůĂƐƚ ŵŽŶƚŚ͛Ɛ ŝŶĚƵƐƚƌŝĂů ĚĞƐŝŐŶ production. Additionally, it would be appropriate to divide our customers into more detailed segments, so we are able to provide the best service possible through customizing. E.g. we could bring specific ŽĨĨĞƌƐ ŽŶ ƚŚĞ ĨƌŽŶƚ ƉĂŐĞ͕ ĨƌŽŵ ǁŚŝĐŚ ŝƐ ŐĞŶĞƌĂƚĞĚ ŝŶĚŝǀŝĚƵĂů ďǇ ĞĂĐŚ ĐƵƐƚŽŵĞƌ͛Ɛ ůĂƐƚ ǀŝƐŝƚƐ ŽŶ ƚŚĞ ǁĞďƐŝƚĞ about what is the preferred content, or we could provide responsibility to maintain the community and give each customer more voice within the communication between peers and customers. Being able to fulfil the demands of customer retentions, a suggestion could be to offer luxury frames for the users to upload their design (Chaffey, 2009, p. 486). This could e.g. be design tools, or Virtual Showroom could provide customers the possibility to create a portfolio for their ideas uploaded, if you are not a designer but only a visitor you could be able to save you favourites.

5.4.2 SUPPLY CHAIN MANAGEMENT ^ƵƉƉůǇ ŚĂŝŶ DĂŶĂŐĞŵĞŶƚ ;^ DͿ ŝŶǀŽůǀĞƐ ƐƚƌĂƚĞŐŝĐ ĐŽůůĂďŽƌĂƚŝŽŶ ǁŝƚŚ Ă ĐŽŵƉĂŶǇ͛Ɛ ƐƵƉƉůŝĞƌƐ͘ dŚŝƐ ŝƐ important to create the optimum customer relations in the longer run. As the supply chain can be divided into both up stream-‐ (e.g. subcontractors or e-‐procurement) and downstream, (e.g. distributors) after when in the process and activity the individual supplier is involved. By Supply Chain Management it is understood; a coordinating and managing process, which incorporates all the activities of the different suppliers, so there will be a fluent and continuing process. This will show in the longer run as lower costs, competitive advantages, and with better service and products which leads to satisfied customers. (Andersen, 2007, p. 48-‐49) (Chaffey, 2009, p. 309)

For us it is relevant to focus on our relationship with our server hosting company, our production company, and possibly software and hardware providers. Hosting company and software/hardware providers is important to keep satisfied and involved; this could result with great agreements and special benefits. It is of course also important to collaborate very closely with our production companies, this is some the two most important suppliers of ours. Our producers should feel well-‐informed, involved and coordinated within Virtual Showroom. Again our customers/designers are the other most important suppliers, and it can be discussed whether their relationship should be discussed as actual customers (CRM) or if they actually belong as a part of our up-‐stream suppliers in the supply chain (SCM). As written in the beginning of this section, we chose to look upon them in the above section about Customer Relationship Management. (Chaffey, 2009, p. 335) This section of the report is a small part of the larger (SOSTAC) strategy, which is approached as part of our Supply Chain Management process.

5.4.3 THE MARKETING MIX The marketing mix (Chaffey, 2009, p. 448) is used in order to try and implement strategies and objectives of marketing. One difficulty is that the marketing mix is symptomatic of a push approach to marketing and does not recognize the needs of the customers. The marketing mix tends to lead a product rather than a customer orientation. Therefore the mix should be backed up by detailed knowledge of buyer behaviour collected through 46

market research and it should be adjusted according to different target markets or segments to better meet the needs of the costumers. Since we have conducted thorough market research we will focus on the chosen costumer segment being: Danish designers with different levels of design skills, interested in getting their industrial design manufactured. To back up ƚŚĞ ŵĂƌŬĞƚŝŶŐ ŵŝǆ͕ ĂŶĚ ƚŽ ƐƚƌĞƐƐ ƚŚĞ ŝŵƉŽƌƚĂŶĐĞ ŽĨ ƚŚĞ ĐŽƐƚƵŵĞƌ ƚŚĞ ͞ϰ ĨƌĂŵĞǁŽƌŬ͟ ; ŚĂĨĨĞǇ͕ ϮϬϬϵ͕ Ɖ͘ ϰϰϵͿ ŚĂƐ ďĞĞŶ ĂĚĚƌĞƐƐĞĚ ŝŶĚŝƌĞĐƚůǇ ŝŶ ƚŚĞ ŵĂƌŬĞƚŝŶŐ ŵŝǆ͕ ĂĚĚƌĞƐƐŝŶŐ ƚŚĞ following: Costumer needs and wants (for the product), cost to the customer (price, and price on rival service providers), convenience (relative to price, user experience), communication (promotion, marketing tools) Furthermore since the Internet is not regarded as being push media, but more as a pull media, when applying the marketing mix, this needs to be taken into consideration.

The marketing mix consŝƐƚƐ ŽĨ ϳ W͛Ɛ (Chaffey, 2009, p. 448) being: Product, Promotion, Price, Place, People, Process and Physical evidence. We have chosen this framework to try and enhance customer acquisition, conversation, retention and growth, though we do not discuss the Process factor, finding it to be to action orientated, and more relevant for the next step in a process of actually implementing a business.

Also for a proper marketing analysis it would have been necessary to base it upon a proper demand analysis, competitor analysis, market analysis and costumer knowledge. With the background we have acquired through the SWOT analysis and the competitor analysis we have tried to apply the marketing mix the best way possible acknowledging our lack of thorough background data.

Finally the marketing mix targets the chosen costumer segment, and we have not worked towards a marketing plan for the targeting production companies. A separate marketing strategy for reaching this segment would be required.

PRODUCT The product, Virtual Showroom offers, is a service for designers, helping them to sell their ideas. The product is backed up by more complex digital products such as the community, the rating of ideas, the information available etc. These products are free of cost. All of these add to a perceived extra value to the costumers, given they have some interest in the subject. dŚĞ ŵĂŝŶ ƉƌŽĚƵĐƚ͕ ŐĞƚƚŝŶŐ ŽŶĞ͛Ɛ ŝĚĞĂƐ ƉƵƚ ŝŶƚŽ ƉƌŽĚƵĐƚŝŽŶ ĚŽĞƐŶ͛ƚ ĐŽƐƚ ĂŶǇ ŵŽŶĞǇ͕ ƵŶůĞƐƐ ƚŚĞ ŝĚĞĂ ǁŝŶƐ and are sold to a production company. Obviously there is the cost of time and effort to get the idea online and submit it (Chaffey, 2009, p. 452). The cost of time needs to be put to a minimum through user friendly design.

In relation to the designer's presentation of their design, the SLEPT-‐analysis enlighten that there are various legal issues, which should be addressed. In the approval phase, virtual showroom should be aware of legal protection of digital assets, such as copyright to video, music and images.

Initial breakthrough In the beginning, the marketing strategy would mainly focus on customer acquisition. This could be done in many ways -‐ being on a niche market Virtual Showroom could benefit from SEO , PPC , and ads, but definitely also much from trying to reach our potential customers in the online spheres they already use, this could be design blogs, social network sites etc. This way Virtual Showroom could reach the part of the target group that is already accustomed with using design communities. 47

For the product to spread, it would be ŝĚĞĂů ĨŽƌ ƚŚĞ ŝĚĞĂ ƚŽ ƌĞĂĐŚ ͞ƚŚĞ ƚŝƉƉŝŶŐ ƉŽŝŶƚ͟ (Chaffey, 2009, p. 452), generating a rapid spread of ideas via word-‐of-‐mouth communication of the users. What Virtual ^ŚŽǁƌŽŽŵ ĐŽƵůĚ ƚƌǇ ƚŽ ĞǆƉůŽŝƚ ŝƐ ƚŚĞ ƉƌŝŶĐŝƉůĞ ŽĨ ͞dŚĞ ůĂǁ ŽĨ ƚŚĞ ĨĞǁ͟ ; ŚĂĨĨĞǇ͕ ϮϬϬϵ͕ Ɖ͘ 453). Here the spreading of the idea depends of initial adoption by connectors, who can be characterized as being socially connected people who encourage adoption. In the online sphere this could e.g. be design bloggers. If Virtual Showroom could succeed in getting connectors to spread the word, that would need to be combined with the costumer feeling attachment to the product. Virtual Showroom has to take ŝŶƚŽ ĐŽŶƐŝĚĞƌĂƚŝŽŶ ͞ƚŚĞ ƐƚŝĐŬŝŶĞƐƐ ĨĂĐƚŽƌ͟ ; ŚĂĨĨĞǇ͕ ϮϬϬϵ͕ Ɖ͘ ϰϱϮͿ trying to assure that users will find attachment to the characteristics or attributes of the product. For obtaining this, Virtual Showroom needs to try and deliver uniqueness and aesthetics, both in site design but also in the overall user experience. Virtual Showroom needs to deliver association and engagement, which fosters emotional involvement. This could be done by giving the users a voice. Also needed would be to add personification e.g. by expressing character and personality, to be expressive value, for example by a very visible online value proposition, and perceived value for money, or value for time.

sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ĂůƐŽ ŶĞĞĚƐ ƚŽ ĐŽŶƐŝĚĞƌ ƚŚĞ ͞ƉŽǁĞƌ ŽĨ ĐŽŶƚĞǆƚ͟ ; ŚĂĨĨĞǇ͕ ϮϬϬϵ͕ Ɖ͘ ϰϱϮͿ that dictates that products and behaviours spread wide only when they fit the physical, social and mental context into which they are launched. Therefore it is a must always keeping the target group in mind, and trying to understand their needs and context. Also ongoing target group investigation and analysis needs to be conducted to always try and improve the product. By delivering these things Virtual Showroom would also be trying to foster costumer conversation and to some extend customer retention and growth.

tŝƚŚ ƚŚĞ ƌŝŐŚƚ ƉŽƐŝƚŝŽŶŝŶŐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ĐŽƵůĚ ŝŶĨůƵĞŶĐĞ ƚŚĞ ĐƵƐƚŽŵĞƌ͛Ɛ ƉĞƌĐĞƉƚŝŽŶ of a product within the market. But Virtual Showroom would need more background knowledge of the target group and potential customers to be able to position the company probably and thereby try to become the costumers first choice. Therefore Virtual Showroom needs a differential advantage, and to try offer a desirable attribute of the product that is not currently matched by competitors. Virtual Showrooms online value proposition needs a clear differentiation from competitors, which corresponds with Porters generic strategy (Andersen, 2007, on Michael Porter, p. 105).

PRICE In the case of Virtual Showroom the price on different ideas will depend of the nature of the idea. As mentioned in the SLEPT-‐analysis price will be influenced by increased material prizes, fees, taxes and to some degree the competition. The commission to the company should be set to a fixed percentage rate of the full sum the designer receives, in order to make the price transparent for the costumers.

Pricing online has to take the cŽŶĐĞƉƚ ŽĨ ͞ƉƌŝĐĞ ĞůĂƐƚŝĐŝƚǇ ŽĨ ĚĞŵĂŶĚ͟ ŝŶƚŽ ĂĐĐŽƵŶƚ ; ŚĂĨĨĞǇ͕ ϮϬϬϵ͕ Ɖ͘ 457). This concerns the change in demand for a product or service in response to changes in price. Price elasticity of demand is determined by the price of the product, availability of alternative goods from alternative suppliers, and consumer income. Virtual Showrooms price on selling the idea to the production companies is an inelastic price. This means that a large change in price, in our case the commission, would probably only be accompanied by a small amount of change in demand. This is due to the fact that Virtual Showroom delivers a service which is not that easy to compare to other services online. Due to the fact similar services are all a little different, to some degree targeting different market shares. Still they do influence the market and the price. 48

Also we believe there is value for the designers in finding their product in the stores, building a portfolio, getting noticed, building a community etc. Something not all competitors offer. Virtual Showroom should not be marketed as being especially cheap on commission, but as trying to deliver more value than their competitors.

PLACE The initial idea for Virtual Showroom was for it to be present only online, but we have realized that Virtual Showroom may benefit from some offline presence and marketing as well, to make the brand more visible and to build trust by making it seem more legit, giving the impression that it is a established company not only found in the online sphere. With that being said, most of the marketing budget would definitely be done online, but by trying to analyse the impact the two different ways of marketing, the outcome can be measured and the budget set accordingly. Later on analysing the different marketing options within the different media could be done.

It is necessary to keep in mind what the Internet as a medium requires and offers so it can be used to the fullest. In the case of Virtual Showroom it would make sense to stress and exploit especially: ; ŚĂĨĨĞǇ ŽŶ DĐ ŽŶĂůĚ ĂŶĚ tŝůƐŽŶƐ͗ ͞dŚĞ Ɛŝǆ /͛Ɛ ;ϭϵϵϵͿ Ɖ͘ ϰϰϯͿ ł Interactivity: Where the traditional media can be characterized as push-‐media, working mainly one-‐way company to costumer, the Internet is dominantly a pull-‐media, and most costumers have made an active choice, going to a website. Also the media itself is of a interactive nature. This may as well be exploited, since it can give the user a voice and enhance engagement and emotion. ł Intelligence: The Internet offers a cheap possibility of collecting market research. Ideally Virtual Showroom could have conducted initial research as well as on-‐going market and costumer research after launch. ł Individualization: Enables Virtual Showroom to personalise the marketing to the specific target segments and even to the specific individual in some instances.

Virtual Showrooms presence Virtual Showrooms Internet channel strategy will, of course, depend on the excising arrangements for the market. Virtual Showrooms is an intermediary and uses the Internet as a communication channel and as a distribution channel. Almost all of the company's presence is online. This makes it as an e-‐ organization because it uses technologies as the core of the business and for managing the entire business process. (Chaffey, 2009, on Azumah et. al (2005) p. 462) An exception is that Virtual Showroom will offer costumer service by telephone as well. This may enhance the ƵƐĞƌ͛Ɛ perception of the company being legit, and their wish to trust us with their ideas. As mentioned in the SLEPT-‐analysis Virtual Showroom should take social factors into consideration such as trust in online markets. Though is not a big problem in Denmark, compared to other nations, the company needs to keep in mind that costumers are sharing sensitive material with unknown subjects; the company, the other users, and ultimately anyone who enters the site. Even though the Internet offers worldwide reach, Virtual Showroom will only target a Danish market.

Besides the online presence at Virtual Showrooms own website, the company should of course work towards being visible at many online design forums, SNS, blogs and spheres, not only by advertisement, but by adding content and being active and visible. 49

PROMOTION The promotion is a part of the communication strategy. Virtual Showroom could use tools as advertising, public relations, direct mail, exhibitions and try and enhance word-‐of-‐mouth (Chaffey, 2009, p. 462). Like mentioned previously Virtual Showroom needs to consider how to budget online vs. offline advertisement. For this Virtual Showroom would need a better understanding of the main target group, in order to know where it would be most profitable to invest in advertisement. Virtual Showroom would need to understand where the potential costumers can be found, and to what extent, the target group can be reached by traditional media as well. Online, to try ĂŶĚ ĞǆƉůŽŝƚ ƚŚĞ ĞŶƚŝƌĞ ͞ƌĞĂĐŚ͟ of the website, (Chaffey, 2009, p. 463) while being on a niche market, a good investment would be search engine marketing, since the costumers actively search for the product online. This is because niche products or services often are hard to find offline. In relation to online advertisement, it was found in the SLEPT-‐analysis, that there are various marketing laws, which also has to be respected.

PEOPLE The people variable involves the delivery of service to customers during interactions. Virtual Showroom would offer both online and offline support. Their employees would need to be skilled in maintaining the site, and in some design areas to be able to offer guidance and value to the community if needed. This would reflect on the company profile and brand.

PHYSICAL EVIDENCE What is particularly important for service delivery is physical evidence. The physical evidence variable involves the tangible expression of a product. When dealing with a service online this needs to be stressed even more, since the nature of a service and of the online sphere is not tangible.

Physical evidence should be applied to the site by clever site design and could also be expressed by staff contact, experience of brand and offline presence through marketing and advertisement. It will add to the physical evidence that Virtual Showroom can be reached by phone offering direct costumer service, and that the previously winning ideas and products will be featured on the site making the service more tangible. Also the individual designer profile and visible presence on the website will adds to the physical evidence.

Online branding To build a proper online brand, Virtual Showroom need to take into consideration that online brands are the sum of characteristics of a service perceived by the user, therefore the brand is completely dependent on costumer perception. (Chaffey, 2009, on Leslie de Chernatony and Malcom McDonald (1992), p. 465) Online customers can add value to a brand by forums, ratings, and adding content.

The online brand is more an experience, and it should be able to accommodate: (Chaffey, 2009, on Dayal et. al. (2000), p. 465)

The promise of convenience: Be better than the rivals or the offline experience. Virtual Showroom offers a very quick connection to other designers and production companies that certainly make it faster and easier for some, than building such a community in the offline world. Specifically targeting the Danish market may add value that the competitors do not offer. The promise of achievement: Assisting consumers in achieving their goals. Even if the design idea does not win, designers can find advise, peers etc. achieving other goals. 50

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The promise of fun and adventure: Needs to be built through clever site design, and supported by the overall user experience, the content and the community. The promise of self-‐expression and recognition by personalising services: This could be supported by the individual profiles and especially by the means of expression. The promise of belonging: Again, this could be supported by the individualized and personal profiles as well as the means of expression.

By trying to address these needs Virtual Showroom would hope to build a strong brand, that in return would build trust, attachment, be recognizable and enhance site traffic and retention of the users.

5.5 ACTION This section is meant to provide an action plan of how the marketing mix should be put into practice, concerning all factors as time, finances et cetera͘ ^ŝŶĐĞ ǁĞ ĂƌĞ ŶŽƚ ĨĂŵŝůŝĂƌ ǁŝƚŚ Ăůů ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵƐ͛ resources as employees, skills, competences, economic situation and partnerships, we find it difficult to plan all the concrete actions for the future. This would feature many details that we do not find necessary in this project. An action plan would typically specify concrete tasks that need to be performed, e.g. planning a detailed budget, planning how and when to contact potential partners, and a detailed timescale e.g. a Gantt-‐ card. This would be the next step if Virtual Showroom was to be realised.

5.6 CONTROL Again this section will be more relevant in the future, when or if the concept is implemented. But we will shortly mention some of the initiatives that could benefit the control of Virtual Showroom, and could measure if the business actually reaches its objectives. Virtual Showroom should prioritise to involve the users to evaluate the site, both its functionality and use. They should conduct usability tests, to make sure that all user groups are able to navigate on the site without problems. And lastly we suggest that they make some analyses of statistics from the website, as number of visitors, number of active visitors, and number of profiles and uploads.

6. DISCUSSION Describing and analyzing Virtual Showroom as a concept have resulted in complications that need to be looked into. This chapter will identify these complications and conflicts that have emerged, and should be resolved or considered if moving on with the concept: Main focus on only one stakeholder Throughout the process we have kept our focus mainly on the designers, for example this is evident in the Marketing mix, and this is obviously a significant issue if implementing the concept. Before the implementation could begin, we would also have to understand the segment of the production ĐŽŵƉĂŶŝĞƐ ;sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƉĂƌƚŶĞƌƐͿ ĂŶĚ ŚŽǁ ƚŽ ƚĂƌŐĞƚ ƚŚĞŵ͘ dŚĞǇ ĂůƐŽ ƉůĂǇ Ă ǀĞƌǇ ďŝŐ ƌŽůĞ ŝŶ ƚŚĞ concept. Based on that, a new marketing strategy would have to be planned, targeting the partners. The consequence of no control of sales or production Having chosen to put the production and sales responsibility to external partners we lose some important control. First off, Virtual Showroom may not insure that sold ideas go into production, since ƚŚĞ ƌŝŐŚƚƐ ǁŽƵůĚ ŶŽƚ ďĞ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ͘ Also the economic consequence is significant, this will be discussed later. Channel conflict ʹ the trouble with having production also handling sales Virtual Showroom may encounter the fact that production companies do not also handle sales. Since we have not talked to an actually production company, we have perhaps had a too idealistic idea about their role. Is there actually a Danish firm that has the resources to do both production and sales? And if not, would a production company use the time on setting up a relationship to a sales firm? We have not focused on this whole aspect of the concept, but it is essential that this external part works, for the concept to have success. A start for further research would be to explore how production firm works, perhaps in form of consultation. Supporting the creative industry -‐ nurturing designers vs. allowing everybody to be a designer ŶŽƚŚĞƌ ĐŽŶĨůŝĐƚ ůŝĞƐ ǁŝƚŚŝŶ ƚŚĞ ĨĂĐƚ ƚŚĂƚ s^͛ ƉƵƌƉŽƐĞ ŝƐ ƚŽ ƐƵƉƉŽƌƚ ƚŚĞ ĐƌĞĂƚŝǀĞ ŝŶĚƵƐƚƌǇ ǁŚŝůĞ ŐŝǀŝŶŐ everybody the opportunity to design, and compete with educated designers. Could it be a seen as undermining educated designer allowing everybody to call themselves a designer, or does it only create growth and competition amongst a larger group of creative people? This is definitely worth taking into consideration if developing the concept further. How to handle legal rights including copyrights? Ŷ ŝŵƉŽƌƚĂŶƚ ĐŽŶƐŝĚĞƌĂƚŝŽŶ ŝƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ůĞŐĂů ĂƐƉĞĐƚ͘ ,Žǁ ĚŽĞƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ƐĞůů ƚŚĞ ĚĞƐŝŐŶĞƌƐ͛ ƌŝŐŚƚƐ ƚŽ Ă ĚĞƐŝŐŶ͍ ,Žǁ ǁŝůů ĐŽƉǇƌŝŐŚƚ ďĞ ŽďƚĂŝŶĞĚ͍ ŶĚ ǁŚŽ ŽǁŶƐ ƚŚĞ ƌŝŐŚƚƐ ƚŽ ĂŶ ŝĚĞĂ ǁŚĞŶ uploading to the site? How to avoid fraud? Implementation and maintaining the concept will need legal consultation, and there also has to be determined if it is necessitate employing a full-‐time attorney to maintain this side of the concept.

tŚĂƚ ŝƐ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ƌŽůĞ ŝŶ ƚŚĞ ͞ƉƌŽĐĞƐƐ ŽĨ ƵƉůŽĂĚŝŶŐ͟ We know that Virtual Showroom has a role in what happens between a designer uploads an idea and the idea being presented on the site. But what exactly happens needs to be outlined. Will the designer already know how much they are able to earn if their design gets sold, or do Virtual Showroom decide this in this phase? Would there need to be an approval phase and what would the guidelines for this be? It would be wise involving the user (a designer) at an early stage in this development, which could ďĞŶŝĨŝƚ ƚŚĞ ĐŽŶĐĞƉƚ͛Ɛ ƵƐĂďŝůŝƚǇ͘ Can VS create a revenue? A aspect to consider is how Virtual Showroom will increase the revenue so it will be greater than the ĐŽƐƚƐ͘ KŶůǇ ĨŽĐƵƐŝŶŐ ŽŶ ŵŽŶĞǇ ĨƌŽŵ ƚŚĞ ĚĞƐŝŐŶĞƌ͛Ɛ ŝĚĞĂƐ ŝƐ ŵŽƐƚ ůŝŬĞůǇ ŶŽƚ ĞŶŽƵŐŚ ƚŽ ŵĂŬĞ ƚhe concept a realistic business -‐ there needs to be found a secondary source of income. We also have not considered salaries. How many people are exactly needed to run this business, and how expensive will this be? Discussing the revenue will continue in the following conclusion of the whole project.

7. CONCLUSION dŚĞ ƐƚĂƌƚŝŶŐ ƉŽŝŶƚ ŽĨ ƚŚŝƐ ƉĂƉĞƌ͛Ɛ ƌĞƐĞĂƌĐŚ ĂŶĚ ĂŶĂůǇƐŝƐ ŚĂƐ ďĞĞŶ ďĂƐĞĚ ĂƌŽƵŶĚ ƚŚĞ ǀŝƐŝŽŶ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͗ ͞Being the intermediary that enables designers to showcase their ideas, and potentially ŚĂǀŝŶŐ ƚŚĞŵ ƉƌŽĚƵĐĞĚ͟. The vision has not changed throughout the whole process, since it was the business foundation. We defined how this vision should be fulfilled with our mission. The goal of this paper was therefore to validate the mission (See section 2.1) which we have done through different methods throughout this ƉĂƉĞƌ͕ ǁŚŝĐŚ ƉƵƌƉŽƐĞ ǁĂƐ ƚŽ ŵĂŬĞ ƵƐ ĂďůĞ ƚŽ ŐŝǀĞ ƋƵĂůŝĨŝĞĚ ĂŶƐǁĞƌ ƚŽ ŽƵƌ ƌĞƐĞĂƌĐŚ ƋƵĞƐƚŝŽŶ͗ ͞Can sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ƉƌŽǀĞ ƚŽ ďĞ Ă ƐƵƐƚĂŝŶĂďůĞ ĐŽŶĐĞƉƚ ŽŶ ƚŚĞ ĂŶŝƐŚ ŵĂƌŬĞƚ͍͟ The market that Virtual Showroom is trying to access contains various profit-‐possibilities which was enlightened in the environment and situation analysis (See section 4.1.2. & section 5.1.). In spite of this, ǁĞ ĚŝĚ ŚŽǁĞǀĞƌ ĨŝŶĚ Ă ƉƌŽďůĞŵ ǁŝƚŚ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ability to create an income big enough to cover the known costs connected to the concept. As we just stated, one of the core critical aspects in Virtual Showroom is the revenue and cost structure. The success of Virtual Showroom is very depended on produĐƚŝŽŶ ĐŽŵƉĂŶŝĞƐ͛ ǁŝůůŝŶŐŶĞƐƐ ĂŶĚ ƚŚĞ interest from the customer segment. Recession and a non-‐solid value proposition for the production companies are the main arguments why it will be difficult to attract production companies to buy design ideas. Given the previously market research and existing players at the market, we do however believe that there is a potential customer market for Virtual Showroom. It is the construction of the business model that in the end will have fatal consequences for Virtual Showroom. ĐĐŽƌĚŝŶŐ ƚŽ WŽƌƚĞƌ͛Ɛ 'ĞŶĞƌŝĐ ^ƚƌĂƚĞŐŝĞƐ͕ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ĐŽƵůĚ ŐĂŝŶ ĐŽŵƉĂƌĂƚŝǀĞ ďĞŶĞĨŝƚ ĨƌŽŵ ƵƐŝŶŐ Ă differentiation focus strategy in order to differentiate from its competitor. In order to gain comparative benefit, Virtual Showroom should seek tŽ ŝŵƉůĞŵĞŶƚ ƚŚĞ ĚĞƐĐƌŝďĞĚ ŝŶŝƚŝĂƚŝǀĞƐ ŝŶ ƚŚĞ ϳW͛Ɛ ;^ĞĞ ϱ͘ϰ͘ϮͿ͘ Since Virtual Showroom is very reliable on designers and production companies CRM and SRM should be incorporated in the marketing mix. Unfortunately, an excellent marketing mix that exploits opportunities will not make up for the critical threats in the environment and weaknesses in the business model. The problem with the business model is that we conducted all our work on the thesis that Virtual Showroom would be able to attract production companies. It is only in the stakeholder analysis that a ŚĂŶĚůŝŶŐ ŽĨ sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ͛Ɛ ďƵƐŝŶĞƐƐ ƉĂƌƚŶĞƌƐ ǁĂƐ ĂĚĚƌĞƐƐĞĚ͘ ,ĞƌĞ ŝƚ ǁĂƐ ƉŽŝŶƚĞĚ ŽƵƚ ƚŚĂƚ ŝŶ ŽƌĚĞƌ to ensure success of the business it is necessary to satisfy and successfully recruit each group of stakeholders, and preferably all at once. In retrospect we see that we focused more on analysing the customer segments than the business partners, which Virtual Showroom is vitally depended on. In order to make the cost structure less vulnerable, a better value proposition should be proposed for production companies. This would need to rest on a thorough understanding of these companies, so more research would need to be conducted. Also a specific marketing strategy to reach these should be performed. BaƐĞĚ ŽŶ Ăůů ŽƵƌ ƌĞƐĞĂƌĐŚ ǁĞ ĚŝĚ ƐƵƌƌŽƵŶĚŝŶŐ ƚŚĞ ĐŽŶĐĞƉƚ͕ ǁĞ ƌĞƚƵƌŶ ƚŽ ƚŚĞ ƌĞƐĞĂƌĐŚ ƋƵĞƐƚŝŽŶ͗ ͞Can sŝƌƚƵĂů ^ŚŽǁƌŽŽŵ ƉƌŽǀĞ ƚŽ ďĞ Ă ƐƵƐƚĂŝŶĂďůĞ ĐŽŶĐĞƉƚ ŽŶ ƚŚĞ ĂŶŝƐŚ ŵĂƌŬĞƚ͍͟ It is our overall opinion that ƚŚĞ ĐŽŶĐĞƉƚ͛Ɛ ĐƵƌƌĞŶƚ ďƵƐŝŶĞƐƐ ŵŽĚĞů ĚŽĞƐ ŶŽƚ ŽĨĨĞƌ Ă strong enough foundation for being able to function as a sustainable e-‐business. Although we find that Virtual Showroom would be able to generate value, it comes down to the concepts inability to generate a sustainable revenue. Based on our research, it would be hard for Virtual Showroom to find enough revenue sources to cover the mayor costs that the concepts would cost to 54

implement. The main argument for not implementing Virtual Showroom would therefore be its weak cost and revenue structure. However, we do believe that Virtual Showroom has a profit potential, and a market share, as long as it would be possible to convince production companies of the value proposition offered by Virtual Showroom. If the concepts would be revised, so that the business would not be depending on recruiting production companies, the concept could end up becoming an interesting e-‐business. Independence obviously would raise new challenges and obstacles to be dealt with, but if overcoming these, there is still the huge challenge of building a strong community of designers, attracting many visitors to the website and the assuring retention of these. Altogether the concept needs to be revised, which will mean overcoming new obstacles in order to make this concept sustainable and ready to be implemented on the market, we find the concept having value and possibilities.

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9. APPENDIX Assignment overview ʹ who wrote what

appendix 1