Aaltoliike Business Plan // 2010

Business Plan

Aaltoliike Project and Aliike Concept Store December 8th, 2010

Student Proposal

Credits:

TABLE OF CONTENTS

Contributing writers: Tuomas Sahramaa Jaakko Lovio Stefan Nieminen Eveliina Kujansuu Kalevi Kurronen Tuukka Kingelin Tuukka Laurila

EXECUTIVE SUMMARY OBJECTIVES

Design and layout: Tuomas Sahramaa Photography: Juha Juvonen Supervised by: Markku Virtanen Laura Isoniemi Jukka Partanen

1. PRODUCT AND SERVICE PLAN: DESCRIPTION OF PACKAGE OFFERED ................ 07 1.1 DESCRIPTION OF PACKAGE OFFERED ................................................................................................ 07

1.1.1 Aliike Project (Annual)

1.1.2 Student Design Community (Currently Enrolled)

1.1.3 Aalto University Brand Products

1.1.4 Art Books and Other Literature (TaiK/Aalto School of Art + Design)

1.1.5 Design Partners (Created Through External Collaborations)

1.1.6 Other Partners (Created Through External Collaborations) 1.2 OTHER OPERATIONAL ENTITIES ........................................................................................................... 13

1.2.1 Entertainment Venue Rentals

1.2.2 Gallery 2. ENVIRONMENTAL ANALYSIS OF OFFERING ............................................................................. 14 2.1 OVERALL ENVIRONMENT .......................................................................................................................... 14 2.2 STRUCTURE OF TARGET INDUSTRY .................................................................................................... 14

2.2.1 Aliike in Specialized Retail Sector 2.3 COMPETITION ................................................................................................................................................... 15

2.3.1 Competitor Observations

2.3.2 Competitive Advantage 3. MARKET ANALYSIS ....................................................................................................................................... 17 3.1 TARGET AUDIENCES OVERVIEW ............................................................................................................ 17

3.1.1 Aalto University Students & Exchange Students (Newly Enrolled)

3.1.2 Aalto University Staff and University Visitors

3.1.3 Aalto University Alumni (including those of HSE, TaiK and TKK)

3.1.4 Helsinki City

3.1.5 Parents or Relatives of Aalto University Students

3.1.6 Design Enthusiasts

3.1.7 Design Partners and Collaborators

3.1.8 Tourists

3.1.9 Design Recruiters business plan | aaltoliike project | december 8th, 2010 | page 2

TABLE OF CONTENTS (CONT.) 3.2 CUSTOMER/STAKEHOLDER VALUE PROPOSITIONS ................................................................. 22 3.3 MARKET SIZE AND GROWTH RATE ...................................................................................................... 23 4. STRATEGY ........................................................................................................................................................... 24 4.1 PRODUCT/MARKET STRATEGY ............................................................................................................... 24 4.2 PRICING STRATEGY ....................................................................................................................................... 25 4.3 PROMOTIONS STRATEGY ........................................................................................................................... 25 4.4 MARKET SHARE + DIFFUSION ................................................................................................................. 26 5. OPERATIONS PLAN ....................................................................................................................................... 27 5.1 PROCUREMENT PLAN AND DESIGN CRITERIA .............................................................................. 27

5.1.1 Product Descriptions and Criteria

5.1.2 Consignment-Based Operations

5.1.3 Product Selection Processes 5.2 MILESTONES ..................................................................................................................................................... 29 6. ORGANIZATION PLAN ................................................................................................................................ 30 6.1 ALTERNATIVE FORMS OF ORGANIZATION ...................................................................................... 30 6.2 MANAGEMENT AND PERSONNEL ......................................................................................................... 30

6.2.1 Store Personnel

6.2.2 Aaltoliike Project Personnel 6.3 REWARDS AND INCENTIVES .................................................................................................................... 32 7. FINANCIAL PLAN ............................................................................................................................................ 33 7.1 BUSINESS ORGANIZATION OVERVIEW ............................................................................................... 33 7.2 BUDGET ANALYSIS .......................................................................................................................................... 33

7.2.1 Cash Budget 7.3 CORPORATION ANALYSIS AND BALANCE .......................................................................................... 34

7.3.1 Store Personnel and Salaries

7.3.2 Depreciation and Trade Receivables

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TABLE OF CONTENTS (CONT.) 8. RISK ANALYSIS ................................................................................................................................................ 37 8.1 SWOT ANALYSIS OF ALIIKE ....................................................................................................................... 37

8.1.1 Strengths

8.1.2 Weaknesses

8.1.3 Opportunities

8.1.4 Threats 8.2 OVERALL EVALUATION OF RISK ............................................................................................................ 39 9. CONCLUSION .................................................................................................................................................... 40 10. REFERENCES ................................................................................................................................................. 41 11. APPENDIX ......................................................................................................................................................... 42

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EXECUTIVE SUMMARY Aliike is more than a premium design store. Opening in 2011 in downtown Helsinki, Finland, Aliike will be built in the same spirit of learning, diversity and integration as Aalto University. “Aliike” is the temporary name for the retail store and the “Aaltoliike project” refers to the team of Aalto University students who developed the store concept in 2010. While the Aliike concept is strictly in a proposal stage, the design team was still subject to certain creative restrictions with respect to the store’s organization and branding in order to stay aligned with precedents set by Aalto University.

Not only will Aliike be a place of business, but also one of inspiration. Once built, Aliike will be a place that aspires for freshness, demonstrates intelligence, is sensible and approachable, and manifests the Aalto University spirit. It will operate as a connecting element between all of Aalto University’s unique entities. Primarily, the Aalto student community will design products. Alumni, Aaltobranded products and other major design partners’ products will also be seen within Aliike.

Aalto University, the majority owning partner in the venture, will need to invest €300 000 altogether, which breaks down to €200 000 in Year 1 (2011) and €100 000 in Year 2 (2012). Additionally, a moderately sized (about €50 000) bank loan will also be needed for Years 1-4. Year 1 sales are €60 000, which are set to double in each Year 2 and Year 3 (2013), with an increase of 50% coming in Year 4 (2014). Additional operating income will come from renting the space for private events or entertainment functions. Aliike will become profitable by Year 4.

The store will employ a total of 2.5 employees for Year 1, consisting of one full-time (100%) Store Manager, and one full-time (100%) and one part-time (50%) In-store Specialist whose primary responsibility is sales. As sales and visitor traffic increases, Aliike will bring aboard more personnel as needed.

A design jury will choose products on at least three occasions per year, that will determine which products appear in the store. Sales in Aliike will occur on a consignment basis, where designers will only receive their share of profits (50%) if their products are sold. A list of product criteria is available for designers or engineers who wish to submit product suggestions to Aliike.

Aliike’s main short-term objective is to become an active attraction and venue for the upcoming 2012 Helsinki Design Capital period, and sustain that early momentum for years to come.

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OBJECTIVES The objectives for Aliike are as follows: οο Establish a fully operational retail store ahead of the 2012 Design Capital kick-off. οο Support the Aalto University brand and evoke positive images of the school; present the brand of Aalto as one of versatility, creativity and connectivity with the community. οο Act as a connecting element between all of Aalto University’s unique departments. οο Cooperate with events, exhibitions and fairs within the fields of design, engineering and business. οο Provide students with real-world experience in applying product development and retail design learning. οο Inspire entrepreneurship and multi-disciplinary interaction.

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1. PRODUCT AND SERVICE PLAN: DESCRIPTION OF PACKAGE OFFERED This section describes the core offerings of Aliike, the pipeline for product development and procurement, as well as the value propositions associated with the primary audience groups.

1.1 DESCRIPTION OF PACKAGE OFFERED The “Aaltoliike project” describes the student course offered at Aalto University whose members are responsible for creating and developing the retail store concept, temporarily called “Aliike.” Aliike will sell student-designed products that are engineered and produced either during the annual Aaltoliike project, or by current or former Aalto University students, staff members or other design partners. While the Aliike concept is strictly in a proposal stage, the design team was still subject to certain creative restrictions with respect to the store’s organization and branding in order to stay aligned with precedents set by Aalto University.

The product portfolio will be built to fulfill customers’ needs. This will be accomplished though solutions creatively derived from a combination of design, technology and marketing communications.

Aliike products will be modern, fresh and sustainable. Moreover they will show a distinct level of high design and engineering. Products will range from decorative art pieces to those that are more functional. All products will encompass the passion Aliike has for serving its customers.

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Core Values The three following attributes represent the core values of the products or services available through Aliike:

UNIQUE STUDENT DESIGN Quality + unique design Support student careers Talent discovery Access future design classics

AALTO SOUL and SPIRIT MATERIALIZED

SUSTAINABILITY Materials, manufacturing Form + function Fewer things doing more Students: stewards of post-recession era

Own a piece of Aalto Glimpse of Finnish milieu Creates pride + unity Brand touchpoint + meeting place

Pictured: Who is Aliike: the core attributes.

ALIIKE

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Product Channels As described in the figure below, Aliike will secure a steady stream of products and revenues through the following channels: οο Aaltoliike project (annual) οο Student design and engineering community οο Aalto University branded products οο Art and design books from the Aalto School of Art + Design οο Design partners (established commercial brands, such as Iittala, etc.)

AALTO BRAND PRODUCTS

S D TU CO ES DE M IGN NT M U N IT Y

+ T IGN AR ES KS D OO B

ALIIKE PRODUCT

ANNUAL AALTOLIIKE PROJECT

PORTFOLIO

DESIGN PARTNERS

Pictured: The five primary sources for Aliike products.

In more detail, this pipeline of product development and procurement looks like the following: 1.1.1 Aaltoliike Project (Annual) The products manufactured in the Aaltoliike project every year will bring the skills, creativity and fresh ideas of Aalto University students to reality. This will ensure that generations of students will be able to update and modify the product portfolio. Ensuring modern creativity through flexibility is only one of many sustainable features Aliike will guarantee to the store’s visitors. Through products, events and various working methods, these products will tell a story of Aalto students working to create innovations together. business plan | aaltoliike project | december 8th, 2010 | page 9

Ideally, the project will produce approximately five to ten products annually. Product production runs in this category will stay fairly small and be available only for a limited time, increasing their degree of attractiveness with visitors. These products will rotate on a yearly basis (where top-selling products might stay longer or be reintroduced via “back-by-popular-demand� marketing efforts) in order to clear inventory for the next Aliike team’s product development efforts. The price of these products will vary anywhere from ten to several hundred euro.

1.1.2 Student Design Community (Currently Enrolled) There is undoubtedly a great amount of expertise and creativity inside the three schools of Aalto University to be tapped. Therefore, the idea of Aliike will be to give the students from all three schools the possibility and the platform from which to gain visibility and sell their products and ideas. Together with the yearly Aaltoliike project, this category of purely student-designed products will create the core selection of the high-quality design and engineering products available.

As these products are not developed within the project itself, they will have to be identified through a careful selection process, taking place three times a year (March, June and September). During these application periods, students will offer their products and ideas for the store, and the selection will happen following an established philosophy and criteria set as established in the Aliike design strategy. By acting to facilitate the application/selection process, Aliike professors and students will have a major role in determining which products end up in Aliike. The production scale of this category would also be fairly small and the pricing would be in the same level as of the products from the Aliike project.

1.1.3 Aalto University Brand Products Aalto brand products (also referred to as Aalto branded products) will include products promoting Aalto University through their design, helping to build and promote the core atmosphere and cohesion of Aalto. They will support and celebrate the brand image of Aalto University both in Finland and abroad, while maintaining the high quality standards established by Aliike. By using logos, colors and other indicators, these products will establish an explicit connection to Aalto. The products will be targeted to Aalto University students and alumni, staff, visiting lecturers and those with personal links to the University; therefore, serving well as corporate university gifts.

In this category, the selection of products would remain more constant allowing higher production levels and thus ensuring a lower per-unit cost. Products in this category will be priced below 100 euro. (See Appendix Attachment 1. University Brand Product Survey).

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1.1.4 Art Books and Other Literature (TaiK/Aalto School of Art + Design) Aliike will feature a selection of design books from the Aalto School of Art + Design. These will be provided through cooperation with the vendor TaiK Books.

1.1.5 Design Partners (Created Through External Collaborations) Besides working as the official display window of Aalto University and its students to the world, Aliike and its products will aim to interact with the community. Cooperation with outside partners in developing products and services will be critical to support this vision. Aliike will aggressively seek to cooperate with events, exhibitions and fairs within the design field. Selected current partnerships are described in more detail below: Partner: Habitare (or other exhibition events) Opportunity: Exhibition booth to tell about Aliike and show its products οο Exhibitions are critical to sharing the Aliike story. At a large fair or exhibition such as Habitare, an interesting and memorable booth that shows Aliike and its products is important. By creating a booth that is surprising or unique, visitors are more likely to find the booth amongst the fray. Hosted by a knowledgeable team member, visitors are also likely to enjoy their stay at the booth, remember the experience and hopefully even tell their friends about Aliike.

Therefore, at exhibition events like Habitare, Aliike could also have a cozy and trendy looking booth to show its projects and offerings. At the booth the staff could also provide information about the shop and discuss possible collaboration opportunities with the visitors. At Habitare 2010, booths like Protoshop, Lahti Design Institute, Keraplast and Omnia made use of fresh and interesting ideas in their designs, parts of which could be used as inspiration for Aliike’s booth.

Opportunity: Event material sponsorships οο Overhead costs of such events include, but are not limited to, tickets, admission stamps, stickers or buttons, daily activity calendars, drink cups, coasters and more. Development of these materials will be outsourced to Aliike and branded accordingly. Such high-touch products will be successful in displaying the brand, all while doing it on products that facilitate a more enjoyable event experience for attendees. These products could be available for distribution following each ticket purchase at the cashier, or otherwise located at pick-up locations/eateries throughout the exhibition hall.

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Opportunity: Exhibition of products designed specifically for the event οο At these events, next to Aliike’s regular product offerings we will also showcase a different line of products designed specifically for that event. This event-specific product line could even follow a united theme or storyline, for example. In addition, like Habitare 2010’s recycled chair competition, these products could also be chosen through an open competition at Aalto University.

Partner: Aalto University Opportunity: Design competitions for all Aalto University students οο For the students of Aalto University to become interested in Aliike, they should feel a sense of affinity towards the shop. To facilitate this, Aliike will organize regular design competitions for all Aalto University students. These kinds of competitions could work as good PR among the student community and help in creating the interest needed to make the competition a success. The competition(s) will consist of simple seasonal or campaign-related products such as textile shopping bags where the main idea of the design will be judged. For example, criteria will be posed to students to design a fabric print with a specific theme for a textile shopping bag sold in Aliike. Through the competition a certain number of the best ideas will then be produced, allowing those students to become designers for Aliike.

Partner: Helsinki Design Week Opportunity: Design competition οο At the Helsinki Design Week (HDW), Aliike will sponsor a product design competition that is featured during each day of the week in the Design Market. Several scenarios exist: Scenario I: Upon unveiling a design brief on day one of HDW, designers or teams of designers then have that week to fully develop a new product idea and submit a prototype for judging by a panel of design/business professionals on the final day of HDW. Scenario II: Based on a design brief provided some time before HDW, completed entries are displayed at the Design Market. On the final day, a winner is picked based on attendee voting which has been collected throughout the week. Scenario III: Through an open call for product ideas with limited guidelines, these are again displayed on the first day of HDW, and a winner is chosen on the last day based on attendee voting gathered throughout the week.

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Partner: Helsinki City Opportunity: Networking events οο Aliike’s central location and inspirational environment makes it an ideal entertainment venue.

Aliike will be a place for young professionals in Helsinki to meet and network. These functions will be organized and promoted by the City, and Aliike will have a strong brand presence at each event and an increase in traffic to the store. One vital communications vehicle for inviting guests is social media, and word-of-mouth hype will be greatly encouraged. Events might carry themes related to certain user groups, such as design bloggers, or “Tweetups” (when Twitter friends meet in person) to ensure all attendees might have some things in common. All of Aliike’s products will remain available for purchase throughout such events.

1.1.6 Other Partners (Created Through External Collaborations) Aliike also recognizes the need to partner with manufacturing, production and logistics firms to ensure a more consistent supply of products to the store. As product details and manufacturing needs become more defined in the future, Aliike will consider these kinds of partnerships further.

1.2 OTHER OPERATIONAL ENTITIES 1.2.1 Entertainment Venue Rentals Aliike will be a space that can be easily converted to an entertainment or gallery venue, and therefore rentable to companies, student unions (for professional activities) or other groups for events.

While this will help to bring event-goers to see Aliike, it will also bring in additional revenue from rental contracts.

1.2.2 Gallery The Aliike space will be used as a gallery where Aalto University students can have their artwork displayed. This will be the ideal opportunity for young and rising artists and engineers to gain publicity, and at the same time the gallery will act as a draw for visitors to come to the store. The gallery will rotate its collection every three to six months to ensure a dynamic experience.

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2. ENVIRONMENTAL ANALYSIS OF OFFERING This section describes the environmental factors surrounding the Aliike offering, or in other words the market conditions and tendencies that affect Aliike’s operations.

2.1 OVERALL ENVIRONMENT Over the last decade, the discussion about sustainability and design thinking has increased.

Sustainability has become the new standard and something that consumers are demanding from companies all over the world. Aliike acknowledges this trend as well. Sustainability is one of the key characteristics that is driving the overall Aliike concept, and will be integrated into all facets of the offering. The high-quality nature of Aliike products will also contribute to the store’s sustainability, as these products will endure for many years, prolonging the need for repair or replacement.

Design thinking creates a distinction between seeing design as not just the aesthetics of an end product, but rather as a process used in reaching that end product. Design thinking exists throughout the duration of the design process and is a key factor in developing successful businesses (Drews, 2009). The process should include empathy, creativity and rationality to meet user needs and drive business success. Unlike analytical thinking, design thinking is a creative process based around the “building up” of ideas. Early on in design thinking there are no judgments, which eliminates the fear of failure and encourages maximum input and participation in the ideation and prototyping phases (Wikipedia, 2010). This is the starting point in Aliike where students can feel free with their ideas and more readily put them into action.

2.2 STRUCTURE OF TARGET INDUSTRY As with the rest of the global economy, the consumer goods industry has experienced declines as a result of the worldwide recession. While some corporations similar to Aliike have faired well in the last year, a number of uncertainties have been unavoidable. At Keskos, they report that consumer demand has remained steady in 2009, especially as consumer confidence has made gains and interest rates have stayed low. Uncertainties in their business include the “evolution of total production, tightening taxation and ramifications of possible disturbances in the financial market” (Keskos, 2009).

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At Fiskars, the story is similar. In their Home business area (occupied by brands such as Iittala) their net sales in 2009 fell by €17 million to €300 million compared to 2008, with the “challenging market situation” cited as the root cause for the decline. Other uncertainties exist with unemployment in Fiskars’ main markets, and their analysis shows that consumer demand has yet to return to pre-recession levels. However, Fiskars is confident that they will manage to improve their profitability in 2010 (Fiskars, 2009).

2.2.1 Aliike in the Specialized Retail Sector According to the classification of specialized retailers in the year 2008 (Erikoiskaupanliitto, 2008) the business concept of Aliike would best fit within the sector of other special retail, including interior products and gift items. Though, with Aliike’s book and other literature presence, it could also dip into the book and paper retail sector. Given the uniqueness of Aliike’s offerings, these reference sectors only help to inform the store’s categorization for the sake of analysis, as opposed to defining it. Aliike is truly a unique concept that will help redefine the retail industry in Finland.

According to Santasalo and Koskela (2008), businesses in the sector of other special retail are typically small shops, where personal service and expertise is of great importance. The vast majority of these shops also prefer downtown locations with heavy street traffic. Most of these businesses are also small private businesses, although the share of multi-store companies and chain stores in this industry is increasing steadily.

The trade of interior products was the biggest category in the industry of other special retail sectors with approximately 2500 stores in the year 2008. Interior fabrics, carpets, handicraft, gift items, electric supplies, rubber goods and other household equipment are among the largest product groups in this industry. According to SOK, the recession has not affected sales in this category as it well diversified and have an optimistic view of the future (SOK, 2009).

2.3 COMPETITION With more and more retailers expanding into the design product category such as supermarkets, etc., Aliike is likely due to experience competition from retailers in these segments. However, Aliike’s main competitors will likely be small shops selling high quality design products in the Helsinki downtown area. These competing stores are usually extremely modern and sophisticated, with warm and open atmospheres. The Aliike team conducted retail studies in several cities around the world, such as Eindhoven, Amsterdam, Stanford, Charleston, Portland and Tokyo. business plan | aaltoliike project | december 8th, 2010 | page 15

However, most market research performed focused on Helsinki, Finland.

In Helsinki, the biggest competitors of Aliike include: οο Design Forum Shop οο Kiasma Shop οο Design Museum Shop οο Artebia οο Norsu οο Salakauppa 2.3.1 Competitor Observations Following site visits to each of the domestic competitors listed above, the Aliike team made the following observations (adjusted to Finnish purchasing standards): οο Stores had a wide range of product prices: low €1-3, high €800-1000 Recurring product categories: οο Ordinary, or everyday products upgraded and improved through a creative flair οο Unique executions of accessories, accent pieces οο Jewelry, lamps and vases οο Ceramics οο Mainstream products (from big brand names such as Iittala and Marimekko) In terms of other offerings, the Design Forum Shop had the best-integrated café area, though Kiasma had one which was outside of the shop area and more connected to the museum gallery. Artebia offered coffee and small snacks, however their atmosphere and facilities did not provide a pleasant café environment.

2.3.2 Competitive Advantage Aalto is a new university fusing three prestigious universities together, which has never been attempted in Finland before. Due to the history and reputation of HSE/TKK/TaiK, Aalto has received considerable attention in the media, meaning Aliike itself will be showcased repeatedly once opened. In a way, Aliike already carries some brand equity as it is representing Aalto University.

However, competitors of Aliike have spent many years building their brands and generating awareness of their offerings. Besides the good brand image and hype around Aalto, Aliike will also differ from its competitors in the sense that almost all products will be new and unique, which cannot be purchased from anywhere else except Aliike.

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3. MARKET ANALYSIS In this section, overall market characteristics are detailed. They are primarily focused on the target audiences of Aliike, the values presented to them and their respective purchasing powers.

3.1 TARGET AUDIENCES OVERVIEW The audience groups that are expected to visit Aliike fall into two primary categories: those who are connected to Aalto University directly (students, alumni and staff ) and those who are not (tourists, design enthusiasts, etc.). Mainly from the Helsinki metropolitan area, the following customer types are most likely to experience Aliike:

Students Faculty Alumni

Connected to University

Helsinki City

Tourists Recruiters Design Enthusiasts

NOT Connected to University

Design Partners + Collaborators Pictured: Overview of Aliike target audiences.

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CONNECTED TO UNIVERSITY 3.1.1 Aalto University Students & Exchange Students (Newly Enrolled) As there is a constant flow of new students starting in Aalto University every year, plus the exchange students starting every semester, this segment is extremely important for Aliike. The majority of students are aged 20-25, but can skew older as well. This segment is most likely to purchase Aalto University branded/licensed products, but would possibly purchase other categories of products as well. Currently, there is a total of 17,128 undergraduate and 3,306 graduate students at Aalto (Aalto University, 2010).

Benefits: Through purchasing Aalto branded products such as t-shirts, hooded sweatshirts (“hoodies”), mugs or overall (“haalari”) patches, these new additions to the Aalto community might feel an increased sense of pride and unity about the University. The exchange students especially might be interested in purchasing Aalto souvenirs for those back home.

Purchasing Power: The price range for students and exchange students is €2 to €80. Members of this segment are more likely to be living off study stipends or on a limited income, which restricts their purchasing power.

3.1.2 Aalto University Staff and University Visitors This group can be divided into multiple sub-segments: οο Staff interested in design οο Staff interested in Aalto brand or spirit οο Visitors interested in Aalto brand or spirit οο Visitors needing gifts or souvenirs This segment might use Aliike products for giveaways or lesson cases/examples. Different kinds of celebrations and award ceremonies can create a potential need for Aliike products. The current number of staff at Aalto is 4,512 (Aalto University, 2010).

Benefits: The feeling of unity when using an Aalto University mug at the workplace will increase “team spirit” for Aalto staff. Also, the products can be used as examples during lessons and as souvenirs for visitors.

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Purchasing Power: The average purchase of this group is presumably between €20 and €80.

3.1.3 Aalto University Alumni (including those of HSE, TaiK and TKK) The old Universities of HSE, TaiK and TKK have a large pool of alumni, and have been following the evolution of the Aalto University brand over the last few years. With ages ranging from 25-80, the products that interest them will likely vary quite a bit. As stated by Professor Markku Virtanen, this group can be summed up as “learn, earn and return.” This means that this group has once studied at these schools (learn), have made a living as members of the workforce (earn), and now are in a position to give back to the University and support initiatives like Aliike (return).

Benefits: This segment is interested in the new Aalto brand, and how the brands of the old schools will now be treated in the future. Aliike products will act as a holistic introduction and touchpoint to the Aalto brand, and might also help to remind them of their University days and how the schools have developed.

Purchasing Power: Since most members of this group will have income from full-time employment, the price range of products to consider would vary from €20 to €1000.

3.1.4 Helsinki City As Aliike can act as an excellent venue for hosting events, the store is attractive for the City of Helsinki. Networking events, parties and gallery events can be organized in this new and innovative space.

Benefits: Venue for connecting residents and visitors of Helsinki; also acts as a touchpoint for City officials and the Aalto University community.

Purchasing Power: Revenue to Aliike would come not from product purchases, but rather from rental fees for the space.

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3.1.5 Parents or Relatives of Aalto University Students This segment consists of Aalto University students’ parents and relatives. This segment is less priceoriented and willing to pay more if they find an interesting product. There is also a good chance for repeat visitors in this segment, which means that the store’s inventory must stock a wide variety of gift items and introduce new products frequently. This segment’s purchase volume usually increases during Christmas and graduation times as they search for gifts for friends and relatives.

Benefits: The pride of a family member’s success in University will be directed towards Aalto with the purchases of Aliike products.

Purchasing Power: Purchases from this segment can vary between €20 and €1000.

NOT CONNECTED TO UNIVERSITY 3.1.6 Design Enthusiasts This segment is most interested in finding unique, never-before-seen products. Design enthusiasts are normally aged 20-60 years, members of the workforce and have disposable income. They can be highly educated people and/or people who work in the field of design, or are very interested in design. They are willing to pay significant sums of money if they find something they like.

Benefits: The benefits for the design enthusiasts will be the uniqueness and one-in-the-world feeling they experience by owning an Aliike product. They want to show their design products to their friends and are proud of their purchases.

Purchasing Power: Design enthusiasts will be the consumers that can buy the most expensive products offered in Aliike. Total purchases can vary between €20 and €1000.

3.1.7 Design Partners and Collaborators This segment may purchase gifts (though perhaps in high volumes), or use Aliike as a ceremony space for events, or use the store in their marketing or advertising. In order to define this segment further the end format of Aliike and of the quality of the partner companies must be clarified. business plan | aaltoliike project | december 8th, 2010 | page 20

Benefits: These partners and collaborators will gain unique and never-seen-before gift products for their partners and therefore differentiate themselves from competitors.

Purchasing Power: Not available. This must be defined on a case-by-case basis.

3.1.8 Tourists Tourists will be a large segment of Aliike’s customer base since the store will be located in the City center. In fact, overnight visitors in Helsinki numbered 2.9 million in 2009, breaking down to 44% domestic and 56% foreign (Visit Helsinki, 2010). Aliike will be mentioned in tourist guides and newspapers (e.g. design and fashion categories) around the world. Aliike will primarily target European travelers, whose demographics will vary greatly.

Benefits: Tourists will want to own a piece of authentic Finnish design. The fact that the products are Finnish, unique and of high quality makes them perfect souvenirs for this segment.

Purchasing Power: Tourists will buy products that are mostly in the price range of â‚Ź2 (the small products that are good for souvenirs) to â‚Ź200 (the more unique design products).

3.1.9 Design Recruiters As Aliike will feature the best and brightest of Finnish student design, it can be an attractive scouting ground for design recruiters or design firm hiring personnel.

Benefits: Recruiters will have access to young designers, and designers will gain a platform on which to show their products and gain visibility with hiring employers.

Purchasing Power: Not applicable.

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3.2 CUSTOMER/STAKEHOLDER VALUE PROPOSITIONS To distill the aforementioned audience groups and benefits offered, the breakdown below looks at Aliike’s target audiences from a broader scope, and also considers the role of the other stakeholders involved in the project. The three primary audiences/stakeholders are: 1. Shoppers + Store Visitors They get: οο Beautiful, practical, high-quality designs οο Access to new design pioneers and classic products οο Memento of a new movement in Finland, Finnish culture, gifts οο Access to popular art books and literature

1. Shoppers + Visitors

2. University

Customer/Stakeholder Value Proposition: Unique, high-quality Finnish student design that makes life a little bit more beautiful.

2. Aalto University They get: οο Image builder; touchpoint for community, student body οο Build internal unity, spirit and pride οο Link to community (Helsinki City) οο Event and reception space οο Sales channel for books and other literature Customer/Stakeholder Value Proposition: A key, unifying community touchpoint for a new brand brought to life.

3. Student Designers They get: οο Outlet/platform for design exposure οο Networking/collaboration opportunity with design community οο Exposure to and learning about retail and entrepreneurship οο Work experience to CV/Résumé Customer/Stakeholder Value Proposition: A vehicle for personal and professional growth, Aliike is a springboard for design careers. business plan | aaltoliike project | december 8th, 2010 | page 22

3. Student Designers (links everything together) Pictured: Aliike stakeholders.

3.3 MARKET SIZE AND GROWTH RATE Since the year 2000, the total turnover of special retail has increased by €400 million, with particular growth in the gift item category. For the interior design retail industry, the turnover in 2007 was about €600 million.

In the southern Finland region the amount of money spent by an individual in the special retail sector was around €570 per year. By comparison, this figure is much higher than the amount spent in northern Finland, €340 per year, or even the national average for Finland, €436 per year.

Erikoiskaupan myynti toukokuu 2010 Lähde: Tilastokeskus, TOL 2008 Ͳ10,0

Ͳ5,0

VÄHITTÄISKAUPPA YHT. (pl. Moottoriajon. ja moottorip. vk.)

0,0

5,0

10,0

15,0

3,8

Tietokoneet, niiden oheislaitteet ja ohjelmistot

17,6

Televiestintälaitteet

17,8

Sähköiset kodinkoneet, viihdeͲelektroniikka

6,6

Huonekalut, valaisimet, matot, tekstiilit ja taloustarvikkeet

4,4

Rautakauppatavara, maalit, lasi sekä tapetit ja lattiapäällysteet Kirjat, sanomalehdet ja paperitavara

13,2 Ͳ4,7

Urheiluvälineet

3,3

Veneet ja veneilytarvikkeet

12,0

Vaatteet, jalkineet ja nahkatavarat erikoismyymälöissä Kukat, kasvit, siemenet ja lannoitteet

20,0

As a whole, the special retail sector’s sales grew by 3,8% from May 2009 to May 2010 according to a survey distributed by the Erikoiskaupanliitto; this growth rate is expected to remain constant until the end of 2010. Finally, the sector for other special retail grew 5,7% from May 2009 to May 2010 (Erikoiskaupanliitto, 2010).

4,1 Ͳ4,3

Kultasepänteokset ja kellot

3,9

Optisen alan vähittäiskauppa

9,3

Vähittäiskauppa postimyyntiliikkeiden tai internetin välityksellä

3,1

Muu vähittäiskauppa

5,7

ERIKOISKAUPPA YHT.

7,5

VuosiͲ muutos, % Arvo 5/2010

Pictured: Specialty store sales chart, 2010 (Finnish only; Erikoiskauppanlitto, 2010).

business plan | aaltoliike project | december 8th, 2010 | page 23

4. STRATEGY Strategy is discussed in this next section, in the contexts of product, market and pricing strategy, and close with a review of market share and diffusion.

4.1 PRODUCT/MARKET STRATEGY As Aliike benefits from the union of three major universities in Finland, it will also benefit from a fusion of three business models to enhance its competitive advantage. The innovative idea to create a location for students and designers to showcase and sell Finland’s premier products will enhance the future of Finland’s footprint on the global design scene. In order to transfer this idea into a profitable business three business models will be incorporated. Through the mixing of traditional direct selling, premium and disintermediation business models, Aliike will tap a bountiful pool of designers and engineers from Aalto University and Finland to offer the world a true “taste” of Finland. As the store is developed and product families are added to the store’s inventory, the pioneering concept of Aliike will expand. Once Aliike is further established, a web presence will be added to augment the level of outreach to the community and customers.

Aliike will be located in the city center of Helsinki, ideally near Lasipalatsi. This location will provide easy access to everyone, whether to commuting students, sightseeing tourists or visitors. As designers and engineers compete to have their products represented in the store, the business model will encompass more of the premium model style of pricing. In other words, Aliike will seek a higher profit margin on a lower sales volume. This will be critical if product families are small or products are difficult to replace, as they are unique.

Direct selling will take place away from the main retail location. In order to spread the news of Aliike to designers and customers, booths will be located at art and design expos and fairs. One of the critical components of direct selling and its importance to Aliike is that the products and the store concept can travel easily from expos and fairs not only across Finland, but also internationally. Maximizing the awareness of Aliike will help enhance the future of top-level designers and engineers contributing to the product line. Direct selling will be a key component in developing value.

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In order to deliver higher profit margins, Aliike will use a disintermediation approach in its business model mix, effectively limiting the extent of the distribution chain seen by most retail stores.

Aliike’s direct communications to designers will also enable higher quality products get to shelves quicker. Products sold at Aliike will be a direct reflection of the vision placed on designers by Aliike, ensuring that only premium products are sold. The lack of dealing with sales and logistics agents will enable a higher profit margin for the store.

Adding to Aliike’s web presence will be a website for the store. In today’s rapidly changing economic environment a strong web presence will be critical. The website will be a crucial tool in aiding direct selling at expos and fairs, and it will also afford world travelers and customers an inside look at what new and future designers have in mind for Aliike.

4.2 PRICING STRATEGY The pricing strategy at Aliike will combine two primary strategies: premium pricing and product competition-based pricing. Most student-designed products and others of limited production runs will employ premium pricing. As these products are unique, they cannot be compared with any other products and can therefore demand a more premium price. Customers who are interested in these products are less sensitive to price, especially if they can see the value and quality of what they are considering to purchase.

Products that use competition-based pricing will be products like Aalto-brand items and other smaller gift/giveaway products as these kinds of products are common all around the world in different universities. As part of our market research, different universities and their products’ prices were benchmarked and Aliike’s price levels for these sorts of products were established accordingly.

4.3 PROMOTIONS STRATEGY Aliike’s promotion strategy is based on Word-of-Mouth (WOM) and Electronic-Word-of-Mouth (eWOM). As the vision of Aliike is to be different and fresh in the market, the store needs to win over students and opinion leaders first and let them initiate the WOM and eWOM. eWOM is rooted in social media (e.g. Facebook) where Aliike will be actively present. Another element in the early promotion strategy is to launch the opening of the store in an eye-catching way. With the right business plan | aaltoliike project | december 8th, 2010 | page 25

launch strategy, WOM and eWOM should initiate additional media attention. Finally, Aliike should be widely active online and soon have its own webstore which will help the store reach a wider audience. In the early phases of Aliike’s launch, the store’s Facebook page should function as an active news and communication channel.

4.4 MARKET SHARE + DIFFUSION Aliike’s diffusion and penetration are hinged on a strategy to win the hearts of students and opinion leaders first. After that, this brand equity should extend to a wider local community of customers and stakeholders. Aliike will gain a lot of attention once introduced to the public because of the popularity of Aalto University as a topic in the media, and will therefore enable WOM and eWOM in the first months following the opening. By creating attention among media and early adopters, there will likely be a surge of customers in the first months. In the long-term, the true uniqueness of the store and its products will be an important factor in its success.

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5. OPERATIONS PLAN How Aliike will operate is discussed in this section, which includes store development details, what kinds of products are available at Aliike and how they will be procured for use in the store. A rough timeline will also be included which shows how the project may progress over the next two years.

5.1 PROCUREMENT PLAN AND DESIGN CRITERIA Critical aspects for success in this area are: οο High quality products οο Sufficient volumes to keep shop commercial οο Reliability and predictability of supply chain οο Goods priced at reasonable levels; avoid underselling or overpricing οο Product submissions are consistent with Aliike values οο Clear criteria for products οο Understandable acquisition process, not daunting or fuzzy 5.1.1 Product Descriptions and Criteria Aliike should represent the whole diversity of Aalto University and its partners; therefore setting exact guidelines for products may undermine this goal. Products that are not conflicting with the values of Aliike and are of sufficient quality are welcome to the store. “Quality” here means durability, manufacturing quality, structure and overall purpose of the product.

General product guidelines are following: οο Do no harm; don’t be evil (i.e. is ethical, causes no risk of electric shock or suffocation, nonpoisonous, noncarcinogenic, does not damage other products, spread hate messages, etc.). οο Performs in its intended use so well that it justifies its existence; is not a throwaway item (quickly useless/disposable) or just-for-laughs. οο Does not break in its intended use or through normal handling in retail conditions. οο Priced such that it may sell in Aliike in a reasonable time; does not consume excessively precious retail space especially in relation to the price of the product. οο Provides variety to overall product selection (15 different bottle openers is too much, but 15 different T-shirts is tolerable).

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οο Should be at least ecologically acceptable (plastic goods are still ok, but baby dolphin skin handbags are not). οο Is not hideous (use common sense). οο Does not copy other existing products or violate other copyrights. οο Focused on consumer segment, not B2B (selling forklifts or production machinery at Aliike may not serve the store’s purpose).

Another purpose of Aliike is to help prepare product designers and engineers for the harsh realities of the marketplace. Thus, a certain level of risk sharing with the designer/manufacturer and the seller (Aliike) will exist. However, loose criteria on the products do not mean Aliike sells anything for any price.

5.1.2 Consignment-Based Operations In the end the customer makes the purchase decision, and if the designer’s offering is not appealing it will remain on the shelf until it is returned to its maker. Essentially all products are property of the designer until the moment of purchase when the customer buys it. This process is an important learning experience for everyone willing to compete in the retail marketplace and should be inherent the in operational model of Aliike. Designers will receive 50% of sales made whereas the store will receive the other 50% to allocate as needed.

5.1.3 Product Selection Processes Aliike should be more of an enabling player than a limiting one in the progression of product designers’ or engineers’ careers. Aliike should encourage designers and engineers to practice risktaking and experience a true marketplace setting. Limiting the product intake too much reduces this part of the learning process, decreases variety, causes unnecessary disappointments and leaves too much power with the personal interpretation for the juror. The process of qualification should be as fast as possible to allow for fresh products to enter the marketplace faster than anywhere else. The process should also be completed well before the product is scheduled to enter the store. The further in advance Aliike can plan for inventory changeover the easier it will be to market the new product line and account for it financially.

The Store Manager is responsible for the day-to-day selection of products. These include products that are intended to be available for a limited time and in small to medium quantities. The Manager is expected to accept products that are compliant with the general checklist of product viability, safety and general good-taste unless special circumstances exist. The Aliike steering group chooses products slated for a longer shelf life and production period. This applies especially to products that business plan | aaltoliike project | december 8th, 2010 | page 28

are designed at Aliike product design project. If Aalto University directly invests in manufacturing the products, the responsibility for decision-making lies with the Aliike steering group and board members. These sessions should take place a maximum of four times a year, or when new products are introduced.

Finally, all products sold must also be reviewed with Iittala and Aalto University executives/administrators to ensure that no trademarks or patents are infringed upon.

5.2 MILESTONES Completed: 02.02.2010 28.04.2010 12.05.2010 26.05.2010 08.12.2010

New class of Aaltoliike project begins Aliike Feasibility Study completed Masters of Arts survey period begins; ends 13.06.2010 Primary research trip to The Netherlands Final Aliike Presentation; DemoShop debut

Upcoming (Tentative): 08.02.2011 New class of Aaltoliike project begins 25.03.2011 First product call-for-entry deadline, 2011 24.06.2011 Second product call-for-entry deadline, 2011 30.09.2011 Third product call-for-entry deadline, 2011 02.12.2011 Final Aliike Presentation 01.01.2012 Aliike events begin in tandem with 2012 Design Capital period 07.02.2012 New class of Aaltoliike project begins 30.03.2012 First product call-for-entry deadline, 2012

business plan | aaltoliike project | december 8th, 2010 | page 29

6. ORGANIZATION PLAN 6.1 ALTERNATIVE FORMS OF ORGANIZATION Aliike will be a private stock company with the Aalto University Foundation as the major shareholder. The percentage owned by Aalto University Foundation will be 60% and the remaining 40% will be divided equally between the Aalto University Student Union (20%) and other possible foundations (20%). The share capital of Aliike will be €100 000 which is double the working capital per month.

6.2 MANAGEMENT AND PERSONNEL The Aliike Employee Structure will consist of an Executive Board, Store Manager, Aliike Project students and several salespeople referred to as In-store Specialists.

6.2.1 Store Personnel The Executive Board will consist of three people, which will either come from each of the major stakeholder groups of Aliike, or from each of the three Universities within Aalto. As Aliike is a corporation there will also be a Store Manager running the business. The Store Manager functions under the Executive Board and has similar corporate responsibilities as a CEO. The Store Manager will double as the Aliike’s lead seller and coordinator of all store elements both internally (sales and store coordination) and externally (outreach and communications). Ideally, the Store Manager will have an office in the store’s backroom, and is available in the store as often as possible and works closely with the In-store Specialists. In order to attract qualified candidates, the Store Manager needs to be paid an above average and competitive salary.

The Store Manager will be changed annually and appointed from the Aliike project by the Executive Board to ensure that there is a person in charge who knows as much as possible about Aliike. Also, this way Aliike will work as a learning experience and a great job opportunity for young Master’slevel students at Aalto University.

Besides the Store Manager, there will be two other In-store Specialists in the store. One of them is a full-time (100%) employee and the other part-time (50%). Their main functions are custom-

business plan | aaltoliike project | december 8th, 2010 | page 30

er service, in-store maintenance (e.g. stock, layout) and completing sales. They should have deep knowledge of Aliike and its products and be passionate about the concept. It is beneficial if they can participate in the planning of other Aliike functions such as marketing and communications.

BOARD (VOLUNTEER)

STORE MANAGER (FULL-TIME)

IN-STORE SPECIALIST (FULL-TIME)

IN-STORE SPECIALIST (PART-TIME) Chart: Aliike personnel.

6.2.2 Aaltoliike Project Personnel To build the Aliike concept and overall design, a multidisciplinary team of students and professors was formed to tackle the varied challenges that creating Aliike posed.

Originally conceived by Professor Laura Isoniemi (School of Art + Design), the Aaltoliike project was presented to the Aalto administration at the University Idea Contest in May 2009, where it was chosen as a promising business idea. Joined by Professor Markku Virtanen (School of Economics) and Professor Raimo Sepponen (School of Technology), these three individuals represent the “teaching team� for the Aaltoliike project. PhD. Researcher Jukka Partanen from the School of Economics also acted as a special consultant on the marketing and retail aspects of Aliike.

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The students taking part in the first Aaltoliike project are all Master’s students at Aalto University: School of Art + Design οο Juha Juvonen οο Anna-Leena Kilpeläinen οο Tuukka Kingelin οο Jenni Särmä School of Science + Technology οο Jussi Koistinen School of Economics οο Eveliina Kujansuu οο Kalevi Kurronen οο Tuukka Laurila οο Jaakko Lovio οο Stefan Nieminen οο Tuomas Sahramaa These professors and students are working as a team to open Aliike in 2011. While the goal of the Aaltoliike project is to emerge with a profitable retail store concept, the project is primarily a handson method of education in the fields of entrepreneurship, retail design, interior design, engineering, marketing, project management, logistics, business law and product design and development. This first project will culminate with a final presentation of this Business Plan and other design concepts to the Aalto University community and guests on December 8th, 2010.

6.3 REWARDS AND INCENTIVES Beginning in Year Two — once there is a better understanding of the trends with respect to sales, profits and performance — a variety of rewards and incentives will be explored for Aliike employees.

This may include those tied to not only to the degree of individual performance of employees, but also the degree of performance of the store as a whole (i.e. profit sharing). As dictated by Finnish employment law, all salaried employees will receive a June bonus of a 50% monthly paycheck for their services.

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7. FINANCIAL PLAN To fully capture the financial plan envisioned for Aliike, this section describes the resources needed to open and maintain the store through a comprehensive budget analysis, corporation balance and analysis and financial reporting.

7.1 BUSINESS ORGANIZATION OVERVIEW Aliike will operate as an Osakeyhtiö, which literally means a “stock company”, and will carry the abbreviation “Oy” to become Aliike Oy as the store’s official legal name. In the United States an Osakeyhtiö is referred to as a limited company (“Ltd.”), or a corporation (or incorporated, “Inc.”).

As a corporation, Aliike Oy satisfies the four qualifications of corporation status, which are the existence of: 1. legal personality; 2. limited liability; 3. transferable shares; and 4. centralized management under a board structure (Wikipedia, 2010).

The majority of Aliike Oy shares will be owned by Aalto University, and with this form of joint-stock company it would be easy to modify the ownership if necessary. Some part of the shares could be owned by other Aalto University-related entities such as the Aalto University Student Union, AYY (Aalto-Yliopiston Ylioppilaskunta). Incorporating Aliike is also a natural choice for this kind of retail business as it provides the easiest and most straightforward judicial platform compared to the other alternatives.

7.2 BUDGET ANALYSIS These figures are based on rough estimates from the information currently available about the store. However, there have been certain assumptions made about key unknown elements, such as the store’s location and any rent and overhead costs therein. The intent for including these figures is to illustrate a realistic estimation of the viability of Aliike, and attempt to avoid promising too much considering the uncertain environment which the store currently is in.

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As Aliike is slated to open in 2011, all financial reports assume a January to December fiscal year.

The first four years the fiscal periods will be as follows: οο Year 1: 1.1.2011 to 31.12.2011 οο Year 2: 1.1.2012 to 31.12.2012 οο Year 3: 1.1.2013 to 31.12.2013 οο Year 4: 1.1.2014 to 31.12.2014 7.2.1 Cash Budget Aliike’s cash budget is illustrated through incoming and outgoing cash flows. For Year 1, an initial capital injection of €200 000 will be needed by Aliike ownership to carry the store through this tough, and likely unprofitable period. The cash sales in Year 1 are projected to be quite moderate, and because of the specialty retail nature of the business there will be a clear increase of sales in December due to holiday sales. The use of credit cards and business-to-business (B2B) sales will bring the amount of trade receivables to an estimated 30% each month. The average margin of goods sold is 50%, which is a very realistic estimation considering the products sold.

The paid employees of Aliike will consist solely of the salespeople (In-store Specialists) and the Store Manager of the store, with other labor coming from donated time by students or other stakeholders. These In-store Specialists’ salaries will be paid according to the minimums of the Union of Trade, and the Federation of Finnish Commerce and Trade, except for the future Store Manager of the shop (whose salary will be determined by SEFE’s guidelines, in case he/she is a student of Aalto University, or by mutual agreement). The salary for the Store Manager is estimated to be €2000/ month.

See APPENDIX for Cash Budget chart (time period: 1.1.2011 to 31.12.2011).

7.3 CORPORATION ANALYSIS AND BALANCE The corporate analysis and balance are made for the fiscal year 2011 (Year 1) and the three following years (fiscal years 2012, 2013 and 2014, or Years 2-4 respectively). The owners of Aliike, of which the majority owner being Aalto University, will need to invest €300 000 for Aliike altogether, which breaks down to €200 000 in Year 1 (2011); €100 000 in Year 2 (2012). A moderately sized (about €50 000) bank loan will also be needed in either Year 3 or 4.

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According to the cash budget, Year 1 sales are €60 000. These sales will double in each Year 2 and Year 3, with an increase of 50% coming in Year 4 (2014). Other operating income for Aliike is the revenue gained from renting the space for private events; this income will also double in each of the first two years but will grow more modestly after that. The purchases of the sold goods represent the Materials and Supplies used at Aliike, and the initial €30 000 capital investment (start-up capital) is divided across a three-year span within this section as well. The renovations and other services needed in the shop represent Renovations and Other Services.

Aliike Projected Sales

400 000

360 000

Sales (€)

300 000 240 000

200 000 120 000

100 000

0.0

60 000

2011 Year 1

2012 Year 2

2013 Year 3

2014 Year 4

7.3.1 Store Personnel and Salaries Personnel expenses and salaries for In-store Specialists are estimated to be approximately €81 000 in Year 1 (two employees + part time employee working half day) and will increase approximately 3% in the following years. For year 2012 (Helsinki as Design Capital) there will be a need for approximately one more employee. This will be organized either by hiring a part-time person working on hourly basis, or through the services of a staffing firm. In any case, the extra personnel expenses for 2012 are approximately €2220 per month (with an average 150 working hours per month). The need for this resource after 2012 will be determined afterwards, but in this calculation it is taken into consideration that the personnel expenses will remain on this level in the following years (www.

Sefe.fi, 2010; www.pam.fi, 2010). business plan | aaltoliike project | december 8th, 2010 | page 35

Salaries for year 2011 Base pay: οο Store Manager (Full Time, 100%): €2000/month (SEFE-palkkasuositukset 181-240 credit) οο In-store Specialist (Full Time, 100%): €1536/month οο In-store Specialist (Part Time): €768/month Hourly wages (base pay): οο €9,6/hour x 80 total hours/month (avg.) = €768/month Additional expenses above base pay Weekend/evening rates: οο Additional 10% over base pay οο €4304 x 10% = €4734/month Social Security expenses: οο 40% over pay; includes pension contribution, insurance, etc. οο €4734 x 40% = €6628 total monthly salary expenses, including extras Full-time employee bonus: οο 50% of monthly salary; obligatory through employment laws; paid each June οο Bonus pay for monthly salaries (without extras) = €2475 See APPENDIX for Result Budget (T2) and Financing Plan (T4).

7.3.2 Depreciation and Trade Receivables Depreciation, involving the shop interior and equipment involved with long-term use, is €21 000 and has been slated as a tax deduction for Years 1-3. Because of the commission-based sales of the student-designed products, the value of stock in the estimation is remaining constant through Years 1-4. It is assumed that a small fluctuation in the value of the stock will occur at the end of each year.

Trades Receivable represent 30% of the Net Sales due to a typical payment cycle of 14-30 days (i.e. purchases made via credit card). Credit card payments are processed several days after the initial purchase, meaning trade receivables are gained only once credit obligations are paid.

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8. RISK ANALYSIS As risks are inevitable in any retail venture, this section will discuss all potential risks posed to Aliike, as well as any possible impacts that may result. This discussion about risk is accomplished through a comprehensive SWOT (Strengths/Weaknesses/Opportunities/Threats) analysis of Aliike.

8.1 SWOT ANALYSIS OF ALIIKE 8.1.1 Strengths One of the greatest strengths and competitive advantages of Aliike lies in the fact that the business has the knowledge and expertise of three different disciplines behind it. In Aliike, students will work in multidisciplinary teams and they will have professionals from the three different schools to support their work. Therefore, Aliike has the ability to make use of the latest knowledge and first-class expertise in design, technology and business in all of its actions.

Besides this knowledge, there will also be a nearly limitless amount of fresh ideas and creativity provided by the enthusiastic students of Aalto University. Through energetic, fearless and openminded multidisciplinary teamwork these students will be able to create something completely unique that will not be found in any other store in the world.

How these strengths will be utilized: οο Keeping product development through multidisciplinary teamwork at the heart of Aliike. οο Engaging and exciting students from all three schools of Aalto to take part in Aliike. οο Arranging new and exciting events and product development projects within Aliike to take advantage of the intellectual property and the different disciplines of students and other professionals.

8.1.2 Weaknesses However, one of the main weaknesses of Aliike may also be seen embedded in the newness of its business concept in the Finnish market. Since there are no earlier businesses in Finland operating with exactly the same concept to reference, it is not possible to learn from the others’ mistakes but rather through trial and error. Therefore, performing regular market research and following the competitors closest to Aliike’s premium retail model is extremely important for Aliike to avoid at least some unnecessary errors. In addition, although the Finnish market as such is very unique in

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nature, it will definitely be worthwhile for Aliike to track similar actors abroad and pick up the best ideas from their success while still maintaining Aliike’s own way of working.

Furthermore, although design is the key element of the Aliike business concept, one of the main ideas of the store is also to represent the entire Aalto University and all of its students from different disciplines. Therefore, the strong focus on art and design in the store concept may act as a weakness. There may be a risk that the students from the School of Economics and the School of Science and Technology will not consider the store as their own, so to speak, as easily as the students of the School of Art and Design will. Therefore, actions to engage students from all three schools of the Aalto University will be crucial. This may be done through various events organized at the store and through simple ideation and design competitions, for instance, where every student regardless of their background could become a designer for Aliike.

How these weaknesses will be overcome: οο Learning from own mistakes; performing market research and track industry trends. οο Tracking and learning from similar actors abroad. οο Making sure Aliike “belongs” to all students of the three schools of Aalto University by organizing various events, exciting competitions and unique campaigns to attract students.

8.1.3 Opportunities The business concept of Aliike is completely new and unique in the Finnish market. There are no design or university stores operating according to a similar idea in Finland which may work as an enormous opportunity for Aliike. By being an early entrant in this blue ocean within the retail industry, it can seek out and develop its own path and create something entirely new.

One key opportunity for the store is that it will be able to design the categories and select the actual products sold in the store. In terms of pricing, Aliike will also be able to affect the pricing of its products and offer something for every customer. Hence, there will be products from different price levels sold in the store. Some of the smaller brand products will cost only a of couple euro, but for example a design collector will be able to find unique products worth a few hundred euro from the store.

How these opportunities will be taken advantage of: οο Creating a strong, lively and exciting business concept to attract customers. οο Designing and developing unique product categories with changing selections. οο Offering products at different price points. business plan | aaltoliike project | december 8th, 2010 | page 38

8.1.4 Threats Aliike will also encounter the general risks that face all start-up retail stores, especially those in premium retail in Helsinki. For instance, with specialized products an ever-present risk is that the targeted customers will neither find the store, nor consider its products appealing. With some of the high quality design products their prices may also turn out to be a risk factor if they are too high for customers. In the category of high design products there will also be quite a lot of competition by other premium retailers in the Helsinki metro area.

Unfortunately, the strong Aalto brand may place threats on Aliike. There is a risk that the partnership between the Aalto University brand and the Alvar Aalto estate may, to some extent, build threats for the creative freedom of Aliike and its designers. Due to intellectual property rights (IPR) protected by the Alvar Aalto estate and owned by Iittala, Aliike cannot design or produce anything too similar to those products sold in Iittala, such as the famous Aalto vase. Finally, with Aliike there will also be risk factors in the continuity of the students within the project. As new students are rotated into the program, a loss of synergy and the reduction of the Aliike spirit may occur. Therefore, it may be extremely important and challenging to communicate the existing Aliike values and spirit to incoming students.

How these threats will be avoided: οο Implementing exciting and innovative PR and advertising campaigns to attract customers and inform them about the store and its latest product selections and events. οο Working with Aalto University’s legal department to handle IPR issues to sustain creative freedom and avoiding legal conflicts. οο Communicating the core Aliike values to all new designers and students of the project through explicit written materials, images and visuals; ensuring the genuine Aliike spirit will stay at the heart of all of its actions at all times.

8.2 OVERALL EVALUATION OF RISK Although it will be a great challenge, it must be reminded that with challenges and risks come great rewards. There are plenty of safety nets in place to ensure that potential investors and Aliike partners will be rewarded for their trust no matter what the outcome may be. They have the potential to partner with a stable, knowledge-regenerating program that will eventually become a pillar in their own business models. As a worse-case scenario they would walk away with plenty of knowledge and fresh ideas from young designers and engineers coming out of Aalto University. business plan | aaltoliike project | december 8th, 2010 | page 39

9. CONCLUSION Aliike will become a sustainable and profitable venture, holistically including students, customers, stakeholders and the Finnish spirit to produce Finland’s first student-created and operated retail store selling premium design products. As we have proven that this venture would be viable, a progressive path should be taken so that Aliike is sure to be running by 2012 when Helsinki acts as the World Design Capital.

Aliike project members have undertaken the following actions in order to understand and legitimize the viability of the retail store: οο οο οο οο οο οο οο οο

Business plan development and financial projections Product prototyping and procurement planning Retail store interior design Branding and graphic identity design Media, PR and marketing campaign development In-depth market research Trademark and immaterial rights research Location research and real estate negotiations

Our team looks forward to a smooth and swift transition to the upcoming 2011 Aaltoliike project class, and their further refinement and implementation of all aspects of this business plan.

business plan | aaltoliike project | december 8th, 2010 | page 40

10. REFERENCES Aalto University (2010). www.aaltouniversity.fi. October 25, 2010.

Drews (2009) Unleashing the Full Potential of Design Thinking as a Business Method. Design Management Review, vol. 20 no.3. Summer 2009.

Erikoiskaupanliitto (2010) www.erikoiskaupanliitto.fi. October 25, 2010.

Fiskars (2009) Fiskars Annual Report 2009. Pgs. 2, 19-21. http://www.fiskarsgroup.com/linked/en/ news/Fiskars_annualreport_2009.pdf Keskos (2009) Keskos Q3 2010 Interim Report. Pgs 1-12. http://www.kesko.fi/PageFiles/14522/ Keskos_interim_report_Q3_2010.pdf Pam.fi (2010) http://www.pam.fi/fi/tyo/palkat/Palkkataulukot/Kaupan_alan_palkat_01052010. pdf. November 11, 2010.

Santasalo, T. & Koskela, K. (2008) Vähittäiskauppa Suomessa 2008. Erweko Painotuote Oy, Helsinki, 2008.

Sefe.fi (2010) http://www.sefe.fi/portal/fi/tyonantajat/kylterien_palkkasuositukset/. November 11, 2010.

SOK (2009) SOK annual report 2009. http://www.digipaper.fi/sok-yhtyma/46519/ Wikipedia (2010) “Osakeyhtiö”. http://en.wikipedia.org/wiki/Osakeyhti%C3%B6. November 11, 2010.

Wikipedia (2010) “Corporation”. http://en.wikipedia.org/wiki/Corporation. November 11, 2010.

Wikipedia (2010) “Design Thinking”. http://en.wikipedia.org/wiki/Design_thinking. November 13, 2010.

business plan | aaltoliike project | december 8th, 2010 | page 41

11. APPENDIX University Brand Product Survey University Brand Products: Oxford Harvard Helsinki University

T-shirt €25 €20 €10

Hoodie €40 €35 (-)

Mug €6 €8 €8

Cufflinks €10 (metal) €35 (golden (-)

Pen €15 (-) €2-8

Sources: www.oushop.com www.ivysport.com http://juno.gagar.fi/epages/28102009-1007.sf/fi_FI/?ObjectPath=/Shops/28102009-1007/ Categories www.theharvardshop.com

business plan | aaltoliike project | december 8th, 2010 | page 42

APPENDIX: FINANCIALS / CASH BUDGET

Aliike Cash Budget, 1000â‚Ź. Inc. VAT Timeperiod 1.1.2011-31.12.2011

Periods Cash at the beginning of the period Cash receipts from the operations Cash sales Trade receivables Other income Total increase in cash from operations Cash disbursements from operations Cash purchases Accounts payable Value-added tax Salaries Obligatory payments by employee Rent Financing expenses Taxes Other expenses Total cash disbursements from operations Total cash disbursements from investments Cash at the end of the period

To 2012 Dec (Year 2) 85.4

Jan 200

Feb 159.1

Mar 153.4

Apr 143.5

May 138.3

Jun 128.4

Jul 122.7

Aug 115.8

Sep 106.1

Oct 102

Nov 96.8

1.8

3.7 0.6

4.3 1.2

3.7 1.8

4.3 1.2

2.5 2.5

4.3 1.2

3.1

5.5

5.5

6.8

5.5

2.5 1.8 1.2 4.3

10.5 3.7

5.5

4.3 1.2 0.6 5.5

4.9 1.8

4.3

4.9 1.8 0.6 6.8

14.1

3.1

5

5

201.8

5

5

4.9

5

5

0.46 4.7 1.9 2.5

0.92 4.7 1.9 2.5

1.15 4.7 1.9 2.5

0.92 4.7 1.9 2.5

1.15 6.5 1.9 2.5

1.5 4.7 2.6 2.5

0.69 4.7 1.9 2.5

1.3 4.7 1.9 2.5

1.15 4.7 1.9 2.5

1.15 4.7 1.9 2.5

1.4 4.7 1.9 2.5

2.53

0 0.5 12.7 30

0 0.5 10.0

0 0.5 15.5

0 0.5 10.7

0 0.5 15.5

0 0.5 12.5

0 0.5 11.8

0 0.5 15.2

0 0.5 10.8

0 0.5 10.7

0 0.5 15.7

0 0.5 16.0

0 4.4

159.1

153.4

143.5

138.3

128.4

122.7

115.8

106.1

102.0

96.8

85.4

83.6

-1.4

4.7 2.5

1.9

business plan | aaltoliike project | december 8th, 2010 | page 43

APPENDIX: FINANCIALS / T2

THE COMMITTEE FOR CORPORATE ANALYSIS

RESULT BUDGET

T2

Date Company

E-mail

Drawn by

Telephone number

Aliike Past period

/

1 000 e 1

NET SALES

2

Other operating income

3

TOTAL OPERATING INCOME

4

Materials and supplies used

5

+ =

%

Prognosis 1

/

1 000 e

%

Prognosis 2

/

1 000 e

%

60.0

120.0

240.0

2.0

4.0

8.0

Prognosis 3

/

1 000 e

% 360.0 10.0

62.0

100,0

124.0

100.0

248.0

100,0

370.0

100,0

-

40.0

64.5

70.0

56.5

130.0

52.4

180.0

48.6

Outsourced services

-

10.0

16.1

5.0

4.0

3.0

1.2

3.0

0.8

6

Personnel expenses

-

81.7

131.8

111.5

89.9

114.8

46.3

118.3

32.0

7

Other operating expenses

-

8

Increase/decrease in finished goods

9

OPERATING MARGIN (EBITDA)

10 Depreciation according to plan

30.0

48.4

30.0

24.2

30.0

12.1

30.0

8.1

+/-

0.0

0.0

-2.0

-1.6

-2.0

-0.8

-2.0

-0.5

=

-99.7

-94.5

-76.2

-31.8

-12.8

36.7

9.9

-

7.0

0.0

0.0

-160.8 11.3

7.0

7.0

11 OPERATING RESULT (EBIT)

=

-106.7

36.7

9.9

+

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

13 Other interest and financial income

+

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

14 Interest and other financial expenses

-

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

15 Direct taxes

-

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

16 PROFIT/LOSS before extraordinary items

=

-106.7

17 Extraordinary income

+

0.0

18 Extraordinary expenses

-

0.0

19 NET PROFIT/LOSS

=

-106.7

20 AVERAGE NUMBER OF EMPLOYEES

2.5

-172.1 0.0 0.0 -172.1

-101.5 0.0 0.0 -101.5 3.5

-81.9

-81.9 0.0 0.0 -81.9

-38.8

2.8

12 Income on shares and other investments

-172.1

-101.5

5.6

-38.8 0.0 0.0 -38.8 3.5

-15.7

-15.7 0.0 0.0 -15.7

36.7

9.9

0.0

0.0

0.0

0.0

36.7

9.9

3.5

business plan | aaltoliike project | december 8th, 2010 | page 44

APPENDIX: FINANCIALS / T4 THE COMMITTEE FOR CORPORATE ANALYSIS

FINANCING PLAN

T4

Date 1 000 e Company

E-mail

Aliike Drawn by

Telephone number

Last Period /

/

/

/

SOURCES OF FUNDS 1 Profit/loss before extraord. items + depreciations

+

-99.7

-94.5

-31.8

+/-

0.0

0.0

0.0

0.0

3 Additional investments by owners

+

200.0

100.0

0.0

0.0

4 Increase in long-term liabilities (T7)

+

0.0

0.0

0.0

0.0

Increase in short-term liabilities

+

0.0

0.0

0.0

0.0

100.3

5.5

-31.8

36.7

28.0

39.0

0.0

2 Extraordinary income/expenses (T2 rows 17 ja 18)

6

+

7 TOTAL

=

36.7

CASH FLOW 8 Land and water areas

+

9 Buildings and constructions

+

10

Machinery and equipment

+

11

Other investments

+

12

Increase/decrease in working capital (row 27)

13

Increase in other current assets

+/+

14

Decrease in long-term liabilities (T7)

+

15

Decrease in short-term liabilities

+

16

Decrease in short-term liabilities

+

17

21.0 20.4

+

18

TOTAL

=

41.4

28.0

39.0

0.0

19

Surplus/deficit

+/-

58.9

-22.5

-70.8

36.7

20

Cumulative surplus/deficit

+/-

58.9

36.4

-34.4

2.3

Past Period

WORKING CAPITAL 21

Current assets

+

10.0

13.0

15.0

18.0

22

Trade receivables

+

18.6

36.0

72.0

108.0

23

Receivables fr. percentage of compl. method

+

0.0

0.0

0.0

0.0

24

Accounts payable

-

20.0

20.0

30.0

30.0

25

Advances received

-

0.0

0.0

0.0

0.0

26

Working capital

=

8.6

29.0

57.0

96.0

27

Increase/decrease in working capital

20.4

28.0

39.0

+/-

business plan | aaltoliike project | december 8th, 2010 | page 45

APPENDIX MOA Survey Results: 10.08.10 Almost 80% find Aaltoliike Interesting or Very Interesting.

This means that the idea piques interest amongst students, though that may not necessarily translate to sales.

Top characteristics of design shop: Unique Design (1.), Durability and Quality (2.) and Environmental Friendliness (3.). Least attractive is Practicality.

Do we need to adjust our thinking of providing highly usable products? Or are more decoration pieces the best direction?

Over 70% find Environmental Friendliness to be Important or Very Important.

Place a premium on responsible products, materials, manufacturing processes, etc. Make this attention to the environment apparent in packaging and communications.

Most respondents want an “Everyday Product”, but what does that mean?

Interesting that Practicality was regarded with such little value in Question 2, but in this case it appears to be important. Perhaps Practicality is only valuable when other options are not available (i.e. Unique Design, Green, etc.)

Over half (50%) want products priced under 100 Euros.

However this doesn’t tell us enough as it could have – should consider how to break this number down further, under 10e? 30e? 50e? Etc. Location: Close results show desire for shop in City Center, with Design District close behind.

These could be considered similar responses (parts of DD are quite central in downtown).

Likely not best to consider a campus location, ease of accessibility and visibility is the likely driver of these responses.

Almost 50% feel that Aalto and student connection is quite compelling.

However, the Very Much response was rarely selected.

Other observations: We need a website and social media accounts set up ASAP.

business plan | aaltoliike project | december 8th, 2010 | page 46

Aaltoliike: MOA Survey Results

APPENDIX

Question 1: How interesting do you find the idea of a university design shop?

Answer Options 1. Not at all 2.

Responses 0 6

3.

5

Question 2: What characteristics would you look for in an Aalto design shop product?

Answer Options 1. Materials 2. Unique Design 3. Affordability Responses 20 37 27 Comments New ideas, no more candles!

Question 3: How important is environmental friendliness?

Answer Options 1. Not at all Responses 0

2.

3

3.

11

4.

19

5. Very interesting 21

4. Env. Friendly 30

5. Dur. & Qual.

32

4.

17

5. Very important 21

6. Practicality 18

Question 4: What purposes do you see yourself using products sold in the design shop?

Answer Options 1. Art Product 2. Everyday Product 3. Other As: gifts (very popular answer!), decorations, for entertaining, for Responses 16 45 work functions, PR-use.

Question 5: What is the price range of the products in the shop?

Answer Options 100 Euro or less 200 Euro Responses 26 11 Question 6: Where should the design shop be located?

Answer Options 1. City Center 2. Aalto Campus Responses 26 4

300 Euro 0

3. Design District 23

500 Euro 2

1000 Euro 2

2000 Euro 1

More 3

4. Other Bookstore, museum, Helsinki University, Senaatintori, Kiasma.

Question 7: Do you think the connection to Aalto and its students gives extra value to the design shop?

Answer Options 1. Very little 2.

3.

4.

Responses 0 5 14 24

5. Very Much 7

Question 8: Which companies/parties would you see the design shop cooperating with?

Answer Options Company Names: Responses Ruohonjuuri, Orion Pharma, Valio, Musiikkitalo, Postitalo, Alumni firms, Helsinki City, Design Forum, Kiasma, Young Designers, Ornamo, Production Firms, Design Industry, TV Firms, Ad Firms, Eco Design Pioneers, Finnish Defense Forces, Greenpeace, Sokeva, Fiskars-Onama, Design Museum, TaiK-Alumni (Designers), Nokia, Medical Firms, Artek, Plastex, Tech Firms, Galleries, Finnish Craft Firms, Student Companies, Craftsmen, Metal or Wood Workers.

Question 9: How would you like to learn more about Aaltoliike?

Answer Options Methods: Responses Email, Facebook, Social Media, Aaltoliike Website.

business plan | aaltoliike project | december 8th, 2010 | page 47

APPENDIX: MOA SURVEY RESULTS Question 1: How interesting do you find the idea of a university design shop?

25

20

15

10

5

0 1. Not at all

2.

3.

4.

5. Very interesting

business plan | aaltoliike project | december 8th, 2010 | page 48

APPENDIX: MOA SURVEY RESULTS Question 2: What characteristics would you look for in an Aalto design shop product?

40

35

30

25

20

15

10

5

0 1. Materials

2. Unique Design

3. Affordability

4. Env. Friendly

5. Dur. & Qual.

6. Practicality

business plan | aaltoliike project | december 8th, 2010 | page 49

APPENDIX: MOA SURVEY RESULTS Question 3: How important is environmental friendliness?

25

20

15

10

5

0 2.

3.

4.

5. Very important

business plan | aaltoliike project | december 8th, 2010 | page 50

APPENDIX: MOA SURVEY RESULTS

Question 4: What purposes do you see yourself using products sold in the design shop?

1. Art Product 2. Everyday Product

business plan | aaltoliike project | december 8th, 2010 | page 51

APPENDIX: MOA SURVEY RESULTS Question 5: What is the price range of the products in the shop?

30

25

20

15

10

5

0 100 Euro or less

200 Euro

300 Euro

500 Euro

1000 Euro

2000 Euro

More

business plan | aaltoliike project | december 8th, 2010 | page 52

APPENDIX: MOA SURVEY RESULTS

Question 6: Where should the design shop be located?

1. City Center 2. Aalto Campus 3. Design District

business plan | aaltoliike project | december 8th, 2010 | page 53

APPENDIX: MOA SURVEY RESULTS Question 7: Do you think the connection to Aalto and its students gives extra value to the design shop?

30

25

20

15

10

5

0 1. Very little

2.

3.

4.

5. Very Much

business plan | aaltoliike project | december 8th, 2010 | page 54

APPENDIX: HOLLAND TRIP RESULTS

business plan | aaltoliike project | december 8th, 2010 | page 55

APPENDIX: HOLLAND TRIP RESULTS

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