DAFZA Online Trading Portal and Application - Case Study Example

New Venture Business Plan: DAFZA Online Trading Portal and Application and Executive Summary The world is increasingly embracing globalization and there is no better way to achieve the benefits of globalization other than utilizing IT in business operations. This business plan shows the benefits that DAFZA stands to get by developing an online platform that will enable its clients to network and collaborate in their business ventures. The product is an online trading portal and an application used on smart gadgets. DAFZA Online Trading Portal and Application is expected to leverage the potential of over 1600 companies enabling them to collaborate and network so as to enjoy economies of scale. The economies of scale will allow these companies to maximize their profitability and save time. The amount of funds being sourced for is US $250,000 which represents the total capital expenditure. The money will be used to fund the development of the portal and application. This paper will show the benefits of such platforms and why DAFZA ought to finance this business venture. Table of Contents Executive Summary…………………………………………………………………….2 Sales/Marketing Plan…………………………………………………...………………5 Risks…............................................................................................................................8 Operational Plan……………………………………………………………………….10 People Plan…………………………………………………………………………….12 Financial Plan………………………………………………………………………….13 Strategic Plan…………………………………………………………………………..14 Deal Opportunity………………………………………………………………………16 Personal Plan……………………………………………………………………...……17 Recommendation………………………………………………………………………17 DAFZA Online Trading Portal and Application Introduction The Dubai Airport Free Zone Authority (DAFZA) is a platform set up by the Dubai government to transform the economy into an investment-driven economy. DAFZA is one of the most efficient free zones in the world (dubai.ae, 2014). A free zone is a special area set aside by the government where companies can set up an operation and be taxed very lightly or exempted from taxation altogether. At the moment, DAFZA has more than 1600 member companies in its facilities set up adjacent to the Dubai International Airport (DAFZA, 2013). These companies offer products and services in diverse areas of interest such as aviation, pharmaceutical, logistics, banking, engineering, food and beverages and many others. There is diversity which if harnessed can result into an even higher contribution to Dubai’s GDP. At the moment, the revenue from DAFZA contributes an average of 4.5% of the total Dubai’s GDP (Geronimo, 2013). In this data-driven era, it is extremely imperative that business be able to have the relevant information as and when required. The world is increasingly adapting new technology. DAFZA has been on the forefront technology-wise utilizing IT services to interact with its member companies. As such, it has been able to introduce an online transactional portal where members can access the various governmental services such as registration, payment, and many other services. But this platform, Tas’heel, is a government-to-business (G2B) type and is hardly beneficial to the business beyond their interaction with DAFZA (DAFZA, 2013). This necessitates the establishment of a platform that will connect businesses to businesses hence creating a virtual business market. Frynas and Mellahi (2011) assert that nearly all the world’s best companies have built their enterprises through collaboration and networking, this is where the world is heading to. As established earlier, DAFZA has more than 1600 clients operating in a wide range of business sectors. If DAFZA can leverage this untapped potential by providing a B2B platform where these clients can interact without having to go through DAFZA then a vibrant virtual business market can be built, consequently strengthening the reputation of DAFZA as one of the world’s leading business hubs (Noack, 2009). This business plan outlines how DAFZA can set up a cheap yet effective B2B platform by setting up DAFZA Online Trading Portal and Application. The sales and marketing plan, the risks involved, the operational and financial plan and the strategic plans will be explicated herein after. Sales/Marketing Plan DAFZA Online Trading Portal and Application is the product to be introduced into the market. It is software that will enable the companies who are DAFZA clients to network and collaborate in their business activities without interference from DAFZA. The uniqueness of the product is that it, unlike physical interaction, opens up the vast possibilities for interaction to its members (Castells, 2011). It is like having a specialized internet just for the members who, by setting up their businesses in Dubai, have common interests. The product also will not only offer a portal in form of a website, but also an application that can be installed in smart devices such as smart phones and tablets. The portal and application will fill the knowledge gap that exists between the clients. The companies can market their services there, form partnerships and collaborate in many endevours that are going to improve their profitability (Wang et al, 2012). The targeted market is wide and includes all the companies in and outside Dubai. However, they have to first be registered as DAFZA clients before they are able to utilize this facility because the Portal and Application will be DAFZA’s brand. A total of 560 companies have already confirmed interest and the numbers are expected to grow as the understanding of the potential opportunities and benefits brought by the portal and application increases. Furthermore, already 300 have confirmed their willingness to utilize the platform. Some of the companies that have confirmed interest include Kawasaki heavy industries, Volkswagen Middle East, Airbus, Audi Middle East, Applebees UK Ltd and Himalaya Drug Company. Companies from the Far East are the majority in terms of membership then America’s then Europe. The following chart, Figure 1, describes how the large Far East market is shared. Figure 1 Marketing, Pricing and Industry Size The Online portal and application will be rolled directly to the customers upon payment of annual fees. A direct marketing approach will be used, advertising the portal over the internet to attract those companies that are not DAFZA clients but will like to have such a platform to interact with other businesses (Sekkat, 2010). The platform will also rely on referrals between its members to net more clients. The promotion plan will involve offering a one month trial period that will give the members a taste of how much the online portal and application can expand the business prospects and horizons. DAFZA clients who would like to utilize the platform will be required to pay an annual fee of US $500. No other charges will be levied. The amount paid will be directly remitted to DAFZA as operational income. This is because the project is DAFZA’s initiative and it will fund its set up exclusively. The pricing was arrived at arbitrarily but with a motive of generating revenue while at the same time offering a fair price to the clients. The US $500 per year fee is one of the cheapest fees levied for such services offered. For instance, Virtuzone Free Zone charges a total of US $720 in total for its platform while Dubai Internet City charges US $850 (Hung-Wen and Jhy-Hong, 2010). Table 1 shows a summary of some of DAFZA Online Trading Portal and Application competitors: Free Zone Pricing in USD UAE Free Zone 700 Virtuzone 720 Dubai Academic City 450 Dubai Internet City 850 Dubai Media City 600 Table 1 The total size of the market is immense. It is estimated to be valued at US $100 million in revenue. In the past 5 years, DAFZA, through Tas’heel, has been generating an average income of US $52 billion (DAFZA, 2013). The market is expanding, providing a new prospect towards profitability. DAFZA has more than 1600 members at the moment. It is also registering more than 150 companies every year, thus presenting a bulging market for the online portal and application. With the introduction of this platform the number of new entrants per year is expected to grow exponentially to more than 300 companies per year. Risks Just like in all business ventures there are risks involved, the developing and rolling out of DAFZA online trading portal and application is not any different. The main risk is posed by the competitors who can provide better solutions (Jordan, 2012). The competitors are international as well as local; they are also direct as well as indirect. The indirect competitors include all the Free Economic Zones that may compete for customers with DAFZA. The main local competitor is UAE Free Zones which provides a suitable environment for companies to operate in by charging no tax on corporate or personal incomes. The risk that UAE Free Zone poses is that unlike DAFZA which restricts membership to those companies that do light manufacturing; the former is not restrictive, allowing even heavy industries. This is thus a competitive advantage to UAE Free Zone and may attract some larger companies at the expense of DAFZA. The Virtuzone Free Zone and the Dubai Internet City and Dubai Silicon Oasis are economic free zones that offer trading benefits to IT companies; they are specialties in IT and therefore provide better infrastructure for the companies in the IT industry (Chen, 2005). This threat has been mitigated by offering a platform that integrates and provides an opportunity to connect with companies from all business sectors, not just IT related companies. The same applies to Dubai Academic City and Dubai Media City which specialize in academics and media related companies respectively. The software vendors who may offer direct competition include Cygnet Infotech, Provectus IT, ScienceSoft, JetBrains, Clarity and DataArt. Provectus is the main competitor; it offers B2B solutions to clients who would like custom-made networking platforms. Clarity is the second competitor who may pose a threat. It is a web designing company that specializes in building interactive websites for companies. These two have rave reviews for their business solutions (Graetz and Joud, 2013). The main operational risks include the threat posed by globalization and cybercrime. It is actually paradoxical that the DAFZA online trading portal and application are all about promoting globalization trough networking and collaboration yet globalization is its main operational risk. The internet has effectively managed to transform the world into a global village where information is readily available as and when needed (Hung-Wen and Jhy-Hong, 2010). Consequently, some targeted companies may not see the need to enlist the services of DAFZA online trading portal and application. This risk will be addressed through extensive marketing of the product to ensure that the prospective clients fully understand the benefits they are foregoing by choosing the general internet over this platform. Online operations are always under the threat of cyber attacks. It is estimated that more than 1500 cyber attacks are recorded daily throughout the world (Jordan, 2012). This poses a huge risk to the companies that will be using the product since the information shared through the portal and application may be of sensitive nature which hackers can use to the clients’ detriment. There is nothing much that can be done except to make sure that the software has been made to the right standards and that it has no bugs that can be exploited by malicious hackers. Regular upgrading of firewalls and constant surveillance for security breaches will also aid in data protection. Operational Plan The product, as stated earlier, is the DAFZA online trading portal and application which is a software application that is meant to create a virtual business market for DAFZA clients. It is meant to facilitate networking and collaboration between members to achieve economies of scale, expand business opportunities through collaboration and networking. The facilities and equipment needed are mainly high grade computers and the application software to be used to develop the platforms. The project is also hugely reliant on personnel who should be able to clearly envisage the situation and develop a portal and application that offer maximum possibilities. The monetary investment required amounted to US $250, 000 upon the first estimate. To minimize the monetary investment less personnel will be used to develop the product though this will mean more time taken to complete the project. The product will leverage the strengths of the customers, capacity and capabilities (Chen, 2005). For example, since most companies operating within free zones are aiming at reducing their operational expenditure, the DAFZA online trading Portal and application will be developed in an inexpensive way providing the basic services that actually add values to the clients’ operations. Other applications or potential uses of the platform that are not actually beneficial will not be included. For example, Dubai Academic City has a portal where schools and academics can interact. On the platform it also has several games that members can play; clearly such extras are not necessary in this case. The key operations and stages include conducting a market survey and analysis, actual development of the software, quality testing and debugging, trial, marketing and promotion and the actual rolling out and use of the platform. All these activities are expected to be carried out within 6 months. The market survey will analyse the market to know what facilities and features ought to be included in the portal and application. This will enable the software developers to tailor the product to a specific target audience, albeit providing an opening for an expansion of the market. It is imperative that the clients feel that the product was made for them, to solve their specific problems and fill a specific niche. The software will then be developed by a team of highly qualified programmers then tested and debugged by a different group of programmers for any errors. After certifying that the product is functional, the prospective users will be offered a one month trial period to test the product. This will be complemented by the marketing and product promotion over the internet by DAFZA. The commercial online trading portal and application will then be rolled out. Then the clients will be required to pay the annual fee to start using the platform. The following table, Table 2, shows the expected timeline. The timeline is tentative and may be changed if the circumstances dictate so. Key Milestone Timeline Market survey and analysis- Analysing the market for specific qualities 4 Weeks Actual development of the online portal and application 8 Weeks Testing and Debugging 2 Weeks Piloting 4 Weeks Marketing and product promotion 4 Weeks Registration and rolling out of the platform for commercial use 1 Week People Plan This venture will require a total of 50 people to carry out all the activities as outlined in the operation plan. The bulk of it, 30, will be comprised of software developers and programmers which will be divided into two teams, one team will act as the primary developers while the other will do the testing and quality management to detect and remove any bugs. These individuals should be highly skilled in software developing and must be proficient in at least four programming languages including C, C#, Python and Java (Graetz and Joud, 2013). They each should have, individually or collectively, have developed a fully functional website or application on which they must be able to show the codes. This team will be tasked with analysing the DAFZA Tas’heel and model a similar portal only that it will be tailored towards business to business interaction. The other 20 personnel will include administrative officials who will manage the portal and set it up and running if it crashes and will also include the marketers. The project will not need any full time support in terms of consultation but will maintain an external advisory support team to seek clarification, directions and advise from. Lastly, in order to keep the teams functioning at full capacity generous compensation strategies will be adopted. For example, all the software developers will be paid $6,000 as remuneration besides a bonus if they develop an error-free application and a fully functional portal. According to the motivation theories, adequate remuneration is one of the factors that contribute to one’s motivation and job satisfaction. The Maslow’s hierarchy of needs implies that a highly paid employee is happier than a lowly paid one since he can satisfy his basic need and move up the pyramid. Hertzberg Two Factor theory points out that a better pay is one of the factors that cause satisfaction. Apart from using remuneration as a reward and motivation plan a performance appraisal system will be put in place. The 360 degree feedback system will be used. The juniors and the seniors will evaluate one another’s work (Cullen and Parboteeah, 2009). Financial Plan The following table, Table 3, summarizes the various expenditures and incomes expected: Item Value in US $ Development cost 225, 000 Equipment cost 25, 000 Total Capital expenditure (CAPEX) 250,000 Working capital 300,000 Yearly Subscription 500 Expected number of clients in the first operational year 300 Expected Margin 0 (zero) As is evident from the summary of the project’s financial plan the project is not directed towards making profit since its margin is at zero. The revenue will come from the members’ yearly subscription at US $500 per member. Therefore, the business venture will be a repetitive one as opposed to a one-time transaction. The capital expenditure amounts to US $250,000 which is will include the total development costs and cost of equipment used for the development of the portal and application. Given the projected number of sales in the first year of operation, DAFZA will be able to break even in the second year of operation. The number of members required for the project to break even is 500 members. Though DAFZA has 1600 clients already, they are expected to take their time before adopting it. If all 1600 plus members use the DAFZA online trading portal and application, paying the annual fee of US $500 then the business will be able to break even during the first year and might even be able to charge as low as US $200 in the subsequent years making it one of the cheapest networking platforms in the business world offered within a free zone. Strategic Plan This business venture has the potential to become the most effective and efficient online portal and application in the world. It has been established on a pedestal that is already at the top of the world with DAFZA lauded as the best free zone in the world at the moment. The vision of this business venture is to be a globally recognizable brand in 10 years. The following is a short SWOT analysis of the venture in 10 years: Strengths Increased customer base- with the rate of registration averaging at over 150 businesses per year, it is safe to project that in 10 years time the number of clients served by DAFZA online trading portal and application will be at around 4000 companies. Recognized brand- At the moment DAFZA is already globally recognized and utilizing this popularity it should not be hard to make its portal and application as recognizable as the organization itself. Tailored platforms- As the number of clients increases it may become imperative to group related businesses together and tailor a bespoke portal for related companies. Therefore, in 10 years this portal will have undergone restructuring to create divisions to enable easier networking between companies with similar interests (Jackson, Harris and Eckersley, 2003). Low Cost Platform and more Sales- The objective of this platform is not profit making, therefore, in 10 years time the mode of operation will still be the same. As members increase the business will be able to utilize its economies of scale and offer services at even lower costs than it is planning at the start. Weakness Non-profitability- As stated earlier, this venture is not about making profit, breaking even will suffice. This will always represent a weakness to the organization since there is a huge potential for profitability if the platform could have charged competitive prices aimed at maximizing profits. Opportunities Increased Market Base- With the business world drifting towards IT, collaboration and networking, there is no platform that aptly captures the essence of this revolution. It is just a matter of time before such ventures prove to be the key towards success; this is the situation in 10 years time. As such, there is expected to be an increased market base which will be more than 5 times the existing one. Expand beyond DAFZA- in 10 years time, the portal and application may be tailored to accommodate all business in the world even if they are not DAFZA clients. Threats Competitors- As always, competitors pose a threat. Right now this project will have 5 major competitors at inception, as pointed out earlier on in this report. In 10 years, that number is expected to have increased and the competition level to stiffen. Globalisation- With the world reduced to being a global village it will not be a surprise if the portal and the app are rendered redundant in 10 years time. Deal Opportunity This project will require US $250, 000 to fund it from start to completion. These funds will be obtained from DAFZA. The invested amount will be used to develop an interactive portal and a smart technology application for interested members. The return on investment for DAFZA will be in form of yearly subscription from the members that will be utilizing the said platforms. The US $500 per registered company will be received as direct revenue which will in turn help in the maintenance and upgrading of these platforms over the years. Personal Plan The urge to stay relevant and create a competitive advantage is what drove this project. Businesses are collaborating in their operations and networking to reduce their operating expenditure, this presented a perfect opportunity to introduce a product that will harness this untapped potential (Sekkat, 2010). I strongly believe that through the development and rolling out of these platforms a unique value proposition for DAFZA will be created which will be hard for competitors to replicate for a very long time. During that time DAFZA will attract more companies improving its profitability and contribution to Dubai’s GDP. Recommendation Given the cost of the project and the possibilities the venture can open, it is extremely important that DAFZA approves and fund the project. The project will not only be able repay the organization by the end of its second year but will also be a massive unique selling proposition for a long time (Jordan, 2012). References Castells, M., 2011. The Rise of the Network Society: The Information Age: Economy, Society, and Culture. New York: John Wiley & Sons. Chen, S., 2005. Strategic Management of e-Business. New York: John Wiley & Sons. Cullen, J., and Parboteeah, P., 2009. International Business Strategy and the Multinational Company. New York: Routledge. DAFZA., 2014. Why Dubai Airport Free Zone? Dafz.ae, [online] Available at: [Accessed 19th February 2014] Dubai.ae., 2014. Dubai Airport Free Zone Authority. Government of Dubai, [online] Available at: [Accessed on 19th February 2014] Frynas, G., and Mellahi, K., 2011. Global strategic management. Oxford: Oxford University Press. Geronimo, A., 2013. DAFZA, 44% increase in the demand for space. Trade and Export, [online] Available at: [Accessed on 18th February 2014] Graetz, M., and Joud, R., 2013. Technological Innovation, International Competition and the Challenges of International Income Taxation: Columbia Law Review, 113(2), pp. 347-445. Hung-Wen, L., Jhy-Hong, D., 2010. The effects of e-business on the performance of strategic alliances. Total Quality Management & Business Excellence, 21(7), pp. 707-724. Jackson, P., Harris, L., and Eckersley, P., 2003. e-Business Fundamentals. London: Routledge. Jordan, J., 2012. Information, Technology, and Innovation: Resources for Growth in a Connected World. New York: John Wiley & Sons. Noack, S., 2009. Business Guide: Doing Business in Dubai and the UAE. New York: Books on Demand. Sekkat, K., 2010. Market dynamics and productivity in developing countries. New York: Springer. Wang, S., Li, L., Wang, K., and Jones, J., 2012. E-Business systems integration and a systems perspective. Information Technology& Management, 13(4), pp. 233-249. Read More