BELINGTOGO.COMMEMBERS:

Hafiz Faisal Ch CIIT/SP14-BBA-018/VHRIqra Nadeem CIIT/SP14-BBA-019/VHRMuhammad Kashif CIIT/SP14-BBA-021/VHR

Summary:

* The Company* SCQA* Conclusion

THE COMPANY

The Business

BTG is a retailer and producer of window dressing.The company started in 1954 as a family business, based on the promise fast delivery.To motivate sales, they used a commission-based system.The company received an capital injection from the Investment Fund from Harvard and is on the track to do an IPO.Biggest issue with expansion was hiring and retaining qualified workers.Launched the online store in 2000.

The Numbers

-120 stores in North America.- For the next years BTG aims to increase the number of stores by 40%, funded only by current CF.- The average of sale per store was over 1M.- Big variety more than 20,000 types of blinds in stock.- Store traffic of 300 to 900 people.- Average close rate of 30 to 40% in store.- Cost of stores: US$ 300K-400K per year.- Cost of the website: US$ 480K per year

The Market

-The industry was growing rapidly - Overall industry sales totaled 2.4 billion in 1997 and by 2005 was already up to 2.9 billion - The number of workers in the industry was starting to decline by the early 2000’s as a result of many companies pursuing the online venture - One of the main concerns in the industry is to keep the designs and templates modern to meet the consumers needs. Therefore it is important to keep on the lifestyle trends of customers. - Manufacturers in the market are divided between two segments: vinyl and aluminum. Vinyl are much cheaper to manufacture, but may become discolored. But the aluminum are much heavier and can damage window frames. Both are equally as popular amongst consumers.

SCQA

Situation- Add 40 to 50 retail stores per year, funded entirely out of current cash flow- Their current complement of 120 stores across North America- In January 2000, BlindsToGo.com was launched.- The process was managed by BTG and the site cost US$500,000 to build and US$40,000 per month to host and maintain.- The online blinds Web site competition worked in two camps — (1) order taking sites that received customer orders and passed them on to manufacturers, (2) catalogue sites that posted their houseware catalogues online.- Originally, the board members were not fond of the idea, however, given market trends, competition and the companies desire to expand, they were eventually convenience

Complication

-Hiring and retaining qualified staff.- Some new stores had delayed openings because of this staff shortage.- After 6 months of operation and seeing other retailers start to go online, and the tremendous valuation being given to dot.coms, the board was now encouraging BTG to devote more resources to this venture.- The company was unsure if the online retail business was actually making money, or just breaking even. The case requires a financial analysis in order to determine if the venture is successful in terms of profitability.

Question

- Should the board push forward aggressively?- Is this going to be a break-even business? - Is this just a distraction to the organization? - They are people constrained do they continue to divert valuable management time to this opportunity?- Essentially did the company make the right decision with the expansion of the online retail business?

Answer

1. We believe the online commerce fits the company’s business model and that it is a strategic and profitable decision being that the company is still operating online today.2. Operating online solves the shortage of employees complication of the company.3. Checking the customer satisfactions surveys (available in the exhibits), we can see that they are quite positive; being that costumers are satisfied with the online services offered by the company it means that the company should keep on investing in it.4. Their time is efficiently used on that online venture, indeed it creates synergies that will highly benefit the company in the long run.

Answer (cont.)

5. Given that the customers are happy with the services they are being provided, pending it is a financially acceptable venture, the company did in fact make the right decision on the expansion to the online sector 6. When analyzing the financials of the company, it is known that per month (of the first six months of operations) the company has sales of 60,000 less 40,000 in website maintenance. As the case does not outline the COGS or any other expenses that are associated with the sale of the blinds online, so assuming that the company profits 15,000/ month (allowing 5,000 for COGS) it would take 33 years to payback the venture, which is extremely long however, this is based on the first 6 months of sales, and given the heavy amount of marketing being put into this venture, the payback will likely be cut down to around 6 years, after sales have fully expanded. Which means the venture is profitable and worthwhile.

Conclusion

Even if the online services are less profitable, the e-commerce is the right choice for Blinds To Go for several reasons:• Strategic importance of the website, key factor to beat the competitors• Overcome the shortage of sales personal, which negatively influences the

store sales• Satisfy the customers with new online services• Development of new synergies especially in the long period