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Animal & Odd Bod Creators


Animal & Odd Bod Creators

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									Animal & Odd Bod Creators
Executive Summary
Animal and Odd Bod Creators Pty Ltd (AOB) makes and sells animal costumes and mascots
and is based at The Basin in the outskirts of Melbourne. AOB was established 27 years ago
and the person who led the team responsible for e-commerce at the company is administration
manager Karen Hoogenbosch.

The company decided to investigate the use of e-commerce in 1998 after receiving customer
requests to get information about AOB through e-mail.

After deciding to try e-commerce AOB spent $2,000 to develop a website and another $2,000 in
internal management and training time in learning how to utilise e-commerce. The business
invested another $600 for the registration of their Internet domain name.

The gross profit generated by AOB through the use of e-commerce was $24,500 in the year
2000 while the ongoing costs attached to maintaining the website were just $1,338. The
company also generated a cost saving of $14,300 in 2000 from the process efficiencies created
by the adoption of e-commerce from the use of e-mail and online banking.

The original reason for adopting e-commerce was to facilitate better communication with clients.
Using e-commerce, the company has also successfully located and sourced reliable overseas
suppliers for the specialised materials used in the manufacturing of AOB products. These
suppliers would have been difficult to find without using the Internet as a research tool.

Encouraged by the results derived from e-commerce, AOB now plans to extend the capabilities
of its website by introducing an online ordering and payments system. The company believes
this initiative will streamline its ordering process and improve cash flow by crediting payments
directly to its bank.

The Business
AOB is a home-based business and the company makes animal costumes and mascots for
companies. The business is 27 years old and employs 10 full time people.

The target market of the business consists of large organisations such as Sony, Melbourne
Storm and Cadbury Schweppes. Their mascots are used for activities such as product and
brand promotions at sporting and trade events.
Getting Started
The increasing number of requests from their customers for e-mail communication led the team
at AOB to investigate the business opportunities available through the Internet. The company’s
management team knew little about e-commerce when they first became interested in this new
business channel.

AOB looked at a range of websites to get an idea of what to include and what could be offered
via the web. Their research found that none of their Australian competitors had an Internet
presence and this also encouraged AOB to adopt e-commerce. After seeking some advice from
business acquaintances, AOB’s management team interviewed several web developers.

The decision was made to outsource the entire website development but no new computer
hardware was required because AOB was already in the process of purchasing computers for
other business activities when they planned their e-commerce initiative.

Current E-commerce Strategy
The first objective of e-commerce for AOB was to use the Internet as a medium of
communication with customers. Because none of AOB’s competitors has an online presence as
yet, AOB also saw e-commerce as a way of gaining a competitive advantage by extending their
customer reach.

The design chosen for the AOB’s website is simple and requires minimal maintenance, which is
essential for AOB because it does not have the resources to dedicate staff to website

The site uses pictures of past work and testimonials from happy customers for marketing
purposes. E-commerce is also used for activities such as online banking.
Revenue and Costs
                                                                       2000                   2001
                                                                      Actual $              Forecast
Gross profit from e-commerce                                            24,500                 28,000
Add: E-commerce cost savings
Time saved sending e-mails to clients                       13,000                13,000
Time saved using online banking                              1,300                 1,300
Total e-commerce cost savings                                           14,300                14,300
Gross benefit from e-commerce                                           38,800                42,300
Less: Ongoing e-commerce costs
ISP and website hosting                                       (738)                (738)
Web maintenance                                                   -               (1,000)
Telephony                                                     (600)                (600)
Total ongoing e-commerce costs                                          (1,338)               (2,338)
Operating benefit from e-commerce                                       37,462                39,962
Less: E-commerce establishment costs
Web development                                             (2,000)               (2,000)
Staff establishment & training time                         (2,000)                     -
Multiple Internet domain name registrations                   (600)                     -
Total e-commerce establishment costs                                    (4,600)               (2,000)
Net benefit from e-commerce                                             32,862                37,962

Financial Analysis
AOB generated a gross profit of $24,500 from e-commerce in the Year 2000. This included
sales to overseas customers that found the company through its website. Ongoing costs
associated with e-commerce amounted to $1,338 in 2000.

The value of staff time has been estimated at $25 per hour in the calculation of the cost savings
obtained from e-commerce. The staff members of AOB use e-mail to communicate with their
customers as well as for debt collection purposes.

It is estimated that AOB saves about 10 hours per week in time spent by staff using e-mail
rather than using the telephone, which translates to a cost saving of $13,000 per year.
Conducting banking activities online, such as transfer of funds across accounts, payroll
administration and bill pay, allows staff to save at least an hour each week, translating to a cost
saving of about $1,300.

The costs associated with the development and design of the website were only $2,000 as a
very simple design was chosen. In order to get the optimum returns from their investment, AOB
invested another $2,000 in time for planning and learning about the application of the Internet in
their business processes. There have been no costs associated with the maintenance of the
website because the company has not yet felt the need for an update but $1,000 for
maintenance has been forecasted for 2001.

With a relatively modest initial investment of $4,600, the business was successful in generating
a net benefit of about $32,862 from e-commerce in 2000. Since the initial costs of web
development and staff training are of a non-recurring nature, the gross operating benefit
generated for subsequent years should contribute significantly to the business’s profitability.

Based on the trend in growth in the past year, it is estimated the additional revenue (after costs)
from e-commerce will increase in the next year to $28,000. AOB plans to update its website,
with further web development costs expected to total $2,000 and ongoing maintenance to total
$1,000. Assuming cost savings are constant for the next year, it is estimated that the net benefit
to AOB from e-commerce will rise to $37,962 in 2001.

Non-financial Benefits
AOB has been successful in generating the following non-financial benefits from the use of e-
commerce as a business tool:
•     E-commerce has allowed the company to communicate more efficiently with its
•     E-commerce is a more efficient debt collection tool.
•     The Internet is now used to source overseas suppliers for specialised materials
      required for the manufacturing of their products.
•     The company now has a more reliable written record of orders by virtue of e-mail,
      which helps it clarify issues with customers.

AOB’s lack of e-commerce knowledge has made it difficult for the company to control the
ongoing maintenance of their website. Although their web developer provided them with
software to allow them to update the website in-house, the lack of technical skills in their team
has made this very difficult. Despite this, outsourcing the on-going maintenance has been an
inexpensive way of overcoming this problem to date.

AOB has been encouraged by the benefits derived from its adoption of e-commerce. The
company plans to develop its website further so that orders can be accepted online. This will
allow AOB to achieve further cost savings by payments being directly credited to the bank and
should also help the company to reduce trade debtors and improve cash flow for the business.

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