King Fahd University Entrepreneurs Marketing Source Inc Case Study After going through the case and having team discussion, provide detailed answers to the

King Fahd University Entrepreneurs Marketing Source Inc Case Study After going through the case and having team discussion, provide detailed answers to the below based
on information in the case and your understandings. This should be no less than 2 pages:

Summarize the current situation of the company from all aspects presented in the case.

Describe the problem statement of the company.

Describe “The Workbook Alternative” presented in the case and then list advantages and
disadvantages in details.

Describe “Partnership with Imagine Alternative” presented in the case and then list advantages
and disadvantages in details.

Based on all the above and discussion as a team, provide detailed recommendations and
suggestions. The Entrepreneur’s Marketing Source Inc.
After only nine months in business, Brent Banda, founder and owner of The
Entrepreneur’s Marketing Source Inc. (EMS), felt like he was facing the biggest
challenge of his career. His business cards promised to provide “ideas, advice, and
solutions” to other companies in Saskatoon, yet Brent wasn’t sure what advice to give
himself regarding the future of his company.
The City: Saskatoon
Saskatoon is the largest city in Saskatchewan with a population of 219,000.
Situated along the banks of the South Saskatchewan River, the city prides itself on
developing riverside parks and recreational facilities. Saskatchewan traditionally has
relied on the agriculture industry and one-third of Canada’s agricultural biotechnology
companies are located in Saskatoon. Recently, Saskatoon has steered its growth toward
becoming a transportation and supply centre for the mining industry. It is home to
mining head offices for potash, uranium, gold, and diamonds.
The Company: EMS
Brent started EMS in Saskatoon just months after he graduated from the
University of Saskatchewan with his Commerce degree in Marketing. Although EMS is
incorporated, Brent owns 100% of the shares and is its only employee. He has operated
EMS out of his home for the past nine months and aims to break even by the end of the
year.
The mission statement of EMS is to “establish the company name as a reliable
source of practical marketing information to North American small and medium-sized
businesses.” The idea for EMS was generated while Brent was working on projects for
his university classes. He noticed many small businesses had little knowledge about, or
expertise in, marketing. However, marketing was a crucial element in their continued
success.
Brent created EMS to develop and sell a practical marketing workbook that could
be used by small businesses in Canada and the United States. The workbook was
envisioned as a general guide to help small business owners with no marketing
experience create strategies tailored to their unique business situations. Brent was
confident that, in the future, he could branch out and create a series of workbooks that
focused on specific marketing problems, such as advertising or new product
development.
The first set-back occurred when Brent approached his banker for a $7,000
business loan to start EMS. The banker demurred that a workbook would take some time
to develop and suggested that EMS offer personalized, marketing consulting services to
small business clients in Saskatoon. The consulting would furnish real-life examples that
Brent could incorporate into the book and would provide EMS with steady income during
the workbook’s creation. Brent knew that EMS could not survive without the bank loan,
so he agreed to become a consultant in the short-term while developing his long-term
plans. He was worried, however, that his consulting projects would slow the progress of
the workbook.
That worry turned out to be correct. Nine months after EMS was created, its
consulting business is flourishing. However, Brent finds himself working 50 to 60 hours
per week on personalized consulting and the workbook still is not completed. He also
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attends many meetings and community events in order to develop a referral network of
small business consumers for his consulting activities.
The Entrepreneur: Brent Banda
Brent was raised in a working-class family, and worked as a waiter and in other
service jobs to put himself through university. As a waiter, Brent had to talk to up to 25
strangers a day and he credits this training with giving him the confidence to approach
new people when the opportunity arises. Brent does not consider himself to be a “thrillseeking” risk taker, but feels that starting his own business is a risk that he can afford
because he has nothing to lose. He is single with few assets and is just starting out in life,
so even if EMS does not become successful, he can always start over working for another
company.
Brent credits his education at the University of Saskatchewan for gaining business
knowledge, project experience, and writing skills. The most difficult part of starting
EMS for Brent was feeling confident in his ability to apply his education to practical
problems. However after a short time at EMS, Brent realized that other small business
owners did not possess extraordinary business skills either and Brent learned to be
confident in his strengths.
Brent is constantly involved in business planning for EMS, both for the short-term
and the long-term. Early on, Brent realized that he could achieve business success by
either creating an image for EMS or creating an image for himself. Because he did not
have the money to launch an image campaign for EMS, Brent chose to create an image
for himself as a successful entrepreneur and small business owner. He was head of the
committee for North Saskatoon Business Associates where he produced their awards
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banquet for two years. Recently, he has been named to the board of directors for the
Provincial Exporters Association. Brent is described by others as outgoing, motivated,
and hard-working.
The Consumer: Small-business Owners
EMS targets small and medium sized businesses in North America that do not
have full-time marketing staff. These companies are usually managed by one owner.
Industry Canada estimates that 60% of all Canadian businesses are run by one selfemployed owner. An additional 30% of businesses have fewer than 5 employees and this
number has grown by 30% in the last 10 years. The number of small businesses by
province is provided in Table 1. In addition, over 13 million home-based businesses exist
in the United States.
Compared to larger companies, small businesses often lack depth and expertise in
many business functions, including marketing. While larger companies have marketing
departments and operate with a marketing plan in place, many small businesses have no
formal marketing plan, strategy, or objectives. In fact, many small business owners are
unclear what exactly marketing is and how to apply it to their situations. Consequently,
they are unlikely to seek marketing help.
To understand the small business owner better, Brent conducted a focus group
interview in Saskatoon. The informants agreed that they had a poor understanding of
marketing concepts and felt that a marketing plan was too theoretical and difficult to use.
They were interested in learning more about how to advertise their products, however.
They indicated that they were too busy to read long books about marketing, but were
enthusiastic when Brent introduced a prototype of his workbook and led the group in a
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strategic planning seminar. Brent felt that the positive response to this workshop
indicated that his marketing workbook could be a success.
EMS Consulting Service
EMS is likely to meet its first-year objectives of breaking even and developing a
consulting practice that provides a steady income to sustain the business. Table 2
provides EMS’s financial results for the first nine months of operations. Examples of
EMS’s first-year clients include a husband and wife team who wanted to make their
photography hobby into a full-time career, an architect who was losing clients to his
competition, a real estate firm trying to attract developers, and a glass company that
didn’t know how to advertise. Customers like these contract with EMS to provide
marketing research, create a marketing plan, and/or develop promotional strategies.
Beyond marketing advice, an important part of EMS’s service is the education Brent
provides to small business owners. Instead of handing over a report, Brent explains the
basis for his decisions and provides EMS’s clients with long-range perspectives on their
marketing situations.
Before any consulting work is started, EMS provides a written quote. Currently,
EMS charges $75 per hour for consulting services, but Brent plans to increase this fee to
$85 next year and to $100 after that. Billable hours are recorded as the work is completed
and used as a guide when quoting future projects. However, if billable hours exceed the
original estimate, EMS only charges the amount of the original quote. In the first year,
Brent often has underestimated the amount of time a project would require, but he
expects to improve this variance with experience. All clients provide a 25% deposit and
5
are invoiced after the work is completed with 15 days to make payment. EMS has had no
trouble collecting receivables from clients.
The Competition
Many other companies offer marketing services in Saskatoon. Large consulting
and research firms and advertising agencies provide specific services to larger clients
with marketing departments. These consultants do not actively solicit small business
clients given that small businesses lack marketing and promotional plans, require extra
time and effort, and may not be able to afford their consulting fees. In addition to large
consultants, sixteen small marketing consulting firms are listed in the Saskatoon Yellow
Pages. Finally, many small businesses rely on media agents to help them with their
marketing plans; for example, a local paper or radio station may design ads or help with
strategic planning if a small business owner buys advertising space or time. Media
agents provide this service free of charge.
To attract clients to EMS in this competitive environment, Brent has established a
network of business contacts in the local community. A free newsletter offering practical
marketing tips is mailed to these contacts each month. The newsletter is intended to build
the awareness and credibility of EMS’s service as well as prompting referrals and repeat
business. The newsletter has a professional appearance and has been well-received by its
recipients. A sample newsletter is provided in Figure 1.
The Offer
Although EMS creates promotional strategies and develops advertising plans,
Brent is not a graphic designer; he relies on other local companies to create finished ads,
artwork, and web pages. One design firm he has worked with is called Imagine and is
6
owned and operated by two young designers who quit their jobs with a large local
advertising agency less than a year ago when they became “fed up” with their boss.
Many of the agency’s clients transferred to Imagine shortly after the split.
Brent was surprised when the partners at Imagine approached him with a business
offer. They wanted to create a strategic alliance with EMS; EMS would refer all of its
clients’ design work to Imagine, and Imagine would send its clients in need of marketing
help to EMS. In addition, EMS would share office space with Imagine; the design firm is
housed on the top floor of a building in the trendy Broadway district of Saskatoon.
Although rent in this district can be pricy, Imagine was willing to let EMS share the
space for only $185 per month. EMS would receive one office and share the reception
area and meeting room.
Brent could see the benefits of aligning EMS with Imagine. He would have
access to Imagine’s clients, many of whom were much larger than those he currently had.
Although the partners of Imagine would not allow him to see their financial statements or
discuss their operating income because Imagine would remain a separate company from
EMS, Brent had a good working relationship with Imagine’s partners. In addition, the
partners valued Brent because he wrote clear marketing strategies that allowed them to
“concentrate on the fun part of the business – making ads.” However, if EMS enters into
the proposed strategic alliance and receives new clients from Imagine, Brent can see that
all of his time will continue to be eaten up by consulting. Publication of the workbook
would be delayed for at least another year.
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The Workbook
If EMS does not enter into the strategic alliance with Imagine, Brent feels that he
can reduce his consulting time by taking fewer clients and finish writing the workbook in
the fall. He would like to begin marketing the workbook in Canada in January of Year 2
and enter the U.S. market in Year 3. Brent is encouraged by the fact that consumers
purchased over $3 billion of products through direct sales in Canada in 1994,with books,
newspapers, and magazines accounting for $1 billion of these sales.
Many marketing reference books, video and audio tapes, and seminars already
exist and can be found in bookstores, public libraries, and economic-development
facilities like Industry Canada. However, many of these materials require a significant
amount of time to read, understand, and apply. The strength of the planned EMS
workbook is that it will be a practical, hands-on workbook that is concisely written for
the small business entrepreneur. Brent plans to conduct focus group interviews to further
refine the workbook. In addition, focus group interviews can help in the creation of a
direct response campaign where small business owners can buy the workbooks by phone
after reading a print ad.
The workbooks will be sold through a two-part direct response campaign. First,
direct response ads will be placed in magazines that the small business owner is likely to
read such as Home Business Report or Income Opportunities. The average Canadian
magazine is published quarterly, reaches 50,000 individuals, and charges $2,500 per ad.
The average U.S. magazine is published monthly, reaches 300,000 individuals, and
charges $5,000 per ad. The planned EMS ads will be one-half page size and in colour.
8
On average, 0.2% of magazine readers order products from direct-response ads in the
first month that the ad appears and 0.15% of readers order after that.
Direct mail will also be used to generate orders. The mail piece will contain a
magazine-style article on a small-business topic and a description of the workbook.
Several companies sell lists of businesses that employ five or fewer employees for $.15 to
$.45 per business name depending on the number of names purchased. In the future,
when more than one type of workbook is available from EMS, past workbook customers
will receive updated product lists through direct mail as well. On average, 3% of
individuals who receive a direct mail solicitation respond; the response rate increases to
15% for individuals who have ordered from the company in the past.
Customers responding to the ads will order through a toll-free number. All orders
will require payment in advance, which is standard with low-cost, direct-response
products. A message service will take the order, including shipping information and
credit card number. This information will be faxed daily to EMS and the order will be
mailed through Canada Post the next day. EMS is able to take both Visa and Mastercard
orders. EMS will include a postage-paid survey with all orders to gather information on
its customers.
Brent estimates that the workbooks will cost between $6.12 and $6.39 to produce
and mail, depending on whether they are sent to Canada or the U.S. Table 3 provides
workbook cost information. EMS will sell each workbook for $29.95 (Canadian) which
includes shipping, but does not include taxes. The type of marketing activity planned and
the estimated number of workbooks sold in Year 2 and Year 3 are presented in Table 4.
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Brent also has estimated the amount of income he expects in Years 2 and 3 from
workbook sales, given the above assumptions, which is shown in Table 5.
The Dilemma
Brent likes consulting and working with Imagine. The offer to form a strategic
alliance with Imagine is tempting, given their larger client base. However, Brent’s true
dream is to complete and market the workbook. He is worried that another company may
publish a similar product aimed at the same market. A tremendous amount of potential
profit would be lost. Given the time that consulting currently takes, Brent is sure that he
will only have time to pursue one option: the strategic alliance with Imagine or
completion of the workbook.
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Table 1
Number of Small Businesses by Province
Province
Canada
Newfoundland
P.E.I.
Nova Scotia
New Brunswick
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
B.C.
Yukon
N.W.T.
Total
Businesses
2,324,518
44,274
15,732
73,678
56,852
493,680
826,733
100,135
127,899
278,771
340,323
4,247
9,154
SelfEmployment
1,393,000
22,000
8,000
41,000
29,000
266,000
518,000
64,000
87,000
167,000
191,000
2,700
4,000
Total
Employers
931,518
22,274
7,732
32,678
27,852
227,680
308,733
36,135
40,899
111,771
149,323
1,547
5,154
Small
Businesses
707,886
17,854
5,684
23,689
20.488
169,812
225,655
24,495
30,617
82,162
109,170
1,011
3,455
Note:
•
•
•
•
Provinces do not sum to the total for Canada because the same companies may be
counted in more than one province.
This table excludes the public sector.
Self-employment is unincorporated self-employment only.
Small businesses are employers with less than 5 employees.
Source: Entrepreneurship and Small Business Office, Industry Canada, 1994.
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Table 2
Income Statement for the Nine Month Period Ended September 30, Year 1
Consulting revenue
Cost of services
Gross margin
Operating expenses
Accounting
Marketing
Memberships
Interest and bank charges
Office supplies
Phone
Business meetings
Wages
Total operating expenses
$30,425.88
9,824.04
$20,601.84
$ 850.00
850.73
250.00
804.44
1,665.95
2,266.26
588.48
16,350.00
23,625.86
Net operating income (loss)
($ 3,024.02)
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Table 3
Workbook Cost Information (in Canadian Dollars)
Cost
Printing of workbook
Printing of survey
Postage
Envelope
1-800 number and
answering service
Credit card fee
Total
Canada
2.37
0.10
0.90
0.15
United States
2.37
0.10
1.17
0.15
2.00
0.60
6.12
2.00
0.60
6.39
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Table 4
Marketing Activities and Estimated Workbooks Sold – Years 2 and 3
Year 2
Year 3
Marketing activities in Canada
Direct mail to list
Direct mail to previous customers
Magazine ads
3,000 pieces
615 pieces
3 ads
–1,050 pieces
6 ads
Marketing activities in the U.S.
Direct mail to list
Direct mail to previous customers
Magazine ads
——-
–8,400 pieces
8 ads
Number of workbooks sold in Canada
From direct mail to list
From direct mail to previous customers
From magazine ads
90
92
525
-157
1,050
Number of workbooks sold in the U.S.
From direct mail to list
From direct mail to previous customers
From magazine ads
——-
–1,260
8,400
Note:
•
•
Direct mail to list is sent to the names purchased from list providers.
Direct mail to previous customers is sent to individuals who have purchased the
workbook in previous months either from the direct mail to list or through the direct
response ads.
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Table 5
Estimated Income from Workbook – Years 2 and 3
Year 2
Sales (Workbook)
COGS (Workbook)
Gross margin
Marketing expenses
Ad design
Ad placement (Canada)
Ad placement (U.S.)
Direct mail design
Mailing list
Printing of mailer
Postage of mailer
Total marketing expenses
Operating income
Year 3
$21,174.65
4,326.84
$325,466.65
69,114.24
$16,847.81
1,000.00
7,500.00
0.00
2,000.00
450.00
723.00
1,265.25
$256,352.41
1,000.00
15,000.00
40,000.00
2,000.00
0.00
1,890.00
4,147.50
12,938.25
$ 3,909.56
15
64,037.50
$192,314.91

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