Group B Course Project: CE Consulting Specialist

CSCE Final Report for CanGo 2014

Group B Course Project: CE Consulting Specialist

Jacqueline Crane, Tamika Nnadi, Philip Tappin,

Glenda Wallace, Tiffany Nazarchyk

BUS 460

Professor Donald Butler

DeVry University

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Executive Summary

By Philip Tappin

CanGo is an online company who sale and rent eBooks, music,

movies, and DVDs. They have experienced rapid success and are

interested in branching out in the online gaming industry. CanGo

has grown a successful, competitive company that’s done a great

job thus far at meeting the markets needs and maintaining

profits. There comes a time when new development is needed in

order to avoid being surpassed.

We are CE Consulting Specialists (CECS) and this report

details our findings and recommendations for CanGo to use in

their endeavors. This document contains research of CanGo’s

operations that was gathered using multiple analyses. This data

helped us to determine its current position in competitiveness,

their effectiveness in marketing opportunities, decide which

strategies are best suited, define the financial situation and

determine the profitability ratios as a barometer for the

company. Our recommendations were built upon a SWOT analysis.

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We know that they have been fortunate to experience this

level of success with their lack of a defined mission and vision

statement as well as strategic planning. In order to become

serious contenders and solidify themselves in the business of

online gaming they will need to have a well-developed business

strategy that uses metrics to ensure the key indicators of a

business’s health are in place. It is the purpose of this report

to address CanGo’s senior staff and board members concerning

analysis made while reviewing your company.

Marketing Analysis for Can Go

By Jackie Crane

The state of online gaming has increases to 41.4 billion

dollar market from 7.4 since 2003 including estimate cost until

2015 (Statisia, 2014).We can see that the trend is always going

up. Online shopping has the same type of increase, from 167

billion in 2010 to 491 billion until 2018. (Statisia, 2014) Some

people do not like the mall, or have the time to search different

store for items to find the best price. During the holiday season

people are busy with family, parties, dinners, school functions

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and do not have the time to do all their holiday shopping with

the quick, safety and easiness of online shopping is a great

help. With online shopping you can search an item, find the best

price, buy it there and have it shipped and in your home as

little as 24- 48 hours if needed. We at Can Go are right there

with our competitive pricing on books, E-Books, music and now

gaming.

With our new adventure to online gaming we are looking at

large demographic pool, ages include early teens up to and

including customers in their 40’s. This includes all genders, all

races, and nationalities across the world. With online gaming

you will be able to play your friends next door or meet someone

in another country and play against them in real time. You are

able to make friends that you can keep in touch with all time,

make gaming alliances, and breaking all stereotypes of nerds,

jocks, and any other labels society has come up with. Because of

this everyone is equal, except if you are better in one game or

another.

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When looking into online gaming and shopping the search is

endless from A to Z and everything in between. We know what the

customer is looking for and better anticipate what they are

buying with the trends and there favorite artist or authors from

their shopping history and send them updates when their favorites

have new items.

SWOT Analysis

By Jackie Crane

I) Strengths

A. Diversified Products

1. Offer book, E-books, videos, online gaming

2. Able to get more the one product from same company

B. Growth of online gaming

1. People of all ages are playing more games online

2. Able to play with anyone, any time, and any where

II) Weakness.

A. Delay in Delivery during busy periods.

1. Out dates picking system

2. Buy or create a new picking system

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B. Wrong Orders

1. Too many steps to pick the correct order.

2. Stream line the pick and pack stations, with double

check system.

III) Opportunities

A. Upgrading the ASRs

1. With a new ASRs increase customer satisfaction

surveys.

2. New ASRs mean quicker picking and fill orders with

fewer errors.

B. Increase growth of company

1. With now products comes new customers, new

technologies, and new office space

2. New products that we can supply all customers.

IV) Threat

A. More established Companies

1. Companies like Amazon, PlayStation, and Xbox have

been around for a long time and worked out the bugs.

2. Years of experience and customers versus no

experience with startup project.

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B. Computer hackers and system crashes

1. People are able to hack the computers and crash the

system in order to cheat, stop players for playing

and steal customers information

2. The more safe guards in place to prevent hackers and

crashes

Competitive Analysis

By Tiffany Nazarchyk

Due to CanGo’s diversity in selling not only online games,

but books, music, and movies, they have two different markets

they must compete with, online gaming and online shopping. First,

the online gaming portion of the business brings in competitors

such as Kongregate, Addicting Games, and Pogo. The online

shopping sections bring in marketing giants such as Amazon,

ITunes, and Barnes & Noble. For this competitive analysis we are

concentrating on Amazon, ITunes, and Addicting Games.

CanGo vs. Amazon

Weaknesses

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Diversity

When it comes to the online shopping market, Amazon has

quickly become a leading competitor. This is due to its diversity

of carrying a majority of products from clothing, electronics,

foods, and entertainment. Unfortunately, CanGo will not be able

to reach the type of diversity or the range of demographics that

Amazon currently does if they do not expand beyond their current

product line.

Pricing

According to Digital Book World (2014), the average price

for a best-selling eBook was $5.36 in January 2014. However, this

price can normally shift anywhere from $5.00 to $8.00. In a

private CanGo memo titled E-Book pricing, it was discussed that

CanGo could possible lower their prices to around $8.00 per eBook

to potentially reach 50,000 sales. If can go continues with the

average $8.00 per eBook price they will be at the top of today’s

pricing market.

Strengths

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Vendor Size

CanGo does have the advantage of over Amazon by being more

specialized. This means that CanGo can have a closer relationship

with their vendors. According to Jay Greene (2014), Amazon has

more than 2 million third-party vendors. CanGo is able to monitor

their transactions closer due to their smaller size.

CanGo vs. ITunes

ITunes is another major competitor for CanGo because it of

its popularity and similarity in the products they sell. ITunes

specialize in music, TV, movies, and eBooks.

Weaknesses

Name Brand

ITunes has been a product of Apply Inc. since 2000 (Pepitone and

Goldman, 2013) and started off as just an MP3 player system.

However, it has since grown in products and popularity. Some of

the popularity is because of its software ability to run on both

Mac and Windows systems. CanGo is still a relatively new company

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who hasn’t had the chance to grow in popularity and was only

conceived in 2006.

Strengths

Locally owned

CanGo has the advantage of being a locally owned company. By

being locally owned they are able to hold more personal

promotions such as the block party mentioned in “CanGo to Unveil

Online Gaming Venture” in August of 2010. Some customers may seek

to buy from locally owned companies.

CanGo vs. Addicting Games

AddictingGames.com is a purely online gaming company is the

largest online gaming site in the U.S. According to Gartner,

Inc., an information and technology research and advisory

company, the entire video game market is set to reach $111,000

billion by 2015 and PC Gaming makes up $21,601 billion of that

(Gartner, 2013).

Weaknesses

Staffing

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Currently Addicting Games employs an entire community of

employees, third-party developers and professional gamers who

help create the online games found on their site. They are able

to launch at least 12 new games every week (Addicting Games,

2014). As it stands, CanGO has one online gaming developer,

Whitney.

Pricing

All of Addicting Games online games are free while CanGo

plans to offer their games in a subscription plan. This will

again place CanGo in the top pricing bracket of the market. Other

sites, such as Pogo also offer free online games and this

furthers hurts CanGo’s ability to remain price competitive.

Strengths

Potential for Hard Copy Games

Even though Addicting Games is the leading online gaming

site in the U.S, they miss out on a large market share by being

only an online gaming company. For hard copy DVD video game

rentals or purchasing a customer would have to go to a different

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company or website. However, if CanGo utilizes both video games

in both online and DVD format they would be able to reach a wider

base of customers.

Customer

According to their website, Addicting Games is currently

experiencing 3-5 day wait time in regards to customer help

tickets. This is because Addicting Games only has an online email

portal for customer interaction. CanGo, on the other hand, has a

phone customer service line that customers can reach when they

have issues. The wait times for phone customer service vary from

3 -10 minutes.

Competitive Analysis Conclusion

In conclusion, CanGo has weaknesses when it comes to pricing

and the popularity of their name, but they do have some strength

they can build upon. If the company chooses to lower prices while

retaining their vendor size, quality of customer service, and

diversity the will be able to compete in both the online shopping

and online gaming markets.

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Financial Analysis

By Glenda Wallace

CanGo’s current net sale as of December 2009 is $50 million.

They had a loss of 1% due to returns. This is an improvement from

2008 which was 3%. CanGo only has a profit of 11% or 11¢ per net

sale dollar, which is pretty good considering that the 89%

majority takes care of liabilities. The profit was calculated by

dividing the net income by the nest sales. Compared to Barnes &

Noble, CanGo is doing pretty well financially on their return on

assets. In October of 2009 Barnes & Noble ROA was at 2.11% and in

January of 2010 they were down to 1.99% (YCharts, n.d.). This is

the maximum ROA for Barnes & Noble in the past 6 years. In

December of 2009 CanGo seemed to be doing better than Barnes &

Noble with their ROA at 2.3%.

Current liabilities are $37,500,000 and current asset are at

$200,220,000 which shows us that they are able to take care of

their short-term bills. CanGo total assets are $235,900,000

compared to Redbox $1,222,799 in total assets (Coinstar, 2010).

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In comparison and for such a young company Cango is doing rather

well.

CECS was against starting the online gaming until we looked

at the projected profit. If Cango sales 2 million units per month

at 15¢ it will cost them 12¢ per unit. At this level the CanGo’s

profit would be $60,000 per month which I $720,000 per year. CECS

would like to see them sale 1.7 million units per month at 17.5¢.

This will cost Cango 11.5¢ per unit. They would see a profit of

$102,000 per month; $1,224,000 per year.

Strategic Planning Recommendations

By Tamika Nnadi

CanGo has established itself as a viable business. Its

leadership has been recognized for its efforts by its peers and

governing body by awarding its CEO as a leader of the Hudson

Valley Professional Business Association. Beginning as a

grassroots startup, CanGo has grown into an established

corporation. This is evident by the success of its recent IPO

offering.

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Although things are faring well, CanGo can still grow into a

giant in its industry. This all starts with strategic planning.

The area in which CanGo can expand is by focusing on its clients

and employees and making them top priority to daily business.

McNamara (1997) states that strategic planning decides "where an

organization is going over the next year or more”. Strategic

planning is defined as “a systematic process of envisioning a

desired future, and translating this vision into broadly

defined goals or objectives and a sequence of steps

to achieve them.”

We here at CEC are excited about CanGo’s new venture into

online gaming! We are making the following recommendations for

CanGo to strategically achieve long term success within the

online gaming platform while advancing sales in its online

shopping division.

First, CanGo must define its actionable market.

According to the “Entertainment Software Association”,

marketing research indicates that CanGo’s target demographic are

males (54%) and females (46%) in their 30s and younger. The data,

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also, suggests that this demographic is primarily interested in

thinking/ puzzle games but there is also great interest in

action/ adventure games. Like all audiences, this group is

interested in game friendly interfacing and reliable networks.

Online shopping is slightly different in the sense of

shoppers in the market, but has similarities. Cooper Smith of

Business Insider suggests that both men and women shop online an

equal amount of the time; most purchases are made by 18-34 year

old shoppers, but seniors and baby boomer shoppers are

increasing. Shopify.com says that over 65% of customers “abandon”

their carts before checkout. A way to entice customers to shop

and complete orders can be achieved by integrating social media.

CanGo can target their demographics by trending topics and

suggestive sales based on those trends.

Next, CanGo needs to hire web and game developers and

programmers that can create the software that is desirable

to the demographic.

According to the Bureau of Labor Statistics, the median

salary for game developers is $93,000, annually. This will

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require incorporation into the cost benefit analysis for CanGo’s

financials. However, attracting premium talent for development is

critical to the success of the business. Premium developers

should be able to create content that is specifically geared

toward the actionable market and maintain the networks,

databases, and content that keeps the audience interested.

CanGo should implement an updated ASRS system that will

enhance overall online shopping experiences by making them more

efficient and user friendly. This will help to reduce errors in

orders as well as gaming experiences.

We also need to be sure that CanGo is operating in a highly

ethical fashion that represents the interests of its

customers and employees.

Having a sense of morality and conduct is imperative to the

long-standing success and well-being of the business- and more

importantly- the client. CanGo should adequately convey their

goals to everyone within the company by organizing quarterly

meetings which will encourage dialog, comments, questions, and

suggestions. Allowing employees to engage their superiors

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provides a sense of direction and gives the employee an

opportunity to be involved. Creating an ‘Ethics in the Workplace’

course and implementing corporate responsibility and philanthropy

standards will ensure that the company remains ethically sound

and conducive to legal work place policies. Associate Director of

corporate affairs and ethics at Affymetrix, Katie Tillman Buck,

is quoted as saying: “…not being thorough, getting embroiled in

something that just feels bad to people, would be bad for us and

would be bad for the technology's ability to address all those

markets we want to be in."

This is the foundation in which great companies and future

endeavors can be built on.

A few more recommendations for CanGo to become more successful

are to:

Develop a stronger evaluation system such as ones that

utilize 360 degree evaluation techniques.

Maintain a large variety of games while protecting underage

gamers from violent content

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Create obtainable short & long term goals

Incorporate a cost benefit analysis for their financials

Keep average eBook price below $8.00 in order to remain

competitively priced.

Sell video game DVDs as well as continue on with online

video gaming

These adjustments to targeting actionable markets,

recruiting content developer talent, user interface improvements,

and moral standards should increase customer acquisition,

customer base, and revenue for the company. This will allow

growth of the company and employee growth within the company. A

defined path starts with a vision and creates the mission.

Communication lays a foundation that a strong business can stand

on.

Conclusion

By Philip Tappin

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First, I would like to say that CanGo has had a history of

decision making on the fly, if CanGo wants to be successful in

their future ventures than these recommendations need to be

adhered to moving forward. However, I’m pleased to announce that

CE Consulting Specialists recommends moving forward with the

online gaming venture. By instituting our proposed strategic

management recommendations combined with our advice of following

a step by step process in decision making, CanGo will be

Exceptionally- well positioned in both their current market as

well as the online gaming arena, to experience continued growth

and success. After identifying the weaknesses and strengths

through our SWOT analysis, CanGo can now move forward with

certainty in their business decisions knowing exactly what the

current threats are while being positioned to capitalize on the

opportunities that lie in front of them. Installing the ASRS and

changing the ordering system will greatly increase efficiency,

save money and most importantly increase customer satisfaction.

Taking these steps will prepare their business for the next

chapter in CanGos’ story, while placing them on the cutting edge

of the industry.

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While the beginning adjustments of a more defined mission &

vision statement, along with effective communication, and

providing a stable foundation are beneficial, the primary short

term strategic recommendations for CanGo include improving the

online gaming section with the aid of temporary employees. The

online department needs to concentrate first on creating a

sustainable platform for the diverse catalog of games that’s

needed to keep up with leading competitors. With the additional

help of an ASRS and a strong continued financial analysis, the

company should be able to improve the overall fundamentals of the

organization and create a strong public company that investors

will want to take part in, who wouldn’t want to take part in 34%

profit margins?

The marketing analysis shows that over the last 10 years the

industry share has tripled in total earnings and is on track to

increase in the double digit percentiles next year. With a wide

range of demographics in age and gender and the available

potential internationally you can expect big things in the future

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from CanGo if they continue their plan and monitor their

decisions while tracking their progress.

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References

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Group B Course Project: CE Consulting Specialist

Documents