Submarino Team 2 PresenationFall 2005

1
Case Analysis
MIS 6413 September 19th, 2005 Instructed by Dr.
Richard S. Segall Presented by Shane Banks,
Deniz Gezgin, Erin Huang, Trung Nguyen, Missie
Swink and James Odom
2
Presentation Outline
1. Submarino Profile Market Scale Missie
2. Business, Revenue, Cost Models Trung
3. SWOT Core Competencies Deniz
4. Problem ID Business Model Evolution- Shane
5. Focus Marketing Strategies- James
6. Fulfillment, IPO Strategies New Evolution-
Erin
7. Q A- Entire Group Members
3
Submarinos Profile founded in June, 1999
Founded by Bonchristianos (also the current CEO)
Establishment
Sao Paulo, Brazil
Headquarter
Pure-play B2C e-retailer company
Business Model

Capital
Largely rely on funding
Market
Ibero-America (Brazil, Argentina, Mexico, Spain,
Portugal)
Decentralized operation w centralized
administration
Org. Structure
Downsized from 603 to 547 full- and part-time
employees by Feb. 2001
Employee
Books, CDs, MP3, Toys, Software, Cell Phones ,
etc.
Product
Service
24X7 delivery telephone-based customer service,
advanced search engine, proprietary,
country-specific content, multiple payment
options, intl shipping, gift wrapping
Front office-Microsoft based Back office-Oracle
based
Technology
4
International Market Scale
Replication of the business model used in Brazil
Brazil
Argentina

• Launched by
• Jul/Aug, 1999

• Launched by
• Nov/Dec, 1999

Spain
Portugal

• Launched by
• Nov/Dec, 1999

• Launched by
• Sep/Oct, 2000

Mexico

• Launched by
• Nov/Dec, 1999

5
Business Model of Submarino
Concept
Replicating the Amazon.com business model in
Ibero-America emerged as a potential opportunity
and to become a B2C market leader in this region.
Value
Capabilities
To customer Provide a variety of products with
convenience innovation by exceeding their
expectations To Investors High rate of return To
employees Higher pay benefits w/
self-fulfillment

• Management team
• Blue-chip investors
• Strategic partners
• Warehouse and fulfillment operations
• Technology infrastructure

6
Revenue Model

• Products sales
• Advertising revenue
• Posting charge
• Affiliate fee
• Referral fee

7
Cost Model

• Fulfillment
• Staffing cost
• Infrastructures
• Marketing budget
• Partnership fee

8
SWOT Analysis

• Strengths
• First-mover advantage
• Experienced leadership decision-making
• Great scale of outstanding offerings
• Splendid partnerships in operation
• Continuous evolution of digital platform
• Enthusiastic creative workforce
• Cost-effective marketing programs

• Weaknesses
• Capital resource heavily relied on funding
• Lack of time for mgmt team in the central
  operation headquarter in Brazil
• High sales, marketing, and labor cost due to its
  impetuous strategy of market expansion
• Lower performance compliance in Spain
  Portugal
• Lagged technology in back office operation

• Opportunities
• Expected growing B2C market
• Potential growth of C2C auction market
• Favorable demographic trends in Latin America
• High inflation, interest rates, and cost of
  capital
• Privatized telecommunications opened market in
  Argentina, Brazil, and Mexico

• Threats
• Inferior consumer purchasing power
• Suspicious attitude in online purchase
• Poor logistics infrastructure
• Intensive global competition

9
Core Competencies

• Management team
• Blue-chip investors
• Strategic partners
• Warehouse and fulfillment operations
• Technology infrastructure

10
Evolution of Business Model

• July 1999
• Acquired Booknet and launched
• Brazilian operations
• September 2000
• Operations in Brazil, Argentina,
• Mexico, Spain and Portugal

• Quickly launched new product lines
• MP3 downloads, rare books, books
• in English
• CDs, toys, electronics, computer
• supplies and cellular phones

Extend
Enhance
Expand
Exit

• Acquired Officenet
• Entered B2B market
• Canceled IPO

• December 2000
• Spin off Officenet
• Secured 3rd round of funding

Remained E-Retail Business Model
11
Problem Identification

• Financial Challenges
• Raising Capital, Investor Pressure
• Operational Challenges
• Poor telecommunications and logistics
  infrastructure
• Technological Challenges
• Overhauling back office systems to support
  growth

12
Adopt Porters Focus Strategy

• Concentrate on serving the central
• operation-Brazil Argentina
• Pros Know the customer base and know it well
• Aggregate resources to meet customers needs
• Increase customer loyalty
• Set a truly replicable business model for
  future expansion
• Cons Limit the revenue scale
• Close down operation in Spain Portugal
• Pros Avoid complexity and hard-to-manage market
  scale
• Eliminate unnecessary costs
• Cons Disconnect Submarinos performance brand
  name in
• Europe

13
Improve Marketing Program
14
Enhance Fulfillment Technology

• Study successful case of local online e-retailer
• Focus on shortening the order processing
  delivery
• Easier to conduct research learning processes

Logistic Benchmark

• Study the practices of Amazon.com Wal-Mart
• Focus on fulfillment processes accuracy rate
• System integration between order mgmt warehouse

Inventory Control Benchmark

• Hold employees training seminar
• Organize and educate its supply-chain network
• Integrate SCP with its ERP system
• Design incentive for vendors employees in
  improving work efficiency

Advance Back Office Operation

• Develop more contact options listed on web-
• email, instant chat with rep. telephone rep.
• Promote effectiveness of communication customer
  service

Enhance Customer Communication
15
Offer IPO in Brazilian stock market

• Satisfy investors expectation
• Generate more capital
• Support all necessary investments
• Raise the public awareness to individual
  investors
• Indicate thriving spirit to current investors

16
Strategic Evolution of Business Model

• Customer service options
• Customized marketing offer
• Multi-language capability
• Frequent update of web

• Auction service
• Evolve into an exchange business
• model

Extend
Enhance
Expand
Exit

• Spain Portugal markets

• Offer the latest products on line
• Discover higher gross margin items

17
Q A
18
Question 1

• What is Submarinos
• business model?
• strategy?

19
Question 2

• How does Submarino provide value how should
  Submarino return the value to its
  investors/owners?

20
Question 3

• What are the strengths and weaknesses of
  Submarino?

21
Question 4

• How did Submarino evolve over time and position
  itself in the market?

22
Question 5

• Can Submarino truly be compared to Amazon.com?