Business plan †CoViTek Essay

CoViTek is an Atlanta based company that offers a unique value added service to the $11 billion dollars video rental industry. CoViTek will revolutionize the industry by renting movies through its video vending machines. These machines are already experiencing tremendous success in Europe, where they were invented. Customers will now be able to rent videos twenty-four hours a day, seven days a week in a timely and efficient manner at the lowest price. Our machines can be implemented anywhere, even in locations that are not accessible to our brick and mortar competitors, and we will therefore focus our efforts on all the strategic locations. Reve-lution Int. will offer a unique business-to-consumer service for the rental of videos and DVDs. The technology, containing a fully automated system, will facilitate continuous rental and return of movies bridging the gap between video stores, who only are open 15 hours a day, and services such as the nonexistent Kozmo. com, who offer video delivery for a premium price. The company has a cost-per-action (CPA) pricing structure. CoViTek’s target customers will include universities with a student body of at least 10,000 in addition to the rest of the city of Atlanta for the first six months of operation. CoViTek will provide their clientele with a complete set of integrated tools within the machine to make accurate and enjoyable purchasing decisions. CoViTek will give video rental customers the freedom of rental 24 hours a day, seven days a week, all year long. CoViTek will build the world’s truly first convenient and efficient rental system†¦ Target Customers Movie rentals have proven to be an integral part of the everyday lives of the American population. With more than $11 billion dollars in rental sales in 1999, we acknowledge the aggregate demand for the video rental industry. Constantly seeking immediate gratification, video rental stores want the most efficient and cost-effective methods of satisfying their customers. CoViTek will make rentals simple by providing consumers the most efficient tools for with which to initialize a rental process. With the killer application technology used in these machines, the customer will be able to conduct multiple searches in order to rent the movie of their desire. CoViTek will further assist them through the provisions of an active preference search, which is currently being used by Amazon. com. This application will determine what the customer rented last and list the preferred movies of that category the customer will like based on past rental behavior. CoViTek’s potential customers will represent the bulk of video rental households who value rental outlet convenience and flexible payment plans. CoViTek will strive for the most efficient, cost-flexible payments and active searches for preservation of quality time. Market Growth Perspective According to analyst Paul Keagan & Associates, at home movie consumption expenditures will increase approximately 40% by 2005 to $27 billion, almost triple the amount spent in 1990. The vast majority of these expenditures, about 83%, will be for video/DVD rentals and retail. However, movie consumption will also encompass pay-per-view and video on demand (VOD) available through cable and satellite services. Video Production Companies Ninety percent of our videotapes will come from one of the six major production companies: 1. Buena Vista 2. Warner Bros. 3. Universal 4. Fox 5. Paramount, or 6. Columbia-Tri-Star The power of these suppliers is very high, as they hold the exclusive rights to the movies they produce. One of our late competitors, Kozmo. com, has built a unique strategic partnership with these production companies. They have developed a profit sharing system with the major production companies requiring no initial investment in the videos, but agreeing to give 40% of the revenue generated by the rentals to the producer of the movie. We believe that this profit sharing system is financially unattractive, although it will allow us to reduce our initial investment costs; it minimizes our profits which in turn will delay our expansion strategy. We will use an initial video vendor, Video Bicicling, based out of Texas to supply us with our videos and DVDs. They will provide us with the most up-do-date movies for competitive prices. Competitor Differentiation CoViTek differentiates itself from its competitors in several key areas. While companies such as Blockbuster and Hollywood Entertainment offer the same features, only CoViTek will incorporate all of the features described below in a way that gives consumers the ultimate ease of use, active preference search, and extremely convenient locations of operations. Time Availability CoViTek’s competitive advantage is based on its time availability for rentals. The machines will be open and available for usage 24 hours a day, seven days a week, all year round. CoViTek will keep customer service readily available even throughout holidays. Strategic Locations CoViTek will implement the vending machines in key strategic locations after performing a detailed demo-geographical analysis of the city of Atlanta. Locations will initially be university campuses and later the urban areas of the city. Each machine will be located in areas where there is heavy human traffic. Payment Flexibility Our pricing will be flexible depending on the amount of time the video is out. Since CoViTek is a system that is open 24 hours a day there are no late fees associated in our model. Our standard rental time for DVDs is â€Å"midnight of the following day† for a price between $2. 50-$3. 00. Each additional day will be between $1. 50-$2. 00. Video Cassettes will be $3. 99 and if returned within 24 hours $1will be credited back. Each additional day will be $1. 99. (Based on new releases) Active Search CoViTek will use an innovative application technology which actively searches for videos categorized by title, actor, new releases, type of movie (action, thriller, comedy), and most frequently rented movies. Relative Competitive Factor Blockbuster Video Hollywood Video Kozmo. com CoViTek Relative Product Quality and Differentiation i i i i Flexible Payment Plan i E-commerce Based i i Brand Recognition % 100% 63% 40% N/A Locations around campuses i i i i Locations on Campuses i i Large video selection.i i Number of employees less than 5/ location i One of the most compelling aspects of the CoViTek model is its portability into untapped realms of video rental opportunities. This will provide the company with a critical advantage-the flexibility to transform itself in response to competitive challenges or to shifts in the video rental market environment. CoViTek’s flexibility will give downside protection to its owners by insuring that new, innovative means of generating cash flow can be realized. Future elements of CoViTek may include: National Expansion. Video rental opportunities in selected national markets such as: Washington D. C. , Los Angeles, Miami and Huston. Washington D. C: our second location has similar features to our first city of operation. It has a few large universities, widely used public transportation, and high pedestrian traffic. The schools we target will be American University, George Washington University, and Georgetown University. Our downtown locations will depend on areas where there is an intersection of the public transportation lines and high pedestrian traffic. Data Distribution. Future plans may include the sale of CoViTek’s proprietary online consumer data to the major video production companies. Specialized Machine Content Another growth opportunity for CoViTek in the future is the implementation of machines with customized video selection. The content of these machines will be select videos and DVDs targeted toward an audience based on specific themes. These machines will be placed in strategic locations based around their themes. Some possible â€Å"themed† machines may include: classic movie machines, foreign movie machines with Spanish subtitles or dubbing, and award-winning movie machines. The placement of these machines will require careful market analysis and planning, and therefore we plan to wait before implementation to gather enough data about the market and the purchasing patterns of our customers. Investment Needs Michel Khoury founder of CoViTek, has accumulated cash in excess of $10,000 for the development and the start-up cost of the company. CoViTek is now prepared to obtain financing through establishing a line of credit and implementing an equipment loan for its initial machine. It will later apply for loans as needed in order to buy more machines as it expands its operation. Using the machines and earnings as collateral CoViTek should have sufficient funds to obtain a line of credit that will secure its implementation of strategy. The initial stage of funding will be used to complete Web-site development, obtain one machines, invest in computer hardware and software, lease location space needed for the machines and market CoViTek during the first 12 months of operations. After 12 to 18 months of operation, CoViTek will require an infusion of an additional $15,000 to expand its brand image and increase its service offerings at an accelerated pace. Successful development and operation of CoViTek will allow it to be self-sufficient within approximately 9 to 12 months of initial operation. CoViTek will be a for-profit company incorporated in the state of Georgia. CoViTek – Start up costs Machines $20,246. 64 Inventory: video tapes $9,210 Cash/ month $2,808 Advertising $8,000 Legal & Accounting $7,000 Insurance $3,000 TOTAL $50,264. 64 Management team Michel Khoury Chief Executive Officer Founder While founding CoViTek, Michel Khoury is Assistant Managing Director at Bear, Stearns & Co. Inc. He is working hand in hand with the Managing Director of the company in order to implement a system of bringing foreign investment to the company. He has had significance experience with young ventures as he has participated in the creation of several companies nationally and internationally. Michel Khoury is also consultant to the CEO of Santege Capital Asset Management Group in New York City. Michel Khoury graduated in May of 2001 from Emory University with a Bachelor of Business administration with concentrations in Finance, Consulting, Venture Management and Marketing.