The Great Wall:中國之消費者保護平台 - 政大學術集成

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(1)國立政治大學商學院國際經營管理英語碩士學位學程 International MBA Program College of Commerce National Chengchi University. 碩士論文政治. 大. 立Master’s Thesis. ‧. ‧ 國. 學 sit. y. Nat. The Great Wall:中國之消費者保護平台 n. al. er. io. Business Plan for the Great Wall Platform. Ch. engchi. i n U. v. Student: Grant Edward Leach Advisor: Professor Jack Wu. 中華民國一〇三年四月 April 2014.

(2) . The Great Wall:中國之消費者保護平台 Business Plan for the Great Wall Platform. 研究生：葛蘭特. Student: Grant Edward Leach. 指導教授：吳文傑. Advisor: Jack Wu. 國立政治大學. 學. ‧ 國. 立. 政治大. ‧. 商學院國際經營管理英語碩士學位學程碩士論文. er. io. sit. y. Nat. A Thesis. n. a to International MBA Program Submitted iv l C n U NationalhChengchi University engchi. in partial fulfillment of the Requirements for the degree of Master in Business Administration. 中華民國一〇三年四月 April 2014.

(3) . Acknowledgements I take this opportunity to thank Honglin Liu, Naixin Zhang, and Jin Yikai fort their support and friendship as we developed this innovative concept together while on my exchange semester abroad at The George Washington University, Shcool of Business. Together, we can achieve anything.. 治政 support and direction throughout the development of this大 business plan. 立. I would like to thank my thesis advisor professor Jack Wu for providing me with valuable. ‧ 國. 學. I also want to thank Mr. Jackie Lee. If it were not for him, I would not have had the confidence to apply to the National Chengchi University for its elite IMBA program.. ‧. I want to thank all the professors for the knowledge and wisdom that they shared as experts in. y. Nat. er. io. sit. the field of business for guiding me to become an extraordinary manager. I also want to thank my fellow 2012 entered IMBA classmates for the depth of knowledge, and experience that. al. n. v i n they shared with me during thisCjourney they we undertook together. It is because of these hengchi U. people that I am far more prepared, better informed and have built my reserve of knowledge against what is to come. I am forever thankful.. My sincerest gratitude also goes to Ms. Lichi Ho, the executive Secretary of the IMBA program, who has worked tirelessly to ensure that my MBA experience was worthwhile and meaningful.. Finally, I dedicate this thesis to my family for all their support and patience while away from home. They have stood by and supported me through this journey. I especially want to thank i.

(4) . my Mom, Ellen Leach, for teaching me how to be a good kind hearted person. Your heart will always be my inspiration Mom. My father, Gerald Leach, for his social abilities as they have served me well throughout my MBA career. I love you both very much and look forward to moving back to North America upon graduation to be closer to you.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. ii. i n U. v.

(5) . Abstract Business Plan for the Great Wall – Meeting the Increasing Demand for a Safer and Higher Quality Mainland Chinese Marketplace By Grant Edward Leach Short of dramatic protests, Chinese citizens do not have much recourse against unscrupulous. 政治大. manufacturing companies who produce defective or unsafe products. The Great Wall web. 立. and app based platform empowers Chinese citizens to hold manufacturers accountable for the. ‧ 國. 學. true costs of their own neglectful and sometimes endangering conduct. The Great Wall corrects the injustice of companies passing the costs of their negligence on to consumers. ‧. while reaping unmitigagted profits. The Great Wall achieves this by offering a suite of. Nat. sit. y. services and tools that effectively unites similary affected consumers, aggregates their legal. n. al. er. io. retainer fees thereby reducing the costs associated with legal proceedings and connects them. i n U. v. with legal representation that will facilitate highly efficient legal negotiations on their. Ch. engchi. behalves. The Great Wall is the first non-profit social venture supporting the Chinese Government’s efforts to foster accountability among manufacturers and meet the demand for a safer and higher quality marketplace for the Chinese population.. Key Words: Non-profit social venture, Manufacturer negligence, Accountability, Consumer rights, Legal retainer, Mainland China.. iii.

(6) . TABLE OF CONTENTS. 1.1.. Introduction ................................................................................................................ 1. 1.2.. Mission Statement ...................................................................................................... 2. 1.3.. Market Analysis .......................................................................................................... 3. 1.4.. Objectives ................................................................................................................... 3. 1.5.. Financial Projections .................................................................................................. 4. 1.6. Organization Summary ............................................................................................... 4. 立. 政治大. Sector and Organization Overview ................................................................................. 5. 學. Quality Climate in China ............................................................................................ 5. 2.2.. Manufacturing Industry Status ................................................................................... 5. 2.3.. Legal Industry Status .................................................................................................. 6. 2.4. The Great Wall Organization Overview ..................................................................... 6. ‧. 2.1.. io. sit. y. Nat. n. al. er. 2. Executive Summary.......................................................................................................... 1. ‧ 國. 1. i n U. v. 2.4.1 What We do for Citizens............................................................................................ 6. Ch. engchi. 2.4.2 What We do for Law Firms ....................................................................................... 7 2.4.3 What We do for the Chinese Domestic Market ......................................................... 7 3. Organizational Strategy and Competitive Advantage .................................................. 8 3.1.. Differentiation Strategy .............................................................................................. 8. 3.1.1. Notification Service ................................................................................................ 8 3.1.2. Consumer Aggregation ........................................................................................... 8 3.1.3. Cost Efficiency ....................................................................................................... 8 3.1.4. Case Lead Generation for Law Firms..................................................................... 9 3.2.. Competitive Advantage .............................................................................................. 9 iv.

(7) . 3.2.1. Few Internal Hurdles .............................................................................................. 9 3.2.2. Great User Experience ............................................................................................ 9 3.2.3. High Exit Barrier .................................................................................................. 10 3.3.. Competitors .............................................................................................................. 10. 3.3.1. Pre-Manufacture Competitors .............................................................................. 11 3.3.2. Pre-Purchase Competitors .................................................................................... 11 3.3.3. 政治大. Market Analysis .............................................................................................................. 13. 立. Market Size Determination....................................................................................... 13. 4.2.. Market Trends ........................................................................................................... 15. 4.3.. Target Market............................................................................................................ 17. 4.4.. SWOT Analysis ........................................................................................................ 19. 4.5.. Marketing Plan ......................................................................................................... 19. 學. 4.1.. ‧. ‧ 國. y. Nat. sit. 4. Post-Purchase Competitors ................................................................................... 11. n. al. er. io. 4.5.1. Positioning Strategy.............................................................................................. 19. i n U. v. 4.5.2. Unique Selling Proposition................................................................................... 20. Ch. engchi. 4.5.3. Pricing Strategy .................................................................................................... 20 4.5.4. Promotional Mix ................................................................................................... 21 4.5.4.1 Advertisement ....................................................................................................... 21 4.5.5. Public Relations ...................................................................................................... 22 4.5.6. Integrated Marketing Communications .................................................................. 23 5. Operations Plan .............................................................................................................. 24 5.1.. Mobile App/Web Based Platform Models in Detail ................................................. 24. 5.2.. User Platform............................................................................................................ 24. 5.3.. Lodging an Official Complaint................................................................................. 26 v.

(8) . 5.5.. Potential for Future Services .................................................................................... 30. 5.6.. Potential for Additional Revenue Stream ................................................................. 30. Management Team ......................................................................................................... 31 6.1.. Chief Executive Officer ............................................................................................ 31. 6.2.. Chief Operating Officer ............................................................................................ 32. 6.3.. Chief Administrative Officer .................................................................................... 32. 6.4.. Chief Financial Officer ............................................................................................. 33. 6.5.. Management Team Gaps .......................................................................................... 33. 立. 政治大. 學. Financial Projections ...................................................................................................... 34 Important Assumptions ............................................................................................. 34. 7.2.. Source & Use of the Funds ....................................................................................... 34. 7.3.. Revenue Model ......................................................................................................... 35. ‧. 7.1.. sit. y. Nat. io. 7.3.1. Revenue from consumers ....................................................................................... 35. n. al. er. 7. Law Firm(s) Portal ................................................................................................... 29. ‧ 國. 6. 5.4.. i n U. v. 7.3.2. Revenue from Member Law Firms ........................................................................ 36 7.4.. Ch. engchi. Expenses ................................................................................................................... 37. 7.4.1 Website and App Development ............................................................................... 37 7.4.2. Domain Name ......................................................................................................... 37 7.4.3. Rental of Server/Storage......................................................................................... 37 7.4.4. SG&A Costs ........................................................................................................... 38 7.4.5. Salary and Wages .................................................................................................... 38 7.4.6. Administrative Costs .............................................................................................. 38 7.4.7. Commission Fees to Third Party Escrow Account ................................................. 39 7.4.8. Taxes ....................................................................................................................... 39 vi.

(9) . 7.4.9 Income Statement Projection ................................................................................... 40 References ............................................................................................................................... 41. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. vii. i n U. v.

(10) . List of Figures and Tables Table 1: Gross Value of Consumer Loss................................................................................... 16 Table 2: Gross Value of Consumer Loss /Market Growth Rate in Target Markets .................. 18 Table 3: SWOT Analysis of the Great Wall Platform and Suite of Services ............................ 19 Table 4: Minimum and Maximum Contributions based on Underlying Asset Value ............... 27 Table 5: Optimistic, Modest, and Pessimistic Net Cash Flow for Year 1 through 3 ................ 35. 政治大. Table 6: Pricing List for Law Firms Based on Number of Memberships within Firm ............ 36. 立. Table 7: Projected income statement for the three year period ................................................ 40. ‧ 國. 學. Figure 1: Pre and Post Purchase Competitive Landscape for the Great Wall .......................... 10. ‧. Figure 2: Market Size Determination Process .......................................................................... 14. Nat. n. al. er. io. sit. y. Figure 3: Gross Value of Nationwide Consumer Loss ............................................................. 17. Ch. engchi. viii. i n U. v.

(11) . 1 Executive Summary 1.1.. Introduction. China is one of the countries with the worst consumer rights in the world, mainly because of the high cost of legal defense and the inequality that exists between consumers and producers.. Imagine for a moment that you purchase a defective refrigerator and the manufacturer will not. 治政 social media followers. As a result of his large following,大 he was able to identify many others in 立 the same situation and gather part of them on the manufacturer’s doorstep. There, in an attempt. honor the warranty. This is what happened to Yonghao Luo, a public figure in China with many. ‧ 國. 學. to apply pressure on the unscrupulous company, he smashed three refrigerators on nation-wide. ‧. media (Want China Times, 2011). It worked, and only then did the manufacturer begin to honor its warranties. Yonghao Luo’s situation was unique because his celebrity enabled him to. y. Nat. er. io. sit. identify hundreds of similarly affected people, but unfortunately this is not the case for normal Chinese citizens. Short of dramatic protests, Chinese citizens don’t have much recourse against. n. al. Ch. i n U. v. manufacturing companies. Due to the imbalance of costs and benefits for individuals, it is. engchi. prohibitive for them to secure legal representation for such cases.. The Great Wall helps citizens solve this problem of consumer rights and public safety by offering a suite of services and tools. Our mobile phone app and complementary web platform scans the barcodes on purchases, saves consumers’ receipts, and connects individuals who have made the same purchases. It is not uncommon for people to be affected in essentially identical ways by mass-produced products in China. If one consumer lodges a complaint on The Great Wall app or web-based platform, other users who have purchased that same product are informed of the issue and kept in the loop and enabled to join in the complaint process. 1.

(12) . Consumers making official complaints become fee-contributing users and offer up a portion of a legal retainer. Our platform employs the Kickstarter model to aggregate all the retainer fees in a third party escrow account. Once the combined monetary value is large enough to engage the services of one of The Great Wall’s member law firms, that firm takes on the case and negotiates on the wronged citizens’ collective behalves. If the negotiation is successful, the money is transferred to the law firm, and The Great Wall collects 10% of the legal fees. As per terms set, in the event of an unsuccessful negotiation, the lawyer gains no financial reward (note:. 政治大. these are acceptable terms in China for such cases) and the money is transferred back to the. 立. fee-contributing users as per the contractual commitment minus the 1.5% fee for use of the. ‧ 國. 學. escrow service.. ‧. We are the first and only such non-profit social venture in China that unites consumers with law. sit. y. Nat. firms to facilitate highly efficient legal negotiations with manufacturers. Both manufacturers. io. er. and the Chinese Government prefer negotiated settlements over civil action cases because they are less time consuming and less costly.. n. al. 1.2.. Mission Statement. Ch. engchi. i n U. v. The Great Wall empowers citizens to hold companies accountable for the true costs of their own neglectful and sometimes endangering conduct. We correct the injustice of companies passing the costs of their negligence on to consumers while reaping unmitigated profits. The Great Wall’s mission is to support the Chinese Government’s efforts to foster accountability among manufacturers and meet the increasing demand for a safer and higher quality marketplace for the Chinese population, with far-reaching implications for the global community.. 2.

(13) . 1.3.. Market Analysis. There are over 564 million people using the Internet in China (TECHINASIA, 2013). In 2012, 334 million individuals lodged quality related inquiries (China Consumer Association reports). Our target markets are Zhejiang, Jiangsu, and Shanghai. With over 92 million internet-capable, well-educated individuals who are highly aware of their rights, this region is famous for its high concentration of manufacturing hubs. The region’s inhabitants are blanketed with products. 政治大 The three provinces account for approximately 21% of China’s GDP. The population of 153 立. from the same, local manufacturers, and create a concentration of similar manufacturing flaws.. ‧ 國. 學. million is expected to increase by 2.85‰ per year (Wikipedia, 2014).. The Great Wall intends to concentrate on the highly competitive industries of home appliances,. ‧. digital products, furniture, and building materials. These have ranked among the top worst for. y. Nat. sit. quality complaints in China for years. For our launch, we will actively pursue one of the. n. al. er. io. abundant quality- and safety-related issues that have captured public attention. Around this. i n U. v. issue, we will sign up negatively affected consumers and build our pool of available legal. Ch. engchi. assistance, using Integrated Marketing Communications techniques on our website and mobile application. In this way, The Great Wall will defend the consumer rights of citizens and raise awareness of our innovative services.. 1.4.. Objectives. . Registered users of 90,000 in Year 1; increase to 1,000,000 by Year 3.. . Over 27,000 resolved issues in Year 1; over 80,000 by Year 3.. . Over 66 member law firms by the end of Year 1; over 140 by the end of Year 3.. 3.

(14) . 1.5.. Financial Projections. Our revenue streams are twofold. The first is membership fees from law firms. The second is 10% of the accumulated legal fees paid to the lawyer by consumers through a third-party financial institution via our platform once their case has been settled. We do not receive the 10% when the lawyers lose the case, and/or the consumers do not receive compensation from the manufacturer. The Great Wall estimates revenue of approximately $281,096 by Year 3 with. 政治大 contributions from our four founders, and do not anticipate any cash flow problems, thanks to 立. a net profit margin of 20.8%, which indicates a $58,465 net income. There will be $10,000 in. ‧ 國. 1.6.. 學. our innovative model that puts citizens first while scaling impact.. Organization Summary. ‧ sit. y. Nat. The Great Wall has completed its rigorous initial concept phase, and its four founding members. io. a l. n. . er. look forward to implementation.. Ch. engchi. 4. i n U. v.

(15) . 2 Sector and Organization Overview In this chapter, the background information about the quality climate in China and manufacturing industry status will be disclosed. The legal industry will be detailed as well as the organizational overview of the Great Wall Platform.. 2.1.. Quality Climate in China. 政治大. Although China has been promoting quality management since the late 70’s, its translation into. 立. quality management has been relatively weak and the quality of many manufactured products. ‧ 國. 學. remains poor, particularly in the electronics, furniture, home appliance, and building material sectors. Chinese manufacturers place too much initial emphasis on meeting quantity and not. ‧. quality. In addition, Chinese culture and values have also hindered in the widespread adoption. Nat. sit. y. and development of total quality management systems. Therefore, they often fail to identify. n. al. er. io. manufacturing mistakes due to respect for authority, face-saving attitude, and unquestioned. i n U. v. obedience (David Fenwick, Tugrul U. Daim, Ibrahim Iskin, Yasser Dahlawi, 2010).. 2.2.. Ch. engchi. Manufacturing Industry Status. Until recent years, China has relied heavily on investment and export to promote economic growth. However, in recent years there has been a shift towards domestic consumption to promote stable growth within China. Chinese citizens with rising salaries are placing more and more emphasis on high quality and safe products. However, much of China's manufacturers unscrupulously pump out substandard products for the domestic market. Ultimately, we believe China will develop like its neighbors in Japan, Taiwan, and Korea, which were once known for inferior products but over time developed their product quality and safety. This transition will 5.

(16) . take some time in China. The Great Wall aspires to speed up this transition phase and put citizens as consumers in a leading role (David Fenwick, Tugrul U. Daim, Ibrahim Iskin,. Yasser Dahlawi, 2010).. 2.3.. Legal Industry Status. There are approximately 20,000 law firms and 230,000 lawyers in China (Statista, 2014), a significant number of which struggle to survive due to systemic difficulties in locating and. 政治大. obtaining new clients. To make matters worse, lawyers are limited in their approach to. 立. advertising by the Chinese government. The maximum amount of money a lawyer may charge. ‧ 國. 學. for a civil suit is 30% of the value of the underlying asset. So when the volume of plaintiffs is low, the lawyer cannot cover his or her costs associated with taking on the case. This generally. ‧. leads to a situation whereby few lawyers are willing to take on product quality related cases.. sit. y. Nat. The Great Wall Organization Overview. io. n. a. er. 2.4.. 2.4.1. What We do for Citizens l. Ch. engchi. i n U. v. Many individuals in China are affected in essentially identical ways by mass-produced products in China. The Great Wall records and tracks purchase data and connects consumers with one another in a safe, privacy-respecting digital community. We help consumers stay up-to-date with real-time information on their complaints and cases. As an individual, a Chinese citizen is at a great disadvantage in the eyes of Corporate China. They know citizens are powerless. The Great Wall applies the KickStarter crowd-funding model by aggregating claims together so that their combined amounts may be large enough to make it possible to engage the services of. 6.

(17) . skilled counsel. We strive to empower the powerless, and oblige companies to pay the true costs of their conduct, rather than passing the burden to citizens and trampling their rights and safety.. 2.4.2. What We do for Law Firms Winning new clients isn’t easy in China. The Great Wall accumulates large numbers of case leads for law firms. They can browse case listings on our web platform or on their smart phones to easily identify high potential cases that are in line with their skill sets. We make their business. 政治大. development an easy task, and vet their reliability to the public. We will track the record of. 立. lawyers so citizens can see how well they have performed. As a nonprofit, this issue needs a. ‧ 國. 學. true consumer advocate, and all our revenue will cycle back into expanding the reach of The Great Wall. Consumers can be confident that our vetting of law firms and matching of firms. ‧. with cases is in their best interest.. n. er. io. al. sit. y. Nat. 2.4.3 What We do for the Chinese Domestic Market. i n U. v. In the spirit of supporting our goal of rapidly scaling up our impact, we plan to offer anonymous. Ch. engchi. data to think tanks and other interested parties for a fee. Our platform collects gems of information that can deliver real value to these parties, which ultimately serve to improve the quality and safety of products offered to the domestic Chinese market. Such data reflects consumers’ habits, inclinations, and expectations for improved product features and safety. We can provide manufacturers with tailored information and provide insights that are not readily apparent, and speed the transformation of the Chinese domestic market to our vision of an honest and safe one.. 7.

(18) . 3 Organizational Strategy and Competitive Advantage 3.1.. Differentiation Strategy. The Great Wall plans to distinguish its services from its competitors by being more attractive to the target markets. The Great Wall is the first mover to provide such a comprehensive set of solutions for all its stakeholders that no other competitors come close to offering.. 政治大. 3.1.1. Notification Service. 立. The Great Wall’s app will be designed to notify consumers of quality and safety concerns. ‧ 國. 學. related to the products they have purchased. As long as a consumer scans the barcodes of all their purchases, they are kept in the loop of complaints regarding those products from other. ‧. consumers.. y. Nat. n. er. io. al. sit. 3.1.2. Consumer Aggregation. i n U. v. All other consumer complaint channels are geared towards individuals. The Great Wall differs. Ch. engchi. in that it allows for the aggregation of both consumers and complaints, reversing the power structure, forcing companies to adhere to their responsibilities.. 3.1.3. Cost Efficiency To solve the problem collectively saves the consumers’ money involved in seeking legal resolutions efficiently and overcomes the obstacle of cost to benefit ratio.. 8.

(19) . 3.1.4. Case Lead Generation for Law Firms We are the first and only place that facilitates the locating of potential fee paying clients for law firms in China where strong restrictions are in place that makes it difficult for law firms to advertise their services.. 3.2.. Competitive Advantage. 政治大 competitors by being more attractive to the target markets. 立. The Great Wall plans to maintain a competitive advantage to distinguish its services from its. ‧ 國. 學. 3.2.1. Few Internal Hurdles. ‧. As a small firm, there are fewer management challenges and easier communication than in. sit. y. Nat. large Chinese run government agencies. Having fewer layers of management than state run. io. al. n. also decreased costs and greater operational efficiencies.. Ch. 3.2.2. Great User Experience. engchi. er. agencies make decision times much quicker, allowing for flexibility and adaptability. There are. i n U. v. Our unique product offerings provide an exceptional user experience while allowing for one click sharing on various social media platforms. The Great Wall stores consumers’ receipts in the cloud waiting safely for potential future use regarding product warranty complaints and keeps users informed on safety/quality issues. The Great Wall is a full service provider.. 9.

(20) . 3.2.3. High Exit Barrier The Great Wall, having captured a significant user base among lawyers and consumers, would results in the network effect, causing a high switching barrier. Consumers having stored all their receipts on our platform would be reluctant to exit because of the high cost of switching to other platforms, as it would be a significant undertaking to download all the receipts from the cloud.. 3.3.. Competitors. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v. Figure 1: Pre and Post Purchase Competitive Landscape for the Great Wall. There are a variety of competitors that compete both directly and indirectly with the Great Wall Platform’s suite of services. Figure 1. Depicts the competitors graphically according to pre-manufacture, pre-purchase and post-purchase timeframes. Each of the individual competitors will be discussed below.. 10.

(21) . 3.3.1. Pre-Manufacture Competitors There are some pre-manufacturing measures that increase the quality of the product, like Total Quality Management and ISO9000 standards, which are indirect competitors to The Great Wall since they in effect decrease the volume of our user base.. 3.3.2. Pre-Purchase Competitors. 政治大 identifying bootlegged alcohol in China, are an indirect competitor. They can reduce The Great 立 Pre-purchase verification measures applied by companies like Genda, which focuses on. ‧ 國. 學. Wall’s potential customer base by reducing the volume of issues on the market. However, their focus is on a narrow segment, which allows them to concentrate more on that specific service. ‧. and be more professional but at the same time it is a disadvantage for them, because it is not. y. sit. io. n. a. er. alcohol.. Nat. easy for them to apply this method to expand into other product categories besides bootlegged. 3.3.3 Post-Purchase Competitors l. Ch. engchi. i n U. v. a) The customer service departments of responsible corporations that follow through on their contractual warranty commitments could be considered direct competitors. However, consumers of their products are not our target market.. b) The China Consumer Association Complaints and Negotiation Platform is our largest direct competitor. It is a website that allows consumers to communicate with a list of only 40 of the most reputable organization with high standards of quality such as China Unicom, Sony, and Hewlett Packard. The consumers of these 40 listed companies are not, however, our target 11.

(22) . market. In addition, the website is not well known by most consumers. It doesn’t offer comprehensive and well-rounded consumers service and law consulting support. Not to mention that such big government organizations within China are famous for their bureaucracy and low efficiency.. c) Those among the nation’s 20,000 law firms that do not wish to cooperate with The Great Wall are potential competitors. The law firms can communicate with the consumers directly without. 政治大 customers, because they lack an efficient means of reaching their target market. They rely 立. an intermediary like The Great Wall, but it is not easy for lawyers to actively seek out new. ‧ 國. 學. solely on the recommendations of others or advertisements in accordance with the rigorous rules as established by the central government.. ‧. Although the measures and organizations listed above are our competitors in a sense, we are. y. Nat. sit. pleased to join this ecosystem and offer our unique service to improving both the exercise of. n. al. er. io. consumer rights and the quality and safety of domestic products in China.. Ch. engchi. 12. i n U. v.

(23) . 4 Market Analysis The Great Wall is a non-profit social venture in the online service industry. It bridges our two distinct customer groups: consumers and lawyers.. 4.1.. Market Size Determination. There are 564 million individuals using the Internet in China, of which 419.77 million. 政治大. individuals use their phones to connect to the Internet (National Bureau of Statistics of the. 立. People’s Republic of China, 2014). 467.75 million individuals use instant messaging like. ‧ 國. 學. “WeChat” to chat and share, while 308.61 million individuals use Weibo (The Chinese equivalent of Twitter) to post status updates (Forbes, 2014). The potential market for the Great. ‧. Wall is constituted by this huge amount of netizens and APP users.. y. Nat. er. io. sit. We used ‘keyword research’ to assess the volume of people who care enough about quality issues and actively post about it on Weibo. We did a search relating to the building material. al. n. v i n industry. This was done by searching the keywords “fang wu jian cai zhi C h for posts containing engchi U liang wen ti’ when literally translated from Chinese to English means “Building material quality problems” This keyword search identified 7,192,288 posts.. We then found the number of officially lodged complaints on the National Bureau of Statistics in the same building materials category. In 2012, there were 24,631 logged complaints in this category (National Bureau of Statistics of the People’s Republic of China, 2014).. The number of people who complained about their products was 0.3425% of the peole who took the time to comment about this issue on Weibo. The volume of people who took serious 13.

(24) . action in protecting their rights and lodged an official complaint was 3353, 13.6170% of the 24,631 people who made complaints (note: all data were in the building materials industry) Refer to figure 2 below.. 學. Figure 2: Market Size Determination Process. ‧. ‧ 國. 立. 政治大. It is our belief that the huge gap between the number of people complaining and the number of. y. Nat. sit. people lodging official complaints is due to the widespread perception that current platforms. er. io. are highly inefficient and this prevents people from taking real actions.. al. n. v i n C hthose who are making Our website’s target consumers are e n g c h i U complaints on Weibo but have not taken further actions due to the perceived inconvenience involved or have previously had a failed experience.. This kind of unstructured interaction is prevalent in China. The Great Wall aims to provide a structured place to lodge quality related complaints instead of yelling them into the hurricane that is Weibo, we provide the place that will actually make a difference. and serve as leverage against unscrupulous companies in a negotiation.. 14.

(25) . 4.2.. Market Trends. Data from the National Bureau of Statistics demonstrates a clear increasing trend in the total value of loss as a result of product quality issues for the 8 year period from 2009 to 2016. See Figure 3 below. This reinforces the severe financial impact that quality related issues have on China and confirms the need for the Great Wall’s services. These figures represent all quality related issues for all products including fast moving consumer goods, which are not a component of our target market.. 立. 政治大. Table 1 below depicts data from the National Bureau of Statistics. We estimate the Gross Value. ‧ 國. 學. of Consumer Loss based on the geometric average growth rate which was calculated based on the 5 year period from 2009 to 2013. This is based on the assumption that the geometric average. ‧. growth rate of 12.5% will be constant over the three year period from 2014 to 2016. This. y. Nat. n. al. Ch. engchi. 15. er. io. consumer loss will continue to rise throughout 2016.. sit. estimation based on historical data allows us to assume that the Gross value of quality related. i n U. v.

(26) . Table 1: Gross Value of Consumer Loss Chinese Nation-Wide Data (in millions) 2009. 2010. 2011. 2012*. 2013. 2014. 2015. 2016. Gross Value of 133.5. 151.7. 100.3. 206.3. 232.2. 294.0. 330.8. 學. 128.77. 12.5%. 26.6%. 12.5%. Consumer Loss. 立. Growth Rate. NA. 3.7%. 13.7%. -33.9%. 105.7%. ‧. ‧ 國. Market. 政治大. *: In 2012, the State Statistics Bureau adopted a new method to count complaints, leading. y. Nat. io. sit. to omissions of some provinces and cities. (The data was gathered from the website of. n. al. er. National Bureau of Statistics of the People’s Republic of China, 2014). Ch. engchi. 16. i n U. v.

(27) . Money involved ($ in millions). 330.79 293.98 232.21 206.38 151.72 128.77. 133.47 100.32. 2010. 2011. 2012. 2013. 2014. 學. 2009. 2015. 2016. ‧. ‧ 國. 立. 政治大. Figure 3: Gross Value of Nationwide Consumer Loss. sit. y. Nat. (The data was gathered from the website of National Bureau of Statistics of the People’s. io. n. al. er. Republic of China, 2014). 4.3.. Target Market. Ch. engchi. i n U. v. The population of our target markets, Zhejiang, Jiangsu and Shanghai, is 153 million. The citizens of these areas are well-educated individuals and are known for having the highest standards of living in China and are well versed in their rights as consumers. These areas account for over 92 million of the total 564 million Internet users in China, which is 16.31% of the total Internet user base. These regions account for more than 40% of the total industrial export for China, containing dense manufacturing hubs. The most important fact is that these combined areas tend to be blanketed with products from the same manufacturers, leading to a higher possibility of similar manufacturing flaws. 17.

(28) . We intend to target these areas with our promotions, but plan to expand into the whole of China. Even in our initial stages, our platform is accessible to all, but marketing measure will be concentrated in these key areas.. The Great Wall intends to concentrate on the highly competitive industries of appliances, building materials, digital products, and furniture, which have ranked among the top of quality complaints in China for years. These figures mirror the trends above, however you can see the. 政治大 percent higher than the yearly national average growth rates for the same period. 立. annual growth rates for our target areas of Zhejiang, Jiangsu and Shanghai are 33.59%, 11.3%. ‧ 國. 學. 2012. 2013. 0.12. 0.17. 0.29. 0.19. sit. Product-Quality Related. 2011. ‧. Nat. Number of. 2010. y. Table 2: Gross Value of Consumer Loss /Market Growth Rate in Target Markets. Consumer Loss (in. al. n. Gross Value of. millions) Market Growth Rate. . er. io. Complaints (in millions). C24.98 h e n g c30.04 hi 20.26%. . 18. i n U. v. 39.89. 58.45. 32.79%. 47.73%.

(29) . 4.4.. SWOT Analysis Table 3: SWOT Analysis of the Great Wall Platform and Suite of Services Strengths. Weaknesses. 1.First mover advantage. 1.Regulations limit class-action suits and are. 2.Obtain economy of scale advantage. frowned upon by government. 3.Government support. 2.Potentially easy to be duplicated. 4.Huge market demand 5.Increase law firms earning potential 6.Favorable geographic location.. 立. 政治大. Opportunities. Threats. ‧ 國. 學. 2.Outsourcing of customer service department. compliance. function for manufacturers. 2.Low entry barrier. 3.Increasing market demand. 3.Potential for defamation suits. y. sit. al. n. 4.5.. 4.Producer/Manufacturers' sabotage. er. io. . Marketing Plan. ‧. 1.Increasing participation in ISO9001. Nat. 1.Relaxing of regulations on class-action suits. Ch. engchi. i n U. v. We have undergone and extensive marketing plan to ensure the rapid takeoff and adoption of the Great Wall’s platform and suite of services.. 4.5.1. Positioning Strategy The Great Wall’s strategy is to facilitate the locating of other consumers who find themselves in the same unfortunate position, seeking resolution to quality issues against unscrupulous corporations.. 19.

(30) . 4.5.2. Unique Selling Proposition To consumers either concerned or negatively affected by product quality/safety from unscrupulous manufacturers the Great Wall is the one stop platform that connects you to other stakeholders for the purpose of 1) keeping informed of quality/safety issues related to purchases 2) to join forces with other affected individuals and together accumulate sufficient legal fees to combat irresponsible companies 3) to engage the services of skilled counsel because by. 政治大 restore integrity in corporate activities in China. 立. working together we will level the playing field, empower the economically powerless, and. ‧ 國. 學. To law firms struggling to connect with civil case clients, The Great Wall is the one and only platform that 1) makes it possible to litigate small civil claims 2) offers browsing of high. ‧. potential cases 3) generates leads 4) efficiently accumulate fees to sufficient compensation. y. Nat. er. io. sit. levels because its the only platform that provides lawyers with appropriate incentives.. al. We also enable users to share their posted complaints in one easy click from our Great Wall App. n. v i n C h mainstream socialUnetworks such as WeChat, Weibo and or on the Great Wall Website to other engchi Qzone. This facilitates the locating of others in the same boat and serves to raise awareness for the Great Wall Platform.. 4.5.3. Pricing Strategy The Great Wall intends to obtain an economy of scale advantage, which means we are able to price our service competitively. Since there are two kinds of users on our platform, consumers and law firms, the Great Wall adopts two different value based pricing strategies that enable us to offer cheap and high quality services. We intend to offer a fist-time free trial opportunity to 20.

(31) . law firms and will charge a membership fee based on the bulk-volume fee structure. (Refer to Table 4 in the financial section below) In addition, The Great Wall charges a brokerage fee on winning cases in order to cover our costs and maintain our daily management. Our APP is a free-download and available to all interested consumers which is used to broaden our customer base and maintain our existing customers.. 4.5.4. Promotional Mix. 政治大. Since The Great Wall is a non-profit social venture to protect consumers, we can utilize this. 立. social corporate responsibility mentality to our advantage and use a variety of channels to. ‧ 國. 學. advertise for free or at reduced costs.. ‧. 4.5.4.1. Advertisement. y. Nat. sit. a) Choose an influential media platform: We choose BAIDU, the Google of China, which. n. al. er. io. allows Non-Profits to advertise for free. Baidu maintains a 76% share in China's search engine. i n U. v. market. We intend to use this in the initial phases of our advertising campaign and throughout our business life- cycle.. Ch. engchi. b) Utilize micro movies on streaming video websites: We will utilize a creative micro movie and upload it on famous streaming video websites in China such as Youku and Tudou (The Youtube’s of China) to show the function of our website.. c) Participate in law conferences: We choose some of the most influential law-related conferences which are held annually in our target markets as our first-step in reaching law firms. We will utilize the opportunity to do face to face advertisement. The conferences we plan on 21.

(32) . attending include the Shanghai International Conference on Law and the China Law Conference in Shanghai.. d) Advertisements on corporate third-party websites: Based on our research and negotiation with our strategic partner "WOCHACHA" (an existing app for scanning barcodes), we intend to do reciprocal advertisements: ours on their site, and theirs on The Great Wall’s site.. e) Advertisements in trade publications: We intend to use two famous trade publications,. 政治大. "Chinese Lawyer" and "Regulations", for focused advertising to lawyers and law firms.. 立. ‧ 國. 學. 4.5.5. Public Relations. We plan to build symbiotic relationships with influential social media users and well known. ‧. public figures in China. During the next inevitable quality related issue we intend to employ. y. Nat. sit. these channels to raise awareness and bring traffic to our platform. In the refrigerator example. n. al. er. io. detailed in the executive summary, a public figure named Yonghao Luo was introduced. The. i n U. v. Great Wall intends to use him as an ambassador of our Platform and promote our services. We. Ch. engchi. intend to ask him to use The Great Wall platform to release future problems and also tweet on our behalf on his Weibo site with his extensive list of followers. Because of this public figure's effect, we could gather a significant consumer base in a relatively short period of time.. At the start of the business, we adopt a door-to-door sales pattern to our suppliers-the law firms in our target market.. We would ride the wave of consumer outcry as our initial phase of advertising utilizing these public figures and bloggers to recommend people to download our APP and start to find other 22.

(33) . people who are experiencing the same challenges with the same quality-related flaws. As the number of consumers with the same issue accelerates to a sufficient level, The Great Wall would assist them by contacting a professional law firm to help them solve their problem. This would be our first success case and we would use public relations to manage the spread of this information in free public media outlets. Since we will choose a big issue which will generate a huge social impact, it will be an efficient way to raise awareness of The Great Wall’s Website and App. We intend to maintain ongoing announcements of our successes via these outlets to. 政治大. maintain our social influence and public attention.. 立. ‧ 國. 學. 4.5.6. Integrated Marketing Communications. To set the tone of our limited marketing/advertising budget, we feel our brand character is. ‧. empathy, empowerment, and effective. We feel our brand personality will highlight our. y. Nat. sit. comprehensive set of our services and further differentiate us from our competitors. We intend. n. al. er. io. to apply a consistent brand message across both the traditional and non-traditional marketing channels described above to reinforce each other.. Ch. engchi. 23. i n U. v.

(34) . 5 Operations Plan It is important to make an early distinction: The Great Wall does not promote class action suits. The Great Wall is a middleman between upset consumers and potential legal representatives charged with seeking resolutions through direct communications and negotiations with manufacturers. The Great Wall effectively lowers the transaction value of this type of legal representation making previously unfeasible cases possible.. 5.1.. 治政大in Detail Mobile App/Web Based Platform Models 立 ‧ 國. 學. The Great Wall is both a web based and app based platform for its two users, consumers with complaints and lawyers willing to take on their cases. The Webpage and App will both be. ‧. designed so that all users can complete their primary task quickly, and efficiently without any. Nat. sit. y. fuss. Both the app and website function similarly. The Great Wall app requires downloading. n. al. er. io. from the Android Market, Wan Dou Jia, 360 App Store for Android mobile devices, while. i n U. v. Apple users will obtain our app through the Apple App Store. From herein the procedures for. Ch. engchi. both the app and the webpage are relatively similar. Unless major variations exist, the minutia of differences will not be detailed. Major variations will be provided as necessary. The User will be prompted to identify themselves as either a consumer or a law firm. The following section discusses the user portal. The law firms portal will be disused later.. 5.2.. User Platform. On both the app and the webpage, users are required to agree with an exhaustive disclaimer that protects and safeguards The Great Wall from legal issues as well as informs users of our. 24.

(35) . information sharing policies. Users will not be able to proceed without agreeing to these safeguards.. The consumer registers by inputting valid personal and contact information including telephone, email, and address. They are now ready to begin scanning barcodes for purchased items, and uploading supporting documents such as receipts, and warranty cards if available. One or all are acceptable; however a push notification will appear stating that a valid receipt must be used in. 政治大 have The Great Wall App will store it in the cloud should it be needed for future legal 立. the event of future negotiations. They will be prompted to take a photograph of the receipt and. ‧ 國. 學. negotiations. This is the user’s choice as some may prefer traditional methods of keeping paper receipts. A clear warning is pushed stating that lacking this critical supporting document will. ‧. prevent them from being involved in a group case should they lose their hard copy being held in. sit. y. Nat. their own personal records at home.. n. al. er. io. Since the major benefit to this system is receiving notifications of potential danger/quality. i n U. v. issues when other users upload formal complaints onto our system, users are now asked to. Ch. engchi. determine their notification preferences and settings. We don’t want them to be bogged down with an overload of messages, so we suggest collecting enough complaints before an initial notification is sent.. If a Great Wall user(s) has lodged an official complaint on our system pertaining to the exact product that other users have stored on our system, notifications will be sent as per their individualized preference settings just discussed.. These notifications will be sent in two formats, one in app notification, and one via email. The message will not detail the personal user information, rather just the complaint details. It will 25.

(36) . also identify the monetary value the individual(s) have transferred to the third party escrow account, Ali Pay where it remains safely. This will be disused in detail to follow.. If the recipient(s) of the notification finds themselves with the same product issue, they can follow the same easy steps to lodge their official complaint on the Great Wall Platform whether they are in the app or on the Great Wall Webpage.. 5.3.. Lodging an Official Complaint. 政治大 The user will be asked to upload a receipt if not previously performed. Additional uploads can 立. ‧ 國. 學. be performed at this time if further supporting documents are available such as warranties. Product photographs depicting the issue can also be supplied if available and pertinent to this. ‧. case.. y. Nat. sit. The user will then be asked to write a series of short answer questions which in the future could. er. io. be used to create value as a potential monetary stream, for example:. al. n. v i n Cservice Did you contact the customer of the store/manufacturer/ distributor? If h e ndepartment gchi U. . yes, was their service helpful? If no, why didn’t you contact them first? . What has caused you to make a complaint on this platform?. . What other features of the product disappoint you?. . Do you have any recommendations on how to improve this product?. Next, in the event that the user had previously scanned the product barcode, a sliding scale of contribution is immediately presented to the user based on the underlying value of the asset. If not previously scanned, the user is prompted to input the price of the product manually. In both 26.

(37) . scenarios, a contribution scale is presented to the user, with a minimum contribution and a maximum contribution.. The calculations of the contribution that take place behind the wall are depicted below in table 4.. Table 4: Minimum and Maximum Contributions based on Underlying Asset Value. US dollars). 立. 10% 8%. 500 to 999. 6%. 1000 to 4999. 5%. 30% 30% 30%. Nat. 30% 30%. er. io. sit. 3%. ‧. 100 to 499. over 5000. Maximum Percentage. 學. ‧ 國. 1 to 99. Percentage 政Minimum治大. y. Price of underlying asset (in. For example, if the underlying asset is a cell phone with an initial purchase price of $400.00,. al. n. v i n C range, to determine the lower end of the 8%U of $400 which is $32. The upper end h e nweg take i h c. calculation based on 30% percent of the underlying cell phone price gives us $120. The sliding scale presented to the consumer would therefore be $32 to $120.. The sliding scale serves to reduce the contribution fees for those with lower incomes or less money to spare to pursue the legal case. Those users who are more capable and more willing to contribute more towards the case may choose a higher value within the sliding range provided. They may be more frustrated/angry so their motivation is to provide more funds to ensure the case is picked up by one of our member law firms.. 27.

(38) . The user manually inputs their desired contribution amount. The user is then directed to our third party to proceed with payment. The money remains in the well-trusted AliPay escrow account until a winning legal resolution has been sought.. Internet escrow works by placing money in the control of an independent and licensed third party in order to protect both buyer and seller in a transaction. When all parties verify the transaction has been completed per terms set, the money is released. If at any point there is a. 政治大 within AliPay and in not the responsibility of The Great Wall. The outcome of the dispute 立 dispute between the parties in the transaction, the process moves along to dispute resolution. ‧ 國. 學. resolution process will decide what happens to money in escrow.. Since a win may be different in the eyes of each party involved (all individual consumers in. ‧. their entirety and the lawyer), a detailed contract must be organized by the lawyer and the. y. Nat. er. io. organization. (This is not the responsibility of the Great Wall). sit. individual case participants in advance of legal proceedings and a contract signed by their own. al. n. v i n C his contacted and authorized In the event of a win, the third party e n g c h i U to release the funds. 10% of the funds are released to the Great Wall. 1.5 % percent is retained by AliPay, and the remaining 88.5% is released to the law firm.. Since the transfer to the lawyer is conditional upon the predetermined definition of a win, if these pre-established criteria are not met, the funds are returned to the consumer. Only the 1.5% charged by AliPay is not returned. In this scenario, the lawyer receives nothing which is a security screen preventing lawyers from taking on cases that are not winnable just to take advantage of the money offered up by The Great Wall users.. 28.

(39) . 5.4.. Law Firm(s) Portal. The law firm portal differs from the User portals in that law firms can only register on the webpage. Once registering, individually identified lawyers in the firm are assigned a username and password, which grants them access to both the webpage and app.. As in the user portal, there is a disclaimer that law firms are required to agree with that protects and safeguards The Great Wall from legal issues as well as informs users of our information. 政治大. sharing policies. Law Firms cannot proceed without agreeing to these safeguards.. 立. ‧ 國. 學. From herein the procedures for both the app and the webpage are relatively similar. The user names and contact information are not visible to the lawyer at this point. The lawyers can utilize. ‧. various filters to sort through the complaints and organize them in ascending or descending. sit. y. Nat. rank according to the gross accumulated value. They can perform similar sorting mechanisms. io. n. al. er. for number of consumers, product category, and date.. i n U. v. The lawyer can click on a set of complaints to expand it and read the particulars of the. Ch. engchi. complaint posted by the consumers and learn the fundamentals of their issues. If not interested in taking this case at that time, he/she can go back to continue exploring complaints. Should the lawyer be interested in taking on the case since an appropriate level of money has been achieved and he/she is confident enough in their ability to seek an agreeable resolution to the issue, they simply click on the TAKE CASE button. A notification is sent to the users that an interested member lawyer has agreed to take on their case. The vetting process then begins by The Great Wall staff. If successfully vetted, the lawyer is required at that time to define the scope of the case and determine the definition of a win. This clear definition once approved by the consumers is sent to AliPay as the guideline for the eventual release of funds. 29.

(40) . 5.5.. Potential for Future Services. Among the services planned for the future as we obtain more resources are as follows. They are in order of priority implementation.. a) Set up lawyers ranking system and give consumers’ the right to choose their preferred lawyer.. 政治大. b) Set up a manufacturing ranking system according to their performance on responding to the. 立. complaints. ‧ 國. 學. c) Establish our own financial institution and fully manage the prepaid funds.. Potential for Additional Revenue Stream. Nat. y. ‧. 5.6.. n. al. er. io. manufacturers legally.. sit. a) Act as data broker and sell relevant data to interested parties including think tanks and. Ch. engchi. b) Charge lawyers a higher percentage than 10%. iv n once fee U. normal/sufficient levels for taking on cases of this nature. . . 30. accumulation has surpassed.

(41) . 6 Management Team The Great Wall will have four founding stakeholders committed to the successful operation and longevity of the organization. It will be formed for the public purpose of fostering accountability among manufacturers and meet the increasing demand for a safer and higher quality marketplace for the Chinese population with far reaching implications for its global trading partners. Each of the four founders will oversees the area of operations best suited to his. 政治大. or her talents and manage additional staff required for filling in the management gaps required. 立. for the operation of our core business.. ‧ 國. 學. 6.1.. Chief Executive Officer. ‧. Mr. Grant Leach, Chief Executive Officer, is in the final semester of his MBA from the. Nat. sit. y. Republic of China’s National Chengchi University (NCCU). He is currently an exchange. n. al. er. io. student at the George Washington School of Business. He was an initiator and organizer of the. i n U. v. first English business plan competition in NCCU, responsible for scope of project,. Ch. engchi. establishment of rules, marketing and promotions, and raising of donor funds for cash prizes. He held the position of president of NCCU’s Oath Club for the duration of his academic career at NCCU. As a Canadian expat in the region for 15 years, he has held a variety of positions. His beginnings as a sales manager for Taiwan’s largest medical device manufacturer has provided him with solid management foundation while his most recent position with the American Chamber of Commerce in Taipei in the membership department has provided him with an impressive rolodex of contacts in both the government and private sectors. Grant will oversee The Great Wall’s operations, bringing experience in membership development and in the lean startup phase will serve as the marketing manager. 31.

(42) . 6.2.. Chief Operating Officer. Ms. Honglin Liu, Chief Operating Officer, holds a Bachelor's Degree in Shandong Finance and Economic University and is currently obtaining her Masters of Finance from the George Washington School of business. She has worked for several years as an independent business consultant. The daughter of a venture capitalist, she has extensive business contacts in China that she will leverage to help this new venture succeed. Her experience in customer. 政治大 her clients. While in the startup phase, she will serve as overseer of contract technical personnel 立. development and strategic partner relationships allowed her to develop end-to-end solutions for. ‧ 國. 學. managing the development and design, and operations and maintenance phases of The Great Wall’s platform and App development.. ‧. 6.3.. Chief Administrative Officer. sit. y. Nat. io. er. Ms. Naixin Zhang, Chief Administrative Officer, has a bachelor degree in Financial. al. Engineering and is currently obtaining her Master of Finance at the George Washington School. n. v i n Ch of Business. She is a native of Shijiazhuang Cum Lade from Nankai University e n gandc graduated hi U and has been in the financial and information technology business for 2 years. She served as the. staff accountant at China Construction Bank for one year. Naixin has gained a thorough working knowledge of office management. In the lean startup phase she will be responsible for the smooth operation of the day-to-day business of the company ensuring the efficient functioning of staff. She will work closely with all partners and meet The Great Wall’s staffing needs filling gaps in the management teams skill sets. She will manage payroll, and the business expenses of the firm. She will also use her above average social skills in the startup phase and act as Public Relations manager assisting in the marketing of the Great Wall platform. 32.

(43) . 6.4.. Chief Financial Officer. Mr. Jin Yikai, Chief Financial Officer, has a bachelors degree in Sichuan University and is currently obtaining his Master of Science in Finance in the School of Business, George Washington University. He is a native of Shaoxing in Zhejiang province of China. He worked as the financial manager at Function Capital, a world class Venture Capital based in Shanghai, China. His expertise is project analysis, specialized in the industry of Technology, Media and. 政治大 several investment cases with a total market value higher than $20,000,000. As the CFO, Jin 立 Telecom (TMT) and mobile internet. At Function Capital, Jin was completely involved in. ‧ 國. 學. will have controllership duties reporting financial information to the CEO. He will perform all treasury duties overseeing the capital structure of the Great Wall. In the lean startup phase he. ‧. will serve as financial manager monitoring and interpreting cash flows and predicting future. y. sit er. Management Team Gaps. io. 6.5.. Nat. trends, analyze change and advise accordingly and formulate long-term business plans.. al. n. v i n C hhomogenous teamUand we require a diverse set of skills to We recognize that we are a relatively engchi succeed. Despite the founders experiences, the company will require legal consulting services as well as ongoing technical consultants to provide technical know-how of database development enhancing The Great Wall’s ability to act as a data broker.. 33.

(44) . 7 Financial Projections We reasonably expect a rapid growth for The Great Wall in the first year. Although this may seem ambitious for the fact that it’s a startup company, this rate of growth is due to the status quo of China’s consumer products market, which indicates an incredible potential in our market research.. 7.1.. 政治大. Important Assumptions. 立. The financial plan depends on important assumptions. The key underlying assumptions are: We. ‧ 國. 學. assume a rapid-growth economy, with an approximately 6%-7% GDP growth rate. We assume that there are no unforeseen changes from which the consumer products’ quality could benefit. ‧. immediately and significantly, such as sudden tight regulations among our target markets. We. Nat. n. al. er. io. there are no monopolies or oligopolies in the target markets.. 7.2.. sit. y. assume the information and capital would be flowing freely and efficiently, which means that. Source & Use of the C Funds. hengchi. i n U. v. The initial contribution from the four founding members as our initial investment will total $45,000. We build up three scenarios, the optimistic, the modest and the passive. Please see table 5 below for our net cash flow projections for the first 3 years.. 34.

(45) . Table 5: Optimistic, Modest, and Pessimistic Net Cash Flow for Year 1 through 3 Y1. Y2. Y3. Optimistic. 26,559. 78,973. 122,999. Modest. 4,154. 34,589. 66,780. Pessimistic. (12,650). (27,975). 24,615. Since The Great Wall is a non-profit social venture, we expect to get about $10,000 donation. 政治大. from the concerned leaders in society each year.. Revenue Model. 立. 學. ‧ 國. 7.3.. 7.3.1. Revenue from consumers. ‧. In 2012, there were 505,304 consumer complaints in China and the consumers were awarded. sit. y. Nat. $94 million in total as compensation. The average value of one complaint is $186. Based on our. n. al. er. io. solid market research, we estimate the consumers’ willingness to pay is $18.6 to solve their. v. problem and earn back their loss of the underlying asset. We expect no fee-contributing. Ch. engchi. i n U. consumers in the first 2 months. We would start to attract fee-contributing consumers from the third month. For that month, we expect only 300 fee-contributing consumers but experience an 80% monthly growth rate for the next 3 months. For the first year, we could gather approximately 27,164 fee-contributing consumers, each of whom pays an average of $18.6 for their specific complaints of which the Great Wall charges 10% of the total payment, accounting for $50,525 in revenue. The other 90% of the payment would flow to the law firms. Additionally, we anticipate a 6% and 4% quarterly growth rate for the following two years, so this part of revenue would be $125,297 and $150,654 respectively.. 35.

(46) . 7.3.2. Revenue from Member Law Firms We charge a monthly fee for each member law firm based on the number of users within the firm, which is a very attractive offer and we expect high adoption of our services. The detailed pricing list is as follows in Table 6.. Table 6: Pricing List for Law Firms Based on Number of Memberships within Firm Bronze. 立. Golden. 政治大5 3. Platinum. 8. Unlimited. 480. 660. ‧. Maximum Number of Lawyers. Silver. 1290. 1590. 4790. 5990. 990. 2490. 3590. y. 690. io. sit. Nat. Annual. 350. er. Quarterly. 240. 學. Monthly. ‧ 國. Total price for a lawyer firm. We assume the average monthly fee that each of the law firms pays is $300. In our target market,. n. al. Ch. i n U. v. there’re 849 law firms in Shanghai, 1039 law firms in Zhejiang and 1362 law firms in Jiangsu,. engchi. approximately 8% of which are specialized in quality-related issues. Based on this data, we intend to sign contracts with our first 5 member law firms in our first month, then the numbers would grow continuously on a monthly basis resulting in the realistic expectation of 66 member firms by the end of the first year. For the next two fiscal years, we expect a 20% and 35% annual growth rate.. 36.

(47) . 7.4.. Expenses. The expenses are broken down into the various categories below.. 7.4.1. Website and App Development We contract out the design and the development of the website and app to a professional team and an app team. We avoid time and materials contracts and focus only on request for quote.. 政治大 development procedure would last for 2 weeks. We would also invest $1,200 for our iOS app 立 The local average cost of a decent website development is approximately $3,600 and the. ‧ 國. 學. development and $800 for the Android development.. 7.4.2. Domain Name. ‧ sit. y. Nat. We intend to rent our domain name from www.net.cn. Because the cost to buy existing domain. io. al. er. name of www.thegreatwall.org or www.thegreatwall.com or www.thegreatwall.cn is very high,. n. we choose to rent the domain name of www.thegreatwall.me with a registration fee about $53 per year.. Ch. engchi. i n U. v. 7.4.3. Rental of Server/Storage Our partner Aliyun, which belongs to the biggest IT company in China, would provide us cost-efficient, safe and high-quality server rental services. The monthly rent for a Relational Database Management System (RDMS) would be $180 for a version 5.5 MySQL that has 1000 GB of storage, 2400 MB of RAM with the node in Hangzhou. We also would rent the Elastic Compute Service (ECS) from Aliyun as our server. The ECS would be a 8-core, 16 GB RAM,. 37.

(48) . 100 Mps bandwidth and 5.7 64-bit Aliyun Linux Operation System, with the node in Hangzhou as well. The rent for the server would be $1,500 per month.. 7.4.4. SG&A Costs Since we are a startup non-profit organization, we would invest a relatively huge amount of our budget to marketing to build up our user base from the beginning. We plan to invest as much as $34,000 in marketing for the first quarter, $14,000 in the second quarter and $9,000 for the. 政治大. following two quarters separately. The marketing cost in the first fiscal year would be $66,000,. 立. almost accounting for 45% of the total expenses. Then we anticipate a 20% QoQ growth rate for. ‧ 國. 學. the next two years.. ‧. 7.4.5. Salary and Wages. y. Nat. sit. We segment our staff into two teams, one of which is a hybrid of development and design and. n. al. er. io. the other team is responsible for customer services, operations and maintenance. The first team. i n U. v. is part-time and the cost is discussed in the initial investment section above. We would hire 4. Ch. engchi. full-time employees for the second team. Their salary is $600 per month, a fair wage for college graduates in our target area. All the four founders won’t get any salary for the first quarter and would get $800 per month beginning in the 4th month.. 7.4.6. Administrative Costs We intend to use the house of Jin Yikai, one of the founders, as our regular office. The house is located in the center of Shaoxing, which is part of our target market and very close to other key cities such as Shanghai, Hangzhou and Ningbo. It also contains almost all the infrastructure we 38.

(49) . require such as telephones, fax and wi-fi etc. From the 4th month, we intend to rent a virtual office in Shanghai from Regus for $300 a month. We can get 5 days’ access to the virtual office per month for the purpose of meeting our key law firm clients. We can use the Regus address to do business and also have unlimited use of their front-desk services (e.g., phone-answering service, and mail-pickup) and free administrative accounting services. This price would grow 50% annually.. 政治大. 7.4.7. Commission Fees to Third Party Escrow Account. 立. We would corporate with Alipay, the biggest third-party payment system in China. They charge. ‧ 國. 學. us 1%-2% of the revenue from the consumers as commission fee. Because we would receive law firm membership fees directly from their accounts, we wouldn’t not incur any third party. ‧. charges for this revenue stream.. n. al. er. io. sit. y. Nat. 7.4.8. Taxes. i n U. v. The Great Wall would be applied the 10% income tax rate, which is the lowest rate for. Ch. engchi. commercial income in China, regardless of whether we’re non-profit or for-profit.. 39.

(50) . 7.4.9. Income Statement Projection Table 7: Projected income statement for the three year period Y1 Quarter. Q1. Revenue. Q2. 10,758. 20,467. Y1. Q3. Y2. Y3. Q4. 33,980. 46,821. 112,025. 221,921. 281,096. Expenses Rental of server. (4,500). (4,500). (4,500). (4,500). (18,000). (18,000). (18,000). Rent of RDMS. (540). (540). (540). (540). (2,160). (2,160). (2,160). (1,872). (1,872). (1,872). (57,600). (80,640). (88,704). (79,200). (95,040). (5,400). (8,100). (1,879). (2,260). Amortization of (468). Selling, general and. EBIT Income taxes** Net income. (9,000). (66,000). 0. (900). (900). (900). (2,700). (8). (91). (253). (405). (758). a l (37,299) (32,461) (32,613)i v (149,090) (35,958) (16,832) 1,519 14,207 n (37,065) Ch U e n g(152) 0 0 0 c h i (1,421). (46,716). n. Total expenses. (9,000). io. third party. (14,000). y. Commission to. (34,000). Nat. Office. (16,800). ‧. Rental of Virtual. (16,800). sit. Costs. (16,800). ‧ 國. Advertisement. (7,200). 學. administrative. er. website & app. 政治大 (468) (468) (468) 立. (35,958). (16,832). 1,367. The projected NPV for these 3 years is $44,452.. 40. 12,787. (37,065). (189,151). (216,136). 32,770. 64,961. (3,277). (6,496). 29,493. 58,465.

(51) . References 1. Want China Times. (2011). Siemens China responds to fridge-smashing protesters.Retrieved May 10th, 2014, from http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20111206000092&cid=1206. 2. TECHINASIA. (2013). CNNIC Report: China Now Has 564 Million Internet Users, More. 治政大 http://www.techinasia.com/cnnic-report-2012-china-internet-users-weibo-stats/ 立 Than Half are on Weibo. Retrieved May 12th, 2014, from. ‧. ‧ 國. 12th, 2014, from. 學. 3. Wikipedia. (2014). List of PRC administrative divisions by GDP per capita. Retrieved April. http://en.wikipedia.org/wiki/List_of_PRC_administrative_divisions_by_GDP_per_capita. y. Nat. er. io. sit. 4. David Fenwick, Tugrul U. Daim, Ibrahim Iskin, Yasser Dahlawi, (2010) "Exploring the influence of cultural elements on Chinese manufacturing quality", Journal of Technology. n. al. Ch. Management in China, Vol. 5 Iss: 2, pp.141 - 157. engchi. i n U. v. 5. Statista. (2014). Number of Lawyers in China between 2005 and 2012. Retrieved April 12th, 2014 from http://www.statista.com/statistics/224787/number-of-lawyers-in-china/. 6. Forbes. (2014). Tencent WeChat and SINA Weibo: The Frenemies of the Chinese Mobile Space.Retrieved April 21, 2014 from http://www.forbes.com/sites/junhli/2014/04/16/tencent-wechat-and-sina-weibo-the-frenemiesof-the-chinese-mobile-space/. 41.

(52) . 7. National Bureau of Statistics of the People’s repubic of China. (2014) retrieved April 12th, 2014 from http://www.stats.gov.cn/tjsj/. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 42. i n U. v.

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