Market Research

MARKET RESEARCHMARKET RESEARCH

•PC Usage: 21% (2006)

•Internet Connections: 17% (2006)

Broadband: 15% (2007)…of which:

25% (2008)

23,3% (2007)

19% (2007)

21% (2008)

•I.T. Products’ Expenditures = 2% G.D.P. (Greece = 1,2%)

•Attempts to reinforce the use and possession of PC (BAIT)

•Main age sectors: 16-24 (32%) και 24-34 (27%)

•E-Skills of individuals: Eurostat test 13%, 15%, 7% το 2007 (10% 13% 5% το 2006)

•Main use : Communication ( e-mail, instant messaging) Social Media E-Shops

USER’S PROFILEUSER’S PROFILE

Only 7,6% of the visitors buy something

•PC percentage: 85% (2007), 99,3% for corporations > 250 employees

B2BB2B

•Internet Connection: 88,1%, 14,1% rise, connections changed from modem to DSL.

•E- Government Services, CRM Systems

•Employees: low use percentages:

19,8% (>250 employees)17,6% (50 – 249 employees)24,3% (<50 employees)

Real G.D.P. Rate

•Continuous increase of the G.D.P.•Growth reaches 6,6%.

•The estimated decrease for the years 2009-2010 is caused by the financial crisis.

•The welfare of the citizens follows a continuous increase, which is estimated at an average rate of 6%-6,5%.

•The income for the period 2000-2007 was increased from 3530 leva to 7130 leva (an increase of 101%).

•We witness a remarkable decrease of unemployment from 19,9% (2001) to 6,90% (2007).

The Bulgarian “headache”•The inflation’s extreme fluidity is a real trouble for the economy. Decrease from 10,3% to 2,3% and then a huge rise to 12%.

•High inflation turns investors away from Bulgaria.

Currency•The Bulgarian currency (lev) is connected to the euro at an exchange rate of 1 euro=1,9558 leva.•Why is the entrance on the European Monetary Union delayed?

•The interest rates in the inter-bank market are at a low level, reaching an average of 4,5%.

Reliability of the state’s and banks’ economic progress

•The drop of the interest rates of the government bonds is remarkable.

•Does this affect investments?

The first signs of the financial crisisThe first signs of the financial crisis

The first data for 2009 from Bulgaria show us the following:

1. The industrial confidence for January and February 2009 dropped to -5,9% and -5,8% respectively.

2. Unemployment rates dropped to 5,6%.

3. Industrial production’s increase rate was 0,9% in 2008 and -13,3% in 2009.

Greece-Bulgaria

After comparing data from both the economies, we found that the Greek one provides a higher welfare for its citizens. However, Bulgaria keeps on improving its rates, a possible sign of a well-sustained

growth policy.

Competition AnalysisCompetition Analysis•Small number of e-shop on the marketSmall number of e-shop on the market

•Bad logistics management (No stock available)Bad logistics management (No stock available)

•Lower prices, due to the fact that the items are obsolete...Lower prices, due to the fact that the items are obsolete...

•……but items that are up to date are more expensive from the but items that are up to date are more expensive from the Greek e-shopsGreek e-shops

•Obsolete design, user unfriendlyObsolete design, user unfriendly

•No need for in-house distribution networkNo need for in-house distribution network

•Scaling Scaling

•Low control of the services that the courier providesLow control of the services that the courier provides

33rdrd Parties Parties (Courier – Logistics Companies)(Courier – Logistics Companies)

DistributionDistribution

PromotionPromotion•Google was considered as the most realistic solution Google was considered as the most realistic solution because it is easy to use and has high performance because it is easy to use and has high performance

•Budget: 1.500€ - 1.825€ every year Budget: 1.500€ - 1.825€ every year

•Use of Bulgarian and English words that are popular for the Use of Bulgarian and English words that are popular for the merchandise merchandise

•Daily cost ofDaily cost of 3€ - 5€ 3€ - 5€ for displaying the link between the for displaying the link between the 11stst and and 33rdrd positionposition

InvestmentsInvestments• In order to successfully expand we need two In order to successfully expand we need two

investmentsinvestments: :

• A new URL ending with A new URL ending with ..bg.bg. Cost: Cost: 30 €30 €..

• Translation of the site and installation of an Translation of the site and installation of an automation which redirects the visitor to the automation which redirects the visitor to the proper URL depending on the country from which proper URL depending on the country from which he logged on. Costhe logged on. Cost 2.000€ 2.000€ ((approximatelyapproximately) )

The Vensim ModelThe Vensim Model

ScenariosScenario Changed Variable Change from Normal Situation

S1 Normal NoneS2 Home PC Price Increase Home Pc Average Price=630S3 Laptop Price Increase Laptop Average Price=640S4 General Increase on Prices Home Pc Average Price=630, Laptop Average Price=640

S5 General Decrease on Prices Home Pc Average Price=590, Laptop Average Price=600S6 Decrease on Home PC Prices Home Pc Average Price=590S7 Decrease on Laptop Prices Laptop Average Price=600S8 Increase of Conversion Rate Conversion Rate=0,03S9 Decrease of Conversion Rate Conversion Rate=0,01

S10 Margin profit Increase Margin Profit=0,3

S11 Margin profit Decrease Margin Profit=0,15S12 CPC Increase CPC=1,1S13 CPC Decrease CPC=0,9S14 Logist ic Expenses Increase Home Pc Package Cost=11, Laptop Package Cost=9S15 Logist ic Expenses Decrease Home Pc Package Cost=9, Laptop Package Cost=7

Financial Analysis (1-1)

Without using Vensim and by assigning a desirable coverage period of 2 years, we concluded that the sales should be:

• 1st year’s sales : 10.716,98 euros

• 2nd year’s sales : 12003,02 euros

Financial Analysis (1-2)

By using the simulation’s results and the Net Present Value method, we found which of the previous scenarios are viable.

Net Present ValueThe net present value of each scenario was estimated

with the use of:• Real earnings• 1st year’s inflation is 2,71%• 2nd year’s inflation is 1,97%• Desirable capital performance ( C )10%• Investment costs (CI) 2030 Euros• The formula that was used is:

Net Present Value’s ResultsScenario Earnings Net Present Value Status Classification

S1 6.518,23 € 3.328,88 € Approved 6S2 5.579,36 € 2.556,95 € Approved 11S3 6.277,58 € 3.140,80 € Approved 9S4 5.482,39 € 2.473,70 € Approved 12

S5 6.490,51 € 3.302,10 € Approved 7S6 6.731,81 € 3.502,04 € Approved 4S7 6.285,36 € 3.135,78 € Approved 10S8 10.047,12 € 6.239,11 € Approved 1S9 2.267,78 € -190,58 € Not approved 14

S10 9.233,48 € 5.604,77 € Approved 2

S11 1.087,73 € -1.222,90 € Not approved 15S12 7.126,66 € 3.819,75 € Approved 3S13 5.129,07 € 2.176,41 € Approved 13S14 6.428,06 € 3.253,36 € Approved 8S15 6.608,39 € 3.404,41 € Approved 5

ConclusionsConclusions

Conclusions (1 of 2)Conclusions (1 of 2)

• 13 of the 15 scenarios were approved, so 13 of the 15 scenarios were approved, so there is a big chance (86,7%) that the there is a big chance (86,7%) that the investment will be successful.investment will be successful.

• PC usage and Internet connections PC usage and Internet connections percentages may be low, but there rates are percentages may be low, but there rates are increasing really fast.increasing really fast.

Conclusions (2 of 2)Conclusions (2 of 2)

• The market is relatively new, so there is no The market is relatively new, so there is no significant competition.significant competition.

• Further research could include a cross-check Further research could include a cross-check of our data with a real e-shop, in order to of our data with a real e-shop, in order to better define our simulation model.better define our simulation model.