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Mindshaker
The Market

Industry Description

Over the past several years, a new and powerful marketplace has emerged. This ever-changing frontier is known as the World Wide Web. Electronic commerce is increasingly becoming the preferred mechanism to transact business in America. The Internet enables online sellers to boost margins and reach new markets with virtually no restraints or regulation. According to Jupiter Communications, there were an estimated 15 million online shoppers in 1997 and this number is expected to grow to over 60 million by the year 2002. Similarly, online shopping revenues are expected to climb from $2 billion in 1997 to over $40 billion in 2002.

The U.S. textbook market is a large, growing, and fragmented business. Textbooks are written and marketed primarily for use in formal educational settings. Much of the demand for graduate level textbooks depends on growth in the population attending institutions of graduate study. In 1997, college textbook sales grew 7.4 percent to $2.67 billion, following an increase of nearly 8 percent in 1996. Based on the current rise in enrollment, sales are expected to remain healthy over the next several years.

Textbooks have historically been the most profitable types of books for publishing houses. This is largely due to the nature of the textbook industry. First, textbooks are written by college and university professors who do not demand the high up-front and on-going royalty payments that popular press authors command. Second, publishers and college bookstores charge high cover prices for their textbooks, primarily because university students and graduate students are a captive audience.

The student population is formed from a wide array of consumers with substantial buying power. Students currently buy their textbooks almost exclusively from their respective college bookstores. However, according to the National Association of College Stores, students have a negative perception of campus bookstores. The overwhelming majority of students feel that campus bookstores are overpriced and are "taking advantage of a captive audience".

In 1995, there were 2.8 million students enrolled in graduate and professional programs. These 2.8 million students are currently under the instruction of over 200,000 graduate professors. The average student buys six books per semester and spends $270-$400 per semester on textbooks and course materials. While used books do represent a significant percentage of the textbooks sold to undergraduate students" the percentage is drastically reduced for the graduate and professional student market. This adds to the attractiveness of this market. In addition, 82 percent of all students have access to the Internet and one in three households have purchased merchandise over the Internet.

Rapid innovation has created a new electronic marketplace, which is in turn changing education. New products such as online/electronic textbooks, simulations, and are now available for use in the graduate classroom. The traditional textbook, while still an important part of education, is being supplemented with additional educational products, such as classroom simulations, online textbooks, educational games, and up-to-date case studies, to expand the depth and breadth of classroom instruction. These educational products are currently offered within an extremely fragmented market. Textbook publishers, software companies, and educational institutions have all begun to develop a small number of these educational tools. However, none of these outlets have reached a critical mass of graduate faculty, and have therefore been used on a limited basis to-date.

Target Market

Mindshaker will focus initially on graduate and professional students and faculty. Twenty of the most prestigious graduate institutions across the country have been selected as the base on which to launch the company (Refer to Exhibit 1 for a list of these institutions) These universities were selected based on reputation, enrollment levels, and proximity to other potential schools.

As a result, Mindshaker's initial target textbook and study aid market will consist of approximately 13 1,000 students. According the National Association of Education Statistics, the average student spends $270-$400 on textbooks each semester. Based on these estimates, Mindshaker's initial market contains approximately $104 million in potential annual textbook sales. Over the following four years, the number of target schools will Increase to 150, yielding a market of approximately 651,000 students by 2003. This leads to a potential market worth $520 million.

The sale of cases, games/simulations, and other educational tools will be focused primarily on the graduate and professional faculty market. There are approximately 13,000 faculty members at our initial 20 target schools. This number increases to approximately 65,000 by 2003 for our market of 150 schools. Based on estimates of the student market in 1999 the potential market is worth $1.4 million. By 2003, potential revenues increase to $13.4 million with the original product mix.

Competition

Initially, Mindshaker will experience significant competition from college bookstores. While these stores are geographically diverse and fragmented, they do possess several attractive characteristics. First, they have on-campus access to the students they serve and typically have access to student information provided by college administrations. Second, they have a physical presence on or near campus. Third, they offer a variety of products in addition to textbooks (supplies, computer software and equipment, magazines). While Mindshaker management recognizes these characteristics we believe that we can provide an attractive alternative for students (discussed in Products and Services section).

Mindshaker will also face competition from various on-line textbook providers. While these competitors focus entirely on textbook sales and do not offer additional educational products that add value for students and faculty. After significant market research, management has discovered three competitors that operate online textbook stores.

To some extent Mindshaker will compete with Amazon.com and BarnesandNoble.com; however, these providers typically do not carry an extensive list of textbook titles and currently do not offer customized services to meet the needs of students at different universities. Mindshaker will also compete with singular providers of software, simulation, electronic textbooks, and other educational tools. However this is an extremely fragmented market full of small firms that have small product offerings. Mindshaker will forge alliances with these companies to offer central sales and mass distribution of their products.

Management is unaware of another company that offers the customization, ease of use, traditional and innovative educational materials, venue to share ideas, and the opportunity to explore the latest tools in education that Mindshaker will provide. Mindshaker is defining and creating its own industry.


Mindshaker
Table of ContentsAppendices
1. Executive Summary
2. Market Analysis
3. Company Description
4. Marketing & Sales
5. Products & Services
6. Operations
7. Management
8. Financials
Initial Programs
Employees
Industry Analysis
Management Biographies
Board CV Summaries
Valuation Analysis
Balance Sheets
Income Statements
Competitor Analysis
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