Business: Entrepreneurship - Essay Example

iBuy is a unique company that has mastered the art of supply chain distribution and taking it to a new level. The firm has a business model in whichthe sale occurs online and using a network of distributors the order is processed without iBuy having to move a finger. Also a variable of importance is the fact that iBuy does not own the inventory it sells. The company adds value to the customers by offering a wider array of product selection better than typical office supply stores. There are over 15,000 item sold by the firm (Youngblood, 2011).

Most companies cannot compete with iBuy in product section due to the fact that it takes millions of dollars in inventory to sell so many items. iBuy makes money in the spread between the final selling and their negotiated cost. For example iBuy might negotiate $2 cost for a red pen. The pen sells at the online store at $2.79. The gross profit earn on the pen is the spread of $0.79. iBuy makes a lot of money on wholesale transactions. Some of the clients of the company include school districts, federal government, and fortune 500 companies.

The human capital of the company is excellent. Despite only having seven employees the capabilities of the staff are outstanding. The company looks to save money in any way it can. Recently iBuy was able to reduce its credit card transaction cost from 3% to 2%; a move that saved the company $1,700 a month. The internet allows iBuy to deliver value that a brick and mortar company cannot achieve. As I mentioned earlier iBuy can offer customers a much bigger product selection than traditional companies due to the fact they do not own its inventory.

iBuy offers a very large selection of suppliers scattered across the United States. Traditional companies that own their inventory cannot afford to have 100 warehouses. iBuy’s supply chain enables the company to offer its customers next day delivery. Another way that Ibid differentiates itself from offline physical firms is that iBuy has used the internet to formulate over 400 online marketing alliances that has helped the company achieve its impressive $4 million in sales. iBuy’s business model works well in the distribution of a lot of products.

Currently the company is expanding its product offering through an alliance with a wholesaler of medical equipment devices. A product line that is currently not offered by the company that could make a lot of money is by selling toys. In 2008 the world’s toy market was valued at $78 billion (Toyassociation, 2009). Another way that the company can expand its scope is by setting up networks of distribution in other parts of the world. The firm is currently in the process of penetrating the Canadian marketplace.

The population of Canada has a GPD per capita of $38,100 (CultureGrams, 2011). Another market that could be easily penetrated due to the NAFTA agreement is Mexico. As of 2006 the population of Mexico was 111.06 million inhabitants (Mapsoftheworld, 2011). Despite the advantages of the iBuy business model the company has limitations to what in can offer. The company is limited in the sales it can achieve internationally because they don’t own their inventory. If a wholesaler does not want to ship outside the US iBuy cannot do anything about it.

The firm cannot sell specialize items that are not available at wholesalers such as expensive watches, certain electronics products, and large items such as automobiles. The firm’s model also limits the capabilities of the company of expanding in the service industry. The customer service capabilities of the firm are limited due to the small size of its staff. The wholesaler is not going to service customers that iBuy sold to. References CultureGrams (2011). Canada. Retrieved April 8, 2011 from CultureGrams database.

Mapsoftheworld.com (2011). Mexico Population. Retrieved April 8, 2011 from http://www.mapsofworld.com/mexico/population-in-mexico.html Toyassociation.org (2009). Toy Markets in the World. Retrieved April 8, 2011 fromhttp://www.toyassociation.org/AM/PDFs/Trends/ToyMarkets09.pdf Youngblood, D. (2009). Ex-Sales Rep Office Supply pushes the envelope; The low cost firm has no warehouses and doesn’t own the inventory it sells. Star Tribune