B&K Distributor Essay

Decent Essays

B&K Distributors

ROI for a Web Based Customer Portal

10 January 2011

Anne Huang, Yu Lee Kim, Min Woo Lee,
Chalida Nakornchai, Kana Osugi, Ryan Thompson

Recommendation to Invest in the Web Portal
We recommend investing in the Web-Based Customer Portal. The expected high financial rewards with net present value of $346K and 41% IRR within five years (see Exhibit 1) are the main motivators. Based on our market research, we believe the high revenue would come from an expanded customer base, increased order frequency/size and reduced costs. Going beyond the financial rewards, the strategic impact of the project is not only to increase our penetration rate and customer service quality in the short run, but also to enhance …show more content…

We recognize that the projected high NPV of $346 and IRR of 41% could be lower if there are changes in the assumptions we made on penetration rate, order frequency, order size, and cost per order (see Exhibit 2). Among the four metrics, penetration rate and order size are the most important factors in determining the return of the investment. For example, NPV will be negative if there is no order size increase as a result of implementing the web portal. Similarly, a minimum increase of 3% in the penetration is needed to obtain positive NPVs. Sensitivity analysis with these two variables is also illustrated in Exhibit 3.
However, our assumptions come from industry case studies, primary and secondary market research, and thorough discussions with people in different functional areas throughout B&K. Hence, the figures will be achievable with appropriate marketing plans. It is also important to conduct training sessions to franchises, as all the variables will be affected by the number of customers who use web portal. Although there will be a certain number of customers who continue to use traditional methods of ordering, given the current trend of increased IT usage, we believe it is reasonable to expect 20% of customers will be either newly added or switched to the web channel within 5 years.
Lastly, we have also considered risks associated with the upfront and ongoing costs of the implementation of the portal system. After

Get Access