Research Paper on Business Opportunities Assessment


The aim of this research paper is to review a list of business opportunities that have received recent venture capital funding using different techniques for assessing business opportunities. Since the list of the companies supported by the London Office of the Venture Capital firm Accel is fairly extensive, the assessment will be narrowed down to businesses in a particular field that appears most prominent under the current economic conditions.

Before a decision about a new venture is taken, it is of paramount importance to perform full macro environmental analysis, encompassing the scan of political, economic, social, and technological aspects of the chosen market; full micro environmental analysis of the industry in question; surveying the consumer behavior by means of collecting and analyzing primary data; S.W.O.T. analysis of the feasibility of the new venture; and development and justification of a comprehensive marketing strategy.

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Choice of Sector

The companies recently funded by Accel are mostly in the field of telecommunications, e-commerce, and gaming. While all these spheres promise high returns, some of them also pose higher risks. Another important consideration to be taken into account is market maturity: it is considerably greater in markets like broadband or mobile as compared to more innovative products and services. Data security, e-commerce and applied technologies are believed to be the most lucrative niches, since the modern era is sometimes referred to as a ‘networking-centric computing’ era (Chesbrough, 2000).

With the advent of the Information Revolution, traditional business techniques are quickly becoming obsolete. Thus, it is of paramount importance that a company adapts to new market conditions before its competitors turn their flexibility into a competitive advantage. Internet is a powerful medium that can be used for a variety of purposes, starting from advertisement and creating awareness to actual selling and collecting feedback from customers. Brand-new solutions include Business Intelligence, Software Configuration Management, Enterprise Application Integration, and Infrastructure Management. The ability of businesses to incorporate scientific advances into the process of product development is one of the primary determinants of success. Therefore, online businesses should be paid more attention than those in traditional spheres of activity. While the burst of the e-commerce bubble has undermined investor confidence in this sector, it has gradually recovered as online businesses kept developing in a more sustainable manner. The rise of electronic commerce, however, urges the government to pay more attention to such issues as computer crime and intellectual property. One more important issue involved in e-commerce is the protection of information. If this is not ensures, investor confidence can be harmed again. However, there are many opportunities associated with doing business online such as ‘the promise of ecommerce is to improve consumer information and lower transaction costs’ (Merges, Menell & Lemley, 2006, p. 924).

Therefore, the range of companies funded by Accel that promise highest returns can be narrowed down to companies working in the field of e-commerce and e-business. Timmons (2006) argues that opportunities for doing business in the Internet are very attractive. There is a need to distinguish further between a click-only company and a ‘bricks and clicks’ company. Click-only companies conduct sales only though interactive media, predominantly Internet, while ‘bricks and clicks’ companies (often dubbed as ‘click and mortar’ companies) integrate traditional ways to sell with interactive sales channels. Each of the models has its own advantages and disadvantages. Clink-only companies are easy to start and are by far more flexible than a typical ‘bricks and clicks’ company. At the same time, ‘click and mortar’ businesses have an advantage of perceived reliability and existing customer networks:

‘The Click and Mortar model offers an advantage in areas of business where it is better to retain ties to a physical company and leverage competencies and assets. Pure dot.coms, on the other hand, have an advantage in areas that stress cost efficiency. They are not burdened with brick and mortar costs and can offer products at very low marginal cost. However, they do tend to spend substantially more on customer acquisition’ (Value Based Management, 2008, para. 4).

Taking all the aforementioned considerations into account, it becomes evident that the advantages offered by click-only companies are greater. Out of all businesses in this field, Autoquake was chosen on the basis of SWOT, Porter’s Five Forces, and Marketing Mix Analyses. Autoquake is an online marketplace for second-hand vehicles. In-depth analysis of this online auction site reveals that it is a very lucrative opportunity.

SWOT Analysis

  • Strengths

Trading online is convenient and fast. Many people prefer to do their business this way for the ample reason that it consumes less time and effort. Online business also offers flexibility and opportunities for cutting costs:

‘Besides the greatly expanded market reach afforded by the Net, there is also the reduced cost of doing business online’ (Sweeney 2001, p. 4).

Keeping expenses to the minimum is very important for start-up businesses, especially under the present conditions when credit is tightening. Nowadays ‘businesses are encountering more restrictions at lending institutions, making it harder to get the credit necessary to expand or, in some cases, stay afloat’ (Olson, 2008, para. 2).

The costs associated with doing business online include the domain name registration fee, which is usually an annual cost, hosting, upfront website development costs (the price of design and site architecture), and promotion and maintenance costs. Costs are much higher for businesses that need a substantial initial investment in infrastructural facilities.

Another peculiarity of Autoquake is that it caters to a highly specialized market. It is a good alternative to other online auction sites, since it provides services for customers specifically interested in buying or selling second-hand vehicles. The design of the website is attractive and creative. The site has a relatively simple layout with adequate font size and adequate use of graphics. Both aesthetic and practical criteria are important when assessing the attractiveness of an online auction website:

‘Online competition could be formidable. For this reason, great design and excellent customer service are very important. The graphical presentation of your own Web site is of particular importance’ (Sweeney 2001, p. 61).

The website has an easy-to-use site navigation system, advanced browse feature and targeted search capabilities.

  • Weaknesses

Entering head to head competition with other online auction sites is a very serious challenge. The market for online auctions is dominated by big players like eBay. Certainly, the greatest challenge for the Autoquake would be to publicize their brand to attract people. Online marketing and promotion is a real challenge for the company’s managers.

Furthermore, Internet transactions are still associated with a certain degree of insecurity, despite the message of accuracy and responsibility sent out by e-businesses.

  • Opportunities

The major opportunity for online auctioning is the growth of net users. The new generation readily trusts online businesses and is eager to sell and buy online. Also, customers from different geographical areas are able to use the company’s services, therefore broader spectrum of consumers of Autoquke’s services can be covered at no extra cost.

  • Threats

In terms of consumer trust, the major threat for any e-commerce project is fraud. It is impossible to guarantee total protection from fraudulent transactions and hacker activity. Providing proper security protection is the key challenge for any e-commerce site. The story of the failure of Wagglepop – the online auction site that had glitches and weak security protection system – can teach start-up online auctions a lot:

‘After three years in development, the site lasted little more than a week before disappearing after a strange course of events’ (Comiskey, 2005, para. 1).

Security lapses and dangerous attacks on the site brought this massive project down in virtually no time. Another concern is privacy. Protecting customers’ privacy in the global online space becomes a very serious task to keep in mind. The very e-nature of the business is associated with certain risks:
‘There is greater risk to the business since in e-business you are exposed to customers and suppliers. Any problems and shortcomings are more visible to the outside world’ (Lientz & Rea, 2000, p. 6).
It is also essential not to repeat the mistakes of the clink-only or ‘bricks and clicks’ companies that failed during the dot-com boom. As a typical example of the so-called ‘economic bubble,’ e-business grew too fast to sustain itself:
‘A core lesson from the dot-com boom is that even if you have a good idea, it is best not to grow too fast too soon’ (German, 2008, para. 1).

Therefore, it is important to figure out the most appropriate rate of growth so that all the elements of business develop in a consistent manner. The company might also be under theat of a takeover if it is perceived as a potentially profitable opportunity. It should better preserve its unique position on the market without mergers and alliances, since loosing its individual style would be fatal for the company.

Porter’s Five Forces Analysis

Macroenvironmetal scan can be performed using Porter’s Five Forces Model (Porter, 1979). This model is useful for estimating the degree of rivalry in a particular sector of the economy.


Autoquake’s suppliers are its customers at the same time. Supplier concentration is not a serious threat, since there are large numbers of people willing to sell online. There is little threat of forward integration: most Autoquake’s customers/suppliers are individuals scattered geographically and interested in one-off sales. There is no differentiation of inputs: bids are the only input. Switching costs are relatively low, since sellers can use several online auction websites at the same time, yet there are very few websites that offer opportunities for dealing specifically in second-hand cars.
Conclusion: low to medium suppliers bargaining power


Customers of Autoquake are generally dispersed. There is little differential advantage in the industry given the similarity of services online auctions offers. There is no backward integration threat. Buyer switching costs are low, as outlined above. At the same time, availability of existing substitute products should not be dismissed, and buyers are very price-sensitive.

Conclusion: low to medium buyer bargaining power

New Entrants

In the current situation, there is a high threat of new entrants. Low barriers to entry makes venturing into online auctioning very attractive. However, brand equity is important: confidence is the key in e-commerce, so new entrants might find it difficult to develop an initial level of confidence.
At the same time, learning curve advantages are relatively unimportant, since innovation is not the most important profit driver in online auctioning. Also, online auctioning does not rely heavily on proprietary technology.

Conclusion: medium threat of new entrants

Threat of Substitution

Higher quality of service and lower price of competitors might encourage customers to switch. Therefore, customer retention relies on Autoquake’s remaining price-competitive and offering excellent customer service.

Conclusion: high threat of substitution


There are factors that enhance the intensity of rivalry in online auctioning, such as little differentiation between players, similarity of players’ strategies, and price competition.
Conclusion: medium to high intensity of rivalry

Marketing Mix

Marketing Mix is one of the most effective tools to formulate a comprehensive marketing strategy. Marketing Mix is sometimes referred to as the ‘4 Ps’, which stands for product, place, price, and promotion. Sometimes this list is extended to ‘7 Ps’ to include people, process, and physical evidence.


There are two basic marketing approaches to evaluating the product – Product Life Cycle and Three Levels of a Product. Product Life Cycle (PLC) model compares the existence of the product on the market with the biological life cycle:

‘After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilizes and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn’ (Marketing Teacher, 2008, para.2).

Product Life Cycle is viewed as being comprised of four distinct stages such as introduction, growth, maturity and decline. At the Introduction stage, the pressure for immediate profit is less important than creating the first impression about the product. At the Growth stage, many competitors exist on the market, therefore companies tend to form strategic alliances, joint ventures, or merge. Profits are growing, and wide-scale advertising is the focus. At the Maturity stage, sales growth is stable, and the companies pay most attention to differentiating their offers and promoting the product through various media. At the Decline stage, the product is either radically transformed or withdrawn from the market. Autoquake, by virtue of being a new business venture, is in its Introduction stage, and management maintains a correct focus on creating brand awareness and attracting new customers.

The Three Levels of a Product model argues that within each product it is possible to distinguish three different levels — the core product, the actual product, and the augmented product. The core product is the immediate benefit the customer receives from the ownership of a product. The actual product is the tangible, material thing. The augmented product encompasses the added value of the product, i.e. additional services that accompany the product. The examples can include ‘toll-free customer information, installation guides, delivery, warranty, and after-sale services’ (Lilien & Rangaswamy, 2006, p. 234).

Autoquake puts a special emphasis on the augmented product in the form of exceptional customer service and extended car warranty package as well as seven day money back guarantee.


There are different pricing strategies, and the application of each strategy should rely on all other elements of the Marketing Mix. The basic pricing strategies include Premium Pricing, Penetration Pricing, Economy Pricing, Price Skimming, Psychological Pricing, Product Line Pricing, Optional Product Pricing, Captive Product Pricing, Product Bundle Pricing, Promotional Pricing, Geographical Pricing, and Value Pricing. Autoquake applies Economy Pricing (low price offered by a company that keeps marketing and manufacture at a minimum) by reducing costs and fees in order to remain price competitive.


Analyzing promotional strategies, a special promotional mix can be useful. Promotional mix comprises the following elements: Personal Selling, Sales Promotion, Public Relations, Direct Mail, Trade Fairs and Exhibitions, Advertising, and Sponsorship (Marketing Teacher, 2008). Autoquake build the value of its brand by online advertising, partnerships with search engines, appearance in trade publications such as Auto Express and in media in general such as Times or The London Paper, and selling cars formerly owned by celebrities.


This element of the Marketing Mix concerns the distribution of a product. The main criterion for the effectiveness of distribution channel is convenience for the customer (Webber, 2005). Given the nature of Autoquake as a clink-only company, the distribution happens through the Internet channel without any intermediaries.


Chesbrough, H.W. (2000). Managing IBM Research in Internet Time. Harvard Business School case #9-601-058.
Comiskey, D. (2005). ‘From ‘Pop’ to ‘Flop’: The Saga of Wagglepop.’ Retrieved November 19, 2008, from
German, K. (2008). Top 10 dot-com flops. Retrieved November 19, 2008, from
Lientz, B.P., and Rea, K.P. (2000). Start Right in E-Business: A Step-by-Step Guide to Successful E-Business Implementation. New York: Academic Press.
Lilien, G.L., & Rangaswamy, A. (2006). Marketing Engineering. Ottawa, Canada: Trafford Publishing.
Marketing Teacher. (2008). The Product Life Cycle (PLC). Retrieved November 19, 2008, from
Merges, R.P., Menell, P.S., & Lemley, M.A. (2006). Intellectual Property in the Technological Age, 4th ed. Rockville, MD: Aspen Publishers.
Olson, E. (2008). Small Firms Find Credit Is Tightening. New York Times. Retrieved November 18, 2008, from
Porter, M.E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(2): 137-45.
Sweeney, S. (2001). 101 Internet Businesses You Can Start from Home. Gulf Breeze, FL: Maximum Press.
Timmons, J.A. (2006). New Venture Creation: Entrepreneurship for the 21st Century, 7th Ed. New York: McGraw-Hill.
Value Based Management. (2008). Bricks and Clicks. Retrieved November 19, 2008, from
Webber, S. (2005). The Marketing Mix. Retrieved November 19, 2008, from


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