2006 Expansion Plan for Eat2Eat.com

Issues and industry overview: Eat2Eat.com has started up for five years, built a good reputation in dining industries, and had a very stable technological operating system. The business model is sample but make sense that can generate a real cash flow from its operation income. However, it still has not reach its breakeven point for five years; therefore, a extra funding resource will be needed in 2006, and how to utilize this new financial support making a successful strategy for a long run business. Therefore, there are two main issues will be identified and examined as follow. One is for the financial alternatives, the other is the financial allocations.

Alternative analysis First of all, from operating perspective and under time and financial constraints, Eat2Eat.com should evaluate which cities have potential to increase revenue sufficiently then close the business where we cannot see any significant improvement in the future. We can evaluate this factor by calculate the contribution margin from single consumer from different cities and the contribution margin from each city to see whether Eat2Eat.com has a right segment positioning towards this regional market.(appendix 1 and 2)

Second, to determine how much effort we should make to different cities, we evaluate this figure by the contribution margin from 2004 marketing campaigns, to see whether the marketing events have significant positive influence on membership growth. (appendix 3)

Recommendation According to the case description, 7%-10% of consumers' bills constitute 40% of eat2eat.com revenue, which is US$478,000, therefore, once we close the operating insufficiently cities, then allocate the new funding to improve the performance where illustrate a highly acceptable behaviour for online restaurants reservation. It will be easily to reach breakeven point. For example, Bangkok is the lowest ranking of all cities, and constitutes a big lost in 2005.

Therefore, it should be shut down immediately. Shanghai and Singapore are suffering extremely loss too; however, the revenues are remaining the same while cost went down rapidly. Those two cities can be put into probation status for one more year to see the performances after implementation of new marketing events and additional sales force. We can see the amount of money of per consumer spends in two cities, Shanghai and Sydney are much higher than others but they are still suffering from huge loss in operating net income, which means the expenditure of per consumer in fine dining is positioning in high-end segment rather than general public; therefore, a re-positioning in marketing segment is crucial from those two cities. Once we make a right positioning in potential market, it could have opportunity to become a golden cow.

From other functional division’s perspectives, marketing and technology divisions are going a good job; however, Eat2eat.com still need some innovation to keep the competitive advantages; otherwise, the official websites host by restaurants their own are likely replace its position, and since web2.0 and blogs are so popular now, a buzzing blogs hosted by local food critics could easily have impact on advertising buyers’ willing to pay advanced advertisement provided by Eat2Eat.com. Eat2eat.com could also consider develop other business related to food ranking content but get involved more OFFLINE applications as well, for example, making partnership with credit card organizations, selling fine dining information to tourists publications etc. to utilize the restaurant inventory.

Implementation Raising capital immediately, it does not matter where the resource come from, and then allocate $ 0.8M on marketing on cities who has potential profits according to contribution margins. Using high technology ex WAP enabled ordering system to build higher entry barrier towards other competitors.