JavaNet just opened its doors for business a little over a month ago. Business is good, and customers have been impressed with our offerings, but we need to focus our efforts on implementing the strategies, programs, and tactics outlined in the original business plan.

Differentiating ourselves from other more traditional cafes has given us the ability to effectively compete on the beverage and pastry side of the business with the already entrenched competition. Sales are brisk and in-line with projections.

The Internet services side of the business is rapidly being accepted by the local community. Memberships are meeting the projections outlined in the business plan, and sales of Internet services are meeting the goals forecast. Students love to gather for late-night sessions, nearby seniors are getting a glimpse of what the Internet offers, and local business people love to stop by for a quick bite and an email check.

Market Summary

JavaNet is faced with the exciting opportunity of being the first-mover in the local cyber-cafe market. The consistent popularity of coffee, combined with the growing interest in the Internet, has been proven to be a winning concept in other markets and will produce the same results here.

All three target markets for the JavaNet service are growing at a relatively fast pace. We're faced with a large number of potential customers, and we're offering a needed service.

Target Market Growth:

• University students continue to grow at a steady pace, at nearly 4%
• Office workers in the downtown area and nearby professional buildings continue to add value, growing at 3%
• Seniors are becoming an important part of downtown business, growing at almost 6%
• Teens continue to play a major role in downtown foot-traffic, growing at 2%

Market Demographics

JavaNet's customers can be divided into two groups. The first group is familiar with the Internet and desires a progressive and inviting atmosphere where they can get out of their offices or homes to enjoy a great cup of coffee and Internet access. This group is made up of students from the University of Oregon and business people from nearby downtown offices and professional centers.

The second group is not as familiar with the Internet. This group is made up of seniors from the downtown retirement centers. There are three large retirement centers in the downtown area, and currently none of them offer Internet access to their residents. Seniors represent a growing segment of Internet users. They use the Internet to communicate with friends and family and they will be regular users of the JavaNet service.

Market Analysis

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Market Needs

Factors, such as addiction, and historical sales data ensure that the high demand for coffee will remain constant over the next five years.

The rapid growth of the Internet and online services that has been witnessed worldwide is only the beginning of a long-lived trend towards an economy built on the infrastructure of the Internet. The potential growth of the Internet is enormous, to the point where one day, a computer terminal with an online connection will be as common and necessary as a telephone or toilet. This may be 5 or 10 years down the road, but for the next five years, the online service provider market is sure to experience tremendous growth. Establishing itself as the first cyber-cafe in the area, JavaNet will enjoy the first-mover advantages of name recognition and customer loyalty. Initially, JavaNet will hold a 100 percent share of the cyber-cafe market locally. In the next five years, competitors will enter the market. JavaNet has set a goal to consistently maintain a market share of greater than fifty percent.

Market Trends

The Internet has become a point of conversation in almost all social groups. People are talking about sites they visited, business people are talking about Internet-based businesses, and kids are talking about the latest Internet clubs and chat rooms. People like to communicate their Internet experiences with their friends, colleagues, and family. However, it can be difficult to do it in front of a computer terminal at the office or in the family study. A comfortable place to gather and share these experiences is becoming a real need.

JavaNet will provide:

• A meeting place for business people interested in sharing their Internet-based business ideas.
• A social hub for students and young people interested in sharing a beverage and their Internet experiences with friends.
• A place for nearby seniors to gather and learn about the powers of the Internet and better communication methods.
• A stopping point for travelers in need of an Internet connection.

A market survey was conducted in the Fall of 1998. Key questions were asked of fifty potential customers. Some key findings include:

• 35 subjects said they would be willing to pay for access to the Internet.
• $2.50 an hour was the most popular hourly Internet fee.
• 24 subjects use the Internet to communicate with others on a regular basis.

Market Growth

The market for the services JavaNet will offer is growing rapidly. The cyber-cafe hasn't come to this area yet, but similar services are growing rapidly on a global scale. Large cities that cater to large numbers of travelling business people and tourists have been saturated with businesses offering the services JavaNet will offer. Business people use the Internet services to catch up on email and communications with their family, and tourists do the same. Our area supports a population that has many of the same needs and interests of this larger group.

The student population continues to grow as the University grows in popularity with high-school graduates from out of state. These students tend to have money and an interest in up-scale social centers. Business in the downtown area is on the rise with the coming completion of the renovated Fifth Street Market and the new Compu-tech facility. JavaNet will target these groups with radio and TV spots on local stations.

SWOT Analysis

The SWOT analysis provides us with an opportunity to examine the internal strengths and weaknesses JavaNet must address. It also allows us to examine the opportunities presented to JavaNet as well as potential threats.

JavaNet has a valuable inventory of strengths that will help it succeed. These strengths include: a knowledgeable and friendly staff, state-of-the-art computer hardware, and a clear vision of the market need. Strengths are valuable, but it is also important to realize the weaknesses JavaNet must address. These weaknesses include: a dependence on quickly changing technology, and the cost factor associated with keeping state-of-the art computer hardware.

JavaNet's strengths will help it capitalize on emerging opportunities. These opportunities include, but are not limited to, a growing population of daily Internet users, and the growing social bonds fostered by the new Internet communities. Threats that JavaNet should be aware of include, the rapidly falling cost of Internet access, and emerging local competitors.

Strengths

1. Knowledgeable and friendly staff. We've gone to great lengths at JavaNet to find people with a passion for teaching and sharing their Internet experiences. Our staff is both knowledgeable and eager to please.
2. State-of-the art equipment. Part of the JavaNet experience includes access to state-of-the-art computer equipment. Our customers enjoy beautiful flat-screen displays, fast machines, and high-quality printers.
3. Up-scale ambiance. When you walk into JavaNet, you'll feel the technology. High backed mahogany booths with flat-screen monitors inset into the walls provide a cozy hideaway for meetings and small friendly gatherings. Large round tables with displays viewable from above provide a forum for larger gatherings and friendly "how-to" classes on the Internet. Aluminum track lighting and art from local artists sets the mood. Last, but not least, quality cappuccino machines and a glass pastry display case provide enticing refreshments.
4. Clear vision of the market need. JavaNet knows what it takes to build an upscale cyber cafe. We know the customers, we know the technology, and we know how to build the service that will bring the two together.

Weaknesses

1. A dependence on quickly changing technology. JavaNet is a place for people to experience the technology of the Internet. The technology that is the Internet changes rapidly. Product lifecycles are measured in weeks, not months. JavaNet needs to keep up with the technology because a lot of the JavaNet experience is technology.
2. Cost factor associated with keeping state-of-the-art hardware. Keeping up with the technology of the Internet is an expensive undertaking. JavaNet needs to balance technology needs with the other needs of the business. One aspect of the business can't be sacrificed for the other.

Opportunities

1. Growing population of daily Internet users. The importance of the Internet almost equals that of the telephone. As the population of daily Internet users increases, so will the need for the services JavaNet offers.
2. Social bonds fostered by the new Internet communities. The Internet is bringing people from across the world together unlike any other communication medium. JavaNet will capitalize on this social trend by providing a place for smaller and local Internet communities to meet in person. JavaNet will grow some of these communities on its own by establishing chat areas and community programs. These programs will be designed to build customer loyalty.

Threats

1. Rapidly falling cost of Internet access. The cost of access to the Internet for home users is dropping rapidly. Internet access may become so cheap and affordable that nobody will be willing to pay for access to it. JavaNet is aware of this threat and will closely monitor pricing.
2. Emerging local competitors. Currently, JavaNet is enjoying a first-mover advantage in the local cyber-cafe market. However, additional competitors are on the horizon, and we need to be prepared for their entry into the market. Many of our programs will be designed to build customer loyalty, and it is our hope that our quality service and up-scale ambiance won't be easily duplicated.

Competition

The dual product/service nature of JavaNet's business faces competition on two levels. JavaNet competes not only with coffee retailers, but also with Internet service providers. The good news is that JavaNet does not currently face any direct competition from other cyber cafes in the local market. There are a total of three cyber cafes in the state: one located in Portland and two in Ashland.

Heavy competition between coffee retailers creates an industry where all firms face the same costs. There is a positive relationship between price and quality of coffee. Some coffees retail at $8/pound, while other more exotic beans may sell for as high as $16/pound. Wholesalers sell beans to retailers at an average of a 50% discount. For example, a pound of Sumatran beans wholesales for $6.95 and retails for $13.95. And as in most industries, price decreases as volume increases.

Service Offering

JavaNet will provide its customers with full access to the Internet and common computer programs and equipment. Some of the Internet and computing services available to JavaNet customers are listed below:

• Access to external POP3 email accounts.
• Customers can sign up for a JavaNet email account. This account will be managed by JavaNet servers and accessible from computer systems outside the JavaNet network.
• FTP, Telnet, Gopher, and other popular Internet utilities will be available.
• Access to Netscape or Internet Explorer browsers.
• Access to laser and color printing.
• Access to popular software applications, like Adobe Photoshop and Microsoft Word.

JavaNet will also provide its customers with access to introductory Internet and email classes. These classes will be held in the afternoon and late in the evening. By providing these classes, JavaNet will build a client base familiar with its services. The computers, Internet access, and classes wouldn't mean half as much if taken out of the environment JavaNet will provide. Good coffee, specialty drinks, bakery goods, and a comfortable environment will provide JavaNet customers with a home away from home; a place to enjoy the benefits of computing in a comfortable and well kept environment.

Keys to Success

The keys to the success for JavaNet are:

• The creation of a unique, innovative, upscale atmosphere that will differentiate JavaNet from other local coffee shops and future Internet cafes.
• The establishment of JavaNet as a community hub for socialization and entertainment.
• The creation of an environment that won't intimidate the novice user. JavaNet will position itself as an educational resource for individuals wishing to learn about the benefits the Internet has to offer.
• Great coffee and bakery items.

Critical Issues

The risks involved for JavaNet are:

• Will there be a continuing demand for the services offered by JavaNet?
• Will the popularity of the Internet continue to grow, or is the Internet a fad?
• Will individuals be willing to pay for the services JavaNet offers?
• Will the cost of accessing the Internet from home drop so significantly that there will not be a market for Internet Cafes such as JavaNet?

Macroenvironment

The retail coffee industry in this area experienced rapid growth at the beginning of the decade and is now moving into the mature stage of its life cycle. Many factors contribute to the large demand for good coffee: The student population at the University is a main source of demand for coffee retailers, the cold and damp climate is extremely conducive to coffee consumption, and current trends in the Northwest reflect the popularity of quality coffee and specialty drinks.

The popularity of the Internet is growing exponentially. Those who are familiar with the information superhighway are well aware of how fun and addicting surfing the Internet can be. Those who have not yet experienced the Internet need a convenient, relaxed atmosphere where they can feel comfortable learning about and utilizing the current technologies. JavaNet seeks to provide its customers with affordable Internet access in an innovative and supportive environment.

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