Alexandria The future of digital music

1. Alexandria The future of digital music South Korea

2. Table of Contents Product description (Sebastian) Market Analysis (Thais) Competition and Barriers to Entry (Sid) Strategy of Entry (Sid) Economic Risk (Emily) Legal Risk (Emily) Political Risk (Charlene) Attractiveness of Market (Charlene) Sourcing & Logistics (Anna) Cost of Operations (Anna) Finance (Anna) Conclusion (Sebastian)

3. Product description • Take all music Upload it to You have: Alexandria • ever produced on common server Worlds greatest online music library • Put simply, this is how Alexandria works + =

4. Product description II • Sources of differentiation • (1) Alexandria allows everybody to upload music to the library •  of music - GrooveShark works this way, however, it is illegal! • (2) By using a streaming model, Alexandria incorporates efficient and transparent payment of artists and intellectual property right holders! • (3) Alexandria allows for social interaction between users, between artists, and between users & artists! For detail, see report.

5. Product description III • Business model • (1) Low monthly subscription fee: $10 (12,000Won) • (2) All subscription revenue is channeled directly to artists. • No intermediary will benefit (excessively) on behalf of muscians! • (3) The source of revenue for Alexandria is customer targeted ads! •  Same way Facebook makes money.

6. Product description IV • Implications of the business model • (1) Streaming ensures that intellectual property rights of artists are protected as piracy becomes impossible! Requires internet access • (2) Payment of artists is transparent and efficient! • Every user’s streaming history is tracked allowing for efficient payment relative to each users music preferences - E.g. Madonna vs. Justin T • (3) The model gives incentive to both suppliers (artists) and consumers! • Consumers: Peace of mind - the model supports altruism • Suppliers: Offer music for free, payment is immediate!

7. Market analysis • The GeertHofstede’s Cultural Dimensions for International Business shows that South Korea has a high degree of power distance and uncertainty avoidance, low individualism and masculinity levels. • The population shows respect for hierarchy and relationships, are persistent, perseverant. • South Korea is a high tech, industrialized economy with global internet integration. According to OECD the number of households with internet in 2000 was below than 50% by 2008 increased to 95%, 50 % of this is supported by fiber optics which provides a much faster data transfer.

8. Market analysis • The main industries in South Korea are consumer electronics and telecommunications, an e.g. is Samsung, LG, Pantech, etc. • South Korea has a population of 48.64 million citizens approximately, 24.5 million live in Seoul, the capital and the world’s 2nd largest metropolitan area. On an average the literacy rate across genders is 98%. The HDI increased yearly for the last 2 decades reaching 0.937, and the highest level is 1, making an extremely high rate. • At the moment the country is the 20th largest economy with a real GDP per capita of US$28,000.00 in 2009 with equal distribution, placing the country at the highest income category.

9. Competition & Barriers to Entry • Porter’s Diamond 1. Factor endowments 2. Demand conditions 3. Relating and supporting industries 4. Firm strategy, structure, and rivalry • 95% of people in South Korea have internet services available to them.

10. Overall Strategy of Entry $10 (12,000 Won) monthly subscription fee Word-of-mouth promotion Other promotion initiatives: contest to sign friends. Global standardization strategy Promotion for artists since they don’t have to go through a record company saving time, money and energy Offer the website in both Korean and English

11. Economic Risk Inflation rate 2008: 4.7% 2009:2.8% comparatively stable reduce the cost of living Widened currency Won trading band from 2.25%-10% in Nov 1997 band allowing Won to float on Dec The strong Won represents an advantage for Alexandria

12. Legal Risk Intellectual property rights Piracy Law and policy is relatively complete Government has increased inspections and developed education Case of piracy have been treated as criminal case Online report centre

13. Political Risk Modern democracy/ republican government type Legal system Crime rate in South Korea is low Corruption is medium Unstable relationship with North Korea Internet music piracy 40-50% Number of reforms

14. Overall Attractiveness of Market Potential market GDP of $1.356 trillion ranks 26th 95% broadband Internet access modern music is very popular 57% of South Korea's music sales were digital 97% of South Koreans boughtring tones 26% of South Koreans listened to MP3 songs

15. Sourcing & Logistics • Sourcing • Engineers in India • Feedback • Inbound Logistics • Transferred to suppliers • Outbound Logistics • Automated

16. Cost of Operations • Venture Capital • Funding initial costs by raising 1 million dollars in venture capital by selling 30% of its shares • Costs of Operations: • Employees • Office Costs • Bandwidth • Marketing

17. Cost of Operations Employees:

18. Cost of Operations • Office: Centralized • Serves universal needs • Stable exchange rate • Office costs:

19. Cost of Operations • Marketing & Bandwidth • Outsourcing to Akamai • Total costs:

20. Financing • Fixed Costs • Revenues: • Costumers x Clicks per year x $ per click

21. Conclusion South Korea offers an attractive market because of: Stable economy, democratic government and legislation supporting online services. Large population (<50 mill) with high purchasing power, on average. Consumers are very technology conscientious, and 95% of households have internet access. Consumers are pioneering in e-commerce, many digital downloads. All in all a very attractive target economy to launch our service in!