Looking at ArtSharks through the Five Forces by Michael Porter (2008), the analysis for the threat of new entrant points us to a different perspective. Since the new entrant is ArtSharks, it is important to determine the barriers to be experienced by an entrant and how these can be used as an advantage of ArtSharks. The very first activities of ArtSharks include being able to build the website. Now, ArtSharks has the choice of how the website will be built – by outsourcing which mean more expensive costs; or hiring its own set website designers who will be the ones to build, as well as manage the website itself.
Having an existing team of website designers is a good investment which will be helpful in the long run. It will also be a challenge for ArtSharks to get their first set of members. According to Porter (2008: 10), buyers will only trust large companies when buying high-value products. They will also value websites with large number of fellow members and customers. Hence, once the website has been launched, a huge portion of the efforts and investments should be geared towards the marketing and promotional activities to make sure that the website gain the desired popularity and membership in a few span of time.
There is a long list of companies and freelancers who offer website hosting and designing from around the globe hence power of suppliers is not expected to be a barrier. Since the supplier’s industry itself is competitive, ArtSharks can leverage on this advantage by looking for quality website hosting and designing companies at a low cost. Buyer power is relevant in this industry as there are a significant number of relevant and strong competition available in the industry of online auction and selling.
However, there is little competition among these online auction and selling websites who specializes in artworks, most especially with social networking. As previously stated, there are customers who value websites with long-standing tradition, as far as the world wide web is concerned, and websites with a large number of members selling and buying online. eBay and Artspan already have this advantage which makes it challenging for ArtSharks to enter the market.
Analyzing the business through SWOT Analysis, it was determined that being able to combine artwork buying and selling with social networking is one competitive proprietary advantage of ArtSharks over its competitors. Since volume of members are important for its customers, being able to connect with other buyers and sellers may be one selling point for ArtSharks. Being able to acquire the business model of Friendster wherein the member will know who viewed their profile is also another advantage. Another is being able to post comments on available artworks.
However, ArtSharks need to ensure to filter comments that can be considered lewd and degrading. However, it should be understood that this business model (i. e. , combining art selling and buying with social networking) is a very new idea hence, it is still subject to a lot of challenges and weaknesses. Due to these advantages over competition, it will be an opportunity for ArtSharks to grab a share of traffic and members from them. These advantages should be communicated clearly and effectively to visitors of the website. Financial Viability
The customers of the website are divided into four – Starter, Individual, Professional and Gallery. These four have different membership packages with varying membership costs – an annual fee and a one-time activation fee. The Starters will not pay any annual fee or any activation fee but Individuals need to pay an annual fee of ? 50 and activation fee of ? 10. Professionals will be charged ? 120 annually and an activation fee of ? 25. Galleries will be charged ? 500 annually and an activation fee of ? 50. During the first year, the website targets to get 250 members by the end of the first semester and 1,000 by the end of the first year.
During the first year and at 250 members, ArtSharks is expected to incur a loss of ? 1,050 after being able to pay for its direct/variable costs and a loss of ? 4,779 after paying for the entire operating expenses. With this, the business needs to spend ? 6,058 and get an operating profit of ? 8,921 of profit by the end of the first year. ArtSharks, being a website marrying social networking and artworks buying and selling, is a promising business. It has been discussed that online artwork buyers choose to buy from websites that has been able to garner a significant number of members.
ArtSharks can leverage on its positioning as social networking to increase its membership rapidly and be able to start selling artworks at the soonest possible time. However, being online-based, ArtSharks needs to ensure that it will be able to provide the same feel and experience of buying artworks in physical shops and galleries, as well as provide security when paying online. On the seller side, ArtSharks should also be able to deliver its sellers with the confidence that copyright infringement will not be a problem with ArtSharks.
However, there is a need to understand why artwork sellers choose to sell through art stores and galleries rather than online to be able to start tapping this market. Competition is weak in the sense that there are a few websites offering the same services as ArtSharks. However, when you look at social networking in itself, ArtSharks maybe in a disadvantage. Hence, ArtSharks needs to spend on advertising and promotions to be able to reach its target members. Supplier resource is also not a problem as website hosting and designing is already ubiqutious hence they can offer quality service with competitive prices.
The financial viability of the business is similar to all other businesses there are. Loss is incurred during the first years of the business but it will be able to achieve profits by the start of the second year.
Art Gallery Worldwide (2009) [online] Available from < http://www. gallery-worldwide. com> [May 9, 2009] Artspan Contemporary Art (2009) [online] Available from < http://www. artspan. com/> [May 8, 2009] Bair, J. (2007). Entrepreneur Draws on Creativity to Sell Art Online [online] Available from <http://findarticles. com/p/articles/mi_qa5295/is_200704/ai_n21238224/> [May 10, 2009] https://www.emarketer.com/