Management

Discussion &
Analysis Report
2019

APRIL 18
Magnate Square LLC

Authored by: Sadeya Sultana (301037771), Lexin

Zhang (301018434)

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2019 Pro Forma Monthly Income
Statement

As seen in our pro forma monthly income statement projection, we plan to steadily increase our
net income from $2,000 to $60,000, an ambitious 96% increase, as we start our business. We are
projecting, and working towards, a best possible outcome of a 30% gross profit margin, in January, and
more or less maintain that margin throughout the year, and ending with a 33% gross profit margin in
December. Thereby having a 3% increase in the gross profit margin over the course of the year.

Why We’re Better

As an electronic retailer, Magnate Square, provides an online shopping experience for
consumers. In order to differentiate ourselves from the many other companies occupying this modern
industry, we are focused on building a platform that will cultivate and support small businesses. The
website transposes the marketplace shopping experience online, through the various different kinds of
shops that operate on the site.

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 Furthermore, there is a moderated discussion server that facilitates a way for users to interact
with each other as a way to recreate the social aspect of shopping. The merchants on the site are also
able to provide customers service through the server as well. By integrating this feature, it can increase
retention of visitors on the site as well as cultivate more purchases through consumer interaction and
recommendation.

Currently, delivery service of all products, and production services for Magnate Square’s
products are being outsourced so there is less operation to personally oversee. There is also less space
that needs to be financed. SampleSquares is also a subscription we provide that delivers a package with
an assortment of promotional products on the site, including samples. These monthly packages are
done by the company. Regardless, all products, including the different shops’ products, have
packaging with a specific visual aesthetic to establish branding quality. This way there is a positive
image associated with the brand.

To appeal to the young generation, Magnate Square manages an initiative called EcoEcho. It
encourages the businesses on the site to become more environmentally friendly in their
products/services and operations through incentives, such as homepage features. Partnering with
influencers in creating merch stores, for their businesses, on the website also incites an influx of traffic
and exposure.

It’s important to have competition in the industry, and have companies reflect and strategize on
ways to persuade consumers of the value of what they are selling. Having competitors makes for a
healthy industry because it prevents monopolization, inflated prices, and a power leverage. It also
forces a climate of innovation, and an overall betterment in product and service. Competition also
comes from small start-up businesses, which positively contributes to the potential number of jobs and
the general growth of the economy.

Target Market & Ideal Customer

Though Magnate Square aims to be a place that provides products and services that are of
value to all consumers, our target market focuses on the younger generations and millennials. Due to
the age of and income level of our target market, we make sure to have our products and partners sell a
majority of their products and services at a relatively affordable price.

Additionally, the target market also happens to be one of the most informed demographics,
with either the social internet or because they are still engaging in academic education. Thus, it means
we work to place emphasis on our corporate social responsibility initiatives. In the future, we’d like to
further explore - and tap into the growing elderly demographic, and cater to the ways they utilize
online shopping and services.

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Target Market & Ideal Customer
As an emerging B2B company, we use penetration pricing. By imposing low prices to the
range of products the suppliers offer, we are able to offer prices that appeals to customers; on occasion
use discounts. The reason for these particular pricing strategies is that we believe that setting lower
prices not only lure in customers but also making them aware of new products and to try them.

IT Resources
Our business requires different types if IT resources, both hardware and software, such as web
servers and database systems.
We use web servers which are networked computers that HTTP (HyperText Transfer Protocol)
clients connect to. They send commands, receive responses and serve useful data to clients. They store
and run all the files and software necessary to host any eCommerce, including ours.
We also use web authoring tools which are pieces of software used by a web developer to
create or modify web content. They range from basic text editors to much more complex authoring
tools and content management systems with built in frameworks, debugging tools and collaboration
features.
Other types of IT resources that we use are database systems that is a collection of programs
that enables us to store, modify and extract information from a database. Also networking and the
internet which defines how computers should be connected to each other over the internet and how
they should transfer information.

Raw Materials & Supplies

The types of raw materials and supplies we will need a use to run our business will be
sustainable and indirect raw materials that will contribute to the final products. Few will be direct raw
materials. Our goods and services will be produced by firms that are specialized in the production of
those particular parts, as they are equipped with the proper machinery. Our hours are flexibly to the
needs of our employees, however as an organization is open to the standard working time.

Quality Assurance
There seven steps that are taken for our company to ensure quality of the product to stay at a high
level.

Step 1: Identify Organizational Goals. At this stage employees are brought up to date and familiarize
with the company’s mission and goals.

Step 2: Identify Critical Success Factors. We identify the factors that makes up our quality assurance
system.
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Step 3: Identify internal and external customers: knowing our customers whom help our quality
assurance system work.

Step 4: Customer Feedback. Consistent feedback from our customers help with assuring quality.

Step 5: Implementing Continuous Improvements.

Step 6: Select Quality Management Software.

Step 7: Measure Results.

We assign specially trained individuals who given the responsibility for maintaining the quality of the
product.

Global Considerations
There are tons of considerations that needs to be made when it comes to import and export,
some of these considerations include specifically on the background in business, international
relations, and global finance. These helps us understand the myriad hoops that we must jump through
to sell or buy a product from a supplier, especially if the supplier is from overseas. For our overseas
locations we have done extensive research on that country’s rules and regulations on how our business
may operate. We also study the cultural differences that may affect our business viability and that the
market is in need of it. As a foreign business in a different country it is very important to us to try to
keep up to date on the political climate, theses helpful especially when we first opening a location.
Two countries that we are projecting to branch out are South Korea and Sweden.
Sweden have high standards of living combined with one of the world’s most skilled labor
forces are among the many factors which makes it strong in carrying out commerce. Along with its
strong infrastructure and well-developed social programs are strong incentives as well.
South Korea is ranked one of the top countries to start a business when it comes to obtaining
electricity, trading across borders, and enforcing contracts. Not to mention South Korea’s super speedy
internet connection which is extremely important and helpful when it comes to a ecommerce business
like ours. We will face global competitions since we won’t be the only company there. Other
companies like Amazon will pose as a global competitor that can pose a threat to our organization.

Legal Considerations
The first legal consideration that Magnate Square needs to deal with is to register a website
domain, also known as establishing the company’s web hosting. This encompasses aspects such as
email accounts with the domain name, and data for the server to run. This is important for a website
that conducts transactions, and hosts discussion boards (2019).

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 The federal permit, “Export Declaration”, also known as “Memorandum D20-1-1”, is a permit
that allows the business to export out of the country. It requires a report of all goods the company is
exporting out of Canada. International shipping/exports of merchandise are required when our
company operates online, and serves globally.

Because our company is a relatively small, it is more appropriate, and simpler, to register for a
limited liability partnership. In Ontario, we must submit an application to the Central Production and
Verification Services Branch to register the partnership. Perhaps, if the company expands to a large
enough stature, in the future, we will choose to transition into a corporation.

A “Master Business License” is needed to confirm that the business’ name is registered in
Ministry of Government and Consumer Services, Companies and Personal Property Security Branch’s
public records. This registration can be done online, with the few exceptions. The Business
Identification Number is important because it can be used as business identification at financial
institutions. So, it is needed, among other reasons, to conduct the financial activities of the business.

The provincial permit, “Accessibility Compliance Reporting Form”, requires all organizations
operating in Ontario to complete and submit a compliance report if the company has over twenty
employees. The purpose of this is to make sure organizations comply with the Accessibility for
Ontarians with Disabilities Act. Regardless, of industry it is important for the government to monitor
the treatment of employees with a disability (BizPal Perle).

Schematic Design of Business

As a start-up e-commerce business, we have decided to outsource manufacturing operations.
We also use dropshipping, which outsources the management of inventory and delivery. This allows us
to save on resources, and operate in a small office workplace, as well as reduce the number of
personnel we would otherwise have to personally hire and train. When we designed the office space,
we made sure to have a portion be a storage room, so we could have some extra inventory (mostly
samples) on hand for partners or sponsors that come in for meetings. Additionally, they are personally
packaged by a group of staff for “SampleSquares” monthly membership delivery.

If we were to execute a pop-up shop in a mall, when you walk through the entrance, the first
thing you see are the products that are on sale, as a way to draw people in. The products are not just
Magnate Square products, they include any product in the store. To the left, there are MG Sq.’s eco-
friendly products. To the right, there are products of various featured businesses on the website that
have participated in the EchoEco initiative. They are placed near the front in order to ensure the most
exposure. The cashier and MG Sq’s signature clothing-line and cosmetic-line are towards to back of
the store so as to lure the customers further into the store, and increase the possibility of them buying
something. The main feature that will lure young customers all the way into the store is the “influencer
merchandise” that is in the display window, but tucked into the very back corner of the store.

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 We tried to make use of the small space, because it is a pop-up shop with a backroom storage,
without it being too overwhelming. The overall colour scheme of the shop will be a softer tone of the
brand colours, and a little simpler as well, so as to echo the website. When we designed the pop-up
shop, we tried to include categories of the website that would make sense to strip down and include in
the brick and mortar space, as a way to represent the website.

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Resources
Canadian governments at the federal, P. (n.d.). PerLE. Retrieved from https://services.bizpal-
perle.ca/results/?b=35&j=Toronto, Ontario&sgc=3520005&s=Electronic shopping and mail-
order businesses&naics=4541&a[]=26549&k=&mode=steps&p=
Website.com. (2019). Learning Center. Retrieved from
https://www.website.com/beginnerguide/webhosting/6/1/what-is-web-hosting?.ws