CHAPTER 2
THEORETICAL BASIS
2.1 Business, Business Plan, & Startup
2.1.1 Definition of Business
According to Lesonsky (2010), business can be defined as:

An organization or enterprising entity involved in commercial, industrial
or professional activities. A business can be a for-profit entity, such as a
providing products/services for trading.

A commercial activity that is done in the purpose of livelihood or profit.

A reference to a specific area and/or a type of economic activity.
According to Noerlina (2002), in order to perform a good business, it is
important to know something that no one else knows. That will be the key to
success. It is why accurate, fast, and precise informations are needed.
2.1.2 Definition of Business Plan
“The business plan is a written document prepared by the entrepreneur
that describe all the relevant external and internal elements Involved in
starting a new venture." (Hisrich, Peter, 1995: 113)
In conclusion, the business plan is a research on the current & future
activities of an organization and develop the activities in order to get the
desired organizational goals. By creating a business plan, organizations will
have a clear motives of what they need to achieve, and how to achieve it.
2.1.3 Definition of Startup
According to Eric Ries (2012) “Startup is a human institution design
that create something new under condition extreme and serenity. It doesn’t
say about what size of the company or what sector of industry, it just says
we’re trying to do institution building when we don’t know what we don’t
know”.
So the point is, Startup is a company, a partnership or temporary
organization designed to search for a repeatable and scalable business model.
These companies, generally newly created, are in a phase of development and
research for markets.
Startup is a company that should be growing fast. These companies are
often initially funded by their entrepreneurial founders as they attempt to
capitalize on developing a product or service for which they believe there is a
demand. Due to limited revenue or high costs, most of these small scale
operations are not sustainable in the long term without additional funding
from venture capitalists.
2.2 Investor & Investment
2.2.1 Definition of Investor
“Investor can be an individual, a government, a pension fund, or a
corporation” (Brown, Reilly, 2010:4). So Investors can be either individual or
group who allocates capital with the expectation of a financial return. The return
could be in the form of cash, stock, valuables, etc, based on the agreement.
2.2.2 Definition of Investment
According to Brown and Reilly, “Investment is the current commitment of
dollars for a period of time in order to derive future payments that will
compensate the investor for: The time the funds are committed, The expected rate
of inflation, and The uncertainty of the future payments.” (Brown,Reilly, 2010:4).
Still according to Brown and Reilly, There are 2 types of investments,
which are: investments by corporations in plant & equipments, and investment by
individuals in stocks, bonds, commodities, or real estate.
2.3 Internet & Website
2.3.1 Definition of Internet
According to MacDonald (2011), Internet is a network that is formed by
computers that are connected to each other across the world to share
informations. Internet use the standard Internet Protocol Suite (TCP/IP) to link
all devices around the world.
2.3.2 Definition of Website
Still according to MacDonald (2011), Website is a collection of web pages
that are accessed through the internet, in order to see the content inside. Below is
the 6 types of website:
1. Personal Site
Personal site is a site that is used to share information about the owner of the
website. Examples of information is about daily life, work, hobbies, etc.
2. Resume Site
Resume Site is a personal site that is used to display the form curriculum
vitae resume, portfolio, and personal data for career interests.
3. Topical Site
Sites that focus on a particular subject of interest of the site owner.
For example, the site of the pop music, books, etc.
4. Event Site
Event Site is not designed for continuous display. An example is the site of a
wedding. Site provides informations, such as: location map, photographs, and
other informations, which will help those who wish to visit. Once the
wedding is over, the site will be deleted.
5. Promotion Site
Promotion Site is used to promote certain products such as: homemade cake.
Promotion Site sometimes evolve into an e-commerce site for online
transactions through the internet.
6. Small Business Site (E-Commerce)
This site is a site in which seller and buyer can negotiate regarding some
products/services, and then online transactions occur. This site is a real
example of the success of web.
2.4 E-Commerce
According to Harisno (2009), E-Commerce is a business-related activities with
consumers, manufactures, service providers, and intermediaries by using computer
network that is the internet.
According to Banerji and Ghosh (2010), Electronic commerce (e-commerce) is
any kind of business that was established electronically and in which financial
transactions done through the network, especially through the internet.
E-commerce applies in many kinds of business models. The business model
consists of:

Business to Customer (B2C)
Businesses that sell directly to end users/customers.

Business to Business (B2B)
Businesses where the transaction is done for the benefit of another business
(inter-business).

Customer to Customer (C2C)
Businesses done by fellow customers. For example, the sale of used goods.

Business to Government (B2G)
Businesses done by selling products / services to the government.

Customer to Government (C2G)
Transactions that is done by the customer to the government. For example:
License extension.
According to Subekti, Tandiono, and Tania (2012), the benefit of ecommerce is customers can utilize internet network facilities to perform activities,
such as: document entry, printing document purchase, send fax documents, send
original documents by courier. While the seller have the ability to accept the order
documents through internet or fax, and re-enter the fax to the sales database.
2.5 HTML
According to Lubbers, Albers, and Salim (2011), HTML stands for Hypertext
Markup Language. HTML is based on the Standard Generlized Markup Language
(SGML), a much larger document-processing system. The point is, HTML is a
language for describing the structure of a document, not its actual representation.
“To write HTML pages, we won’t need to know a whole lot about SGML, but
knowing that one of the main features of SGML is that it describes the general
structure of the content inside documents, not that content’s actual appearance on
the page or on the screen, does help.” (Lemay 2003:55)
Example of HTML code:
<!DOCTYPE sampleHTML>
<html>
<head>
<title>My sample HTML Page</title>
</head>
<body>
<h1>This is the content of HTML page</h1>
</body>
</html>
2.6 PHP
According to Welling and Thomson (2003), PHP is a server-side scripting
language designed specifically for the Web. Within an HTML page, we can embed
PHP code that will be executed each time the page is visited. Our PHP code is
interpreted at the Web server and generates HTML or other output that the visitor
will see. PHP originally stood for Personal Home Page, but was changed in line
with the GNU (Gnu’s Not Unix) recursive naming convention, and now stands for
PHP Hypertext Preprocessor.
Some of PHP’s main competitors are Perl, Microsoft Active Server Pages
(ASP), Java Server Pages (JSP), and Allaire Cold Fusion. In comparison to these
products, PHP has many strengths including the following:
-
High Performance
-
Interfaces to many different database systems
-
Built-in libraries for many common Web tasks
-
Low cost
-
Ease of learning and use
-
Portability
-
Availability of Source Code
2.6.1 PHP Tag Styles
There are 4 different styles of PHP tags we can use. Each of the following
fragments of code is equivalent:

Short Style
<? Echo “<p>Order processed.”; ?>
This is the default tag that PHP developers use to code PHP

XML Style
<?php echo “<p>Order processed.”; ?>
This style of tag can be used with XML (Extensible Markup
Language) documents. If you plan to serve XML on site, you
should use this style of tag.

SCRIPT Style
<SCRIPT LANGUAGE=’php’> echo “<p>Order processed.”;
</SCRIPT>
This style of tag is the longest and will be familiar if you’ve used
JavaScript or VBScript. It can be used if you are using an HTML
editor that gives you problems with the other tag styles.

ASP Style
<% echo “<p>Order processed.”; %>
This style of tag is the same as used in Active Server Pages
(ASP). It can be used if you have enabled the asp_tags
configuration setting. You might want to use this style of tag if
you are using an editor that is geared towards ASP or if you
already program in ASP.
2.6.2 PHP Statements
We tell the PHP interpreter what to do by having PHP statements
between our opening and closing tags. In this example, we used only one type
of statement: echo “<p>Order processed.”;
You will notice that a semicolon appears at the end of the echo
statement. This is used to separate statements in PHP much like a period is
used to separate sentences in English. Leaving the semicolon off is a common
syntax error that is easily made. However, it’s equally easy to find and to
correct.
2.7 MySQL
According to Welling and Thomson (2003), MySQL is a very fast, robust,
relational database management system (RDBMS). A database enables you to
efficiently store, search, sort, and retrieve data. The MySQL server controls access to
your data to ensure that multiple users can work with it concurrently, to provide fast
access to it, and ensure that only authorized users can obtain access. Hence, MySQL
is a multi-user, multi-threaded server. It uses SQL (Structured Query Language), the
standard database query language worldwide.
2.7.1 Relational Database Concepts
Relational databases are, by far, the most commonly used type of
database. They depend on a sound theoretical basis in relational algebra.You
do not need to understand relational theory to use a relational database, but
you need to understand some basic database concepts, such as:

Tables
Relational databases are made up of relations, more commonly
called tables. In example below, we can see a sample table
containing names and addresses of customers.
Table 2.1 Database Table
CustomerID
Name
Address
20
City
Spooner
Cust001
Peter Griffin
Street
Quahog
Cust002
Laura Wong
Baines Avenue
Beijing
Cust003
Dmitry Melkov
244 North Road
Moscow
The table has a name (Customers), a number of columns, each
corresponding to a different piece of data, and rows that
correspond to individual customers.

Columns
Each column in the table has a unique name and contains different
data. Each column has an associated data type. For instance, we
can see in the table above that CustomerID is an integer and the
other three columns are strings. Columns are sometimes called
fields or attributes.

Rows
Each row in the table represents a different customer. Because of
the tabular format, they all have the same attributes. Rows are also
called records or tuples.

Values
Each row consists of a set of individual values that correspond to
columns. Each value must have the data type specified by its
column.

Keys
We need to have a way of identifying each specific customer.
Names usually aren’t a very good way of doing this, because
some common names are not unique. To identify and differentiate
column in the table, we use key or the primary key. Databases
usually consist of multiple tables and use a key as a reference
from one table to another.
Table 2.2 Multiple Table
CustomerID
Name
Address
City
Cust001
Peter Griffin
20 Spooner Street
Quahog
Cust002
Laura Wong
Baines Avenue
Beijing
Cust003
Dmitry Melkov 244 North Road
OrderID
CustomerID
Amount (Rp)
Date
Ord001
Cust001
580.000,-
02-June-2014
Ord002
Cust003
390.000,-
08-July-2014
Ord003
Cust002
46.000,-
10-Oct-2014
Moscow
We can see from the table above that each order in the Orders table
refers to a customer from the Customers table. The Orders table
use Primary key of the Customers table as its references. In the
Orders table, CustomerID is called Foreign key.

Schemas
The complete set of the table designs for a database is called the
database schema. It is akin to a blueprint for the database. A
schema should show the tables along with their columns, the data
types of columns and indicate the primary key of each table and
any foreign keys. The schema can be shown as it is in the
diagrams we are using, such as:
-
Customers(CustomerID, Name, Address, City)
-
Orders(OrderID, CustomerID, Amount, Date)
Underlined items in the schema are the primary keys in the
relation.

Relationships
Foreign keys represent a relationship between data in two
tables. For example, the link from Orders to Customers represent
a relationship between a row in the Orders table and a row in the
Customer table.
Three basic kinds of relationships exist in a relational
database. They are classified according to the number of things on
each side of the relationship. Relationships can be either one-toone, one-to-many, many-to-many.
A one-to-one relationship means that there is one of each
thing in the relationship. For example, if we had to put addresses
in a separate table from Customers, there would be a one-to-one
relationship between them. You could have a foreign key from
Addresses to Customer or the other way around (both are not
required)
In one-to-many relationship, one row in the table is linked to
many rows in another table. In example: one customer might
place many Orders. In these relationships, the table that contains
many rows will have a foreign key to the table with the one row.
Here, we have put the CustomerID into the Order table to show
the relationship.
In many-to-many relationship, many rows in one table are
linked to many rows in another table. For example, if we had two
tables, Books and Authors, you might find that one book had been
written by 2 co-authors, each of whom had written another books,
on their own or possibly with another authors.
This type of relationship usually gets a table all to itself. So
you might have Books, Authors, and Books_Authors. The third
table would only contain the keys of other tables as foreign keys
in pairs, to show which authors have been involved with which
books.
2.8 JavaScript
According to Flanagan (2003), JavaScript is a lightweight, interpreted
programming language with object-oriented capabilities. The general purpose core of
the language has been embedded in Netscape, Internet Explorer, and other web
browsers and embellished for web programming with the addition of objects that
represent the web browser window and its contents.
This client-side version of JavaScript allows executable content to be
included in web pages, means that a web page need no longer be static HTML, but
can include programs that interact with the user, control the browser, and
dynamically create HTML content.
According to Duckett (2009) JavaScript is not the same as Java, which is a
different programming language (although there are some similarities). JavaScript
and Java do, however, make a good team. The two languages have different sets of
capabilities. JavaScript can control browser behavior and content but cannot draw
graphics or perform networking. Java has no control over the browser as a whole but
can do graphics, networking, and multithreading.
Sample of JavaScript:
<html>
<body>
<p>
<script type=”text/javascript”>
document.write(“My first JavaScript”)
</script>
</p>
</body>
</html>
In the sample, we are using write() method to add a new line into the web
page (and the webpage is represented using the document object). The text is added
into the page where the script is written in the page.
There are three places where you can put your JavaScripts, and a single
XHTML document can use all three because there is no limit on the number of
scripts one document can contain:
 In the <head> of a page: These scripts will be called when an event
triggers them.
 In the <body> of a page: These scripts will run as the page loads.
 In an external file: In this case, we need to use the src attribute on the
<script> element; the value of the src attribute should be an absolute or
relative URL pointing to the file containing the JavaScript. For Example:
<script type=”JavaScript” src=”scripts/validation.js”></script>
2.9 C#
According to Murach and Boehm (2013), C# is an elegant, object-oriented
language that uses syntax that’s similar to C++ and Java. As a result, it provides an
easy migration path for C++ and Java developers who want to leverage the power of
the .NET Framework. In addition, C# provides an opportunity for Visual Basic
developers to learn a powerful language that’s in the C++ family without leaving the
comfort of the Visual Studio development environment.
Simple example of C# code:
namespace Test{
class DBConnect{
private MySqlConnection connection;
private string server;
private string database;
public DBConnect(){
Initialize();}
private void Initialize(){
server = "localhost";
database = "connectcsharptomysql";
string connectionString;
connectionString = "SERVER=" + server + ";" + "DATABASE=" + database
+ ";"
connection = new MySqlConnection(connectionString);
}
}
}
2.10 Object Oriented Analysis and Design (OOAD)
According to Satzinger, Jackson, and Burd (2005), there are two general
approaches in the development of a system that became the basis for all of the
methodology, which is Traditional Approach, and Object-Oriented approach.
The main difference between the traditional approach and an object-oriented
approach is the traditional approach sees the system as a set of processes, some
performed by users and some is done by computer. While the object-oriented
approach sees the system as a set of objects that interact
Figure 2.1 Requirement Model of Traditional and Object-Oriented Approach
Source: (Satzinger, Jackson, & Burd, 2005)
2.10.1 Use Case Diagram
According to Satzinger, Jackson, & Burd (2005), Use Case diagram is
a diagram that illustrates user roles and how the user interacts with the
system. Use Case diagram is a diagram used to describe the users who use the
system and forms of interaction between the user with the system it uses.
Figure 2.2 Use Case Diagram Example
Source: (Satzinger, Jackson, & Burd, 2005)
2.10.2 Domain Model Class Diagram
According to Satzinger, Jackson, & Burd (2005), Domain Model
Class Diagram is UML Class Diagram that illustrates the important objects in
the implementation of the user tasks, such as problem domain classes,
relations between the classes, and attributes.
Figure 2.3 Domain Model Class Diagram Example
Source: (Satzinger, Jackson, & Burd, 2005)
2.10.3 Multilayer Design Sequence Diagram
According to Satzinger, Jackson, & Burd (2005), Multilayer Design
Sequence Diagram is the next stage of First-cut sequence diagram. While
First-cut sequence diagram focuses only on existing classes in the domain
layer, in multilayer design, view layer and data access layer are added.
Figure 2.4 Multilayer Design Sequence Diagram
Source: (Satzinger, Jackson, & Burd, 2005)
2.11 Business Model Canvas
According to Osterwalder & Pigneur (2010), The business model describes
the reason of how an organization creates, delivers, and captures value. Business
model canvas is a common language or guidelines that are used to describe,
visualize, evaluate and change the business model. Business model business model
canvas split into 9 main blocks.
Figure 2.5 Business Model Canvas Example
Source: (Osterwalder & Pigneur, 2010)
2.11.1 Customer Segments
“The Customer Segments Building Block defines the different groups
of people or organizations an enterprise aims to reach and serve.”
(Osterwalder, Pigneur, 2010:20)
Customer groups represent separate segments if:
•
Their needs require and justify a distinct offer
•
They are reached through different Distribution Channels
•
They require different types of relationships
•
They have substantially different profitabilities
•
They are willing to pay for different aspects of the offer
2.11.2 Value Propositions
“The Value Propositions Building Block describes the bundle of
products and services that create value for a specific Customer Segment”
(Osterwalder, Pigneur, 2010:22). The Value Proposition is the reason why
customers turn to one company over another. It solves a customer problem
or satisfies a customer need.
Elements from the following non-exhaustive list can contribute to
customer value creation:

Newness

Performance

Customization

“Getting the job done”

Design

Price

Brand/Status

Cost Reduction

Risk Reduction

Accessibility

Convenience/Usability
2.11.3 Channels
“The
Channels
Building
Block
describes
how
a
company
communicates with and reaches its Customer Segments to deliver a Value
Proposition” (Osterwalder, Pigneur, 2010:26).
Figure 2.6 Channel Phases
Source: (Osterwalder & Pigneur, 2010)
The functions/phases of the Channels:
 Raising awareness among customers about a company’s products
and services
 Helping customers evaluate a company’s Value Proposition
 Allowing customers to purchase specific products and services
 Delivering a Value Proposition to customers
 Providing post-purchase customer support
2.11.4 Customer Relationships
“Customer Relationships Building Block describes the types of
relationships a company establishes with specific Customer Segments”
(Osterwalder, Pigneur, 2010:28).
Several categories of Customer Relationships:
 Personal Assistance
 Dedicated Personal Assistance
 Self-Service
 Automated Service
 Communities
 Co-Creation
2.11.5 Revenue Streams
“The Revenue Streams Building Block represents the cash a company
generates from each Customer Segment (costs must be subtracted from
revenues to create earnings)” (Osterwalder, Pigneur, 2010:30).
There are several ways to generate Revenue Streams:
 Asset Sale
 Usage Fee
 Subscription Fees
 Lending/Renting/Leasing
 Licensing
 Brokerage Fees
 Advertising
Each Revenue Stream might have different pricing mechanisms. The
type of pricing mechanism chosen can make a big difference in terms of
revenues generated. There are two main types of pricing mechanism: fixed
and dynamic pricing
Figure 2.7 Pricing Mechanisms
Source: (Osterwalder & Pigneur, 2010)
2.11.6 Key Resources
“The Key Resources Building Block describes the most important
assets required to make a business model work” (Osterwalder, Pigneur,
2010:34).
Key Resources can be categorized as follows:

Physical
This category includes physical assets such as manufacturing
facilities, buildings, vehicles, machines, systems, point-of-sales
systems, and distribution networks.

Intellectual
Intellectual resources such as: brands, proprietary knowledge,
patents, and copyrights, partnerships, and customer databases
are increasingly important components of a business model.

Human
Every enterprise requires human resources, but people are
particularly prominent in certain business models. For example,
human resources are crucial in knowledge-intensive and
creative industries.

Financial
Some business models call for financial resources and/or
financial guarantees, such as: cash, lines of credit, or a stock
option pool for hiring key employees
2.11.7 Key Activities
“The Key Activities Building Block describes the most important
things a company must do to make its business model work” (Osterwalder,
Pigneur, 2010:36).
Key Activities can be categorized as follows:

Production
These activities relate to designing, making, and delivering a
product in substantial quantities and/or of superior quality.
Production
activity
dominates
the
business
models
of
manufacturing firms

Problem Solving
Key activities of this type relate to coming up with new solutions
to individual customer problems. The operations of consultancies,
hospitals, and other service organizations are typically dominated
by problem solving activities.

Platform/Network
Business models designed with a platform as a Key Resource are
dominated by platform or network-related Key Activities,
Networks, matchmaking platforms, software, and even brands
can function as a platform
2.11.8 Key Partnerships
“The Key Partnerships Building Block describes the network of
suppliers and partners that make the business model work” (Osterwalder,
Pigneur, 2010:38).
We can distinguish between 4 different types of partnerships:

Strategic alliances between non-competitors

Coopetition: strategic partnerships between competitors

Joint ventures to develop new businesses

Buyer-supplier relationships to assure reliable supplies
2.11.9 Cost Structure
“The Cost Structure describes all costs incurred to operate a
business model” (Osterwalder, Pigneur, 2010:40).
There are 2 broad classes of Business Model Cost Structure:

Cost-driven
Cost-driven business models focus on minimizing costs
wherever possible. This approach aims at creating and
maintaining the leanest possible Cost Structure, using low price
Value Propositions, maximum automation, and extensive
outsourcing.

Value-driven
Some companies are less concerned with the cost implications
of a particular business model design, and instead focus on
value creation (Premium Value).
Cost Structure can have the following characteristics:

Fixed costs
Costs that remain the same despite the volume of goods or
services produced. Examples include salaries, rents, and
physical manufacturing facilities.

Variable costs
Costs that vary proportionally with the volume of goods or
services provided. Some businesses, such as: music festivals,
are characterized by a high proportion of variable costs.

Economies of scale
Cost advantages that a business enjoys as its output expands.
Larger companies, for instance, benefit from lower bulk
purchase rates. This and other factors cause average cost per
unit to fall as output rises.

Economies of scope
Cost advantages that a business enjoys due to a larger scope of
operations. In a large enterprise, for example, the same
marketing activities or Distribution Channels may support
multiple products.
2.12 Framework of Thinking
Business Model Canvas
Fact Analysis
Customer Segments
Market Analysis
Value Propositions
Competitor Analysis
Channels
Customer Relationships
Revenue Streams
Using the analysis result
to design system
Key Resources
Key Activities
System
Design
Key Partners
Usecase Diagram
Cost Structure
Domain Model Class Diagram
Multilayer Design Sequence Diagram
Business
Plan
Website Prototype
Design
Business Activity
Front End UI
Financial Simulation
Back End UI
Business Target
Website Features
Business Strategy
Implementation
Figure 2.8 Framework of Thinking
The Framework of Thinking of the writing of this Thesis started by analyzing
the market by sharing questionnaire to respondents, and the competitors by gaining
informations about them, creating competitor mapping, and comparison table. Then
in order to observe the potential of the business, business analysis was conducted by
creating Business Model Canvas, which is divided into 9 building blocks: Customer
Segments, Value Propositions, Channels, Customer Relationships, Revenue Streams,
Key Resources, Key Activity, Key Partnership, and Cost Structure.
From those analysis and Business Model Canvas, the system design was
created using Object-Oriented Analysis & Design (OOAD) concept with Use Case
Diagram, Domain Model Class Diagram, and Multilayer Design Sequence
Diagram. The system describes the flow of business activities, business processes,
and databases needed to operate business processes.
Based on all of the previous data, the website prototype can be designed and
developed, including the Front End User Interface, Back End User Interface, and all
of the Website Features. After all resources are established, Business Plan for the
future can be created. The Business Plan includes business activities and its
schedule, Financial Simulation of the upcoming years, Business Target, and
Business Strategy to achieve the target. Finally after system has been designed,
resources, and business plan are done, the system can be implemented.