Kiefat Video Game Project – Part 1, Task 3
Business Case for Video Game Delivery Project
11 Jun 10
Project Name: Online Game Rental Site
1.0 Introduction/ Background
The International Marketing and Distribution (TIMAD) Company has conducted market
research and, as a result, decided to provide a monthly video game rental program. The
company believes based on this research and the research of Lori, the VP of marketing,
that they can be quite successful in meeting untapped customer needs.
2.0 Business Objective
This company, like many others, has the goal of growth in both positive influence on
their customers and profit. The Video Game Delivery Project will help support this goal
by expanding the influence that the company has locally and internationally in homes and
schools. By supporting only educational and sport-related games, the company is
avoiding the spread of games with negative connotations and influence. The Video
Game Delivery Project must also produce a profit. Doing well for the world is a
wonderful goal, but if it bankrupts the company, it is better left undone until better means
can be found.
3.0 Current Situation and Problem/Opportunity Statement
The company has found a way to expand the business and meet an untapped store of
customer needs in a pre-existing commercial market. The purpose is to develop a Webbased application and support structure to provide customers with video games on a
monthly rental basis. In doing so, the company would focus on only educational and
sports-related video games for all types of platforms, including those that are found in
schools. Furthering the reach for an untapped market, the company would make the
service available to the international market and offer products in several languages.
4.0 Critical Assumption and Constraints
The proposed website must show to be a good investment for the company. If agreed to,
the Video Game Delivery Project will need a team to manage the installation and the
support of the company and its personnel. It is assumed that the Project will take 12
months to complete, costing $500,000. Each year the benefits must outweigh the costs.
The Project must meet a majority of the proposed requirements as addressed in the Initial
Assessment.
.
5.0 Analysis of Options and Recommendation
There are five options for addressing this opportunity:
1. Do nothing. The company is doing well on its own and there is no vital need for
Kiefat Video Game Project – Part 1, Task 3
2.
3.
4.
5.
this project.
Create the website within the company and create a new staff organization to
support it both in site management and equipment management.
Hire external sources to develop the website, but leave site and equipment
management internal to the company.
Hire external sources to develop the website and manage the site and equipment.
Buy out an existing video game rental website and modify it internally to the
company’s design.
After thorough examination, I believe that option two is the best option.
6.0 Preliminary Project Requirements
The main features of the online rental site include the following:
1. Offering only educational and sport games to customers
2. Offering games for various platforms – to include learning systems used in
preschools and elementary schools
3. Reaching out to an international market, providing information and products in
multiple languages
4. Providing a thorough site search function that allows customers to search for
games by platform, age, and gender appropriateness, customer reviews, genre,
and language
5. Allowing customers to track, order, and return games via express mail
6. Allowing customers to pay online or via other methods such as checks, school
payment systems, and other e-payment systems
7. Allowing customers to write reviews of the games they rent
8. Tracking referrals from other sites
9. Tracking customer usage patterns
10. Displaying advertisements
7.0 Budget Estimate and Financial Analysis
A preliminary estimate of costs shows that during installation (Year 0), costs are
estimated at $500,000 with an additional cost of $50,000 per month in Year 1, and
$60,000 per month during Years 2 and 3.
Estimated benefits on this project include a $1 million benefit for Year 1, and $2 million
benefit during Years 2 and 3.
Exhibit A summarizes the projected costs and benefits and shows the estimated net
present value (NPV), return on investment (ROI), and year in which payback occurs. It
also lists assumptions made in performing this preliminary financial anaylsis. All of the
financial estimates are very encouraging. The estimated payback is in Year 2 after
installation is complete. The NPV is $2,036,695, and the discounted ROI based on a
three-year system life is 89%.
8.0 Schedule Estimate
Kiefat Video Game Project – Part 1, Task 3
It is assumed that the project will take 12 months to complete. We are assuming that this
online site will have a useful life of at least 3 years, with some minor modifications
required during those 3 years.
9.0 Potential Risks
There are several risks involved with this project. The first risk is that the online video
game rental market is already saturated and there will be less customer need than was
previously estimated. The main business risk is investing the time and money into this
project and not realizing the projected benefits.
10.0
Exhibits
Exhibit A: Financial Analysis