Proposed business model

The business model that was proposed by the author, prior to beginning this research, is summarized as follows: 

• A VSAT broadband connection would be established, capable of supporting around 70 simultaneous Internet users at access speeds which would easily be the fastest in the area, establishing a clear competitive advantage.
• The VSAT connection would be distributed to multiple offices across town using point to multipoint wireless networking connections. 
• The revenue would be optimized by deliberately splitting the usage of bandwidth between users whose peak consumption is at different times of the day, and by maximizing utilization by ensuring a competitive package of products and services and by operating 24 hours a day, every day.
• Approximately half of the bandwidth would be resold to businesses whose peak usage is during office hours.  This would be delivered via the wireless network connections.
• The remaining bandwidth would be deployed in one or more Internet cafés, where the peak usage is during the evening and night. 
• The business would be financed through borrowings and would be free of  grants and subsidies.

Research Theory

The foregoing part of this chapter has charted the thinking which led up to the development of a proposed business model for use in developing countries.  In theoretical terms, this process would be described as having an ideographic methods emphasis (Burrell and Morgan, 1979).  This involves the generation of meaning and explanations for the subjective qualitative data (e.g. personal observations) collected in real-world settings.  The formation of a proposed business model is in effect a hypothesis.

Burrell and Morgan also describe a Nomothetic methods emphasis which

looks to deduce cause and effect, or rules that explain what happens in certain circumstances.  This approach requires a more controlled environment, so that the effect of a smaller number of variables may be quantitatively measured.  In order to answer the research question, the methodology needed to be mainly

nomothetic, since the objective was to not just describe some of the factors affecting viability of Internet businesses, but also to begin to develop tools which can predict success and failure in the light of a few variables.  Since the study is based on a real-world business and not in a controlled laboratory, some constants have to be assumed and definitions clarified, so that the number of measured variables can be reduced.  If there are too many variables, then it is difficult to correlate outcomes to any particular one. 

Viability criteria

In order to be able to comment on the viability of the case study business, some criteria for viability should be adopted.  There are complex inter-relationships between a myriad of factors that could be discussed, but pragmatism demands that the scope of this research be limited.  In a developed nation, business risks tend to be well understood, the availability of investment capital is good and therefore the range of returns that are considered acceptable are comparatively modest.  In the developing world, there are generally more unknowns, higher levels of corruption, capital markets are harder to access and the expected rate of returns is much higher.  (Vail, 2006; World Bank, 2006; Transparency International, 2005)  It is therefore proposed that, to be considered viable, the following set of benchmark criteria will be used.  In reality, different criteria could be proposed, and their validity debated at length.  Clearly different criteria will be more applicable in different markets and circumstances.  In post-tsunami Aceh, these criteria are thought to be realistic.  They were adopted after discussion with a number of business people with current experience in Aceh province, and will be used when evaluating the viability of the case study business:

1. A viable business does not, at any stage, receive any form of subsidy or advantageous trading terms above those available to all businesses in their market. 

2. All the finance required for start-up and working capital is borrowed at an interest rate of 10% per annum.  

3. Repayment of the loan is required within 36 months and breakeven is expected within 18 months.

4. The business owner will receive a 20% per annum return on investment (60% over three years).

The impact of other, non-financial criteria will also be discussed later.

References:

BURRELL, G. and MORGAN, G. (1979) Socialogical Paradigms and organizational analysis.  Heinemann, London

TRANSPARENCY INTERNATIONAL (2005) Transparency International (TI) 2005 Corruption Perceptions Index (CPI)[online] Last accessed on 7/21/2006

at URL: http://www.icgg.org/corruption.cpi_2005.html

VAIL, T. (2006) Personal interviews on multiple occasions.  

WORLD BANK (2006) Doing Business [online] Last accessed on 7/23/2006 at URL: http://www.doingbusiness.org