National Innovation Competition 2005

Business Plan Title:

WORLDTALK.com

Contact details of the Co-ordinator

Title: Name: Surname: University: Telephone number: Cell number: Fax number: E-mail address: Mr Stuart Craig Taylor University of Cape Town N/A N/A N/A stuart@trenzeta.com

Alternative Contact
Title: Name: Surname: University: Telephone number: Cell number: Fax number: E-mail address: Mr Machaba Machaba University of Cape Town N/A N/A N/A Only1Machaba@Yahoo.com

Team Members:

1) Stuart Taylor

2) Machaba Machaba

Registered at: University of Cape Town

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Executive Summary The Objectives

We hope to enter the eCommerce travel industry by developing and marketing phrase guides in an MP3 format in numerous languages. A language reference guide in an MP3 format enables the user to access almost any phrase by using his/her MP3 player. Furthermore, we will expand into as many areas of the eCommerce travel industry as possible (e.g. accommodation bookings). We hope to eventually make phrase guides of any kind obsolete by developing devices that can instantaneously translate your words into another language.

Description of the Product

We plan to sell phrase guides in an MP3 format that can be loaded onto an MP3 player via a computer, turning these devices that are generally used for listening to music into instantly accessible phrase books. We plan to sell our product on the internet, where the customer can download it, and in retail stores.

Approach/Brief Methodology
We will record phrases in numerous languages, arrange them in a phrase guide format and the customer can then select and purchase a phrase guide of any combination of these languages from the website. We will also distribute the MP3 phrase guides in DVD format to be sold in travel and book stores. Our website will also offer other travel services.

The Team
We are two dynamic and driven students on the verge of completing our studies. One is an imaginative Biochemistry major with a passionate and methodical working style. The other is a logically minded Information Engineering graduate currently studying Accounting. We work excellently together, having known each other since high school.

Market Strategy
Accumulate a large database of contacts in the travel industry and relevant advertising media, allowing us to launch a worldwide advertising campaign simultaneously with the launch of our website. By using the internet we immediately have a worldwide market.

Competitor Analysis
Our major competitors are companies that currently sell phrase guides (books and CDs), who can become a formidable force if they join with a company that has the channels to distribute MP3s over the internet.

Project Plan
It will take us approximately 8 months to get the recordings, develop the website and software and investigate potential affiliates and advertising streams. We plan to launch our product on the internet in June 2006. Page 2 of 11

Table of Contents
1) Description of Idea
a) Problem Statement b) Description I. How it works c) Proposed Methodology I. Obtaining the material II. Distribution d) Objectives e) Operations

2) Team 3) Marketing Plan

a) Market Size b) Target Market c) Competitor Analyses d) Marketing Strategy e) Key Success Factors

4) Envisaged Budget 5) Risks

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Description of idea Problem Statement

When travelling to a country where the language spoken is foreign to you, a phrase guide is an invaluable tool. However, these books can be difficult to interpret and a bit vague. Furthermore the more comprehensive the phrase book, the bulkier it becomes and it can be difficult to find one in your language especially if you do not speak a popular language e.g. Turkish.

Description
We intend to sell audio phrase guides in an MP3 format that can be loaded onto an MP3 player via a computer, turning these devices that are generally used for listening to music into instantly accessible phrase books. There is no learning required, no need to rummage through pages of a book, no getting pronunciation wrong and no looking like a lost tourist. Our phrase guides can be downloaded from the internet or bought in stores on a DVD.

How it works
Load the phrase guide onto your MP3 player via a PC. When you need to use a certain phrase, look for the required phrase track e.g. Where is the airport from here? which will be alphabetically listed according to subject in either a topic category (e.g. At the Airport, In a Restaurant etc.) or a sentence function category (e.g. Where, How etc.) according to user preference. Then play the track: This is what will be heard 1) Native phrase (Eng) Where is the Airport from here? 2) Translated phrase (French) L o est l'aroport d'ici 3) The next track will be a slower, articulated version of the translated phrase with certain syllables pronounced. You can either repeat the phrase to another person or hold the earphone next to their ear. MP3 is an audio format that allows the user to store audio information using far less storage space than the usual WAV format while maintaining the original quality. These audio files can then be stored and played on MP3 players such as the Apple iPOD mini shown below. With this device a listener can wear or carry up to 1,500 songs on its 6GB storage space and take it everywhere with the greatest of ease since it weighs only 3.6 ounces. It has an outrageously long battery life: Up to 18 hours on a single charge. It has a large and easy to read screen so tracks can be easily identified and played back. It has become one of Apples most popular products and is the leading the MP3 player on the market. Songs are downloaded with incredible speed from the web or from a computer hard drive using a USB port connection. Other models have up to 40 gigabytes of storage space and can carry up to 15000 songs. Page 4 of 11

This is the ideal MP3 player for our phrase guides to be stored and used with but any MP3 player with a LCD screen and a decent amount of storage space can be used effectively with the phrase guides.

Proposed methodology Obtaining the material

We start by obtaining recordings of phrases in a number of languages. We can do this in one of two ways. Firstly license the material from a company that already has what we need and then convert it for our purposes. This is not a viable option as most of the companies we have contacted are not willing to license their material to potential competitors. It is also very expensive, for example it costs US$ 25000 to license from one of the leading competitors in the phrase guide industry. The second option is that we record phrases and words ourselves in an MP3 format. We can rent a simple recording studio. We need recording artists which can be recruited from the wealth of international students presently studying in Cape Town. We can be sure that these people are educated, can generally speak English and will accept a minimal salary. We estimate that it will require +/- 15 hours of recording time for each language to obtain a collection 4000 phrases and 6000 words. For ten languages and working 6 hours a day, we estimate this to take approximately a month to complete. This will take longer than the first option but will be far cheaper and will ensure that our business exclusively owns the material.

Distribution Publishing on DVD

Since it takes quite a while to download 1.5 GB from the internet, we feel that it is necessary to publish and sell DVDs to book and travel stores. They will also be sold online for wholesale price and mailed to the customer for an additional fee. On the DVD will be the user interface program, the entire collection of MP3 phrases and words for the relevant languages and a printable version of the phrase books in both native to translated and translated to native, a two way dictionary and an introduction and usage guide. Using a reference number on the DVD the customer can go online and download new phrases and other relevant information that is not included on the DVD and be offered special deals. It costs approximately R43 per unit including shipping costs to publish DVDs via Mixonic inc. This is a small batch cost and therefore more expensive than if we were to produce a large amount of DVDs. This company publishes on an ad hoc basis so large amounts of DVDs do not need to be published initially which means a lower risk if they dont sell. The DVD itself is very portable and can be taken along on someones travels.

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Internet Site
The user when entering the site can select the language they would like the site to be displayed in by selecting the flag of the relevant country. They can then read a description of the product and how it works. Upon deciding to purchase our product they would first select from the menu their native tongue and then the language they want translated. This will bring up a page that has combined two of the languages that we have recorded in the relevant order. The customer can now buy and download the entire phrase guide, a topic category or a number of single phrases or words. 1

2 3

4 8

7 1) Logo: WORLDTALK.com 2) The other services we hope to offer: Travel clothing and products: Back packs, camping equipment, etc Travel guides, maps and other books Phone cards: international and local calling cards News: International, local and business Accommodation: Bookings and Listings of International Hotels, Backpackers, B&Bs Travel agents: Flight, tour, and package bookings available Selling music MP3s and MP3 players Personal and commercial advertising We can offer links to other sites that offer these services until our site can offer them. 3) Purchase the full translation package: It will roughly take a half day to download and will include all the features on the DVD. People that have permanent connections to the internet such as the majority of Europe, Britain, America and anyone using WiFi or a Page 6 of 11

similar server can begin downloading in the evening and have the phrase guide by the morning. 4) Purchase a specific topic folder: A far more immediate means of buying our product that will take roughly 10 - 20 minutes to download. The customer can use it for certain situations e.g. At the Airport or In a Restaurant. 5) Purchase single phrases. The most immediate way to purchase our product, depending on how many phrases are downloaded, it could take as little as a minute to download. 6) We offer a variety of free features for our customer. The important phrases and words folder will provide customers and potential customers with essential audio files i.e. Excuse me, can u please help me or show me on the map. Printable phrase books will be given away for free on our site. This will ensure people visit our site even if they do not intend on buying our product. 7) The user interface program will be free to download. This program will recognize our audio files in ways that other programs will not. It would be able to break the audio file up into its respective parts i.e. (Native language) (translated version) (Slow and pronounced translated version). These segments can then be removed or added. It would be able to categorize our product in a variety of ways according to user preference. It can print track lists, phrase booklets and any additional information we offer. 8) After the products have been selected, the customer can then check what they have acquired, select a payment option and finally pay for the product. 9) A comments and suggestions feature will help keep us in contact with our visitors.

Objectives
1) Enter the eCommerce travel industry by developing and selling phrase guides in an MP3 format in numerous languages. 2) Encourage traffic on our site by providing a variety of services or links to non competition sites that offer these services. 3) Branch out into as many areas of the eCommerce travel industry as possible. 4) Establish our name in this market for affordability, ease of use and innovativeness. 5) Using the finance we have obtained from our areas of eCommerce we hope to develop and patent universal language translators using technology that is currently available. These devices will be able to directly and instantaneously translate spoken phrases into any language from any language.

Operations
Our operations will begin 1 month before the launch date. Our office space can be minimal and does not have to be centrally located or aesthetically appealing allowing us to spend little on rent. Our staff will consist of a software/web developer and an admin clerk/secretary. The admin clerk will handle orders and distribution of DVDs and other administrative duties. The software/web developer will maintain and upgrade the software and website as well as providing customer support for users of the website. Page 7 of 11

Team Details

Title: Name: Surname: Citizenship:

Mr Stuart Craig Taylor RSA

Project Responsibilities: Team Leader Conception and Development of Idea Research into competitors and related products Description and marketing of the product

Relative Experience: I am currently in my final year of studying a degree in Cellular and Molecular Biology with majors in Biochemistry and Zoology. I am a creative thinker who handles the development of business ideas and projects in a scientific and formulative manner with the ability to recognise customer needs.

Title: Name: Surname: Citizenship:

Mr Machaba Machaba RSA

Project Responsibilities: Development of the financial model and preparation of the projected financial data Research into technological feasibility and costing

Relevant Experience: I hold a B.SC Elec. Eng. (Information Engineering) degree Cum Laude from Wits University and I have led a research project in speech recognition and translation in the Wits School of Electrical and Information Engineering Artificial Intelligence Research Group. I am currently studying towards a CA(SA) qualification at the UCT department of accounting. I have a keen interest in entrepreneurship and I have previously submitted two business plans to the Wits leg of the National Innovation Competition, for which I received a commendation.

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Marketing plan Market Size

Tourism is the fastest growing industry in the world, accounting for 10.7% of the worlds GDP, generating revenues of US$ 500 billion per year and currently growing at about 7% per annum. Travel is the number one online consumer category. Approximately 52 million travellers used the Internet to plan trips and make travel reservations in 1999, up 54% from 1998. The worldwide MP3 player market is expected to reach nearly US$ 58 billion in revenues by 2008, representing a five-year compound annual growth rate of 20%.

Target Market
Primary - Youth travelers are the majority market for MP3 players and are adventurous travelers willing to use new technology and the internet to better their traveling experience. Secondary Bookshops from around the world will buy our DVDs in bulk. Tertiary Business and older travelers who do not have MP3 players may purchase one specifically for the use of our product.

Competitor Analyses
Companies like Living Language, Berlitz and Penton Overseas have been in the travel and phrase guide market for many years. If they were to develop a product like ours or join forces with Apple iTunes, they would be a formidable force to contend with. We estimate that it would take at least 6 months for them to develop a similar product, due to barriers of entry such as software and material development.

Marketing strategy
Accumulate a database of contacts in the travel industry and inform them of the product all at once on the launch date. Intensive 3-6 month advertising campaign, beginning on the launch date, with adverts appearing in magazines and on the internet around the world.

Key Success factors

Ease of use and portability compared with the standard phrase guides Makes use of technology that would probably be with the customer anyway No learning required for the use of our products, Instantaneous. By using the internet we immediately have a worldwide market. The ability to branch out into almost any field of travel commerce.

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Envisaged budget
Projected Cash Flow Statement Expected Scenario Notes Revenue internet sales DVD Expenditure - variable Distribution costs DVD publishing Expenditure - fixed Recordings Website Development Software Development Web hosting cost Transaction processing Launch Promotion Office Equipment Advertising Administrative costs Salaries Net Cash Flow before tax Cumulative Net Cash Flow
Website Launch
R 2,000,000.00

Notes to Cash Flow Statement 1. Office Equipment Unit R 130.00 9 9 9 9 2 3 4 5 1 7 6 R 60.00 R 70.00 R 43.00 R 3.00 R 40.00 2006 R 170,540.00 R 117,900.00 R R R R R R R R R R R 52,640.00 32,336.00 2,256.00 30,080.00 8,000.00 10,000.00 15,000.00 4,550.00 1,550.00 10,000.00 20,300.00 2007 R 1,757,150.00 R 1,175,100.00 R R R R R R R R R R R R R R R R R 582,050.00 357,545.00 24,945.00 332,600.00 634,400.00 7,800.00 1,800.00 2,000.00 360,000.00 34,800.00 228,000.00 765,205.00 101,009.00 2008 R 2,810,060.00 R 1,875,840.00 R R R R R R R R R R R R R R R 934,220.00 573,878.00 40,038.00 533,840.00 634,400.00 7,800.00 1,800.00 2,000.00 360,000.00 34,800.00 228,000.00 Office Equipment consists of 2 PCs, printer and telephone and maintenance thereof 2. Recordings Approx. 15 hrs to do the recordings for each language @ R30/hr for the speaker + R150 for reference phrasebook = R600 per language + R2000/month to rent and fit the room. 10 Languages will be recorded in 2006 3. Website and Software Development Once off website and software development in 2006 and then maintenance and improvements will be done in house from then on 4. Transaction Processing Transaction processing will be performed by www.Pay4it.co.za 5. Salaries Software and Web developer Admin Clerk & Secretary Total 6. Administrative costs Office space rental Stationery Water and electricity Telephone and internet Total R -664,196.00 R 1,702,791.00 monthly R R R R R R R R 2,900.00 monthly 2000 200 200 500 12000 7000 19,000.00 Annually R R R R R R R R 144,000.00 84,000.00 228,000.00 Annually 24,000.00 2,400.00 2,400.00 6,000.00 34,800.00

R 802,400.00

R 450,000.00 R 150,000.00 R 133,000.00 R -664,196.00

R 1,601,782.00

Cumulative Net Cash Flow and Time plan

7. Volume Sales Volume Sales are based on an approximation of the Rogers S-curve innovation diffusion model
Innovators Early Adopters

Monthly Sales Volume

Late Majority Laggards

Website Design
R 1,500,000.00

Early Majority
3000

Software Design
R 1,000,000.00

Expected Scenario Payback Period = 22months Investment = R670 000

2500

Fund Search
R 500,000.00

2000

Recordings
R-

1500

Launch Advertising Campaign

R -500,000.00

1000

Alternative Scenario Payback Period = 28months Investment = R750 000

500

R -1,000,000.00
May May February February November December November December November December February May November September September September December July July January January January March March March June June October October June April April April July October August August August
0
July July February February January May January August August May July November November August December December November April October October April October March March June June June September September September December

2005

2006

2007

2008

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2006

2007

2008

Risks
Strengths Global market Global sales channel Ease of use and portability No learning required, Instantaneous Weaknesses Contending with long-established and large companies We have to cater for an international market Threats Competitors catching up before the market has caught on Piracy

Opportunities Ability to branch out into many areas of the travel industry We are entering the travel market during a phase of high growth

Potential Problem

Probability of Occurrence 4

Cause Premature Information Leakage Companies combining forces

Planned Action Tight control over information during development Providing a variety of valuable services to our customers Monitor the internet for pirated offerings of our

Competitors catching up before the market has caught on

Piracy

10

Piracy is always going to happen

product and pursue legal action. Develop preventative measures for our website and software

Alternative Scenario
If our sales are below what we expected, we will always have a positive net cash flow as long as our revenue exceeds our upkeep costs for our website, which are fairly minimal. The alternative scenario is plotted in the cumulative net cash flow chart.

Conclusion
We have thoroughly researched the potential for success of our business and we feel confident that whatever hurdles we may come across, we can establish an innovative and lucrative enterprise. Page 11 of 11