2. Financial features

	2017 year	2018 year	2019 year
Sales	156,000,000	306,000,000	468,000,000
Profits	28,000,000	51,000,000	78,000,000
Cash flows	(18,100,000)	(8,817,140)	(35,682,640)

Return on investment = 20%

Payback period = 2.62 years

Breakeven point = beginning of 2019 year

3. Financial requirements

Based on the estimations made in the financial part of our project, amount needed to be invested equal 65,000,000 tg. Out of which 20% will be invested by us, where 65,000,000 * 20% = 13,000,000 tg and the rest amount or 52,000,000 is expected to be invested. The required amount of money is needed mostly for the planning and development part of our budget, where 50,000,000 tg will be used for the customization of first 5000 eBooks from the supplier. Moreover, the price of the eBook from supplier equals 10,000 tg and the price of customized Smart Tutorial Book will be 12,000 tg. The loan for initial capital will be based on security instead of equity and the collateral will be apartment of one of the partner in Almaty.

4. Current business position

The legal form of the company is going to be partnership, because all of the group members will be equal partners and owners of the business. The company will be formed in January 2016 and principal owners are Aisha Seisenbayeva, Azhar Kuanysheva, Dinara Ishanova and Zeinel Abisheva. In addition, each partner will be a head manager in different departments: Aisha Seisenbayeva will be a financial manager, Azhar Kuanysheva operations manager, Dinara Ishanova accounting manager and Zeinel Abisheva marketing strategies manager. In addition, other key personnel will consist of project managers, sales managers, head engineer and quality managers.

5. Major achievments – government, kimep uni agreement

There are two main developments within the company that are essential to the success of the business. First, our company will need to establish crucial contracts with Universities for the succesfull business operation. As it was mentioned earlier, during first months we are going to establish contract with KIMEP University and then we will cooperate with other universities from Almaty. Second, we believe that the project itself is beneficial not only for Universities and its students, but also for the education system itself, because it changes system to the core and brings innovativeness and freshness, which is strongly needed for its future development. Thus, we hope that within 3 or 4 years we will be able to cooperate with Government and bring Smart Tutorial Books to the new level.

Business description

Industry description, structure of business, legal issues and cooperation

To begin with, the two main industry of our business are education and technology industries. To be more specific, this includes the industry of providing book services for students at the library and smart technologies. Nowadays smart technologies play a big role in human's life and we believe that the emphasis of such technologies will only rise from year to year. For this reason it is a great time to introduce new technologies for education purposes that will allow Universities to better educate students and in addition will make studying and preparations for exams easier. We assume that someday we will live in the world where people won’t use any traditional paper books anymore and the need of incorporating the old systems of books will go away.

The present outlook of the education industry of providing book services for students has existed for decades and it has not changed in many ways during this time. All the Universities have a similar system of book services at the libraries: student pays a certain amount of fee each semester and for this money he can borrow books and then return them to the library when the semester ends. We believe that this industry has a lot of future possibilities for development and Smart Tutorial Books (STB) are one of the possible solutions that can improve this industry. Currently Universities provide only paper books for their students and with the development of smart technologies STB can become a substitute for traditional books. This industry also has suppliers that offer paper books to the Universities and in this case each University has its own supplier.

On the contrary, the structure of our business will be retail, because we will purchase goods (eBooks) from the wholesalers, add value to them (tutorial books for students) and sell them to the customers (Universities). In this case our customer will be University and its library department, because we can't sell STB directly to students, as students usually borrow books from the libraries and it will take us lot more time, money and effort to work without the collaboration with Universities. Moreover, the business will be new, because currently there are no other prototypes and such kind of collaborations with Universities.

The legal form of our business is partnership, because all the group members will be equal partners and owners of the business, sharing the management, profit and liability for company debts. The company will be formed in the January 2016 and principal owners are Aisha Seisenbayeva, Azhar Kuanysheva, Dinara Ishanova and Zeinel Abisheva. All the principals will contribute to the business development and each of us has her own role within the business: Aisha Seisenbayeva will be responsible for financial part, Azhar Kuanysheva for operations management, Dinara Ishanova for accounting issues and Zeinel Abisheva for marketing development. In addition, we are going to cooperate with various Universities and authors of required books. While considering copyright issues with the book authors, we looked into different possible options and came to the conclusion that the best option of the cooperation would be a possibility of receiving free online copies of authors' tutorial books and accruing them a certain percentage (10%) of sales from STB.

As it was mentioned earlier, we would like to cooperate with the Universities and as a starting point of this cooperation we chose KIMEP University. By the end of these cooperations we would like to substitute traditional books with STB, but we understand that this process will take us a lot of time and effort, especially including the time needed for students to get used to STB. For this reason we can implement STB for trials on the same conditions as paper books and take future actions based on the results. We want to see how the business will work, what will be the conditions for collaborations, how Universities and students will react to the new system and work on finding possible weaknesses and removing them for the future cooperations.

In addition, as distributers we will sell our product to the University libraries’ and they will deliver the product directly to students. Business’s support systems will include product management, customer management, revenue management and order management. In addition, we assume that the word of mouth will be our best support, due to the fact that the number of people involved in this particular industry is relatively small and students themselves will promote our product to their peers. Nevertheless, in the beginning we will promote STB in the Universities with the promo materials and we will have a more aggressive advertisement in the future for further cooperations.

Product description, competitive advantage and future profits

Concerning the product description, STB are the type of books that would help students in universities to better understand the program, and as a result not only have better grades, but also increase the overall progress and make the studies more interesting and less stressful. Such gadgets would be the absolute substitute for the usual tutorial books, not only containing the information from the book, but also having voice, that could explain the students any issues on the subject. Such electronic tutorial book would be made on the basis of the usual Readers, but with installed voice program and the whole book in it. This technology meets the needs of the most modern business systems, as specifically developed for this purpose.

There are few competitors in the industry, but we assume that our main competitors are traditional books (its suppliers) and in this comparison STB has a lot of competitive edges. First of all, STB are more convenient and comfortable in usage compared to traditional books. Nowadays paper books are quite expensive, students take them to the library for a semester and pay extra money for textbooks in case of loss. However, textbooks are often very large, carry is not convenient, and sometimes there is a shortage of physical books at the library, especially by the end of the semester. Secondly, we believe that with the STB we could decrease the cost for the books for students, because STB may have not only one book inside of it, but it will contain a big range of different books based on the student's needs, which is also one of the competitive advantage.

To continue, the third competitive advantage is that STB will have an option of voice descriptions and by this we could also target a market of people with special needs (for example, blind people). Fourthly, STB are environmentally friendly products and we all know that nowadays the world is facing difficult times and every day environmental issues are becoming more important for the human kind. We believe that environmental friendly products are a trend that will only increase with some time and therefore this product will meet the needs of the society. Currently there are no prototypes for this product on the market and for this reason we believe that this project will not only bring profits, but will also be popular among students - the target audience of this project.

In addition, we assume that the main reason for this business to be successful and profitable is because the market is ready for the product. In our opinion a latent need for such product exists, because lots of our friends complained about the disadvantages of traditional books and if there was a substitute product on the market, such as STB, young people would definitely use it during their student life. Furthermore, the price for STB is reasonable and the product is dynamic itself, meeting the latent needs of students, trend of environmental friendly products and edge of technology. In addition, STB are valuable and rare products which distinguishes them on a market where other competitors do not offer such products. To conclude, we believe that these factors will contribute to the success of the product and with some time and effort substitute paper books.

Market strategies

Defining market – target market

To begin with, the total market of the Smart Tutorial books consists of current students who study at Universities in Kazakhstan. In our project we are targeting universities and their students, because universities will buy the product, but in the end students will use these books and our profit will be based on their usage rate and product estimations. According to the statistics of the year 2015, there are 477,387 students who study in 126 universities in different cities of Kazakhstan. Moreover, structure of the market shows that the number of students studying on the governmental grants is 129,335 and the number of students on a payment base is 335,516. In addition, 232,072 students study in the public universities and 245,306 students study in private institutions. If we are talking about the growth prospects and trends, in Kazakhstan the overall number of students decreased for more than 100,000 during the last four years and there are many reasons for this trend, such as high prices for education, high level of corruption, high level of competition for the students’ admissions and inconsistency of the pricing strategy and quality of education.

The information above can be very useful for our future product development, but as it was mentioned earlier, for the beginning we are going to market students and universities that are located only in Almaty. As statistics shows, there are 42 universities and 133,700 students in Almaty, which is around 30% of the total number of students. In addition, 9 out of 42 universities in Almaty are public with the total number of 55,100 students (41.2%), while 31 are private with 77,500 numbers of students (58%) and only 2 universities are owned by other countries with the total number of 1,100 students (0.8%). This information can have a big influence for our project, because it will be easier for us to implement our products in the private institutions and in the public universities we need to receive a governmental support for the future cooperation.

To continue with, for the current moment we are going to cooperate only with the private universities with the future possibility of cooperation with the government and public universities. Therefore our target market consists of 31 private universities in Almaty with the total of 77,500 students. Moreover, we already mentioned that we want to start our business from the cooperation with the KIMEP University and data shows that currently there are ?? students who study at this University.

Furthermore, we assume that 100% of the target market is feasible, due to the fact that all the universities offer books for their students on the same bases and there are no segmentation factors that may produce gaps within the market. We believe that all the universities will buy our product on the same level they buy traditional books for students.

Projecting market share

We assume that for the beginning it will be difficult for the Smart Tutorial Books to compete with the traditional type of books, because students are used to the traditional ones and it will take a lot of time for us to change the new generation’s culture of reading. Although some of the students already have eBooks where they can read novels or other type of literature, they don’t use them for the purposes of studying yet and it will be quite difficult for them to adjust. In addition, there are two main factors that will play a big role in a projection of the future market share and the following two paragraphs will discuss both of them.

First of all, we assume that the number of private universities in the future will either decline or stay at the same level, because currently qualifying requirements for the universities are becoming more strict and not all of them are ready to meet such high level of standards. For this reason we assume that during the next few years the number of private universities will stay on the same level. On the other hand, demographical statistics shows that the number of students will also stay on the same level till 2017/2018 years, which will also affect our product future market share.

Secondly, not all of the private universities are going to cooperate with us from the very beginning. In our opinion, first cooperation with KIMEP will be evaluated by other universities and based on the results they will either accept or decline our product offering. For this reason we need to carefully think about our business plan, all the details and create cooperation on the highest-level possible. To sum up, we think that the KIMEP University is going to be an early pioneer, private universities are going to be early and late majority users, and public institutions are going to be late users. In addition to this information, nowadays there is a big trend for the environmentally friendly products and we assume that this trend will only increase and it will also influence our market share.

Nonetheless, according to the law it is estimated that on average 140 books should be located in the library for one student and 40% of the overall books must be in the electronic format (such as CD) and our product will cover these 40% or 56 books out of 140. Projection of the market share is a subjective estimate, but we tried to estimate approximate numbers. Currently our target market consists of 77,500 students * 56 books = 4,340,000 units and for the first few months we are going to cover only KIMEP students and our business will consist of 12,463 (нужно поменять цифру на то количество студентов, которое на самом деле в кимэпе учится) students * 56 books = 623,150 units. Based on the results current market share = 623,150/4,340,000 = 14%. In the future we will cooperate with the private and then with the public universities, which will increase our market share in big amounts.

Positioning Business

For students of Universities, Smart Tutorial books is a new generation of educational material that provides instant access to all the necessary information needed in just one simple usage eBook, which in addition have synchronization with voice that explains students any issues concerning different subjects.

Our direct competitor is traditional physical book itself. Of course it has several advantages such as, tangible pleasure of holding the book in your hands and sifting through the pages or tactile experience such as, smell and feeling of the book, its cover, texture, pages, its weight. But we live in a time of digital revolution, when buying CD’s was replaced by buying an IPod. So digital is continuously growing and eBook is quickly becoming a standard. Instead of walking through the library with different books, we can walk through the digital library and choose any book you need within one device.

Unlike traditional tutorial books, Smart Tutorial books provide a combination of physical convenience, compactness, artificial brain (or artificial mind) and comprehensive selection in just one device. Smart tutorial books appeal to customers, such as universities, who place a very high value on books as a whole. Our smart books are developed specifically to the needs of students and focus on theoretical and practical approaches that can improve overall students’ academic performance.

Pricing

To begin with, our company will be using the markup pricing strategy. Markup pricing is a strategy in which a company first calculates the cost of the product, and then adds a proportion of it as markup. Retailers or start-up companies mainly use it.

We chose this strategy, because the idea of Smart Tutorial books was not presented to the Kazakhstani market yet, thus, we have no competitors and we can set the prices first. We need extra money in order to pay authors of the books. In addition, our books are very convenient for libraries, because they do not have to pay extra money for transportation and lose their valuable time. Therefore, the markup for convenience is appropriate too. The markup pricing strategy involves three steps:

Step 1. Determining the cost price. The wholesale cost price of on e-book will be approximately 10 000 tenge.

Step 2. Determine the markup over the costs. The first markup will be the percentage that we are going to pay to the s, which will be approximately 10% markup. We thought that this number would be most appropriate because at the start our company is going to buy 5 000 books and take e-versions of approximately 150 books from authors. Therefore, (5 000 * 10% (1 000 tenge))/150 = 33 333.33 tenge per author. In addition, we will add markup for our interest in order to cover other costs (transportation costs, salaries, etc.) and to make our company profitable. It will be 10% more. Overall, we are going to markup 20% over the cost of one book.

Step 3. Calculate the price of one unit with markup. 10 000 tenge + 20% (2 000 tenge) = 12 000 tenge.

Distribution

Our company

O

Universities

(KIMEP University)

Supply

Supply

ur company is going to use Manufacturer’s representative’s distribution channel. Here is the scheme, which will provide better understanding of how our distribution will go.

E-book manufacturer

Payment

Payment

Book authors

For the beginning, we are going to buy 5 000 e-books from manufacturers at wholesale price. In order to get e-versions of books, we are going to contact authors or their representatives directly. Therefore, payment in cash goes from our company to both manufacturer and authors in order not to violate any copyrights. After that, we will download books at our devices. Finally, we will distribute our Smart Tutorial book into the universities’ libraries in exchange for cash payment. We want to start distributing from KIMEP University, after that we will be developing further by entering other universities and downloading more books into the devices.

Promotion plan

Promotion – one of the main issues of selling the products, it helps to convey to people the information and to compete with others. At first time the main purpose would be to introduce to people the best points and superiority over physical book. The main points of promotion plan are:

• Advertising;

• Packaging;

• Public relations;

• Sales promotions;

• Personal sales.

At first, we need to have advertising budget. In our case the budget should not be so much, approximately 50000-70000tg. We assume that this amount would be enough to make brochures and to make presentation of our product at KIMEP University. Also the good way to show our book to the students is to make as much advertisements as possible in all social networks, such as Vkontakte, Facebook, Instagram, Twitter, KIMEP radio and all KIMEP pages at the internet.

Packaging of the Smart Tutorial Book includes bright cover, instructions for using and list of books that can be inside of it. The packaging of the product has all details such as producer, year, instructions and etc., so people would not have any questions and any doubts.

Public relations - to meet people themselves, and to tell them about the product face to face. For this purpose presentation at KIMEP campus is going to be the best idea. The presentation will include promo of Smart Book, the instructions how to use it and chance for people to try it, to handle. Also some entertainment part, gifts and free drinks should provide presentation. First 10 people, who buy this book will have the discount about 30%, the next 10 people will have 20% discount, it is kind of sales promotion. Such sales are going to motivate people to buy it immediately without “blue study”. The time for meeting should be during the study hours, because it is the best hours to catch all students, Friday or Saturday. We hope that such event will attract many people.

The product is not going to have only good quality or good impact on studies, but also the guarantee for half a year that would reassure our customer, that some technical difficulties we will correct ourselves for free.

Sales Potential

In developing the revenue model we are going to use a simple formula consisting of the total number of customer - “T”, average revenue per customer – “A” and the sales projection “S”. The equation for projection of sales is following: (T) * (A) = S. The total number of customers in our project equals 77,500 students and the average revenue per customer for now is 1000 tg. Despite the fact that the average revenue is relatively small, we are going to have high profits because of the amount of quantity, but not the interest itself.

In the best-case scenario we assume that we will be able to achieve the 100% of the market of private universities in 3 years and in the worst-case scenario this will take us 5 years. Nevertheless, we have an additional option of targeting the market of public universities with the total of 55,100 students and we think that in 3 years we will be able to enter this market too. Furthermore, in the beginning we are going to have revenue approximately for 250 tg per book, because at this point of time we are going to have a lot of expenses that may not even cover our costs.

Year, month	Average revenue, A	Total number of customers, T	Sales projection, S
2017, Janury - March	250	4000	1.000.000
2017, April - June	250	3000	1.250.000
2017, July - September	250	2000	750.000
2017, October - December	500	4000	3.000.000
2018, Janury - March	500	6500	3.250.000
2018, April - June	750	8000	5.250.000
2018, July - September	750	7000	3.750.000
2018, October - December	750	8000	6.000.000
2019, Janury - March	750	7000	6.000.000
2019, April - June	750	9000	6.750.000
2019, July - September	1000	8000	6.000.000
2019, October - December	1000	10.000	10.000.000
Total		77.500	53.000.000 tg

As the table above shows, in the best-case scenario by the end of third year sales projection are going to be 53.000.000 tg. The number of customers varies, depending on the number of universities that we are going to target and on the season. For example, first year of 2017 we are going to target students of the KIMEP University. With the experience and knowledge that we get from this work, we will enter the market of the rest 30 private universities and hopefully cover the market by the end of 2019. In addition, we can see that during autumn we will have the largest amount of customer, due to the fact that most of the students get books in the beginning of the academic year and not so many of them study during summer period.

Nonetheless, this is the approximate sales projection and if the best scenario works, we are going to target market of public universities with the current total of 55,100 students that will increase by the end of 2018 year, which will have a positive affect on out business.

Competitive analysis