Tutor Email Mobile Work office Students

Edward. F. McAlvanah Edward.f.mcalvanah@rmit.edu .vn 3.6.2 Duong Thuy Linh Tran Thi Phong Le Xuan Tien Trung Sultanskyi Pavlo Linh.duongthuy@rmit.edu.vn Phong.tranthi@rmit.edu.vn Trung.lexuantien@rmit.edu.vn Pavlo.sultanskyi@rmit.edu.vn 091 2 623 557 091 5 442 705 090 4 054 005 090 4 470 034 Business enterprise 1 BUSM 2368 Business Pan 50% of total mark

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Subject name Subject code Title of assignment Weight

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Table of Contents

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I.

EXECUTIVE SUMMARY

1.1 Description of business concept and the business opportunity and strategy The idea is to publish a magazine on the theme of creativity on varieties of fields such as: business entrepreneurship, arts & literature, science & technology... Theres a large market for ideas and innovations to be published and marketed to the public and a forum for people to discuss about their latest ideas and innovations. Together with the information provided by the magazine, the readers can also have advertising opportunities, opportunity to market new products, sales and transfers of technologies. Creativity magazines strategy is to implement a wide variety of marketing campaigns to attract initial customers for the magazine. The magazine will penetrate into the market of intellectuals, and businesspeople in Vietnam, convincing them that this will be beneficial for their work and satisfy their information needs. By collaborating with the best journalists, especially in the field of science and technology, the magazine will satisfy even the most hard-to-please readers. Part of the magazine issues published will be distributed to Government offices for political and marketing purpose. 1.2 Target market and projections The customers of the magazine will be inventors and innovators in the country, and all interested in creativity such as scientists, inventors in businesses, corporations, factories, farmers, handicraft works, creators in arts and literature, creators as youths and children... The customers will also be Government and Party agencies and organizations, ministries and agencies, Vietnamese National Front agencies, political social organizations, creators as Vietnam expatriates in and outside the country, non-governmental organizations in Vietnam, and authors of creativity awards, businesses, co-operatives, and joint ventures. 1.3 Competitive advantages Main features of our product are: wide range of topics covered, cooperation with intellectual property organisation, hence relevant expertise in this field available and evident in our articles regarding this area, and

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an approach, not previously attempted by other editorials in Vietnam, to study real life application of creativity by seeking it in seemingly ordinary and routine environments.

1.4 Costs It will cost 5720$ to launch the business. Monthly fixed costs are 2959$ and variable are 0,045$ per unit. 1.5 Economics, profitability and harvesting potential Magazine will gain its main auditory in 5 years, dropping 2% of growth speed each year. It is possible to achieve break-even in 1 year and 7 months. Full return on investment in liquid assets is attainable in 4 years 8.5 months. Since most equipment will become almost obsolete, liquidation of assets can potentially bring not more than 2500$ dollars in 5 years. Managers see no reason as to why should the company be eliminated so early, giving credit to the fact, that its operating margin grows steadily as predicted in respectful part of the document. 1.6 Team The management team and advisors of the magazine are the most prominent and respected figures in the field of science and technology. Prof. Ha Hoc Trac has been working for the Vietnam Association of Science and Technology for twenty years. Dr. Le Xuan Thao is the Director of VIFOTEC Fund as well as the President of the INVENCO Intellectual Property Law Firm, the biggest IP Law Firm in Vietnam. Most of the management members are fresh graduates. We do not have much experience in the working place, but we have the most powerful and influential advisors. They do not step in as a member of the management team; instead they stand outside advice us and use their influence to help us.

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II. The industry and the company and its product

Creativity Magazine is our latest publication under the support of the VIFOTEC Fund of Vietnams Association of Science and Technology. The idea is to publish a magazine on the theme of creativity on varieties of fields such as: business entrepreneurship, arts & literature, science & technology... Theres a large market for ideas and innovations to be published and marketed to the public and a forum for people to discuss about their latest ideas and innovations. The customers of the magazine will be inventors and innovators in the country, and all whos interested in creativity such as scientists, inventors in businesses, corporations, factories, farmers, handicraft works, creators in arts and literature, creators as youths and children... The customers will also be Government and Party agencies and organizations, ministries and agencies, Vietnamese National Front agencies, political social organizations, creators as Vietnam expatriates in and outside the country, non-governmental organizations in Vietnam, and authors of creativity awards, businesses, co-operatives, and joint ventures. Together with the information provided by the magazine, the readers can also have advertising opportunities, opportunity to market new products, sales and transfers of technologies... Because the magazine publisher is operating under the VIFOTEC Fund, theres no cost for rents of office or purchase of the equipment, machinery, but in returns, part of the profit from the sales of magazine must go to the VIFOTEC Fund because its one of VIFOTEC Funds business unit. Theres no fixed cost in publishing operation, and some of the works are outsourced, such as printing, marketing... Therefore theres much less time to recover the investment into the magazine. However, theres a considerable concern when running a business in Vietnam that is an initial cost of lobbying to some governmental organizations for the operation of the magazine, and the high rate of inflation must be considered when analyzing the accounting reports (Inflation rate of Vietnam currently ranges from 7% to 8%). The likely lifespan of the magazine is 30 years.

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There are many competitors in the magazine market, thus this is a fairly mature industry. However, theres no direct competitor to Creativity Magazine because from our research, this is the first magazine addressing the issue of ideas and innovation in Vietnam, therefore the magazine has a great potential if developed and published in Vietnam. The market growth rate for the publishing industry in general is very high, particularly in magazines and online newspapers market. Because Creativity Magazine belongs to a niche market within the big market of publishing industry, it has greater potential to grow than the industry average rate of 20%. The expense currently is fairly high, especially the payment to collaborators of 50 million VND. Therefore, the gross margin is only 3%, which is very low for a new business. The expense in the future must be cut down, and the publisher needs to look for new ways to generate income for the magazine so that the gross margin will improve. The potential gross margin for this magazine is from 25% to 40%. If all conditions are met, the magazine can generate a large profit. The profit margin and the return on capital employed are currently calculated as 13% and 13.4% respectively. Time to breakeven can be well within the first year of publication and the time to positive cash can also be within the first year. Theres a high return to investment potential because the investment required for starting this magazine is low. The magazine doesnt have a high strategic value to the managers of the Fund. However if successful, the magazine can greatly beneficial to the Fund because it will help promote the reputation of VIFOTEC Fund, help people become more aware of its activities and most importantly, the magazine will help promote the activities of creativity and inventiveness in Vietnam, a country which needs a lot of creative, talented people for its process of transition into the market economy. If the magazine fails to be commercialized, what the Fund will lose is the capital invested in the project, and the time invested. However, as a separate business unit from the Funds other activities, the magazines failure will not affect the performance of other business units. The trade-offs are time and money to invest into other activities of the Fund.

POTENTIAL TO SURVIVE AND GROW

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The price is calculated based on the cost-plus pricing strategy. The sale price of one copy is 20.000 VND. The contribution margin ratio is 0.817, thus the markup amount is 18%. This is a competitive pricing strategy, making the breakeven sales volume of 4284 copies for the first issue. The planned sales for the magazine will be 5000 copies. The costs of operation of the magazine is not very competitive because the costs havent been accurately analyzed, which requires more research and analysis in the future reports. Again, the gross margin will be greatly improved if the numbers are studied more carefully. The distribution channels are fairly effective and competitive, including local newspaper shops, stands, kiosks, through advertisements, through the State-distribution channels, and through distribution channels of collaborators. Distribution channels are very important to make sure the magazine reaches the customers and details of distribution channels will be more carefully studied in further reports. Barriers of entry for the publishing industry are fairly low, the most likely are set-up costs (rent expense, purchase of equipment), and a fairly broad network of collaborators. These barriers of entry can be effectively managed by the publisher of Creativity Magazine because theres no rent and equipment purchase as set-up costs and there is an existing network of collaborators from other activities of the VIFOTEC Fund, which can help with the management of the magazine. Therefore, broad network of collaborators for the magazine is a great competitive advantage against its competitors. This report identifies some of the fatal flaws that the magazine can face, such as certain readers unable to reach the magazine and inefficient distribution method. In general, most other weaknesses, threats and fatal flaws have been considered, although the numbers are to be more correctly examined for the best analysis. Thus, more detailed reports and researches will be conducted to minimize the risks and to be more in line with the real situation.

III. MARKET RESEARCH AND ANALYSIS

3.1 SWOT analysis Weakness

Strength

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- The publication of this magazine is also consistent with the mission and objectives of VIFOTEC Fund as promoting innovation and creativity, thus the magazine and the Funds activities can greatly complement each other. - Good, experienced management team, including some of the most prominent figures in the field of science and technology, and law. - Broad varieties of readers, anyone can have interest in this magazine. - High value through large amount of information provided to the readers. - Large capital. - Large network of contacts. - Large number of advisors. - Possible political support from the Government. - Reputation as the largest Fund for science and technology in Vietnam. - The magazine is the first on the theme of creativity in Vietnam, official organ of the Vietnams Association of Science and Technology. - Already established office and equipment for the operation of the magazine (no rents of office building, or purchase of equipment). - Beautiful, easily accessible location of the

- Limited knowledge and experience in the field of publishing. - As a new magazine, it doesnt have distribution channel, market research, network of collaborators, and regular customers base. - High marketing and distribution costs in the beginning. - Lacking specialists in the field of publishing and designing, although this part can be outsourced. - Motivation and creativity for a number of employees are low.

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headquarter at 53 Nguyen Du St., Ha Noi - Search and examination of Intellectual Property objects/ideas/inventions through the INVENCO Intellectual Property Law Firm for the prospect of registration into the National Office of Intellectual Property (NOIP). Opportunities Threats

- The first magazine on creativity theme, a very - Possible competition from similar hot subject in the society nowadays, theres a considerable interest in this topic. magazines in the future. - The number of competitors in the rapidly, which can take away Creativity Magazines market share. - Readers can be difficult to reach, or theres no efficient distribution method. - Risk of failure and unsuccessful commercialization.

- Magazine publication is a fairly new industry, magazine market is growing very its easier to compete. Thus, theres low competition from other magazines. - New measures to protect intellectual property, especially the promulgation of a new IP law code, helping to promote innovations and creativity. - The privatization of State-owned enterprises results in the establishment of numerous small and medium enterprises, helping to promote competition and innovation. - Through this beginning process of transition into market economy, the idea of innovations and creativity are highly valued, thus the possible life span of the magazine can be very long. - Opportunity to gain revenue from advertising on the magazine.

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- An online version of the magazine can be established together with the Creativity magazine (hard copy).

3.2

Customers

Who are the customers: inventors and creators in the country, and all whos interested in creativity. (scientist, inventors in businesses, corporations, factories, farmers, handicraft works, creators in arts and literature, creators as youths and children...) The main group of customers include: + Government and Party agencies and organizations at State level and local level. + Ministries and agencies at State level and local level. + Vietnamese National Front agencies. + Political social organizations from State level to localities. + Creators as Vietnam expatriates in and outside the country. + Non-governmental organizations in Vietnam. + Authors of creativity awards every year. + Businesses, co-operatives, joint ventures. Because Hanoi is the nations capital and a big cosmopolitan area with many governmental organizations and NGOs situated here, they are the most likely customers for Creativity Magazine. And they can easily be reached. Customers want Creativity Magazine because they want to know about new ideas on business entrepreneurship, arts & literature, science & technology..., learn from other peoples stories of creativity and news on the topic around the country. Though the market survey, the level of interest of readers in Creativity Magazine is: Level of interest Very interested Interested Maybe I dont know I dont care Total: 124 (people) Number of people 39 31 30 11 13 Percentage 31.5 25 24.2 8.9 10.5

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There are a total of 124 people being interviewed and 56.5 % people show interest in the establishment of the magazine. Negative customer reaction to the magazine (19.4%) come from people who rarely read magazines or theyre interested in the magazine addressing fashion, society,... Because the magazine has not been established yet, the Editorial Office will expect the above reaction will change when the magazine is commercialized. Customers make purchase decisions on price and quality of contents of the magazine, and a large number of customers come from government agencies through VIFOTEC Fund and businesses involved with the Fund. Customers can purchase the magazine directly from the distribution locations in Hanoi and Hochiminh City, or they can subcribe for regular delivery from our Editorial Office. 3.3 Market size and trends

The publishing market, especially market for magazines, is relatively small, there are currently 600 magazines in circulation in Vietnam today and all of them are licensed and operated under another governmental organization. The growth rate for the magazine industry is 10% per year. The growth rate is expected to rise rapidly once the regime of managing organization will be dropped. Year Industry growth rate Creativity Mag market share 1st year 10% 5% 2nd year 10% 10% 3rd year 12% 15% 4th year 15% 18% 5th year 20% 20%

Year Government and Party agencies and organizations Businesses, cooperatives, joint ventures. Other readers

1st year 5% 5% 5%

2nd year 5% 10% 15%

3rd year 5% 15% 25%

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Although having an independent accounting system, most of the magazines are subsidized by the managing organizations because of small market share and sales number. A large part of the magazines in circulation are small magazines which are circulated among different governmental organizations and agencies. They are not considered the competitors of the Creativity Magazine. The publishing industrys trend in Vietnam is the dismissal of the managing organization. In a few years time, businesses dont need to have a managing organization to be licensed; instead, they can be licensed as regular businesses and they will have to pay taxes as regular businesses. Many magazines nowadays are online magazines and some are purely online publications such as VNExpress, VietnamNet,... The trend for the publishing industry in general is electronic publication and its advantages compared with traditional printed publication is that electronic publication is low-cost, can be more regularly updated, and appeals to a broader audience, thus easier to attract advertiser. Creativity Magazine will also have a online version in the Internet in the second and third year.
Magazine Market share Quality Design Price * Delivery Service Saigon Times 5% Very Good Good Expensive 7000 Good Very Good PC World 10% Very Good Very Good Fair 8000 Very Good Very Good Womens World 20% ** Good Excellent Fair 9000 Very Good Very Good Marketing/ Family 15% Good Excellent Fair 7000 Good Good HealthFamily 5% Good Very Good Low 4000 Good Good Student Magazine 12% Fair Fair Low 10000 Very Good Fair Youth Fashion 6% Fair Excellent Expensive 10000 Very Good Good TV Magazine 4% Fair Very Good Fair 4000 Very Good Very Good

3.4

Competition and Competitive edges

In the magazine industry, the competitors of the Creativity Magazine include the following magazines: Womens World: 22%, Family-Marketing: 15% and Hoa Hoc Tro: 16%, they are best-selling magazines in the country today. Direct competitors of the magazine also are Tia Sang Magazine of the Ministry of Science and Technology, and numerous online websites, including:

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- Website cafe-sangtao: http://www.cafesangtao.com - Ideas-creativity forum: http://www.ttvnol.com/ytst.ttvn - Vietnam ideas website: http://www.ytuong.com.vn Strengths of competitors They have a strong network of journalists and collaborators. They have expertise in the industry. They are appealing to the readers by content and design, especially young readers. Their advantage is in low price. They have a well-established distribution channel. Comparison of the competing magazines Categories: Poor, Fair, Good, Very Good, Excellent. * Price: Low, Fair, Expensive. ** Category leaders in bold and underlined. Magazine Reasons Womens World - The content is not - Too many advertisements leading Reasons for customers' boredom - Nice design of the magazine. - Content of the magazine. Health-Family - The content is not interesting. - The design is not interesting. - Readers are health conscious. - Their organization works closely with the managing organization of the magazine. Student Magazine - Readers have no time to read. - The content is not interesting. - Readers have free time to read. - The magazine is cheap. Weaknesses of competitors Their range of issues addressed are limited to society and fashion. They are not appealing to a diversified range of audience. They have rigid structure.

for leaving interesting.

purchasing - Readers have free time.

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The competitive edges of the magazine is first the subject that the magazine addresses, which is ideas and creativity. This is a very popular subject today in Vietnam because the growth of the economy is very high, and there is a big potential for new ideas to be commercialized. However, there hasnt been a magazine specialized in this subject. Because theres no competitor in this field, this is the right time for the magazine to be established. Another competitive advantage comes from the team of experts, and advisers of VIFOTEC Fund and their experience in the field, close collaboration with the Fund can provide the Editorial Office with publishing expertise and also financial support in the beginning. The VIFOTEC Fund is a most well-known fund in Vietnam in sciencetechnology field and it has relationships with many businesses and government agencies such as Ministry of Commerce and Ministry of Science and Technology. Therefore, the Editorial Office can gain revenue through attracting those potential customers both as advertisers and subscribers. The possible disadvantages of the magazine is that theres a diverse range of customers, therefore, its difficult to establish an effective distribution network so that all possible readers can be reached. Another threat to the magazine comes from the electronic magazines that are competing directly with the Creativity Magazine and they can take away the magazines market share. In recent years, there are cases where a magazine went out of business in a few months of operation and the reason can be that the cost to finance the business from printing and distribution can be as much as $100,000 and there are payback period on investment for this type of business is around 4-5 years, even with government subsidy. 3.5 Estimated Market Share and Sales This estimation is based on the industry growth rate in part. III.2 - Market size and trends. This estimation is possible because there are many subsidized magazines at the moment and they are inefficient organizations. When the publishing regulations are loosened and the market size increases, as many as 20 percent of magazines will go out of business, the Creativity Magazine is expected to take over the market shares from those magazines. Year 1st year 2nd year 3rd year 4th year 5th year

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Estimated Market share Estimated Sales 3.6

5% 10,000

10% 21,000

15% 35,000

18% 45,000

20% 58,000

Ongoing market evaluation

The Editorial Office will constantly evaluate the market and carry out market research to find out information of the competitors and their positions. The company will determine market information in every 6-month period and will compare with the previous months to forecast the trend in the industry as well as evaluate performance. The company will establish a set of key performance indicators in order to assess the performance and determine the price of the magazine. The marketing strategy in this business plan can be adjusted to suit the market condition.

IV. The economics of business

4.1 Gross and operating margins Year Revenue ($) Expenses ($) 1 6400 7459 2 13440 12409 3 22400 18709 4 28800 23209 5 37120 29059 4.2 Profit potential and durability Gross margin ($) -1059 1031 3691 5591 8061 Operation margin *100(%) -0,16547 0,076711 0,164777 0,194132 0,217161

After undertaking an interview with chief editor of a successful magazine, we have concluded that our idea, if properly implemented, has high potential to attain break-even audience and keep growing tendency over the next 5 years. Due to astonishing speed of economy in Vietnam, we may even be able to entice full return on investment in liquid assets by slightly increasing the price. Our policy is to keep long-term relationships with polygraph company, since this is the only way to control quality in a non-manual way. Giving credit to this, our price will be rising by equal amount each time variable costs rise. Concrete figures for nearest time are located in section 4.1 4.3 Fixed, variable and semi-variable costs Fixed cost Renting of premise Amount 50$

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Wages of permanent staff Utilities, communication Administrative expenses Web-site (yearly/12 months) Total

2570$ 90$ 20$ 4$ 2734$

Variable cost (for 1 magazine) Amount Colour A3 two-sided page printed (multiplied by 0.03$ # of pages in 1 mag.) Printable material for 1 page (authors premium) 15$ (divided by # of mag. sold, then multiplied by # of pages, excluding cover) (figures derived from investigation using fake requests for quotation) Total expenses for forecasted sales, assuming 15 two-sided pages per magazine are as follows:
Year TVC $4 725,00 $9 675,00 $15 975,00 $20 475,00 $26 325,00 TC $7 459,00 $12 409,00 $18 709,00 $23 209,00 $29 059,00 Break-even price $0,75 $0,59 $0,53 $0,52 $0,50

1st 2nd 3
rd

10000 21000 35000 45000 58000

4th 5th

4.4 Months to breakeven Our price will be set within commonly practiced limit for magazines 10000 VND, which approximates to 64 cents. As we can see from the table above, first year will generate losses, totally amounting to (0,75-0,64)*10000=1100$. Achieving twofold auditory increase every month is our main objective in first year. We accept insignificant sales in first few months, dedicating it to word of mouth marketing, which as we estimate will increase our auditory exponentially. In year 2 our monthly growth of sales should average to 6,5% and a break-even of 15250 will be achieved on 7th month of second year. 4.5 Months to reach positive cash flow Following capital investments should be made in first year: Name Fixtures and fittings Amount 400$ Page 16 of 34

Electric equipment (incl computers) 5020$ Establishment of relations with authors 300$ (phone, meeting, instructing expenses) Total 5720$ Contribution margin in year two is 0,11$ per magazine per month. Since we are tax-free, year 2 will bring additional 0,11*(21000-15250)=632,5$. Year 3 is expected to have 4,4% growth of sales and will generate 0,11*(35000-15250)=2172,5. Year 4 will generate 0,11*(45000-15250)=3272,5 and total pure profit generated by that time is 6077,5$. # of months required to achieve positive cash flow is 8,5 months.

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V.
5.1

MARKETING PLAN
Market analysis

Situational analysis

Establish marketing objectives

Identify target markets

Develop marketing strategies

Implementation

Monitoring and Controlling 5.2 5.3 Statement of marketing objective Invest 10 % of sales revenue for marketing Create differentiation in consumers mind. Effective quality management Increasing product awareness to 20% of the target market Expanding distribution channels by 20% Increasing market share Increasing brand awareness to 75% of potential customers Increasing size of existing markets and expanding into new markets each year. Overall marketing strategy

The magazines philosophy is helping to promote innovations and creativity in Vietnam and the marketing plan will focus on people who are intellectuals, interested in new ideas and innovations, and entrepreneurial. Those include scientists, inventors in businesses, corporations, factories, farmers, handicraft works, creators in arts and Page 18 of 34

literature, creators as youths and children... Around 90% of our readers will come from big cities such as Hanoi, HCM City and Haiphong. The customer groups that can be targeted for initial intensive orders as well as advertisers and sponsors are: Government and Party agencies and organizations at State level and local level, Ministries and agencies at State level and local level, Vietnamese National Front agencies, Political social organizations from State level to localities and Authors of creativity awards every year. Those targeted for later selling efforts are creators as Vietnam expatriates in and outside the country, non-governmental organizations in Vietnam, businesses, co-operatives, joint ventures. The features of the magazine that will be emphasized to generate sales are quality of contents, and price. In the first year, the price will be increased due to the high investment cost and operational cost. However, in the second or third year, the price will be reduced because of the higher sale number and there are more regular reader groups. There will be more choice for readers access to our magazine through an online version of the website, possibly in the second and third year, bring the magazine closer to people who are difficult to reach in our distribution channel and keep the magazine updated frequently. Both the electronic and printed versions will be operated together to maximize readers satisfaction. In the first few years, the magazine will be sold in major cities of Hanoi, Haiphong, Danang, HCM City, and countryside people and minorities can subcribe the magazine through the Editorial Office in Hanoi. If the magazine is successful, in the next five years, the Editorial Office can extend the subscription of the magazine to foreign countries so that the magazine can reach overseas Vietnamese, helping to enhance the magazines image and reputation internationally. 5.4 Pricing

A price setting in todays consumer oriented market is directly linked to the product strategy defined in Porters two-dimensional matrix. It determines whenever company, operating in broad market scope strives for cost leadership or high differentiation level (offers products with similar core product, but of different quality, service, packaging, etc. Successful magazines are often unique to the market due to very nature of the needs it intends to satisfy. Our price is therefore determined by how much unique value new Page 19 of 34

magazine adds to customer. Advantages of the new magazine are discussed in respectful parts of the document; most influential of them are: wide range of topics covered, cooperation with intellectual property organisation, hence relevant expertise in this field available and evident in our articles regarding this area, and an approach, not previously attempted by other editorials in Vietnam, to study real life application of creativity by seeking it in seemingly ordinary and routine environments. All those factors characterise our business as highly valued, but we must also take into account rules, set by market leaders, which appear to require a magazine not to cost more than 10000 VND. We consider this price to be eligible for as until we are able to dictate it ourselves. 5.5 Sales Tactics

The magazine will be sold using our own sales force to distribute the magazine and direct mail for its subscribers. The two offices in Hanoi and HCM City will be used for sales and subscriptions of the magazine, and our sales people will be located there. Our distributors will receive 15% margins of the magazine. At the end of the month, the distributors will send back the revenue from sales of magazine to the Editorial Office and receive their margins.

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There will be a wide network of street distributors because its the best way to build brand awareness. The magazine will be distributed to the street shops because the magazine is suitable for all groups of readers. Shops that are close to commercial and governmental offices will be the priority of our distribution networks because those areas are the potential places for readers of the magazine, and they are expected to make large sales. 5.6 Service and warranty policies

Our service policies are serving the customers to their full satisfaction by timely deliveries of the subscribed magazines and having a 24 hours/day customer hotline to answer any customer requests with free charges. The Editorial Office has the policies of exchange of new magazines for those which are misdelivered or damaged and there are customer feedback in our offices or our website so that the readers can make suggestions/feedbacks to the Editorial Office. There will be a readers section in the magazine so that some customers letters/feedbacks can be mentioned to our readers. 5.7 Advertising and Promotion

Advertising approaches that will be used are advertising in the Internet (newspaper, magazine, governmental websites, forums), advertising in some magazines/newspapers (Thanh Nien, Tuoi Tre, An ninh Nhan dan, Tien Phong). The major approach is through the word-of-mouth effect of our readers to spread the magazine information to our prospective readers. The magazine will also be marketed through trade shows, promotions shows, direct mailings and through seminars and conferences. The prospective readers of governmental organizations and agencies having working relationships with the Editorial offices and the VIFOTEC Fund can be the initial subcribers of the magazine. In the long range, our focus of advertising and promotion activities will be businesses and entrepreneurs. 5.8 Distribution

The magazine will be distributed to local newspaper/magazine shops, including street kiosks. The magazine will also be distributed to government subscribers, bookshops, and

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post offices. For subscribers, the magazines will be sent by direct mails straight from our two printing locations in the North and the South. Shipping cost will be 5% of the selling price because our shipping cost can be lowered through bulk shipping. The shipping time will be approximately three days from the published date.

VI. DESIGN AND DEVELOPMENT PLAN

6.1 Development status and tasks

Currently, the management is finalizing the business plan for the Editorial Office. There are several tasks to be completed within the next three months: Establishing the Editorial Office in Hanoi in 53 Nguyen Du St., Hanoi: the office will be rented in the complex building of the Vietnams Association of Science and Technology. The place is very convenient for management of both the Editorial Office and the VIFOTEC Fund to regularly meet and the place is at the heart of the city center. Registering licence with the Ministry of CultureInformation to be operating as the official organ the VIFOTEC Fund: This process is not difficult since the VIFOTEC Fund is a popular organization and has good relationships with the Ministry of Culture-Information so that the process of attaining the license can be shortened. Establishing a network of journalists and collaborators: journalists and collaborators from different fields will be contracted to write articles, and reports for the magazine. Some journalists and collaborators can be introduced through our network of friends and colleagues. Publishing the first issue of the magazine.

Online survey for creativity magazine conducted: - Age Under 15: 2 (3.2%) 15-22: 26 (41.3%) 23-35: 33 (52.4%) Above 35: 2 (3.2%)

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- Gender female: 28 (45.2%) male: 34 (54.8%) - Work-/study- place High school: 39 (30.2%) College: 38 (29.5%) Government agency: 37 (28.7%) NGO: 1 (0.8%) Entrepreneur: 1 (0.8%) Employee in private company: 13 (10.1%) - Which magazines do you read? Saigon times: 7 (6.3%) PC world: 13 (11.6%) Womens world: 26 (23.2%) Marketing/Family: 15 (13.4%) Health and family: 8 (7.1%) Hoa hoc tro (student magazine): 16 (14.3%) Youths fashion: 11 (9.8%) Shopping: 11 (9.8%) TV magazine: 5 (4.5%) - If the magazine on creativity and innovation will be published, will you be interested? Very interested, will buy: 23 (39.0%) Interested: 15 (25.4%) So so: 14 (23.7%) Not much interested: 5 (8.5%) Not interested at all: 2 (3.4%) (survey conducted online, at http://invenco.vnn.vn/thamdoykien.htm; total number of respondents: 75; omission of fields was allowed) 6.2 Difficulties and risks.

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One of the anticipated design and development problems is the parallel existence of the published version and the electronic website of the Creativity Magazine, because part of the readers will be drawn to the electronic version, abandoning the published version. The solution is that the electronic version will be established after two years of the published version, so that the electronic version is only the supplementary tool for the actual magazine. The design and development of the electronic version is not very difficult. This task can be outsourced to a professional web design and the page can operate like a online magazine where the technical people in the Editorial Offices only task is to update the information into the website. 6.3 Costs

There are three types of costs: Production costs, marketing costs, and distribution costs. Production costs include cost of designing on the electronic template, payment to the collaborators of the magazine, wages for editors, marketing, technical department, utilities, and printing. Production costs can make up most of the total expense that the magazines operation incurs. The marketing costs can be high at the beginning, especially advertisements in public media, to introduce the magazine in the market. This cost can be reduced as the publics awareness of the magazine increases. Distribution cost can be relatively low because the market for the magazine is within the city of Hanoi, because Hanoi is the nations capital and a big cosmopolitan area with many governmental organizations and NGOs situated here, they are the most likely customers for Creativity Magazine; and they can easily be reached. The magazine will be first published in Hanoi and distributed to local newspaper shops, stands, kiosks, through advertisements, through the State-distribution channels, and through distribution channels of collaborators

6.4

Proprietary issues

The issue of copyright is one of the difficult issues because the IP Law enforcement in Vietnam is still currently weak. The administration and marketing staff will have to constantly watch for any copyright violation so that the content of the magazine can be

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protected from illicit copying and reproduction. In case of extreme violations, the Editorial Office will bring the violators to court for compensations. The copyright of the articles will belong to the Editorial Office, not the authors of the articles. There will be a commercial contract between VIFOTEC Fund and the Editorial Office so that: The Editorial Office will invest half of the investment and VIFOTEC will invest the other half into the venture. The VIFOTEC Fund shall provide necessary technical or financial support. The profit from the business will be split by 50:50 between the VIFOTEC Fund and the Editorial Office.

VII. Manufacturing and Operations Plan

Creativity magazine is a monthly magazine. So the lead time of the magazine is exactly one month and normally one day after one month for other cities in the country due to transportation time. There will be a special magazine for the month of Christmas and New Year and the month of Tet holiday. Such issues will have a higher price at about 30,000 VND. We do not intend to hold a lot of inventory, in fact we will sell all our printed copies and only keep a few at our editing station for later reference. As we plan, the vendor and the post office that are selling our magazines will order the number of prints before hands so we know the number of magazines to be sent out. Our office is located at 53 Nguyen Du Street. This is a small street with very beautiful surrounding and quiet for the job of an editor. The house is owned by one of the owners of the magazine so the rent is low and it is located in the centre of Hanoi, easy and convenient for access. The printing houses are also near by so the movement between the our station and the publishing house is not so far. The disadvantages may be we do not have a huge site for our parking and for expansion in the future. So if in the future we expand, we will need a bigger location. In our stations, we have two graphic designers with apple computers, printers for designing. We also provide our editors with Personal Computers for writing articles.

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Photocopier, fax machine, telephone are very important for us to keep in contact with our consultants and advisors. We also have a small photo studio inside the house for shootings. The facilities inside the studio are light box, fans, props, tools, reflection board. The photographer will have his own camera but in the next few years we will consider to invest in buying our own camera for higher quality pictures. The space that we are sited on is leased; we are not intending to buy any estate to serve the magazine because it is too costly and not economical. In the future, when the magazine becomes more popular we will hire more editors and designers so definitely new equipments are going to be purchased. In the next three years, we plan to buy our own camera, a new set of computer for better graphic design, computers for new editors and clerks. We will try to provide each section a telephone to reduce the congestion of communication. If in the next three years we plan to expand, we will hire space floor in one of the buildings such as Vincom city in Ba Trieu Street. Vincom city provides a pretty low price for rental per meter square compared to other options. Vincom has a large floor space so we do not have to worry about expanding. It is also a shopping centre so accessibility is not a problem. Ba Trieu Street is quite big so vehicle can move around more easily. Strategy and Plan To produce creativity magazine, we need the consultation of our advisors from different fields. Our editors will decide what topics to cover in that specific month and seek out expert for help or for their own articles. The head editor will check through the article for grammatical or spelling mistake. That person will need to approve the article as well. Then the article will be sent to our in house graphic designers for the design of layout, if pictures are not ready, we will ask our photographer (not full time, only on job contracted) for a shoot. Before the soft copy is sent to the publishing house, the head editor needs to check through the whole magazine for any mistake or changes need to make. One of our editors will bring the final soft copy to the publishing house; the first copy will once again need to be revised by the editor for correct coloring and wordings. After all of such process, printing of copies will be proceeded. Page 26 of 34

We are intent to cooperate with the Educational Publishing house. This is a very reputable publishing house and suitable with the content of our magazine. This is a governmental organization so it is not so expensive. However, we need to keep a good relationship with the publishing house because that is where our production is made. We outsource our printing to them. We apply total quality management, from the first step of production to the end when the magazines reach the hands of our intermediaries. We decide on the quality of our content, checking constantly for mistakes. Since we are a media representative, our information needs to be accurate to avoid misrepresentation. We also focus on the design and layout of the magazine to ensure the high standard of our products. We do not compromise in the design and layout because we believe that is how we can attract customers to buy our products. Regulatory and legal issues We need to obtain a license from the Ministry of Culture and Information. In order to do so we will apply and will be requested to provide a business plan and what this magazine is about. The Ministry of Culture and Information then will review and decide to provide us the license. Our content will also be censored by the Ministry of Culture and Information. We are not allowed to be political or represent wrong information. We will also need to several responsibilities to the government to provide information that is favor towards them sometimes. That is how media in Vietnam works; we have to face pressure from our superiors.

VIII.

MANAGEMENT TEAM

The management team and advisors of the magazine are the most prominent and respected figures in the field of science and technology. Prof. Ha Hoc Trac has been working for the Vietnam Association of Science and Technology for twenty years. Dr. Le Xuan Thao is the Director of VIFOTEC Fund as well as the President of the INVENCO Intellectual Property Law Firm, the biggest IP Law Firm in Vietnam. The management team can gather a group of collaborators, who are the best scientists and journalists in the Page 27 of 34

country to contribute to the magazine, and also a team of experienced advisors from different fields: science-technology, business, arts and literature... Level of communication: Frequent communication among managers, members and staff. Most importantly, members of the management have known each other and working together for a long time. If well-managed, the Creativity Magazine can last for at least 30 years. Its currently in the Introduction stage; however, it should be fairly short because the VIFOTEC Fund is the most reputable Fund in the country with large capital and relationships with many Governmental and Party agencies and organizations, to quickly develop and market this product. Our station will comprise of a head editor, Mr. Nguyen Xuan Trung, one vice head editor, two graphic designers, five editors, one coordinator, one accountant, one marketing clerk, one administration co. HR, one PR officer, one receptionist, one part time photographer, one cleaner, one IT man. In total we will have 18 employees. We will also have part time editors and consultants. For the positions, we have not allocated to any specific person as we are still the midst of recruiting. Most of the management members are fresh graduates. We do not have much experience in the working place, but we have the most powerful and influential advisors. They do not step in as a member of the management team, instead they stand outside advise us and use their influence to help us.

Position Head editor Sub Head Editor Graphic designer Editor Coordinator Accountant Admin and HR PR officer Receptionist

Amount of salary (VND) 8,000,000 VND 6,000,000 VND 3,000,000 VND 3,000,000 VND 5,000,000 VND 3,000,000 VND 3,000,000 VND 3,000,000 VND 1,500,000 VND Page 28 of 34

Cleaner IT clerk Advertisement officer

800,000 VND 1,500,000 VND 3,000,000 VND

Since all members in the station are new so they do not really receive any compensation. However, editors from other magazines can join us for the same salary but we will give out bonus to employees at the end of the year after review of their work. The amount of bonus will vary according to the revenue we generate in the year or the quality of work the employee produces.

Board of directors philosophy We plan to keep the station a small size organization to promote creativities, ideas and innovation. We also want to keep a flat structure and decentralized strategies to create a warm and easy feeling environment. Managerial Skills and Know How Assessment for Magazine industry Competency Inventory Rank Though Some No Knowledge Knowledge knowledge or and and Experience Experience Experience (New (Well done) (So so) Ground) Marketing Market research and 1 Evaluation Market Planning 1 Product Pricing 1 Sales Management 2 Direct Selling Direct Mail/Catalogue Selling Telemarketing Customer Service Distribution Management 2 3 3 2 1

Importance (1-3 years) Now Now Now After one year After year After 3 years After 3 years Now Now

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Product Management New Product Planning Operations/production Manufacturing management Inventory control Cost analysis and Control Quality control Production Scheduling and Flow Purchasing Job evaluation Finance Accounting Capital Budgeting Cash flow management Credit and Collection Management Short term Financing Public and Private Offering Skills Administration Problem solving Communications Planning Decision making Project management Negotiating Personnel Administration Management Information system Computer Interpersonal team Leadership/Vision/Influ ence Helping Feedback Conflict management Teamwork and people

1 3 2 2 3 2 2 1 1 1 1 3 3 1 1 3 2 1 1 2 1 2 2 1 2 2 1 2 1

Now After 3 years Now Now After 3 years Now Now Now After 4 months Now Now 3 years 3 years Now Now 3 years Now Now After 4 months Now Now Now Now Now

Now 2 years Now 2 years Now

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management Law Corporations Contract Taxes Securities Patents and proprietary rights Real estate Bankruptcy Unique skills

2 1 3 3 1 3 3 1

1 year Now Now > 3 years Now 2 years Now

IX. OVERALL SCHEDULE

X.

CRITICAL RISKS, PROBLEMS AND ASSUMPTIONS

Environmental factors

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Internally, we do not have experience in publishing attractive magainze like " student flower" magazine which has highest market share at the moment. It is possible that we may have weak logistics systems, content is not attractive enough and marketing strategy does not appeal customers. Externally, It is difficult for the customers to reach , not many customers are willing to buy and we can't control the market fluctuations: e.g. more competitors enter the market Sales projections not achieved The market's size has been increasing rapidly. One of the main reasons is magazine industry has favorable incentives for Govermental organizations where they can publish any new magazine. Therefore, it is likely that our company will lose market share and our acutal sales volume will be less than the volumes estimated. The continue of stable price Magazine industry is considered the most stable price. While costs generating to a magazine such as reporters payment, stationery stuff, salary for employees are increasing parallel with high rate of inflation in Vietnam nowadays. With interface of these factors, net profit is shrinking dramatically Long lead times encounted in the publishing process Several tasks should be finished successfully before publishing magazine. The execution of first phase of our planned entry strategy depends on the completion of the following key elements: reporters, photographer. There are many mistakes during this period which bring the prevention to publishing e.g. it is a need of more time to gather and analyse information or information/photos Writing and taking photographs 1 day to reorganize information 3 day to type and correct mistakes 1 day to publish 3 days to deliver Bill 15 days 15 days
8 days

collect

23 days are not attractive to readers. It is estimated that the elapsed time for writing articles and other tasks before editing is 23 days. A buffer of 7 days remains in the event of publishing delay.

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XI. Financial plan

BEP calculation
TVC TC Break-even price $0,75 $0,59 $0,53 $0,52 $0,50 Total sales 2,44140 6 4,88281 3 9,76562 5 19,5312 5 39,0625 78,125 156,25 312,5 625 1250 2500 5000 10000 10637,7 9 11316,2 7 12038,0 1 12805,7 9 13622,5 4 14491,3 8 15415,6 3 16398,8 3 17444,7 4 18557,3 6 19740,9 3 21000 Growt h 2,4414 1 2,4414 1 4,8828 1 9,7656 3 19,531 3 39,062 5 78,125 156,25 312,5 625 1250 2500 5000 637,79 5 678,47 3 721,74 6 767,77 8 816,74 7 868,83 8 924,25 2 983,20 1 1045,9 1 1112,6 2 1183,5 8 1259,0 BEPu 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4 02 15249,4

10000 21000 35000 45000 58000

2,441406 1,063779 15249,4 6,82465 1,043488 1,021164

$4 725,00 $9 675,00 $15 975,00 $20 475,00 $26 325,00

$7 459,00 $12 409,00 $18 709,00 $23 209,00 $29 059,00

1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4 2

-minimal sales in first month -average monthly growth in second year of operations -break even point in sales -months in second year required to achieve break-even -average monthly growth in third year of operations -average monthly growth in fourth year of operations

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02

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