1 Executive Summary
HD Oceanography is an ocean modelling company dedicated to create and deliver software, codes and models for a wide range of clients in the marine industry.
HD Oceanography, founded by Michael Hart-Davis and Tanja Hanekom, would target the lucrative ocean modelling services market. Michael Hart-Davis and Tanja Hanekom have considerable experience in hands-on operation as well as establishing ocean modelling services. The HD Oceanography team comprise of leading marine and IT experts. Our company has obtained a licence to set up an ocean modelling company in South Africa and to expand our services through the African region.
HD Oceanography plans to undertake close to 15 projects in our first year of operations and growing to undertake close to 36 projects by the fifth year of operations, as we will have expanded after the third year of operations. Our main customers would be oil and gas companies, scientists, research companies, wave forecasters, shipping industries, the government, and other related marine companies/ industries.
HD Oceanography would differentiate itself from competition by incorporating services that are excellent in consistently exceeding the existing industry standards for customer services. Our team would be hired for their superior technical experience, innovative thinking, excellent work ethic, as well as containing customer-centric attitudes. HD Oceanography has excellent experience in ocean modelling considering the marine industry. We are also intimately familiar with customers' needs in our chosen market, including their needs for specific codes, software and models.
Our company would invest into highly developed IT systems to bring the best available predictive and ocean modelling technologies to our customers.
HD Oceanography would be set up in Cape Town, South Africa. HD Oceanography will have a soft launch in the third quarter of 2016 and will be fully operational by the first quarter of 2017. Our services would be provided as individual project services, or as long-term contracts. In the near future, HD Oceanography would partner with international companies and/or clients in the ocean modelling industry to extend our reach globally and also to benefit from being associated with a recognised global brand. Strategic partnerships would also provide HD Oceanography to provide niche services to customers at any location.
HD Oceanography revenues in the first year are expected to be R4 985 800. Revenues are expected to grow from R5 770 800 in the second year to R6 070 800 in the third year. Our company would be profitable from the very first year of operation, and margins would improve further as it grows and finds internal proficiencies.
HD Oceanography has identified a profitable market in ocean modelling to target. Our exceptional capabilities to efficiently operate an ocean modelling company, as well as provide excellent customer services uniquely positions our company to be a successful, fast growing organisation.'
2 General Company Description
HD Oceanography is designed as an ocean modelling company that incorporates scientists and IT developers to create software, codes and models for a wide range of clients. Ocean modelling creates a visual representation of several ocean parameters that allow for the further understanding of the ocean and helps to forecast certain ocean conditions. These models are created for scientific research, oil and gas companies, harbours, shipping, pollution tracking, weather forecasting and wave forecasting. The increasing importance of understanding the ocean and the impacts that certain parameters have on the ocean has resulted in an increased demand for ocean modellers.
This company was started as a partnership between Tanja Hanekom and Michael Hart-Davis that combines our expertise in oceanography and ocean modelling. It is this combination that forms the basis of the entire company, with the company being divided into three separate departments (codes, models and software). Each department has a single team, initially, that is made up of a project leader, an oceanographer, and two IT developers. These teams work together in order to create the software, codes and models for each specific project that is provided by each client. It is important that the teams comprise of an oceanographer as each project will be area or site-specific and will require knowledge about the specific ocean parameters. The project leader manages the team and will have an oceanographic background that can provide assistance to his or her team members. The project leader and the oceanographer will both do the required research on the area of study and any activities that will have an impact on the services that are being produced. The IT developers provide the specific coding expertise that is required to develop models. The combination of these team members provide a great assortment of coding and ocean knowledge, that allows for a higher quality and more accurate service/product to be produced.
Having a background in the IT industry and in the oceanographic industry, we assessed the market and have seen that the modelling industry is growing. However, there are no companies that incorporate IT developers and oceanographers in order to provide these services. The expertise learnt by IT developers makes it more convenient for them to code and develop specific models and software required by certain clients.
HD Oceanography will market their service to oil and gas companies, scientists, research companies, wave forecasters, shipping industries and the government. The expertise, the high standard of work and the confidentiality that the company works under will entice clients towards HD Oceanography. Due to the fact that the market is rapidly expanding, several competing clients in the oil, shipping and research industry will want to work with companies, such as ours, that provide a good service that caters for several different aspects of the ocean.
As HD Oceanography, it is important that our company maintains a high standard of work and operates at a good pace. Being perfectionists, we want our clients to be more than satisfied with the work that we give them so that we can leave a positive impression on them and entice them to work with us in the future. We want to contribute to the further understanding of the ocean so that we can further understand the many physical, biological and chemical processes and contribute in a positive way to saving of the ocean, as well as understand one of the most progressing processes globally, climate change.
Our goal is to become the leading ocean modelling company in South Africa and to eventually expand into the international market. Our company also aims to build strong relationships with research companies within South Africa and African regions in order to build partnerships that will aid in the fight against climate change and try to save the ocean, as well as gaining knowledge from it.
3 Products and Services
This company, through its employed staff and different teams, will provide codes and software that can be used to create ocean models that cater for the needs of specific clients. HD Oceanography also provides models for clients if that is requested. Clients of HD Oceanography will receive the highest quality of products and services from staff that act at high levels of professionalism and that are willing to assist the clients as far possible. Each member of staff is qualified in their specific field of studies from which their expertise stems.
The following services and products are provided by HD Oceanography:
3.1 Codes: These will be developed for clients to input their own data in order to produce a model. This is focused around work that is confidential or private and where the clients do not want to share their data with anyone. This can also be developed for clients that want to reuse the codes at a later date. These codes are used by scientists and ocean modellers who want to use the codes to create their own models for their own projects. These codes will be created to measure certain ocean parameters such as salinity, currents, temperature, and so forth.
3.2 Software: The software will be created for projects that will create models for clients on a regular basis (weekly, bi-weekly or daily). This can be used by companies such as surf forecasters and weather forecasters. This software will be created so that clients can simply put in their data in an input function and then it will create models for the clients. This will be one of the toughest projects undertaken by the teams and will require greater time and effort by the staff in order to produce the software.
3.3 Models: Models will be created for clients in order to show their desired oceanic property. These models will be both 3D and 2D depending on the clients' wishes. Models will create codes and use the data given by clients and thus create models that will fulfil clients' specifications and then send the models to the clients. The data used to create the models will not be distributed or used in any other form but will only be used in the specific project for the specific client. This product will be aimed to serve oil companies, shipping companies, scientific institutions, harbours and the government.
Unlike other ocean modelling companies, we do not only provide models but also, provide the software and codes for clients. Furthermore, we produce these products that illustrate the physical, chemical and biological oceanographic parameters and do not only focus on one aspect. This allows us to have a greater client base compared to that of other oceanographic companies.
The pricing of the software, codes and models is all project based, therefore a set price for these products is not set. However, based on these different products an hourly rate has been given that takes into account the difficulty of the work and the effort required to produce the product. The price list is as follows:
Table 1: The illustration of initial hourly rates of the products being produced by HD Oceanography.
Products/ Services Codes Software Models
Hourly Rate R 625,00 R 937,50 R 781,25
This product pricing is based on the assessment of the market and the amount of effort that is required by the teams to produce the product and services. Further contributions to the costing of the products was given by researching both IT companies (Korbitec and EOH) and ocean modelling companies (CSIR) and deriving the costs that we can charge for our products. Another benefit of HD Oceanography is that we have assessed the costs of products developed by the above-mentioned companies and we have decreased the prices of our products. This cost is the cost per hour for the entire team and not for each member of the team. Attached in the appendix is an illustration of the types of models and software that will be created by HD Oceanography.
4 Operational Plan
HD Oceanography plans to be fully operational by the third quarter of 2016, with projects being taken on from the 1st of July 2016. HD Oceanography plans to set up its offices in Black River Business Park, in Cape Town, South Africa. The premises will be rented at an approximate annual cost of R195 000. HD Oceanography will be able to cater for clients within Cape Town but will be looking to expand into parts of the Africa region as the company grows.
The actual location of the company will be divided into six different areas. There will be a management area (containing the offices of Tanja Hanekom and Michael Hart-Davis), a kitchen area for staff to have lunch and tea/coffee, an administration section (containing admin staff and in-house legal counsel) and three different rooms for each team (models, software and codes). The company will also contain a reception area and a storage room which will house the cleaning and maintenance equipment as well as any additional office supplies. Each department room will be made up of four desks and four chairs as well as four sets of computer equipment (desktops and related equipment). The company will also have a boardroom where meetings can occur.
HD Oceanography has partnered up with several universities and companies locally that require ocean modelling and have agreed to use HD Oceanography in the next five years. The following universities and companies are the University of Cape Town, SANCOR, Lwandle Technologies, Cape Peninsula University of Technology, University of the Western Cape and Metoceans. These major oceanographic companies and universities have helped to grow HD Oceanography itself and will help the company start up. Furthermore, HD Oceanography has developed relationships with several international companies and universities and have agreed to do projects after three years. These companies include Scripps Oceanographic Institute, Woods Hole Oceanographic Institute, Fight for the Reef Australia and the University of Southampton.
In order to allow the company to work at maximum efficiency, the company will be divided into three different departments. As mentioned above, these departments are the coding, modelling and software developing departments. These departments will, initially, be made up of one team that will focus on the development of the certain products. In the future, HD Oceanography will expand to incorporate more teams under each department to allow for more projects to be taken on by the company. Each product that is developed by HD Oceanography requires certain software that will be used by the teams. The work brought into HD Oceanography by the partnered companies and any other companies that would like to use this company, will be distributed by the certain requirements of the companies.
Each team will consist of a project leader, who is responsible to interact with the client and the members of the team in order to ensure that the clients' needs are satisfied. The project leader is also responsible to make sure that the project is completed within the required due date and to communicate with the management about any problems with the project or members of the team. There will be weekly meetings with the project leaders and management in order to sort out the problems with projects and so that management can monitor the process of the projects. This further ensures the high standard and quality of work of the entire company.
4.1 Corporate Structure
Figure 1: An illustration of the corporate structure of HD Oceanography.
4.2 Personnel Plan - Yearly
Year 1 2 3
Owners R 312 000 R 409 200 R 447 600
Project Leaders R 558 000 R 613 800 R 675 180
Scientists R 558 000 R 613 800 R 675 180
IT Developers R 1 116 000 R 1 227 600 R 1 350 360
Secretory R 148 800 R 163 680 R 180 048
Totals R 2 692 801 R 3 028 082 R 3 328 371
4.3 Numbers of Personnel
Year 1 2 3
Owners 2 2 2
Project Leader 3 3 3
Scientist 3 3 3
IT Developers 6 6 6
Secretory 1 1 1
Totals 15 15 15
In order for HD Oceanography to become successful, certain resources are required. These resources include:
- Human resources (e.g. labour)
- Financial resources
- Office furniture (e.g. desks; chairs)
- Computers and related equipment
- Additional office appliances (e.g. cleaning equipment; coffee machine; water dispensers)
The human resources are the main resources of our company, as it focuses on how we plan to manage our employees, as well as focuses on our short-term and long-term plans for employee recruitment, training, and retention.
HD Oceanography and our staff strive to have the necessary balance of skills, drive and experience to enable our business to continuously improve and grow, and thus succeed.
6 Marketing Plan
6.1 Market Research
HD Oceanography has done considerable market research to compare and improve our own service offerings list and prices comparing to that of our competitors in the same market. HD Oceanography has obtained quotes directly from other companies in the same market industry. In addition, publicly available sources of information like corporate websites, industry association sources and websites have been used to come up with comparisons of service offerings and prices.
6.2 Economics of the Industry
The ocean modelling industry typically has high capital costs. Special programmes and experienced staff are required to provide high standard products and services.
Customer acceptance and brand recognition is an important factor and customers prefer to stick to known brand names for services while trying out new companies. HD Oceanography seeks to accommodate these customer behaviours in its plans by focusing on other companies as well.
6.3 Product/ Service
6.3.1 Features and Benefits
HD Oceanography offers our customers all the benefits of outsourcing ocean modelling services to a specialised ocean modelling service provider. Customers do not need to spend management time and energy on hiring, training and retaining staff for these services. Contract staffing allows corporate to vary support staff strength in line with the variations in demand from their own customers.
HD Oceanography targets all members in the marine industry, irrespective of their nature of business. These include:
- oil and gas companies
- research companies
- wave forecasters
- shipping industries
- the government
- other related companies/ industries
The industry HD Oceanography operates in and our company's need to be associated with an internationally known brand creates a unique set of circumstances where some of our strategic partners could also be our competitors. Ocean modelling services and companies can be categorised as large global providers, mid-size and regional providers, and small regional providers. As HD Oceanography is more focused towards mid-size and regional providers, we will only focus this category.
Mid-size and regional providers are considerably smaller in size and typically focus on providing services within their immediate region of operations. They are usually not yet a global recognised brand but are strong within their region to be able to attract customers. This applies to our company, HD Oceanography, and we are aiming to grow towards being a large global provider in the future.
6.6 Competitive Positioning
HD Oceanography see itself different from our competitors for the wide range of services we provide and for the strength of our presence in South Africa and Africa region. The larger global companies have a wider range of services but have a much weaker local presence.'
HD Oceanography's marketing strategy will focus on establishing and growing long-term relationships with customers. In the initial years, HD Oceanography will rely upon the network of contacts of its founders and senior management to grow our company's business. As HD Oceanography's brand gets established and recognised by its customers, we would benefit from its investments in advertising and public relations.
HD Oceanography will use a relationship approach as the mainstay of its sales and marketing strategies. The management team's network of contacts and references will be leveraged to provide HD Oceanography with business leads.
In addition, press releases, advertisements in relevant magazines and newspapers, as well as our developed website will reach out to the wider customer base. Interested customers will be provided with brochures with detailed descriptions of HD Oceanography's services and the benefits customers would get from using our services.
HD Oceanography will also maintain a very visible presence at a variety of marine related talks, as well as at shows conducted by various marine associations.
HD Oceanography has done a detailed analysis of the pricing of its services provided and it was conducted through thorough research on its competitors' pricings. Based on this analysis, we have arrived at a pricing that is competitive, yet supports profitable growth for our company.
We seek to benefit from our low overheads and the advantage of being based within the region to offer lower prices as compared to global companies. A fuller range, wider reach and superior quality of our services, in addition to our competitors' pricings, would position us as providing better value to our customers as compared to our other local competitors.
We would be able to provide our customers who enter into long-term contracts a flat fee-based pricing, with no hassles of detailed billing and reconciliation.
6.10 Proposed Location
HD Oceanography proposes to set up its first ocean modelling company in Black River Business Park, Cape Town, South Africa. HD Oceanography's representatives will also staff the main busy stations for customers.
6.11 Sales forecast
HD Oceanography will derive its revenues from individual project services, as well as long-term retainer contracts. Individual project services will be individual services requested by first time or new clients who are interesting in trying out our company's services. Long term contracts will be established over time as our brand and credibility is developed in the market and region.
It is thus expected that in the first year the larger proportion of revenues will be achieved from individual project services, and then the rest from long term retainer contracts. As our company's quality of services, as well as the HD Oceanography brand is recognised by our customers, we expect that more long-term contracts will be signed.
7 Financial Plan
7.1 Start-Up Costs
Sources of Capital
Owners' Investment (name and percent ownership)
Partner A (50 %) R 500 000,00
Partner B (50 %) R 500 000,00
Total Investment R 1 000 000,00
Bank 1 R 1 000 000,00
Total Bank Loans R 1 000 000,00
Personal Bond Partner A R 150 000,00
Personal Bond Partner B R 150 000,00
Total Other Loans R 300 000,00
Deposit R 15 000,00
Remodelling R 5 000,00
Total Buildings/Real Estate R 20 000,00
Capital Equipment List
Furniture R 44 400,00
Equipment R 231 500,00
Fixtures R 2 500,00
Vehicle R 160 000,00
Total Capital Equipment R 438 400,00
Location and Admin Expenses
Rental R 15 000,00
Legal and accounting fees R 8 000,00
Prepaid insurance R 7 500,00
Pre-opening salaries R 87 000,00
Total Location and Admin Expenses R 117 500,00
Advertising and Promotional Expenses
Advertising R 2 000,00
Signage R 3 000,00
Printing R 2 000,00
Travel/entertainment R 10 000,00
Total Advertising/Promotional Expenses R 17 000,00
Members Compensation R 37 000,00
Software R 100 000,00
Total Other Expenses R 137 000,00
Reserve for Contingencies R 300 000,00
Working Capital R 600 000,00
Sources of Capital
Owners' and other investments R 1 000 000,00
Bank loans R 1 000 000,00
Total Source of Funds R 2 000 000,00
Buildings/real estate R 20 000,00
Capital equipment R 438 400,00
Location/administration expenses R 117 500,00
Advertising/promotional expenses R 17 000,00
Other expenses R 137 000,00
Contingency fund R 300 000,00
Working capital R 600 000,00
Total Start-up Expenses R 1 629 900,00
7.2 Partnership Agreement
Owners Percentage Ownership
Michael Hart-Davis 50 %
Tanja Hanekom 50 %
7.3 Breakeven Analysis
Figure 2: A comparison of the mean monthly and yearly revenue of HD Oceanography.
7.4 Profit and Loss Projection
Figure 3: A profit and loss projection over three years.
8 Risk Analysis
Identifying and management of risks are critical to the success of our business. Therefore, the risks are identified and addressed as follows:
Operational risks include a range of threats from loss of key personnel, settlement failure, and compliance failure, as well as system failure and building damage. HD Oceanography aims to ensure integrity and quality of the operations using a variety of tools including audit, recruitment policies, system controls, and business continuity planning.
The financial risks are closely associated with the operational risks, having a chain reaction in the company. Therefore, a financial advisor is hired to address the related issues that also includes the market, liquidity, and credit risks.
Marketing risks include all the activities that help coordinate production with consumer demand, the market developing differently than expected, as well as failure to not reach the target market sufficiently and running a successful business. HD Oceanography aims to address these through investing time, money and resources in improving our marketing strategies and keeping up with the development of the market on a regular basis.
Competitive risks include international companies and other companies, as well as competing with the products and services in the ocean modelling industry or encountering a situation where competitors could mimic our product. Therefore, continuous research will be done to keep up with the growing industry and to keep on improving the products and services produced. Furthermore, our products and services will be protected through trademarks and copyrights.
8.1 SWOT Analysis
This section analysis the Strengths, Weaknesses, Opportunities and Threats for HD Oceanography in our chosen market industry of providing ocean modelling services to target customers.
While HD Oceanography has several advantages in its business model currently, HD Oceanography is also realistic enough to acknowledge its weaknesses and threats that the ever changing business environment is likely to expose.
The management team of HD Oceanography has a very good understanding of the target market. A formidable barrier to entry in this industry is obtaining the required permissions and a licence to set up an ocean modelling and IT operating company. HD Oceanography has very quickly established its credibility with the regulatory authorities and has obtained certifications necessary to set up the company.
HD Oceanography will need to overcome the challenges all new companies face. We currently do not have an existing track record of past performance and a customer base. It is also not yet a well-known brand in the industry. HD Oceanography seeks to overcome these weaknesses by partnering with established international companies.
HD Oceanography's services would primarily be available in South Africa and Africa regions. For services outside of this region, HD Oceanography would rely on other companies providing similar services. We seek to go international with our services in the near future.
South Africa and Africa regions have limited numbers of local providers of ocean modelling services. The companies that exist have very limited ranges of services and reach. HD Oceanography has thus access to largely unexploited markets that we seek to tap through a fuller range, broader reach and superior quality of services.
Through the personal network of contacts that the management team will bring, HD Oceanography has exclusive access to several South Africa and Africa region customers. Being a local company in South Africa gives HD Oceanography an advantage over the larger global companies.
South Africa has attracted a lot of interest from several multinational companies in the ocean modelling industry. HD Oceanography faces the threat of the larger global companies, as well as the already well-established South African companies in the ocean modelling industry to enter Africa with customised services and pricing getting into direct competition with these other companies.
Table 2: SWOT Analysis of HD Oceanography summarised.
- Right products and services, quality
- Experienced and well-trained staff
- Political support
- Market experience
- Strong leadership
- Competitive advantages Weaknesses
- Not being able to supply end-users abroad
- Complex project and company
- Stretched staff resources
- Cash flow, start-up cash-drain
- Could develop new product and services
- Profit margins will be good
- Could extend to overseas
- Can surprise competitors
- Boost business's public image more
- Competitors' vulnerabilities
- Information and research
- Could expand the business in the area,
as well as in the industry itself Threats
- Market demand decline
- Possible negative publicity
- Vulnerable to reactive attack by
- Legislative and political impacts
- Resistance to change
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