MB0036 - Strategic Management & Business Policy Assignment Set-1

MB0036 – Strategic Management & Business
Policy
Assignment Set- 1
1. Explain the different circumstances under which a

suitable growth strategy should be selected by any company
to improve its performance (i.e., intensive, integrative or
diversification growth). You may select an example of your
choice to substantiate your views.
Answer: Strategies to Improve Sales

There are three alternatives to improve the sales performance of a
business unit, to fill the gap between actual sales and targeted
sales:
a) Intensive growth
b) Integrative growth
c) Diversification growth
a) Intensive Growth:
It refers to the process of identifying opportunities to achieve further
growth within the company’s current businesses. To achieve
intensive growth, the management should first evaluate the
available opportunities to improve the performance of its existing
current businesses.
It may find three options:

• To penetrate into existing markets
• To develop new markets
• To develop new products
At times, it may be possible to gain more market share with the

current products in their current markets through a market
penetration strategy. For instance, SONY introduced TV sets with
Trinitron picture tubes into the market in 1996 priced at a premium
of Rs.10,000 and above over the market through a niche market
capture strategy. They gradually lowered the prices to market
levels. However, it also simultaneously launched higher-end
products (high-technology products) to maintain its global image as
a technology leader. By lowering the prices of TVs with Trinitron
picture tubes, the company could successfully penetrate into the
markets to add new customers to its customer base.
Market Development Strategy is to explore the possibility to find or

develop new markets for its current products (from the northern
region to the eastern region etc.). Most multinational companies
MB0036 – Strategic Management and Business Policy -1-

have been entering Indian markets with this strategy, to develop
markets globally. However, care should be taken to ensure that
these new markets are not low density or saturated markets, which
could lead to price pressures.
Product Development Strategy involves consideration of new

products of potential interest to its current markets (e.g.
Gramaphone Records to Musical Productions to CDs)– as part of a
Diversification strategy.
Study the following example to understand what Product

Development Strategy is.
MICROSOFT’s New Strategy

It is called PC-plus. It has three elements:
a) Providing computer power to the most commonly used devices
such as cell phone, personal computer, toaster oven, dishwasher,
refrigerator, washing machines and so on.
b) Developing software to allow these devices to communicate.
c) Investing heavily to help build wireless and high-speed internet
access throughout the world to link it all together.
Microsoft envisions a home where everyday appliances and

electronics are smart. According to Bill Gates, ‘In the near future,
PC-based networks will help us control many of our domestic
matters with devices that cost no more than $ 100 each ‘.
It is also said at Microsoft that VCRs can be programmed via e-mail,

laundry washers can be designed to send an instant message to the
home computer when the load is done and refrigerators can be
made to send an e-mail when there’s no more milk. Microsoft plans
to give these appliances ‘brains‘ and provide them the means to
talk to each other through their Windows CE Operating System.
b) Integrative Growth:
It refers to the process of identifying opportunities to develop or
acquire businesses that are related to the company’s current
businesses. More often, the business processes have to be
integrated for linear growth in the profits. The corporate plan may
be designed to undertake backward, forward or horizontal
integration within the industry.
If a company operating in music systems takes over the

manufacturing business of its plastic material supplier, it would be
able to gain more control over the market or generate more profit.
(Backward Integration)
Alternatively, if this company acquires some of its most profitably

operating intermediaries such as wholesalers or retailers, it is

forward integration. If the company legally takes over or acquires
the business of any of its leading competitors, it is called horizontal
integration (however, if this competitor is weak, it might be counter-
productive due to dilution of brand image).
c) Diversification Growth:
It refers to the process of identifying opportunities to develop or
acquire businesses that are not related to the company’s current
businesses. This makes sense when such opportunities outside the
present businesses are identified with attractive returns and that
industry has business strengths to be successful. In most cases, this
is planned with new products that have technological or marketing
synergies with existing businesses to cater to a different group of
customers (Concentric Diversification).
A printing press might shift over to offset printing with computerised

content generation to appeal to higher-end customers and also add
new application areas ( Horizontal Diversification ) – or even sell
stationery.
Alternatively, the company might choose new businesses that have

nothing to do with the current technology, products or markets
(Conglomerate Diversification).
The classic examples for this would be engineering and textile firms
setting up software development centres or Call Centres with new
service clients.
Situation Analysis
Sales Improvement Strategies:
a) A supplier of computer stationery invests in a computer
stationery manufacturing unit.
b) A vendor supplying engine boxes to Maruti decides to supply the
same with modifications to Hyundai.
c) A company dealing in computer floppies plans to set up a
Software Technology Park.
2. What are the components of a good Business Plan and

briefly explain the importance of each.
Answer: The format of a Business Plan is something that has been

developed and refined over the years and is something that should
not be changed. Like a good recipe, a business plan needs to
include certain ingredients to make it work.
When you create a business plan, don't attempt to recreate its

format. Those reviewing this type of document have expectations
you must meet. If they do not see those crucial decision making

components they’ll see no reason to proceed with their review of
your business plan, no matter how great your business idea.
Executive Summary Section

Every business plan must begin with an Executive Summary section.
A well-written Executive Summary is critical to the success of the
rest of the document. Here is where you need to capture the
attention of your audience so that they will be compelled to read on.
Remember, it's a summary, so each and every word must be
carefully selected and presented.
Use the Executive Summary section of your business plan to

accurately describe the nature of your business venture including
the need that you plan to fill. Show the reasons why people need
your product or service. Show this by including a brief analysis of
the characteristics of your potential market.
Describe the organization of your business including your

management team. Also, briefly describe your sales and marketing
plan or approach. Finally include the numbers that those reviewing
your business plan want to see - the amount of capital you seek, the
carefully calculated sales projections and your plan to repay the
loan.
If you've captured your audience so far they'll read on. Otherwise,

they'll close the document and add your business plan to the heap
of other rejected ideas.
Devote the balance of your business plan to providing details of the

items outlined in the Executive Summary.
The Business Section

Be sure to include the legal name, physical address and detailed
description of the nature of your business. It's important to keep the
description easy to read using common terminology. Never assume
that those reading your business plan have the same level of
technical knowledge that you do. Describe how you plan to better
serve your market than your competition is currently doing.
Market Analysis Section

An analysis of the market shows that you have done your
homework. This section is basically a summary of your Marketing
Plan. It needs to show the demand for your product or service, the
proposed market, trends within the industry, a description of your
pricing plan and packaging and a description of your company
policies.
Financing Section

The Financing section must show that you are as committed to your
business venture as you expect those reading your business plan to
be. Show the amount of personal funds you are contributing and
their source. Also include the amount of capital you need and your
plan to repay this debt. Include all pertinent financial worksheets in
this section: annual income projections, a break-even worksheet,
projected cash flow statements and a balance sheet.
Management Section
Outline your organizational structure and management team here.
Include the legal structure of your business whether it is a
partnership, corporation or limited liability corporation. Include
resumes and biographies of key players on your management team.
Show staffing projection data for the next few years.
By now you're probably thinking that you don't need Business Plan
just yet. Well you do, and there is business plan building software
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3. You wish to start a new venture to manufacture auto

components. Explain different stages in the process of
starting this new business.
Answer: Every business starts out as an idea. This idea usually

involves the invention of a new product, or revolves around a better
way of making and marketing an existing one. While many would
argue that the idea stage is not a stage at all, it is actually a turning
point, as business adviser Mike Pendrith points out. After this, you
as a business builder must refine this idea into a money-making
reality. Here in this case supposing we are to start a new venture of
manufacturing auto components and also to market them. We will
see here in the following paragraphs different stages of achieving
the same goal.
1. Idea Researching
In this stage, you are researching your idea. The object of your
research is to find out who is marketing the same product or
service in your area, and how successful the marketer has
been. You can accomplish this by a Google search on the
Internet, launching a test-marketing campaign, or conducting
surveys. Also, you are attempting to find what the level of
interest is in the products (or services) you wish to market.

Here as the main goal is to start a company that
manufactures the auto components, we are to make a
research on all the auto companies which are procuring the
spares from the outside vendors. And also the competitors
who are all marketing that, their existence and also how
successful they are.
As part of the initial research process, it is important to

consider the legal requirements of selling your product or
service. According to the Biz Ed website, examine the legal
ramifications of your business. Know the tax laws governing
your business. If insurance is a requirement, prepare to
budget for it. Also, be aware of any safety laws governing you
as an employer. Hence we are also to make a research on the
feasible area where we can start our organization and licenses
that we need to take keeping in mind the environmental
factors as well.
2. Business Plan Formulation

You must write a business plan. As Pendrith points out, this is
crucial if you want funding, such as a small business loan or
grant, or if you wish to lease a building. At this stage, Pendrith
advises, you need to consult with an attorney or business
adviser for assistance.
In the business plan you typically include following heads:
i) Executive Summary
ii) Company and Product Description
iii) Market Description
iv) Equipment and Materials
v) Operations
vi) Management and Ownership
vii) Financial Information and Start-Up Timeline
viii) Risks and Their Mitigation
3. Financial Planning
Financial planning involves thinking about the financial costs
of starting and maintaining your business. According to the Biz
Ed website, you should consider such issues as the costs of
running the business; the prices you wish to charge your
customers; cash flow control; and how you wish to set up
financial reserves in case of an emergency or an event
causing significant loss to the business. This includes the
planning of whether to take any loans or make personal
investments in the company.
4. Advertising Campaign

Decide how you will market your product. Consider your
budget and your target audience. Make up business cards
with your logo on it, your name and the name of your
business. Make sure that they are of the most professional
quality. Utilizing print, the newspaper, the Internet, radio or TV
is also wise, considering, of course, the size of your
advertising budget.
Here in this case more than TV, a better advertising media will
be road side sign boards placed close to the auto companies
for getting the deals to manufacture their spares. As TV is
useful only to reach the common man and he is not our target
customer. Hence sign boards are the feasible solution and
also pamphlets circulated across the pioneers. This apart
personal marketing is much more suggested.
5. Preparing for Launch

Advertise for employees. This also requires adequate
planning. Think about what you look for in an employee. Be
specific about the requisite skills and experience you are
seeking. Then begin requesting resumes and setting up
interviews, making hiring decisions based on the standards
you have set. In this case we will be looking for a few
candidates in managerial position who must be good in
managing things apart from minimal technical knowledge.
Lower level people at the shopfloor people. They need to
have real time experience in the shop floor activities. The
employees apart, one needs to plan on the plant and
machinery as well.
Thus these are all the stages that I would consider performing if
incase I plan to start a manufacturing unit producing automobile
components.
4. Explain the process of due Diligence and why it is

necessary.
Answer: Due diligence

Of course, your commercial partner will need some reassurance
about the quality of the offer you are making to them. If you are
involved in licensing technology or seeking commercial support for
your research you are likely to hear of ‘due diligence.’ When a
future partner is considering whether or not to license technology,
to buy a share of patent rights, or to support your research, they will
need to satisfy themselves that it is a viable proposition. The
process of assessing the viability, risk, potential liabilities and
commercial prospects of a project is known as ‘due diligence.’
Indeed, if a potential partner seems not to be interested in this kind
of issues, it may actually raise questions about their commitment to

the project or the credibility of their business plan, particularly if the
relationship assumes some degree of risk and investment on their
part.
Generally, due diligence will involve assessing the overall

commercial operations, cash flow, assets and liabilities of a business
that is being purchased or otherwise financially supported. You
would think twice about purchasing a business if you found that it
was burdened with debts, or was about to be involved in difficult
litigation, or if there were doubts about whether it really owned its
assets. The same applies to a potential investment involving
intellectual property. For instance, a potential commercial partner
would not want to invest in patented technology only to find out
that patent renewal fees have not been paid and the patent has
lapsed, or to find out that the patent was being opposed by another
company, or to find that there is prior art available that calls into
question its validity. It may transpire that a student, a contractor or
a visiting researcher could actually be legally entitled to some or all
of the patent rights. Even a serious level of uncertainty or doubt
could be enough to deter a potential partner, especially if they have
run into this kind of difficulty before.
Due diligence may also involve searching for information about the
full range of IP rights that might impact on the relevant technology –
for instance, to check whether you have later filed patent
applications on improvements to the original patented technology,
that may limit the value of their investment in the original
technology. Other intellectual property rights – such as related trade
mark or design registrations, or key trade secrets or copyright
material (such as manuals or software) – may also need to be
identified or located, as these may also affect the commercial
partner’s interests in the technology. For example, they may be
unwilling to take out a licence for your patent without getting access
to the software you have developed for a related process. They may
want the right to use your trade mark in association with the
patented technology.
So in a due diligence process, your commercial partner may

undertake a range of checks and need various forms of information.
These may include:
• Checks on external records, such as patent registers and
patent databases, including foreign patents;
• Searches of patent databases for conflicting technology;
• Independent advice from patent attorneys on issues such as
patent ownership, patent validity and scope of patent claims;
• Checks on employment contracts, confidentiality
arrangements, and contracts with other parties that may
interfere with the exercise of IP rights;
• Details of the patent prosecution such as examiners’ reports
and other opinions;

• Details of any legal challenges to the patent, and the way the
proceedings were resolved;
• Checks on laboratory notebooks in the event that the validity
of US patents is of concern to the commercial partner (this
also provides reassurance as to claims of ownership of the
patent);
• Surveys of the activity of competitors and owners of
competing technology, and possibilities of conflict; and
• Analysis of freedom to operate issues.
In preparing to licence your technology, you should consider in

advance these kind of due diligence issues. If you can anticipate and
provide comprehensive answers to these questions, you will be able
more effectively to reassure your commercial partner, and you will
be in a stronger negotiating position in negotiating licence terms. It
should also speed up the licensing negotiations, and ultimately the
commercialization of your intellectual property.
5. Is Corporate Social Responsibility necessary and how does

it benefit a company and its shareholders?
Answer: Corporate social responsibility (CSR), also known as

corporate responsibility, corporate citizenship, responsible business,
sustainable responsible business (SRB), or corporate social performance, is a
form of corporate self-regulation integrated into a business model.
Ideally, CSR policy would function as a built-in, self-regulating mechanism
whereby business would monitor and ensure its support to law, ethical
standards, and international norms. Consequently, business would embrace
responsibility for the impact of its activities on the environment, consumers,
employees, communities, stakeholders and all other members of the public
sphere. Furthermore, CSR-focused businesses would proactively promote
the public interest by encouraging community growth and development, and
voluntarily eliminating practices that harm the public sphere, regardless of
legality. Essentially, CSR is the deliberate inclusion of public interest into
corporate decision-making, and the honoring of a triple bottom line:
people, planet, profit.
The practice of CSR is much debated and criticized. Proponents

argue that there is a strong business case for CSR, in that
corporations benefit in multiple ways by operating with a
perspective broader and longer than their own immediate, short-
term profits. Critics argue that CSR distracts from the fundamental
economic role of businesses; others argue that it is nothing more
than superficial window-dressing; others yet argue that it is an
attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations. Corporate Social Responsibility
has been redefined throughout the years. However, it essentially is
titled to aid to an organization's mission as well as a guide to what
the company stands for and will uphold to its consumers.

Development business ethics is one of the forms of applied ethics
that examines ethical principles and moral or ethical problems that
can arise in a business environment.
In the increasingly conscience-focused marketplaces of the 21st

century, the demand for more ethical business processes and
actions (known as ethicism) is increasing. Simultaneously, pressure
is applied on industry to improve business ethics through new public
initiatives and laws (e.g. higher UK road tax for higher-emission
vehicles).
Business ethics can be both a normative and a descriptive

discipline. As a corporate practice and a career specialization, the
field is primarily normative. In academia, descriptive approaches are
also taken. The range and quantity of business ethical issues
reflects the degree to which business is perceived to be at odds with
non-economic social values. Historically, interest in business ethics
accelerated dramatically during the 1980s and 1990s, both within
major corporations and within academia. For example, today most
major corporate websites lay emphasis on commitment to
promoting non-economic social values under a variety of headings
(e.g. ethics codes, social responsibility charters). In some cases,
corporations have re-branded their core values in the light of
business ethical considerations (e.g. BP's "beyond petroleum"
environmental tilt).
The term "CSR" came in to common use in the early 1970s, after
many multinational corporations formed, although it was seldom
abbreviated. The term stakeholder, meaning those on whom an
organization's activities have an impact, was used to describe
corporate owners beyond shareholders as a result of an influential
book by R Freeman in 1984.
ISO 26000 is the recognized international standard for CSR

(currently a Draft International Standard). Public sector
organizations (the United Nations for example) adhere to the triple
bottom line (TBL). It is widely accepted that CSR adheres to similar
principles but with no formal act of legislation. The UN has
developed the Principles for Responsible Investment as guidelines
for investing entities.
Potential business benefits

The scale and nature of the benefits of CSR for an organization can
vary depending on the nature of the enterprise, and are difficult to
quantify, though there is a large body of literature exhorting
business to adopt measures beyond financial ones (e.g., Deming's
Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes
found a correlation between social/environmental performance and
MB0036 – Strategic Management and Business Policy - 10 -

financial performance. However, businesses may not be looking at
short-run financial returns when developing their CSR strategy.
The definition of CSR used within an organization can vary from the
strict "stakeholder impacts" definition used by many CSR advocates
and will often include charitable efforts and volunteering. CSR may
be based within the human resources, business development or
public relations departments of an organization, or may be given a
separate unit reporting to the CEO or in some cases directly to the
board. Some companies may implement CSR-type values without a
clearly defined team or program.
The business case for CSR within a company will likely rest on one
or more of these arguments:
Human resources
A CSR program can be an aid to recruitment and retention,
particularly within the competitive graduate student market.
Potential recruits often ask about a firm's CSR policy during an
interview, and having a comprehensive policy can give an
advantage. CSR can also help improve the perception of a company
among its staff, particularly when staff can become involved
through payroll giving, fundraising activities or community
volunteering. See also Corporate Social Entrepreneurship, whereby
CSR can also be driven by employees' personal values, in addition to
the more obvious economic and governmental drivers.
Risk management
Managing risk is a central part of many corporate strategies.
Reputations that take decades to build up can be ruined in hours
through incidents such as corruption scandals or environmental
accidents. These can also draw unwanted attention from regulators,
courts, governments and media. Building a genuine culture of 'doing
the right thing' within a corporation can offset these risks.
Brand differentiation
In crowded marketplaces, companies strive for a unique selling
proposition that can separate them from the competition in the
minds of consumers. CSR can play a role in building customer
loyalty based on distinctive ethical values. Several major brands,
such as The Co-operative Group, The Body Shop and American
Apparel are built on ethical values. Business service organizations
can benefit too from building a reputation for integrity and best
practice.
License to operate

Corporations are keen to avoid interference in their business
through taxation or regulations. By taking substantive voluntary
steps, they can persuade governments and the wider public that
they are taking issues such as health and safety, diversity, or the
environment seriously as good corporate citizens with respect to
labour standards and impacts on the environment
Stakeholder priorities
Increasingly, corporations are motivated to become more socially
responsible because their most important stakeholders expect them
to understand and address the social and community issues that are
relevant to them. Understanding what causes are important to
employees is usually the first priority because of the many
interrelated business benefits that can be derived from increased
employee engagement (i.e. more loyalty, improved recruitment,
increased retention, higher productivity, and so on). Key external
stakeholders include customers, consumers, investors (particularly
institutional investors), communities in the areas where the
corporation operates its facilities, regulators, academics, and the
media.
6. Distinguish between a Financial Investor and a Strategic

Investor explaining the role they play in a Company. (10
marks).
Answer: In the not so distant past, there was little difference

between financial and strategic investors. Investors of all colors
sought to safeguard their investment by taking over as many
management functions as they could. Additionally, investments
were small and shareholders few. A firm resembled a household and
the number of people involved – in ownership and in management –
was correspondingly limited. People invested in industries they were
acquainted with first hand.
As markets grew, the scales of industrial production (and of service

provision) expanded. A single investor (or a small group of
investors) could no longer accommodate the needs even of a single
firm. As knowledge increased and specialization ensued – it was no
longer feasible or possible to micro-manage a firm one invested in.
Actually, separate businesses of money making and business
management emerged. An investor was expected to excel in
obtaining high yields on his capital – not in industrial management
or in marketing. A manager was expected to manage, not to be
capable of personally tackling the various and varying tasks of the
business that he managed.
Thus, two classes of investors emerged. One type supplied firms

with capital. The other type supplied them with know-how,

technology, management skills, marketing techniques, intellectual
property, clientele and a vision, a sense of direction.
In many cases, the strategic investor also provided the necessary

funding. But, more and more, a separation was maintained. Venture
capital and risk capital funds, for instance, are purely financial
investors. So are, to a growing extent, investment banks and other
financial institutions.
The financial investor represents the past. Its money is the result of
past - right and wrong - decisions. Its orientation is short term: an
"exit strategy" is sought as soon as feasible. For "exit strategy" read
quick profits. The financial investor is always on the lookout,
searching for willing buyers for his stake. The stock exchange is a
popular exit strategy. The financial investor has little interest in the
company's management. Optimally, his money buys for him not
only a good product and a good market, but also a good
management. But his interpretation of the rolls and functions of
"good management" are very different to that offered by the
strategic investor. The financial investor is satisfied with a
management team which maximizes value. The price of his shares
is the most important indication of success. This is "bottom line"
short termism which also characterizes operators in the capital
markets. Invested in so many ventures and companies, the financial
investor has no interest, nor the resources to get seriously involved
in any one of them. Micro-management is left to others - but, in
many cases, so is macro-management. The financial investor
participates in quarterly or annual general shareholders meetings.
This is the extent of its involvement.
The strategic investor, on the other hand, represents the real long
term accumulator of value. Paradoxically, it is the strategic investor
that has the greater influence on the value of the company's shares.
The quality of management, the rate of the introduction of new
products, the success or failure of marketing strategies, the level of
customer satisfaction, the education of the workforce - all depend
on the strategic investor. That there is a strong relationship
between the quality and decisions of the strategic investor and the
share price is small wonder. The strategic investor represents a
discounted future in the same manner that shares do. Indeed,
gradually, the balance between financial investors and strategic
investors is shifting in favour of the latter. People understand that
money is abundant and what is in short supply is good
management. Given the ability to create a brand, to generate
profits, to issue new products and to acquire new clients - money is
abundant.
These are the functions normally reserved to financial investors:

Financial Management
The financial investor is expected to take over the financial
management of the firm and to directly appoint the senior
management and, especially, the management echelons, which
directly deal with the finances of the firm.
1. To regulate, supervise and implement a timely, full and

accurate set of accounting books of the firm reflecting all its
activities in a manner commensurate with the relevant
legislation and regulation in the territories of operations of the
firm and with internal guidelines set from time to time by the
Board of Directors of the firm. This is usually achieved both
during a Due Diligence process and later, as financial
management is implemented.
2. To implement continuous financial audit and control systems
to monitor the performance of the firm, its flow of funds, the
adherence to the budget, the expenditures, the income, the
cost of sales and other budgetary items.
3. To timely, regularly and duly prepare and present to the Board
of Directors financial statements and reports as required by all
pertinent laws and regulations in the territories of the
operations of the firm and as deemed necessary and
demanded from time to time by the Board of Directors of the
Firm.
4. To comply with all reporting, accounting and audit
requirements imposed by the capital markets or regulatory
bodies of capital markets in which the securities of the firm
are traded or are about to be traded or otherwise listed.
5. To prepare and present for the approval of the Board of
Directors an annual budget, other budgets, financial plans,
business plans, feasibility studies, investment memoranda
and all other financial and business documents as may be
required from time to time by the Board of Directors of the
Firm.
6. To alert the Board of Directors and to warn it regarding any
irregularity, lack of compliance, lack of adherence, lacunas
and problems whether actual or potential concerning the
financial systems, the financial operations, the financing
plans, the accounting, the audits, the budgets and any other
matter of a financial nature or which could or does have a
financial implication.
7. To collaborate and coordinate the activities of outside
suppliers of financial services hired or contracted by the firm,
including accountants, auditors, financial consultants,
underwriters and brokers, the banking system and other
financial venues.
8. To maintain a working relationship and to develop additional
relationships with banks, financial institutions and capital
markets with the aim of securing the funds necessary for the

operations of the firm, the attainment of its development
plans and its investments.
9. To fully computerize all the above activities in a combined
hardware-software and communications system which will
integrate into the systems of other members of the group of
companies.
10. Otherwise, to initiate and engage in all manner of
activities, whether financial or of other nature, conducive to
the financial health, the growth prospects and the fulfillment
of investment plans of the firm to the best of his ability and
with the appropriate dedication of the time and efforts
required.
Collection and Credit Assessment

1. To construct and implement credit risk assessment tools,
questionnaires, quantitative methods, data gathering methods
and venues in order to properly evaluate and predict the
credit risk rating of a client, distributor, or supplier.
2. To constantly monitor and analyse the payment morale,
regularity, non-payment and non-performance events, etc. –
in order to determine the changes in the credit risk rating of
said factors.
3. To analyse receivables and collectibles on a regular and
timely basis.
4. To improve the collection methods in order to reduce the
amounts of arrears and overdue payments, or the average
period of such arrears and overdue payments.
5. To collaborate with legal institutions, law enforcement
agencies and private collection firms in assuring the timely
flow and payment of all due payments, arrears and overdue
payments and other collectibles.
6. To coordinate an educational campaign to ensure the
voluntary collaboration of the clients, distributors and other
debtors in the timely and orderly payment of their dues.
The strategic investor is, usually, put in charge of the following:
Project Planning and Project Management

The strategic investor is uniquely positioned to plan the technical
side of the project and to implement it. He is, therefore, put in
charge of:
1. The selection of infrastructure, equipment, raw materials,

industrial processes, etc.;
2. Negotiations and agreements with providers and suppliers;
3. Minimizing the costs of infrastructure by deploying proprietary
components and planning;
4. The provision of corporate guarantees and letters of comfort
to suppliers;

5. The planning and erecting of the various sites, structures,
buildings, premises, factories, etc.;
6. The planning and implementation of line connections,
computer network connections, protocols, solving issues of
compatibility (hardware and software, etc.);
7. Project planning, implementation and supervision.
Marketing and Sales

1. The presentation to the Board an annual plan of sales and
marketing including: market penetration targets, profiles of
potential social and economic categories of clients, sales
promotion methods, advertising campaigns, image, public
relations and other media campaigns. The strategic investor
also implements these plans or supervises their
implementation.
2. The strategic investor is usually possessed of a brandname
recognized in many countries. It is the market leaders in
certain territories. It has been providing goods and services to
users for a long period of time, reliably. This is an important
asset, which, if properly used, can attract users. The
enhancement of the brandname, its recognition and market
awareness, market penetration, co-branding, collaboration
with other suppliers – are all the responsibilities of the
strategic investor.
3. The dissemination of the product as a preferred choice among
vendors, distributors, individual users and businesses in the
territory.
4. Special events, sponsorships, collaboration with businesses.
5. The planning and implementation of incentive systems (e.g.,
points, vouchers).
6. The strategic investor usually organizes a distribution and
dealership network, a franchising network, or a sales network
(retail chains) including: training, pricing, pecuniary and
quality supervision, network control, inventory and accounting
controls, advertising, local marketing and sales promotion and
other network management functions.
7. The strategic investor is also in charge of "vision thinking":
new methods of operation, new marketing ploys, new market
niches, predicting the future trends and market needs, market
analyses and research, etc.
The strategic investor typically brings to the firm valuable

experience in marketing and sales. It has numerous off the shelf
marketing plans and drawer sales promotion campaigns. It
developed software and personnel capable of analysing any market
into effective niches and of creating the right media (image and PR),
advertising and sales promotion drives best suited for it. It has built
large databases with multi-year profiles of the purchasing patterns
and demographic data related to thousands of clients in many

countries. It owns libraries of material, images, sounds, paper
clippings, articles, PR and image materials, and proprietary
trademarks and brand names. Above all, it accumulated years of
marketing and sales promotion ideas which crystallized into a new
conception of the business.
Technology
1. The planning and implementation of new technological
systems up to their fully operational phase. The strategic
partner's engineers are available to plan, implement and
supervise all the stages of the technological side of the
business.
2. The planning and implementation of a fully operative
computer system (hardware, software, communication,
intranet) to deal with all the aspects of the structure and the
operation of the firm. The strategic investor puts at the
disposal of the firm proprietary software developed by it and
specifically tailored to the needs of companies operating in
the firm's market.
3. The encouragement of the development of in-house,
proprietary, technological solutions to the needs of the firm,
its clients and suppliers.
4. The planning and the execution of an integration program
with new technologies in the field, in collaboration with other
suppliers or market technological leaders.
Education and Training

The strategic investor is responsible to train all the personnel in the
firm: operators, customer services, distributors, vendors, sales
personnel. The training is conducted at its sole expense and
includes tours of its facilities abroad.
The entrepreneurs – who sought to introduce the two types of

investors, in the first place – are usually left with the following
functions:
Administration and Control

1. To structure the firm in an optimal manner, most conducive to
the conduct of its business and to present the new structure
for the Board's approval within 30 days from the date of the
GM's appointment.
2. To run the day to day business of the firm.
3. To oversee the personnel of the firm and to resolve all the
personnel issues.
4. To secure the unobstructed flow of relevant information and
the protection of confidential organization.
5. To represent the firm in its contacts, representations and
negotiations with other firms, authorities, or persons.

This is why entrepreneurs find it very hard to cohabitate with
investors of any kind. Entrepreneurs are excellent at identifying the
needs of the market and at introducing technological or service
solutions to satisfy such needs. But the very personality traits which
qualify them to become entrepreneurs – also hinder the future
development of their firms. Only the introduction of outside
investors can resolve the dilemma. Outside investors are not
emotionally involved. They may be less visionary – but also more
experienced.
They are more interested in business results than in dreams. And –
being well acquainted with entrepreneurs – they insist on having
unmitigated control of the business, for fear of losing all their
money. These things antagonize the entrepreneurs. They feel that
they are losing their creation to cold-hearted, mean spirited,
corporate predators. They rebel and prefer to remain small or even
to close shop than to give up their cherished freedoms. This is
where nine out of ten entrepreneurs fail - in knowing when to let go.

MB0036 – Strategic Management & Business
Policy
Assignment Set- 2
1. What is the purpose of a Business Plan? Explain the

features of the component of the Plan dealing with the
Company and its product description.
Answer: A good business plan will help attract necessary financing

by demonstrating the feasibility of your venture and the level of
thought and professionalism you bring to the task.
The first step in planning a new business venture is to establish

goals that you seek to achieve with the business. You can establish
these goals in a number of ways, but an inclusive and ordered
process like an organizational strategic planning session or a
comprehensive neighborhood planning process may be best. The
board of directors of your organization should review and approve
the goals, because these goals will influence the direction of the
organization and require the allocation of valuable staff and
financial resources. Your goals will serve as a filter to screen a wide
range of possible business opportunities. If you fail to establish clear
goals early in the process, your organization may spend substantial
time and resources pursuing potential business ventures that may
be financially viable but do not serve the mission of your
organization in other important ways. A liquor store on the corner
may be a clear money-maker; however, it may not be the retail to
assist your community desires.
The following are examples of goals you may seek to achieve

through the creation of a new business venture:
Revenue Generation – Your organization may hope to create a

business that will generate sufficient net income or profit to finance
other programs, activities or services provided by your organization.
Employment Creation – A new business venture may create job

opportunities for community residents or the constituency served by
your organization.
Neighborhood Development Strategy – A new business venture

might serve as an anchor to a deteriorating neighborhood
commercial area, attract additional businesses to the area and fill a
gap in existing retail services. You may need to find a use for a
vacant commercial property that blights a strategic area of your

neighborhood. Or your business might focus on the rehabilitation of
dilapidated single family homes in the community.
Whenever possible, goals should have quantifiable outcomes such
as “to generate a minimum of $50,000 of net income or profit within
three years”; “to employ at least 15 community residents within two
years in new permanent jobs at a livable wage”; “to occupy and
support a minimum of 10,000 square feet of neighborhood
commercial space”; or “to rehabilitate 50 single-family houses over
three years.” Clearly defined and quantifiable goals provide
objective measurements to screen potential business opportunities.
They also establish clear criteria to evaluate the success of the
business venture.
Establish Goals
Once you have identified goals for a new business venture, the next
step in the business planning process is to identify and select the
right business. Many organizations may find themselves starting at
this point in the process. Business opportunities may have been
dropped at your doorstep. Perhaps an entrepreneurial member of
the board of directors or a community resident has approached your
organization with an idea for a new business, or a neighborhood
business has closed or moved out of the area, taking jobs and
leaving a vacant facility behind. Even if this is the case, we
recommend that you take a step back and set goals. Failing to do so
could result in a waste of valuable time and resources pursuing an
idea that may seem feasible, but fails to accomplish important goals
or to meet the mission of your organization.
Depending on the goals you have set, you might take several
approaches to identify potential business opportunities.
Local Market Study: Whether your goal is to revitalize or fill space

in a neighborhood commercial district or to rehabilitate vacant
housing stock, you should conduct a local market study. A good
market study will measure the level of existing goods and services
provided in the area, and assess the capacity of the area to support
existing and additional commercial or home-ownership activity. This
assessment is based on the shopping and traffic patterns of the
area and the demographic and socio-economic characteristics of the
community. A bad or insufficient market study could encourage your
organization to pursue a business destined to fail, with potentially
disastrous results for the organization as a whole. Through a market
study you will be able to identify gaps in existing products and
services and unsatisfied demand for additional or expanded
products and services. If your organization does not have staff
capacity to conduct a market study, you might hire a consultant or
solicit the assistance of business administration students from a
local college or university. Conducting a solid and thorough market

study up front will provide essential information for your final
business plan.
Analysis of Local and Regional Industry Trends: Another

method of investigating potential business opportunities is to
research local and regional business and industry trends. You may
be able to identify which business or industrial sectors are growing
or declining in your city, metropolitan area or region. The regional or
metropolitan area planning agency for your area is a good source of
data on industry trends.
Internal Capacity: The board, staff or membership of your

organization may possess knowledge and skills in a particular
business sector or industry. Your organization may wish to draw
upon this internal expertise in selecting potential business
opportunities.
Internal Purchasing Needs / Collaborative Procurement:

Perhaps, your organization frequently purchases a particular service
or product. If nearby affiliate organizations also use this service or
product, this may present a business opportunity. Examples of such
products or services include printing or copying services, travel
services, transportation services, property management services,
office supplies, catering services, and other products. You will still
need to conduct a complete market study to determine the demand
for this product or service beyond your internal needs or the needs
of your partners or affiliates.
Identify Business Opportunities
Buying an Existing Business: Rather than starting a new

business, you may wish to consider purchasing an existing business.
Perhaps a local retail or small light manufacturing business that has
been an anchor to the local retail area or a much-needed source of
jobs in the neighborhood is for sale. Its closure would mean the loss
of jobs and services for your neighborhood. Your organization might
consider purchasing and taking over the enterprise instead of
starting a new business. If you decide to pursue this option, you still
need to go through the steps of creating a business plan. However,
before moving ahead, these are just a few important areas to
research in assessing the business you plan to purchase:
Be sure to conduct a thorough review of the financial statements for

the past three to five years to determine the current fiscal status
and recent financial trends, the validity of the accounts receivable
and the status of the accounts payable. Are all the required licenses
and permits in place and can they be transferred to a new owner?

Also look at the quality of key employees who, because of their
expertise, may need to remain with the business.
You will also need to assess the customer or client base and
determine whether its members will remain loyal to the business
after it changes hands.
Another area to evaluate is the perception or image of the business.
Inspect the facilities and talk to suppliers, customers and other
businesses in the area to learn more about the reputation of the
business.
At this early stage of your planning process, be sure to consult an
attorney experienced in corporation law. As a non-profit corporation,
engaging in income-generating activities not related to your mission
may affect your tax-exempt status. You may also wish to protect
your organization from any liability issues connected with the
proposed business activity. After you have decided on a particular
business activity, have a qualified attorney advise you on the proper
corporate structure for your new venture. In addition to qualified
legal counsel, seek the expertise of an experienced professional in
that particular industry. He or she will bring valuable knowledge and
insights regarding the industry that will prove extremely useful
during the business planning process.
Advisory
You have decided on a business opportunity that meets the goals of
your organization. Now you are ready to test the feasibility of the
venture and to present your business concept to the world. A solid
business plan will clearly explain the business concept, describe the
market for your product or service, attract investment, and establish
operating goals and guidelines.
The first step in writing your business plan is to identify your target
audience. Will this be an internal plan the board will use to assess
the feasibility and appropriateness of the business? Or will this plan
be distributed to a larger external audience such as funding
sources, commercial lenders or the community to gain financial
backing and political support for the proposed venture? The content
and emphasis of the plan will shift according to the audience.
You will also need to decide who will conduct the necessary
research and write the plan. The following table lists the advantages
and disadvantages of several options for getting the work done. You
might consider a combination of the options.

Creating One’s Own Business Plan
It is also important to establish a timeline for completing the plan. A
business plan can be completed by one staff member working full
time in as little as a week, although a thorough market analysis will
add several days at least. A committee will probably need much
more time. Combinations of staff, volunteers, consultants and a
board committee may lengthen or shorten the process depending
on skill level, available time, experience with planning and research,
and the group’s facilitation needs. Now that you have decided who
will put together your business plan and have set a timeline for its
completion, you are ready to begin assembling the elements of the
plan. Your business plan should contain the following sections:
• Executive summary
• Company and product description
• Market description
• Operations
• Management and ownership
• Financial information and timeline
• Risks and their mitigation
A solid business plan will clearly explain the business concept,

describe the market for your product or service, attract investment,
and establish operating goals and guidelines.
1. Executive Summary
In this section of your business plan, provide a description of your
company, the industry you will be competing in, and the product or
service you plan to offer.
Sell your concept! The executive summary may be the first and only
section of your business plan that most of your audience will read.
Tell the audience why the business is a great idea. Some readers

will look at this section to determine whether or not they want to
learn more about a business. Other readers will look to the
executive summary as a sample of the quality and professionalism
of the overall plan.
The executive summary should be no more than one to three pages

long and should answer the following questions:
• Who are you? (describe your organization)

• What are you planning? (describe the service or product)
• Why are you planning it? (discuss the demand and market for
the service or product)
• How will you operate your business?
• When will you be in operation? (overview of timeline)
• What is your expected net profit? (discuss your projected
sales and costs)
Although the executive summary is the first part of your business

plan, you should write it after you have written the other sections of
the plan in order to include the most important points of each
section.
2. Company and Product Description

In describing your company be sure to include what type of business
you are planning (homeownership development, wholesale, retail,
manufacturing
or service) and the legal structure (corporation or partnership). You
should discuss why you are creating this new venture, referencing
the goals you set at the beginning of the business planning process.
Also include a description of your non-profit organization, the role it
has played in developing this new venture and the on-going role, if
any, it will play in operations. Give the reader a brief overview of the
industry, describing historic and current growth trends.
Whenever possible, provide documentation or references supporting

your trend analysis such as articles from business-oriented
newspapers and magazines, research journals or other publications.
Include these references in the attachments of your business plan.
Product or Service
After describing your company and its industry context, describe the
products or services you plan to provide. Focus on what
distinguishes your product or service from the rest of the market.
Discuss what will attract consumers to your product or service.
Provide as much detail as necessary to inform the reader about the
particular characteristics of your product that distinguish it from its
competition – many nonprofits, for example, expect to produce
higher-quality housing than otherwise exists in the area. Mention
any distinctive elements in the manufacture of the product, such as

being “hand-made by a particular people from a specific area.” If
you are providing a service, explain the steps you will take to
provide a service that is better than your competition.
Price
Provide a realistic estimate of the price for your product or service,
and discuss the rationale behind that price. An unrealistic price
estimate may undermine the credibility of your plan and raise
concerns that your product or service may not be of sufficient
quality or that you will not be able to maintain profitability in the
long run. Describe where this price positions you in the
marketplace: at the high end, low end or in the middle of the
existing range of prices for a similar product or service.
In other sections of the plan you will discuss the target market for
your product or service and also provide additional details on how
the price of your product fits into the overall financial projections for
the enterprise.
Place
Describe the location where you will produce or distribute your
product or provide your service. Discuss the advantages of the
location, such as its accessibility, surrounding amenities and other
characteristics that may enhance your business.
Depending on your anticipated customer base, accessibility to your

location via public transportation could affect the marketability of
your product or service.
Customers
In this section of your business plan, you will describe the customer
base or market for your product or service. In addition to providing a
detailed description of your customer base, you will also need to
describe your competition (other local developers or nearby
businesses providing a similar service to your potential customer
base).
Who will purchase your product or use your service? How large is
your customer base? Define the characteristics of your target
market in terms of its:
• Demographics – Measures of age, gender, race, religion and
family size.
• Geography – Measures based on location.
• Socioeconomic Status – Measures based on individual or
household annual income.
Provide statistical data to describe the size of your target market.

Sources for this information may include recent data from the
Bureau of Statistics, state or local census data, or information

gathered by your organization, such as membership lists,
neighborhood surveys and group or individual interviews. Be sure to
list the sources for your data, as this will further validate your
market assumptions. Include any relevant information regarding the
growth potential for your target market if your business is expected
to rely on growth. Cite any research forecasting population
increases in your target market or other trends and factors that may
increase the demand for your product or service.
Competition
Discuss how people identified in your target market currently meet
their need for your product or service. What other businesses exist
in your area that are similar to your proposed venture? For example,
for a housing business, what are the local markets for purchase and
rental? How much are people currently paying for similar products
or services? Briefly describe what differentiates your proposed
venture from these existing businesses and discuss why you are
entering this market.
Sales Projections
Present an estimate of how many people you expect will purchase
your product or service. Your estimate should be based on the size
of your market, the characteristics of your customers and the share
of the market you will gain over your competition. Project how many
units you will sell at a specified price over several years. The initial
year should be broken down in monthly or quarterly increments.
Account for initial presentation and market penetration of your
product and any seasonal variations in sales, if appropriate.
3. Market Description
In this section, you will describe how you plan to operate the
business. You will present information on how you plan to create
your product or provide your service, describe the staff required to
operate and manage the business, discuss the equipment and
materials necessary, and define the site or facility requirements, if
any. A key component of the operation of your business will be your
sales and marketing strategy, so you must describe how you will
inform your target market about your product or service and how
you will convince customers to purchase it.
Production Description
Describe the steps for creating your product, from the raw material
or initial stage to the finished product, packaged and ready for
distribution and sale. If you plan to provide a service, describe the
process of service deliver (such as the initial interview, for instance,
if you are offering consulting services), assessment, research and
design, and final presentation. Provide a description of any sub-
contractors or external services you plan to use in the production

process. The reader of the plan may be unfamiliar with the industry,
so avoid using industry jargon to describe the production process.
Staffing
Describe the staff required to operate your business: discuss how
many people you will need; describe the tasks they will carry out;
and the skills they will need. Prepare a chart outlining the salaries
and benefits you will provide to your workforce. Provide information
on how you will recruit staff and provide initial and ongoing training
of employees.
4. Equipment and Materials

To manufacture your product or provide your service, what type of
equipment will you need? Describe any machinery and vehicles
necessary in the production, packaging and distribution of your
product, including any office equipment such as computers, copiers,
furniture, fixtures and telephone systems. Also discuss the types of
materials you will use in the production process and describe the
source and cost of those materials.
Facility
Describe the type of facility in which you will house your business.
Indicate the amount of building space you will need for production
and administration. Also discuss any building features required for
the production process such as high ceilings, specialized ventilation
and heating systems, sanitized laboratory space or vehicular
accessibility. If you have already identified a location and a facility
that meets your requirements, describe its features. Even if you are
planning to provide a service instead of manufacturing a product,
you need to demonstrate that you will have adequate space for
administrative functions and other activities related to the service
you plan to provide.
Market Description
Describe your strategy for locating your target market, informing or
educating customers about your product or service and convincing
them to purchase it. Provide details on the methods you will use to
advertise your product, such as print media (advertisements in
newspapers, magazines or trade journals), electronic media
(television, radio and the Internet), direct mail, telemarketing,
individual sales agents or representatives, or other approaches.
Discuss the product’s or service’s features you plan to emphasize to
gain the attention of your target market. Also detail how you will
distribute and sell your product or service. Will you use sales agents
or existing retail outlets, or directly distribute your product through
a delivery service such as United Parcel Service, Federal Express or
independent trucking company?
5. Operations

In this section of your business plan, describe the senior managers
responsible for overseeing the start-up and operation of your
business, their background and their responsibilities in the business.
Be sure to highlight your management team’s experience in
managing the production, marketing and administration of similar
businesses or within the selected industry and attach the resumes
of each member to the plan. Be sure to provide a complete job
description of any vacancies in your management team. Describe
the responsibilities, the skills, the background required and the
steps you plan to take to fill that key position.
Ownership
What is its relationship to your existing organization? Who is on the
board of directors / board of advisors of the new business and what
are their backgrounds and areas of expertise? Potential investors or
lenders will be interested in the ownership stake of the board of
directors and also in what portion of the company’s equity is
available. Success is often due to one’s contacts, so fully describe
your business relationships with attorneys, accountants and
advertising or public relations agencies, and any industry-specific
services such as suppliers and distributors.
6. Management and Ownership

In this section you will describe the financial feasibility of your
planned venture and provide several financial reports and
statements to document why your business will be a viable
enterprise and a sound investment. At a minimum, you should
provide a brief descriptive narrative for each of the following
financial statements and include a copy in the attachments to your
plan:
• Start-up budget
• Cash flow projection
• Income statement
• Balance sheet
In preparing these statements, you may want to seek the advice of

a certified public accountant (CPA).
Start-up Budget
Describe the initial expenses you will incur to get your business up
and running. Some items you might include in your start-up budget
research and product design and development expenses, legal
incorporation and licensing expenses, facility purchase or rental,
equipment and vehicle purchase or rental, and initial material or
supply purchase. You can use Worksheet B as a sample format for
preparing your start-up budget.

Cash Flow Projection
This statement presents a month-to-month schedule of the
estimated cash inflows and outflows of your business for the first
year. This schedule should indicate how much money your business
will have or need and when you will need it. You should describe
your sources of income and capital, detailing your projected sales
revenue and indicating your own or investor equity contribution,
lenders, investors and other sources of capital. Itemize your
projected expenses, distinguishing between the cost of goods sold
(materials, supplies, production labor), overhead expenses (rent,
utilities, insurance, maintenance, interest, insurance, administrative
costs and salaries, legal and accounting services, marketing, taxes,
fees and other ongoing operating expenses) and capital
expenditures (land and buildings, equipment, furniture, vehicles,
and building repair or renovation expenses). In preparing this
statement, account for a gradual increase in sales from initial
product introduction and any expected seasonal fluctuations in
revenue projections.
Income Statement
Prepare a multiyear (three- to five – year) statement of projected
revenue, expenses, capital expenditures and cost of goods sold. If
you make assumptions about the growth of your business, provide
supporting documentation such as growth patterns of similar
companies or studies that forecast an industry-wide growth rate.
This statement should indicate to the reader the potential of your
business to generate cash and its profitability over time. For an
existing business, also submit an income statement for at least
three prior consecutive years. Lenders may look at this statement to
determine whether your business can support the additional debt
you are requesting.
Balance Sheet
A start-up business probably will not have any assets or liabilities at
the time you are drafting the business plan. Provide a copy of the
balance sheet of the business’s sponsoring organization or
individual. Describe in your narrative any assets that will be
allocated to the start-up of the business.
7. Financial Information and Start up Timeline

Capital Requirements
Describe the amount and type of financing you are seeking for your
business. Are you looking for debt from a lender or equity from an
investor? Refer to your start up budget and cash flow statement
presented earlier. Discuss how and when you will draw on these
funds and how they will affect the bottom line. Also describe any
commitments or investments that you may have already secured.

If you are seeking investors, such as venture capitalists, describe
what they will receive in return for their capital. What is the
repayment period and the expected return on investment? Also
discuss the nature of their ownership share and how it may change
with future investments. Equity investors are looking for rates of
return higher than rates offered by banks or other business lenders.
The level of risk in your business and industry will help to determine
the actual market rate, as will the availability of equity dollars.
Check with other businesses (although not direct competitors) to
see what return on investment their investors demanded. Be
prepared to negotiate. And make sure you research the investment
market carefully; several socially minded investment pools exist and
more are in development. or lenders, describe the type of financing
you are seeking:
• Seed Capital – Short-term financing to cover start-up costs.
• Fixed Asset Financing – Longer-term financing for property,
building improvements, equipment or vehicles. The asset
being purchased is usually pledged as security for the loan.
• Working Capital – Short-term financing to cover operating
expenses and to bridge gaps in cash flow.
Initial Start-up Timeline

Provide a timeline of tasks and events necessary to get your
business operational. Be sure to describe the current stage you are
in and what steps you have taken to date. Include deadlines for task
completion. Set realistic deadlines according to your capacity to
complete these tasks. The following is a list of some of the steps you
may wish to include:
• Filing legal incorporation documents
• Identifying and securing suitable space
• Designing and developing the product
• Obtaining required licenses or permits
• Securing necessary financing
• Leasing or purchasing equipment
• Hiring key staff
• Hiring and training of production or support staff
• Purchasing materials and production supplies
• Beginning marketing activities
• Opening
Although it is impossible to know exactly what will go wrong in

starting and running your business, thinking about different
challenges will strengthen your plan. Potential problems could
include:
• Insufficient public subsidy available to new home owners or

residents
• The competition drops its prices

• Not enough customers
• Production costs exceed estimates
• Difficulty in finding qualified employees
• Environmental or governmental changes such as tax
increases, additional regulations or population changes
For each potential problem, discuss its likelihood and describe

possible solutions or actions you might undertake to mitigate the
problem.
Risks and their Mitigation

Although it is impossible to know exactly what will go wrong in
starting and running your business, thinking about different
challenges will strengthen your plan.
After you have completed all of the elements of your business plan,
you should focus its presentation. A well-organized plan will assist
you in communicating the most important elements of your
business plan to the reader, and a persuasive plan will help you to
convince the reader to invest in your business.
Executive Summary
As mentioned earlier, this section should be written last. However, if
you have already written the executive summary, review it to make
sure it embodies the following characteristics. Because it is the first
and possibly the only section of the plan that many readers may
see, the executive summary should provide an overview of the plan
and entice the reader to read the whole plan or to agree to meet
with you. The executive summary should be no more than three
pages and should briefly describe the most important elements of
the plan. Review the Executive Summary section of this manual for
more tips on this critical introduction to your business.
2. Write short notes on :

a) Sales Projections
Answer: Sales Projections

Present an estimate of how many people you expect will purchase
your product or service. Your estimate should be based on the size
of your market, the characteristics of your customers and the share
of the market you will gain over your competition. Project how many
units you will sell at a specified price over several years. The initial
year should be broken down in monthly or quarterly increments.

Account for initial presentation and market penetration of your
product and any seasonal variations in sales, if appropriate.
Steps for Developing Sales Projections

Your business plan is not just a funding tool, but also a blueprint for
how your business should operate. The following are steps for
developing sales projections.
Step I:
Estimate
For each product or service, estimate the number of people who are
likely to buy and when they will buy it. You can get this information
from asking your likely customers about their possible use of your
business, or you can base your estimates on your knowledge of the
market.
Step 2:
Use a Calendar
Estimate your sales and number of customers served during one
week. Using the totals for a week, make projections for each month.
For the first few months, keep in mind that business will start off
slowly before people become more aware of your business. Use will
most likely increase as people learn about your products and
services. Seasonal variations may affect your business as well. You
will use these numbers to project your equipment, supply and
staffing needs, as well as income.
Cost Account Heads:

• Organizational Start up Costs
• Product Design/Development
• Research & Development
• Legal/Licensing Expenses
• Property & Facilities
• Land/Building Purchase
• Initial Lease Deposit
• Building Repairs/Improvements
• Equipment/Machinery
• Production-related
• Administrative/Office Equip.
• Materials & Supplies
• Personnel
• Key Employees
• Contract Labour/Temps
• Training Expenses
• Marketing Expenses
• Advertisements
• Brochures/Literature/Other
• Insurance Premiums

• Distributor Contracts
• Contingency (5%)
Expenses:
Costs of Goods Sold
• Materials/Supplies
• Labor
• Rent
• Utilities
• Insurance
• Admin. Exp. (PT Sec.)
• Legal & Accounting
• Marketing
• Equipment Maintenance/Supplies
• Facility Maintenance
• Fees/Miscellaneous
Debt / Equity Investment:

• Equipment Loan
• Building Rehabilitation Loan
• Grants
• Owner Equity
Expenses
• Cost of Goods Sold
• Wages & Benefits
• Materials
• Supplies
Overhead Expenses:
• Rent
• Utilities
• Building Maintenance/Security
• Marketing
• Accounting
• Legal
• Administrative Expense
• Interest Expense
• Depreciation
The Business Priorities are based upon six top-level objectives;

these are:
• To make Business data available both to decision-makers and as

much as possible available in the public domain;
• To ensure all holders of Business information are able to
participate.

• To ensure that the data available through the NETWORK are of
known quality;
• To ensure that the NETWORK Gateway gives access to data on
Location and species used to inform decisions affecting Business
at local, regional, national and international levels;
• To promote knowledge, use and awareness of the NETWORK;
• To enhance the skills base and expertise needed to support and
develop the NETWORK.
i) The objectives have cross-cutting themes which are:

A. Infrastructure development
B. Data standards and tools
C. Capacity building
D. Working with the wider public
E. Co-ordination and promotion
i) In addition, the partners will contribute to the overall realisation of

the objectives through work that they initiate on their own account,
but which does not necessarily fall under the focussed objectives for
the Network.
ii) A series of assumptions have been made in formulating the
Business Priorities and their associated work programme. These
are:
• It is assumed that the present way of working, i.e. a lead
partner approach for each project will be retained;
• The plan is not intended to represent all the work that could
be undertaken;
• It is anticipated that other work towards the principal aim of
adding content and providing a fully functional gateway will
be adopted by the NETWORK as part of its programme, but
this work would have to be prioritised against this core activity
and separately resourced;
To give additional focus to the challenging nature of the task that

the NETWORK is setting itself, a series of principle drivers have been
recognised. The drivers are:
• Processes – This driver relates to facilitated targeted action on
the ground through providing knowledge of resource location,
extent, pattern of distribution, data quality and gaps. It also
has the potential for engaging more partners in the
NETWORK;
• Environmental Impact Assessment (EIA) and Strategic
Environmental Assessment – This driver is concerned with
providing ready access to data on location, extent, pattern
and quality of Business.
• Data contributor engagement – This driver is concerned with
accessing sources of data for the NETWORK enabling the

assessment of actions and continual improvement in the
targeting of actions from the two previous drivers;
• Operational use – This relates to the use of the NETWORK
within the day to day business of agencies as a source of data
relevant to local reporting or casework;
• Generic enhancement – This driver encompasses capacity
building and Recording Schemes and other contributing
organisations and user groups, in order to ensure the
continued and enhanced supply and use of information.
These lead naturally to three broad areas of work:

• Developing the recording network;
• Enhancing the Internet Gateway in terms of its functionality
and the data it accesses;
• Ensuring that the benefits already secured through the earlier
work are maintained.
The plan also acknowledges the need to co-ordinate activity

between the members of the NETWORK and their partners, and to
communicate the progress and successes of the work programme.
2b) importance of creativity in Business
Answer: Creativity
Everyone in business is creative.
Some of most creative people are in manufacturing.
They actually CREATE products that change the world.
Some of the least creative people perhaps are in advertising.
They spend most of their creative energy telling manufacturers that
they…aren’t creative!
Salespeople Are Creative – They are natural born story-tellers.

Accountants are creative.
Best Creative Exercise Ever

Write down your ideas.
You have a ton every day.
But most of the time, you can’t remember them by the day’s end.
Don’t let spelling and grammar issues or relentless self-editing stop
you.
Get your ideas on paper (Let someone else edit it.)
Go retro: Carry a notebook, pen, and calendar into your meetings.

Look up at people.
Story First, Technology Last.

Don’t invest in a presentation class called “How to Use
PowerPoint”….…until you’ve taken a class called “How to Tell
Stories and Connect with Your Audience”.

2.A: Simple Creative Exercise…
Simplify everything. Your life, your home, your office, your desk,
your processes, vision, policy, procedures. Everything.
Fixing Problems is Creative.

Your job is to fix problems, not to complain.
Brainstorming
Don’t tell people that their ideas are bad, especially if you don’t
have a better one.
It’s only your life’s work.

Never say, “It’s not my job to be creative.”
How to Lose an Audience…
• Show your audience slides with columns of numbers.
• Refuse to tell them a story about the meaning of the numbers.
• Do not read your speech or presentation.
• Instead, read your audience.
• How about a Show?
• Try “giving a performance” instead of merely “giving a
presentation.”
Everyone in Sales Knows…

• Tell stories.
• Don’t just provide data.
Avoid Meetings.
Do not attend more than two meetings a day, or else you will never
get any real creative work done.
Get Fresh Ideas.

Leave the office building at least once a day.
Another Lame Excuse…
Designers should put more of their passion into designing great
work, instead of endless (boring) discussions about the superiority
of the Macintosh over the PC!
The Lame Excuse …
“I can’t [write/design/create] because I don’t have the latest
[software/hardware/ upgrade]….”
You can’t let a machine take credit for your creativity.

And you can’t blame a machine for your creative failures, either.
Don’t Blame the Tool!
The more you become a master of your particular creative form….

….the fewer tools you will use.
Master carpenters use fewer tools than novices.
So do cooks.
Use what works.

Creativity: Use it or Lose it.
Create something every day.
Creativity takes place every day, not once in a while.
It’s not rare.
It’s just been mystified – Own your creativity.
Facts and observations

Giga-investments made in the paper and pulp industry, in the heavy
metal industry and in other base industries, today face scenarios of
slow growth (2-3 % p.a.) in their key markets and a growing over-
capacity in Europe.
The energy sector faces growing competition with lower prices and
cyclic variations of demand.
Productivity improvements in these industries have slowed down to

1-2% p.a.
Global financial markets make sure that capital cannot be used non-
productively, as its owners are offered other opportunities and the
capital will move (often quite fast) to capture these opportunities.
The capital markets have learned “the American way”, i.e. there is a
shareholder dominance among the actors, which has brought (often
quite short-term) shareholder return to the forefront as a key
indicator of success, profitability and productivity.
There are lessons learned from the Japanese industry, which point
to the importance of immaterial investments. These lessons show
that investments in buildings, production technology and supporting
technology will be enhanced with immaterial investments, and that
these are even more important for re-investments and for gradually
growing maintenance investments.
The core products and services produced by giga-investments are

enhanced with life-time service, with gradually more advanced
maintenance and financial add-on services.
New technology and enhanced technological innovations will change

the life cycle of a giga-investment.
Technology providers are involved throughout the life cycle of a
giga-investment.
Giga-investments are large enough to have an impact on the market

for which they are positioned:
A 3,00,000 ton paper mill will change the relative competitive

positions; smaller units are no longer cost effective.
A new technology will redefine the CSF:s for the market.

Customer needs are adjusting to the new possibilities of the giga-
investment.
The proposition that we can describe future cash flows as stochastic

processes is no longer valid; neither can the impact be expected to
be covered through the stock market.
Types of options
• Option to Defer
• Time-to-Build Option
• Option to Expand
• Growth Options
• Option to Contract
• Option to Shut Down/Produce
• Option to Abandon
• Option to Alter Input/Output Mix
Table of Equivalences:
INVESTMENT OPPORTUNITY VARIABLE CALL OPTION

Present value of a project’sS Stock price.
operating cash flows.
Investment costs X Exercise price
Length of time the decisiont Time to expiry.
may be deferred.
Time value of money. rf Risk-free interest
rate
Risk of the project. σ Standard deviation
of returns on stock
Fuzzy numbers (fuzzy sets) are a way to express the cash flow
estimates in a more realistic way.
This means that a solution to both problems (accuracy and

flexibility) is a real option model using fuzzy sets.
3. What factors are to be taken into account in a crisis

communications strategy?
Answer: The following items should be taken into account in the

crisis communications strategy:
• Communications should be timely and honest.

• To the extent possible, an audience should hear news from
the organization first.

• Communications should provide objective and subjective
assessments.
• All employees should be informed at approximately the same
time.
• Give bad news all at once – do not sugarcoat it.
• Provide opportunity for audiences to ask questions, if possible.
• Provide regular updates and let audiences know when the
next update will be issued.
• Treat audiences as you would like to be treated.
• Communicate in a manner appropriate to circumstances:
o Face-to-face meetings (individual and group)
o News conferences
o Voice mail/email
o Company Intranet and Internet sites
o Toll-free hotline
o Special newsletter
o Announcements using local/national media.
Preplanning for communications is critical. Drafts of message

templates, scripts, and statements can be crafted in advance for
threats identified in the Risk Assessment.
Procedures to ensure that communications can be distributed at

short notice should also be established, particularly when using
resources such as Intranet and Internet sites and toll-free hotlines.
Official Spokesperson
The organization should designate a single primary spokesperson,
with back-ups identified, who will manage/disseminate crisis
communications to the media and others. This individual should be
trained in media relations prior to a crisis. All information should be
funneled through a single source to assure that the messages being
delivered are consistent.
It should be stressed that personnel should be informed quickly

regarding where to refer calls from the media and that only
authorized company spokespeople are authorized to speak to the
media. In some situations, an appropriately trained site
spokesperson may also be necessary.
4. What elements should be included in a Marketing Plan

under Due Diligence while seeking investment in for your
Company?
Answer: The Process of Due Diligence

A business which wants to attract foreign investments must present
a business plan. But a business plan is the equivalent of a visit card.
The introduction is very important – but, once the foreign investor
has expressed interest, a second, more serious, more onerous and
more tedious process commences: Due Diligence.
"Due Diligence" is a legal term (borrowed from the securities

industry). It means, essentially, to make sure that all the facts
regarding the firm are available and have been independently
verified. In some respects, it is very similar to an audit. All the
documents of the firm are assembled and reviewed, the
management is interviewed and a team of financial experts, lawyers
and accountants descends on the firm to analyze it.
First Rule:
The firm must appoint ONE due diligence coordinator. This person
interfaces with all outside due diligence teams. He collects all the
materials requested and oversees all the activities which make up
the due diligence process.
The firm must have ONE VOICE. Only one person represents the
company, answers questions, makes presentations and serves as a
coordinator when the DD teams wish to interview people connected
to the firm.
Second Rule:
Brief your workers. Give them the big picture. Why is the company
raising funds, who are the investors, how will the future of the firm
(and their personal future) look if the investor comes in. Both
employees and management must realize that this is a top priority.
They must be instructed not to lie. They must know the DD
coordinator and the company’s spokesman in the DD process.
The DD is a process which is more structured than the preparation

of a Business Plan. It is confined both in time and in subjects: Legal,
Financial, Technical, Marketing, Controls.
The Marketing Plan

Must include the following elements:
• A brief history of the business (to show its track performance
and growth)
• Points regarding the political, legal (licences) and competitive
environment
• A vision of the business in the future
• Products and services and their uses
• Comparison of the firm’s products and services to those of the
competitors
• Warranties, guarantees and after-sales service
• Development of new products or services

• A general overview of the market and market segmentation
• Is the market rising or falling (the trend: past and future)
• What customer needs do the products / services satisfy
• Which markets segments do we concentrate on and why
• What factors are important in the customer’s decision to buy
(or not to buy)
• A list of the direct competitors and a short description of each
• The strengths and weaknesses of the competitors relative to
the firm
• Missing information regarding the markets, the clients and the
competitors
• Planned market research
• A sales forecast by product group
• The pricing strategy (how is pricing decided)
Promotion of the sales of the products (including a description of the

sales force, sales-related incentives, sales targets, training of the
sales personnel, special offers, dealerships, telemarketing and sales
support). Attach a flow chart of the purchasing process from the
moment that the client is approached by the sales force until he
buys the product.
• Marketing and advertising campaigns (including cost
estimates) – broken by market and by media
• Distribution of the products
• A flow chart describing the receipt of orders, invoicing,
shipping.
• Customer after-sales service (hotline, support, maintenance,
complaints, upgrades, etc.)
• Customer loyalty (example: churn rate and how is it monitored
and controlled).
Legal Details
• Full name of the firm
• Ownership of the firm
• Court registration documents
• Copies of all protocols of the Board of Directors and the
General Assembly of Shareholders
• Signatory rights backed by the appropriate decisions
• The charter (statute) of the firm and other incorporation
documents
• Copies of licences granted to the firm
• A legal opinion regarding the above licences
• A list of lawsuit that were filed against the firm and that the
firm filed against third parties (litigation) plus a list of disputes
which are likely to reach the courts

• Legal opinions regarding the possible outcomes of all the
lawsuits and disputes including their potential influence on the
firm
Financial Due Diligence

• Last 3 years income statements of the firm or of constituents
of the firm, if the firm is the result of a merger. The
statements have to include:
• Balance Sheets
• Income Statements
• Cash Flow statements
• Audit reports (preferably done according to the International
Accounting Standards, or, if the firm is looking to raise money
in the USA, in accordance with FASB)
• Cash Flow Projections and the assumptions underlying them
Controls
• Accounting systems used
• Methods to price products and services
• Payment terms, collections of debts and ageing of receivables
• Introduction of international accounting standards
• Monitoring of sales
• Monitoring of orders and shipments
• Keeping of records, filing, archives
• Cost accounting system
• Budgeting and budget monitoring and controls
• Internal audits (frequency and procedures)
• External audits (frequency and procedures)
• The banks that the firm is working with: history, references,
balances
Technical Plan
• Description of manufacturing processes (hardware, software,
communications, other)
• Need for know-how, technological transfer and licensing
required
• Suppliers of equipment, software, services (including offers)
• Manpower (skilled and unskilled)
• Infrastructure (power, water, etc.)
• Transport and communications (example: satellites, lines,
receivers, transmitters)
• Raw materials: sources, cost and quality
• Relations with suppliers and support industries
• Import restrictions or licensing (where applicable)
• Sites, technical specification
• Environmental issues and how they are addressed
• Leases, special arrangements

• Integration of new operations into existing ones (protocols,
etc.)
A successful due diligence is the key to an eventual investment.
This is a process much more serious and important than the
preparation of the Business Plan.
5. Distinguish between Joint Ventures and Licensing,

explaining the relative advantages and disadvantages of
each.
Answer: Licensing and Assigning IP rights

One basic choice is whether you should actively exploit your IP
rights yourself, or to keep your IP rights and license them to others
to use, or sell or assign the rights to another person. You can, in
principle, make different choices in different countries for exploiting
IP rights for the same underlying invention. If you are based in
Malaysia, you could in theory decide to exploit your patent yourself
in the East Asian region, grant a licence a Canadian company to use
the invention in North America, and sell or assign the rights in
Europe to a Danish company – whether or not this is the best
approach in practice is a different matter, of course.
A licence is a grant of permission made by the patent owner to

another to exercise any specified rights as agreed. Licensing is a
good way for an owner to benefit from their work as they retain
ownership of the patented invention while granting permission to
others to use it and gaining benefits, such as financial royalties,
from that use. However, it normally requires the owner of the
invention to invest time and resources in monitoring the licensed
use, and in maintaining and enforcing the underlying IP right.
The patent right normally includes the right to exclude others from
making, using, selling or importing the patented product, and
similar rights concerning patented processes. The license can
therefore cover the use of the patented invention in many different
ways.
For instance, licences can be exclusive or non-exclusive. If a patent

owner grants a non-exclusive licence to Company A to make and
sell their patented invention in Malaysia, the patent owner would
still be able to also grant Company B another non-exclusive for the
same rights and the same time period in Malaysia. In contrast, if a
patent owner granted an exclusive licence to Company A to make
and sell the invention in Malaysia, they would not be able to give a
licence to anyone else in Malaysia while the licence with Company A
remained in force.
Licenses are normally confined to a particular geographical area –

typically, the jurisdiction in which particular IP rights have effect.

You can grant different exclusive licences for different territories at
the same time. For example, a patent owner can grant an exclusive
licence to make and sell their patented invention in Malaysia for the
term of the patent, and grant a separate exclusive licence to
manufacture and sell their patented invention in India for the term
of the patent.
Separate licences can be granted for different ways of using the
same technology. For example, if an inventor creates a new form of
pharmaceutical delivery, she could grant an exclusive licence to one
company to use the technology for an arthritis drug, a separate
exclusive licence to another company to use it for relief of cold
symptoms, and a further exclusive licence to a third company to use
it for veterinary pharmaceuticals.
A licence is merely the grant of permission to undertake some of the

actions covered by intellectual property rights, and the patent
holder retains ownership and control of the basic patent.
An assignment of intellectual property rights is the sale of a patent

right, or a share of the patent.
It should be remembered that the person who makes an invention

can be different to the person who owns the patent rights in that
invention. If an inventor assigns their patent rights to someone else
they no longer own those rights. Indeed, they can be in infringement
of the patent right if they continue to use it.
Patent licences and assignments of patent rights do not have to

cover all patent rights together.
Licences are often limited to specific rights, territories and time

periods. For example, a patent owner could exclusively licence only
their importation right to a company for the territory of Indonesia for
12 months. If an inventor owns patents on the same invention in
five different countries, they could assign (or sell) these patents to
five different owners in each of those countries. Portions of a patent
right can also be assigned – so that in order to finance your
invention, you might choose to sell a half-share to a commercial
partner.
If you assign your rights, you normally lose any possibility of further
licensing or commercially exploiting your intellectual property
rights. Therefore, the amount you charge for an assignment is
usually considerably higher than the royalty fee you would charge
for a patent licence. When assigning the rights, you might seek to
negotiate a licence from the new owner to ensure that you can
continue to use your invention. For instance, you might negotiate an
arrangement that gives you licence to use the patented invention in
the event that you come up with an improvement on your original

invention and this falls within the scope of the assigned patent.
Equally, the new owner of the assigned patent might want to get
access to your subsequent improvements on the invention.
Licensing Advantages
• An Inventive Incentive
• "Licensing", tried and true
• Fair and Balanced
• Product Exclusivity
• Inventions of interest to you
• You are free to view our inventions
• An informed business decision
• A production head start
• We are vitally committed to your success
• A resource for future projects
Joint Venture Agreements and Start-up Companies

Rather than simply exploit your IP rights by licensing or assignment,
you might choose to set up a new legal mechanism to exploit your
technology. Typically this can be a partnership expressed through a
joint venture agreement or a new corporation, such as a start-up or
spin-off company.
These options require much more work on your part than licensing
or assigning your intellectual property rights. This could be a
desirable choice in cases where:
• you want to keep your institute’s research activities separate
from the development and commercialisation of technology,
especially when your institute has a public interest focus or an
educational role; or
• you need to attract financial support from those prepared to
take a risk with an unproven technology (‘angel investors’ or
‘venture capitalists’), and they will only take on a long-term
risk if they can get a share of future profits of the technology.
In working out the right vehicle for your technology, you will
normally need specific legal advice from a commercial lawyer,
preferably one with experience in technology and commercialisation
in your jurisdiction. The laws governing partnerships and companies
differ considerably from one country to another, and this discussion
is only intended to give a general flavour of the various options.
A joint venture agreement involves a formal, legally binding

commitment between two or more partners to work together on a
shared enterprise. It is normally created for a specific purpose (for
example, to commercialise a specific new technology) and for a
limited duration. For instance, you might sign a partnership
agreement with a manufacturing company to develop and market a

product based on your invention. Before entering into a joint
venture agreement, you need to check out possible commercial
partners and make sure that the objectives of your potential
commercial partners are consistent with your objectives. In the joint
venture agreement, the partners typically agree to share the
benefits, as well as the risks and liabilities, in a specified way.
But this kind of partnership isn’t normally able in itself to enter legal
commitments, or own IP in its own right, so that the partners remain
directly legally responsible for any losses or other liabilities that the
partnership’s operations create. In other words, a partnership which
is not a corporation, a company or a specific institution doesn’t
really separately exist as a legal entity.
By contrast, a company is a new legal entity (a ‘legal person’

recognised by the law as having its own legal identity) which can
own and license IP and enter into legal commitments in its own
right. A spin-off company is an independent company created from
an existing legal body – for example, if a research institute decided
to turn its licensing division or a particular laboratory into a separate
company. A start-up company is a general term for a new company
in its early stages of development. If a company is defined as a
limited liability company, the partners or investors normally cannot
lose more than their investment in the company (but officeholders
in the company might be personally responsible for their actions in
the way they manage the company). This separate legal identity
means that a start-up company can be a useful way of developing
and commercialising a new technology based on original research,
while keeping the main research effort of an institute focused on
broader scientific and public objectives, and insulated from the
commercial risks and pressures of the commercialisation process. At
the same time, the research institute can benefit from the
commercialisation of its research, through receiving its share of the
profits and growth in assets of the spin-off company, thus
strengthening the institute’s capacity to do scientific research.
The company is normally owned through shares (its ‘equity’). These

effectively represent a portion of the assets and entitlement to
profits of the company. Investors can purchase shares in the
company, which is one way of bringing in new financial resources to
support the development of the technology – in exchange, the
investors stand to benefit from the growth in the company’s worth,
as their shares proportionately rise in value, and to receive a portion
of any profits produced by the company’s operations,
commensurate with the number of shares they own. If it is a public
company, shares in the company can be bought and sold on the
open stock market. An initial public offering is when the shares in a
start up company are first made available to the public to purchase.

A private company’s shares, by contrast, are not traded on the open
market (but can still be bought and sold).
The option of starting up your own company to manufacture and

market your patented invention requires you to have business skills,
marketing skills, management skills and substantial capital to draw
on for factory premises, hiring staff and so on. But it also can offer a
mechanism for attracting financial backing for research,
development and marketing, which can improve access to the
necessary resources and expertise.
Which model of commercialisation is best for you?

Each new technology and associated package of IP rights is
potentially difference, and the mechanism you choose for
commercialisation should take into account the particular features
of the technology. One basic consideration is to what extent you, as
originator of the technology, wish to be involved and to invest in the
subsequent development of the technology. You will need to
compare the advantages and disadvantages of each model of
commercialisation. Generally speaking, the higher degree of risk
and commitment of finance and resources you can invest, the
higher the degree of control you can secure over exploitation of the
technology invention, and the higher the financial return to your
institution may be.
There are many possible variations on each of these general

models, and in practice they can overlap. In deciding which model of
commercialisation is best for you, it is always a good idea to seek
commercial or legal advice.
Remember that IPRs alone do not guarantee you a financial return
on your invention. You need to make good commercial decisions to
benefit financially from your intellectual property rights.
Properly managed, intellectual property rights should not be a

burden but should yield a return from your hard work in creating an
invention.
Advantages of Joint ventures:

• Provide companies with the opportunity to gain new capacity
and expertise
• Allow companies to enter related businesses or new
geographic markets or gain new technological knowledge
• access to greater resources, including specialised staff and
technology
• sharing of risks with a venture partner
• Joint ventures can be flexible. For example, a joint venture can
have a limited life span and only cover part of what you do,
thus limiting both your commitment and the business'
exposure.

• In the era of divestiture and consolidation, JV’s offer a creative
way for companies to exit from non-core businesses.
• Companies can gradually separate a business from the rest of
the organisation, and eventually, sell it to the other parent
company. Roughly 80% of all joint ventures end in a sale by
one partner to the other.
6. You wish to commercialize your invention. What factors

would you weigh in choosing an appropriate course?
Answer: Following are the ways to commercialize my

invention.
Licensing and Assignment - Defined

The difference between licensing and selling your invention is
comparable to leasing vs. selling house. When you sell your house,
you transfer your title, making someone else in charge of and liable
for the house from that point on. When you sell your invention, the
scenario is the same, except that the process is called “assigning”
rather than selling. You, the inventor would be the “assignor” and
the person receiving the title or ownership of the patent would be
the “assignee.”
Instead of selling, though, you may choose to rent out your house.
In this case, you retain the title to the house and give someone
permission to use it for a limited period of time. In consideration for
this, they pay you on a monthly, yearly or other basis. The terms of
this lease are entirely up to you and the person leasing your house.
It is up to you to negotiate within the boundaries of the law.
When you license an invention, it’s nearly the same as leasing.

You’re offering a manufacturer, for example, the right to
manufacture and sell your invention for a period of time, and in
consideration for this they pay you on a quarterly basis. In this case
you are the “licensor” and the company is the “licensee.” It is up to
the parties to negotiate the terms of the license within the
boundaries of antitrust laws and other regulations that would affect
licenses and similar business arrangements.
Should I Sell or License?

You will generally have a better chance of licensing your invention
instead of assigning (selling) your rights for two reasons:
First, it is initially hard to ascertain what the eventual value of an

invention will be. This will almost invariably result in a win/lose
situation. If the value is estimated high, the inventor wins and the
company loses. On the other hand, if the estimates are low, the
inventor loses out.

Second, companies don’t like to pay cash up front unless they
absolutely have to. Generally, when a company makes a
commitment to manufacture and promote an invention, they are
already anticipating a substantial financial commitment for tooling,
manufacturing setup, engineering expenses, advance purchases of
raw materials, marketing, and promotional expenses. A company
that is savvy with licensing negotiations will state that the more
money they pay the inventor up front, the fewer resources they will
have available to put into the promotion. This is a hard point to
argue against, particularly if you’re interested in the long-range
commercial success of your invention.
At this point, Inventors have often already incurred substantial initial

expenses for patenting, prototyping and research, and need to be
reimbursed as soon as possible. Therefore, the inventor can argue
that the potential licensees should at least reimburse them for these
out-of-pocket expenses. After all, these are expenses the company
would have normally paid if they had developed such a product on
their own. At that point, the company may very well come back to
the table and agree to reimburse you for such initial expenses.
However, they may want to make it an advance against future
royalties. Bear in mind that all negotiations are unique and this is
just an example.
When you assign (sell) your invention, you will typically lose control
of it. Although you may have cash in hand from the sale of your
invention, the company has the prerogative to ditch your
technology and simply “sit on it” unless you’ve made other
arrangements. In some cases it is just as important to the inventor
to see his invention commercialized as it is to receive the cash from
it. Having an invention commercialized can give an inventor a
substantial head start in attracting interest in his additional
inventions. This may eventually be worth more to an inventor than
the initial cash he would receive from his first commercialized
invention.
Should I Go It Alone?
Some inventors prefer to keep their inventions close and go into
business for themselves, which comes with its own set of risks and
rewards.
There are several different elements at play during the

commercialization of an invention: the company, the management,
the technology, the market, and the marketing team. Each of these
is a variable. The more variables you introduce, the greater the risk
of failure. If you start with a new company under new management
with a new product, your chance of success is obviously much
slimmer than an existing company already in the field with
experience and knowledge in a similar product line. Even when you

look at an experienced company like 3-M, which brings many new
products to market, you’ll find that the company’s new products fail
often. With all its resources, 3-M’s success rate is said to be only
30%. Unless you have greater resources, your success rate may be
even less.
Because there are significant startup risks, it’s important to

seriously investigate the distinct advantages of having your
invention introduced by an existing company with experience in
your field can promote your product effectively and already has a
skilled sales force with an existing client base. These factors can
greatly reduce the amount of time it takes to introduce your
invention to the marketplace. What you lose in control when you
license can be gained tenfold from a timing standpoint, and in
reducing your risk.
Licensing offers another strong advantage when it is time to sell

your manufactured invention to customers. Manufacturers who
introduce only one invention or a very small product line often have
a hard time selling to large accounts. Large retail outlets prefer to
deal with companies where they can do one-stop shopping. Buyers
(or purchasing agents) for the big outlets want to reduce the
number of bills they get and the number of vendors they see each
week. This is why the introduction of a new invention to retailers by
a new company is particularly challenging.
Licensing also has advantages over starting your own company
because few products have an unlimited life cycle. In time, your
invention may be replaced by new technology. What will your
company sell then? Most single-item companies that are still
around after five years have done so by introducing new products
and expanding their product line. Companies need new products to
survive.
Sometimes starting your own company is the only way to go. If

you’ve attempted the licensing route and no manufacturer is
interested in your invention at its current stage of development, you
may need to do a small market test with a limited production run to
prove your invention has sales potential. Then if your sales results
are positive, you may pique the interest of a potential licensee who
can take your invention to the next step.
It is easy to get ‘upside down’ financially with invention projects.

This is especially true since inventors have a tendency to
overestimate the ultimate value of their inventions. Get some
realistic market research as early in the game as possible. If you
find that you must make a substantial investment to actually
manufacture an invention to prove its commercial viability and to
interest potential licensees, keep careful track of your expenses and

constantly weigh these expenses against any royalty potential that
may result.
There are too many sad stories of inventors pouring money into
inventions that can never provide a return on their investment.
Inventors always take a risk when they spend time and money on an
idea and if they’re lucky, it’ll pay off quite well. The lesson is to
minimize your risks so you can bail out or put the project on hold if
warranted. It will save you time, money, and the personal energy
you’ll need for future successes.

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MB0036 – Strategic Management & Business

1. Explain the different circumstances under which a

Answer: Strategies to Improve Sales

It may find three options:

At times, it may be possible to gain more market share with the

Market Development Strategy is to explore the possibility to find or

MB0036 – Strategic Management and Business Policy -1-

Product Development Strategy involves consideration of new

Study the following example to understand what Product

MICROSOFT’s New Strategy

Microsoft envisions a home where everyday appliances and

It is also said at Microsoft that VCRs can be programmed via e-mail,

If a company operating in music systems takes over the

Alternatively, if this company acquires some of its most profitably

MB0036 – Strategic Management and Business Policy -2-

A printing press might shift over to offset printing with computerised

Alternatively, the company might choose new businesses that have

2. What are the components of a good Business Plan and

Answer: The format of a Business Plan is something that has been

When you create a business plan, don't attempt to recreate its

MB0036 – Strategic Management and Business Policy -3-

Executive Summary Section

Use the Executive Summary section of your business plan to

Describe the organization of your business including your

If you've captured your audience so far they'll read on. Otherwise,

Devote the balance of your business plan to providing details of the

The Business Section

Market Analysis Section

MB0036 – Strategic Management and Business Policy -4-

3. You wish to start a new venture to manufacture auto

Answer: Every business starts out as an idea. This idea usually

MB0036 – Strategic Management and Business Policy -5-

As part of the initial research process, it is important to

2. Business Plan Formulation

In the business plan you typically include following heads:

MB0036 – Strategic Management and Business Policy -6-

5. Preparing for Launch

4. Explain the process of due Diligence and why it is

Answer: Due diligence

MB0036 – Strategic Management and Business Policy -7-

Generally, due diligence will involve assessing the overall

So in a due diligence process, your commercial partner may

MB0036 – Strategic Management and Business Policy -8-

In preparing to licence your technology, you should consider in

5. Is Corporate Social Responsibility necessary and how does

Answer: Corporate social responsibility (CSR), also known as

The practice of CSR is much debated and criticized. Proponents

MB0036 – Strategic Management and Business Policy -9-

In the increasingly conscience-focused marketplaces of the 21st

Business ethics can be both a normative and a descriptive

ISO 26000 is the recognized international standard for CSR

Potential business benefits

MB0036 – Strategic Management and Business Policy - 10 -

MB0036 – Strategic Management and Business Policy - 11 -

6. Distinguish between a Financial Investor and a Strategic

Answer: In the not so distant past, there was little difference

As markets grew, the scales of industrial production (and of service

Thus, two classes of investors emerged. One type supplied firms

MB0036 – Strategic Management and Business Policy - 12 -

In many cases, the strategic investor also provided the necessary

These are the functions normally reserved to financial investors:

MB0036 – Strategic Management and Business Policy - 13 -