MB0036 Set1 and Set2

Siddharth Sharma Roll no:
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Master of Business Administration – MBA Semester 4
MB0036 – Strategic Management & Business Policy
Assignment Set- 1
Note: Each question carries 10 Marks. Answer all the questions.
Q1. 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 (10 marks).
Ans: 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.
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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 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)
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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 computerized 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 centers or Call Centers 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.
Q2. What are the components of a good Business Plan and briefly explain
the importance of each. (10 marks).
Ans. 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
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see those crucial decision-making
components, they'll see no reason to precede 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.
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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 that can help you through this
immense project. These
software packages are easy to use and affordable. Use one today and produce a
professional-quality Business Plan - including all critical components - tomorrow!
Q3. You wish to start a new venture to manufacture auto components.

Explain different stages in the process of starting this new business. (10
marks).
Ans. 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.
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.
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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.
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:
• Executive Summary
• Company and Product Description
• Market Description
• Equipment and Materials
• Operations
• Management and Ownership
• Financial Information and Start-Up Timeline
• Risks and Their Mitigation
• 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.
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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 is the feasible solution and also pamphlets
circulated across the pioneers. This apart personal marketing is much more
suggested.
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 shop floor 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.
Q4. Explain the process of due Diligence and why it is necessary.(10

marks).
Ans. 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
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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 license 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;
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· 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 license 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 license
terms. It should also speed up the licensing negotiations, and ultimately the
commercialization of your intellectual property.
Q5. Is Corporate Social Responsibility necessary and how does it benefit a

company and its shareholders? (10 marks).
Ans. 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.
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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 financial
performance. However, businesses may not be looking at short-run financial
returns when developing their CSR strategy.
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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
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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.
Q6. Distinguish between a Financial Investor and a Strategic Investor

explaining the role they play in a Company. (10 marks).
Ans. 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
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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.
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.
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.
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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.
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.
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.
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.
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.
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.
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.
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
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.
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To constantly monitor and analyses 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.
To analyses receivables and collectibles on a regular and timely basis.
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.
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.
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:
The selection of infrastructure, equipment, raw materials, industrial processes, etc.;
Negotiations and agreements with providers and suppliers;
Minimizing the costs of infrastructure by deploying proprietary components and

planning;
The provision of corporate guarantees and letters of comfort to suppliers;
The planning and erecting of the various sites, structures, buildings, premises,
factories, etc.;
The planning and implementation of line connections, computer network

connections, protocols, solving issues of compatibility (hardware and software,
etc.);
Project planning, implementation and supervision.
Marketing and Sales
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
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and other media campaigns. The strategic investor also implements these plans or
supervises their implementation.
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.
The dissemination of the product as a preferred choice among vendors, distributors,

individual users and businesses in the territory.
Special events, sponsorships, collaboration with businesses.
The planning and implementation of incentive systems (e.g., points, vouchers).
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.
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
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.
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
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proprietary software developed by it and specifically tailored to the needs of
companies operating in the firm's market.
The encouragement of the development of in-house, proprietary, technological

solutions to the needs of the firm, its clients and suppliers.
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
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.
To run the day to day business of the firm.
To secure the unobstructed flow of relevant information and the protection of

confidential organization.
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.
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Master of Business Administration-MBA Semester 4
MB0036- Strategic management & Business Policy
Assignment Set-2
Note: Each question carries 10 Marks. Answer all the questions.
Q.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.(10 marks)
Ans. 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.
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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
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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.
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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
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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)
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· 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
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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
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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.
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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
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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
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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
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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:
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· 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.
Q2. Write short notes on :
a) sales projections (10 marks).
Ans.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
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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
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· 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:
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· 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;
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· 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 focused 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 prioritized 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 recognized. 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;
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· 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 organizations 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.
b) importance of creativity in Business
Ans. 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.)
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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.
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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 .
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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
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· 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’s S Stock price.

operating cash flows.
Investment costs X Exercise price
Length of time the decision may t Time to expiry.

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.
Self Assessment Questions I
State whether the following statements are True or False:
1. The people involved in manufacturing actually create products that change the
world.
2. In the rapidly changing world of global markets, e-commerce, evolving tele-

communications and internet, the secrets of Complex System evolution offer us a
basis on which to reflect on the management of our businesses.
3. Complex Systems thinking informs us how to achieve a high rate of delivery of

new products and services and rapid adaptation to changing conditions.
4. The creativity and imagination of a business will come from the dynamic
interaction of diverse individuals.
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5. Efficiency of execution must precede imagination and creativity.
Q3. What factors are to be taken into account in a crisis communications

strategy?(10 marks).
Ans. 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:
– Face-to-face meetings (individual and group)
– News conferences
– Voice mail/email
– Company Intranet and Internet sites
– Toll-free hotline
– Special newsletter
– 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.
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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.
Q4. What elements should be included in a Marketing Plan under Due

Diligence while seeking investment in for your Company? (10 marks).
Ans. 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.
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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 (licenses) 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.
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· 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 licenses granted to the firm
· A legal opinion regarding the above licenses
· 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)
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· 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
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· 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.
Q5. Distinguish between Joint Ventures and Licensing, explaining the

relative advantages and disadvantages of each.(10 marks).
Ans. 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 license 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 license 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, licenses can be exclusive or non-exclusive. If a patent owner grants a

non-exclusive license 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 license to Company A to make and
sell the invention in Malaysia, they would not be able to give a license to
anyone else in Malaysia while the license 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
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exclusive licenses for different territories at the same time. For example, a patent
owner can grant an exclusive license to make and sell their patented invention in
Malaysia for the term of the patent, and grant a separate exclusive license to
manufacture and sell their patented invention in India for the term of the patent.
Separate licenses 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 license to one company to use the technology for an
arthritis drug, a separate exclusive license to another company to use it for relief of
cold symptoms, and a further exclusive license to a third company to use it for
veterinary pharmaceuticals.
A license 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 licenses and assignments of patent rights do not have to cover all patent
rights together.
Licenses are often limited to specific rights, territories and time periods. For
example, a patent owner could exclusively license 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 license. When assigning the rights, you might seek to
negotiate a license from the new owner to ensure that you can continue to use your
invention. For instance, you might negotiate an arrangement that gives you license
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.
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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 commercialization 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 commercialization 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 flavor 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 commercialize a specific new
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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’ recognized 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 commercializing 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 commercialization process. At the same time,
the research institute can benefit from the commercialization 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).
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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 commercialization is best for you?
Each new technology and associated package of IP rights is potentially difference,

and the mechanism you choose for commercialization 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 commercialization. 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 commercialization 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 specialized 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.
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Companies can gradually separate a business from the rest of the organization, 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.
Q6. You wish to commercialize your invention. What factors would you
weigh in choosing an appropriate course? (10 marks).
Ans. 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
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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
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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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Note: Each question carries 10 Marks. Answer all the questions.

Q1. Explain the different circumstances under which a suitable growth

Ans: Strategies to Improve Sales

It refers to the process of identifying opportunities to achieve further growth within

It may find three options:

· To penetrate into existing markets

· To develop new markets

· To develop new products

Product Development Strategy involves consideration of new products of potential

MICROSOFT’s New Strategy

It is called PC-plus. It has three elements:

b) Developing software to allow these devices to communicate.

c) Investing heavily to help build wireless and high-speed internet access

It refers to the process of identifying opportunities to develop or acquire businesses

If a company operating in music systems takes over the manufacturing business of

It refers to the process of identifying opportunities to develop or acquire businesses

Sales Improvement Strategies:

a) A supplier of computer stationery invests in a computer stationery manufacturing

c) A company dealing in computer floppies plans to set up a Software Technology

Executive Summary Section

The Business Section

Market Analysis Section

Q3. You wish to start a new venture to manufacture auto components.

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

Business Plan Formulation

In the business plan you typically include following heads:

• Company and Product Description

• Equipment and Materials

• Management and Ownership

• Financial Information and Start-Up Timeline

• Risks and Their Mitigation

Preparing for Launch

Q4. Explain the process of due Diligence and why it is necessary.(10

So in a due diligence process, your commercial partner may undertake a range of

· Checks on external records, such as patent registers and patent databases,

· Searches of patent databases for conflicting technology;

· Independent advice from patent attorneys on issues such as patent ownership,

· Checks on employment contracts, confidentiality arrangements, and contracts

· Checks on laboratory notebooks in the event that the validity of US patents is of

· Surveys of the activity of competitors and owners of competing technology, and

· Analysis of freedom to operate issues.

Q5. Is Corporate Social Responsibility necessary and how does it benefit a

Ans. Corporate social responsibility (CSR), also known as corporate responsibility,

In the increasingly conscience-focused marketplaces of the 21st century, the

Business ethics can be both a normative and a descriptive discipline. As a corporate

Potential business benefits

Corporations are keen to avoid interference in their business through taxation or

Q6. Distinguish between a Financial Investor and a Strategic Investor

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

These are the functions normally reserved to financial investors:

To implement continuous financial audit and control systems to monitor the

To collaborate and coordinate the activities of outside suppliers of financial services

To maintain a working relationship and to develop additional relationships with

To fully computerize all the above activities in a combined hardware-software and

Otherwise, to initiate and engage in all manner of activities, whether financial or of

Collection and Credit Assessment

To construct and implement credit risk assessment tools, questionnaires,

To analyses receivables and collectibles on a regular and timely basis.

To collaborate with legal institutions, law enforcement agencies and private

To coordinate an educational campaign to ensure the voluntary collaboration of the

The strategic investor is, usually, put in charge of the following:

Project Planning and Project Management