Mba Sem - 4 SET-1 Strategic Management & Business Policy

MB0036 Strategic Management and Business Policy
Semester-IV
MBA SEM – 4
SET-1
STRATEGIC MANAGEMENT
&
BUSINESS POLICY
Q:1 Explain the different circumstances under which a suitable growth

strategy should be selected by any company to improve its
performance (i.e., intensive, integrative or diversification growth).
You may select an example of your choice to substantiate your
views.
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. (BackwardIntegr ation)
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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 (ConcentricD iver s ificat ion).
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 centres or Call Centres with new service
clients.
Situation Analysis
Sales Improvement Strategies:
a) A supplier of computer stationery invests in a computer stationery
manufacturing unit.
b) A vendor supplying engine boxes to Maruti decides to supply the same
with modifications to Hyundai.
c) A company dealing in computer floppies plans to set up a Software
Technology Park.
Q:2. What are the components of a good Business Plan and briefly
explain the importance of each.
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.
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If they do not see those crucial decision-making components, they'll see no

reason to proceed with their review of your business plan, no matter how
great your business idea.
Executive Summary Section
Every business plan must begin with an Executive Summary section. A
well-written Executive Summary is critical to the success of the rest of the
document. Here is where you need to capture the attention of your
audience so that they will be compelled to read on. Remember, it's a
summary, so each and every word must be carefully selected and
presented.
Use the Executive Summary section of your business plan to accurately
describe the nature of your business venture including the need that you
plan to fill. Show the reasons why people need your product or service.
Show this by including a brief analysis of the characteristics of your
potential market. Describe the organization of your business including your
management team. Also, briefly describe your sales and marketing plan or
approach. Finally include the numbers that those reviewing your business
plan want to see - the amount of capital you seek, the carefully calculated
sales projections and your plan to repay the loan.
If you've captured your audience so far they'll read on. Otherwise, they'll
close the document and add your business plan to the heap of other
rejected ideas. Devote the balance of your business plan to providing
details of the items outlined in the Executive Summary.
The Business Section

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

An analysis of the market shows that you have done your homework. This
section is basically a summary of your Marketing Plan. It needs to show the
demand for your product or service, the proposed market, trends within
the industry, a description of your pricing plan and packaging and a
description of your company policies.
Financing Section
The Financing section must show that you are as committed to your
business venture as you expect those reading your business plan to be.
Show the amount of personal funds you are contributing and their source.
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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!
Q:3 You wish to start a new venture to manufacture auto components.

Explain different stages in the process of starting this new
business.
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.
1. Idea Researching
In this stage, you are researching your idea. The object of your research is
to find out who is marketing the same product or service in your area, and
how successful the marketer has been. You can accomplish this by a
Google search on the Internet, launching a test- marketing campaign, or
conducting surveys. Also, you are attempting to find what the level of
interest is in the products (or services) you wish to market.
Here as the main goal is to start a company that manufactures the auto
components, we are to make a research on all the auto companies which
are procuring the spares from the outside vendors. And also the
competitors who are all marketing that, their existence and also how
successful they are.
As part of the initial research process, it is important to consider the legal
requirements of selling your product or service. According to the Biz Ed
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website, examine the legal ramifications of your business. Know the tax
laws governing your business. If insurance is a requirement, prepare to
budget for it. Also, be aware of any safety laws governing you as an
employer. Hence we are also to make a research on the feasible area
where we can start our organization and licenses that we need to take
keeping in mind the environmental factors as well.
2. Business Plan Formulation

You must write a business plan. As Pendrith points out, this is crucial if you
want funding, such as a small business loan or grant, or if you wish to
lease a building. At this stage, Pendrith advises, you need to consult with
an attorney or business adviser for assistance. In the business plan you
typically include following heads:
i) Executive Summary
ii) Company and Product Description
iii) Market Description
iv) Equipment and Materials
v) Operations
vi) Management and Ownership
vii) Financial Information and Start-Up Timeline
viii) Risks and Their Mitigation
3. Financial Planning
Financial planning involves thinking about the financial costs of starting
and maintaining your business. According to the Biz Ed website, you
should consider such issues as the costs of running the business; the
prices you wish to charge your customers; cash flow control; and how you
wish to set up financial reserves in case of an emergency or an event
causing significant loss to the business. This includes the planning of
whether to take any loans or make personal investments in the company.
4. Advertising Campaign
Decide how you will market your product. Consider your budget and your
target audience. Make up business cards with your logo on it, your name
and the name of your business. Make sure that they are of the most
professional quality. Utilizing print, the newspaper, the Internet, radio or
TV is also wise, considering, of course, the size of your advertising budget.
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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.
5. Preparing for Launch

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

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 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
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patented technology only to find out that patent renewal fees have not
been paid and the patent has lapsed, or to find out that the patent was
being opposed by another company, or to find that there is prior art
available that calls into question its validity. It may transpire that a
student, a contractor or a visiting researcher could actually be legally
entitled to some or all of the patent rights. Even a serious level of
uncertainty or doubt could be enough to deter a potential partner,
especially if they have run into this kind of difficulty before.
Due diligence may also involve searching for information about the full
range of IP rights that might impact on the relevant technology – for
instance, to check whether you have later filed patent applications on
improvements to the original patented technology, that may limit the
value of their investment in the original technology. Other intellectual
property rights – such as related trade mark or design registrations, or key
trade secrets or copyright material (such as manuals or software) – may
also need to be identified or located, as these may also affect the
commercial partner’s interests in the technology. For example, they may
be unwilling to take out a licence for your patent without getting access to
the software you have developed for a related process. They may want the
right to use your trade mark in association with the patented technology.
So in a due diligence process, your commercial partner may undertake a
range of checks and need various forms of information. These may include:
• Checks on external records, such as patent registers and patent
databases, including foreign patents;
• Searches of patent databases for conflicting technology;
• Independent advice from patent attorneys on issues such as patent
ownership, patent validity and scope of patent claims;
• Checks on employment contracts, confidentiality arrangements, and
contracts with other parties that may interfere with the exercise of IP
rights;
• Details of the patent prosecution such as examiners’ reports and other
opinions;
• Details of any legal challenges to the patent, and the way the proceedings
were resolved;
• Checks on laboratory notebooks in the event that the validity of US patents
is of concern to the commercial partner (this also provides reassurance as
to claims of ownership of the patent);
• Surveys of the activity of competitors and owners of competing
technology, and possibilities of conflict; and
• Analysis of freedom to operate issues.
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In preparing to licence your technology, you should consider in advance

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

benefit a company and its shareholders?
Ans: Corporate social responsibility (CSR), also known as corporate
responsibility, corporate citizenship, responsible business, sustainable
responsible business (SRB), or corporate social performance,[1] is a form
of corporate self-regulation integrated into a business model.
Ideally, CSR policy would function as a built-in, self-regulating mechanism
whereby business would monitor and ensure its support to law, ethical
standards, and international norms. Consequently, business would
embrace responsibility for the impact of its activities on the environment,
consumers, employees, communities, stakeholders and all other members
of the public sphere. Furthermore, CSR-focused businesses would
proactively promote the public interest by encouraging community growth
and development, and voluntarily eliminating practices that harm the
public sphere, regardless of legality. Essentially, CSR is the deliberate
inclusion of public interest into corporate decision-making, and the
honoring of a triple bottom line: people, planet, profit.
The practice of CSR is much debated and criticized. Proponents argue that
there is a strong business case for CSR, in that corporations benefit in
multiple ways by operating with a perspective broader and longer than
their own immediate, short-term profits. Critics argue that CSR distracts
from the fundamental economic role of businesses; others argue that it is
nothing more than superficial window-dressing; others yet argue that it is
an attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations. Corporate Social Responsibility has
been redefined throughout the years. However, it essentially is titled to aid
to an organization's mission as well as a guide to what the company stands
for and will uphold to its consumers.
Development business ethics is one of the forms of applied ethics that
examines ethical principles and moral or ethical problems that can arise in
a business environment.
In the increasingly conscience-focused marketplaces of the 21st century,
the demand for more ethical business processes and actions (known as
ethicism) is increasing. Simultaneously, pressure is applied on industry to
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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. [2]
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. 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.
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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 torecruitm ent andretention,[12] 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, fundrais ing activities or
community volunteering. See also Corporate Social Entrepreneurship,
whereby CSR can also be driven by employees' personal values, in addition
to the more obvious economic and governmental drivers.
Risk management
Managing risk is a central part of many corporate strategies. Reputations
that take decades to build up can be ruined in hours through incidents
such as corruption scandals or environmental accidents. These can also
draw unwanted attention from regulators, courts, governments and media.
Building a genuine culture of 'doing the right thing' within a corporation
can offset these risks.
Brand differentiation
In crowded marketplaces, companies strive for a unique selling proposition
that can separate them from the competition in the minds of consumers.
CSR can play a role in building customer loyalty based on distinctive
ethical values. Several major brands, such as The Co-operative Group, The
Body Shop and American Apparel are built on ethical values. Business
service organizations can benefit too from building a reputation for
integrity and best practice.
License to operate
Corporations are keen to avoid interference in their business through
taxation or regulations. By taking substantive voluntary steps, they can
persuade governments and the wider public that they are taking issues
such as health and safety, diversity, or the environment seriously as good
corporate citizens with respect to labour standards and impacts on the
environment.
Stakeholder priorities
Increasingly, corporations are motivated to become more socially
responsible because their most important stakeholders expect them to
understand and address the social and community issues that are relevant
to them. Understanding what causes are important to employees is usually
the first priority because of the many interrelated business benefits that
can be derived from increased employee engagement (i.e. more loyalty,
improved recruitment, increased retention, higher productivity, and so on).
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Key external stakeholders include customers, consumers, investors

(particularly institutional investors), and communities in the areas where
the corporation operates its facilities, regulators, academics, and the
media.
Q:6 Distinguish between a Financial Investor and a Strategic Investor

explaining the role they play in a Company.
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 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
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companies, the financial investor has no interest, nor the resources to get
seriously involved in any one of them. Micro-management is left to others -
but, in many cases, so is macro-management. The financial investor
participates in quarterly or annual general shareholders meetings. This is
the extent of its involvement.
The strategic investor, on the other hand, represents the real long term
accumulator of value. Paradoxically, it is the strategic investor that has the
greater influence on the value of the company's shares. The quality of
management, the rate of the introduction of new products, the success or
failure of marketing strategies, the level of customer satisfaction, the
education of the workforce - all depend on the strategic investor. That
there is a strong relationship between the quality and decisions of the
strategic investor and the share price is small wonder. The strategic
investor represents a discounted future in the same manner that shares
do. Indeed, gradually, the balance between financial investors and
strategic investors is shifting in favour of the latter. People understand that
money is abundant and what is in short supply is good management.
Given the ability to create a brand, to generate profits, to issue new
products and to acquire new clients - money is abundant.
These are the functions normally reserved to financial investors:
Financial Management
The financial investor is expected to take over the financial management
of the firm and to directly appoint the senior management and, especially,
the management echelons, which directly deal with the finances of the
firm.
1. To regulate, supervise and implement a timely, full and accurate set of
accounting books of the firm reflecting all its activities in a manner
commensurate with the relevant legislation and regulation in the territories
of operations of the firm and with internal guidelines set from time to time
by the Board of Directors of the firm. This is usually achieved both during a
Due Diligence process and later, as financial management is implemented.
2. To implement continuous financial audit and control systems to monitor
the performance of the firm, its flow of funds, the adherence to the budget,
the expenditures, the income, the cost of sales and other budgetary items.
3. To timely, regularly and duly prepare and present to the Board of Directors
financial statements and reports as required by all pertinent laws and
regulations in the territories of the operations of the firm and as deemed
necessary and demanded from time to time by the Board of Directors of
the Firm.
4. To comply with all reporting, accounting and audit requirements imposed
by the capital markets or regulatory bodies of capital markets in which the
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securities of the firm are traded or are about to be traded or otherwise

listed.
5. To prepare and present for the approval of the Board of Directors an
annual budget, other budgets, financial plans, business plans, feasibility
studies, investment memoranda and all other financial and business
documents as may be required from time to time by the Board of Directors
of the Firm.
6. To alert the Board of Directors and to warn it regarding any irregularity,
lack of compliance, lack of adherence, lacunas and problems whether
actual or potential concerning the financial systems, the financial
operations, the financing plans, the accounting, the audits, the budgets
and any other matter of a financial nature or which could or does have a
financial implication.
7. To collaborate and coordinate the activities of outside suppliers of financial
services hired or contracted by the firm, including accountants, auditors,
financial consultants, underwriters and brokers, the banking system and
other financial venues.
8. To maintain a working relationship and to develop additional relationships
with banks, financial institutions and capital markets with the aim of
securing the funds necessary for the operations of the firm, the attainment
of its development plans and its investments.
9. To fully computerize all the above activities in a combined hardware-
software and communications system which will integrate into the systems
of other members of the group of companies.
10. Otherwise, to initiate and engage in all manner of activities, whether
financial or of other nature, conducive to the financial health, the growth
prospects and the fulfillment of investment plans of the firm to the best of
his ability and with the appropriate dedication of the time and efforts
required.
Collection and Credit Assessment

1. To construct and implement credit risk assessment tools,
questionnaires, quantitative methods, data gathering methods and
venues in order to properly evaluate and predict the credit risk rating of
a client, distributor, or supplier.
2. To constantly monitor and analyse the payment morale, regularity, non-
payment and non- performance events, etc. – in order to determine the
changes in the credit risk rating of said factors.
3. To analyse receivables and collectibles on a regular and timely basis.
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4. To improve the collection methods in order to reduce the amounts of

arrears and overdue payments, or the average period of such arrears
and overdue payments.
5. To collaborate with legal institutions, law enforcement agencies and
private collection firms in assuring the timely flow and payment of all
due payments, arrears and overdue payments and other collectibles.
6. To coordinate an educational campaign to ensure the voluntary
collaboration of the clients, distributors and other debtors in the timely
and orderly payment of their dues.
The strategic investor is, usually, put in charge of the following:

Project Planning and Project Management
The strategic investor is uniquely positioned to plan the technical side of
the project and to implement it. He is, therefore, put in charge of:
1. The selection of infrastructure, equipment, raw materials, industrial
processes, etc.
2. Negotiations and agreements with providers and suppliers;
3. Minimizing the costs of infrastructure by deploying proprietary components
and planning;
4. The provision of corporate guarantees and letters of comfort to suppliers;
5. The planning and erecting of the various sites, structures, buildings,
premises, factories, etc.;
6. The planning and implementation of line connections, computer network
connections, protocols, solving issues of compatibility (hardware and
software, etc.);
7. Project planning, implementation and supervision.
Marketing and Sales

1. The presentation to the Board an annual plan of sales and marketing
including: market penetration targets, profiles of potential social and
economic categories of clients, sales promotion methods, advertising
campaigns, image, public relations and other media campaigns. The
strategic investor also implements these plans or supervises their
implementation.
2. The strategic investor is usually possessed of a brand name 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 brand name, its recognition and market awareness,
market penetration, co-branding, collaboration with other suppliers – are
all the responsibilities of the strategic investor.
3. The dissemination of the product as a preferred choice among vendors,
distributors, individual users and businesses in the territory.
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4. Special events, sponsorships, collaboration with businesses.

5. The planning and implementation of incentive systems (e.g., points,
vouchers).
6. The strategic investor usually organizes a distribution and dealership
network, a franchising network, or a sales network (retail chains) including:
training, pricing, pecuniary and quality supervision, network control,
inventory and accounting controls, advertising, local marketing and sales
promotion and other network management functions.
7. The strategic investor is also in charge of "vision thinking": new methods of
operation, new marketing ploys, new market niches, predicting the future
trends and market needs, market analyses and research, etc.
The strategic investor typically brings to the firm valuable experience in
marketing and sales. It has numerous off the shelf marketing plans and
drawer sales promotion campaigns. It developed software and personnel
capable of analysing any market into effective niches and of creating the
right media (image and PR), advertising and sales promotion drives best
suited for it. It has built large databases with multi-year profiles of the
purchasing patterns and demographic data related to thousands of clients
in many countries. It owns libraries of material, images, sounds, paper
clippings, articles, PR and image materials, and proprietary trademarks
and brand names. Above all, it accumulated years of marketing and sales
promotion ideas which crystallized into a new conception of the business.
Technology
1. The planning and implementation of new technological systems up to
their fully operational phase. The strategic partner's engineers are
available to plan, implement and supervise all the stages of the
technological side of the business.
2. The planning and implementation of a fully operative computer system
(hardware, software, communication, intranet) to deal with all the aspects
of the structure and the operation of the firm. The strategic investor puts
at the disposal of the firm proprietary software developed by it and
specifically tailored to the needs of companies operating in the firm's
market.
3. The encouragement of the development of in-house, proprietary,
technological solutions to the needs of the firm, its clients and suppliers.
4. The planning and the execution of an integration program with new
technologies in the field, in collaboration with other suppliers or market
technological leaders.
Education and Training

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The strategic investor is responsible to train all the personnel in the firm:
operators, customer services, distributors, vendors, sales personnel. The
training is conducted at its sole expense and includes tours of its facilities
abroad.
The entrepreneurs – who sought to introduce the two types of investors, in
the first place – are usually left with the following functions:
Administration and Control
1. To structure the firm in an optimal manner, most conducive to the
conduct of its business and to present the new structure for the Board's
approval within 30 days from the date of the GM's appointment.
2. To run the day to day business of the firm.
3. To oversee the personnel of the firm and to resolve all the personnel
issues.
4. To secure the unobstructed flow of relevant information and the
protection of confidential organization.
5. To represent the firm in its contacts, representations and negotiations
with other firms, authorities, or persons.
This is why entrepreneurs find it very hard to cohabitate with investors of
any kind. Entrepreneurs are excellent at identifying the needs of the
market and at introducing technological or service solutions to satisfy such
needs. But the very personality traits which qualify them to become
entrepreneurs – also hinder the future development of their firms. Only the
introduction of outside investors can resolve the dilemma. Outside
investors are not emotionally involved. They may be less visionary – but
also more experienced.
They are more interested in business results than in dreams. And – being
well acquainted with entrepreneurs – they insist on having unmitigated
control of the business, for fear of losing all their money. These things
antagonize the entrepreneurs. They feel that they are losing their creation
to cold-hearted, mean spirited, corporate predators. They rebel and prefer
to remain small or even to close shop than to give up their cherished
freedoms. This is where nine out of ten entrepreneurs fail - in knowing
when to let go.
Hanisha Dudeja
Semester-IV
Roll. No. 510918049

Semester-IV
MBA SEM – 4
SET-2
STRATEGIC MANAGEMENT
&
BUSINESS POLICY
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.
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 homeownership activity. This assessment is based on the
shopping and traffic patterns of the area and the demographic and socio-
economic characteristics of the community. A bad or insufficient market
study could encourage your organization to pursue a business destined to
fail, with potentially disastrous results for the organization as a whole.
Through a market study you will be able to identify gaps in existing
products and services and unsatisfied demand for additional or expanded
products and services. If your organization does not have staff capacity to
conduct a market study, you might hire a consultant or solicit the
assistance of business administration students from a local college or
university. Conducting a solid and thorough market study up front will
provide essential information for your final business plan.
Analysis of Local and Regional Industry Trends: Another method of
investigating potential business opportunities is to research local and
regional business and industry trends. You may be able to identify which
business or industrial sectors are growing or declining in your city,
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metropolitan area or region. The regional or metropolitan area planning

agency for your area is a good source of data on industry trends.
Internal Capacity: The board, staff or membership of your organization
may possess knowledge and skills in a particular business sector or
industry. Your organization may wish to draw upon this internal expertise
in selecting potential business opportunities.
Internal Purchasing Needs / Collaborative Procurement: Perhaps, your
organization frequently purchases a particular service or product. If nearby
affiliate organizations also use this service or product, this may present a
business opportunity. Examples of such products or services include
printing or copying services, travel services, transportation services,
property management services, office supplies, catering services, and
other products. You will still need to conduct a complete market study to
determine the demand for this product or service beyond your internal
needs or the needs of your partners or affiliates.
Identify Business Opportunities
Buying an Existing Business: Rather than starting a new business, you may
wish to consider purchasing an existing business. Perhaps a local retail or
small light manufacturing business that has been an anchor to the local
retail area or a much-needed source of jobs in the neighborhood is for sale.
Its closure would mean the loss of jobs and services for your neighborhood.
Your organization might consider purchasing and taking over the
enterprise instead of starting a new business. If you decide to pursue this
option, you still need to go through the steps of creating a business plan.
However, before moving ahead, these are just a few important areas to
research in assessing the business you plan to purchase:
Be sure to conduct a thorough review of the financial statements for the
past three to five years to determine the current fiscal status and recent
financial trends, the validity of the accounts receivable and the status of
the accounts payable. Are all the required licenses and permits in place
and can they be transferred to a new owner?
Also look at the quality of key employees who, because of their expertise,
may need to remain with the business.
You will also need to assess the customer or client base and determine
whether its members will remain loyal to the business after it changes
hands.
Another area to evaluate is the perception or image of the business.
Inspect the facilities and talk to suppliers, customers and other businesses
in the area to learn more about the reputation of the business. At this early
stage of your planning process, be sure to consult an attorney experienced
in corporation law. As a non-profit corporation, engaging in income-
generating activities not related to your mission may affect your tax-
exempt status. You may also wish to protect your organization from any
liability issues connected with the proposed business activity. After you
have decided on a particular business activity, have a qualified attorney
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advise you on the proper corporate structure for your new venture. In
addition to qualified legal counsel, seek the expertise of an experienced
professional in that particular industry. He or she will bring valuable
knowledge and insights regarding the industry that will prove extremely
useful during the business planning process.
Advisory
You have decided on a business opportunity that meets the goals of your
organization. Now you are ready to test the feasibility of the venture and
to present your business concept to the world. A solid business plan will
clearly explain the business concept, describe the market for your product
or service, attract investment, and establish operating goals and
guidelines.
The first step in writing your business plan is to identify your target
audience. Will this be an internal plan the board will use to assess the
feasibility and appropriateness of the business? Or will this plan be
distributed to a larger external audience such as funding sources,
commercial lenders or the community to gain financial backing and
political support for the proposed venture? The content and emphasis of
the plan will shift according to the audience.
You will also need to decide who will conduct the necessary research and
write the plan. The following table lists the advantages and disadvantages
of several options for getting the work done. You might consider a
combination of the options.
Creating One’s Own Business Plan
It is also important to establish a timeline for completing the plan. A
business plan can be completed by one staff member working full time in
as little as a week, although a thorough market analysis will add several
days at least. A committee will probably need much more time.
Combinations of staff, volunteers, consultants and a board committee may
lengthen or shorten the process depending on skill level, available time,
experience with planning and research, and the group’s facilitation needs.
Now that you have decided who will put together your business plan and
have set a timeline for its completion, you are ready to begin assembling
the elements of the plan. Your business plan should contain the following
sections:
• Executive summary
• Company and product description
• Market description
• Operations
• Management and ownership
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• 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.
Executive Summary
In this section of your business plan, provide a description of your
company, the industry you will be competing in, and the product or service
you plan to offer. Sell your concept! The executive summary may be the
first and only section of your business plan that most of your audience will
read. Tell the audience why the business is a great idea. Some readers will
look at this section to determine whether or not they want to learn more
about a business. Other readers will look to the executive summary as a
sample of the quality and professionalism of the overall plan. The
executive summary should be no more than one to three pages long and
should answer the following questions:
• Who are you? (describe your organization)
• What are you planning? (describe the service or product)
• Why are you planning it? (discuss the demand and market for the
service or product)
• How will you operate your business?
• When will you be in operation? (overview of timeline)
• What is your expected net profit? (discuss your projected sales and
costs)
Although the executive summary is the first part of your business plan, you
should write it after you have written the other sections of the plan in
order to include the most important points of each section.
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.
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Product or Service
After describing your company and its industry context, describe the
products or services you plan to provide. Focus on what distinguishes your
product or service from the rest of the market. Discuss what will attract
consumers to your product or service. Provide as much detail as necessary
to inform the reader about the particular characteristics of your product
that distinguish it from its competition – many nonprofits, for example,
expect to produce higher-quality housing than otherwise exists in the area.
Mention any distinctive elements in the manufacture of the product, such
as being “hand-made by a particular people from a specific area.” If you
are providing a service, explain the steps you will take to provide a service
that is better than your competition.
Price
Provide a realistic estimate of the price for your product or service, and
discuss the rationale behind that price. An unrealistic price estimate may
undermine the credibility of your plan and raise concerns that your product
or service may not be of sufficient quality or that you will not be able to
maintain profitability in the long run. Describe where this price positions
you in the marketplace: at the high end, low end or in the middle of the
existing range of prices for a similar product or service.
In other sections of the plan you will discuss the target market for your
product or service and also provide additional details on how the price of
your product fits into the overall financial projections for the enterprise.
Place
Describe the location where you will produce or distribute your product or
provide your service. Discuss the advantages of the location, such as its
accessibility, surrounding amenities and other characteristics that may
enhance your business.
Depending on your anticipated customer base, accessibility to your
location via public transportation could affect the marketability of your
product or service.
Customers
In this section of your business plan, you will describe the customer base
or market for your product or service. In addition to providing a detailed
description of your customer base, you will also need to describe your
competition (other local developers or nearby businesses providing a
similar service to your potential customer base).
Who will purchase your product or use your service? How large is your
customer base? Define the characteristics of your target market in terms
of its:
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• Demographics – Measures of age, gender, race, religion and family

size.
• Geography – Measures based on location.
• Socioeconomic Status – Measures based on individual or household
annual income.
Provide statistical data to describe the size of your target market. Sources
for this information may include recent data from the Bureau of Statistics,
state or local census data, or information gathered by your organization,
such as membership lists, neighborhood surveys and group or individual
interviews. Be sure to list the sources for your data, as this will further
validate your market assumptions. Include any relevant information
regarding the growth potential for your target market if your business is
expected to rely on growth. Cite any research forecasting population
increases in your target market or other trends and factors that may
increase the demand for your product or service.
Competition
Discuss how people identified in your target market currently meet their
need for your product or service. What other businesses exist in your area
that are similar to your proposed venture? For example, for a housing
business, what are the local markets for purchase and rental? How much
are people currently paying for similar products or services? Briefly
describe what differentiates your proposed venture from these existing
businesses and discuss why you are entering this market.
Sales Projections
Present an estimate of how many people you expect will purchase your
product or service. Your estimate should be based on the size of your
market, the characteristics of your customers and the share of the market
you will gain over your competition. Project how many units you will sell at
a specified price over several years. The initial year should be broken down
in monthly or quarterly increments. Account for initial presentation and
market penetration of your product and any seasonal variations in sales, if
appropriate.
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
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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.
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 .
Q:2 Write short notes on :

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(A) sales projection

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 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
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• Equipment/Machinery
• Production-related
• Administrative/Office Equip.
• Materials & Supplies
• Personnel
• Key Employees
• Contract Labour/Temps
• Training Expenses
• Marketing Expenses
• Advertisements
• Brochures/Literature/Other
• Insurance Premiums
• Distributor Contracts
• Contingency (5%)
Expenses:
Costs of Goods Sold
· Materials/Supplies
· Labor
· Rent
· Utilities
· Insurance
· Admin. Exp. (PT Sec.)
· Legal & Accounting
· Marketing
· Equipment Maintenance/Supplies
· Facility Maintenance
· Fees/Miscellaneous
Debt / Equity Investment:
· Equipment Loan
· Building Rehabilitation Loan
· Grants
· Owner Equity
Expenses
· Cost of Goods Sold
· Wages & Benefits
· Materials
· Supplies
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Overhead Expenses:
· Rent
· Utilities
· Building Maintenance/Security
· Marketing
· Accounting
· Legal
· Administrative Expense
· Interest Expense
· Depreciation
The Business Priorities are based upon six top-level objectives; these are:
· To make Business data available both to decision-makers and as much as
possible available in
the public domain;
· To ensure all holders of Business information are able to participate.
· To ensure that the data available through the NETWORK are of known
quality;
· To ensure that the NETWORK Gateway gives access to data on Location and
species used to
inform decisions affecting Business at local, regional, national and international
levels;
· To promote knowledge, use and awareness of the NETWORK;
· To enhance the skills base and expertise needed to support and develop
the NETWORK.
i) The objectives have cross-cutting themes which are:
A. Infrastructure development
B. Data standards and tools
C. Capacity building
D. Working with the wider public
E. Co-ordination and promotion
i) In addition, the partners will contribute to the overall realisation of the
objectives through work
that they initiate on their own account, but which does not necessarily fall under
the focussed
objectives for the Network.
ii) A series of assumptions have been made in formulating the Business Priorities
and their
associated work programme. These are:
· It is assumed that the present way of working, i.e. a lead partner approach for
each project will
be retained;
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· The plan is not intended to represent all the work that could be undertaken;
· It is anticipated that other work towards the principal aim of adding content and
providing a fully functional gateway will be adopted by the NETWORK as
part of its programme, but this work would have to be prioritised against
this core activity and separately resourced;
To give additional focus to the challenging nature of the task that the NETWORK
is setting
itself, a series of principle drivers have been recognised. The drivers are:
· Processes – This driver relates to facilitated targeted action on the ground
through providing knowledge of resource location, extent, pattern of
distribution, data quality and gaps. It also has the potential for engaging
more partners in the NETWORK;
· Environmental Impact Assessment (EIA) and Strategic Environmental
Assessment – This driver is concerned with providing ready access to data
on location, extent, pattern and quality of Business.
· Data contributor engagement – This driver is concerned with accessing sources
of data for the NETWORK enabling the assessment of actions and continual
improvement in the targeting of actions from the two previous drivers;
· Operational use – This relates to the use of the NETWORK within the day to day
business of
agencies as a source of data relevant to local reporting or casework;
· Generic enhancement – This driver encompasses capacity building and
Recording Schemes and
other contributing organisations and user groups, in order to ensure the
continued and enhanced
supply and use of information.
These lead naturally to three broad areas of work:
· Developing the recording network;
· Enhancing the Internet Gateway in terms of its functionality and the data
it accesses;
· Ensuring that the benefits already secured through the earlier work are
maintained.
The plan also acknowledges the need to co-ordinate activity between the
members of the NETWORK and their partners, and to communicate the
progress and successes of the work programme.
b) importance of creativity in Business
Sol.
Creativity
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Everyone in business is creative.

Some of most creative people are inman u factu rin g.
They actuallyCR EA TE products that change the world.
Some of the least creative people perhaps are inad vertis in g.
They spend most of their creative energy telling manufacturers that they…aren’t
creative!
Salespeople Are Creative – They are natural born story-tellers.
Accountants are creative.
Best Creative Exercise Ever
Write down your ideas.
You have a ton every day.
But most of the time, you can’t remember them by the day’s end.
Don’t let spelling and grammar issues or relentless self-editing stop you.
Get your ideas on paper (Let someone else edit it.)
Go retro: Carry a notebook, pen, and calendar into your meetings.
Look up at people.
Story First, Technology Last.
Don’t invest in a presentation class called “How to Use PowerPoint”….…until
you’ve taken a
class called “How to Tell Stories and Connect with Your Audience”.
2 A Simple Creative Exercise…
Simplify everything. Your life, your home, your office, your desk, your processes,
vision, policy,
procedures. Everything.
Fixing Problems is Creative.
Your job is to fix problems, not to complain.
Brainstorming
Don’t tell people that their ideas are bad, especially if you don’t have a
better one.
It’s only your life’s work.
Never say, “It’s not my job to be creative.”
How to Lose an Audience…
· Show your audience slides with columns of numbers.
· Refuse to tell them a story about the meaning of the numbers.
· Do not read your speech or presentation.
· Instead, read your audience.
How about a Show?
Try “giving a performance” instead of merely “giving a presentation.”
Everyone in Sales Knows…
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· Tell stories.
· Don’t just provide data.
Avoid Meetings.
Do not attend more than two meetings a day, or else you will never get any real
creative work
done.
Get Fresh Ideas.
Leave the office building at least once a day.
Another Lame Excuse…
Designers should put more of their passion into designing great work, instead of
endless
(boring) discussions about thes up eriority of the Macintosh over the PC!
The Lame Excuse …
“I can’t [write/design/create] because I don’t have the latest
[software/hardware/ upgrade]….”
You can’t let a machine take credit for your creativity.
And you can’t blame a machine for your creative failures, either.
Don’t Blame the Tool!
The more you become a master of your particular creative form….
….the fewer tools you will use.
Master carpenters use fewer tools than novices.
So do cooks.
Use what works.
Creativity: Use it or Lose it.
Create something every day.
Creativity takes place every day, not once in a while.
It’s not rare.
It’s just been mystified – Own your creativity.
Facts and observations
Giga-investments made in the paper and pulp industry, in the heavy metal
industry and in other base industries, today face scenarios of slow growth
(2-3 % p.a.) in their key markets and a growing over-capacity in Europe.
The energy sector faces growing competition with lower prices and cyclic
variations of demand.
Productivity improvements in these industries have slowed down to 1-2 % p.a .
Global financial markets make sure that capital cannot be used non-productively,
as its owners are offered other opportunities and the capital will move
(often quite fast) to capture these opportunities.
Semester-IV
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 teechnology 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 operating
cash flows.
S
Stock price.
Investment costs
X
Exercise price
Length of time the decision may be
deferred.
t
Time to expiry.
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:
Which model of commercialisation is best for you?

Each new technology and associated package of IP rights is potentially
difference, and the mechanism you choose for commercialisation should
take into account the particular features of the technology. One basic
consideration is to what extent you, as originator of the technology, wish
Semester-IV
to be involved and to invest in the subsequent development of the

technology. You will need to compare the advantages and disadvantages
of each model of commercialisation. Generally speaking, the higher degree
of risk and commitment of finance and resources you can invest, the
higher the degree of control you can secure over exploitation of the
technology invention, and the higher the financial return to your institution
may be.
There are many possible variations on each of these general models, and in
practice they can overlap. In deciding which model of commercialisation is
best for you, it is always a good idea to seek commercial or legal advice.
Remember that IPRs alone do not guarantee you a financial return on your
invention. You need to make good commercial decisions to benefit
financially from your intellectual property rights. Properly managed,
intellectual property rights should not be a burden but should yield a
return from your hard work in creating an invention.
Advantages of Joint ventures:
•
Provide companies with the opportunity to gain new capacity and expertise
•
Allow companies to enter related businesses or new geographic markets or gain
new
technological knowledge
•
access to greater resources, including specialised staff and technology
•
sharing of risks with a venture partner
•
Joint ventures can be flexible. For example, a joint venture can have a limited life
span and only cover part of what you do, thus limiting both your
commitment and the business' exposure.
•
In the era of divestiture and consolidation, JV’s offer a creative way for companies
to exit
from non-core businesses.
•
Companies can gradually separate a business from the rest of the organisation,
and eventually, sell it to the other parent company. Roughly 80% of all
joint ventures end in a sale by one partner to the other.
Semester-IV
6. You wish to commercialize your invention. What factors would you weigh in
choosing an
appropriate course? (10 marks).
Sol.
Following are the ways to commercialize my invention.
Licensing and Assignment - Defined
The difference between licensing and selling your invention is comparable to
leasing vs. selling house. When you sell your house, you transfer your title,
making someone else in charge of and liable for the house from that point
on. When you sell your invention, the scenario is the same, except that the
process is called “assigning” rather than selling. You, the inventor would
be the “assignor” and the person receiving the title or ownership of the
patent would be the “assignee.” Instead of selling, though, you may
choose to rent out your house. In this case, you retain the title to the
house and give someone permission to use it for a limited period of time.
In consideration for this, they pay you on a monthly, yearly or other basis.
The terms of this lease are entirely up to you and the person leasing your
house. It is up to you to negotiate within the boundaries of the law.
When you license an invention, it’s nearly the same as leasing. You’re offering a
manufacturer, for example, the right to manufacture and sell your
invention for a period of time, and in consideration for this they pay you on
a quarterly basis. In this case you are the “licensor” and the company is
the “licensee.” It is up to the parties to negotiate the terms of the license
within the boundaries of antitrust laws and other regulations that would
affect licenses and similar business arrangements.
Should I Sell or License?
You will generally have a better chance of licensing your invention instead of
assigning (selling)
your rights for two reasons:
First, it is initially hard to ascertain what the eventual value of an invention will
be. This will almost invariably result in a win/lose situation. If the value is
estimated high, the inventor wins and the company loses. On the other
hand, if the estimates are low, the inventor loses out.
Second, companies don’t like to pay cash up front unless they absolutely have to.
Generally, when a company makes a commitment to manufacture and
promote an invention, they are already anticipating a substantial financial
commitment for tooling, manufacturing setup, engineering expenses,
advance purchases of raw materials, marketing, and promotional
expenses. A company that is savvy with licensing negotiations will state
that the more money they pay the inventor up front, the fewer resources
they will have available to put into the promotion. This is a hard point to
Semester-IV
argue against, particularly if you’re interested in the long- range

commercial success of your invention.
At this point, Inventors have often already incurred substantial initial expenses
for patenting, prototyping and research, and need to be reimbursed as
soon as possible. Therefore, the inventor can argue that the potential
licensees should at least reimburse them for these out-of-pocket expenses.
After all, these are expenses the company would have normally paid if
they had developed such a product on their own. At that point, the
company may very well come back to the table and agree to reimburse
you for such initial expenses. However, they may want to make it an
advance against future royalties. Bear in mind that all negotiations are
unique and this is just an example.
When you assign (sell) your invention, you will typically lose control of it.
Although you may have cash in hand from the sale of your invention, the
company has the prerogative to ditch your technology and simply “sit on
it” unless you’ve made other arrangements. In some cases it is just as
important to the inventor to see his invention commercialized as it is to
receive the cash from it. Having an invention commercialized can give an
inventor a substantial head start in attracting interest in his additional
inventions. This may eventually be worth more to an inventor than the
initial cash he would receive from his first commercialized invention.
Should I Go It Alone?
Some inventors prefer to keep their inventions close and go into business for
themselves, which
comes with its own set of risks and rewards.
There are several different elements at play during the commercialization of an
invention: the company, the management, the technology, the market,
and the marketing team. Each of these is a variable. The more variables
you introduce, the greater the risk of failure. If you start with a new
company under new management with a new product, your chance of
success is obviously much slimmer than an existing company already in
the field with experience and knowledge in a similar product line. Even
when you look at an experienced company like 3-M, which brings many
new products to market, you’ll find that the company’s new products fail
often. With all its resources, 3-M’s success rate is said to be only 30%.
Unless you have greater resources, your success rate may be even less.
Because there are significant startup risks, it’s important to seriously investigate
the distinct advantages of having your invention introduced by an existing
company with experience in your field can promote your product
effectively and already has a skilled sales force with an existing client
base. These factors can greatly reduce the amount of time it takes to
introduce your invention to the marketplace. What you lose in control
Semester-IV
when you license can be gained tenfold from a timing standpoint, and in
reducing your risk.
Licensing offers another strong advantage when it is time to sell your
manufactured invention to customers. Manufacturers who introduce only
one invention or a very small product line often have a hard time selling to
large accounts. Large retail outlets prefer to deal with companies where
they can do one-stop shopping. Buyers (or purchasing agents) for the big
outlets want to reduce the number of bills they get and the number of
vendors they see each week. This is why the introduction of a new
invention to retailers by a new company is particularly challenging.
Licensing also has advantages over starting your own company because few
products have an unlimited life cycle. In time, your invention may be
replaced by new technology. What will your company sell then? Most
single-item companies that are still around after five years have done so
by introducing new products and expanding their product line. Companies
need new products to survive.
Sometimes starting your own company is the only way to go. If you’ve attempted
the licensing route and no manufacturer is interested in your invention at
its current stage of development, you may need to do a small market test
with a limited production run to prove your invention has sales potential.
Then if your sales results are positive, you may pique the interest of a
potential licensee who can take your invention to the next step.
It is easy to get ‘upside down’ financially with invention projects. This is
especially true since inventors have a tendency to overestimate the
ultimate value of their inventions. Get some realistic market research as
early in the game as possible. If you find that you must make a substantial
investment to actually manufacture an invention to prove its commercial
viability and
to interest potential licensees, keep careful track of your expenses and
constantly weigh these
expenses against any royalty potential that may result.
There are too many sad stories of inventors pouring money into inventions that
can never provide a return on their investment. Inventors always take a
risk when they spend time and money on an idea and if they’re lucky, it’ll
pay off quite well. The lesson is to minimize your risks so you can bail out
or put the project on hold if warranted. It will save you time, money, and
the personal energy you’ll need for future successes.

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MB0036 Strategic Management and Business Policy

Q:1 Explain the different circumstances under which a suitable growth

Market Development Strategy is to explore the possibility to find or

Alternatively, if this company acquires some of its most profitably

If they do not see those crucial decision-making components, they'll see no

The Business Section

Market Analysis Section

Q:3 You wish to start a new venture to manufacture auto components.

2. Business Plan Formulation

5. Preparing for Launch

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

In preparing to licence your technology, you should consider in advance

Q: 5 Is Corporate Social Responsibility necessary and how does it

Potential business benefits

Key external stakeholders include customers, consumers, investors

Q:6 Distinguish between a Financial Investor and a Strategic Investor

securities of the firm are traded or are about to be traded or otherwise

Collection and Credit Assessment

4. To improve the collection methods in order to reduce the amounts of

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

Marketing and Sales

4. Special events, sponsorships, collaboration with businesses.

Education and Training

Roll. No. 510918049

Q:1 What is the purpose of a Business Plan? Explain the features of

Whenever possible, goals should have quantifiable outcomes such as “to

metropolitan area or region. The regional or metropolitan area planning

• Financial information and timeline

Company and Product Description

• Demographics – Measures of age, gender, race, religion and family

Q:2 Write short notes on :

(A) sales projection

Everyone in business is creative.

· Option to Shut Down/Produce

Which model of commercialisation is best for you?

to be involved and to invest in the subsequent development of the

argue against, particularly if you’re interested in the long- range

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