10/26/2008

Iqra University
Faculty of Management Sciences

Entrepreneurship

Session I

•Attendance
•Introduction of the class
•Quiz
•Discussion on Course Outline
•Home Assignment – 1 {Summary of Socio-
Survey of Pakistan}
•CR
CR anddEEmail
il contacts
t t off all
ll students
t d t
•Briefing on Master Business Plan
•Groups formation
•Break
•Lecture

Lecture

What is Entrepreneurship?

Entrepreneurship is the practice of starting new

stuff (organizations) particularly new businesses , generally in
response to identified opportunities (obvious or obscure)

1
 10/26/2008

Lecture

Characteristics of entrepreneurship
• The entrepreneur has an enthusiastic vision, the driving force of an enterprise.
• The entrepreneur's vision is usually supported by an interlocked collection
of specific ideas not available to the marketplace.
• The overall blueprint to realize the vision is clear, however details may be
incomplete, flexible, and evolving.
• The entrepreneur promotes the vision with enthusiastic passion.
• With persistence and determination, the entrepreneur develops strategies
to change the vision into reality.
• The entrepreneur takes the initial responsibility to cause a vision to
become a success.
• Entrepreneurs take prudent risks. They assess costs, market/customer needs
and persuade others to join and help.
• An entrepreneur is usually a positive thinker and a decision maker.
• He is more of a Leader as compared to a Manager

Lecture

Small Businesses
is one that is independantly owned and operated and not dominant
in its field of operations.

Like, Small NGOs, retail outlets, boutiques, saloons, net cafes, gaming zones
Car spare parts manufacturers
manufacturers, edible oil company and many others
others. Just
remember that it should not be dominating player of its industry!

Criteria for SBM: (annually) - US

• Manufacturing: 250 or fewer employees
• Wholesaling 9.5 Milion to 22 Dollars in Sales
• Retailing: 2 – 7.5 Million
• Service: 1.5 – 10 Million

Lecture

Characteristics:

• Management is independent since manager

usually owns the business
• Capital
p is supplied
pp by
y and ownership
p is held by
y
an individual or a few individuals
• Area of operations is primarily local, although the market
isn't necessarily local
• Firm is small in comparison with the largest competitors
in its own industry

2
 10/26/2008

Lecture

Advantages of going into Small Business

• Independence
• Financial Opportunities
• Community Service
• Job Security
• Family Employment
• Challenge

Lecture

Disadvantages

• Sales fluctuations
• Comeptition
• Increased responsibilities
• Financial loses
• Employee relations
• Laws and regulations
• Risk of failure

Lecture

Why Small Business Fail?

• Business Failures can be defined as halt / seizure of operations

• Incompetence
• Neglect
• Fraud
• Disaster (force majeur)

3
 10/26/2008

Lecture

Some specific causes that lead to Business Failures

• Inadequate Records
• Expansion beyond resources
• Lack of information about customers
• Failre to diversify market
• Lack of marketing research
• Legal problems
• Nepotism (favouritism shown to relatives)
• Lack of technical competence
• Absentee management

Lecture 2

Home Assignment
Quiz
Term Project (10 members in 1 group, 6 groups)

Groups
Group 1 Group 2 Group 3 Group 4 Group 5 Group 6
aa ss

4
 10/26/2008

Lecture 2

Discussion

Critical Obstacles to SB Sucecss

Discussion on Page 20

Lecture 2

Technological Revolution and SBM

- Computers, Notebooks, Software (what speed, space, technological

obsolescence, right quantity, Software registration, MS Raids at offices
in Karachi, Insurance of your systems)

Some common sense questions when it comes to purchasing a software

• Does the program do what needs to be done
• Does the developer have a reputation for reliability
• Will this program run on the current computer
• Will this program run quickly enough on current computer / upgrading?
• Is the program easy to learn and use
• Is the documentation clear

Lecture 2

Technological Revolution and SBM

Fax, copier, printers, Scanners, PABC

Cell phones
Internet – brought greatest revolution in small business management
category.
t
Due to Price, greater accessibility, better service, increased convenience
etc

5
 10/26/2008

Lecture 2

Family Business

Advantages of Family controlled firms

• Long term orientation
• p
Greater independence of action
• Family culture as a source of pride
• Greater resilience in hard times
• Less bureaucratic and impersonal
• Financial benefits
• Knowing the business

Lecture 2

Faimly Business

Disadvantages of Family controlled firms

• Less access to capital market may curtail growth

• Confusing organization (no clear cut division of tasks)
• Nepotism
• Spoiled kid syndrome
• Internecine strife (family disputes overflow into business)
• Paternalistic / autocratic rule
• Financial strain (disequilibrium between contribution and compensation)
• Succession dramas

Lecture 2

Business Plan – Entrepreneur’s Road Map for a successful enterprises.

Contents (PAGE 176)

• Executive Summary – Vision, Mission. Identification of Market, start-up Capital.

• Description of Business (brief history of company where applicable
o at o on
information o overall
o e a industry,
dust y, pproduct
oduct o
or se
service
ce desc
description
pt o (overview
(o e e unique
u que
qualities, value to consumers, Start-up Capital.)
• Research and Analysis for Product Development / Competitor’s Analysis
• Marketing, Advertising and Promotion / Competitor’s Analysis
• Management and Critical Risk Analysis
• Critical Risk analysis
• Financial Forecasting
• Milestone Scheduling
• Appendix

6
 10/26/2008

Lecture 3

Home Assignment
Quiz
Submission of Individual Business Plan Idea
Presentation of Group 1

Recap of what we discussed in last session

Technololgical Revolution
Family business
Ad/Disadvantages of Family controlled firms
Business Plan

Lecture 3

Franchsing

What is Frachising?
is a system of distribution that enables a supplier (the franchisor) to
arrange for a dealer (the franchisee) to handle a specific product or
service under certain mutually agreed on conditions.

Lecture 3

Franchsing
• When a product is franchised, the franchisee receives the goods from the
franchisor and sells them through a wholesale or retail outlet.

• When a service is franchised the franchisee receives a license for a trade

name and the particular services to be sold.

• Mc Donald’s, Pizza Hut, KFC

7
 10/26/2008

Lecture 3

Franchsing
Conversion Franchising

conversion
co e so oof independent,
depe de t, on-going
o go g bus
businesses
esses into
to franchise-system
a c se syste
members. Daewoo-Matiz > Chevrolet Aftab Associates > A C Nielson
Aftab – Idea is to capitalize on the brand equity of a franchisor, usually
from same product or service category. (access to additional customers,
marketing assistance, brand name, improved business

Lecture 3

Franchsing

How a Small Business Franchise Works –

• Make a financial investment in the operations

• Obtain and maintain a standardized inventory ad/or equipment package
usually purchased from the franchisor
• Maintain a specified quality of performance
• Follow a specific operating procedures and promotional efforts of the
franchisor
• Pay a Franchise Fee as well as a percentage of gross revenue
• Engage in a continuing business relationship

Lecture 3

Franchsing

In turn the franchisor provides:

• The company name (brand) - KFC

• Identifying symbols, Logos, designs and facilities
• Professional training
• Sale of raw material needed at a reduced price.

8
 10/26/2008

Lecture 3

Franchsing
Advantages of Franchising
• Training and guidance are provided by the franchisor
• Thee franchise
a c se offers
o e s brand-name
b a d a e appea
appeal
• Track record of other franchisees shows proof of success
• Financial assistance can be secured from the franchisor

Disadvantages of Franchising
• Franchise Fee
• The control of franchisor exercises (modalities of operations), Pizza Hut
global 20-min delivery promise …
• Unfulfilled promises of some franchisors

Lecture 3

Franchsing
When it comes to opening up a Franchise

• Identify
de t y opportunities;
oppo tu t es; get reliable
e ab e information
o at o from
o reliable
e ab e sou
source
ce
• Investigate franchisor, thoroughly
• Seek professional help from an Iqra University MBA / CPAs / CFAs

Lecture 3

Franchsing
Franchising your business – the other side of franchising

• Developing
e e op g a franchise
a c se bus
business
ess – de
developing
e op g operating
ope at g systems
syste s for
o you
your
own business. Policies, procedures, guidelines etc
• Selling franchises
• servicing franchises
• learning more about running the franchised business to create long-term,
mutually profitable relations with the franchisees

9
 10/26/2008

Lecture 4

Home Assignment
Quiz

Recap of what we discussed in last session

Franchising
Conversion Franchising
Ad/Disad

Lecture 4

Start-up Concerns
- Types of Capital
- Types of Debt
- Sources of Capital
- Types of Loans

Location
- Factors in selecting location
- Leasing vs buying option

Lecture 4

Start-up Concerns

Basic Types of Capital > Financing comes from 2 basic

cources a) Debt b) Owner’s Equity

Debt is further divided into a) Current or Short-term

(12 months) b) Intermediate Term (1-10 years) c)
Long-term (10 +).

Your trade credits also come under short-term loans.

Credits from Suppliers, Credit to Wholesalers /
Retailers etc

10
 10/26/2008

Lecture 4

Start-up Concerns

What are the sources of capital? a Personal Savings b)

Friends and Relatives c) Informal investors
((Business Angels)
g ) d)) Internal Funds ((Retained
Earnings) e) Trade Credit f) Banks (Concept of Line
of credit (but bank is never liable to extend always.

Revolving Credit Agreement – in which bank is liable

Lecture 4

Start-up Concerns

Credit > maximum credit amount, but bank is never

liable to extend always…. The one in which bank is
li bl iis R
liable Revolving
l i CCredit
dit Agreement.
A t

LOANS > a) straight Commercial Loans b) Term Loans

c) Account Receivable loans d) Warehouse Receipt
Loans (pay back when the inventory is sold) e)
Collateral Loans (against some security).

Lecture 4

Start-up Concerns

Some Other sources of capital > a) Insurance

Companies b) Finance Companies e) Factors
(they buy your A/c Receivables and take full
responsibility)

11
 10/26/2008

Lecture 4

Start-up Concerns
LOCATION
Factors in selecting the location >
a) Personal > where do you want to locate
b) Economics > locate where money is
c) Competition > comparatively less competition but
greater economics
d) Geographic > a boat repair shop should ideally be
near the beach.
E) Area Laws and Regulations > Music Shop at
highly religious area.

Lecture 4

Start-up Concerns
LOCATION
Important factors in selecting a manufacturing location
a) Nearness to markets
b) Nearness to suppliers
c) Adequacy and cost of labor supply
d) Adequacy and cost of power supply
e) State and local regulations and taxes
f) Transportation services and cost

Lecture 4

Start-up Concerns
LEASING VERSUS BUYING

Advantages of Leasing > a) Initial outlay is less b)

M i t
Maintenance costt off assett borne
b by
b the
th lessor
l
Advantages of Buying > a) Tax Depreciation b) Assets
that you seem WILL BE required after some time, it
would be better to by than to lease.

12
 10/26/2008

Lecture 5
Home Assignment
Quiz

Recap of what we discussed in last session

Start-up
p concerns
Locations (factord)
Leasing vs Buying)

Lecture 5

Legal Concerns
- What is a contract?
- Aspects of contract
- Home reading assignment – Types of
Warraty
- Bankruptcy
- Patents
- Copyrights
- Trademarks

Lecture 5

What is a contract?
¾ is a legal agreement that can be enforced by the courts
if either party fails to abide by its provisions

13
 10/26/2008

Lecture 5

Components of a Contract:
• Agreement – an offer from someone must be accepted by the other. An
intent to contract must exist, just words are not sufficient. Office Rental,
House purchase etc
• Consideration – something of Value the offeree gives to the offerer.
(Money,
(Mo ey, barter,
ba te , so
something
et g ofo value)
a ue)
• Contractual Capacity – parties must be able to contract. Minors (under
18), Insanity and Intoxication.
• Legality – It should have Legality of Purpose, means a contract that is in
violation of law cannot be enforced. Contract to bribe, contract to
murder. Sometimes, depending upon intensity of situation, courts may
intervene.
• Reality of Consent – the agreement should state what actually was
agreed or meant by the parties involved. Fraud (deception with the
intent of misleading another person), innocent misrepresentations or
mistakes cannot be done.

Lecture 5

Home Reading Assignment > Page 269, Table 11.2. –

Types of Warranty , Quiz in next class.

Lecture 5
Agency Law – A third party that acts as an intermediary between two or
more parties for representation. Agent is also bound by the contract a per
its contents. Ideal example is of Advertising Agency.

Bankruptcy - occurs when a debtor’s financial obligations are greater than

his assets.

Two types of Bankruptcy:

A) Voluntary > debtor himself files an application for bankruptcy

B) Involuntary < when creditors file application for bankruptcy of debtor.

14
 10/26/2008

Lecture 5
Patents, Copyrights and Trademarks

Patent > Patent is granted to an inventor for developing a “product” or a

“process”; has two parts a) disclosure statement describing the invention
b) a set of claims covering the exact particulars to be protected. Pursuing
a Patent can be expensive. Example 3M global strategy

Copyrights > Copyright protects authors of written material for the extent of
their lives plus 50 years (American Law).

Fairness Doctrine > allows limited reproduction for criticism, comment,

reporting, teaching, scholarship, or research without any infringement of
copyright.

Trademarks > is a word, name, symbol, character, slogan, series of letters or

numbers, types of packaging or labeling, or even a combination of colors
that identify the particular goods and service of a business and
distinguish them from competitors.

Lecture 6
Home Assignment
Quiz

Recap of what we discussed in last session

Contract
Components of Contract
Patents, Copyrights, Tradermarks

Lecture 6
Home Assignment
Quiz

Management

What is management?
g
Four Functions of Management

Human Resource Management

Challenge of managing HR (staff leaving, demanding etc_)
Diversity in Work Force
Proportion of men to women
Legalities of HR

15
 10/26/2008

Lecture 6
Management

What is management?
Management is the process of accomplishing tasks through people

Avoid Owner-Manager syndrome

All management
g revolves around a)) People
p b)) work
Management Activities can be divided into two> Doing and Thinking

Lecture 6
Management

Four Functions of Management > Planning, Organising, Leading,

Controlling.

Planning > Process a) Be aware of opportunities b) Set Objectives c) Forecast

environment d)) Determine Alternative courses of action e)) evaluate
alternative courses of action f) Select and implement a course of action
g) formulate support plans h) budget the plan
Organizing > Who will do what? How? When? a) Job Definitions b)
Departmentalization (Functional vs Product) c) Span of Control d)
Delegation of Authority (Size, Cost, energy of Owner, Comeptition,
Nature of Work, Trust in employees)

Lecture 6
Management

Directing > a) communicating b) Leading (art of influencing people

towards organizational goals)
Authoritarion Leadership vs Participatory Leadership vs Laissez Faire
Leadership (occasional information exchange)
Control > Establishing standards, comparing performance with standards,
and
d correcting
i any deviations.
d i i
Concept of Overcontrolling > avoid
How to Control > a) Budget b) Break-even point analysis = Total Fixed
costs / Selling Price – Variable cost

16
 10/26/2008

Lecture 6
Human Resource Management

The Challenge of managing HR

- People coming and leving
- Demands
- Polictics
- Job Poaching

Diversity in Work Foce

Proportion of men to women

Increasing inflation, soaring disposable incomes!

Lecture 6
Legalities of HR
- Labour Laws
- Labour Unions

Staffing
Involves recruiting and selecting. What’s the difference?
Assessing Staffing Needs > Short-term and Long-term needs

How to Recruit > Press Ad, Present employee promotion, Former

Employees, Commercial Employment agencies, educational institution
placement services etc

Selection > interviews, tests, group discussions, stress tests, reference

checks.

Lecture 6
Indoctrination > is job orientation with staff, processes etc

Training > TNA, Choosing the most practical training methods (on-job
coaching, role playing, Programmed Instructions (canned presentation,
to suit each person learn at his own pace)

Performance Appraisal > 5 basic characteristics

a) is tied with the job and its performance
b) comprehensive, measuring all aspects
c) objective
d) based on standards of desired performance
e) to pinpoint strong points and shortcoming of a person

17
 10/26/2008

Lecture 6
MBO > Management by Objective > 6 steps a) Identify Org Goals b)
Examine current organizational structure c) Meet with personnel to
establish their objectives with their consent d ) Employees determine
how to attain their objectives e) Talk with the individual worker to
determine the types of assistance required by them f) Evaluate overall
results and begin cycle again.

Compensation > Wages vs Salary system .. Straight Salary vs Incentive

Compensation Benefits > Medical, Gratuity, Provident, LFA, Leaves,
Bonus.
Critical Issues >
Employee Morale > Job Satisfaction (Turnover, Productivity, Waste&Crap,
Service, Tardiness and Absenteeism, Accidents, Complaints &
Grievances)

Lecture 7
Home Assignment
Quiz

Recap of what we discussed in last session

Management
HRM
MBO
Performance Appraisals
Labor Laws

Lecture 7

Managing Growth in Small Business

TQM

Internationalization of Small Business

18
 10/26/2008

Lecture 7

Managing Growth in Small Business

Size of company >Advantages (flexibility, closeness with

market/consumers) Disadvantages (smaller size limits geographic
expansion, higher ordering cost burden small firms, smaller staff
greater tasks)
k )

Lecture 7

Managing Growth in Small Business

The One-person-band syndrome > Owner / entrepreneur doing

everything, from planning to execution to all. But his abilities are
limited.

Time Management > (Assessment, Prioritization, Creating Procedures,

Delegation)

Lecture 7

Managing Growth in Small Business

Community Obligations (donations, attendance in community

programmes)

Continuing Management Education (CME) > entrepreneurs constantly

need to upgrade their education / knowledge

Formative Year Problems – Table 14.1, page 354.

19
 10/26/2008

Lecture 7
Managing Growth in Small Business

Key Elements of Growth

Control > Growth creates problems in command and control. Your control
system should answer yes to the trust that prevails amongst your
supervisors and subordinates.
subordinates
Responsibility > growth is followed by greater responsibility for all.
Develop a sense of responsibility in the organization than simple
delegation.
Tolerance of failure > You need to develop tolerance to failure. 3 forms a)
Moral Failure (violation of internal trust) b) Personal Failure (lack of
required skill or application) c) Uncontrollable failure (product flop,
market non-responsive, faulty strategies).
Change > all aspects of management are subject to Change.
Flexibility > most important asset, ability to assess and accumulate
resources are required in growth stage. Networking could be done for
resource generation.

Lecture 7
Managing Growth in Small Business

• The Transition from Entrepreneur to Manager >

• Problems > a) highly centralized Decision making b) Over
dependence on 1 or 2 individuals c) inadequate repertoire (range) of
managerial skills and training d) paternalistic atmosphere.

• The ability to remain Entrepreneurial while adopting to

Administrative traits is what is the key here.

Lecture 7
Managing Growth in Small Business

The Challenge of Ethics in Small Business – Table 14.3 – Page 361

Code of Conduct > is a statement of ethical practices or guidelines an

enterprises adheres to.

Social Responsibility >

20
 10/26/2008

Lecture 8
Managing Growth in Small Business

TQM > continuous improvement of quality in all aspects of business.

• Top management involvement

• Focus on customer needs
• Train Employees
• Empower Employees – generate new ideas
• Recognize employees
• Conquering Fear

Lecture 8
International Opportunities for Small Business

• Why should you or consider to go international?

Lecture 8
International Opportunities for Small Business

Reasons: a) Increased Profit b) Unique Goods of Services c0 Technological

Advantage d) Exclusive Market Information e) Owner-Manager Desires
f) Tax Benefits g) Economies of Scale

Reactive Reasons a) competitive Pressure b) Declining domestic demand

c) Overcapacity d) Proximity to customers e) Counterattack foreign
competition

21
 10/26/2008

Lecture 8
International Opportunities for Small Business

When you go international there are lots of areas or challenges that you need
to recognize and address
1. Cultural Challenge > Definition of Culture (is an integrated system of
learned behavioral patterns that help distinguish one country,
community social group from another
2. Language, Religion, Values, Manners and Customs, Material Elements
(bikes in Asia and America), Education

Lecture 8
International Opportunities for Small Business

Before every efficient marketing effort, lies Research

International Market Research > Secondary Research , Primary Research

Lecture 8
International Opportunities for Small Business

The option of Exporting > Most small businesses engage in this easily

In Exporting > a) International Product Adaptation b) Pricing (Cost plus

and Marginal, only adding the difference and Market Differentiated
Pricing),
Pricing)

Intermediaries (clearing forwarding agents, banks, insurance agencies)

22
 10/26/2008

Lecture 8
Class Discussion 1

Should we or should
we nott endeavour
d to
t
be an entrepreneur?

Lecture 9
Home Assignment
Quiz

Recap of what we discussed in last session

Total Quality Management

International Opportunities for Small Businesses
Reasons for going international
Factors to consider when going international

Lecture 9
Marketing Goods and Services

- Need to understand what is marketing

- Consumer Behaviour
- Impact of price on Market Behaviour
- Types of Competition
- Market Research

23
 10/26/2008

Lecture 9
Marketing Goods and Services
Before we discuss what is Marketing, it is imperative to learn what a
MARKET is…

Why should an entrepreneur consider this concept of Marketing?

Lecture 9
Marketing Goods and Services
What is Consumer Behaviour?

What do people look for when they make a purchase?

People’s buying decision is 3-pronged a) Needs b) Competitive prices c)

availability of Substitutes - Shaving Cream / Foam / Gel

How can we influence the behaviour of our targetted

consumers/customers?

Lecture 9
Marketing Goods and Services
Impact of Price on Market Behaviour

- Economic definition
- Marketing perspective. Market Behaviour changes with price,
alongside other factors like category of product/service,
availability of substitutes, macroeconomic situation etc

24
 10/26/2008

Lecture 9
Marketing Goods and Services
Types of Competition

Based on the Degree of Competition, there are 4 basic types.

• M
Monopoly l – 1 seller,
ll with
i h no substitutes
b i (PTCL
(PTCL, SUI GAS,
GAS KESC)
• Oligopoly – few dominant players that constitute 70-80% of industry
sales (MOBILINK, U-FONE, WARID, TELENOR, PAKTEL)
• Monopolistic Competition – many firms, each producing small share of
sales, with slight product / feature variations (Most small businesses fall
into this) (TAILORS, CONECTIONARY SHOPS, SHOES etc)
• Pure Competition – many independent sellers offer same products.

Lecture 9
Marketing Goods and Services
Once you get the idea of what the market is and how the competition is
affecting this market, then you need to examine the current market niche.

Market Niche is your segment of the market, Who are customers, Their
Buying behavior,
behavior What do they buybuy, How often? Answering these
questions will give you Customer Profile.

Lecture 9
Class Discussion 2

Entrepreneural Ability
is something in which
Men are blessed more
than women!

25
 10/26/2008

Lecture 10
Home Assignment
Quiz
Prersentation by Group

Recap of what we discussed in last session

Need to understand what is marketing

Consumer Behaviour
Impact of price on Market Behaviour
Types of Competition
Market Research

Lecture 10

Pricing for Profit, Promotion and Personal Selling

Lecture 10

Pricing Consideration
Find the extent of price sensitivity of your product (how much price
sensitive or insensitive your product is…. Example: Flour, Sugar, Petrol)
{Nature of Product}

A lot of times your product will be brought solely on the basis of

competitive pricing {Competition}

26
 10/26/2008

Lecture 10

How do you want sell / market your product?

What is your positioning? Is it for high class?

All such marketing strategy issues addressed {Marketing Strategy}

Economic downturn / upturn, religious factors, cultural sensitivities,

{General Business Conditions}

Lecture 10

Key Pricing Factors

• Cost of Goods, common sense {Selling Price = Purchase price + operating
expense + profit}
• Competitive Prices
• Market Demand {CNG}

Lecture 10

Pricing Strategies

Skimming Pricing {selling a high price to skim off the strongest demand in
the market place} – Often a short range activity as skimming conditions
do not last for long- New Mobile Phones, Laptops with Wireless LAN,
T l
Telecommunication
i ti charges
h

Penetration Pricing – strategy of employing a low price that is competitive

and designed both to stimulate demand and to discourage competition.
{mobile phones}

Odd Pricing (psychological pricing) – setting of a price just below a round

number. Rs. 299.9. this only works when it gives a psychological benefit
to the customer

27
 10/26/2008

Lecture 10

Leader Pricing – reducing the high price of a popular product in order to

sell more

Price Lining – offering merchandise in several different price ranges. Ice

Cream plain , ice cream with topping.

Geographic Pricing – technique of charging customers on the basis of where

they live (geography). Ads on the cost of transporting from one place to
another

Discounts – reduction in the list price. Seasonal Discounts, Group

Discounts, Quantity discounts, Cash discounts

Combination Strategy can also be used

Lecture 10

Markup – difference between price and its cost to business.

Markon – Cushion in case the products get sold after discounts.

Channel Members.

Lecture 11
Quiz
Prersentation by Group

Recap of what we discussed in last session

Pricing for Goods and Services

Key Pricing Factors
Pricing Strateies
Markup and Markon

28
 10/26/2008

Lecture 11
Risk Analysis
Exit Strategy

Lecture 11
Risk Analysis

is a measure of the likelihood and consequences of not achieving a defined

target

1. Likelihood
2. Consequence

How do we calculate Risk?

Likelihood x Consequence = Intensity of Risk

Prepare back-up plans in accordance with how intensive a particular risk is

Lecture 11
Risk of Business Failure (due to any reason)

Risk of technological obsolence

Risk of switching HR

Risk of Safety and Security aspects

Risk of any other factor beyond one’s control (Force Majeur)

29
 10/26/2008

Lecture 11
Exit Strategy

What is Exit Strategy?

Why do we need to plan ahead for our failure?
What are the advantages of doing so?

Lecture 11
Exit Strategy

What are the key factors that you should keep in mind when it comes to
devising an Exit Strategy?

- Chalk out all possible areas/reasons for business failure?

- Include all elements in the above chalked out areas,
areas like Company,
Company
People, Customers, Suppliers, Environment, Legal/Political/Cultural
aspect, Technology, others
- List possible solutions to the above potential problems.
- Analyze still if everything fails, how would you respond?
- Flight vs Fight
- List down the steps you would take to divest the business and their
implications.
- Always end in good notes.

Lecture 11
Videos on How to present a Business Plan

30