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MB0036 Strategic Management & Business

Policy

Assignment Set- 2

1. What is the purpose of a Business Plan? Explain thefeatures of the component of the Plan dealing with theCompany and its product description.

Answer: A good business plan will help attract necessary financingby demonstrating the feasibility of your venture and the level ofthought and professionalism you bring to the task.

The first step in planning a new business venture is to establishgoals that you seek to achieve with the business. You can establishthese goals in a number of ways, but an inclusive and orderedprocess like an organizational strategic planning session or acomprehensive neighborhood planning process may be best. Theboard of directors of your organization should review and approvethe goals, because these goals will influence the direction of theorganization and require the allocation of valuable staff andfinancial resources. Your goals will serve as a filter to screen a widerange of possible business opportunities. If you fail to establish cleargoals early in the process, your organization may spend substantialtime and resources pursuing potential business ventures that maybe financially viable but do not serve the mission of yourorganization in other important ways. A liquor store on the cornermay be a clear money-maker; however, it may not be the retail toassist your community desires.

The following are examples of goals you may seek to achievethrough 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 financeother programs, activities or services provided by your organization.

Employment Creation A new business venture may create jobopportunities for community residents or the constituency served byyour organization.

Neighborhood Development Strategy A new business venturemight serve as an anchor to a deteriorating neighborhoodcommercial area, attract additional businesses to the area and fill agap in existing retail services. You may need to find a use for a

vacant commercial property that blights a strategic area of your

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neighborhood. Or your business might focus on the rehabilitation ofdilapidated single family homes in the community.Whenever possible, goals should have quantifiable outcomes suchas to generate a minimum of $50,000 of net income or profit withinthree years; to employ at least 15 community residents within two

years in new permanent jobs at a livable wage; to occupy andsupport a minimum of 10,000 square feet of neighborhoodcommercial space; or to rehabilitate 50 single-family houses overthree years. Clearly defined and quantifiable goals provideobjective measurements to screen potential business opportunities.They also establish clear criteria to evaluate the success of thebusiness venture.

Establish GoalsOnce you have identified goals for a new business venture, the nextstep in the business planning process is to identify and select theright business. Many organizations may find themselves starting atthis point in the process. Business opportunities may have beendropped at your doorstep. Perhaps an entrepreneurial member ofthe board of directors or a community resident has approached yourorganization with an idea for a new business, or a neighborhoodbusiness has closed or moved out of the area, taking jobs andleaving a vacant facility behind. Even if this is the case, werecommend that you take a step back and set goals. Failing to do socould result in a waste of valuable time and resources pursuing anidea 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 severalapproaches to identify potential business opportunities.

Local Market Study: Whether your goal is to revitalize or fill spacein a neighborhood commercial district or to rehabilitate vacanthousing stock, you should conduct a local market study. A goodmarket study will measure the level of existing goods and servicesprovided in the area, and assess the capacity of the area to supportexisting and additional commercial or home-ownership activity. This

assessment is based on the shopping and traffic patterns of thearea and the demographic and socio-economic characteristics of thecommunity. A bad or insufficient market study could encourage yourorganization to pursue a business destined to fail, with potentiallydisastrous results for the organization as a whole. Through a marketstudy you will be able to identify gaps in existing products andservices and unsatisfied demand for additional or expandedproducts and services. If your organization does not have staffcapacity to conduct a market study, you might hire a consultant orsolicit the assistance of business administration students from a

local college or university. Conducting a solid and thorough market


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study up front will provide essential information for your finalbusiness plan.

Analysis of Local and Regional Industry Trends: Anothermethod of investigating potential business opportunities is to

research local and regional business and industry trends. You maybe able to identify which business or industrial sectors are growingor declining in your city, metropolitan area or region. The regional ormetropolitan area planning agency for your area is a good source ofdata on industry trends.

Internal Capacity: The board, staff or membership of yourorganization may possess knowledge and skills in a particularbusiness sector or industry. Your organization may wish to drawupon this internal expertise in selecting potential businessopportunities.

Internal Purchasing Needs / Collaborative Procurement:Perhaps, your organization frequentlypurchases a particular serviceor product. If nearby affiliate organizations also use thisservice orproduct, this may present a businessopportunity. Examples of suchproducts or services include printing or copying services, travelservices, transportation services, property management services,office supplies, catering services, and other products. You will stillneed to conduct a complete market study to determine the demandfor 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 newbusiness, you may wish to consider purchasing an existing business.Perhaps a local retail or small light manufacturing business that hasbeen an anchor to the local retail area or a much-needed source ofjobs in the neighborhood is for sale. Its closure would mean the lossof jobs and services for your neighborhood. Your organization mightconsider purchasing and taking over the enterprise instead of

starting a new business. If you decide to pursue this option, you stillneed to go through the steps of creating a business plan. However,before moving ahead, these are just a few important areas toresearch in assessing the business you plan to purchase:

Be sure to conduct a thorough review of the financial statements forthe past three to five years to determine the current fiscal statusand recent financial trends, the validity of the accounts receivableand the status of the accounts payable. Are all the required licensesand permits in place and can they be transferred to a new owner?


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Also look at the quality of key employees who, because of theirexpertise, may need to remain with the business.

You will also need to assess the customer or client base anddetermine 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 otherbusinesses in the area to learn more about the reputation of thebusiness.At this early stage of your planning process, be sure to consult anattorney experienced in corporation law. As a non-profit corporation,engaging in income-generating activities not related to your missionmay affect your tax-exempt status. You may also wish to protectyour organization from any liability issues connected with theproposed business activity. After you have decided on a particularbusiness activity, have a qualified attorney advise you on the propercorporate structure for your new venture. In addition to qualifiedlegal counsel, seek the expertise of an experienced professional inthat particular industry. He or she will bring valuable knowledge andinsights regarding the industry that will prove extremely usefulduring the business planning process.

AdvisoryYou have decided on a business opportunity that meets the goals ofyour organization. Now you are ready to test the feasibility of the

venture and to present your business concept to the world. A solidbusiness plan will clearly explain the business concept, describe themarket for your product or service, attract investment, and establishoperating goals and guidelines.

The first step in writing your business plan is to identify your targetaudience. Will this be an internal plan the board will use to assessthe feasibility and appropriateness of the business? Or will this planbe distributed to a larger external audience such as fundingsources, commercial lenders or the community to gain financialbacking 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 necessaryresearch and write the plan. The following table lists the advantagesand disadvantages of several options for getting the work done. Youmight consider a combination of the options.


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will look at this section to determine whether or not they want tolearn more about a business. Other readers will look to theexecutive summary as a sample of the quality and professionalismof the overall plan.

The executive summary should be no more than one to three pageslong 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 forthe 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 businessplan, you should write it after you have written the other sections ofthe plan in order to include the most important points of eachsection.

2. Company and Product DescriptionIn describing your company be sure to include what type of businessyou are planning (homeownership development, wholesale, retail,manufacturingor service) and the legal structure (corporation or partnership). Youshould discuss why you are creating this new venture, referencingthe goals you set at the beginning of the business planning process.Also include a description of your non-profit organization, the role ithas played in developing this new venture and the on-going role, ifany, it will play in operations. Give the reader a brief overview of theindustry, describing historic and current growth trends.

Whenever possible, provide documentation or references supportingyour trend analysis such as articles from business-oriented

newspapers and magazines, research journals or other publications.Include these references in the attachments of your business plan.

Product or ServiceAfter describing your company and its industry context, describe theproducts or services you plan to provide. Focus on whatdistinguishes 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 theparticular characteristics of your product that distinguish it from itscompetition many nonprofits, for example, expect to produce

higher-quality housing than otherwise exists in the area. Mentionany distinctive elements in the manufacture of the product, such as


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being hand-made by a particular people from a specific area. Ifyou are providing a service, explain the steps you will take toprovide 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 priceestimate may undermine the credibility of your plan and raiseconcerns that your product or service may not be of sufficientquality or that you will not be able to maintain profitability in thelong run. Describe where this price positions you in themarketplace: at the high end, low end or in the middle of theexisting range of prices for a similar product or service.

In other sections of the plan you will discuss the target market foryour product or service and also provide additional details on howthe price of your product fits into the overall financial projections forthe enterprise.

PlaceDescribe the location where you will produce or distribute yourproduct or provide your service. Discuss the advantages of thelocation, such as its accessibility, surrounding amenities and othercharacteristics that may enhance your business.

Depending on your anticipated customer base, accessibility to your

location via public transportation could affect the marketability ofyour product or service.

CustomersIn this section of your business plan, you will describe the customerbase or market for your product or service. In addition to providing adetailed description of your customer base, you will also need todescribe your competition (other local developers or nearbybusinesses providing a similar service to your potential customerbase).

Who will purchase your product or use your service? How large isyour customer base? Define the characteristics of your targetmarket in terms of its:

Demographics Measures of age, gender, race, religion andfamily size.

Geography Measures based on location.

Socioeconomic Status Measures based on individual orhousehold annual income.

Provide statistical data to describe the size of your target market.

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


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gathered by your organization, such as membership lists,neighborhood surveys and group or individual interviews. Be sure tolist the sources for your data, as this will further validate yourmarket assumptions. Include any relevant information regarding thegrowth potential for your target market if your business is expected

to rely on growth. Cite any research forecasting populationincreases in your target market or other trends and factors that mayincrease the demand for your product or service.

CompetitionDiscuss how people identified in your target market currently meettheir need for your product or service. What other businesses existin your area that are similar to your proposed venture? For example,for a housing business, what are the local markets for purchase andrental? How much are people currently paying for similar productsor services? Briefly describe what differentiates your proposedventure from these existing businesses and discuss why you areentering this market.

Sales ProjectionsPresent an estimate of how many people you expect will purchaseyour product or service. Your estimate should be based on the sizeof your market, the characteristics of your customers and the shareof the market you will gain over your competition. Project how manyunits you will sell at a specified price over several years. The initialyear should be broken down in monthly or quarterly increments.

Account for initial presentation and market penetration of yourproduct and any seasonal variations in sales, if appropriate.

3. Market DescriptionIn this section, you will describe how you plan to operate thebusiness. You will present information on how you plan to createyour product or provide your service, describe the staff required tooperate and manage the business, discuss the equipment andmaterials necessary, and define the site or facility requirements, ifany. A key component of the operation of your business will be yoursales and marketing strategy, so you must describe how you will

inform your target market about your product or service and howyou will convince customers to purchase it.

Production DescriptionDescribe the steps for creating your product, from the raw materialor initial stage to the finished product, packaged and ready fordistribution and sale. If you plan to provide a service, describe theprocess of service deliver (such as the initial interview, for instance,if you are offering consulting services), assessment, research anddesign, and final presentation. Provide a description of any sub-

contractors or external services you plan to use in the production


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process. The reader of the plan may be unfamiliar with the industry,so avoid using industry jargon to describe the production process.

StaffingDescribe 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 salariesand benefits you will provide to your workforce. Provide informationon how you will recruit staff and provide initial and ongoing trainingof employees.

4. Equipment and MaterialsTo manufacture your product or provide your service, what type ofequipment will you need? Describe any machinery and vehiclesnecessary in the production, packaging and distribution of yourproduct, including any office equipment such as computers, copiers,furniture, fixtures and telephone systems. Also discuss the types ofmaterials you will use in the production process and describe thesource and cost of those materials.

FacilityDescribe the type of facility in which you will house your business.Indicate the amount of building space you will need for productionand administration. Also discuss any building features required forthe production process such as high ceilings, specialized ventilationand heating systems, sanitized laboratory space or vehicular

accessibility. If you have already identified a location and a facilitythat meets your requirements, describe its features. Even if you areplanning to provide a service instead of manufacturing a product,you need to demonstrate that you will have adequate space foradministrative functions and other activities related to the serviceyou plan to provide.

Market DescriptionDescribe your strategy for locating your target market, informing oreducating customers about your product or service and convincingthem to purchase it. Provide details on the methods you will use to

advertise your product, such as print media (advertisements innewspapers, magazines or trade journals), electronic media(television, radio and the Internet), direct mail, telemarketing,individual sales agents or representatives, or other approaches.Discuss the products or services features you plan to emphasize togain the attention of your target market. Also detail how you willdistribute and sell your product or service. Will you use sales agentsor existing retail outlets, or directly distribute your product througha delivery service such as United Parcel Service, Federal Express orindependent trucking company?

5. Operations


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In this section of your business plan, describe the senior managersresponsible for overseeing the start-up and operation of yourbusiness, their background and their responsibilities in the business.Be sure to highlight your management teams experience inmanaging the production, marketing and administration of similar

businesses or within the selected industry and attach the resumesof each member to the plan. Be sure to provide a complete jobdescription of any vacancies in your management team. Describethe responsibilities, the skills, the background required and thesteps you plan to take to fill that key position.

OwnershipWhat is its relationship to your existing organization? Who is on theboard of directors / board of advisors of the new business and whatare their backgrounds and areas of expertise? Potential investors orlenders will be interested in the ownership stake of the board ofdirectors and also in what portion of the companys equity isavailable. Success is often due to ones contacts, so fully describeyour business relationships with attorneys, accountants andadvertising or public relations agencies, and any industry-specificservices such as suppliers and distributors.

6. Management and OwnershipIn this section you will describe the financial feasibility of your

planned venture and provide several financial reports andstatements to document why your business will be a viableenterprise and a sound investment. At a minimum, you shouldprovide a brief descriptive narrative for each of the followingfinancial statements and include a copy in the attachments to yourplan:

Start-up budget

Cash flow projection

Income statement

Balance sheet

In preparing these statements, you may want to seek the advice ofa certified public accountant (CPA).

Start-up BudgetDescribe the initial expenses you will incur to get your business upand running. Some items you might include in your start-up budgetresearch and product design and development expenses, legalincorporation and licensing expenses, facility purchase or rental,equipment and vehicle purchase or rental, and initial material orsupply purchase. You can use Worksheet B as a sample format for

preparing your start-up budget.


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Cash Flow Projection This statement presents a month-to-month schedule of theestimated cash inflows and outflows of your business for the firstyear. This schedule should indicate how much money your businesswill have or need and when you will need it. You should describe

your sources of income and capital, detailing your projected salesrevenue and indicating your own or investor equity contribution,lenders, investors and other sources of capital. Itemize yourprojected expenses, distinguishing between the cost of goods sold(materials, supplies, production labor), overhead expenses (rent,utilities, insurance, maintenance, interest, insurance, administrativecosts and salaries, legal and accounting services, marketing, taxes,fees and other ongoing operating expenses) and capitalexpenditures (land and buildings, equipment, furniture, vehicles,and building repair or renovation expenses). In preparing thisstatement, account for a gradual increase in sales from initialproduct introduction and any expected seasonal fluctuations inrevenue projections.

Income StatementPrepare a multiyear (three- to five year) statement of projectedrevenue, expenses, capital expenditures and cost of goods sold. Ifyou make assumptions about the growth of your business, providesupporting documentation such as growth patterns of similarcompanies or studies that forecast an industry-wide growth rate.This statement should indicate to the reader the potential of your

business to generate cash and its profitability over time. For anexisting business, also submit an income statement for at leastthree prior consecutive years. Lenders may look at this statement todetermine whether your business can support the additional debtyou are requesting.

Balance SheetA start-up business probably will not have any assets or liabilities atthe time you are drafting the business plan. Provide a copy of thebalance sheet of the businesss sponsoring organization orindividual. Describe in your narrative any assets that will be

allocated to the start-up of the business.

7. Financial Information and Start up TimelineCapital RequirementsDescribe the amount and type of financing you are seeking for yourbusiness. Are you looking for debt from a lender or equity from aninvestor? Refer to your start up budget and cash flow statementpresented earlier. Discuss how and when you will draw on thesefunds and how they will affect the bottom line. Also describe anycommitments or investments that you may have already secured.


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If you are seeking investors, such as venture capitalists, describewhat they will receive in return for their capital. What is therepayment period and the expected return on investment? Alsodiscuss the nature of their ownership share and how it may changewith future investments. Equity investors are looking for rates of

return higher than rates offered by banks or other business lenders.The level of risk in your business and industry will help to determinethe actual market rate, as will the availability of equity dollars.Check with other businesses (although not direct competitors) tosee what return on investment their investors demanded. Beprepared to negotiate. And make sure you research the investmentmarket carefully; several socially minded investment pools exist andmore are in development. or lenders, describe the type of financingyou are seeking:

Seed Capital Short-term financing to cover start-up costs.

Fixed Asset Financing Longer-term financing for property,building improvements, equipment or vehicles. The assetbeing purchased is usually pledged as security for the loan.

Working Capital Short-term financing to cover operatingexpenses and to bridge gaps in cash flow.

Initial Start-up TimelineProvide a timeline of tasks and events necessary to get yourbusiness operational. Be sure to describe the current stage you arein and what steps you have taken to date. Include deadlines for taskcompletion. Set realistic deadlines according to your capacity to

complete these tasks. The following is a list of some of the steps youmay wish to include:

Filing legal incorporation documents

Identifying and securing suitable space

Designing and developing the product

Obtaining required licenses or permits

Securing necessary financing

Leasing or purchasing equipment

Hiring key staff

Hiring and training of production or support staff

Purchasing materials and production supplies Beginning marketing activities

Opening

Although it is impossible to know exactly what will go wrong instarting and running your business, thinking about differentchallenges will strengthen your plan. Potential problems couldinclude:

Insufficient public subsidy available to new home owners or

residents The competition drops its prices


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Not enough customers

Production costs exceed estimates

Difficulty in finding qualified employees

Environmental or governmental changes such as taxincreases, additional regulations or population changes

For each potential problem, discuss its likelihood and describepossible solutions or actions you might undertake to mitigate theproblem.

Risks and their MitigationAlthough it is impossible to know exactly what will go wrong instarting and running your business, thinking about differentchallenges will strengthen your plan.

After you have completed all of the elements of your business plan,you should focus its presentation. A well-organized plan will assistyou in communicating the most important elements of yourbusiness plan to the reader, and a persuasive plan will help you toconvince the reader to invest in your business.

Executive SummaryAs mentioned earlier, this section should be written last. However, ifyou have already written the executive summary, review it to makesure it embodies the following characteristics. Because it is the firstand possibly the only section of the plan that many readers may

see, the executive summary should provide an overview of the planand entice the reader to read the whole plan or to agree to meetwith you. The executive summary should be no more than threepages and should briefly describe the most important elements ofthe plan. Review the Executive Summary section of this manual formore tips on this critical introduction to your business.

2. Write short notes on :a) Sales Projections

Answer: Sales ProjectionsPresent an estimate of how many people you expect will purchaseyour product or service. Your estimate should be based on the sizeof your market, the characteristics of your customers and the shareof the market you will gain over your competition. Project how manyunits you will sell at a specified price over several years. The initial

year should be broken down in monthly or quarterly increments.


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Account for initial presentation and market penetration of yourproduct and any seasonal variations in sales, if appropriate.Steps for Developing Sales ProjectionsYour business plan is not just a funding tool, but also a blueprint for

how your business should operate. The following are steps fordeveloping sales projections.

Step I:EstimateFor each product or service, estimate the number of people who arelikely to buy and when they will buy it. You can get this informationfrom asking your likely customers about their possible use of yourbusiness, or you can base your estimates on your knowledge of themarket.

Step 2:Use a CalendarEstimate your sales and number of customers served during oneweek. Using the totals for a week, make projections for each month.For the first few months, keep in mind that business will start offslowly before people become more aware of your business. Use willmost likely increase as people learn about your products andservices. Seasonal variations may affect your business as well. Youwill use these numbers to project your equipment, supply andstaffing needs, as well as income.

Cost Account Heads:

Organizational Start up Costs

Product Design/Development

Research & Development

Legal/Licensing Expenses

Property & Facilities

Land/Building Purchase

Initial Lease Deposit

Building Repairs/Improvements

Equipment/Machinery Production-related

Administrative/Office Equip.

Materials & Supplies

Personnel

Key Employees

Contract Labour/Temps

Training Expenses

Marketing Expenses

Advertisements

Brochures/Literature/Other Insurance Premiums


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Distributor Contracts

Contingency (5%)

Expenses:Costs of Goods Sold

Materials/Supplies Labor

Rent

Utilities

Insurance

Admin. Exp. (PT Sec.)

Legal & Accounting

Marketing

Equipment Maintenance/Supplies

Facility Maintenance

Fees/Miscellaneous

Debt / Equity Investment:

Equipment Loan

Building Rehabilitation Loan

Grants

Owner Equity

Expenses

Cost of Goods Sold

Wages & Benefits

Materials

Supplies

Overhead Expenses:

Rent

Utilities

Building Maintenance/Security

Marketing

Accounting

Legal

Administrative Expense

Interest Expense

Depreciation

The Business Priorities are based upon six top-level objectives;these are:

To make Business data available both to decision-makers and asmuch as possible available in the public domain;

To ensure all holders of Business information are able toparticipate.


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To ensure that the data available through the NETWORK are ofknown quality;

To ensure that the NETWORK Gateway gives access to data onLocation and species used to inform decisions affecting Businessat 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 developmentB. Data standards and toolsC. Capacity buildingD. Working with the wider publicE. Co-ordination and promotion

i) In addition, the partners will contribute to the overall realisation ofthe objectives through work that they initiate on their own account,but which does not necessarily fall under the focussed objectives forthe Network.ii) A series of assumptions have been made in formulating theBusiness Prioritiesand their associated work programme. Theseare:

It is assumed that the present way of working, i.e. a leadpartner approach for each project will be retained;

The plan is not intended to represent all the work that couldbe undertaken;

It is anticipated that other work towards the principal aim ofadding content and providing a fully functional gateway willbe adopted by the NETWORK as part of its programme, butthis work would have to be prioritised against this core activityand separately resourced;

To give additional focus to the challenging nature of the task thatthe NETWORK is setting itself, a series of principle drivers have beenrecognised. The drivers are:

Processes This driver relates to facilitated targeted action onthe ground through providing knowledge of resource location,extent, pattern of distribution, data quality and gaps. It alsohas the potential for engaging more partners in theNETWORK;

Environmental Impact Assessment (EIA) and StrategicEnvironmental Assessment This driver is concerned withproviding ready access to data on location, extent, patternand quality of Business.

Data contributor engagement This driver is concerned withaccessing sources of data for the NETWORK enabling the


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assessment of actions and continual improvement in thetargeting of actions from the two previous drivers;

Operational use This relates to the use of the NETWORKwithin the day to day business of agencies as a source of datarelevant to local reporting or casework;

Generic enhancement This driver encompasses capacitybuilding and Recording Schemes and other contributingorganisations and user groups, in order to ensure thecontinued 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 functionalityand 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 activitybetween the members of the NETWORK and their partners, and tocommunicate the progress and successes of the work programme.

2b) importance of creativity in Business

Answer: CreativityEveryone in business is creative.Some ofmost creative people are in manufacturing.

They actually CREATE products that change the world.Some of the least creative people perhaps are in advertising.They spend most of their creative energy telling manufacturers thattheyarent creative!

Salespeople Are Creative They are natural born story-tellers.Accountants are creative.

Best Creative Exercise EverWrite down your ideas.

You have a ton every day.But most of the time, you cant remember them by the days end.Dont let spelling and grammar issues or relentless self-editing stopyou.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.Dont invest in a presentation class called How to Use

PowerPoint.until youve taken a class called How to TellStories and Connect with Your Audience.


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2.A: Simple Creative ExerciseSimplify 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.BrainstormingDont tell people that their ideas are bad, especially if you donthave a better one.

Its only your lifes work.Never say, Its 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 apresentation.

Everyone in Sales Knows

Tell stories.

Dont just provide data.

Avoid Meetings.Do not attend more than two meetings a day, or else you will neverget any real creative work done.

Get Fresh Ideas.Leave the office building at least once a day.Another Lame ExcuseDesigners should put more of their passion into designing greatwork, instead of endless (boring) discussions about the superiorityof the Macintosh over the PC!

The Lame Excuse I cant [write/design/create] because I dont have the latest[software/hardware/ upgrade].

You cant let a machine take credit for your creativity.And you cant blame a machine for your creative failures, either.Dont 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.


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Creativity: Use it or Lose it.Create something every day.Creativity takes place every day, not once in a while.Its not rare.

Its just been mystified Own your creativity.

Facts and observationsGiga-investments made in the paper and pulp industry, in the heavymetal industry and in other base industries, today face scenarios ofslow 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 andcyclic variations of demand.

Productivity improvements in these industries have slowed down to1-2% p.a.Global financial markets make sure that capital cannot be used non-productively, as its owners are offered other opportunities and thecapital will move (often quite fast) to capture these opportunities.

The capital markets have learned the American way, i.e. there is ashareholder dominance among the actors, which has brought (oftenquite short-term) shareholder return to the forefront as a keyindicator of success, profitability and productivity.

There are lessons learned from the Japanese industry, which pointto the importance of immaterial investments. These lessons showthat investments in buildings, production technology and supportingtechnology will be enhanced with immaterial investments, and thatthese are even more important for re-investments and for graduallygrowing maintenance investments.

The core products and services produced by giga-investments areenhanced with life-time service, with gradually more advancedmaintenance and financial add-on services.

New technology and enhanced technological innovations will changethe life cycle of a giga-investment.Technology providers are involved throughout the life cycle of agiga-investment.

Giga-investments are large enough to have an impact on the marketfor which they are positioned:

A 3,00,000 ton paper mill will change the relative competitivepositions; smaller units are no longer cost effective.

A new technology will redefine the CSF:s for the market.


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Customer needs are adjusting to the new possibilities of the giga-investment.

The proposition that we can describe future cash flows as stochasticprocesses is no longer valid; neither can the impact be expected to

be covered through the stock market.

Types of options

Option to Defer

Time-to-Build Option

Option to Expand

Growth Options

Option to Contract

Option to Shut Down/Produce

Option to Abandon Option to Alter Input/Output Mix

Table of Equivalences:

INVESTMENT OPPORTUNITY VARIABLE CALL OPTION

Present value of a projectsoperating 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 interestrate

Risk of the project. Standard deviationof returns on stock

Fuzzy numbers (fuzzy sets) are a way to express the cash flowestimates in a more realistic way.

This means that a solution to both problems (accuracy and

flexibility) is a real option model using fuzzy sets.

3. What factors are to be taken into account in a crisiscommunications strategy?

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

Communications should be timely and honest.

To the extent possible, an audience should hear news from

the organization first.


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Communications should provide objective and subjectiveassessments.

All employees should be informed at approximately the sametime.

Give bad news all at once do not sugarcoat it.

Provide opportunity for audiences to ask questions, if possible.

Provide regular updates and let audiences know when thenext update will be issued.

Treat audiences as you would like to be treated.

Communicate in a manner appropriate to circumstances:o Face-to-face meetings (individual and group)

o News conferences

o Voice mail/email

o Company Intranet and Internet sites

o Toll-free hotline

o Special newslettero Announcements using local/national media.

Preplanning for communications is critical. Drafts of messagetemplates, scripts, and statements can be crafted in advance forthreats identified in the Risk Assessment.

Procedures to ensure that communications can be distributed atshort notice should also be established, particularly when usingresources such as Intranet and Internet sites and toll-free hotlines.

Official SpokespersonThe organization should designate a single primary spokesperson,with back-ups identified, who will manage/disseminate crisiscommunications to the media and others. This individual should betrained in media relations prior to a crisis. All information should befunneled through a single source to assure that the messages beingdelivered are consistent.

It should be stressed that personnel should be informed quicklyregarding where to refer calls from the media and that only

authorized company spokespeople are authorized to speak to themedia. In some situations, an appropriately trained sitespokesperson may also be necessary.

4. What elements should be included in a Marketing Planunder Due Diligence while seeking investment in for yourCompany?

Answer: The Process of Due Diligence


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A business which wants to attract foreign investments must presenta business plan. But a business plan is the equivalent of a visit card.The introduction is very important but, once the foreign investorhas expressed interest, a second, more serious, more onerous andmore tedious process commences: Due Diligence.

"Due Diligence" is a legal term (borrowed from the securitiesindustry). It means, essentially, to make sure that all the factsregarding the firm are available and have been independentlyverified. In some respects, it is very similar to an audit. All thedocuments of the firm are assembled and reviewed, themanagement is interviewed and a team of financial experts, lawyersand accountants descends on the firm to analyze it.

First Rule:The firm must appoint ONE due diligence coordinator. This personinterfaces with all outside due diligence teams. He collects all thematerials requested and oversees all the activities which make upthe due diligence process.

The firm must have ONE VOICE. Only one person represents thecompany, answers questions, makes presentations and serves as acoordinator when the DD teams wish to interview people connectedto the firm.

Second Rule:

Brief your workers. Give them the big picture. Why is the companyraising funds, who are the investors, how will the future of the firm(and their personal future) look if the investor comes in. Bothemployees and management must realize that this is a top priority. They must be instructed not to lie. They must know the DDcoordinator and the companys spokesman in the DD process.

The DD is a process which is more structured than the preparationof a Business Plan. It is confined both in time and in subjects: Legal,Financial, Technical, Marketing, Controls.

The Marketing PlanMust include the following elements:

A brief history of the business (to show its track performanceand growth)

Points regarding the political, legal (licences) and competitiveenvironment

A vision of the business in the future

Products and services and their uses

Comparison of the firms products and services to those of thecompetitors

Warranties, guarantees and after-sales service Development of new products or services


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A general overview of the market and market segmentation

Is the market rising or falling (the trend: past and future)

What customer needs do the products / services satisfy

Which markets segments do we concentrate on and why

What factors are important in the customers decision to buy(or not to buy)

A list of the direct competitors and a short description of each

The strengths and weaknesses of the competitors relative tothe firm

Missing information regarding the markets, the clients and thecompetitors

Planned market research

A sales forecast by product group

The pricing strategy (how is pricing decided)

Promotion of the sales of the products (including a description of thesales force, sales-related incentives, sales targets, training of thesales personnel, special offers, dealerships, telemarketing and salessupport). Attach a flow chart of the purchasing process from themoment that the client is approached by the sales force until hebuys the product.

Marketing and advertising campaigns (including costestimates) broken by market and by media

Distribution of the products

A flow chart describing the receipt of orders, invoicing,

shipping. Customer after-sales service (hotline, support, maintenance,

complaints, upgrades, etc.)

Customer loyalty (example: churn rate and how is it monitoredand controlled).

Legal Details

Full name of the firm

Ownership of the firm

Court registration documents

Copies of all protocols of the Board of Directors and theGeneral Assembly of Shareholders

Signatory rights backed by the appropriate decisions

The charter (statute) of the firm and other incorporationdocuments

Copies of licences granted to the firm

A legal opinion regarding the above licences

A list of lawsuit that were filed against the firm and that thefirm filed against third parties (litigation) plus a list of disputeswhich are likely to reach the courts


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Legal opinions regarding the possible outcomes of all thelawsuits and disputes including their potential influence on thefirm

Financial Due Diligence

Last 3 years income statements of the firm or of constituentsof the firm, if the firm is the result of a merger. Thestatements have to include:

Balance Sheets

Income Statements

Cash Flow statements

Audit reports (preferably done according to the InternationalAccounting Standards, or, if the firm is looking to raise moneyin the USA, in accordance with FASB)

Cash Flow Projections and the assumptions underlying them

Controls

Accounting systems used

Methods to price products and services

Payment terms, collections of debts and ageing of receivables

Introduction of international accounting standards

Monitoring of sales

Monitoring of orders and shipments

Keeping of records, filing, archives

Cost accounting system

Budgeting and budget monitoring and controls Internal audits (frequency and procedures)

External audits (frequency and procedures)

The banks that the firm is working with: history, references,balances

Technical Plan

Description of manufacturing processes (hardware, software,communications, other)

Need for know-how, technological transfer and licensing

required Suppliers of equipment, software, services (including offers)

Manpower (skilled and unskilled)

Infrastructure (power, water, etc.)

Transport and communications (example: satellites, lines,receivers, transmitters)

Raw materials: sources, cost and quality

Relations with suppliers and support industries

Import restrictions or licensing (where applicable)

Sites, technical specification

Environmental issues and how they are addressed Leases, special arrangements


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Integration of new operations into existing ones (protocols,etc.)

A successful due diligence is the key to an eventual investment. This is a process much more serious and important than thepreparation of the Business Plan.

5. Distinguish between Joint Ventures and Licensing,explaining the relative advantages and disadvantages ofeach.

Answer: Licensing and Assigning IP rightsOne basic choice is whether you should actively exploit your IPrights yourself, or to keep your IP rights and license them to othersto use, or sell or assign the rights to another person. You can, inprinciple, make different choices in different countries for exploitingIP rights for the same underlying invention. If you are based inMalaysia, you could in theory decide to exploit your patent yourselfin the East Asian region, grant a licence a Canadian company to usethe invention in North America, and sell or assign the rights inEurope to a Danish company whether or not this is the bestapproach in practice is a different matter, of course.

A licence is a grant of permission made by the patent owner toanother to exercise any specified rights as agreed. Licensing is agood way for an owner to benefit from their work as they retainownership of the patented invention while granting permission to

others to use it and gaining benefits, such as financial royalties,from that use. However, it normally requires the owner of theinvention to invest time and resources in monitoring the licenseduse, and in maintaining and enforcing the underlying IP right.

The patent right normally includes the right to exclude others frommaking, using, selling or importing the patented product, andsimilar rights concerning patented processes. The license cantherefore cover the use of the patented invention in many differentways.

For instance, licences can be exclusive or non-exclusive. If a patentowner grants a non-exclusive licence to Company A to make andsell their patented invention in Malaysia, the patent owner wouldstill be able to also grant Company B another non-exclusive for thesame rights and thesame time period in Malaysia. In contrast, if apatent owner granted an exclusive licence toCompany A to makeand sell the invention in Malaysia, they would not be able to give alicence to anyone else in Malaysia while the licence with Company Aremained in force.

Licenses are normally confined to a particular geographical area typically, the jurisdiction in which particular IP rights have effect.


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You can grant different exclusive licences for different territories atthe same time. For example, a patent owner can grant an exclusivelicence to make and sell their patented invention in Malaysia for theterm of the patent, and grant a separate exclusive licence tomanufacture and sell their patented invention in India for the term

of the patent.Separate licences can be granted for different ways of using thesame technology. For example, if an inventor creates a new form ofpharmaceutical delivery, she could grant an exclusive licence to onecompany to use the technology for an arthritis drug, a separateexclusive licence to another company to use it for relief of coldsymptoms, and a further exclusive licence to a third company to useit for veterinary pharmaceuticals.

A licence is merely the grant of permission to undertake some of theactions covered by intellectual property rights, and the patentholder retains ownership and control of the basic patent.

An assignment of intellectual property rights is the sale of a patentright, or a share of the patent.

It should be remembered that the person who makes an inventioncan be different to the person who owns the patent rights in thatinvention. If an inventor assigns their patent rights to someone elsethey no longer own those rights. Indeed, they can be in infringementof the patent right if they continue to use it.

Patent licences and assignments of patent rights do not have tocover all patent rights together.

Licences are often limited to specific rights, territories and timeperiods. For example, a patent owner could exclusively licence onlytheir importation right to a company for the territory of Indonesia for12 months. If an inventor owns patents on the same invention infive different countries, they could assign (or sell) these patents tofive different owners in each of those countries. Portions of a patentright can also be assigned so that in order to finance your

invention, you might choose to sell a half-share to a commercialpartner.

If you assign your rights, you normally lose any possibility of furtherlicensing or commercially exploiting your intellectual propertyrights. Therefore, the amount you charge for an assignment isusually considerably higher than the royalty fee you would chargefor a patent licence. When assigning the rights, you might seek tonegotiate a licence from the new owner to ensure that you cancontinue to use your invention. For instance, you might negotiate an

arrangement that gives you licence to use the patented invention inthe event that you come up with an improvement on your original


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invention and this falls within the scope of the assigned patent.Equally, the new owner of the assigned patent might want to getaccess to your subsequent improvements on the invention.

Licensing Advantages

An Inventive Incentive "Licensing", tried and true

Fair and Balanced

Product Exclusivity

Inventions of interest to you

You are free to view our inventions

An informed business decision

A production head start

We are vitally committed to your success

A resource for future projects

Joint Venture Agreements and Start-up CompaniesRather than simply exploit your IP rights by licensing or assignment,you might choose to set up a new legal mechanism to exploit yourtechnology. Typically this can be a partnership expressed through ajoint venture agreement or a new corporation, such as a start-up orspin-off company.

These options require much more work on your part than licensingor assigning your intellectual property rights. This could be a

desirable choice in cases where: you want to keep your institutes research activities separate

from the development and commercialisation of technology,especially when your institute has a public interest focus or aneducational role; or

you need to attract financial support from those prepared totake a risk with an unproven technology (angel investors orventure capitalists), and they will only take on a long-termrisk if they can get a share of future profits of the technology.

In working out the right vehicle for your technology, you will

normally need specific legal advice from a commercial lawyer,preferably one with experience in technology and commercialisationin your jurisdiction. The laws governing partnerships and companiesdiffer considerably from one country to another, and this discussionis only intended to give a general flavour of the various options.

A joint venture agreement involves a formal, legally bindingcommitment between two or more partners to work together on ashared enterprise. It is normally created for a specific purpose (forexample, to commercialise a specific new technology) and for a

limited duration. For instance, you might sign a partnershipagreement with a manufacturing company to develop and market a


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product based on your invention. Before entering into a jointventure agreement, you need to check out possible commercialpartners and make sure that the objectives of your potentialcommercial partners are consistent with your objectives. In the jointventure agreement, the partners typically agree to share the

benefits, as well as the risks and liabilities, in a specified way.

But this kind of partnership isnt normally able in itself to enter legalcommitments, or own IP in its own right, so that the partners remaindirectly legally responsible for any losses or other liabilities that thepartnerships operations create. In other words, a partnership whichis not a corporation, a company or a specific institution doesntreally separately exist as a legal entity.

By contrast, a company is a new legal entity (a legal personrecognised by the law as having its own legal identity) which canown and license IP and enter into legal commitments in its ownright. A spin-off company is an independent company created froman existing legal body for example, if a research institute decidedto turn its licensing division or a particular laboratory into a separatecompany. A start-up company is a general term for a new companyin its early stages of development. If a company is defined as alimited liability company, the partners or investors normally cannotlose more than their investment in the company (but officeholdersin the company might be personally responsible for their actions inthe way they manage the company). This separate legal identity

means that a start-up company can be a useful way of developingand commercialising a new technology based on original research,while keeping the main research effort of an institute focused onbroader scientific and public objectives, and insulated from thecommercial risks and pressures of the commercialisation process. Atthe same time, the research institute can benefit from thecommercialisation of its research, through receiving its share of theprofits and growth in assets of the spin-off company, thusstrengthening the institutes capacity to do scientific research.

The company is normally owned through shares (its equity). These

effectively represent a portion of the assets and entitlement toprofits of the company. Investors can purchase shares in thecompany, which is one way of bringing in new financial resources tosupport the development of the technology in exchange, theinvestors stand to benefit from the growth in the companys worth,as their shares proportionately rise in value, and to receive a portionof any profits produced by the companys operations,commensurate with the number of shares they own. If it is a publiccompany, shares in the company can be bought and sold on theopen stock market. An initial public offering is when the shares in a

start up company are first made available to the public to purchase.


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A private companys shares, by contrast, are not traded on the openmarket (but can still be bought and sold).

The option of starting up your own company to manufacture andmarket your patented invention requires you to have business skills,

marketing skills, management skills and substantial capital to drawon for factory premises, hiring staff and so on. But it also can offer amechanism for attracting financial backing for research,development and marketing, which can improve access to thenecessary resources and expertise.

Which model of commercialisation is best for you?Each new technology and associated package of IP rights ispotentially difference, and the mechanism you choose forcommercialisation should take into account the particular featuresof the technology. One basic consideration is to what extent you, asoriginator of the technology, wish to be involved and to invest in thesubsequent development of the technology. You will need tocompare the advantages and disadvantages of each model ofcommercialisation. Generally speaking, the higher degree of riskand commitment of finance and resources you can invest, thehigher the degree of control you can secure over exploitation of thetechnology invention, and the higher the financial return to yourinstitution may be.

There are many possible variations on each of these general

models, and in practice they can overlap. In deciding which model ofcommercialisation is best for you, it is always a good idea to seekcommercial or legal advice.Remember that IPRs alone do not guarantee you a financial returnon your invention. You need to make good commercial decisions tobenefit financially from your intellectual property rights.

Properly managed, intellectual property rights should not be aburden but should yield a return from your hard work in creating aninvention.

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.


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In the era of divestiture and consolidation, JVs offer a creativeway for companies to exit from non-core businesses.

Companies can gradually separate a business from the rest ofthe organisation, and eventually, sell it to the other parentcompany. Roughly 80% of all joint ventures end in a sale by

one partner to the other.

6. You wish to commercialize your invention. What factorswould you weigh in choosing an appropriate course?

Answer: Following are the ways to commercialize myinvention.

Licensing and Assignment - Defined The difference between licensing and selling your invention iscomparable to leasing vs. selling house. When you sell your house,you transfer your title, making someone else in charge of and liablefor the house from that point on. When you sell your invention, thescenario is the same, except that the process is called assigningrather than selling. You, the inventor would be the assignor andthe person receiving the title or ownership of the patent would bethe 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 someonepermission 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 ofthis 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, its nearly the same as leasing. Youre offering a manufacturer, for example, the right tomanufacture and sell your invention for a period of time, and inconsideration for this they pay you on a quarterly basis. In this caseyou are the licensor and the company is the licensee. It is up tothe parties to negotiate the terms of the license within theboundaries 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 inventioninstead of assigning (selling) your rights for two reasons:

First, it is initially hard to ascertain what the eventual value of aninvention will be. This will almost invariably result in a win/losesituation. If the value is estimated high, the inventor wins and thecompany loses. On the other hand, if the estimates are low, the

inventor loses out.


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Second, companies dont like to pay cash up front unless theyabsolutely have to. Generally, when a company makes acommitment to manufacture and promote an invention, they arealready anticipating a substantial financial commitment for tooling,manufacturing setup, engineering expenses, advance purchases of

raw materials, marketing, and promotional expenses. A companythat is savvy with licensing negotiations will state that the moremoney they pay the inventor up front, the fewer resources they willhave available to put into the promotion. This is a hard point toargue against, particularly if youre interested in the long-rangecommercial success of your invention.

At this point, Inventors have often already incurred substantial initialexpenses for patenting, prototyping and research, and need to bereimbursed as soon as possible. Therefore, the inventor can arguethat the potential licensees should at least reimburse them for theseout-of-pocket expenses. After all, these are expenses the companywould have normally paid if they had developed such a product ontheir own. At that point, the company may very well come back tothe table and agree to reimburse you for such initial expenses.However, they may want to make it an advance against futureroyalties. Bear in mind that all negotiations are unique and this isjust an example.

When you assign (sell) your invention, you will typically lose controlof it. Although you may have cash in hand from the sale of your

invention, the company has the prerogative to ditch yourtechnology and simply sit on it unless youve made otherarrangements. In some cases it is just as important to the inventorto see his invention commercialized as it is to receive the cash fromit. Having an invention commercialized can give an inventor asubstantial head start in attracting interest in his additionalinventions. This may eventually be worth more to an inventor thanthe initial cash he would receive from his first commercializedinvention.

Should I Go It Alone?

Some inventors prefer to keep their inventions close and go intobusiness for themselves, which comes with its own set of risks andrewards.

There are several different elements at play during thecommercialization of an invention: the company, the management,the technology, the market, and the marketing team. Each of theseis a variable. The more variables you introduce, the greater the riskof failure. If you start with a new company under new managementwith a new product, your chance of success is obviously much

slimmer than an existing company already in the field withexperience and knowledge in a similar product line. Even when you


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look at an experienced company like 3-M, which brings many newproducts to market, youll find that the companys new products failoften. With all its resources, 3-Ms success rate is said to be only30%. Unless you have greater resources, your success rate may beeven less.

Because there are significant startup risks, its important toseriously investigate the distinct advantages of having yourinvention introduced by an existing company with experience inyour field can promote your product effectively and already has askilled sales force with an existing client base. These factors cangreatly reduce the amount of time it takes to introduce yourinvention to the marketplace. What you lose in control when youlicense can be gained tenfold from a timing standpoint, and inreducing your risk.

Licensing offers another strong advantage when it is time to sellyour manufactured invention to customers. Manufacturers whointroduce only one invention or a very small product line often havea hard time selling to large accounts. Large retail outlets prefer todeal with companies where they can do one-stop shopping. Buyers(or purchasing agents) for the big outlets want to reduce thenumber of bills they get and the number of vendors they see eachweek. This is why the introduction of a new invention to retailers bya new company is particularly challenging.Licensing also has advantages over starting your own company

because few products have an unlimited life cycle. In time, yourinvention may be replaced by new technology. What will yourcompany sell then? Most single-item companies that are stillaround after five years have done so by introducing new productsand expanding their product line. Companies need new products tosurvive.

Sometimes starting your own company is the only way to go. Ifyouve attempted the licensing route and no manufacturer isinterested in your invention at its current stage of development, youmay need to do a small market test with a limited production run to

prove your invention has sales potential. Then if your sales resultsare positive, you may pique the interest of a potential licensee whocan 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 tooverestimate the ultimate value of their inventions. Get somerealistic market research as early in the game as possible. If youfind that you must make a substantial investment to actuallymanufacture an invention to prove its commercial viability and to

interest potential licensees, keep careful track of your expenses and


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constantly weigh these expenses against any royalty potential thatmay result.

There are too many sad stories of inventors pouring money intoinventions that can never provide a return on their investment.

Inventors always take a risk when they spend time and money on anidea and if theyre lucky, itll pay off quite well. The lesson is tominimize your risks so you can bail out or put the project on hold ifwarranted. It will save you time, money, and the personal energyyoull need for future successes.

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