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MB0036 Strategic Management & Business Policy

Assignment Set- 160 Marks

Note: Each question carries 10 Marks. Answer all the questions.

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1. Explain the different circumstances under which a suitable growth strategy

should be selected by any company to improve its performance (i.e., intensive,

integrative or diversification growth). You may select an example of your

choice to substantiate your views (10 marks).

Sol:

Strategies to Improve Sales

There are three alternatives to improve the sales performance of a business unit, to fill the gapbetween actual sales and targeted sales:a) Intensive growthb) Integrative growthc) Diversification growth

a) Intensive Growth:It refers to the process of identifying opportunities to achieve further growth within thecompanys current businesses. To achieve intensive growth, the management should first

evaluate the available opportunities to improve the performance of its existing currentbusinesses.It may find three options: To penetrate into existing markets To develop new markets To develop new productsAt times, it may be possible to gain more market share with the current products in their currentmarkets through a market penetration strategy. For instance, SONY introduced TV sets withTrinitron picture tubes into the market in 1996 priced at a premium of Rs.10,000 and above overthe market through a niche market capture strategy. They gradually lowered the prices to marketlevels. However, it also simultaneously launched higher-end products (high-technology

products) to maintain its global image as a technology leader. By lowering the prices of TVswith Trinitron picture tubes, the company could successfully penetrate into the markets to addnew customers to its customer base.Market Development Strategy is to explore the possibility to find or develop new markets for itsCurrent products (from the northern region to the eastern region etc.). Most multinationalCompanies have been entering Indian markets with this strategy, to develop markets globally.However, care should be taken to ensure that these new markets are not low density or saturatedMarkets, which could lead to price pressures.Product Development Strategy involves consideration of new products of potential interest to itsCurrent markets (e.g. Gramophone Records to Musical Productions to CDs) as part of aDiversification strategy.

Study the following example to understand what Product Development Strategy is.

MICROSOFTs New Strategy:

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

a) Providing computer power to the most commonly used devices such as cell phone, personalcomputer, toaster oven, dishwasher, refrigerator, washing machines and so on.

b) Developing software to allow these devices to communicate.c) Investing heavily to help build wireless and high-speed internet access throughout the world tolink it all together.Microsoft envisions a home where everyday appliances and electronics are smart. According toBill Gates, In the near future, PC-based networks will help us control many of our domesticmatters with devices that cost no more than $ 100 each .It is also said at Microsoft that VCRs can be programmed via e-mail, laundry washers can bedesigned to send an instant message to the home computer when the load is done andrefrigerators can be made to send an e-mail when theres no more milk. Microsoft plans to givethese appliances brainsand provide them the means to talk to each other through their WindowsCE Operating System.

b) Integrative Growth:It refers to the process of identifying opportunities to develop or acquire businesses that arerelated to the companys current businesses. More often, the business processes have to beintegrated for linear growth in the profits. The corporate plan may be designed to undertakebackward, forward or horizontal integration within the industry.If a company operating in music systems takes over the manufacturing business of its plasticmaterial supplier, it would be able to gain more control over the market or generate more profit.(BackwardIntegration)Alternatively, if this company acquires some of its most profitably operating intermediaries suchas wholesalers or retailers, it isforward integration. If the company legally takes over or

acquires the business of any of its leading competitors, it is called horizontal integration(however, if this competitor is weak, it might be counter-productive due to dilution of brandimage).

c) Diversification Growth:It refers to the process of identifying opportunities to develop or acquire businesses that are notrelated to the companys current businesses. This makes sense when such opportunities outsidethe present businesses are identified with attractive returns and that industry has businessstrengths to be successful. In most cases, this is planned with new products that havetechnological or marketing synergies with existing businesses to cater to a different group ofcustomers (ConcentricDiversification).A printing press might shift over to offset printing with computerized content generation toappeal to higher-end customers and also add new application areas (Horizontal Diversification)or even sell stationery.Alternatively, the company might choose new businesses that have nothing to do with the currenttechnology, products or markets (Conglomerate Diversification).The classic examples for this would be engineering and textile firms setting up softwaredevelopment centers or Call Centers with new service clients.

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Situation Analysis

Sales Improvement Strategies:

a) A supplier of computer stationery invests in a computer stationery manufacturing unit.b) A vendor supplying engine boxes to Maruti decides to supply the same with modifications to

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

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

importance of

each.(10 marks).

Sol.

The format of a Business Plan is something that has been developed and refined over the yearsand is something that should not be changed. Like a good recipe, a business plan needs toinclude certain ingredients to make it work.

When you create a business plan, don't attempt to recreate its format. Those reviewing this typeof document have expectations you must meet. If they do not see those crucial decision-makingcomponents, they'll see no reason to proceed with their review of your business plan, no matterhow great your business idea.

Executive Summary Section

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

your business venture including the need that you plan to fill. Show the reasons why people needyour product or service. Show this by including a brief analysis of the characteristics of yourpotential market.Describe the organization of your business including your management team. Also, brieflydescribe your sales and marketing plan or approach. Finally include the numbers that thosereviewing your business plan want to see - the amount of capital you seek, the carefullycalculated sales projections and your plan to repay the loan.If you've captured your audience so far they'll read on. Otherwise, they'll close the document andadd your business plan to the heap of other rejected ideas.Devote the balance of your business plan to providing details of the items outlined in theexecutive Summary.

The Business Section

Be sure to include the legal name, physical address and detailed description of the nature of yourbusiness. It's important to keep the description easy to read using common terminology. Neverassume that those reading your business plan have the same level of technical knowledge thatyou do. Describe how you plan to better serve your market than your competition is currentlydoing.

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Market Analysis Section

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

Financing Section

The Financing section must show that you are as committed to your business venture as youexpect those reading your business plan to be. Show the amount of personal funds you arecontributing and their source. Also include the amount of capital you need and your plan to repaythis debt. Include all pertinent financial worksheets in this section: annual income projections, abreak-even worksheet, projected cash flow statements and a balance sheet.

Management Section

Outline your organizational structure and management team here. Include the legal structure ofyour business whether it is a partnership, corporation or limited liability corporation.

Include resumes and biographies of key players on your management team. Show staffingprojection data for the next few years.By now you're probably thinking that you don't need Business Plan just yet. Well you do, andthere is business plan building software that can help you through this immense project. Thesesoftware packages are easy to use and affordable. Use one today and produce a professionalquality.Business Plan - including all critical components - tomorrow!

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

different stages in the process of starting this new business. (10 marks)

Sol.Every business starts out as an idea. This idea usually involves the invention of a new product, orrevolves around a better way of making and marketing an existing one. While many would arguethat the idea stage is not a stage at all, it is actually a turning point, as business adviser MikePendrith points out. After this, you as a business builder must refine this idea into amoneymaking reality. Here in this case supposing we are to start a new venture of manufacturingauto components and also to market them. We will see here in the following paragraphs differentstages of achieving the same goal.

1. Idea Researching

In this stage, you are researching your idea. The object of your research is to find out who is

marketing the same product or service in your area, and how successful the marketer has been.You can accomplish this by a Google search on the Internet, launching test marketing campaign,or conducting surveys. Also, you are attempting to find what the level of interest is in theproducts (or services) you wish to market.Here as the main goal is to start a company that manufactures the auto components, we are tomake a research on all the auto companies which are procuring the spares from the outsidevendors. And also the competitors who are all marketing that, their existence and also howsuccessful they are.

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As part of the initial research process, it is important to consider the legal requirements of sellingyour product or service. According to the Biz Ed website, examine the legal ramifications ofyour business. Know the tax laws governing your business. If insurance is a requirement, prepareto budget for it. Also, be aware of any safety laws governing you as an employer. Hence we arealso to make a research on the feasible area where we can start our organization and licenses that

we need to take keeping in mind the environmental factors as well.

2. Business Plan Formulation

You must write a business plan. As Pendrith points out, this is crucial if you want funding, suchas a small business loan or grant, or if you wish to lease a building. At this stage, Pendrithadvises, you need to consult with an attorney or business adviser for assistance.In the business plan you typically include following heads:i) Executive Summaryii) Company and Product Descriptioniii) Market Descriptioniv) Equipment and Materials

v) Operationsvi) Management and Ownershipvii) Financial Information and Start-Up Timelineviii) Risks and Their Mitigation

3. Financial Planning

Financial planning involves thinking about the financial costs of starting and maintaining yourbusiness. According to the Biz Ed website, you should consider such issues as the costs ofrunning the business; the prices you wish to charge your customers; cash flow control; and howyou wish to set up financial reserves in case of an emergency or an event causing significant lossto the business. This includes the planning of whether to take any loans or make personalinvestments in the company.

4. Advertising Campaign

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

5. Preparing for Launch

Advertise for employees. This also requires adequate planning. Think about what you look for inan employee. Be specific about the requisite skills and experience you are seeking. Then beginrequesting resumes and setting up interviews, making hiring decisions based on the standardsyou have set.

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In this case we will be looking for a few candidates in managerial position who must be good inmanaging things apart from minimal technical knowledge.Lower level people at the shop floor people. They need to have real time experience in the shopfloor activities.The employees apart, one needs to plan on the plant and machinery as well.

Thus these are all the stages that I would consider performing if incase I plan to start amanufacturing unit producing automobile components.

4. Explain the process of due Diligence and why it is necessary.(10 marks).

Sol.

Due diligence:

Of course, your commercial partner will need some reassurance about the quality of the offer youare making to them. If you are involved in licensing technology or seeking commercial supportfor your research you are likely to hear of due diligence. When a future partner is consideringwhether or not to license technology, to buy a share of patent rights, or to support your research,

they will need to satisfy themselves that it is a viable proposition. The process of assessing theviability, risk, potential liabilities and commercial prospects of a project is known as duediligence. Indeed, if a potential partner seems not to be interested in this kind of issues, it mayactually raise questions about their commitment to the project or the credibility of their businessplan, particularly if the relationship assumes some degree of risk and investment on their part.Generally, due diligence will involve assessing the overall commercial operations, cash flow,assets and liabilities of a business that is being purchased or otherwise financially supported.You would think twice about purchasing a business if you found that it was burdened with debts,or was about to be involved in difficult litigation, or if there were doubts about whether it reallyowned its assets. The same applies to a potential investment involving intellectual property. Forinstance, a potential commercial partner would not want to invest in patented technology only to

find out that patent renewal fees have not been paid and the patent has lapsed, or to find out thatthe patent was being opposed by another company, or to find that there is prior art available thatcalls into question its validity. It may transpire that a student, a contractor or a visiting researchercould actually be legally entitled to some or all of the patent rights. Even a serious level ofuncertainty or doubt could be enough to deter a potential partner, especially if they have run intothis kind of difficulty before.Due diligence may also involve searching for information about the full range of IP rights thatmight impact on the relevant technology for instance, to check whether you have later filedpatent applications on improvements to the original patented technology, that may limit the valueof their investment in the original technology. Other intellectual property rights such as relatedtrade mark or design registrations, or key trade secrets or copyright material (such as manuals or

software) may also need to be identified or located, as these may also affect the commercialpartners interests in the technology. For example, they may be unwilling to take out a license foryour patent without getting access to the software you have developed for a related process. Theymay want the right to use your trade mark in association with the patented technology.So in a due diligence process, your commercial partner may undertake a range of checks andneed various forms of information. These may include: Checks on external records, such as patent registers and patent databases, including foreignpatents;

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Searches of patent databases for conflicting technology; Independent advice from patent attorneys on issues such as patent ownership, patent validityand scope of patent claims; Checks on employment contracts, confidentiality arrangements, and contracts with other partiesthat may interfere with the exercise of IP rights;

Details of the patent prosecution such as examiners reports and other opinions; Details of any legal challenges to the patent, and the way the proceedings were resolved; Checks on laboratory notebooks in the event that the validity of US patents is of concern to thecommercial partner (this also provides reassurance as to claims of ownership of the patent); Surveys of the activity of competitors and owners of competing technology, and possibilities ofconflict; and Analysis of freedom to operate issues.In preparing to license your technology, you should consider in advance these kind of duediligence issues. If you can anticipate and provide comprehensive answers to these questions,you will be able more effectively to reassure your commercial partner, and you will be in astronger negotiating position in negotiating licence terms. It should also speed up the licensing

negotiations, and ultimately the commercialization of your intellectual property.

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

company and its shareholders? (10 marks)

Sol.

Corporate social responsibility (CSR), also known as corporate responsibility, corporatecitizenship, responsible business, sustainable responsible business (SRB), orcorporatesocial performance,is a form of corporate self-regulation integrated into a business model.Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby businesswould monitor and ensure its support to law, ethical standards, and international norms.

Consequently, business would embrace responsibility for the impact of its activities on theenvironment, consumers, employees, communities, stakeholders and all other members of thepublic sphere. Furthermore, CSR-focused businesses would proactively promote the publicinterest by encouraging community growth and development, and voluntarily eliminatingpractices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberateinclusion of public interest into corporate decision-making, and the honoring of a triple bottomline: people, planet, profit.The practice of CSR is much debated and criticized. Proponents argue that there is a strongbusiness case for CSR, in that corporations benefit in multiple ways by operating with aperspective broader and longer than their own immediate, short-term profits. Critics argue thatCSR distracts from the fundamental economic role of businesses; others argue that it is nothing

more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the roleof governments as a watchdog over powerful multinational corporations. Corporate SocialResponsibility has been redefined throughout the years. However, it essentially is titled to aid toan organization's mission as well as a guide to what the company stands for and will uphold to itsconsumers.Development business ethics is one of the forms of applied ethics that examines ethicalprinciples and moral or ethical problems that can arise in a business environment.

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In the increasingly conscience-focused marketplaces of the 21st century, the demand for moreethical business processes and actions (known as ethicism) is increasing. Simultaneously,pressure is applied on industry to improve business ethics through new public initiatives andlaws (e.g. higher UK road tax for higher-emission vehicles).Business ethics can be both a normative and a descriptive discipline. As a corporate practice and

a career specialization, the field is primarily normative. In academia, descriptive approaches arealso taken. The range and quantity of business ethical issues reflects the degree to which businessis perceived to be at odds with non-economic social values. Historically, interest in businessethics accelerated dramatically during the 1980s and 1990s, both within major corporations andwithin academia. For example, today most major corporate websites lay emphasis oncommitment to promoting non-economic social values under a variety of headings (e.g. ethicscodes, social responsibility charters). In some cases, corporations have re-branded their corevalues in the light of business ethical considerations (e.g. BP's "beyond petroleum"environmental tilt).The term "CSR" came in to common use in the early 1970s, after many multinationalcorporations formed, although it was seldom abbreviated. The term stakeholder, meaning those

on whom an organization's activities have an impact, was used to describe corporate ownersbeyond shareholders as a result of an influential book by R Freeman in 1984.[2]ISO 26000 is the recognized international standard for CSR (currently a Draft InternationalStandard). Public sector organizations (the United Nations for example) adhere to the triplebottom line (TBL). It is widely accepted that CSR adheres to similar principles but with noformal act of legislation. The UN has developed the Principles for Responsible Investment asguidelines for investing entities.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary depending on the natureof the enterprise, and are difficult to quantify, though there is a large body of literature exhortingbusiness to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balancedscorecards). Orlitzky, Schmidt, and Rynes found a correlation between social/environmentalperformance and financial performance. However, businesses may not be looking at short-runfinancial returns when developing their CSR strategy.The definition of CSR used within an organization can vary from the strict "stakeholder impacts"definition used by many CSR advocates and will often include charitable efforts andvolunteering. CSR may be based within the human resources, business development or publicrelations departments of an organization,[11] or may be given a separate unit reporting to the CEOor in some cases directly to the board. Some companies may implement CSR-type valueswithout a clearly defined team or program.The business case for CSR within a company will likely rest on one or more of these arguments:

Human resources

A CSR program can be an aid to recruitment and retention,[12]particularly within the competitivegraduate student market. Potential recruits often ask about a firm's CSR policy during aninterview, and having a comprehensive policy can give an advantage. CSR can also help improvethe perception of a company among its staff, particularly when staff can become involvedthrough payroll giving, fundraising activities or community volunteering. See also Corporate

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Social Entrepreneurship, whereby CSR can also be driven by employees' personal values, inaddition to the more obvious economic and governmental drivers.

Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades to

build up can be ruined in hours through incidents such as corruption scandals or environmentalaccidents. These can also draw unwanted attention from regulators, courts, governments andmedia. Building a genuine culture of 'doing the right thing' within a corporation can offset theserisks.

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separatethem from the competition in the minds of consumers. CSR can play a role in building customerloyalty based on distinctive ethical values.[14] Several major brands, such as The Co-operativeGroup, The Body Shop and American Apparel [15 ] are built on ethical values. Business serviceorganizations can benefit too from building a reputation for integrity and best practice.

License to operate

Corporations are keen to avoid interference in their business through taxation or regulations. Bytaking substantive voluntary steps, they can persuade governments and the wider public that theyare taking issues such as health and safety, diversity, or the environment seriously as goodcorporate citizens with respect to labor standards and impacts on the environment

Stakeholder priorities

Increasingly, corporations are motivated to become more socially responsible because their mostimportant stakeholders expect them to understand and address the social and community issuesthat are relevant to them. Understanding what causes are important to employees is usually thefirst priority because of the many interrelated business benefits that can be derived fromincreased employee engagement (i.e. more loyalty, improved recruitment, increased retention,higher productivity, and so on). Key external stakeholders include customers, consumers,investors (particularly institutional investors), communities in the areas where the corporationoperates its facilities, regulators, academics, and the media.

6. Distinguish between a Financial Investor and a Strategic Investor

explaining the role they play in a Company. (10 marks)

Sol.

In the not so distant past, there was little difference between financial and strategic investors.

Investors of all colors sought to safeguard their investment by taking over as many managementfunctions as they could. Additionally, investments were small and shareholders few. A firmresembled a household and the number of people involved in ownership and in managementwas correspondingly limited. People invested in industries they were acquainted with first hand.As markets grew, the scales of industrial production (and of service provision) expanded. Asingle investor (or a small group of investors) could no longer accommodate the needs even of asingle firm. As knowledge increased and specialization ensued it was no longer feasible orpossible to micro-manage a firm one invested in. Actually, separate businesses of money making

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and business management emerged. An investor was expected to excel in obtaining high yieldson his capital not in industrial management or in marketing. A manager was expected tomanage, not to be capable of personally tackling the various and varying tasks of the businessthat he managed.Thus, two classes of investors emerged. One type supplied firms with capital. The other type

supplied them with know-how, technology, management skills, marketing techniques,intellectual property, clientele and a vision, a sense of direction.In many cases, the strategic investor also provided the necessary funding. But, more and more, aseparation was maintained. Venture capital and risk capital funds, for instance, are purelyfinancial investors. So are, to a growing extent, investment banks and other financial institutions.The financial investor represents the past. Its money is the result of past - right and wrong -decisions. Its orientation is short term: an "exit strategy" is sought as soon as feasible. For "exitstrategy" read quick profits. The financial investor is always on the lookout, searching for willingbuyers for his stake. The stock exchange is a popular exit strategy. The financial investor haslittle interest in the company's management. Optimally, his money buys for him not only a goodproduct and a good market, but also a good management. But his interpretation of the rolls and

functions of "good management" are very different to that offered by the strategic investor. Thefinancial investor is satisfied with a management team which maximizes value. The price of hisshares is the most important indication of success. This is "bottom line" short termism which alsocharacterizes operators in the capital markets. Invested in so many ventures and companies, thefinancial investor has no interest, nor the resources to get seriously involved in any one of them.Micro-management is left to others - but, in many cases, so is macro-management. The financialinvestor participates in quarterly or annual general shareholders meetings. This is the extent of itsinvolvement.The strategic investor, on the other hand, represents the real long term accumulator of value.Paradoxically, it is the strategic investor that has the greater influence on the value of thecompany's shares. The quality of management, the rate of the introduction of new products, thesuccess or failure of marketing strategies, the level of customer satisfaction, the education of theworkforce - all depend on the strategic investor. That there is a strong relationship between thequality and decisions of the strategic investor and the share price is small wonder. The strategicinvestor represents a discounted future in the same manner that shares do. Indeed, gradually, thebalance between financial investors and strategic investors is shifting in favor of the latter.People understand that money is abundant and what is in short supply is good management.Given the ability to create a brand, to generate profits, to issue new products and to acquire newclients - money is abundant.

These are the functions normally reserved to financial investors:

Financial Management

The financial investor is expected to take over the financial management of the firm and todirectly appoint the senior management and, especially, the management echelons, whichdirectly deal with the finances of the firm.1. To regulate, supervise and implement a timely, full and accurate set of accounting books ofthe firm reflecting all its activities in a manner commensurate with the relevant legislation andregulation in the territories of operations of the firm and with internal guidelines set from time to

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time by the Board of Directors of the firm. This is usually achieved both during a Due Diligenceprocess and later, as financial management is implemented.

2. To implement continuous financial audit and control systems to monitor the performance ofthe firm, its flow of funds, the adherence to the budget, the expenditures, the income, the cost of

sales and other budgetary items.

3. To timely, regularly and duly prepare and present to the Board of Directors financialstatements and reports as required by all pertinent laws and regulations in the territories of theoperations of the firm and as deemed necessary and demanded from time to time by the Board ofDirectors of the Firm.

4. To comply with all reporting, accounting and audit requirements imposed by the capitalmarkets or regulatory bodies of capital markets in which the securities of the firm are traded orare about to be traded or otherwise listed.

5. To prepare and present for the approval of the Board of Directors an annual budget, otherbudgets, financial plans, business plans, feasibility studies, investment memoranda and all otherfinancial and business documents as may be required from time to time by the Board of Directorsof the Firm.

6. To alert the Board of Directors and to warn it regarding any irregularity, lack of compliance,lack of adherence, lacunas and problems whether actual or potential concerning the financialsystems, the financial operations, the financing plans, the accounting, the audits, the budgets andany other matter of a financial nature or which could or does have a financial implication.

7. To collaborate and coordinate the activities of outside suppliers of financial services hired orcontracted by the firm, including accountants, auditors, financial consultants, underwriters andbrokers, the banking system and other financial venues.

8. To maintain a working relationship and to develop additional relationships with banks,financial institutions and capital markets with the aim of securing the funds necessary for theoperations of the firm, the attainment of its development plans and its investments.

9. To fully computerize all the above activities in a combined hardware-software andcommunications system which will integrate into the systems of other members of the group ofcompanies.

10. Otherwise, to initiate and engage in all manner of activities, whether financial or of othernature, conducive to the financial health, the growth prospects and the fulfillment of investmentplans of the firm to the best of his ability and with the appropriate dedication of the time andefforts required.

Collection and Credit Assessment

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1. To construct and implement credit risk assessment tools, questionnaires, quantitative methods,data gathering methods and venues in order to properly evaluate and predict the credit risk ratingof a client, distributor, or supplier.2. To constantly monitor and analyze the payment morale, regularity, non-payment andnonperformance events, etc. in order to determine the changes in the credit risk rating of said

factors.3. To analyze receivables and collectibles on a regular and timely basis.4. To improve the collection methods in order to reduce the amounts of arrears and overduepayments, or the average period of such arrears and overdue payments.5. To collaborate with legal institutions, law enforcement agencies and private collection firms inassuring the timely flow and payment of all due payments, arrears and overdue payments andother collectibles.6. To coordinate an educational campaign to ensure the voluntary collaboration of the clients,distributors and other debtors in the timely and orderly payment of their dues.

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

Project Planning and Project Management

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

Marketing and Sales

1. The presentation to the Board an annual plan of sales and marketing including: marketpenetration targets, profiles of potential social and economic categories of clients, salespromotion methods, advertising campaigns, image, public relations and other media campaigns.The strategic investor also implements these plans or supervises their implementation.2. The strategic investor is usually possessed of a brand name recognized in many countries.It is the market leaders in certain territories. It has been providing goods and services to users fora long period of time, reliably. This is an important asset, which, if properly used, can attractusers. The enhancement of the brand name, its recognition and market awareness, marketpenetration, co-branding, collaboration with other suppliers are all the responsibilities of thestrategic investor.3. The dissemination of the product as a preferred choice among vendors, distributors, individualusers and businesses in the territory.4. Special events, sponsorships, collaboration with businesses.5. The planning and implementation of incentive systems (e.g., points, vouchers).6. The strategic investor usually organizes a distribution and dealership network, a franchisingnetwork, or a sales network (retail chains) including: training, pricing, pecuniary and quality

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supervision, network control, inventory and accounting controls, advertising, local marketing andsales promotion and other network management functions.7. The strategic investor is also in charge of "vision thinking": new methods of operation, newmarketing ploys, new market niches, predicting the future trends and market needs, marketanalyses and research, etc.

The strategic investor typically brings to the firm valuable experience in marketing and sales. Ithas numerous off the shelf marketing plans and drawer sales promotion campaigns. It developedsoftware and personnel capable of analyzing any market into effective niches and of creating theright media (image and PR), advertising and sales promotion drives best suited for it. It has builtlarge databases with multi-year profiles of the purchasing patterns and demographic data relatedto thousands of clients in many countries. It owns libraries of material, images, sounds, paperclippings, articles, PR and image materials, and proprietary trademarks and brand names. Aboveall, it accumulated years of marketing and sales promotion ideas which crystallized into a newconception of the business.

Technology

1. The planning and implementation of new technological systems up to their fully operationalphase. The strategic partner's engineers are available to plan, implement and supervise all thestages of the technological side of the business.2. The planning and implementation of a fully operative computer system (hardware, software,communication, intranet) to deal with all the aspects of the structure and the operation of thefirm. The strategic investor puts at the disposal of the firm proprietary software developed by itand specifically tailored to the needs of companies operating in the firm's market.3. The encouragement of the development of in-house, proprietary, technological solutions to theneeds of the firm, its clients and suppliers.4. The planning and the execution of an integration program with new technologies in the field,in collaboration with other suppliers or market technological leaders.

Education and Training

The strategic investor is responsible to train all the personnel in the firm: operators, customerservices, distributors, vendors, sales personnel. The training is conducted at its sole expense andincludes tours of its facilities abroad.The entrepreneurs who sought to introduce the two types of investors, in the first place areusually left with the following functions:

Administration and Control

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

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This is why entrepreneurs find it very hard to cohabitate with investors of any kind.Entrepreneurs are excellent at identifying the needs of the market and at introducingtechnological or service solutions to satisfy such needs. But the very personality traits whichqualify them to become entrepreneurs also hinder the future development of their firms. Onlythe introduction of outside investors can resolve the dilemma. Outside investors are not

emotionally involved. They may be less visionary but also more experienced.They are more interested in business results than in dreams. And being well acquainted withentrepreneurs they insist on having unmitigated control of the business, for fear of losing alltheir money. These things antagonize the entrepreneurs. They feel that they are losing theircreation to cold-hearted, mean spirited, corporate predators. They rebel and prefer to remainsmall or even to close shop than to give up their cherished freedoms. This is where nine out often entrepreneurs fail - in knowing when to let go.

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MB0036 Strategic Management & Business Policy

3 Credits (60 Marks)

Assignment Set- 2

Note: Each question carries 10 Marks. Answer all the questions.

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1. What is the purpose of a Business Plan? Explain the features of the component of the

Plan dealing with the Company and its product description.(10 marks)

Sol.

A good business plan will help attract necessary financing by demonstrating the feasibility ofyour venture and the level of thought and professionalism you bring to the task.The first step in planning a new business venture is to establish goals that you seek to achievewith the business. You can establish these goals in a number of ways, but an inclusive andordered process like an organizational strategic planning session or a comprehensiveneighborhood planning process may be best. The board of directors of your organization shouldreview and approve the goals, because these goals will influence the direction of the organizationand require the allocation of valuable staff and financial resources. Your goals will serve as afilter to screen a wide range of possible business opportunities. If you fail to establish clear goalsearly in the process, your organization may spend substantial time and resources pursuingpotential business ventures that may be financially viable but do not serve the mission of your

organization in other important ways. A liquor store on the corner may be a clear money-maker;however, it may not be the retail to assist your community desires.The following are examples of goals you may seek to achieve through the creation of a newbusiness venture:

Revenue Generation Your organization may hope to create a business that will generatesufficient net income or profit to finance other programs, activities or services provided by yourorganization.

Employment Creation A new business venture may create job opportunities for communityresidents or the constituency served by your organization.

Neighborhood Development Strategy A new business venture might serve as an anchor to adeteriorating neighborhood commercial 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 thatblights a strategic area of your neighborhood. Or your business might focus on the rehabilitationof dilapidated single family homes in the community.Whenever possible, goals should have quantifiable outcomes such as to generate a minimum of$50,000 of net income or profit within three years; to employ at least 15 community residentswithin two years in new permanent jobs at a livable wage; to occupy and support a minimumof 10,000 square feet of neighborhood commercial space; or to rehabilitate 50 single-familyhouses over three years. Clearly defined and quantifiable goals provide objective measurementsto screen potential business opportunities. They also establish clear criteria to evaluate thesuccess of the business venture.

Establish Goals

Once you have identified goals for a new business venture, the next step in the business planningprocess is to identify and select the right business. Many organizations may find themselvesstarting at this point in the process. Business opportunities may have been dropped at yourdoorstep. Perhaps an entrepreneurial member of the board of directors or a community resident

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has approached your organization with an idea for a new business, or a neighborhood businesshas closed or moved out of the area, taking jobs and leaving a vacant facility behind. Even if thisis the case, we recommend that you take a step back and set goals. Failing to do so could result ina waste of valuable time and resources pursuing an idea that may seem feasible, but fails toaccomplish important goals or to meet the mission of your organization.

Depending on the goals you have set, you might take several approaches to identify potentialbusiness opportunities.

Local Market Study: Whether your goal is to revitalize or fill space in a neighborhoodcommercial district or to rehabilitate vacant housing stock, you should conduct a local marketstudy. A good market study will measure the level of existing goods and services provided in thearea, and assess the capacity of the area to support existing and additional commercial orhomeownership activity. This assessment is based on the shopping and traffic patterns of the areaand the demographic and socio-economic characteristics of the community. A bad or insufficientmarket study could encourage your organization to pursue a business destined to fail, withpotentially disastrous results for the organization as a whole. Through a market study you will be

able to identify gaps in existing products and services and unsatisfied demand for additional orexpanded products and services. If your organization does not have staff capacity to conduct amarket study, you might hire a consultant or solicit the assistance of business administrationstudents from a local college or university. Conducting a solid and thorough market study upfront will provide essential information for your final business plan.

Analysis of Local and Regional Industry Trends: Another method of investigating potentialbusiness opportunities is to research local and regional business and industry trends. You may beable to identify which business or industrial sectors are growing or declining in your city,metropolitan area or region. The regional or metropolitan area planning agency for your area is agood source of data on industry trends.

Internal Capacity: The board, staff or membership of your organization may possessknowledge and skills in a particular business sector or industry. Your organization may wish todraw upon this internal expertise in selecting potential business opportunities.

Internal Purchasing Needs / Collaborative Procurement: Perhaps, your organizationfrequently purchases a particular service or product. If nearby affiliate organizations also use thisservice or product, this may present a business opportunity. Examples of such products orservices include printing or copying services, travel services, transportation services, propertymanagement services, office supplies, catering services, and other products. You will still needto conduct a complete market study to determine the demand for this product or service beyondyour internal needs or the needs of your partners or affiliates.

Identify Business Opportunities

Buying an Existing Business: Rather than starting a new business, you may wish to considerpurchasing an existing business. Perhaps a local retail or small light manufacturing business thathas been an anchor to the local retail area or a much-needed source of jobs in the neighborhoodis for sale. Its closure would mean the loss of jobs and services for your neighborhood. Your

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organization might consider purchasing and taking over the enterprise instead of starting a newbusiness. If you decide to pursue this option, you still need to go through the steps of creating abusiness plan. However, before moving ahead, these are just a few important areas to research inassessing the business you plan to purchase:Be sure to conduct a thorough review of the financial statements for the past three to five years to

determine the current fiscal status and recent financial trends, the validity of the accountsreceivable and the status of the accounts payable. Are all the required licenses and permits inplace and can they be transferred to a new owner?Also look at the quality of key employees who, because of their expertise, may need to remainwith the business.You will also need to assess the customer or client base and determine whether its members willremain loyal to the business after it changes hands.Another area to evaluate is the perception or image of the business. Inspect the facilities and talkto suppliers, customers and other businesses in the area to learn more about the reputation of thebusiness.At this early stage of your planning process, be sure to consult an attorney experienced in

corporation law. As a non-profit corporation, engaging in income-generating activities notrelated to your mission may affect your tax-exempt status. You may also wish to protect yourorganization from any liability issues connected with the proposed business activity. After youhave decided on a particular business activity, have a qualified attorney advice you on the propercorporate structure for your new venture. In addition to qualified legal counsel, seek the expertiseof an experienced professional in that particular industry. He or she will bring valuableknowledge and insights regarding the industry that will prove extremely useful during thebusiness planning process.

Advisory

You have decided on a business opportunity that meets the goals of your organization. Now youare ready to test the feasibility of the venture and to present your business concept to the world.A solid business plan will clearly explain the business concept, describe the market for yourproduct or service, attract investment, and establish operating goals and guidelines.The first step in writing your business plan is to identify your target audience. Will this be aninternal plan the board will use to assess the feasibility and appropriateness of the business? Orwill this plan be distributed to a larger external audience such as funding sources, commerciallenders or the community to gain financial backing and political support for the proposedventure? The content and emphasis of the plan will shift according to the audience.You will also need to decide who will conduct the necessary research and write the plan. Thefollowing table lists the advantages and disadvantages of several options for getting the workdone. You might consider a combination of the options.

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Creating Ones Own Business Plan

It is also important to establish a timeline for completing the plan. A business plan can becompleted by one staff member working full time in as little as a week, although a thoroughmarket analysis will add several days at least. A committee will probably need much more time.Combinations of staff, volunteers, consultants and a board committee may lengthen or shortenthe process depending on skill level, available time, experience with planning and research, andthe groups facilitation needs. Now that you have decided who will put together your businessplan and have set a timeline for its completion, you are ready to begin assembling the elementsof the plan. Your business plan should contain the following sections: Executive summary Company and product description Market description Operations Management and ownership Financial information and timeline Risks and their mitigationA solid business plan will clearly explain the business concept, describe the market for yourproduct or service, attract investment, and establish operating goals and guidelines.

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1 Executive Summary

In this section of your business plan, provide a description of your company, the industry youwill be competing in, and the product or service you plan to offer.Sell your concept! The executive summary may be the first and only section of your businessplan that most of your audience will read. Tell the audience why the business is a great idea.

Some readers will look at this section to determine whether or not they want to learn more abouta business. Other readers will look to the executive summary as a sample of the quality andprofessionalism of the overall plan. The executive summary should be no more than one to threepages long and should answer the following questions: Who are you? (Describe your organization) What are you planning? (Describe the service or product) Why are you planning it? (Discuss the demand and market for the service or product) How will you operate your business? When will you be in operation? (Overview of timeline) What is your expected net profit? (Discuss your projected sales and costs)Although the executive summary is the first part of your business plan, you should write it after

you have written the other sections of the plan in order to include the most important points ofeach section.

2 Companies and Product Description

In describing your company be sure to include what type of business you are planning(Homeownership development, wholesale, retail, manufacturing or service) and the legalstructure (corporation or partnership).You should discuss why you are creating this new venture,referencing the goals you set at the beginning of the business planning process. Also include adescription of your non-profit organization, the role it has played in developing this new ventureand the on-going role, if any, 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 supporting your trend analysis such asarticles from business-oriented newspapers and magazines, research journals or otherpublications. Include these references in the attachments of your business plan.

Product or Service

After describing your company and its industry context, describe the products or services youplan to provide. Focus on what distinguishes your product or service from the rest of the market.Discuss what will attract consumers to your product or service. Provide as much detail asnecessary to inform the reader about the particular characteristics of your product that distinguishit from its competition many nonprofits, for example, expect to produce higher-quality housingthan otherwise exists in the area. Mention any distinctive elements in the manufacture of theproduct, such as being hand-made by a particular people from a specific area. If you areproviding a service, explain the steps you will take to provide a service that is better than yourcompetition.

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Price

Provide a realistic estimate of the price for your product or service, and discuss the rationalebehind that price. An unrealistic price estimate may undermine the credibility of your plan andraise concerns that your product or service may not be of sufficient quality or that you will not beable to maintain profitability in the long run. Describe where this price positions you in the

marketplace: at the high end, low end or in the middle of the existing range of prices for a similarproduct or service.In other sections of the plan you will discuss the target market for your product or service andalso provide additional details on how the price of your product fits into the overall financialprojections for the enterprise.

Place

Describe the location where you will produce or distribute your product or provide your service.Discuss the advantages of the location, such as its accessibility, surrounding amenities and othercharacteristics that may enhance your business.Depending on your anticipated customer base, accessibility to your location via public

transportation could affect the marketability of your product or service.

Customers

In this section of your business plan, you will describe the customer base or market for yourproduct or service. In addition to providing a detailed description of your customer base, you willalso need to describe your competition (other local developers or nearby businesses providing asimilar service to your potential customer base).Who will purchase your product or use your service? How large is your customer base? Definethe characteristics of your target market in terms of its:

Demographics Measures of age, gender, race, religion and family size. Geography Measures based on location. Socioeconomic Status Measures based on individual or household annual income.Provide statistical data to describe the size of your target market. Sources for this informationmay include recent data from the Bureau of Statistics, state or local census data, or informationgathered by your organization, such as membership lists, neighborhood surveys and group orindividual interviews. Be sure to list the sources for your data, as this will further validate yourmarket assumptions. Include any relevant information regarding the growth potential for yourtarget market if your business is expected to rely on growth. Cite any research forecastingpopulation increases in your target market or other trends and factors that may increase thedemand for your product or service.

Competition

Discuss how people identified in your target market currently meet their need for your product orservice. What other businesses exist in your area that is similar to your proposed venture? Forexample, for a housing business, what are the local markets for purchase and rental? How muchare people currently paying for similar products or services? Briefly describe what differentiatesyour proposed venture from these existing businesses and discuss why you are entering thismarket.

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Sales Projections

Present an estimate of how many people you expect will purchase your product or service. Yourestimate should be based on the size of your market, the characteristics of your customers andthe share of the market you will gain over your competition. Project how many units you will sell

at a specified price over several years. The initial year should be broken down in monthly orquarterly increments. Account for initial presentation and market penetration of your product andany seasonal variations in sales, if appropriate.

3 Market Descriptions

In this section, you will describe how you plan to operate the business. You will presentinformation on how you plan to create your product or provide your service, describe the staffrequired to operate and manage the business, discuss the equipment and materials necessary, anddefine the site or facility requirements, if any. A key component of the operation of yourbusiness will be your sales and marketing strategy, so you must describe how you will informyour target market about your product or service and how you will convince customers to

purchase it.

Production Description

Describe the steps for creating your product, from the raw material or initial stage to the finishedproduct, packaged and ready for distribution and sale. If you plan to provide a service, describethe process of service deliver (such as the initial interview, for instance, if you are offeringconsulting services), assessment, research and design, and final presentation. Provide adescription of any sub-contractors or external services you plan to use in the production process.The reader of the plan may be unfamiliar with the industry, so avoid using industry jargon todescribe the production process.

Staffing

Describe the staff required to operate your business: discuss how many people you will need;describe the tasks they will carry out; and the skills they will need. Prepare a chart outlining thesalaries and benefits you will provide to your workforce. Provide information on how you willrecruit staff and provide initial and ongoing training of employees.

4 Equipment and Materials

To manufacture your product or provide your service, what type of equipment will you need?Describe any machinery and vehicles necessary in the production, packaging and distribution ofyour product, including any office equipment such as computers, copiers, furniture, fixtures andtelephone systems. Also discuss the types of materials you will use in the production process anddescribe the source and cost of those materials.

Facility

Describe the type of facility in which you will house your business. Indicate the amount ofbuilding space you will need for production and administration. Also discuss any buildingfeatures required for the production process such as high ceilings, specialized ventilation andheating systems, sanitized laboratory space or vehicular accessibility. If you have alreadyidentified a location and a facility that meets your requirements, describe its features. Even if you

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are planning to provide a service instead of manufacturing a product, you need to demonstratethat you will have adequate space for administrative functions and other activities related to theservice you plan to provide.

Market Description

Describe your strategy for locating your target market, informing or educating customers aboutyour product or service and convincing them to purchase it. Provide details on the methods youwill use to advertise your product, such as print media (advertisements in newspapers, magazinesor trade journals), electronic media (television, radio and the Internet), direct mail, telemarketing,individual sales agents or representatives, or other approaches. Discuss the products or servicesfeatures you plan to emphasize to gain the attention of your target market. Also detail how youwill distribute and sell your product or service. Will you use sales agents or existing retailoutlets, or directly distribute your product through a delivery service such as United ParcelService, Federal Express or independent trucking company.

5 Operations

In this section of your business plan, describe the senior managers responsible for overseeing thestart-up and operation of your business, their background and their responsibilities in thebusiness. Be sure to highlight your management teams experience in managing the production,marketing and administration of similar businesses or within the selected industry and attach theresumes of each member to the plan. Be sure to provide a complete job description of anyvacancies in your management team. Describe the responsibilities, the skills, the backgroundrequired and the steps you plan to take to fill that key position.

Ownership

What is its relationship to your existing organization? Who is on the board of directors / board ofadvisors of the new business and what are their backgrounds and areas of expertise? Potentialinvestors or lenders will be interested in the ownership stake of the board of directors and also inwhat portion of the companys equity is available. Success is often due to ones contacts, so fullydescribe your business relationships with attorneys, accountants and advertising or publicrelations agencies, and any industry-specific services such as suppliers and distributors.

6 Management and Ownership

In this section you will describe the financial feasibility of your planned venture and provideseveral financial reports and statements to document why your business will be a viableenterprise and a sound investment. At a minimum, you should provide a brief descriptivenarrative for each of the following financial statements and include a copy in the attachments toyour plan: Start-up budget Cash flow projection Income statement Balance sheetIn preparing these statements, you may want to seek the advice of a certified public accountant(CPA).

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Start-up Budget

Describe the initial expenses you will incur to get your business up and running. Some items youmight include in your start-up budget research and product design and development expenses,legal incorporation and licensing expenses, facility purchase or rental, equipment and vehiclepurchase or rental, and initial material or supply purchase. You can use Worksheet B as a

sample format for preparing your start-up budget.

Cash Flow Projection

This statement presents a month-to-month schedule of the estimated cash inflows and outflowsof your business for the first year. 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 andcapital, detailing your projected sales revenue and indicating your own or investor equitycontribution, lenders, investors and other sources of capital. Itemize your projected expenses,distinguishing between the cost of goods sold (materials, supplies, production labor), overheadexpenses (rent, utilities, insurance, maintenance, interest, insurance, administrative costs andsalaries, legal and accounting services, marketing, taxes, fees and other ongoing operating

expenses) and capital expenditures (land and buildings, equipment, furniture, vehicles, andbuilding repair or renovation expenses). In preparing this statement, account for a gradualincrease in sales from initial product introduction and any expected seasonal fluctuations inrevenue projections.

Income Statement

Prepare a multiyear (three- to five year) statement of projected revenue, expenses, capitalexpenditures and cost of goods sold. If you make assumptions about the growth of your business,provide supporting documentation such as growth patterns of similar companies or studies thatforecast an industry-wide growth rate. This statement should indicate to the reader the potentialof your business to generate cash and its profitability over time. For an existing business, alsosubmit an income statement for at least three prior consecutive years. Lenders may look at thisstatement to determine whether your business can support the additional debt you are requesting.

Balance Sheet

A start-up business probably will not have any assets or liabilities at the time you are drafting thebusiness plan. Provide a copy of the balance sheet of the businesss sponsoring organization orindividual. Describe in your narrative any assets that will be allocated to the start-up of thebusiness.

7 Financial Information and Start up Timeline

Capital Requirements

Describe the amount and types of financing you are seeking for your business. Are you lookingfor debt from a lender or equity from an investor? Refer to your start up budget and cash flowstatement presented earlier. Discuss how and when you will draw on these funds and how theywill affect the bottom line. Also describe any commitments or investments that you may havealready secured.If you are seeking investors, such as venture capitalists, describe what they will receive in returnfor their capital. What is the repayment period and the expected return on investment? Also

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discuss the nature of their ownership share and how it may change with future investments.Equity investors are looking for rates of return higher than rates offered by banks or otherbusiness lenders. The level of risk in your business and industry will help to determine the actualmarket rate, as will the availability of equity dollars. Check with other businesses (although notdirect competitors) to see what return on investment their investors demanded. Be prepared to

negotiate. And make sure you research the investment market carefully; several socially mindedinvestment pools exist and more 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 asset being purchased is usually pledged as security for the loan. Working Capital Short-term financing to cover operating expenses and to bridge gaps incash flow.

Initial Start-up Timeline

Provide a timeline of tasks and events necessary to get your business operational. Be sure to

describe the current stage you are in and what steps you have taken to date. Include deadlines fortask completion. Set realistic deadlines according to your capacity to complete these tasks. Thefollowing is a list of some of the steps you may wish to include: Filing legal incorporation documents Identifying and securing suitable space Designing and developing the product Obtaining required licenses or permits Securing necessary financing Leasing or purchasing equipment Hiring key staff Hiring and training of production or support staff Purchasing materials and production supplies Beginning marketing activities OpeningAlthough it is impossible to know exactly what will go wrong in starting and running yourbusiness, thinking about different challenges will strengthen your plan. Potential problems couldinclude: Insufficient public subsidy available to new home owners or residents The competition drops its prices Not enough customers Production costs exceed estimates Difficulty in finding qualified employees Environmental or governmental changes such as tax increases, additional regulations orpopulation changesFor each potential problem, discuss its likelihood and describe possible solutions or actions youmight undertake to mitigate the problem.

Risks and their Mitigation

Although it is impossible to know exactly what will go wrong in starting and running yourbusiness, thinking about different challenges will strengthen your plan.

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After you have completed all of the elements of your business plan, you should focus itspresentation. A well-organized plan will assist you in communicating the most importantelements of your business plan to the reader, and a persuasive plan will help you to convince thereader to invest in your business.

Executive SummaryAs mentioned earlier, this section should be written last. However, if you have already writtenthe executive summary, review it to make sure it embodies the following characteristics. Becauseit is the first and possibly the only section of the plan that many readers may see, the executivesummary should provide an overview of the plan and entice the reader to read the whole plan orto agree to meet with you. The executive summary should be no more than three pages andshould briefly describe the most important elements of the plan. Review the Executive Summarysection of this manual for more tips on this critical introduction to your business.

2. Write short notes on :

a) Sales projections (10 marks).

Sol.

Sales Projections

Present an estimate of how many people you expect will purchase your product or service. Yourestimate should be based on the size of your market, the characteristics of your customers andthe share of the market you will gain over your competition. Project how many units you will sellat a specified price over several years. The initial year should be broken down in monthly orquarterly increments. Account for initial presentation and market penetration of your product andany seasonal variations in sales, if appropriate.

Steps for Developing Sales Projections

Your business plan is not just a funding tool, but also a blueprint for how your business shouldoperate. The following are steps for developing sales projections.

Step I: Estimate

For each product or service, estimate the number of people who are likely to buy and when theywill buy it. You can get this information from asking your likely customers about their possibleuse of your business, or you can base your estimates on your knowledge of the market.

Step 2: Use a Calendar

Estimate your sales and number of customers served during one week. Using the totals for aweek, make projections for each month. For the first few months, keep in mind that business will

start off slowly before people become more aware of your business. Use will most likely increaseas people learn about your products and services. Seasonal variations may affect your business aswell. You will use these numbers to project your equipment, supply and staffing needs, as wellas income.

Cost Account Heads:

Organizational Start up Costs Product Design/Development

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Research & Development Legal/Licensing Expenses Property & Facilities Land/Building Purchase Initial Lease Deposit

Building Repairs/Improvements Equipment/Machinery Production-related Administrative/Office Equip. Materials & Supplies Personnel Key Employees Contract Labour/Temps Training Expenses Marketing Expenses Advertisements

Brochures/Literature/Other Insurance Premiums Distributor Contracts Contingency (5%)

Expenses: Costs of Goods Sold

Materials/Supplies Labor Rent Utilities Insurance Admin. Exp. (PT Sec.) Legal & Accounting Marketing Equipment Maintenance/Supplies Facility Maintenance Fees/Miscellaneous

Debt / Equity Investment:

Equipment Loan Building Rehabilitation Loan Grants Owner Equity

Expenses

Cost of Goods Sold Wages & Benefits Materials Supplies

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Overhead Expenses: Rent Utilities Building Maintenance/Security

Marketing Accounting Legal Administrative Expense Interest Expense Depreciation

TheBusiness Priorities are based upon six top-level objectives; these are: To make Business data available both to decision-makers and as much as possible available inthe public domain; To ensure all holders of Business information are able to participate.

To ensure that the data available through the NETWORK are of known quality; To ensure that the NETWORK Gateway gives access to data on Location and species used toinform decisions affecting Business at local, regional, national and international levels; To promote knowledge, use and awareness of the NETWORK; To enhance the skills base and expertise needed to support and develop the NETWORK.i) The objectives have cross-cutting themes which are:A. Infrastructure 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 realization of the objectives throughwork that they initiate on their own account, but which does not necessarily fall under thefocused objectives for the Network.ii) A series of assumptions have been made in formulating theBusiness Priorities and theirassociated work programme. These are: It is assumed that the present way of working, i.e. a lead partner approach for each project willbe retained; The plan is not intended to represent all the work that could be undertaken; It is anticipated that other work towards the principal aim of adding content and providing afully functional gateway will be adopted by the NETWORK as part of its programme, but thiswork would have to be prioritized against this core activity and separately resourced;To give additional focus to the challenging nature of the task that the NETWORK is settingitself, a series of principle drivers have been recognized.The drivers are: Processes This driver relates to facilitated targeted action on the ground through providingknowledge of resource location, extent, pattern of distribution, data quality and gaps. It also hasthe potential for engaging more partners in the NETWORK;

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Environmental Impact Assessment (EIA) and Strategic Environmental Assessment Thisdriver is concerned with providing ready access to data on location, extent, pattern and quality ofBusiness. Data contributor engagement This driver is concerned with accessing sources of data for theNETWORK enabling the assessment of actions and continual improvement in the targeting of

actions from the two previous drivers; Operational use This relates to the use of the NETWORK within the day to day business ofagencies as a source of data relevant to local reporting or casework; Generic enhancement This driver encompasses capacity building and Recording Schemes andother contributing organizations and user groups, in order to ensure the continued and enhancedsupply and use of information.These lead naturally to three broad areas of work: Developing the recording network; Enhancing the Internet Gateway in terms of its functionality and the data it accesses; Ensuring that the benefits already secured through the earlier work are maintained.The plan also acknowledges the need to co-ordinate activity between the members of the

NETWORK and their partners, and to communicate the progress and successes of the workprogramme.

b) Importance of creativity in Business

Sol.

Creativity

Everyone in business is creative.Some ofmost creativepeople are in manufacturing.They actually CREATEproducts that change the world.Some of the least creativepeople perhaps are in advertising.

They spend most of their creative energy telling manufacturers that theyarent creative!Salespeople Are Creative They are natural born story-tellers.

Accountants are creative.

Best Creative Exercise Ever

Write down your ideas.You have a ton every day.But most of the time, you cant remember them by the days end.Dont let spelling and grammar issues or relentless self-editing stop you.Get your ideas on paper (Let someone else edit it.)

Go retro: Carry a notebook, pen, and calendar into your meetings.Look up at people.

Story First, Technology Last.

Dont invest in a presentation class called How to Use PowerPoint.until youve taken aclass called How to Tell Stories and Connect with Your Audience.

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A Simple Creative Exercise

Simplify everything. Your life, your home, your office, your desk, your processes, vision, policy,procedures, everything.

Fixing Problems is Creative.

Your job is to fix problems, not to complain.BrainstormingDont tell people that their ideas are bad, especially if you dont have 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 a presentation.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 never get any real creative workdone.

Get Fresh Ideas.

Leave the office building at least once a day.Another Lame ExcuseDesigners should put more of their passion into designing great work, instead of endless(Boring) discussions about the superiority of the Macintosh over the PC!The Lame Excuse I 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.

Creativity: Use it or lose it.

Create something every day.

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Creativity takes place every day, not once in a while.Its not rare.Its just been mystified Own your creativity.

Facts and observations

Giga-investments made in the paper and pulp industry, in the heavy metal industry and in otherbase industries, today face scenarios of slow growth (2-3 % p.a.) in their key markets and agrowing over-capacity in Europe.The energy sector faces growing competition with lower prices and cyclic variations of demand.Productivity improvements in these industries have slowed down to 1-2 % p.a .Global financial markets make sure that capital cannot be used non-productively, as its ownersare offered other opportunities and the capital will move (often quite fast) to capture theseopportunities.The capital markets have learned the American way, i.e. there is a shareholder dominanceamong the actors, which has brought (often quite short-term) shareholder return to the forefrontas a key indicator of success, profitability and productivity.

There are lessons learned from the Japanese industry, which point to the importance ofimmaterial investments. These lessons show that investments in buildings, production technologyand supporting technology will be enhanced with immaterial investments, and that these are evenmore important for re-investments and for gradually growing maintenance investments.The core products and services produced by giga-investments are enhanced with life-timeservice, with gradually more advanced maintenance and financial add-on services.New technology and enhanced technological innovations will change the life cycle of a gigainvestment.Technology providers are involved throughout the life cycle of a giga -investment.Giga-investments are large enough to have an impact on the market for which they arepositioned:A 3, 00,000 ton paper mill will change the relative competitive positions; smaller units are nolonger cost effective.A new technology will redefine the CSF:s for the market.Customer needs are adjusting to the new possibilities of the giga-investment.The proposition that we can describe future cash flows as stochastic processes is no longer valid;neither can the impact be expected to be covered through the stock market.

Types of options

Option to Defer Time-to-Build Option Option to Expand Growth Options Option to Contract Option to Shut Down/Produce Option to Abandon Option to Alter Input/ Output Mix

INVESTMENT OPPORTUNITY CALL VARIABLE OPTION

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Present value of a projects operatingcash flows.

S Stock Price

Investment Costs X Exercise Price

Length of time the decision may be

deferred

t Time to Expiry

Time value of money rf Risk-free interest rate

Risk of the project. Standard deviation of returns on stock

Fuzzy numbers (fuzzy sets) are a way to express the cash flow estimates in a more realistic way.This means that a solution to both problems (accuracy and flexibility) is a real option modelusing fuzzy sets.

Self Assessment Questions I

State whether the following statements are True or False:

1. The people involved in manufacturing actually create products that change the world.

2. In the rapidly changing world of global markets, e-commerce, evolving telecommunicationsand internet, the secrets of Complex System evolution offers us a basis on which to reflect on themanagement of our businesses.

3. Complex Systems thinking informs us how to achieve a high rate of delivery of new products

and services and rapid adaptation to changing conditions.

4. The creativity and imagination of a business will come from the dynamic interaction ofdiverse individuals.

5. Efficiency of execution must precede imagination and creativity.

3. What factors are to be taken into account in a crisis communications

strategy? (10marks).

Sol.

The following items should be taken into account in the crisis communications strategy: Communications should be timely and honest. To the extent possible, an audience should hear news from the organization first. Communications should provide objective and subjective assessments. All employees should be informed at approximately the same time. Give bad news all at once do not sugarcoat it. Provide opportunity for audiences to ask questions, if possible. Provide regular updates and let audiences know when the next update will be issued.

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Treat audiences as you would like to be treated. Communicate in a manner appropriate to circumstances: Face-to-face meetings (individual and group) News conferences Voice mail/email

Company Intranet and Internet sites Toll-free hotline Special newsletter Announcements using local/national media.Preplanning for communications is critical. Drafts of message templates, scripts, and statementscan be crafted in advance for threats identified in the Risk Assessment.Procedures to ensure that communications can be distributed at short notice should also beestablished, particularly when using resources such as Intranet and Internet sites and toll-freehotlines.

Official Spokesperson

The organization should designate a single primary spokesperson, with back-ups identified, whowill manage/disseminate crisis communications to the media and others. This individual shouldbe trained in media relations prior to a crisis. All information should be funneled through a singlesource to assure that the messages being delivered are consistent.It should be stressed that personnel should be informed quickly regarding where to refer callsfrom the media and that only authorized company spokespeople are authorized to speak to themedia. In some situations, an appropriately trained site spokesperson may also be necessary.

4. What elements should be included in a Marketing Plan under Due Diligence

while seeking investment in for your Company? (10 marks).

Sol.The Process of Due Diligence

A business which wants to attract foreign investments must present a business plan. But abusiness plan is the equivalent of a visit card. The introduction is very important but, once theforeign investor has expressed interest, a second, more serious, more onerous and more tediousprocess commences: Due Diligence."Due Diligence" is a legal term (borrowed from the securities industry). It means, essentially, tomake sure that all the facts regarding the firm are available and have been independentlyverified. In some respects, it is very similar to an audit. All the documents of the firm areassembled and reviewed, the management 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 person interfaces with all outsidedue diligence teams. He collects all the materials requested and oversees all the activities whichmake up the due diligence process.The firm must have ONE VOICE. Only one person represents the company, answers questions,makes presentations and serves as a coordinator when the DD teams wish to interview peopleconnected to the firm.

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Second Rule:

Brief your workers. Give them the big picture. Why is the company raising funds, who are theinvestors, how will the future of the firm (and their personal future) look if the investor comes in.Both employees and management must realize that this is a top priority. They must be instructed

not to lie. They must know the