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    Master of Business Administration MBA Semester 4MB0036 Strategic Management & Business Policy

    Assignment Set- 1

    Note: Each question carries 10 Marks. Answer all the questions.1. Explain the different circumstances under which a suitable growth strategy should beselected by any company to improve its performance (i.e., intensive, integrative ordiversification growth). You may select an example of your choice to substantiate yourviews (10 marks).Sol:Strategies to Improve SalesThere are three alternatives to improve the sales performance of a business unit, to fill thegap between actual sales and targeted sales:a) Intensive growthb) Integrative growth

    c) Diversification growtha) 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 firstevaluate 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 theircurrent markets through a market penetration strategy. For instance, SONY introduced TV

    sets with Trinitron picture tubes into the market in 1996 priced at a premium of Rs.10,000and above over the market through a niche market capture strategy. They gradually loweredthe prices to market levels. However, it also simultaneously launched higher-end products(high-technology products) to maintain its global image as a technology leader. By loweringthe prices of TVs with Trinitron picture tubes, the company could successfully penetrate intothe markets to add new customers to its customer base.Market Development Strategyis to explore the possibility to find or develop new markets forits current 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 orsaturated markets, which could lead to price pressures.Product Development Strategyinvolves consideration of new products of potential interest to

    its current markets (e.g. Gramaphone Records to Musical Productions to CDs) as part of aDiversification strategy.

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

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    MICROSOFTs New StrategyIt is called PC-plus. It has three elements:a) Providing computer power to the most commonly used devices such as cell phone,personal computer, toaster oven, dishwasher, refrigerator, washing machines and so on.b) Developing software to allow these devices to communicate.c) Investing heavily to help build wireless and high-speed internet access throughout theworld to link it all together.Microsoft envisions a home where everyday appliances and electronics are smart. Accordingto Bill Gates, In the near future, PC-based networks will help us control many of ourdomestic matters with devices that cost no more than $ 100 each .It is also said at Microsoft that VCRs can be programmed via e-mail, laundry washers can 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 togive these appliances brains and provide them the means to talk to each other throughtheir Windows CE Operating System.

    b) Integrative Growth:It refers to the process of identifying opportunities to develop or acquire businesses that are

    related to the 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 moreprofit. (Backward Integration)Alternatively, if this company acquires some of its most profitably operating intermediariessuch as wholesalers or retailers, it isforward integration. If the company legally takes over oracquires 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 arenot related to the companys current businesses. This makes sense when such opportunitiesoutside the present businesses are identified with attractive returns and that industry hasbusiness strengths 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 (Concentric Diversification).A printing press might shift over to offset printing with computerised content generation toappeal to higher-end customers and also add new application areas ( HorizontalDiversification ) or even sell stationery.Alternatively, the company might choose new businesses that have nothing to do with thecurrent technology, products or markets (Conglomerate Diversification).The classic examples for this would be engineering and textile firms setting up software

    development centres or Call Centres with new service clients.Situation AnalysisSales 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 modificationsto Hyundai.c) A company dealing in computer floppies plans to set up a Software Technology Park.

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    2. What are the components of a good Business Plan and briefly explain the importance ofeach.(10 marks).Sol.The format of a Business Plan is something that has been developed and refined over theyears and is something that should not be changed. Like a good recipe, a business plan needs

    to include certain ingredients to make it work.When you create a business plan, don't attempt to recreate its format. Those reviewing thistype of 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, nomatter how great your business idea.Executive Summary SectionEvery 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 tocapture the attention of your audience so that they will be compelled to read on. Remember,it's a summary, so each and every word must be carefully selected and presented.Use the Executive Summary section of your business plan to accurately describe the nature of

    your business venture including the need that you plan to fill. Show the reasons why peopleneedyour 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 documentand add your business plan to the heap of other rejected ideas.Devote the balance of your business plan to providing details of the items outlined in theExecutive Summary.

    The Business SectionBe sure to include the legal name, physical address and detailed description of the nature ofyour business. 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.Market Analysis SectionAn 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 packaging

    and a description of your company policies.Financing SectionThe 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 torepay this debt. Include all pertinent financial worksheets in this section: annual incomeprojections, a break-even worksheet, projected cash flow statements and a balance sheet.Management Section

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    Outline your organizational structure and management team here. Include the legal structureof your 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 professional-quality Business Plan - including all critical components - tomorrow!

    3. You wish to start a new venture to manufacture auto components. Explain differentstages 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,or revolves around a better way of making and marketing an existing one. While many wouldargue that the idea stage is not a stage at all, it is actually a turning point, as business adviser

    Mike Pendrith points out. After this, you as a business builder must refine this idea into amoney-making reality. Here in this case supposing we are to start a new venture ofmanufacturing auto components and also to market them. We will see here in the followingparagraphs different stages of achieving the same goal.

    1. Idea ResearchingIn this stage, you are researching your idea. The object of your research is to find outwho is marketing the same product or service in your area, and how successful themarketer has been. You can accomplish this by a Google search on the Internet,launching a test-marketing campaign, or conducting surveys. Also, you are attemptingto find what the level of interest is in the products (or services) you wish to market.Here as the main goal is to start a company that manufactures the auto components,

    we are to make a research on all the auto companies which are procuring the sparesfrom the outside vendors. And also the competitors who are all marketing that, theirexistence and also how successful they are.As part of the initial research process, it is important to consider the legalrequirements of selling your product or service. According to the Biz Ed website,examine the legal ramifications of your business. Know the tax laws governing yourbusiness. If insurance is a requirement, prepare to budget for it. Also, be aware of anysafety laws governing you as an employer. Hence we are also to make a research onthe feasible area where we can start our organization and licenses that we need totake keeping in mind the environmental factors as well.

    2. Business Plan FormulationYou must write a business plan. As Pendrith points out, this is crucial if you want

    funding, such as a small business loan or grant, or if you wish to lease a building. Atthis stage, Pendrith advises, you need to consult with an attorney or business adviserfor assistance.In the business plan you typically include following heads:

    i) Executive Summaryii) Company and Product Descriptioniii) Market Description

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    iv) Equipment and Materialsv) Operationsvi) Management and Ownershipvii) Financial Information and Start-Up Timelineviii) Risks and Their Mitigation

    3. Financial PlanningFinancial planning involves thinking about the financial costs of starting andmaintaining your business. According to the Biz Ed website, you should consider suchissues as the costs of running the business; the prices you wish to charge yourcustomers; cash flow control; and how you wish to set up financial reserves in case ofan emergency or an event causing significant loss to the business. This includes theplanning of whether to take any loans or make personal investments in the company.

    4. Advertising CampaignDecide how you will market your product. Consider your budget and your targetaudience. Make up business cards with your logo on it, your name and the name ofyour business. Make sure that they are of the most professional quality. Utilizing print,

    the newspaper, the Internet, radio or TV is also wise, considering, of course, the sizeof your advertising budget.Here in this case more than TV, a better advertising media will be road side signboards placed close to the auto companies for getting the deals to manufacture theirspares. As TV is useful only to reach the common man and he is not our targetcustomer. Hence sign boards is the feasible solution and also pamphlets circulatedacross the pioneers. This apart personal marketing is much more suggested.

    5. Preparing for LaunchAdvertise for employees. This also requires adequate planning. Think about what youlook for in an employee. Be specific about the requisite skills and experience you areseeking. Then begin requesting resumes and setting up interviews, making hiringdecisions based on the standards you have set.In this case we will be looking for a few candidates in managerial position who must begood in managing things apart from minimal technical knowledge.Lower level people at the shopfloor people. They need to have real time experiencein the shop floor activities.The employees apart, one needs to plan on the plant and machinery as well.Thus these are all the stages that I would consider performing if incase I plan to start amanufacturing unit producing automobile components.

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

    Due diligenceOf course, your commercial partner will need some reassurance about the quality of the offeryou are making to them. If you are involved in licensing technology or seeking commercialsupport for your research you are likely to hear of due diligence. When a future partner isconsidering whether or not to license technology, to buy a share of patent rights, or tosupport your research, they will need to satisfy themselves that it is a viable proposition. Theprocess of assessing the viability, risk, potential liabilities and commercial prospects of aproject is known as due diligence. Indeed, if a potential partner seems not to be interestedin this kind of issues, it may actually raise questions about their commitment to the projector the credibility of their business plan, particularly if the relationship assumes some degreeof 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 withdebts, or was about to be involved in difficult litigation, or if there were doubts aboutwhether it really owned its assets. The same applies to a potential investment involvingintellectual property. For instance, a potential commercial partner would not want to investin patented technology only to find out that patent renewal fees have not been paid and thepatent has lapsed, or to find out that the patent was being opposed by another company, orto find that there is prior art available that calls into question its validity. It may transpirethat a student, a contractor or a visiting researcher could actually be legally entitled to someor all of the patent rights. Even a serious level of uncertainty or doubt could be enough todeter a potential partner, especially if they have run into this kind of difficulty before.Due diligence may also involve searching for information about the full range of IP rights that

    might impact on the relevant technology for instance, to check whether you have later filedpatent applications on improvements to the original patented technology, that may limit thevalue of their investment in the original technology. Other intellectual property rights suchas related trade mark or design registrations, or key trade secrets or copyright material (suchas manuals or software) may also need to be identified or located, as these may also affectthe commercial partners interests in the technology. For example, they may be unwilling totake out a license for your patent without getting access to the software you have developedfor a related process. They may want the right to use your trade mark in association with thepatented 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 foreign

    patents; Searches of patent databases for conflicting technology; Independent advice from patent attorneys on issues such as patent ownership, patentvalidity and scope of patent claims; Checks on employment contracts, confidentiality arrangements, and contracts with otherparties that may interfere with the exercise of IP rights; Details of the patent prosecution such as examiners reports and other opinions; Details of any legal challenges to the patent, and the way the proceedings were resolved;

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    Checks on laboratory notebooks in the event that the validity of US patents is of concern tothe commercial partner (this also provides reassurance as to claims of ownership of thepatent); Surveys of the activity of competitors and owners of competing technology, and possibilitiesof conflict; 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 license terms. It should also speed up thelicensing negotiations, and ultimately the commercialization of your intellectual property.

    5. Is Corporate Social Responsibility necessary and how does it benefit a company and itsshareholders? (10 marks).Sol.

    Corporate social responsibility (CSR), also known as corporate responsibility, corporatecitizenship, responsible business, sustainable responsible business (SRB), or corporatesocial performance,[1] is a form of corporateself-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 ofthe public 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 triplebottom line: 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 arguethat CSR distracts from the fundamental economic role of businesses; others argue that it isnothing more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.Corporate Social Responsibility has been redefined throughout the years. However, itessentially is titled to aid to an organization's mission as well as a guide to what the companystands for and will uphold to its consumers.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.In the increasingly conscience-focused marketplaces of the 21st century, the demand for

    more ethical business processes and actions (known as ethicism) is increasing. Simultaneously,pressure is applied on industry to improve business ethics through new public initiatives 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 practiceand a career specialization, the field is primarily normative. In academia, descriptiveapproaches are also taken. The range and quantity of business ethical issues reflects thedegree to which business is perceived to be at odds with non-economic social values.Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s,

    http://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-0http://en.wikipedia.org/wiki/Corporatehttp://en.wikipedia.org/wiki/Self-regulationhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Norm_(sociology)http://en.wikipedia.org/wiki/Stakeholder_(corporate)http://en.wikipedia.org/wiki/Public_spherehttp://en.wikipedia.org/wiki/Proactivehttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Decision-makinghttp://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/Display_windowhttp://en.wikipedia.org/wiki/Multinational_corporationshttp://en.wikipedia.org/wiki/Business_ethicshttp://en.wikipedia.org/wiki/Applied_ethicshttp://en.wikipedia.org/wiki/Ethical_businesshttp://en.wikipedia.org/wiki/Business_ethicshttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-0http://en.wikipedia.org/wiki/Corporatehttp://en.wikipedia.org/wiki/Self-regulationhttp://en.wikipedia.org/wiki/Business_modelhttp://en.wikipedia.org/wiki/Norm_(sociology)http://en.wikipedia.org/wiki/Stakeholder_(corporate)http://en.wikipedia.org/wiki/Public_spherehttp://en.wikipedia.org/wiki/Proactivehttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Public_interesthttp://en.wikipedia.org/wiki/Decision-makinghttp://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/Display_windowhttp://en.wikipedia.org/wiki/Multinational_corporationshttp://en.wikipedia.org/wiki/Business_ethicshttp://en.wikipedia.org/wiki/Applied_ethicshttp://en.wikipedia.org/wiki/Ethical_businesshttp://en.wikipedia.org/wiki/Business_ethics
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    both within major corporations and within academia. For example, today most majorcorporate websites lay emphasis on commitment to promoting non-economic social valuesunder a variety of headings (e.g. ethics codes, social responsibility charters). In some cases,corporations have re-branded their core values in the light of business ethical considerations(e.g. BP's "beyond petroleum" environmental tilt).The term "CSR" came in to common use in the early 1970s, after many multinational

    corporations formed, although it was seldom abbreviated. The term stakeholder, meaningthose on whom an organization's activities have an impact, was used to describe corporateowners beyond shareholders as a result of an influential book by R Freeman in 1984.[2]

    ISO 26000 is the recognized international standard for CSR (currently a Draft 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 benefitsThe scale and nature of the benefits of CSR for an organization can vary depending on thenature of the enterprise, and are difficult to quantify, though there is a large body ofliterature exhorting business to adopt measures beyond financial ones (e.g., Deming's

    Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes found a correlationbetween social/environmental performance and financial performance. However, businessesmay not be looking at short-run financial returns when developing their CSR strategy.The definition of CSR used within an organization can vary from the strict "stakeholderimpacts" definition used by many CSR advocates and will often include charitable effortsandvolunteering. 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 theCEO or 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 thesearguments:Human resources

    A CSR program can be an aid to recruitment and retention,[12] particularly within thecompetitive graduate student market. Potential recruits often ask about a firm's CSR policyduring an interview, and having a comprehensive policy can give an advantage. CSR can alsohelp improve the perception of a company among its staff, particularly when staff canbecome involved throughpayroll giving, fundraising activities or community volunteering. Seealso Corporate Social Entrepreneurship, whereby CSR can also be driven by employees'personal values, in addition to the more obvious economic and governmental drivers.Risk managementManaging risk is a central part of many corporate strategies. Reputations that take decades tobuild up can be ruined in hours through incidents such as corruption scandals orenvironmental accidents. These can also draw unwanted attention from regulators, courts,governments and media. Building a genuine culture of 'doing the right thing' within a

    corporation can offset these risks.[13]

    Brand differentiationIn 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 buildingcustomer loyalty based on distinctive ethical values.[14]Several major brands, such as The Co-operative Group, The Body Shop and American Apparel[15] are built on ethical values. Businessservice organizations can benefit too from building a reputation for integrity and bestpractice.

    http://en.wikipedia.org/wiki/Social_responsibilityhttp://en.wikipedia.org/wiki/BPhttp://en.wikipedia.org/wiki/Stakeholder_(corporate)http://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-1http://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/UNhttp://en.wikipedia.org/wiki/Principles_for_Responsible_Investmenthttp://en.wikipedia.org/wiki/W._Edwards_Deminghttp://en.wikipedia.org/wiki/W._Edwards_Deminghttp://en.wikipedia.org/wiki/Balanced_scorecardhttp://en.wikipedia.org/wiki/Philanthropyhttp://en.wikipedia.org/wiki/Philanthropyhttp://en.wikipedia.org/wiki/Volunteeringhttp://en.wikipedia.org/wiki/Human_resourceshttp://en.wikipedia.org/wiki/Business_developmenthttp://en.wikipedia.org/wiki/Public_relationshttp://en.wikipedia.org/wiki/Public_relationshttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-10http://en.wikipedia.org/wiki/CEOhttp://en.wikipedia.org/wiki/Board_of_directorshttp://en.wikipedia.org/wiki/Business_casehttp://en.wikipedia.org/wiki/Recruitmenthttp://en.wikipedia.org/wiki/Retentionhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-11http://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-11http://en.wikipedia.org/wiki/Graduate_schoolhttp://en.wikipedia.org/wiki/Graduate_schoolhttp://en.wikipedia.org/wiki/Payroll_givinghttp://en.wikipedia.org/wiki/Payroll_givinghttp://en.wikipedia.org/wiki/Fundraisinghttp://en.wikipedia.org/wiki/Corporate_Social_Entrepreneurshiphttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-12http://en.wikipedia.org/wiki/Unique_selling_propositionhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-13http://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-13http://en.wikipedia.org/wiki/Brandshttp://en.wikipedia.org/wiki/The_Co-operative_Grouphttp://en.wikipedia.org/wiki/The_Co-operative_Grouphttp://en.wikipedia.org/wiki/The_Body_Shophttp://en.wikipedia.org/wiki/American_Apparelhttp://en.wikipedia.org/wiki/American_Apparelhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-14http://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-14http://en.wikipedia.org/wiki/Social_responsibilityhttp://en.wikipedia.org/wiki/BPhttp://en.wikipedia.org/wiki/Stakeholder_(corporate)http://en.wikipedia.org/wiki/Shareholdershttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-1http://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/Triple_bottom_linehttp://en.wikipedia.org/wiki/UNhttp://en.wikipedia.org/wiki/Principles_for_Responsible_Investmenthttp://en.wikipedia.org/wiki/W._Edwards_Deminghttp://en.wikipedia.org/wiki/Balanced_scorecardhttp://en.wikipedia.org/wiki/Philanthropyhttp://en.wikipedia.org/wiki/Volunteeringhttp://en.wikipedia.org/wiki/Human_resourceshttp://en.wikipedia.org/wiki/Business_developmenthttp://en.wikipedia.org/wiki/Public_relationshttp://en.wikipedia.org/wiki/Public_relationshttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-10http://en.wikipedia.org/wiki/CEOhttp://en.wikipedia.org/wiki/Board_of_directorshttp://en.wikipedia.org/wiki/Business_casehttp://en.wikipedia.org/wiki/Recruitmenthttp://en.wikipedia.org/wiki/Retentionhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-11http://en.wikipedia.org/wiki/Graduate_schoolhttp://en.wikipedia.org/wiki/Payroll_givinghttp://en.wikipedia.org/wiki/Fundraisinghttp://en.wikipedia.org/wiki/Corporate_Social_Entrepreneurshiphttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-12http://en.wikipedia.org/wiki/Unique_selling_propositionhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-13http://en.wikipedia.org/wiki/Brandshttp://en.wikipedia.org/wiki/The_Co-operative_Grouphttp://en.wikipedia.org/wiki/The_Co-operative_Grouphttp://en.wikipedia.org/wiki/The_Body_Shophttp://en.wikipedia.org/wiki/American_Apparelhttp://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-14
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    License to operateCorporations are keen to avoid interference in their business through taxation or regulations.By taking substantive voluntary steps, they can persuade governments and the wider publicthat they are taking issues such as health and safety, diversity, or the environment seriouslyas good corporate citizens with respect to labour standards and impacts on the environmentStakeholder priorities

    Increasingly, corporations are motivated to become more socially responsible because theirmost important stakeholders expect them to understand and address the social andcommunity issues that are relevant to them. Understanding what causes are important toemployees is usually the first priority because of the many interrelated business benefits thatcan be derived from increased employee engagement (i.e. more loyalty, improvedrecruitment, increased retention, higher productivity, and so on). Key external stakeholdersinclude customers, consumers, investors (particularly institutional investors), communities inthe areas where the corporation operates its facilities, regulators, academics, and the media.

    6. Distinguish between a Financial Investor and a Strategic Investor explaining the rolethey play in a Company. (10 marks).Sol.In the not so distant past, there was little difference between financial and strategicinvestors. Investors of all colors sought to safeguard their investment by taking over as manymanagement functions as they could. Additionally, investments were small and shareholdersfew. A firm resembled a household and the number of people involved in ownership and inmanagement was correspondingly limited. People invested in industries they wereacquainted 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 ofa single firm. As knowledge increased and specialization ensued it was no longer feasible or

    possible to micro-manage a firm one invested in. Actually, separate businesses of moneymaking and business management emerged. An investor was expected to excel in obtaininghigh yields on his capital not in industrial management or in marketing. A manager wasexpected to manage, not to be capable of personally tackling the various and varying tasks ofthe business that he managed.Thus, two classes of investors emerged. One type supplied firms with capital. The other typesupplied 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 andmore, a separation was maintained. Venture capital and risk capital funds, for instance, arepurely financial investors. So are, to a growing extent, investment banks and other financialinstitutions.

    The financial investor represents the past. Its money is the result of past - right and wrong -decisions. Its orientation is short term: an "exit strategy" is sought as soon as feasible. For"exit strategy" read quick profits. The financial investor is always on the lookout, searchingfor willing buyers for his stake. The stock exchange is a popular exit strategy. The financialinvestor has little interest in the company's management. Optimally, his money buys for himnot only a good product and a good market, but also a good management. But hisinterpretation of the rolls and functions of "good management" are very different to thatoffered by the strategic investor. The financial investor is satisfied with a management team

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    which maximizes value. The price of his shares is the most important indication of success.This is "bottom line" short termism which also characterizes operators in the capital markets.Invested in so many ventures and companies, the financial investor has no interest, nor theresources to get seriously involved in any one of them. Micro-management is left to others -but, in many cases, so is macro-management. The financial investor participates in quarterlyor annual general shareholders meetings. This is the extent of its involvement.

    The strategic investor, on the other hand, represents the real long term accumulator ofvalue. Paradoxically, it is the strategic investor that has the greater influence on the value ofthe company's shares. The quality of management, the rate of the introduction of newproducts, the success or failure of marketing strategies, the level of customer satisfaction,the education of the workforce - all depend on the strategic investor. That there is a strongrelationship between the quality and decisions of the strategic investor and the share price issmall wonder. The strategic investor represents a discounted future in the same manner thatshares do. Indeed, gradually, the balance between financial investors and strategic investorsis shifting in favour of the latter. People understand that money is abundant and what is inshort supply is good management. Given the ability to create a brand, to generate profits, toissue new products and to acquire new clients - money is abundant.

    These are the functions normally reserved to financial investors:Financial ManagementThe 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 accountingbooks of the firm reflecting all its activities in a manner commensurate with therelevant legislation and regulation in the territories of operations of the firm and withinternal guidelines set from time to time by the Board of Directors of the firm. This isusually achieved both during a Due Diligence process and later, as financialmanagement is implemented.

    2. To implement continuous financial audit and control systems to monitor the

    performance of the firm, its flow of funds, the adherence to the budget, theexpenditures, 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 theterritories of the operations of the firm and as deemed necessary and demanded fromtime to time by the Board of Directors of the Firm.

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

    5. To prepare and present for the approval of the Board of Directors an annual budget,other budgets, financial plans, business plans, feasibility studies, investmentmemoranda and all other financial and business documents as may be required from

    time to time by the Board of Directors of the Firm.6. To alert the Board of Directors and to warn it regarding any irregularity, lack of

    compliance, lack of adherence, lacunas and problems whether actual or potentialconcerning the financial systems, the financial operations, the financing plans, theaccounting, the audits, the budgets and any other matter of a financial nature orwhich could or does have a financial implication.

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    7. To collaborate and coordinate the activities of outside suppliers of financial serviceshired or contracted by the firm, including accountants, auditors, financial consultants,underwriters and brokers, the banking system and other financial venues.

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

    investments.9. To fully computerize all the above activities in a combined hardware-software and

    communications system which will integrate into the systems of other members of thegroup of companies.

    10. Otherwise, to initiate and engage in all manner of activities, whether financial or ofother nature, conducive to the financial health, the growth prospects and thefulfillment of investment plans of the firm to the best of his ability and with theappropriate dedication of the time and efforts required.

    Collection and Credit Assessment1. To construct and implement credit risk assessment tools, questionnaires, quantitative

    methods, data gathering methods and venues in order to properly evaluate and predict

    the credit risk rating of a client, distributor, or supplier.2. To constantly monitor and analyse the payment morale, regularity, non-payment and

    non-performance events, etc. in order to determine the changes in the credit riskrating of said factors.

    3. To analyse receivables and collectibles on a regular and timely basis.4. To improve the collection methods in order to reduce the amounts of arrears and

    overdue payments, or the average period of such arrears and overdue payments.5. To collaborate with legal institutions, law enforcement agencies and private collection

    firms in assuring the timely flow and payment of all due payments, arrears andoverdue payments and other collectibles.

    6. To coordinate an educational campaign to ensure the voluntary collaboration of theclients, 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 ManagementThe 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

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    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,sales promotion methods, advertising campaigns, image, public relations and othermedia campaigns. The strategic investor also implements these plans or supervisestheir implementation.

    2. The strategic investor is usually possessed of a brandname recognized in many

    countries. It is the market leaders in certain territories. It has been providing goodsand services to users for a long period of time, reliably. This is an important asset,which, if properly used, can attract users. The enhancement of the brandname, itsrecognition and market awareness, market penetration, co-branding, collaborationwith other suppliers are all the responsibilities of the strategic investor.

    3. The dissemination of the product as a preferred choice among vendors, distributors,individual users and businesses in the territory.

    4. Special events, sponsorships, collaboration with businesses.5. The planning and implementation of incentive systems (e.g., points, vouchers).6. The strategic investor usually organizes a distribution and dealership network, a

    franchising network, or a sales network (retail chains) including: training, pricing,pecuniary and quality supervision, network control, inventory and accounting controls,

    advertising, local marketing and sales promotion and other network managementfunctions.

    7. The strategic investor is also in charge of "vision thinking": new methods of operation,new marketing ploys, new market niches, predicting the future trends and marketneeds, market analyses and research, etc.

    The strategic investor typically brings to the firm valuable experience in marketing and sales.It has numerous off the shelf marketing plans and drawer sales promotion campaigns. Itdeveloped software and personnel capable of analysing any market into effective niches andof creating the right media (image and PR), advertising and sales promotion drives best suitedfor it. It has built large databases with multi-year profiles of the purchasing patterns anddemographic data related to thousands of clients in many countries. It owns libraries ofmaterial, images, sounds, paper clippings, articles, PR and image materials, and proprietary

    trademarks and brand names. Above all, it accumulated years of marketing and salespromotion ideas which crystallized into a new conception of the business.Technology

    1. The planning and implementation of new technological systems up to their fullyoperational phase. The strategic partner's engineers are available to plan, implementand supervise all the stages of the technological side of the business.

    2. The planning and implementation of a fully operative computer system (hardware,software, communication, intranet) to deal with all the aspects of the structure andthe operation of the firm. The strategic investor puts at the disposal of the firmproprietary software developed by it and specifically tailored to the needs ofcompanies operating in the firm's market.

    3. The encouragement of the development of in-house, proprietary, technological

    solutions to the needs of the firm, its clients and suppliers.4. The planning and the execution of an integration program with new technologies in

    the field, in collaboration with other suppliers or market technological leaders.Education and TrainingThe strategic investor is responsible to train all the personnel in the firm: operators,customer services, distributors, vendors, sales personnel. The training is conducted at its soleexpense and includes tours of its facilities abroad.

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    The entrepreneurs who sought to introduce the two types of investors, in the first place are usually left with the following functions:Administration and Control

    1. To structure the firm in an optimal manner, most conducive to the conduct of itsbusiness and to present the new structure for the Board's approval within 30 days fromthe date of the GM's appointment.

    2. To run the day to day business of the firm.3. To oversee the personnel of the firm and to resolve all the personnel issues.4. To secure the unobstructed flow of relevant information and the protection of

    confidential organization.5. To represent the firm in its contacts, representations and negotiations with other

    firms, authorities, or persons.This is why entrepreneurs find it very hard to cohabitate with investors of any kind.Entrepreneurs are excellent at identifying the needs of the market and at 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.Only the introduction of outside investors can resolve the dilemma. Outside investors are notemotionally 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 toremain small or even to close shop than to give up their cherished freedoms. This is wherenine out of ten entrepreneurs fail - in knowing when to let go.

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    Master Of Business Administration-MBA Semester 4MB0036- Strategic management & Business Policy

    Assignment Set-2

    Note: Each question carries 10 Marks. Answer all the questions.1. What is the purpose of a Business Plan? Explain the features of the component of thePlan 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 achieve

    with 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 organizationshould review and approve the goals, because these goals will influence the direction of theorganization and require the allocation of valuable staff and financial resources. Your goalswill serve as a filter to screen a wide range of possible business opportunities. If you fail toestablish clear goals early in the process, your organization may spend substantial time andresources pursuing potential business ventures that may be financially viable but do not servethe mission of your organization in other important ways. A liquor store on the corner may bea 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 byyour organization.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 filla gap in existing retail services. You may need to find a use for a vacant commercial propertythat blights a strategic area of your neighborhood. Or your business might focus on therehabilitation of dilapidated single family homes in the community.Whenever possible, goals should have quantifiable outcomes such as to generate a minimumof $50,000 of net income or profit within three years; to employ at least 15 community

    residents within two years in new permanent jobs at a livable wage; to occupy and supporta minimum of 10,000 square feet of neighborhood commercial space; or to rehabilitate 50single-family houses over three years. Clearly defined and quantifiable goals provideobjective measurements to screen potential business opportunities. They also establish clearcriteria to evaluate the success of the business venture.Establish GoalsOnce you have identified goals for a new business venture, the next step in the businessplanning process is to identify and select the right business. Many organizations may find

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    themselves starting at this point in the process. Business opportunities may have beendropped at your doorstep. Perhaps an entrepreneurial member of the board of directors or acommunity resident has approached your organization with an idea for a new business, or aneighborhood business has closed or moved out of the area, taking jobs and leaving a vacantfacility behind. Even if this is the case, we recommend that you take a step back and setgoals. Failing to do so could result in a waste of valuable time and resources pursuing an idea

    that may seem feasible, but fails to accomplish important goals or to meet the mission ofyour 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 inthe area, and assess the capacity of the area to support existing and additional commercial orhome-ownership activity. This assessment is based on the shopping and traffic patterns of thearea and the demographic and socio-economic characteristics of the community. A bad orinsufficient market study could encourage your organization to pursue a business destined tofail, with potentially disastrous results for the organization as a whole. Through a market

    study you will be able to identify gaps in existing products and services and unsatisfieddemand for additional or expanded products and services. If your organization does not havestaff capacity to conduct a market study, you might hire a consultant or solicit the assistanceof business administration students from a local college or university. Conducting a solid andthorough market study up front will provide essential information for your final business plan.Analysis of Local and Regional Industry Trends: Another method of investigatingpotentialbusiness opportunities is to researchlocal and regional business and industry trends. You maybe able 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 areais a good 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 to

    draw upon this internal expertise in selecting potential business opportunities.Internal Purchasing Needs / Collaborative Procurement: Perhaps, your organizationfrequentlypurchases a particular service or product.If nearby affiliate organizations also usethisservice or product, this may present a businessopportunity. Examples of such products orservicesinclude printing or copying services, travelservices, transportation services, propertymanagement services, office supplies, catering services, and other products. You will stillneed to conduct a complete market study to determine the demand for this product orservice beyond your internal needs or the needs of your partners or affiliates.Identify Business OpportunitiesBuying 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 businessthat has been an anchor to the local retail area or a much-needed source of jobs in the

    neighborhood is for sale. Its closure would mean the loss of jobs and services for yourneighborhood. Your organization might consider purchasing and taking over the enterpriseinstead of starting a new business. If you decide to pursue this option, you still need to gothrough the steps of creating a business plan. However, before moving ahead, these are just afew important areas to research in assessing the business you plan to purchase:Be sure to conduct a thorough review of the financial statements for the past three to fiveyears to determine the current fiscal status and recent financial trends, the validity of the

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    shorten the process depending on skill level, available time, experience with planning andresearch, and the groups facilitation needs. Now that you have decided who will puttogether your business plan and have set a timeline for its completion, you are ready to beginassembling the elements of the plan. Your business plan should contain the followingsections: 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.1 Executive SummaryIn 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 business

    plan that most of your audience will read. Tell the audience why the business is a great idea.Some readers will look at this section to determine whether or not they want to learn moreabout a business. Other readers will look to the executive summary as a sample of the qualityand professionalism of the overall plan. The executive summary should be no more than oneto three pages long and should answer the following questions: Who are you? (describe your organization) What are you planning? (describe the service or product) Why are you planning it? (discuss the demand and market for the service or product) How will you operate your business? When will you be in operation? (overview of timeline) What is your expected net profit? (discuss your projected sales and costs)Although the executive summary is the first part of your business plan, you should write it

    after you have written the other sections of the plan in order to include the most importantpoints of each section.2 Company and Product DescriptionIn describing your company be sure to include what type of business you are planning(homeownership development, wholesale, retail, manufacturingor service) and the legal structure (corporation or partnership). You should discuss why youare creating this new venture, referencing the goals you set at the beginning of the businessplanning process. Also include a description of your non-profit organization, the role it hasplayed in developing this new venture and the on-going role, if any, it will play in operations.Give the reader a brief overview of the industry, describing historic and current growthtrends.Whenever possible, provide documentation or references supporting your trend analysis such

    as articles from business-oriented newspapers and magazines, research journals or otherpublications. Include these references in the attachments of your business plan.Product or ServiceAfter 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 themarket. Discuss what will attract consumers to your product or service. Provide as muchdetail as necessary to inform the reader about the particular characteristics of your productthat distinguish it from its competition many nonprofits, for example, expect to produce

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    higher-quality housing than otherwise exists in the area. Mention any distinctive elements inthe manufacture of the product, such as being hand-made by a particular people from aspecific area. If you are providing a service, explain the steps you will take to provide aservice that is better than your competition.PriceProvide a realistic estimate of the price for your product or service, and discuss the rationale

    behind that price. An unrealistic price estimate may undermine the credibility of your planand raise concerns that your product or service may not be of sufficient quality or that youwill not be able to maintain profitability in the long run. Describe where this price positionsyou in the marketplace: at the high end, low end or in the middle of the existing range ofprices for a similar product 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.PlaceDescribe the location where you will produce or distribute your product or provide yourservice. Discuss the advantages of the location, such as its accessibility, surroundingamenities and other characteristics that may enhance your business.

    Depending on your anticipated customer base, accessibility to your location via publictransportation could affect the marketability of your product or service.CustomersIn 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, youwill also need to describe your competition (other local developers or nearby businessesproviding a similar 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 thisinformation may include recent data from the Bureau of Statistics, state or local census data,or information gathered by your organization, such as membership lists, neighborhood surveysand group or individual interviews. Be sure to list the sources for your data, as this willfurther validate your market assumptions. Include any relevant information regarding thegrowth potential for your target market if your business is expected to rely on growth. Citeany research forecasting population increases in your target market or other trends andfactors that may increase the demand for your product or service.CompetitionDiscuss how people identified in your target market currently meet their need for yourproduct or service. What other businesses exist in your area that are similar to your proposedventure? For example, for a housing business, what are the local markets for purchase and

    rental? How much are people currently paying for similar products or services? Brieflydescribe what differentiates your proposed venture from these existing businesses and discusswhy you are entering this market.Sales ProjectionsPresent an estimate of how many people you expect will purchase your product or service.Your estimate should be based on the size of your market, the characteristics of yourcustomers and the share of 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

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    down in monthly or quarterly increments. Account for initial presentation and marketpenetration of your product and any seasonal variations in sales, if appropriate.3 Market DescriptionIn 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 thestaff required to operate and manage the business, discuss the equipment and materials

    necessary, and define the site or facility requirements, if any. A key component of theoperation of your business will be your sales and marketing strategy, so you must describehow you will inform your target market about your product or service and how you willconvince customers to purchase it.Production DescriptionDescribe the steps for creating your product, from the raw material or initial stage to thefinished product, packaged and ready for distribution and sale. If you plan to provide aservice, describe the process of service deliver (such as the initial interview, for instance, ifyou are offering consulting services), assessment, research and design, and final presentation.Provide a description of any sub-contractors or external services you plan to use in theproduction process. The reader of the plan may be unfamiliar with the industry, so avoidusing 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 outliningthe salaries and benefits you will provide to your workforce. Provide information on how youwill recruit staff and provide initial and ongoing training of employees.4 Equipment and MaterialsTo 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 distributionof your product, including any office equipment such as computers, copiers, furniture,fixtures and telephone systems. Also discuss the types of materials you will use in theproduction process and describe the source and cost of those materials.Facility

    Describe the type of facility in which you will house your business. Indicate the amount 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. Evenif you are planning to provide a service instead of manufacturing a product, you need todemonstrate that you will have adequate space for administrative functions and otheractivities related to the service you plan to provide .Market DescriptionDescribe your strategy for locating your target market, informing or educating customersabout your product or service and convincing them to purchase it. Provide details on themethods you will use to advertise your product, such as print media (advertisements in

    newspapers, magazines or trade journals), electronic media (television, radio and theInternet), direct mail, telemarketing, individual sales agents or representatives, or otherapproaches. Discuss the products or services features you plan to emphasize to gain theattention of your target market. Also detail how you will distribute and sell your product orservice. Will you use sales agents or existing retail outlets, or directly distribute your productthrough a delivery service such as United Parcel Service, Federal Express or independenttrucking company?5 Operations

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    In this section of your business plan, describe the senior managers responsible for overseeingthe start-up and operation of your business, their background and their responsibilities in thebusiness. Be sure to highlight your management teams experience in managing theproduction, marketing and administration of similar businesses or within the selected industryand attach the resumes of each member to the plan. Be sure to provide a complete jobdescription of any vacancies in your management team. Describe the responsibilities, the

    skills, the background required and the steps you plan to take to fill that key position.OwnershipWhat is its relationship to your existing organization? Who is on the board of directors / boardof advisors of the new business and what are their backgrounds and areas of expertise?Potential investors or lenders will be interested in the ownership stake of the board ofdirectors and also in what portion of the companys equity is available. Success is often dueto ones contacts, so fully describe your business relationships with attorneys, accountantsand advertising or public relations agencies, and any industry-specific services such assuppliers and distributors.6 Management and OwnershipIn 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 viable

    enterprise 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 attachmentsto your plan: Start-up budget Cash flow projection Income statement Balance sheetIn preparing these statements, you may want to seek the advice of a certified publicaccountant (CPA).Start-up BudgetDescribe the initial expenses you will incur to get your business up and running. Some itemsyou might include in your start-up budget research and product design and development

    expenses, legal incorporation and licensing expenses, facility purchase or rental, equipmentand vehicle purchase or rental, and initial material or supply purchase. You can useWorksheet B as a sample format for preparing your start-up budget.Cash Flow ProjectionThis statement presents a month-to-month schedule of the estimated cash inflows andoutflows of your business for the first year. This schedule should indicate how much moneyyour business will have or need and when you will need it. You should describe your sourcesof income and capital, detailing your projected sales revenue and indicating your own orinvestor 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, administrative costs and salaries, legal and accounting services, marketing, taxes,

    fees and other ongoing operating expenses) and capital expenditures (land and buildings,equipment, furniture, vehicles, and building repair or renovation expenses). In preparing thisstatement, account for a gradual increase in sales from initial product introduction and anyexpected seasonal fluctuations in revenue projections.Income StatementPrepare 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 yourbusiness, provide supporting documentation such as growth patterns of similar companies or

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    studies that forecast an industry-wide growth rate. This statement should indicate to thereader the potential of your business to generate cash and its profitability over time. For anexisting business, also submit an income statement for at least three prior consecutive years.Lenders may look at this statement to determine whether your business can support theadditional debt you are requesting.Balance Sheet

    A start-up business probably will not have any assets or liabilities at the time you are draftingthe business plan. Provide a copy of the balance sheet of the businesss sponsoringorganization or individual. Describe in your narrative any assets that will be allocated to thestart-up of the business.7 Financial Information and Start up TimelineCapital RequirementsDescribe the amount and type 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 howthey will affect the bottom line. Also describe any commitments or investments that you mayhave already secured.If you are seeking investors, such as venture capitalists, describe what they will receive in

    return for their capital. What is the repayment period and the expected return oninvestment? Also discuss the nature of their ownership share and how it may change withfuture investments. Equity investors are looking for rates of return higher than rates offeredby banks or other business lenders. The level of risk in your business and industry will help todetermine the actual market rate, as will the availability of equity dollars. Check with otherbusinesses (although not direct competitors) to see what return on investment their investorsdemanded. Be prepared to negotiate. And make sure you research the investment marketcarefully; several socially minded investment pools exist and more are in development. orlenders, describe the type of financing you are seeking: Seed Capital Short-term financing to cover start-up costs. Fixed Asset Financing Longer-term financing for property, building improvements,equipment or vehicles. The asset being purchased is usually pledged as security for the loan.

    Working Capital Short-term financing to cover operating expenses and to bridge gaps incash flow.Initial Start-up TimelineProvide a timeline of tasks and events necessary to get your business operational. Be sure todescribe the current stage you are in and what steps you have taken to date. Includedeadlines for task completion. Set realistic deadlines according to your capacity to completethese tasks. The following is a list of some of the steps you may wish to include: Filing legal incorporation documents Identifying and securing suitable space Designing and developing the product Obtaining required licenses or permits Securing necessary financing

    Leasing or purchasing equipment Hiring key staff Hiring and training of production or support staff Purchasing materials and production supplies Beginning marketing activities Opening

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    Although it is impossible to know exactly what will go wrong in starting and running yourbusiness, thinking about different challenges will strengthen your plan. Potential problemscould include: 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 actionsyou might undertake to mitigate the problem.Risks and their MitigationAlthough it is impossible to know exactly what will go wrong in starting and running yourbusiness, thinking about different challenges will strengthen your plan.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

    the reader to invest in your business.Executive SummaryAs mentioned earlier, this section should be written last. However, if you have alreadywritten the executive summary, review it to make sure it embodies the followingcharacteristics. Because it is the first and possibly the only section of the plan that manyreaders may see, the executive summary should provide an overview of the plan and enticethe reader to read the whole plan or to agree to meet with you. The executive summaryshould be no more than three pages and should briefly describe the most important elementsof the plan. Review the Executive Summary section of this manual for more tips on thiscritical introduction to your business.

    2. Write short notes on :a) sales projections (10 marks).Sol.Sales ProjectionsPresent an estimate of how many people you expect will purchase your product or service.Your estimate should be based on the size of your market, the characteristics of yourcustomers and the share of 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. Account for initial presentation and marketpenetration of your product 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 shouldoperate. The following are steps for developing sales projections.Step I:Estimate

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    For each product or service, estimate the number of people who are likely to buy and whenthey will buy it. You can get this information from asking your likely customers about theirpossible use of your business, or you can base your estimates on your knowledge of themarket.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 businesswill start off slowly before people become more aware of your business. Use will most likelyincrease as people learn about your products and services. Seasonal variations may affectyour business as well. You will 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 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/MiscellaneousDebt / Equity Investment: Equipment Loan

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    Building Rehabilitation Loan Grants Owner EquityExpenses Cost of Goods Sold Wages & Benefits

    Materials SuppliesOverhead Expenses: Rent Utilities Building Maintenance/Security Marketing Accounting Legal Administrative Expense Interest Expense Depreciation

    The Business Prioritiesare based upon six top-level objectives; these are: To make Business data available both to decision-makers and as much as possible availablein the public domain; To ensure all holders of Business information are able to participate. To ensure that the data available through the NETWORK are of known quality; To ensure that the NETWORK Gateway gives access to data on Location and species used 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 tools

    C. Capacity buildingD. Working with the wider publicE. Co-ordination and promotioni) In addition, the partners will contribute to the overall realisation 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 the Business Prioritiesand theirassociated work programme. These are: It is assumed that the present way of working, i.e. a lead partner approach for each projectwill be retained; The plan is not intended to represent all the work that could be undertaken; It is anticipated that other work towards the principal aim of adding content and providing a

    fully functional gateway will be adopted by the NETWORK as part of its programme, but 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 alsohas the potential for engaging more partners in the NETWORK;

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    Environmental Impact Assessment (EIA) and Strategic Environmental Assessment This driveris 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 forthe NETWORK enabling the assessment of actions and continual improvement in the targetingof 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 Schemesand other contributing organizations and user groups, in order to ensure the continued andenhanced supply and use of information.These lead naturally to three broad areas of work: Developing the recording network; Enhancing the Internet Gateway in terms of its functionality and the data it accesses; Ensuring that the benefits already secured through the earlier work are maintained.The plan also acknowledges the need to co-ordinate activity between the members of theNETWORK and their partners, and to communicate the progress and successes of the workprogramme.

    b) importance of creativity in BusinessSol.CreativityEveryone in business is creative.Some of most creative people are in manufacturing.They actually CREATE products that change the world.Some of the least creative people perhaps are in advertising.They spend most of their creative energy telling manufacturers that 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.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 dont have a better one.Its only your lifes work.Never say, Its not my job to be creative.How to Lose an Audience

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    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 creativework done.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.

    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 heavy metal industry and inother base industries, today face scenarios of slow growth (2-3 % p.a.) in their key marketsand a growing over-capacity in Europe.The energy sector faces growing competition with lower prices and cyclic variations ofdemand.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 itsowners are offered other opportunities and the capital will move (often quite fast) to capture

    these opportunities.The capital markets have learned the American way, i.e. there is a shareholder dominanceamong the actors, which has brought (often quite short-term) shareholder return to theforefront as 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, productiontechnology and supporting technology will be enhanced with immaterial investments, and

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    that these are even more important for re-investments and for gradually growingmaintenance 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 giga-investment.

    Technology providers are involved throughout the life cycle of a giga-investment.Giga-investments are large enough to have an impact on the market for which they 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 longervalid; 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 MixTable of Equivalences:

    INVESTMENT OPPORTUNITY VARIABLE CALL OPTION

    Present value of a projects operatingcash flows.

    S Stock price.

    Investment costs X Exercise price

    Length of time the decision may bedeferred.

    t Time to expiry.

    Time value of money. rf Risk-free interest rate

    Risk of the project. Standard deviation ofreturns on stock

    Fuzzy numbers (fuzzy sets) are a way to express the cash flow estimates in a more realisticway.This means that a solution to both problems (accuracy and flexibility) is a real option modelusing fuzzy sets.Self Assessment Questions IState whether the following statements are True or False:

    1. The people involved in manufacturing actually create products that change the world.2. In the rapidly changing world of global markets, e-commerce, evolving tele-communications and internet, the secrets of Complex System evolution offer us a basis onwhich to reflect on the management of our businesses.3. Complex Systems thinking informs us how to achieve a high rate of delivery of newproducts 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.

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    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. 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