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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.

Q1. 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).

Ans: Strategies to Improve Sales

There are three alternatives to improve the sales performance of a business unit, to

fill the gap between actual sales and targeted sales:

a) Intensive growth

b) Integrative growth

c) Diversification growth

a) Intensive Growth:

It refers to the process of identifying opportunities to achieve further growth within

the companys current businesses. To achieve intensive growth, the management

should first evaluate the available opportunities to improve the performance of its

existing current businesses.

It may find three options:

To penetrate into existing markets

To develop new markets

To develop new products

At times, it may be possible to gain more market share with the current products in

their current markets through a market penetration strategy. For instance, SONY

introduced TV sets with Trinitron picture tubes into the market in 1996 priced at apremium of Rs.10,000 and above over the market through a niche market capture

strategy. They gradually lowered the prices to market levels. However, it also

simultaneously launched higher-end products (high-technology products) to

maintain its global image as a technology leader. By lowering the prices of TVs with

Trinitron picture tubes, the company could successfully penetrate into the markets

to add new customers to its customer base.

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Market Development Strategy is to explore the possibility to find or develop new

markets for its current products (from the northern region to the eastern region

etc.). Most multinational companies have been entering Indian markets with this

strategy, to develop markets globally. However, care should be taken to ensure

that these new markets are not low density or saturated markets, which could lead

to price pressures.

Product Development Strategy involves consideration of new products of potential

interest to its current markets (e.g. Gramaphone Records to Musical Productions to

CDs) as part of a Diversification strategy.

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

MICROSOFTs New Strategy

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

a) Providing computer power to the most commonly used devices such as cell

phone, personal computer, toaster oven, dishwasher, refrigerator, washingmachines and so on.

b) Developing software to allow these devices to communicate.

c) Investing heavily to help build wireless and high-speed internet access

throughout the world to link it all together.

Microsoft envisions a home where everyday appliances and electronics are smart.

According to Bill Gates, In the near future, PC-based networks will help us control

many of our domestic matters with devices that cost no more than $ 100 each .

It is also said at Microsoft that VCRs can be programmed via e-mail, laundry

washers can be designed to send an instant message to the home computer when

the load is done and refrigerators can be made to send an e-mail when theres no

more milk. Microsoft plans to give these appliances brains and provide them the

means to talk to each other through their Windows CE Operating System.

b) Integrative Growth:

It refers to the process of identifying opportunities to develop or acquire businesses

that are related to the companys current businesses. More often, the business

processes have to be integrated for linear growth in the profits. The corporate planmay be designed to undertake backward, forward or horizontal integration within

the industry.

If a company operating in music systems takes over the manufacturing business of

its plastic material supplier, it would be able to gain more control over the market

or generate more profit. (Backward Integration)

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Alternatively, if this company acquires some of its most profitably operating

intermediaries such as wholesalers or retailers, it is forward integration. If the

company legally takes over or acquires the business of any of its leading

competitors, it is called horizontal integration (however, if this competitor is weak,

it might be counter-productive due to dilution of brand image).

c) Diversification Growth:

It refers to the process of identifying opportunities to develop or acquire businesses

that are not related to the companys current businesses. This makes sense when

such opportunities outside the present businesses are identified with attractive

returns and that industry has business strengths to be successful. In most cases,

this is planned with new products that have technological or marketing synergies

with existing businesses to cater to a different group of customers (Concentric

Diversification).

A printing press might shift over to offset printing with computerized content

generation to appeal to higher-end customers and also add new application areas(Horizontal Diversification) or even sell stationery.

Alternatively, the company might choose new businesses that have nothing to do

with the current technology, products or markets (Conglomerate Diversification).

The classic examples for this would be engineering and textile firms setting up

software development centers or Call Centers with new service clients.

Situation Analysis

Sales Improvement Strategies:

a) A supplier of computer stationery invests in a computer stationery manufacturing

unit.

b) A vendor supplying engine boxes to Maruti decides to supply the same with

modifications to Hyundai.

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

Park.

Q2. What are the components of a good Business Plan and briefly explain

the importance of each. (10 marks).

Ans. The format of a Business Plan is something that has been developed and

refined over the years and is something that should not be changed. Like a good

recipe, a business plan needs to include certain ingredients to make it work.

When you create a business plan, don't attempt to recreate its format. Those

reviewing this type of document have expectations you must meet. If they do not

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see those crucial decision-making

components, they'll see no reason to precede with their review of your business

plan, no matter how great your business idea.

Executive Summary Section

Every business plan must begin with an Executive Summary section. A well-written

Executive Summary is critical to the success of the rest of the document. Here iswhere you need to capture the attention of your audience so that they will be

compelled to read on. Remember, it's a summary, so each and every word must be

carefully selected and presented.

Use the Executive Summary section of your business plan to accurately describe

the nature of your business venture including the need that you plan to fill. Show

the reasons why people need

your product or service. Show this by including a brief analysis of the characteristics

of your potential market.

Describe the organization of your business including your management team. Also,

briefly describe your sales and marketing plan or approach. Finally include the

numbers that those

reviewing your business plan want to see - the amount of capital you seek, the

carefully calculated sales projections and your plan to repay the loan.

If you've captured your audience so far they'll read on. Otherwise, they'll close the

document and add your business plan to the heap of other rejected ideas.

Devote the balance of your business plan to providing details of the items outlined

in the Executive Summary.

The Business Section

Be sure to include the legal name, physical address and detailed description of the

nature of your business. It's important to keep the description easy to read using

common terminology. Never

assume that those reading your business plan have the same level of technical

knowledge that you do. Describe how you plan to better serve your market than

your competition is currently

doing.

Market Analysis Section

An analysis of the market shows that you have done your homework. This section is

basically a summary of your Marketing Plan. It needs to show the demand for your

product or service, the

proposed market, trends within the industry, a description of your pricing plan and

packaging and a description of your company policies.

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Financing Section

The Financing section must show that you are as committed to your business

venture as you expect those reading your business plan to be. Show the amount of

personal funds you are contributing and their source. Also include the amount of

capital you need and your plan to repay this debt. Include all pertinent financial

worksheets in this section: annual income projections, a break-even worksheet,

projected cash flow statements and a balance sheet.

Management Section

Outline your organizational structure and management team here. Include the legal

structure of your business whether it is a partnership, corporation or limited liability

corporation.

Include resumes and biographies of key players on your management team. Show

staffing projection data for the next few years.

By now you're probably thinking that you don't need Business Plan just yet. Well

you do, and there is business plan building software that can help you through this

immense project. These

software packages are easy to use and affordable. Use one today and produce a

professional-quality Business Plan - including all critical components - tomorrow!

Q3. You wish to start a new venture to manufacture auto components.

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

marks).

Ans. Every business starts out as an idea. This idea usually involves the invention

of a new product, or revolves around a better way of making and marketing anexisting one. While many would argue that the idea stage is not a stage at all, it is

actually a turning point, as business adviser Mike Pendrith points out. After this,

you as a business builder must refine this idea into a money-making reality. Here

in this case supposing we are to start a new venture of manufacturing auto

components and also to market them. We will see here in the following paragraphs

different stages of achieving the same goal.

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 successfulthe marketer has been. You can accomplish this by a Google search on the

Internet, launching a test-marketing campaign, or conducting surveys. Also, you

are attempting to find what the level of interest is in the products (or services) you

wish to market.

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Here as the main goal is to start a company that manufactures the auto

components, we are to make a research on all the auto companies which are

procuring the spares from the outside vendors. And also the competitors who are

all marketing that, their existence and also how successful they are.

As part of the initial research process, it is important to consider the legal

requirements of selling your product or service. According to the Biz Ed website,

examine the legal ramifications of your business. Know the tax laws governing your

business. If insurance is a requirement, prepare to budget for it. Also, be aware of

any safety laws governing you as an employer. Hence we are also to make a

research on the feasible area where we can start our organization and licenses that

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

Business Plan Formulation

You must write a business plan. As Pendrith points out, this is crucial if you want

funding, such as a small business loan or grant, or if you wish to lease a building.

At this stage, Pendrith advises, you need to consult with an attorney or businessadviser for assistance.

In the business plan you typically include following heads:

Executive Summary

Company and Product Description

Market Description

Equipment and Materials

Operations

Management and Ownership

Financial Information and Start-Up Timeline

Risks and Their Mitigation

Financial Planning

Financial planning involves thinking about the financial costs of starting and

maintaining your business. According to the Biz Ed website, you should consider

such issues as the costs of running the business; the prices you wish to charge your

customers; cash flow control; and how you wish to set up financial reserves in case

of an emergency or an event causing significant loss to the business. This includes

the planning of whether to take any loans or make personal investments in the

company.

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Advertising Campaign

Decide how you will market your product. Consider your budget and your target

audience. Make up business cards with your logo on it, your name and the name of

your business. Make sure that they are of the most professional quality. Utilizing

print, the newspaper, the Internet, radio or TV is also wise, considering, of course,

the size of your advertising budget.

Here in this case more than TV, a better advertising media will be road side sign

boards placed close to the auto companies for getting the deals to manufacture

their spares. As TV is useful only to reach the common man and he is not our

target customer. Hence sign boards is the feasible solution and also pamphlets

circulated across the pioneers. This apart personal marketing is much more

suggested.

Preparing for Launch

Advertise for employees. This also requires adequate planning. Think about what

you look for in an employee. Be specific about the requisite skills and experience

you are seeking. Then begin requesting resumes and setting up interviews, making

hiring decisions based on the standards you have set.

In this case we will be looking for a few candidates in managerial position who must

be good in managing things apart from minimal technical knowledge.

Lower level people at the shop floor people. They need to have real time

experience in the shop floor activities.

The employees apart, one needs to plan on the plant and machinery as well.

Thus these are all the stages that I would consider performing if incase I plan to

start a manufacturing unit producing automobile components.

Q4. Explain the process of due Diligence and why it is necessary.(10

marks).

Ans. Due diligence of course, your commercial partner will need some reassurance

about the quality of the offer you are making to them. If you are involved in

licensing technology or seeking commercial support for your research you are likely

to hear of due diligence. When a future partner is considering whether or not to

license technology, to buy a share of patent rights, or to support your research,

they will need to satisfy themselves that it is a viable proposition. The process of

assessing the viability, risk, potential liabilities and commercial prospects of a

project is known as due diligence. Indeed, if a potential partner seems not to be

interested in this kind of issues, it may actually raise questions about their

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commitment to the project or the credibility of their business plan, particularly if

the relationship assumes some degree of risk and investment on their part.

Generally, due diligence will involve assessing the overall commercial operations,

cash flow, assets and liabilities of a business that is being purchased or otherwise

financially supported. You would think twice about purchasing a business if you

found that it was burdened with debts, or was about to be involved in difficult

litigation, or if there were doubts about whether it really owned its assets. The

same applies to a potential investment involving intellectual property. For instance,

a potential commercial partner would not want to invest in patented technology

only to find out that patent renewal fees have not been paid and the patent has

lapsed, or to find out that the patent was being opposed by another company, or to

find that there is prior art available that calls into question its validity. It may

transpire that a student, a contractor or a visiting researcher could actually be

legally entitled to some or all of the patent rights. Even a serious level of

uncertainty or doubt could be enough to deter a potential partner, especially if they

have run into this kind of difficulty before.

Due diligence may also involve searching for information about the full range of IP

rights that might impact on the relevant technology for instance, to check

whether you have later filed patent applications on improvements to the original

patented technology, that may limit the value of their investment in the original

technology. Other intellectual property rights such as related trade mark or

design registrations, or key trade secrets or copyright material (such as manuals or

software) may also need to be identified or located, as these may also affect the

commercial partners interests in the technology. For example, they may be

unwilling to take out a license for your patent without getting access to the

software you have developed for a related process. They may want the right to useyour trade mark in association with the patented technology.

So in a due diligence process, your commercial partner may undertake a range of

checks and need various forms of information. These may include:

Checks on external records, such as patent registers and patent databases,

including foreign patents;

Searches of patent databases for conflicting technology;

Independent advice from patent attorneys on issues such as patent ownership,patent validity and scope of patent claims;

Checks on employment contracts, confidentiality arrangements, and contracts

with other parties that may interfere with the exercise of IP rights;

Details of the patent prosecution such as examiners reports and other opinions;

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Details of any legal challenges to the patent, and the way the proceedings were

resolved;

Checks on laboratory notebooks in the event that the validity of US patents is of

concern to the commercial partner (this also provides reassurance as to claims of

ownership of the patent);

Surveys of the activity of competitors and owners of competing technology, andpossibilities of conflict; and

Analysis of freedom to operate issues.

In preparing to license your technology, you should consider in advance these kind

of due diligence issues. If you can anticipate and provide comprehensive answers to

these questions, you will be able more effectively to reassure your commercial

partner, and you will be in a stronger negotiating position in negotiating license

terms. It should also speed up the licensing negotiations, and ultimately the

commercialization of your intellectual property.

Q5. Is Corporate Social Responsibility necessary and how does it benefit a

company and its shareholders? (10 marks).

Ans. Corporate social responsibility (CSR), also known as corporate responsibility,

corporate citizenship, responsible business, sustainable responsible business (SRB),

or corporate social 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 business would monitor and ensure its support to

law, ethical standards, and international norms. Consequently, business would

embrace responsibility for the impact of its activities on the environment,consumers, employees, communities, stakeholders and all other members of the

public sphere. Furthermore, CSR-focused businesses would proactively promote the

public interest by encouraging community growth and development, and voluntarily

eliminating practices that harm the public sphere, regardless of legality. Essentially,

CSR is the deliberate inclusion of public interest into corporate decision-making,

and the honoring of a triple bottom line: people, planet, profit.

The practice of CSR is much debated and criticized. Proponents argue that there is

a strong business case for CSR, in that corporations benefit in multiple ways by

operating with a perspective broader and longer than their own immediate, short-

term profits. Critics argue that CSR distracts from the fundamental economic role of

businesses; others argue that it is nothing more than superficial window-dressing;

others yet argue that it is an attempt to pre-empt the role of governments as a

watchdog over powerful multinational corporations. Corporate Social Responsibility

has been redefined throughout the years. However, it essentially is titled to aid to

an organization's mission as well as a guide to what the company stands for and

will uphold to its consumers.

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Development business ethics is one of the forms of applied ethics that examines

ethical principles and moral or ethical problems that can arise in a business

environment.

In the increasingly conscience-focused marketplaces of the 21st century, the

demand for more ethical business processes and actions (known as ethicism) is

increasing. Simultaneously, pressure is applied on industry to improve business

ethics through new public initiatives and laws (e.g. higher UK road tax for higher-

emission vehicles).

Business ethics can be both a normative and a descriptive discipline. As a corporate

practice and a career specialization, the field is primarily normative. In academia,

descriptive approaches are also taken. The range and quantity of business ethical

issues reflects the degree to which business is perceived to be at odds with non-

economic social values. Historically, interest in business ethics accelerated

dramatically during the 1980s and 1990s, both within major corporations and

within academia. For example, today most major corporate websites lay emphasis

on commitment to promoting non-economic social values under a variety ofheadings (e.g. ethics codes, social responsibility charters). In some cases,

corporations have re-branded their core values in the light of business ethical

considerations (e.g. BP's "beyond petroleum" environmental tilt).

The term "CSR" came in to common use in the early 1970s, after many

multinational corporations formed, although it was seldom abbreviated. The term

stakeholder, meaning those on whom an organization's activities have an impact,

was used to describe corporate owners beyond shareholders as a result of an

influential book by R Freeman in 1984.

ISO 26000 is the recognized international standard for CSR (currently a Draft

International Standard). Public sector organizations (the United Nations for

example) adhere to the triple bottom line (TBL). It is widely accepted that CSR

adheres to similar principles but with no formal act of legislation. The UN has

developed the Principles for Responsible Investment as guidelines for investing

entities.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary depending

on the nature of the enterprise, and are difficult to quantify, though there is a largebody of literature exhorting business to adopt measures beyond financial ones

(e.g., Deming's Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and

Rynes found a correlation between social/environmental performance and financial

performance. However, businesses may not be looking at short-run financial

returns when developing their CSR strategy.

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The definition of CSR used within an organization can vary from the strict

"stakeholder impacts" definition used by many CSR advocates and will often include

charitable efforts and volunteering. CSR may be based within the human resources,

business development or public relations departments of an organization, or may

be given a separate unit reporting to the CEO or in some cases directly to the

board. Some companies may implement CSR-type values without a clearly defined

team or program.

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, particularly within the

competitive graduate student market. Potential recruits often ask about a firm's

CSR policy during an interview, and having a comprehensive policy can give an

advantage. CSR can also help improve the perception of a company among its staff,

particularly when staff can become involved through payroll giving, fundraisingactivities or community volunteering. See also Corporate Social Entrepreneurship,

whereby CSR can also be driven by employees' personal values, in addition to the

more obvious economic and governmental drivers.

Risk management

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

decades to build up can be ruined in hours through incidents such as corruption

scandals or environmental accidents. These can also draw unwanted attention from

regulators, courts, governments and media. Building a genuine culture of 'doing the

right thing' within a corporation can offset these risks. Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can

separate them from the competition in the minds of consumers. CSR can play a role

in building customer loyalty based on distinctive ethical values. Several major

brands, such as The Co-operative Group, The Body Shop and American Apparel are

built on ethical values. Business service organizations can benefit too from building

a reputation for integrity and best practice.

License to operate

Corporations are keen to avoid interference in their business through taxation orregulations. By taking substantive voluntary steps, they can persuade governments

and the wider public that they are taking issues such as health and safety,

diversity, or the environment seriously as good corporate citizens with respect to

labour standards and impacts on the environment

Stakeholder priorities

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Increasingly, corporations are motivated to become more socially responsible

because their most important stakeholders expect them to understand and address

the social and community issues that are relevant to them. Understanding what

causes are important to employees is usually the first priority because of the many

interrelated business benefits that can be derived from increased employee

engagement (i.e. more loyalty, improved recruitment, increased retention, higher

productivity, and so on). Key external stakeholders include customers, consumers,investors (particularly institutional investors), communities in the areas where the

corporation operates its facilities, regulators, academics, and the media.

Q6. Distinguish between a Financial Investor and a Strategic Investor

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

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

strategic investors. Investors of all colors sought to safeguard their investment by

taking over as many management functions as they could. Additionally,

investments were small and shareholders few. A firm resembled a household and

the number of people involved in ownership and in management wascorrespondingly limited. People invested in industries they were acquainted with

first hand.

As markets grew, the scales of industrial production (and of service provision)

expanded. A single investor (or a small group of investors) could no longer

accommodate the needs even of a single firm. As knowledge increased and

specialization ensued it was no longer feasible or possible to micro-manage a firm

one invested in. Actually, separate businesses of money making and business

management emerged. An investor was expected to excel in obtaining high yields

on his capital not in industrial management or in marketing. A manager wasexpected to manage, not to be capable of personally tackling the various and

varying tasks of the business that he managed.

Thus, two classes of investors emerged. One type supplied firms with capital. The

other type supplied them with know-how, technology, management skills,

marketing techniques, intellectual property, clientele and a vision, a sense of

direction.

In many cases, the strategic investor also provided the necessary funding. But,

more and more, a separation was maintained. Venture capital and risk capital

funds, for instance, are purely financial investors. So are, to a growing extent,investment banks and other financial institutions.

The financial investor represents the past. Its money is the result of past - right and

wrong - decisions. Its orientation is short term: an "exit strategy" is sought as soon

as feasible. For "exit strategy" read quick profits. The financial investor is always on

the lookout, searching for willing buyers for his stake. The stock exchange is a

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popular exit strategy. The financial investor has little interest in the company's

management. Optimally, his money buys for him not only a good product and a

good market, but also a good management. But his interpretation of the rolls and

functions of "good management" are very different to that offered by the strategic

investor. The financial investor is satisfied with a management team which

maximizes value. The price of his shares is the most important indication of

success. This is "bottom line" short termism which also characterizes operators inthe capital markets. Invested in so many ventures and companies, the financial

investor has no interest, nor the resources to get seriously involved in any one of

them. Micro-management is left to others - but, in many cases, so is macro-

management. The financial investor participates in quarterly or annual general

shareholders meetings. This is the extent of its involvement.

The strategic investor, on the other hand, represents the real long term

accumulator of value. Paradoxically, it is the strategic investor that has the greater

influence on the value of the company's shares. The quality of management, the

rate of the introduction of new products, the success or failure of marketing

strategies, the level of customer satisfaction, the education of the workforce - all

depend on the strategic investor. That there is a strong relationship between the

quality and decisions of the strategic investor and the share price is small wonder.

The strategic investor represents a discounted future in the same manner that

shares do. Indeed, gradually, the balance between financial investors and strategic

investors is shifting in favour of the latter. People understand that money is

abundant and what is in short supply is good management. Given the ability to

create a brand, to generate profits, to issue new products and to acquire new

clients - money is abundant.

These are the functions normally reserved to financial investors:

Financial Management

The financial investor is expected to take over the financial management of the firm

and to directly appoint the senior management and, especially, the management

echelons, which directly deal with the finances of the firm.

To regulate, supervise and implement a timely, full and accurate set of accounting

books of the firm reflecting all its activities in a manner commensurate with the

relevant legislation and regulation in the territories of operations of the firm and

with internal guidelines set from time to time by the Board of Directors of the firm.This is usually achieved both during a Due Diligence process and later, as financial

management is implemented.

To implement continuous financial audit and control systems to monitor the

performance of the firm, its flow of funds, the adherence to the budget, the

expenditures, the income, the cost of sales and other budgetary items.

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To timely, regularly and duly prepare and present to the Board of Directors financial

statements and reports as required by all pertinent laws and regulations in the

territories of the operations of the firm and as deemed necessary and demanded

from time to time by the Board of Directors of the Firm.

To comply with all reporting, accounting and audit requirements imposed by the

capital markets or regulatory bodies of capital markets in which the securities of the

firm are traded or are about to be traded or otherwise listed.

To prepare and present for the approval of the Board of Directors an annual budget,

other budgets, financial plans, business plans, feasibility studies, investment

memoranda and all other financial and business documents as may be required

from time to time by the Board of Directors of the Firm.

To alert the Board of Directors and to warn it regarding any irregularity, lack of

compliance, lack of adherence, lacunas and problems whether actual or potential

concerning the financial systems, the financial operations, the financing plans, the

accounting, the audits, the budgets and any other matter of a financial nature orwhich could or does have a financial implication.

To collaborate and coordinate the activities of outside suppliers of financial services

hired or contracted by the firm, including accountants, auditors, financial

consultants, underwriters and brokers, the banking system and other financial

venues.

To maintain a working relationship and to develop additional relationships with

banks, financial institutions and capital markets with the aim of securing the funds

necessary for the operations of the firm, the attainment of its development plans

and its investments.

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

communications system which will integrate into the systems of other members of

the group of companies.

Otherwise, to initiate and engage in all manner of activities, whether financial or of

other nature, conducive to the financial health, the growth prospects and the

fulfillment of investment plans of the firm to the best of his ability and with the

appropriate dedication of the time and efforts required.

Collection and Credit Assessment

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.

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and other media campaigns. The strategic investor also implements these plans or

supervises their implementation.

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 goods

and services to users for a long period of time, reliably. This is an important asset,

which, if properly used, can attract users. The enhancement of the brandname, its

recognition and market awareness, market penetration, co-branding, collaboration

with other suppliers are all the responsibilities of the strategic investor.

The dissemination of the product as a preferred choice among vendors, distributors,

individual users and businesses in the territory.

Special events, sponsorships, collaboration with businesses.

The planning and implementation of incentive systems (e.g., points, vouchers).

The strategic investor usually organizes a distribution and dealership network, a

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

controls, advertising, local marketing and sales promotion and other network

management functions.

The strategic investor is also in charge of "vision thinking": new methods of

operation, new marketing ploys, new market niches, predicting the future trends

and market needs, market analyses and research, etc.

The strategic investor typically brings to the firm valuable experience in marketing

and sales. It has numerous off the shelf marketing plans and drawer sales

promotion campaigns. It developed software and personnel capable of analysing

any market into effective niches and of creating the right media (image and PR),

advertising and sales promotion drives best suited for it. It has built large

databases with multi-year profiles of the purchasing patterns and demographic data

related to thousands of clients in many countries. It owns libraries of material,

images, sounds, paper clippings, articles, PR and image materials, and proprietary

trademarks and brand names. Above all, it accumulated years of marketing and

sales promotion ideas which crystallized into a new conception of the business.

Technology

The planning and implementation of new technological systems up to their fully

operational phase. The strategic partner's engineers are available to plan,

implement and supervise all the stages of the technological side of the business.

The planning and implementation of a fully operative computer system (hardware,

software, communication, intranet) to deal with all the aspects of the structure and

the operation of the firm. The strategic investor puts at the disposal of the firm

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proprietary software developed by it and specifically tailored to the needs of

companies operating in the firm's market.

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

solutions to the needs of the firm, its clients and suppliers.

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,

customer services, distributors, vendors, sales personnel. The training is conducted

at its sole expense and includes tours of its facilities abroad.

The entrepreneurs who sought to introduce the two types of investors, in the first

place are usually left with the following functions:

Administration and Control

To structure the firm in an optimal manner, most conducive to the conduct of its

business and to present the new structure for the Board's approval within 30 days

from the date of the GM's appointment.

To run the day to day business of the firm.

To secure the unobstructed flow of relevant information and the protection of

confidential organization.

This is why entrepreneurs find it very hard to cohabitate with investors of any kind.

Entrepreneurs are excellent at identifying the needs of the market and at

introducing technological or service solutions to satisfy such needs. But the very

personality traits which qualify them to become entrepreneurs also hinder the

future development of their firms. Only the introduction of outside investors can

resolve the dilemma. Outside investors are not emotionally involved. They may be

less visionary but also more experienced.

They are more interested in business results than in dreams. And being well

acquainted with entrepreneurs they insist on having unmitigated control of the

business, for fear of losing all their money. These things antagonize the

entrepreneurs. They feel that they are losing their creation to cold-hearted, meanspirited, corporate predators. They rebel and prefer to remain small or even to

close shop than to give up their cherished freedoms. This is where nine out of ten

entrepreneurs fail - in knowing when to let go.

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Master of Business Administration-MBA Semester 4

MB0036- Strategic management & Business Policy

Assignment Set-2

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

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

component of the Plan dealing with the Company and its product

description.(10 marks)

Ans. A good business plan will help attract necessary financing by demonstrating

the feasibility of your venture and the level of thought and professionalism you

bring to the task.

The first step in planning a new business venture is to establish goals that you seek

to achieve with the business. You can establish these goals in a number of ways,

but an inclusive and ordered process like an organizational strategic planningsession or a comprehensive neighborhood planning process may be best. The board

of directors of your organization should review and approve the goals, because

these goals will influence the direction of the organization and require the allocation

of valuable staff and financial resources. Your goals will serve as a filter to screen a

wide range of possible business opportunities. If you fail to establish clear goals

early in the process, your organization may spend substantial time and resources

pursuing potential business ventures that may be financially viable but do not serve

the mission of your organization in other important ways. A liquor store on the

corner may be a clear money-maker; however, it may not be the retail to assist

your community desires.

The following are examples of goals you may seek to achieve through the creation

of a new business venture:

Revenue Generation Your organization may hope to create a business that will

generate sufficient net income or profit to finance other programs, activities or

services provided by your organization.

Employment Creation A new business venture may create job opportunities for

community residents or the constituency served by your organization.

Neighborhood Development Strategy A new business venture might serve as an

anchor to a deteriorating neighborhood commercial area, attract additional

businesses to the area and fill a gap in existing retail services. You may need to find

a use for a vacant commercial property that blights a strategic area of your

neighborhood. Or your business might focus on the rehabilitation of dilapidated

single family homes in the community.

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Whenever possible, goals should have quantifiable outcomes such as to generate a

minimum of $50,000 of net income or profit within three years; to employ at least

15 community residents within two years in new permanent jobs at a livable wage;

to occupy and support a minimum of 10,000 square feet of neighborhood

commercial space; or to rehabilitate 50 single-family houses over three years.

Clearly defined and quantifiable goals provide objective measurements to screen

potential business opportunities. They also establish clear criteria to evaluate thesuccess of the business venture.

Establish Goals

Once you have identified goals for a new business venture, the next step in the

business planning process is to identify and select the right business. Many

organizations may find themselves starting at this point in the process. Business

opportunities may have been dropped at your doorstep. Perhaps an entrepreneurial

member of the board of directors or a community resident has approached your

organization with an idea for a new business, or a neighborhood business has

closed or moved out of the area, taking jobs and leaving a vacant facility behind.Even if this is the case, we recommend that you take a step back and set goals.

Failing to do so could result in a waste of valuable time and resources pursuing an

idea that may seem feasible, but fails to accomplish important goals or to meet the

mission of your organization.

Depending on the goals you have set, you might take several approaches to

identify potential business opportunities.

Local Market Study: Whether your goal is to revitalize or fill space in a

neighborhood commercial district or to rehabilitate vacant housing stock, you

should conduct a local market study. A good market study will measure the level of

existing goods and services provided in the area, and assess the capacity of the

area to support existing and additional commercial or home-ownership activity. This

assessment is based on the shopping and traffic patterns of the area and the

demographic and socio-economic characteristics of the community. A bad or

insufficient market study could encourage your organization to pursue a business

destined to fail, with potentially disastrous results for the organization as a whole.

Through a market study you will be able to identify gaps in existing products and

services and unsatisfied demand for additional or expanded products and services.

If your organization does not have staff capacity to conduct a market study, you

might hire a consultant or solicit the assistance of business administration students

from a local college or university. Conducting a solid and thorough market study up

front will provide essential information for your final business plan.

Analysis of Local and Regional Industry Trends: Another method of investigating

potential business opportunities is to research local and regional business and

industry trends. You may be able to identify which business or industrial sectors are

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growing or declining in your city, metropolitan area or region. The regional or

metropolitan area planning agency for your area is a good source of data on

industry trends.

Internal Capacity: The board, staff or membership of your organization may

possess knowledge and skills in a particular business sector or industry. Your

organization may wish to draw upon this internal expertise in selecting potential

business opportunities.

Internal Purchasing Needs / Collaborative Procurement: Perhaps, your organization

frequently purchases a particular service or product. If nearby affiliate organizations

also use this service or product, this may present a business opportunity. Examples

of such products or services include printing or copying services, travel services,

transportation services, property management services, office supplies, catering

services, and other products. You will still need to conduct a complete market study

to determine the demand for this product or service beyond your internal needs or

the needs of your partners or affiliates.

Identify Business Opportunities

Buying an Existing Business: Rather than starting a new business, you may wish to

consider purchasing an existing business. Perhaps a local retail or small light

manufacturing business that has been an anchor to the local retail area or a much-

needed source of jobs in the neighborhood is for sale. Its closure would mean the

loss of jobs and services for your neighborhood. Your organization might consider

purchasing and taking over the enterprise instead of starting a new business. If you

decide to pursue this option, you still need to go through the steps of creating a

business plan. However, before moving ahead, these are just a few important areas

to research in assessing the business you plan to purchase:

Be sure to conduct a thorough review of the financial statements for the past three

to five years to determine the current fiscal status and recent financial trends, the

validity of the accounts receivable and the status of the accounts payable. Are all

the required licenses and permits in place and can they be transferred to a new

owner?

Also look at the quality of key employees who, because of their expertise, may

need to remain with the business.

You will also need to assess the customer or client base and determine whether its

members will remain loyal to the business after it changes hands.

Another area to evaluate is the perception or image of the business. Inspect the

facilities and talk to suppliers, customers and other businesses in the area to learn

more about the reputation of the business.

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At this early stage of your planning process, be sure to consult an attorney

experienced in corporation law. As a non-profit corporation, engaging in income-

generating activities not related to your mission may affect your tax-exempt status.

You may also wish to protect your organization from any liability issues connected

with the proposed business activity. After you have decided on a particular business

activity, have a qualified attorney advise you on the proper corporate structure for

your new venture. In addition to qualified legal counsel, seek the expertise of anexperienced professional in that particular industry. He or she will bring valuable

knowledge and insights regarding the industry that will prove extremely useful

during the business planning process.

Advisory

You have decided on a business opportunity that meets the goals of your

organization. Now you are ready to test the feasibility of the venture and to present

your business concept to the world. A solid business plan will clearly explain the

business concept, describe the market for your product or service, attract

investment, and establish operating goals and guidelines.

The first step in writing your business plan is to identify your target audience. Will

this be an internal plan the board will use to assess the feasibility and

appropriateness of the business? Or will this plan be distributed to a larger external

audience such as funding sources, commercial lenders or the community to gain

financial backing and political support for the proposed venture? The content and

emphasis of the plan will shift according to the audience.

You will also need to decide who will conduct the necessary research and write the

plan. The following table lists the advantages and disadvantages of several options

for getting the work done. You might consider a combination of the options.

Creating Ones Own Business Plan

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It is also important to establish a timeline for completing the plan. A business plan

can be completed by one staff member working full time in as little as a week,

although a thorough market analysis will add several days at least. A committee will

probably need much more time. Combinations of staff, volunteers, consultants and

a board committee may lengthen or shorten the process depending on skill level,

available time, experience with planning and research, and the groups facilitation

needs. Now that you have decided who will put together your business plan andhave set a timeline for its completion, you are ready to begin assembling the

elements of the plan. Your business plan should contain the following sections:

Executive summary

Company and product description

Market description

Operations

Management and ownership

Financial information and timeline

Risks and their mitigation

A solid business plan will clearly explain the business concept, describe the market

for your product or service, attract investment, and establish operating goals and

guidelines.

1 Executive Summary

In this section of your business plan, provide a description of your company, the

industry you will be competing in, and the product or service you plan to offer.

Sell your concept! The executive summary may be the first and only section of your

business plan that most of your audience will read. Tell the audience why the

business is a great idea. Some readers will look at this section to determine

whether or not they want to learn more about a business. Other readers will look to

the executive summary as a sample of the quality and professionalism of the

overall plan. The executive summary should be no more than one to three pageslong and should answer the following questions:

Who are you? (describe your organization)

What are you planning? (describe the service or product)

Why are you planning it? (discuss the demand and market for the service or

product)

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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 themost important points of each section.

2 Company and Product Description

In describing your company be sure to include what type of business you are

planning (homeownership development, wholesale, retail, manufacturing

or service) and the legal structure (corporation or partnership). You should discuss

why you are creating this new venture, referencing the goals you set at the

beginning of the business planning process. Also include a description of your non-

profit organization, the role it has played in developing this new venture and the

on-going role, if any, it will play in operations. Give the reader a brief overview of

the industry, describing historic and current growth trends.

Whenever possible, provide documentation or references supporting your trend

analysis such as articles from business-oriented newspapers and magazines,

research journals or other publications. Include these references in the attachments

of your business plan.

Product or Service

After describing your company and its industry context, describe the products or

services you plan to provide. Focus on what distinguishes your product or service

from the rest of the market. Discuss what will attract consumers to your product or

service. Provide as much detail as necessary to inform the reader about the

particular characteristics of your product that distinguish it from its competition

many nonprofits, for example, expect to produce higher-quality housing than

otherwise exists in the area. Mention any distinctive elements in the manufacture of

the product, such as being hand-made by a particular people from a specific area.

If you are providing a service, explain the steps you will take to provide a service

that is better than your competition.

Price

Provide a realistic estimate of the price for your product or service, and discuss the

rationale behind that price. An unrealistic price estimate may undermine the

credibility of your plan and raise concerns that your product or service may not be

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of sufficient quality or that you will not be able to maintain profitability in the long

run. Describe where this price positions you in the marketplace: at the high end,

low end or in the middle of the existing range of prices for a similar product or

service.

In other sections of the plan you will discuss the target market for your product or

service and also provide additional details on how the price of your product fits into

the overall financial projections for the enterprise.

Place

Describe the location where you will produce or distribute your product or provide

your service. Discuss the advantages of the location, such as its accessibility,

surrounding amenities and other characteristics that may enhance your business.

Depending on your anticipated customer base, accessibility to your location via

public transportation could affect the marketability of your product or service.

Customers

In this section of your business plan, you will describe the customer base or market

for your product or service. In addition to providing a detailed description of your

customer base, you will also need to describe your competition (other local

developers or nearby businesses providing a similar service to your potential

customer base).

Who will purchase your product or use your service? How large is your customer

base? Define the characteristics of your target market in terms of its:

Demographics Measures of age, gender, race, religion and family size.

Geography Measures based on location.

Socioeconomic Status Measures based on individual or household annual

income.

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

information may include recent data from the Bureau of Statistics, state or local

census data, or information gathered by your organization, such as membership

lists, neighborhood surveys and group or individual interviews. Be sure to list the

sources for your data, as this will further validate your market assumptions. Includeany relevant information regarding the growth potential for your target market if

your business is expected to rely on growth. Cite any research forecasting

population increases in your target market or other trends and factors that may

increase the demand for your product or service.

Competition

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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 of your product, including any office equipment such as

computers, copiers, furniture, fixtures and telephone systems. Also discuss thetypes of materials you will use in the production process and describe the source

and cost of those materials.

Facility

Describe the type of facility in which you will house your business. Indicate the

amount of building space you will need for production and administration. Also

discuss any building features required for the production process such as high

ceilings, specialized ventilation and heating systems, sanitized laboratory space or

vehicular accessibility. If you have already identified a location and a facility that

meets your requirements, describe its features. Even if you are planning to provide

a service instead of manufacturing a product, you need to demonstrate that you will

have adequate space for administrative functions and other activities related to the

service you plan to provide .

Market Description

Describe your strategy for locating your target market, informing or educating

customers about your product or service and convincing them to purchase it.

Provide details on the methods you will use to advertise your product, such as print

media (advertisements in newspapers, magazines or trade journals), electronicmedia (television, radio and the Internet), direct mail, telemarketing, individual

sales agents or representatives, or other approaches. Discuss the products or

services features you plan to emphasize to gain the attention of your target

market. Also detail how you will distribute and sell your product or service. Will you

use sales agents or existing retail outlets, or directly distribute your product

through a delivery service such as United Parcel Service, Federal Express or

independent trucking company?

5 Operations

In this section of your business plan, describe the senior managers responsible foroverseeing the start-up and operation of your business, their background and their

responsibilities in the business. 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 the resumes of each member

to the plan. Be sure to provide a complete job description of any vacancies in your

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management team. Describe the responsibilities, the skills, the background

required 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 of advisors of the new business and what are their backgrounds

and areas of expertise? Potential investors or lenders will be interested in theownership stake of the board of directors and also in what portion of the companys

equity is available. Success is often due to ones contacts, so fully describe your

business relationships with attorneys, accountants and advertising or public

relations 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

provide several 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 descriptive narrative for each of the following financial statements

and include a copy in the attachments to your plan:

Start-up budget

Cash flow projection

Income statement

Balance sheet

In preparing these statements, you may want to seek the advice of a certified

public accountant (CPA).

Start-up Budget

Describe the initial expenses you will incur to get your business up and running.

Some items you might include in your start-up budget research and product design

and development expenses, legal incorporation and licensing expenses, facility

purchase or rental, equipment and vehicle purchase 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 outflows of your business for the first year. This schedule should indicate how

much money your business will have or need and when you will need it. You should

describe your sources of income and capital, detailing your projected sales revenue

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and indicating your own or investor equity contribution, lenders, investors and

other sources of capital. Itemize your projected 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). Inpreparing this statement, account for a gradual increase in sales from initial product

introduction and any expected seasonal fluctuations in revenue projections.

Income Statement

Prepare a multiyear (three- to five year) statement of projected revenue,

expenses, capital expenditures 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 that forecast an industry-wide

growth rate. This statement should indicate to the reader the potential of your

business to generate cash and its profitability over time. For an existing 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 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 the business plan. Provide a copy of the balance sheet of the businesss

sponsoring organization or individual. Describe in your narrative any assets that will

be allocated to the start-up of the business.

7 Financial Information and Start up Timeline

Capital Requirements

Describe the amount and type of financing you are seeking for your business. Are

you looking for debt from a lender or equity from an investor? Refer to your start

up budget and cash flow statement presented earlier. Discuss how and when you

will draw on these funds and how they will affect the bottom line. Also describe any

commitments or investments that you may have 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 on investment? Also 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 other business lenders. The level of

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risk in your business and industry will help to determine the actual market rate, as

will the availability of equity dollars. Check with other businesses (although not

direct 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 minded investment pools exist and more are in

development. or lenders, 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 in cash 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 for task completion. Set realistic deadlines according to

your capacity to complete these 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

Although it is impossible to know exactly what will go wrong in starting and running

your business, thinking about different challenges will strengthen your plan.

Potential problems could include:

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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 or population changes

For each potential problem, discuss its likelihood and describe possible solutions or

actions you might undertake to mitigate the problem.

Risks and their Mitigation

Although it is impossible to know exactly what will go wrong in starting and running

your business, thinking about different challenges will strengthen your plan.

After you have completed all of the elements of your business plan, you should

focus its presentation. A well-organized plan will assist you in communicating the

most important elements of your business plan to the reader, and a persuasive plan

will help you to convince the reader to invest in your business.

Executive Summary

As mentioned earlier, this section should be written last. However, if you have

already written the executive summary, review it to make sure it embodies the

following characteristics. Because it is the first and possibly the only section of theplan that many readers may see, the executive summary should provide an

overview of the plan and entice the reader to read the whole plan or to agree to

meet with you. The executive summary should be no more than three pages and

should briefly describe the most important elements of the plan. Review the

Executive Summary section of this manual for more tips on this critical introduction

to your business.

Q2. Write short notes on :

a) sales projections (10 marks).

Ans.Sales Projections

Present an estimate of how many people you expect will purchase your product or

service. Your estimate should be based on the size of your market, the

characteristics of your customers and the share of the market you will gain over

your competition. Project how many units you will sell at a specified price over

several years. The initial year should be broken down in monthly or quarterly

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increments. Account for initial presentation and market penetration of your product

and any seasonal variations in sales, if appropriate.

Steps for Developing Sales Projections

Your business plan is not just a funding tool, but also a blueprint for how your

business should operate. The following are steps for developing sales projections.

Step I:

Estimate

For each product or service, estimate the number of people who are likely to buy

and when they will buy it. You can get this information from asking your likely

customers about their possible use of your business, or you can base your

estimates on your knowledge of the market.

Step 2:

Use a Calendar

Estimate your sales and number of customers served during one week. Using the

totals for a week, make projections for each month. For the first few months, keep

in mind that business will start off slowly before people become more aware of your

business. Use will most likely increase as people learn about your products and

services. Seasonal variations may affect your business as well. You will use these

numbers to project your equipment, supply and staffing needs, as well as income.

Cost Account Heads:

Organizational Start up Costs

Product Design/Development

Research & Development

Legal/Licensing Expenses

Property & Facilities

Land/Building Purchase

Initial Lease Deposit

Building Repairs/Improvements

Equipment/Machinery

Production-related

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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:

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Equipment Loan

Building Rehabilitation Loan

Grants

Owner Equity

Expenses

Cost of Goods Sold

Wages & Benefits

Materials

Supplies

Overhead Expenses:

Rent

Utilities

Building Maintenance/Security

Marketing

Accounting

Legal

Administrative Expense

Interest Expense

Depreciation

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

To make Business data available both to decision-makers and as much as possible

available in the public domain;

To ensure all holders of Business information are able to participate.

To ensure that the data available through the NETWORK are of known quality;

To ensure that the NETWORK Gateway gives access to data on Location and

species used to inform decisions affecting Business at local, regional, national and

international levels;

To promote knowledge, use and awareness of the NETWORK;

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To enhance the skills base and expertise needed to support and develop the

NETWORK.

i) The objectives have cross-cutting themes which are:

A. Infrastructure development

B. Data standards and tools

C. Capacity building

D. Working with the wider public

E. Co-ordination and promotion

i) In addition, the partners will contribute to the overall realisation of the objectives

through work that they initiate on their own account, but which does not

necessarily fall under the focused objectives for the Network.

ii) A series of assumptions have been made in formulating the Business Prioritiesand their associated work programme. These are:

It is assumed that the present way of working, i.e. a lead partner approach for

each project will be retained;

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

It is anticipated that other work towards the principal aim of adding content and

providing a fully functional gateway will be adopted by the NETWORK as part of its

programme, but this work would have to be prioritized against this core activity and

separately resourced;

To give additional focus to the challenging nature of the task that the NETWORK is

setting itself, a series of principle drivers have been recognized. The drivers are:

Processes This driver relates to facilitated targeted action on the ground through

providing knowledge of resource location, extent, pattern of distribution, data

quality and gaps. It also has the potential for engaging more partners in the

NETWORK;

Environmental Impact Assessment (EIA) and Strategic Environmental Assessment

This driver is concerned with providing ready access to data on location, extent,pattern and quality of Business.

Data contributor engagement This driver is concerned with accessing sources of

data for the NETWORK enabling the assessment of actions and continual

improvement in the targeting of actions from the two previous drivers;

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Operational use This relates to the use of the NETWORK within the day to day

business of agencies as a source of data relevant to local reporting or casework;

Generic enhancement This driver encompasses capacity building and Recording

Schemes and other contributing organizations and user groups, in order to ensure

the continued and enhanced supply and use of information.

These lead naturally to three broad areas of work:

Developing the recording network;

Enhancing the Internet Gateway in terms of its functionality and the data it

accesses;

Ensuring that the benefits already secured through the earlier work are

maintained.

The plan also acknowledges the need to co-ordinate activity between the members

of the NETWORK and their partners, and to communicate the progress andsuccesses of the work programme.

b) importance of creativity in Business

Ans. Creativity

Everyone 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.)

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Go retro: Carry a notebook, pen, and calendar into your meetings.

Look up at people.

Story First, Technology Last.

Dont invest in a presentation class called How to Use PowerPoint.until youve

taken a class called How to Tell Stories and Connect with Your Audience.

2 A Simple Creative Exercise

Simplify everything. Your life, your home, your office, your desk, your processes,

vision, policy, procedures. Everything.

Fixing Problems is Creative.

Your job is to fix problems, not to complain.

Brainstorming

Dont 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 work done.

Get Fresh Ideas.

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Leave the office building at least once a day.

Another Lame Excuse

Designers should put more of their passion into designing great work, instead of

endless (boring) discussions about 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 observations

Giga-investments made in the paper and pulp industry, in the heavy metal industry

and in other base industries, today face scenarios of slow growth (2-3 % p.a.) in

their key markets and a growing over-capacity in Europe.

The energy sector faces growing competition with lower prices and cyclic variations

of demand.

Productivity improvements in these industries have slowed down to 1-2 % p.a .

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Global financial markets make sure that capital cannot be used non-productively, as

its owners are offered other opportunities and the capital will move (often quite

fast) to capture these opportunities.

The capital markets have learned the American way, i.e. there is a shareholder

dominance among the actors, which has brought (often quite short-term)

shareholder return to the forefront as a key indicator of success, profitability and

productivity.

There are lessons learned from the Japanese industry, which point to the

importance of immaterial investments. These lessons show that investments in

buildings, production technology and supporting technology will be enhanced with

immaterial investments, and that these are even more important for re-

investments and for gradually growing maintenance investments.

The core products and services produced by giga-investments are enhanced with

life-time service, with gradually more advanced maintenance and financial add-on

services.

New technology and enhanced technological innovations will change the life cycle of

a giga-investment.

Technology providers are involved throughout the life cycle of a giga-investment.

Giga-investments are large enough to have an impact on the market for which they

are positioned:

A 3,00,000 ton paper mill will change the relative competitive positions; smaller

units are no longer cost effective.

A new 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

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Option to Shut Down/Produce

Option to Abandon

Option to Alter Input/Output Mix

Table of Equivalences:

INVESTMENT OPPORTUNITY VARIABLE CALL OPTION

Present value of a projects

operating cash flows.

S Stock price.

Investment costs X Exercise price

Length of time the decision may

be deferred.

t Time to expiry.

Time value of money. rf Risk-free interest

rate

Risk of the project. Standard deviation of

returns on stock

Fuzzy numbers (fuzzy sets) are a way to express the cash flow estimates in a more

realistic way.

This means that a solution to both problems (accuracy and flexibility) is a real

option model using fuzzy sets.

Self Assessment Questions I

State whether the following statements are True or False:

1. The people involved in manufacturing actually c

mb0036 set1 and set2

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