MB0036 – Strategic Management & Business Policy

Assignment Set- 1

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

should be selected by any company to improve its performance (i.e.,
intensive, integrative or diversification growth). You may select an example of
your choice to substantiate your views.

Ans: a) Intensive Growth: It refers to the process of identifying opportunities to

achieve further growth within the company’s 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 a
premium 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.

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.

b) Integrative Growth: It refers to the process of identifying opportunities to develop

or acquire businesses that are related to the company’s current businesses. More often,
the business processes have to be integrated for linear growth in the profits. The
corporate plan may 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)

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

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

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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 company’s 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 computerised 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 centres or Call Centres with new service clients.

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

Ans: A business plan is a detailed description of how an organization intends to

produce, market and sell a product or service. Whether the business is housing,
commercial or some other enterprise, a good business plan describes to others and to
your own board of directors, management and staff the details of how you intend to
operate and expand your business.

A solid business plan describes who you are, what you do, how you will do it, your
capacity to do it, what financial resources are necessary to carry it out, and how you
intend to secure those resources. A well-written plan will serve as a guide through the
start-up phase of the business. It can also establish benchmarks to measure the
performance of your business venture in comparison with expectations and industry
standards. And most important, a good business plan will help to attract necessary
financing by demonstrating the feasibility of your venture and the level of thought and
professionalism you bring to the task.

The components of a good business plan are:

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 neighbourhood 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

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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 neighbourhood
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 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 neighbourhood is for sale. Its closure would mean the loss
of jobs and services for your neighbourhood. 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:

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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.

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 an experienced 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.

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

different stages in the process of starting this new business.

Ans: The Different Phases of a New Business

A new business goes through phases in the business cycle (very similar to the stages of
human life).

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The first phase – is the formation of an idea. A person – or a group of people join forces,
centred around one exciting invention, process or service.

These crystallizing ideas have a few hallmarks:

They are oriented to fill the needs of a market niche (a small group of select consumers
or customers), or to provide an innovative solution to a problem which bothers many, or
to create a market for a totally new product or service, or to provide a better solution to
a problem which is solved in a less efficient manner.

At this stage, what the entrepreneurs need most is expertise. They need a marketing
expert to tell them if their idea is marketable and viable. They need a financial expert to
tell them if they can get funds in each phase of the business cycle – and wherefrom and
also if the product or service can produce enough income to support the business, pay
back debts and yield a profit to the investors. They need technical experts to tell them if
the idea can or cannot be realized and what it requires by way of technology transfers,
engineering skills, know-how, etc.

Once the idea has been shaped to its final form by the team of entrepreneurs and
experts – the proper legal entity should be formed. A bewildering array of possibilities
arises:

A partnership? A corporation – and if so, a stock or a non-stock company? A research

and development (RND) entity? A foreign company or a local entity? And so on.

This decision is of cardinal importance. It has enormous tax implications and in the near
future of the firm it greatly influences the firm’s ability to raise funds in foreign capital
markets. Thus, a lawyer must be consulted who knows both the local applicable laws
and the foreign legislation in markets which could be relevant to the firm.

This costs a lot of money, one thing that entrepreneurs are in short supply of free legal
advice is likely to be highly appreciated by them.

When the firm is properly legally established, registered with all the relevant authorities
and has appointed an accounting firm – it can go on to tackle its main business:
developing new products and services. At this stage the firm should adopt Western
accounting standards and methodology. Accounting systems in many countries leave
too much room for creative playing with reserves and with amortization. No one in the
West will give the firm credits or invest in it based on domestic financial statements.

A whole host of problems faces the new firm immediately upon its formation.

Good entrepreneurs do not necessarily make good managers. Management techniques

are not a genetic heritage.

They must be learnt and assimilated. Today’s modern management includes many
elements: manpower, finances, marketing, investing in the firm’s future through the
development of new products, services, or even whole new business lines. That is quite
a lot and very few people are properly trained to do the job successfully.

On top of that, markets do not always react the way entrepreneurs expect them to
react. Markets are evolving creatures: they change, develop, disappear and re-appear.

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They are exceedingly hard to predict. The sales projections of the firm could prove to be
unfounded. Its contingency funds can evaporate.

Sometimes it is better to create a product mix: well-recognized brands which sell well –
side by side with innovative products.

This is a brief – and by no way comprehensive – taste of what awaits the new business
and its initiator, the entrepreneur. You see that a lot of money and effort are needed
even in the first phases of creating a business.

How can the Government help?

It could set up an "Entrepreneur’s One Stop Shop".

A person wishing to establish a new business will go to a government agency.

In one office, he will find the representatives of all the relevant government offices,
authorities, agencies and municipalities.

He will present his case and the business that he wishes to develop. In a matter of few
weeks he will receive all the necessary permits and licences without having to go to
each office separately.

Having obtained the requisite licences and permits and having registered with all the
appropriate authorities – the entrepreneur will move on to the next room in the same
building. Here he will receive a list of all the sources of capital available to him both
locally and from foreign sources. The terms and conditions of the financing will be
specified for each and every source. Example: EBRD – loans of up to 10 years – interest
between 6.5% to 8% – grace period of up to 3 years – finances mainly industry, financial
services, environmental projects, infrastructure and public services.

The entrepreneur will select the sources of funds most suitable for his needs – and
proceed to the next room.

The next room will contain all the experts necessary to establish the business, get it
going – and, most important, raise funds from both local and international institutions.
For a symbolic sum they will prepare all the documents required by the financing
institutions as per their instructions.

But entrepreneurs in many developing countries are still fearful and uninformed. They
are intimidated by the complexity of the task facing them.

The solution is simple: a tutor or a mentor will be attached to each and every
entrepreneur. This tutor will escort the entrepreneur from the first phase to the last.

He will be employed by the "One Stop Shop" and his role will be to ease life for the
novice businessman. He will transform the person to a businessman.

And then they will wish the entrepreneur: "Bon Voyage" – and may the best ones win.

There is an inherent conflict between owners and managers of companies. The former
want, for instance, to minimize costs – the latter to draw huge salaries as long as they
are in power.

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In publicly traded companies, the former wish to maximize the value of the stocks (short
term), the latter might have a longer term view of things. In the USA, shareholders place
emphasis on the appreciation of the stocks (the result of quarterly and annual profit
figures). This leaves little room for technological innovation, investment in research and
development and in infrastructure. The theory is that workers who also own stocks
avoid these cancerous conflicts which, at times, bring companies to ruin and, in many
cases, dilapidate them financially and technologically. Whether reality lives up to
theory, is an altogether different question.

4. Explain the process of due Diligence and why it is necessary.

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

"Due Diligence" is a legal term (borrowed from the securities industry). It means,
essentially, to make sure that all the facts regarding the firm are available and have
been independently verified. In some respects, it is very similar to an audit. All the
documents of the firm are assembled and reviewed, the management is interviewed
and a team of financial experts, lawyers and accountants descends on the firm to
analyze it.

First Rule:

The firm must appoint ONE due diligence coordinator. This person interfaces with all
outside due diligence teams. He collects all the materials requested and oversees all the
activities which make up the due diligence process.

The firm must have ONE VOICE. Only one person represents the company, answers
questions, makes presentations and serves as a coordinator when the DD teams wish to
interview people connected to the firm.

Second Rule:

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

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

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

company and its shareholders?

Ans: CSR is a concept whereby companies integrate social and environmental

concerns in their business operations and in their interaction with their stakeholders on
a voluntary basis.

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The main function of an enterprise is to create value through producing goods and
services that society demands, thereby generating profit for its owners and
shareholders as well as welfare for society, particularly through an ongoing process of
job creation. However, new social and market pressures are gradually leading to a
change in the values and in the horizon of business activity.

There is today a growing perception among enterprises that sustainable business

success and shareholder value cannot be achieved solely through maximising short-
term profits, but instead through market-oriented, yet responsible behaviour.
Companies are aware that they can contribute to sustainable development by managing
their operations in such a way as to enhance economic growth and increase
competitiveness whilst ensuring environmental protection and promoting social
responsibility, including consumer interests.

In this context, an increasing number of firms have embraced a culture of CSR. Despite
the wide spectrum of approaches to CSR, there is large consensus on its main features:

· CSR is behaviour by businesses over and above legal requirements, voluntarily

adopted because businesses deem it to be in their long-term interest;

· CSR is intrinsically linked to the concept of sustainable development: businesses need

to integrate the economic, social and environmental impact in their operations;

· CSR is not an optional "add-on" to business core activities – but about the way in which
businesses are managed.

Socially responsible initiatives by entrepreneurs have a long tradition in Europe. What

distinguishes today’s understanding of CSR from the initiatives of the past is the
attempt to manage it strategically and to develop instruments for this. It means a
business approach, which puts stakeholder’s expectations and the principle of
continuous improvement and innovation at the heart of business strategies. What
constitutes CSR depends on the particular situation of individual enterprises and on the
specific context in which they operate, be it in Europe or elsewhere. In view of the EU
enlargement, it is however important to enhance common understanding both in
Member States and candidate countries.

There are various theoretical perspectives on the concept of Corporate Responsibility:

ranging from a traditional view of the firm (e.g. Friedman, 1962; Walley and Whitehead,
1994) to a call for a complete paradigm shift in business practice (e.g. Dyllick and
Hockerts, 2002; Gladwin et al, 1995). However, all views on corporate responsibility are
based on the same premise: that there is a corporate strategic approach to
environmental and social issues (c.f. Banerjee et al, 2003; Lyon, 2004). Hence, it
contains both corporate environmentalism and corporate social responsibility (Dyllick
and Hockerts, 2002), leading to the current construct that Corporate Responsibility
includes any initiative that reduces the environmental impact and/or contributes to the
improvement of the social conditions beyond the firm’s legal obligations (Roome, 2006).
As such, it is considered a key development in connecting corporate practices with the
societal goal of sustainable development, as firms can “contribute to more sustainable
patterns of production and consumption within society” (Roome,2006:p. 137).

Corporate Responsibility can be considered as encompassing two components

(Banerjee, 2002; Bansal and Roth, 2000; van Marrewijk, 2004): a strategy focus (i.e.
how strategically important environmental and social issues are perceived by
management), and an orientation aspect (i.e. a set of underlying corporate values that

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provide an internal ‘compass’ to which the company can orient its environmental and
social actions). The orientation of an organisation has significant strategic power in
terms of shaping the organisational direction (Chen et al, 1997; Keogh and Polonsky,
1998; Shrivastava, 1995c). As such, the ‘responsible’ orientation not only influences the
overall responsibility of a firm, it also affects the extent and form that actual responsible
strategies will take, as well as the ethical behaviour standards and the environmental
protection commitment of the organisation (Shrivastava, 1995b). Therefore, the
responsible orientation within a firm needs to be studied in more detail to provide
additional insights into organisational attitudes towards the environment and society.

Various researchers (e.g. Bansal and Roth, 2000; McKay, 2001; Prakash, 2001) found
that a multi-theoretical perspective explained some organisational responses to a
greater extent than single theories in isolation, and could explain the seemingly ad hoc
choices of firms to go beyond legal compliance. Since this paper aims to propose two
complementary multidisciplinary approaches, none of the existing theories is judged or
favoured above others. Instead, the different theories are used in combination to draw
out more comprehensive notions of the role of values in corporate responsibility.

Assuming that organisations are open systems (Katz and Kahn, 1966), and as such
become interdependent with those elements of the environment with which they
transact (Pfeffer, 1982), organisations work within such interdependencies to reduce
uncertainty and ensure survival (DiMaggio, 1988; McKay, 2001). Based on this, the
central premise of resource dependence is that power relations among actors are
commonly asymmetrical and that organisations strive to obtain power, maintain
autonomy, and reduce uncertainty in the context of external pressures and demands.
Control over resources is critical in maintaining power and is therefore pursued by
organisations (McKay, 2001). As such, an organisation-wide dedication to a compelling
long-range vision (a shared vision) is the key to generating the internal pressure and
enthusiasm needed for [responsible] innovation and change (Hamel and Prahalad, 1989;
Hart, 1995). Given the difficulty of generating a consensus about a purpose, shared
vision is a rare (firm-specific) resource, and few companies have been able to establish
or maintain a widely shared or enduring sense of mission (Hamel and Prahalad, 1989).
Starik and Rands (1995) extended this idea to include values, as these act as a
mechanism to unify and orient organisational units toward sustainability. Norms and
shared values are essential to understand the sustainability of organisations, and
provide links between the organisation and the environment and society (Starik and
Rands, 1995).

Institutional theory is also based on the open systems assumption as described above.
However, the central premise of institutional theory is that survival arises out of
conformity to external rules and norms. Thus, the theory examines how external social
and regulatory pressures influence organisational actions (Scott 1987). Due to the
powerful nature of environmental influences, organisations seek to conform to
environmental pressures as a way to secure stability, legitimacy and access to
resources. Those organisations that are responsive to such institutional pressures are
assumed to be more likely to survive (DiMaggio and Powell, 1983; McKay, 2001). In
setting environmental strategy and structure, firms may choose action from a repertoire
of possible options. However, the internal structure and culture of the firm reflect the
dominant institutions of the organisational field, hence the range of that repertoire is
bound by the rules, norms, and beliefs of the organisational field (Hoffman, 1997).

Based on the ‘systems’ view of organisations, the central premise of stakeholder theory
is that there are specific interest groups in the outside environment, which have a stake
in the behaviour and effectiveness of that organisation (Freeman, 1984). Although

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stakeholder theory shares notions of power with both previously discussed theories,
neither resource dependence theory nor institutional theory appears to suffice to
explain the full range of stakeholder power. Both theories offer explanations of reactions
to economic or formal/legal pressures, but fail to account for political pressures (Jonker
and Foster, 2002): where environmental or social stakeholders are involved, there is
neither resource dependency nor formal/legal pressure to conform (Frooman, 1999).
The perception of the responsible managers influences the approach to stakeholders
(e.g. Collison et al, 2003; Cormier et al, 2004; Sharma and Henriques, 2005), and it is
argued that “responses to environmental pressures can vary widely among firms
depending on managerial perceptions of environmental risks and opportunities … on
their interpretation of the importance and relationship of the natural environment to
their business activity” (Banerjee, 1998: p. 148). In explicitly describing the values and
responsibilities of a firm, business codes can help by providing a framework for
managers to guide their decisions, and simultaneously informing external stakeholders
(Kaptein, 2004).

A number of scholars argue that current research and practice in corporate environ-
mentalism may be limited by the assumptions under which much is carried out (Porter,
2005). These authors therefore call for a revolutionary way of thinking about business
regarding environment and society (e.g. Dyllick and Hockerts, 2002; Gladwin et al,
1995; Peattie, 2000; Shrivastava (1995a); Stern et al. (1995)). A variety of authors (e.g.
Banerjee, 2001; Gladwin et al. 1995; Hoffman, 2000) have demonstrated how using
traditional management theories (in particular institutional theory, strategic choice,
transformational leadership) can hinder efforts to change to a more ‘green’ state of
doing business at the institutional as well as the organisational level. Therefore, new
perspectives, preferably from new domains, are required to challenge current
assumptions and facilitate the transition of developing appropriate organisational values
(Starkey and Crane, 2003).

From the above, we could conclude that shared values are a key component in attaining
a shared vision of the Corporate Responsibility of an organisation and to guide
interactions with stakeholders, and are formed by rules, norms and ethical behaviour
standards from both inside and outside of the organisation.

However, there is academic and anecdotal evidence that the integration of corporate
responsibility throughout the hierarchy of organisations is marginal, and even absent in
some cases (e.g. Barakat, 2006b; Knox et al, 2005). A recent study by Barakat (2006b)
suggested that among employees in three UK case studies there was a general absence
of shared meaning with regards to key environmental themes and issues (although
smaller clusters around hierarchical levels and some functional groups shared some
experiences on some issues). There was no system for the identification and definition
of environmental concepts, no explicit means by which concepts could be shared and
discussed, and no mechanism to indicate to employees the concepts and definitions
that would be acceptable and those that would not. Hence, employees experienced
their firm’s corporate environmentalism predominantly in an individual manner. The
perceived corporate orientation towards environmentalism followed this, and this study
therefore offers some evidence that corporate environmental orientation can be
perceived and experienced differently within the same organisation.

Furthermore, many researchers and practitioners in the Corporate Responsibility field

(e.g. Banerjee et al, 2003; Juholin, 2004; Murphy, 1988) have argued (or assumed) that
the vision and commitment of senior management is communicated clearly, and
understood and incorporated by all staff within the organisation in the manner as it was
initially intended (Preston, 2001; Ramus, 2001). Yet, there is little evidence that this

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assumption is grounded in practice (Barakat, 2006a; Knox et al, 1995). Even more so,
there is evidence that (mainly lower-level) employees do not perceive their firm to be
pro-active in its environmental and social responsibilities (e.g. Barakat, 2006a; Lingard
et al, 2000; Ramasamy and Woan-Ting, 2004). Research suggests that since employees
are not oblivious to the ethical climate of the company, this interaction affects the trust
that employees have of their organisations and affects their commitment to it (Van
Dyne et al, 1994; Fritz et al, 1999; Gross and Etzioni, 1985). Also, the employees’
experience of Corporate Responsibility appears to be significantly affected by their
perception of the behaviours and attitudes of management, especially if an employee
perceives an inconsistency between the immediate manager and the corporate policy
(Ramus, 2001). The resultant dissatisfaction and lack of engagement could potentially
impact the success of responsible initiatives (e.g. Preston, 2001; Ramus, 2001). Hence,
it has become important to understand how Corporate Responsibility is interpreted by
decision-makers (Banerjee, 2002) and decision implementers.

6. Distinguish between a Financial Investor and a Strategic Investor

explaining the role they play in a Company.

Ans: Within the not so distant past, there was little difference among financial and
strategic investors. Investors of all colours 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
individuals involved - in ownership and in management - was correspondingly limited.
People invested in industries they were acquainted with initial 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. In fact, 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 was expected to manage, not to
become 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 methods,
intellectual property, clientele and a vision, a sense of direction.

In many cases, the strategic investor also provided the necessary funding. But, a lot
more and much 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 funds could be 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 can be a popular
exit method. The financial investor has little interest inside the company's management.
Optimally, his money buys for him not only a great product and a great industry, but
also an excellent management. But his interpretation with the rolls and functions of
"good management" are really diverse to that offered by the strategic investor. The
financial investor is satisfied having a management team which maximizes value. The
cost of his shares is probably the most essential indication of success. This really is

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"bottom line" short termism which also characterizes operators in the capital markets.
Invested in so numerous ventures and firms, the financial investor has no interest, nor
the resources to obtain seriously involved in any a single of them. Micro-management is
left to others - but, in several 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 actual lengthy term
accumulator of value. Paradoxically, it is the strategic investor that has the greater
influence on the value with the company's shares. The quality of management, the rate
from the introduction of new products, the success or failure of marketing methods, the
level of customer satisfaction, the education of the workforce - all depend on the
strategic investor. That there is a strong relationship in between the quality and
decisions from the strategic investor and the share price is small wonder. The strategic
investor represents a discounted future inside the same manner that shares do. Indeed,
gradually, the balance among financial investors and strategic investors is shifting in
favour with 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.

MB0036 – Strategic Management & Business Policy

Assignment Set- 2

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.

Ans: A business plan is a detailed description of how an organization intends to

produce, market and sell a product or service. Whether the business is housing,
commercial or some other enterprise, a good business plan describes to others and to
your own board of directors, management and staff the details of how you intend to
operate and expand your business.

A solid business plan describes who you are, what you do, how you will do it, your
capacity to do it, what financial resources are necessary to carry it out, and how you
intend to secure those resources. A well-written plan will serve as a guide through the
start-up phase of the business. It can also establish benchmarks to measure the
performance of your business venture in comparison with expectations and industry
standards. And most important, a good business plan will help to attract necessary
financing by demonstrating the feasibility of your venture and the level of thought and
professionalism you bring to the task.

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.

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

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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 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. Include any 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.

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Competition: Discuss how people identified in your target market currently meet their
need for your product or service. What other businesses exist in your area that are
similar to your proposed venture? 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? Briefly describe what differentiates your proposed venture from
these existing businesses and discuss why you are entering this market.

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

2. Write short notes on: a) sales projections b) importance of creativity in

Business.

Ans: a) 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
increments. Account for initial presentation and market penetration of your product and
any seasonal variations in sales, if appropriate.

b) Importance of creativity in Business: Logical thinking progresses in a series of

steps, each one dependent on the last. This new knowledge is merely an extension of
what we know already, rather than being truly new. The need for creative problem
solving has arisen as a result of the inadequacies of logical thinking. It is a method of
using imagination along with techniques which use analogies, associations and other
mechanisms to help produce insights into problems which might not otherwise be
obtained through conventional, traditional methods of problem solving. In management,
problems arise as different or new situations present themselves and they often require
novel solutions. Frequently, it is difficult to see solutions to problems by thinking in a
conventional fashion. Logical thinking takes our existing knowledge and uses rules of
inference to produce new knowledge. However, because logical thinking progresses in a
series of steps, each one dependent on the last, this new knowledge is merely an
extension of what we know already, rather than being truly new. It would seem,
therefore, that logical thinking has only a limited role to play in helping managers to be
creative. The need for creative problem solving has arisen as a result of the
inadequacies of logical thinking. It is a method of using imagination along with
techniques which use analogies, associations and other mechanisms to help produce
insights into problems.

Over the past few decades creativity has become a highly fashionable topic in
both the academic and business worlds. That is not to say that creativity did not exist
before, but its importance to the continued success of an organisation had yet to be
recognised. Many management problems require creative insights in order to find
satisfactory solutions. Nowadays, the majority of organisations are fully aware of just
how vital creativity is to their prosperity. Over time, considerable research has been
undertaken which enables us to obtain a better understanding of creativity and become
more innovative ourselves.

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

Ans: Crisis Communication is also sometimes considered a sub-speciality of the

Business Continuity area of modern business. The aim of crisis communication in this
context is to assist organisations to achieve continuity of critical business processes and
information flows under crisis, disaster or event driven circumstances.

Responding quickly, efficiently, effectively and in a premeditated way are the primary
objectives of an effective crisis communication strategy and/or solution. Harnessing
technology and people to ensure a rapid and co-ordinated response to a range of
potentially crippling scenarios distinguishes a well thought out and executed plan from a
poorly or ill-considered one. The inherent lag time in marshalling responses to a crisis
can result in considerable losses to company revenues, reputation as well as
substantially impacting on costs.

Effective crisis communication strategies will typically consider achieving most, if not
all, of the following objectives:

• Maintain connectivity
• Be readily accessible to the news media
• Show empathy for the people involved
• Allow distributed access
• Streamline communication processes
• Maintain information security
• Ensure uninterrupted audit trails
• Deliver high volume communications
• Support multi-channel communications
• Remove dependencies on paper based processes

By definition a crisis is an unexpected and detrimental situation or event. Crisis

communication can play a significant role by transforming the unexpected into the
anticipated and responding accordingly.

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

while seeking investment in for your Company?

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

"Due Diligence" is a legal term (borrowed from the securities industry). It means,
essentially, to make sure that all the facts regarding the firm are available and have
been independently verified. In some respects, it is very similar to an audit. All the
documents of the firm are assembled and reviewed, the management is interviewed
and a team of financial experts, lawyers and accountants descends on the firm to
analyze it.

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First Rule: The firm must appoint ONE due diligence coordinator. This person
interfaces with all outside due diligence teams. He collects all the materials requested
and oversees all the activities which make up the due diligence process.

The firm must have ONE VOICE. Only one person represents the company, answers
questions, makes presentations and serves as a coordinator when the DD teams wish to
interview people connected to the firm.

Second Rule: Brief your workers. Give them the big picture. Why is the company
raising funds, who are the investors, how will the future of the firm (and their personal
future) look if the investor comes in. Both employees and management must realize
that this is a top priority. They must be instructed not to lie. They must know the DD
coordinator and the company’s spokesman in the DD process.

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

The Marketing Plan

Must include the following elements:
· A brief history of the business (to show its track performance and growth)
· Points regarding the political, legal (licences) and competitive environment
· A vision of the business in the future
· Products and services and their uses
· Comparison of the firm’s products and services to those of the competitors
· Warranties, guarantees and after-sales service
· Development of new products or services
· A general overview of the market and market segmentation
· Is the market rising or falling (the trend: past and future)
· What customer needs do the products / services satisfy
· Which markets segments do we concentrate on and why
· What factors are important in the customer’s decision to buy (or not to buy)
· A list of the direct competitors and a short description of each
· The strengths and weaknesses of the competitors relative to the firm
· Missing information regarding the markets, the clients and the competitors
· Planned market research
· A sales forecast by product group
· The pricing strategy (how is pricing decided)
· Promotion of the sales of the products (including a description of the sales force,
sales-related incentives, sales targets, training of the sales personnel, special
offers, dealerships, telemarketing and sales support). Attach a flow chart of the
purchasing process from the moment that the client is approached by the sales
force until he buys the product.
· Marketing and advertising campaigns (including cost estimates) – broken by
market and by media
· Distribution of the products
· A flow chart describing the receipt of orders, invoicing, shipping.
· Customer after-sales service (hotline, support, maintenance, complaints,
upgrades, etc.)
· Customer loyalty (example: churn rate and how is it monitored and controlled).

Legal Details
· Full name of the firm
· Ownership of the firm
· Court registration documents

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 · Copies of all protocols of the Board of Directors and the General Assembly of
Shareholders
· Signatory rights backed by the appropriate decisions
· The charter (statute) of the firm and other incorporation documents
· Copies of licences granted to the firm
· A legal opinion regarding the above licences
· A list of lawsuit that were filed against the firm and that the firm filed against
third parties (litigation) plus a list of disputes which are likely to reach the courts
· Legal opinions regarding the possible outcomes of all the lawsuits and disputes
including their potential influence on the firm

Financial Due Diligence

· Last 3 years income statements of the firm or of constituents of the firm, if the
firm is the result of a merger. The statements have to include:
· Balance Sheets
· Income Statements
· Cash Flow statements
· Audit reports (preferably done according to the International Accounting
Standards, or, if the firm is looking to raise money in the USA, in accordance with
FASB)
· Cash Flow Projections and the assumptions underlying them

Controls
· Accounting systems used
· Methods to price products and services
· Payment terms, collections of debts and ageing of receivables
· Introduction of international accounting standards
· Monitoring of sales
· Monitoring of orders and shipments
· Keeping of records, filing, archives
· Cost accounting system
· Budgeting and budget monitoring and controls
· Internal audits (frequency and procedures)
· External audits (frequency and procedures)
· The banks that the firm is working with: history, references, balances

Technical Plan
· Description of manufacturing processes (hardware, software, communications,
other)
· Need for know-how, technological transfer and licensing required
· Suppliers of equipment, software, services (including offers)
· Manpower (skilled and unskilled)
· Infrastructure (power, water, etc.)
· Transport and communications (example: satellites, lines, receivers, transmitters)
· Raw materials: sources, cost and quality
· Relations with suppliers and support industries
· Import restrictions or licensing (where applicable)
· Sites, technical specification
· Environmental issues and how they are addressed
· Leases, special arrangements
· Integration of new operations into existing ones (protocols, etc.)

A successful due diligence is the key to an eventual investment. This is a process

much more serious and important than the preparation of the Business Plan.

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

Ans: Licensing: One basic choice is whether you should actively exploit your IP rights
yourself, or to keep your IP rights and license them to others to use, or sell or assign the
rights to another person. You can, in principle, make different choices in different
countries for exploiting IP rights for the same underlying invention. If you are based in
Malaysia, you could in theory decide to exploit your patent yourself in the East Asian
region, grant a licence a Canadian company to use the invention in North America, and
sell or assign the rights in Europe to a Danish company – whether or not this is the best
approach in practice is a different matter, of course.

A licence is a grant of permission made by the patent owner to another to exercise any
specified rights as agreed. Licensing is a good way for an owner to benefit from their
work as they retain ownership of the patented invention while granting permission to
others to use it and gaining benefits, such as financial royalties, from that use. However,
it normally requires the owner of the invention to invest time and resources in
monitoring the licensed use, and in maintaining and enforcing the underlying IP right.

The patent right normally includes the right to exclude others from making, using,
selling or importing the patented product, and similar rights concerning patented
processes. The license can therefore cover the use of the patented invention in many
different ways.

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

Licenses are normally confined to a particular geographical area – typically, the

jurisdiction in which particular IP rights have effect. You can grant different exclusive
licences for different territories at the same time. For example, a patent owner can
grant an exclusive licence to make and sell their patented invention in Malaysia for the
term of the patent, and grant a separate exclusive licence to manufacture and sell their
patented invention in India for the term of the patent.

Separate licences can be granted for different ways of using the same technology. For
example, if an inventor creates a new form of pharmaceutical delivery, she could grant
an exclusive licence to one company to use the technology for an arthritis drug, a
separate exclusive licence to another company to use it for relief of cold symptoms, and
a further exclusive licence to a third company to use it for veterinary pharmaceuticals.

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

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

the patent.

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

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

Licences are often limited to specific rights, territories and time periods. For example, a
patent owner could exclusively licence only their importation right to a company for the
territory of Indonesia for 12 months. If an inventor owns patents on the same invention
in five different countries, they could assign (or sell) these patents to five different
owners in each of those countries. Portions of a patent right can also be assigned – so
that in order to finance your invention, you might choose to sell a half-share to a
commercial partner.

If you assign your rights, you normally lose any possibility of further licensing or
commercially exploiting your intellectual property rights. Therefore, the amount you
charge for an assignment is usually considerably higher than the royalty fee you would
charge for a patent licence. When assigning the rights, you might seek to negotiate a
licence from the new owner to ensure that you can continue to use your invention. For
instance, you might negotiate an arrangement that gives you licence to use the
patented invention in the event that you come up with an improvement on your original
invention and this falls within the scope of the assigned patent. Equally, the new owner
of the assigned patent might want to get access to your subsequent improvements on
the invention.

Joint Venture: Rather than simply exploit your IP rights by licensing or assignment,
you might choose to set up a new legal mechanism to exploit your technology. Typically
this can be a partnership expressed through a joint venture agreement or a new
corporation, such as a start-up or spin-off company.

These options require much more work on your part than licensing or assigning your
intellectual property rights. This could be a desirable choice in cases where:

– you want to keep your institute’s research activities separate from the development
and commercialisation of technology, especially when your institute has a public
interest focus or an educational role; or

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

In working out the right vehicle for your technology, you will normally need specific legal
advice from a commercial lawyer, preferably one with experience in technology and
commercialisation in your jurisdiction. The laws governing partnerships and companies
differ considerably from one country to another, and this discussion is only intended to
give a general flavour of the various options.

A joint venture agreement involves a formal, legally binding commitment between two
or more partners to work together on a shared enterprise. It is normally created for a
specific purpose (for example, to commercialise a specific new technology) and for a
limited duration. For instance, you might sign a partnership agreement with a

MB0036 Page 19
manufacturing company to develop and market a product based on your invention.
Before entering into a joint venture agreement, you need to check out possible
commercial partners and make sure that the objectives of your potential commercial
partners are consistent with your objectives. In the joint venture agreement, the
partners typically agree to share the benefits, as well as the risks and liabilities, in a
specified way.

But this kind of partnership isn’t normally able in itself to enter legal commitments, or
own IP in its own right, so that the partners remain directly legally responsible for any
losses or other liabilities that the partnership’s operations create. In other words, a
partnership which is not a corporation, a company or a specific institution doesn’t really
separately exist as a legal entity.

By contrast, a company is a new legal entity (a ‘legal person’ recognised by the law as
having its own legal identity) which can own and license IP and enter into legal
commitments in its own right. A spin-off company is an independent company created
from an existing legal body – for example, if a research institute decided to turn its
licensing division or a particular laboratory into a separate company. A start-up
company is a general term for a new company in its early stages of development. If a
company is defined as a limited liability company, the partners or investors normally
cannot lose more than their investment in the company (but officeholders in the
company might be personally responsible for their actions in the way they manage the
company). This separate legal identity means that a start-up company can be a useful
way of developing and commercialising a new technology based on original research,
while keeping the main research effort of an institute focussed on broader scientific and
public objectives, and insulated from the commercial risks and pressures of the
commercialisation process. At the same time, the research institute can benefit from
the commercialisation of its research, through receiving its share of the profits and
growth in assets of the spin-off company, thus strengthening the institute’s capacity to
do scientific research.

The company is normally owned through shares (its ‘equity’). These effectively
represent a portion of the assets and entitlement to profits of the company. Investors
can purchase shares in the company, which is one way of bringing in new financial
resources to support the development of the technology – in exchange, the investors
stand to benefit from the growth in the company’s worth, as their shares
proportionately rise in value, and to receive a portion of any profits produced by the
company’s operations, commensurate with the number of shares they own. If it is a
public company, shares in the company can be bought and sold on the open stock
market. An initial public offering is when the shares in a start up company are first made
available to the public to purchase. A private company’s shares, by contrast, are not
traded on the open market (but can still be bought and sold).

The option of starting up your own company to manufacture and market your patented
invention requires you to have business skills, marketing skills, management skills and
substantial capital to draw on for factory premises, hiring staff and so on. But it also can
offer a mechanism for attracting financial backing for research, development and
marketing, which can improve access to the necessary resources and expertise.

Which model of commercialisation is best for you?

Each new technology and associated package of IP rights is potentially difference, and
the mechanism you choose for commercialisation should take into account the
particular features of the technology. One basic consideration is to what extent you, as

MB0036 Page 20
originator of the technology, wish to be involved and to invest in the subsequent
development of the technology. You will need to compare the advantages and
disadvantages of each model of commercialisation. Generally speaking, the higher
degree of risk and commitment of finance and resources you can invest, the higher the
degree of control you can secure over exploitation of the technology invention, and the
higher the financial return to your institution may be.

There are many possible variations on each of these general models, and in practice
they can overlap. In deciding which model of commercialisation is best for you, it is
always a good idea to seek commercial or legal advice.

Remember that IPRs alone do not guarantee you a financial return on your invention.
You need to make good commercial decisions to benefit financially from your
intellectual property rights.

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

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

Ans: The cost of going through the patenting process in a number of countries is
typically beyond the resources of all but the largest companies and research
establishments, and most enterprises and institutions require some kind of commercial
partnership or financial support to gain, and to keep in force, the patent rights.

The case is similar for other intellectual property rights, like plant breeders’ rights,
trademarks, and industrial designs, although these normally cost less overall than
patents. The applicant takes a risk and invests time and money in the process of
obtaining an IP right. The hope is that the IP right will improve their capacity to develop
a new product and gain the benefits from their research and innovation. But when the
costs are unpredictable and potentially high, and the future benefits from the IP right
are uncertain and may only be realized after a number of years, it can be difficult to
work out whether it is worth making the investment. Unregistered rights, like trade
secrets and copyright, do not incur direct costs in the same way, but may involve
investment in physical security, preparation of confidentiality agreements, and
monitoring and enforcement costs.

In short, obtaining registered intellectual property rights can be expensive, and do not
in themselves make you any returns for your investment. Patents can be costly
liabilities to you, your business or your research institute, unless you can find a way to
apply your invention commercially or can get other forms of financial support. This calls
for a range of skills and experience quite apart from technological and scientific skills.
Often the most difficult aspect of putting a new technology to work, and of making it
available to the public, lies not in the patenting process, but in finding a suitable
commercial vehicle to gain suitable returns from the invention, including through
commercial use of the patent. Commercialising inventions can involve a great deal of
commercial risk, which small companies and research institutes might not be able to
accept and manage. Because of these considerations, in many cases institutions and
companies choose not to commercialise their invention at all, but elect to sell (‘assign’)
or license their rights to the invention to other companies for them to take the invention
to the marketplace.

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Because intellectual property rights can be so costly to obtain, to keep in force and to
enforce, they should not be pursued for their own sake. Patenting your invention may
be worthless, and in fact could waste resources, unless you have a commercial strategy
in which your patenting program has a logical place. And this strategy will usually
involve some form of partnership – this may be a bank or venture capitalist providing
you with the funds you need, a company with access to technology or a product that is
needed for the success of your invention, or a commercial enterprise with product
development and marketing skills.

When you are weighing up whether to commercialise your invention yourself, or

whether you should find commercial partners or another way of developing your
invention, you should consider:

1. Your overall objectives: Are you looking just to fund further research, or to create
a new industry particularly for the benefit of your own country, or to build up a capital
asset, or simply to disseminate the fruits of your research as broadly as possible, with
some control over the way the technology is used?

2. Your financial position: Can you accept the cost and financial risk of investing in
patents and other IPRs, and other aspects of commercialisation; do you have the
reserves to defend and enforce your IPRs, potentially in several countries; will financial
constraints keep you out of some of the major potential markets for the invention?

3. The skills and resources available: Do you, or your organization, have the
capacity to develop and implement a product development and marketing program for
a new product?

What are the focus and core expertise of your organization?

4. Regulatory requirements for getting onto the market: Do you have access to
sufficient expertise and resources to undertake the kind of testing and approval
processes that might be required for a new product, such as a new pharmaceutical, a
new pesticide or a genetically modified crop? Can you deal with labelling and
certification requirements in different countries? Are there joint ventures or local
participation obligations to enter some markets?

5. Your options for overseas production or export: Do you have the capacity to
produce, export and market your invention in major foreign markets?

6. The nature of the technology: The invention may require access to other IP-
protected technologies or know-how for it to be produced; and particular manufacturing
technologies might be required for it to be made in an economic manner, so that the
product is competitively priced.

7. The strength of the competition: Does your product need to find a place in a
crowded market with strong competition, requiring the backing and resources of a
major company in the field?

8. The range of possible uses for your invention: Do you have the capacity to put
it to work in all the areas it could be used, or do you need partnership with others to
make sure your invention achieves its full potential?

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