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.

Answer: 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 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

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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.

MICROSOFT’s 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, washing machines and so on.
b) Developing software to allow these devices to communicate.
c) Investing heavily to help build wireless and high-speed internet
access throughout the world 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 there’s 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 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

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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 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.

Situation Analysis
Sales Improvement Strategies:
a) A supplier of computer stationery invests in a computer
stationery manufacturing unit.
b) A vendor supplying engine boxes to Maruti decides to supply the
same with modifications to Hyundai.
c) A company dealing in computer floppies plans to set up a
Software Technology Park.

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

briefly explain the importance of each.

Answer: 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 see those crucial decision making

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components they’ll see no reason to proceed 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 is where 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.

Financing Section

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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!

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

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

Answer: Every business starts out as an idea. This idea usually

involves the invention of a new product, or revolves around a better
way of making and marketing an existing one. While many 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.

1. Idea Researching
In this stage, you are researching your idea. The object of your
research is to find out who is marketing the same product or
service in your area, and how successful the marketer has
been. You can accomplish this by a Google search on the
Internet, launching 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.

2. 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 business
adviser for assistance.

In the business plan you typically include following heads:

i) Executive Summary
ii) Company and Product Description
iii) Market Description
iv) Equipment and Materials
v) Operations
vi) Management and Ownership
vii) Financial Information and Start-Up Timeline
viii) Risks and Their Mitigation

3. 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.

4. Advertising Campaign

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 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 are the feasible solution and
also pamphlets circulated across the pioneers. This apart
personal marketing is much more suggested.

5. Preparing for Launch

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

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

necessary.

Answer: 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 commitment to

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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
partner’s interests in the technology. For example, they may be
unwilling to take out a licence for your patent without getting access
to the software you have developed for a related process. They may
want the right to use your trade mark in association with the
patented technology.

So in a due diligence process, your commercial partner may

undertake a range of checks 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, and possibilities of conflict; and
• Analysis of freedom to operate issues.

In preparing to licence 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 licence terms. It
should also speed up the licensing negotiations, and ultimately the
commercialization of your intellectual property.

5. Is Corporate Social Responsibility necessary and how does

it benefit a company and its shareholders?

Answer: 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 of headings
(e.g. ethics codes, social responsibility charters). In some cases,
corporations have re-branded their core values in the light of
business ethical considerations (e.g. BP's "beyond petroleum"
environmental tilt).
The term "CSR" came in to common use in the early 1970s, after
many multinational corporations formed, although it was seldom
abbreviated. The term stakeholder, 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 large body 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

MB0036 – Strategic Management and Business Policy - 10 -

financial performance. However, businesses may not be looking at
short-run financial returns when developing their CSR strategy.

The definition of CSR used within an organization can vary from the
strict "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, fundraising activities 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

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Corporations are keen to avoid interference in their business
through taxation or regulations. 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
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.

6. Distinguish between a Financial Investor and a Strategic

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

Answer: 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 –
was correspondingly limited. People invested in industries they were
acquainted with first hand.

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

provision) expanded. 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 was expected 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,

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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
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 in the 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:

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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.

1. 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.
2. To implement continuous financial audit and control systems
to monitor the performance of the firm, its flow of funds, the
adherence to the budget, the expenditures, the income, the
cost of sales and other budgetary items.
3. To timely, regularly and duly prepare and present to the Board
of Directors 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.
4. 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.
5. 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.
6. To alert the Board of Directors and to warn it regarding any
irregularity, lack of compliance, lack of adherence, lacunas
and problems whether actual or potential concerning the
financial systems, the financial operations, the financing
plans, the accounting, the audits, the budgets and any other
matter of a financial nature or which could or does have a
financial implication.
7. To collaborate and coordinate the activities of outside
suppliers of financial services hired or contracted by the firm,
including accountants, auditors, financial consultants,
underwriters and brokers, the banking system and other
financial venues.
8. To maintain a working relationship and to develop additional
relationships with banks, financial institutions and capital
markets with the aim of securing the funds necessary for the

MB0036 – Strategic Management and Business Policy - 14 -

 operations of the firm, the attainment of its development
plans and its investments.
9. To fully computerize all the above activities in a combined
hardware-software and communications system which will
integrate into the systems of other members of the group of
companies.
10. 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

1. To construct and implement credit risk assessment tools,
questionnaires, quantitative methods, data gathering methods
and venues in order to properly evaluate and predict the
credit risk rating of a client, distributor, or supplier.
2. To constantly monitor and analyse the payment morale,
regularity, non-payment and non-performance events, etc. –
in order to determine the changes in the credit risk rating of
said factors.
3. To analyse receivables and collectibles on a regular and
timely basis.
4. To improve the collection methods in order to reduce the
amounts of arrears and overdue payments, or the average
period of such arrears and overdue payments.
5. To collaborate with legal institutions, law enforcement
agencies and private collection firms in assuring the timely
flow and payment of all due payments, arrears and overdue
payments and other collectibles.
6. To coordinate an educational campaign to ensure the
voluntary collaboration of the clients, distributors and other
debtors in the timely and orderly payment of their dues.

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

Project Planning and Project Management

The strategic investor is uniquely positioned to plan the technical
side of the project and to implement it. He is, therefore, put in
charge of:

1. The selection of infrastructure, equipment, raw materials,

industrial processes, etc.;
2. Negotiations and agreements with providers and suppliers;
3. Minimizing the costs of infrastructure by deploying proprietary
components and planning;
4. The provision of corporate guarantees and letters of comfort
to suppliers;

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 5. The planning and erecting of the various sites, structures,
buildings, premises, factories, etc.;
6. The planning and implementation of line connections,
computer network connections, protocols, solving issues of
compatibility (hardware and software, etc.);
7. Project planning, implementation and supervision.

Marketing and Sales

1. The presentation to the Board an annual plan of sales and
marketing including: market penetration targets, profiles of
potential social and economic categories of clients, sales
promotion methods, advertising campaigns, image, public
relations and other media campaigns. The strategic investor
also implements these plans or supervises their
implementation.
2. The strategic investor is usually possessed of a 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.
3. The dissemination of the product as a preferred choice among
vendors, distributors, individual users and businesses in the
territory.
4. Special events, sponsorships, collaboration with businesses.
5. The planning and implementation of incentive systems (e.g.,
points, vouchers).
6. The strategic investor usually organizes a distribution and
dealership network, a franchising network, or a sales network
(retail chains) including: training, pricing, pecuniary and
quality supervision, network control, inventory and accounting
controls, advertising, local marketing and sales promotion and
other network management functions.
7. The strategic investor is also in charge of "vision thinking":
new methods of operation, new marketing ploys, new market
niches, predicting the future trends and 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

MB0036 – Strategic Management and Business Policy - 16 -

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
1. 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.
2. The planning and implementation of a fully operative
computer system (hardware, software, communication,
intranet) to deal with all the aspects of the structure and the
operation of the firm. The strategic investor puts at the
disposal of the firm proprietary software developed by it and
specifically tailored to the needs of companies operating in
the firm's market.
3. The encouragement of the development of in-house,
proprietary, technological solutions to the needs of the firm,
its clients and suppliers.
4. The planning and the execution of an integration program
with new technologies in the field, in collaboration with other
suppliers or market technological leaders.

Education and 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

1. 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.
2. To run the day to day business of the firm.
3. To oversee the personnel of the firm and to resolve all the
personnel issues.
4. To secure the unobstructed flow of relevant information and
the protection of confidential organization.
5. To represent the firm in its contacts, representations and
negotiations with other firms, authorities, or persons.

MB0036 – Strategic Management and Business Policy - 17 -

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, mean spirited,
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.

MB0036 – Strategic Management and Business Policy - 18 -