Master of Business Administration – MBA Semester 4

MB0036 – Strategic Management & Business Policy

Assignment Set- 1

Question1: Explain the different circumstances under which a suitable growth

strategy should be selected by any company to improve its performance (i.e.,
intensive, integrative or diversification growth). You may select an example of your
choice to substantiate your views (10 marks).

Answer 1:
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 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. Gramophone 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 it’s most profitably operating intermediaries such
as wholesalers or retailers, it is forward integration. If the company legally takes over or acquires
the business of any of its leading competitors, it is called horizontal integration (however, if this
competitor is weak, it might be counter-productive due to dilution of brand image).
c) Diversification Growth:
It refers to the process of identifying opportunities to develop or acquire businesses that are not
related to the 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 computerized content generation to
appeal to higher-end customers and also add new application areas ( Horizontal Diversification )–
or even sell stationery.
Alternatively, the company might choose new businesses that have nothing to do with the
current technology, products or markets (Conglomerate Diversification).
The classic examples for this would be engineering and textile firms setting up software
development centers or Call Centers with new service clients.
Situation Analysis
Sales Improvement Strategies:
a) A supplier of computer stationery invests in a computer stationery manufacturing unit.
b) A vendor supplying engine boxes to Maruti decides to supply the same with modifications to
Hyundai.
c) A company dealing in computer floppies plans to set up a Software Technology Park.

Question 2: What are the components of a good Business Plan and briefly explain the
importance of each. (10 marks).

Answer 2:
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
components, they'll see no reason to precede with their review of your business plan, no matter
how great your business idea.
Executive Summary Section
Every business plan must begin with an Executive Summary section. A well-written Executive
Summary is critical to the success of the rest of the document. Here 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
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.

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Question 3: You wish to start a new venture to manufacture auto components. Explain
different stages in the process of starting this new business. (10 marks).

Answer 3:
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
moneymaking 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.
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
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 a sign board is 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.
Question 4: Explain the process of due Diligence and why it is necessary.(10 marks).

Answer 4:
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 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 license 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;
· 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 license your technology, you should consider in advance these kind of due
diligence issues. If you can anticipate and provide comprehensive answers to these questions,
you will be able more effectively to reassure your commercial partner, and you will be in a
stronger negotiating position in negotiating license terms. It should also speed up the licensing
negotiations, and ultimately the commercialization of your intellectual property.

Question 5.: Is Corporate Social Responsibility necessary and how does it benefit a
company and its shareholders? (10 marks).

Answer 5:
Corporate social responsibility (CSR), also known as corporate responsibility, corporate
citizenship, responsible business, sustainable responsible business (SRB), or corporate
performance,[1] 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.
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.[2]
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
natureof 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 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,[11] 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,[12] 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.[13]

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.[14] Several major brands, such as The Co-operative
Group, The Body Shop and American Apparel [15 ] are built on ethical values. Business service
organizations can benefit too from building a reputation for integrity and best practice.
License to operate

Corporations are keen to avoid interference in their business through taxation 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), and communities in the areas where the
corporation operates its facilities, regulators, academics, and the media.

Question 6: Distinguish between a Financial Investor and a Strategic Investor

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

Answer 6:
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, 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, and the education
of the workforce - all depend on the strategic investor. That there is a strong relationship
between the quality and decisions of the strategic investor and the share price is small wonder.
The strategic investor represents a discounted future in the same manner that shares do.
Indeed, gradually, the balance between financial investors and strategic investors is shifting in
favour of the latter.
People understand that money is abundant and what is in short supply is good management.
Given the ability to create a brand, to generate profits, to issue new products and to acquire new
clients - money is abundant.
These are the functions normally reserved to financial investors:
Financial Management
The financial investor is expected to take over the financial management of the firm and to
directly appoint the senior management and, especially, the management echelons, which
directly deal with the finances of the firm.
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
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 this 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
nonperformance 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;
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 brand name 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 brand name, 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 well suited for it. It has built
large databases with multi-year profiles of the purchasing patterns and demographic data
related to thousands of clients in many countries. It owns libraries of material, images, sounds,
paper clippings, articles, PR and image materials, and proprietary trademarks and brand names.
Above all, it accumulated years of marketing and sales promotion ideas which crystallized into a
new conception of the business.
Technology
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.
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
often entrepreneurs fail - in knowing when to let go.