Name: ID No.

Deborah Abebe 540910884 MB0036

Subject Code:

Subject Name: Strategic Management and Business Policy Specialization: Project Management Semester: 4th Set 1 Deadline: 20 July 2011

Q1.

Explain how strategies are formulated and implemented?

Answer: The term strategy is drawn from the armed forces. It is a strategic plan that interlocks all aspects of the corporate mission designed to overpower the enemy or the competitor. An appropriate strategy is considered to be essential to face adverse situations such as cut-throat competition. Strategy may imply general or specific programmes of action outlining how the resources are deployed to attain goals in a given set of conditions. If these conditions change, the strategy also changes. Strategies give direction for the achievement of objectives necessary through the deployment of resources. Purpose of Strategy

A strategy is an operational tool to achieve the goals, and thus, the corporate mission. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives. A company may view downsizing as a strategy in a competitive market to render cost-effective services. Thus, strategy provides a framework to guide thinking and action. Strategies are very much useful in organisations for guiding, planning and control. Strategy Formulation and Implementation

It is the crux of the strategic management process. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process. Stages in Strategy Formulation and Implementation

a) Identification of mission and objectives

b) Environment scanning c) Generic strategy alternatives d) Strategy variations e) Strategic choice

f) Allocation of resources and formulation of organisational structure g) Formulation of plans, policies, programmes and administration h) Evaluation and control Generic Strategy Alternatives

They refer to the strategy alternatives in broader terms. After the nature of the business of the firm is defined, the next task is to focus on the type of strategic alternative, in general, the firm should pursue. The strategist seeks to identify the right alternative through questions such as: 1. Should we get out of this business entirely? 2. Should we try to expand? There are four strategy alternatives available to a firm or business:

a) To expand b) To wind up or retrench c) To stabilize, and d) To continue its operations pertaining to its products, markets or functions.

a) Expansion strategy can be adopted in the case of highly competitive and volatile industries, particularly, if they are in the introduction stage of product / service life cycle. b) Stability strategy is a better choice when the firm is doing well, the environment is relatively less volatile, and the product / service has reached the stability or maturity stage of the life cycle. c) Retrenchment strategy is the obvious choice when the firm is not doing well in terms of sales and revenue and finds greater returns elsewhere, or the product / service is in the finishing stage of the product life cycle. d) Combination strategy is not a new strategy as it combines the other strategies. However, it is to be noted that it is better to evolve individual strategies and combine them rather than trying to evolve a complex combination strategy which could be cumbersome with loss of precious business time. It is best-suited to multiple SBU firms in times of economic transition and also when changes occur in the product / service life cycle. If a firm realises that some of its main product lines have outlived their lives, it may not be profitable to continue investment in the same product or SBU. The firm may choose to withdraw its resources from this area (or SBU) (Retrenchment strategy) and follow an Expansion strategy in a new product area. Combination strategy is best suited when the firm finds that its product-wise performance is uneven, or all or most of its products differ in their future potential. Sometimes, a combination of a few or all of these strategies may be necessary. Any change must be contemplated considering what is to be done (Business definition) and the speed (Pace) with which it is to be done. Each of these alternatives has to be evaluated on its merits. Strategic Alliances

Strategic alliances constitute another viable alternative. Companies can develop alliances with the members of the strategic group and perform more effectively. These alliances may take any of the following forms:

a) Product and/or service alliance: Two or more companies may get together to synergise their operations, seeking alliance for their products and/or services. The product or service alliance may take any of the following forms: A manufacturing company may grant license to another company to produce its products. The necessary market and product support, including technical know-how, is provided as part of the alliance. Coca-cola initially provided such support to Thums Up. Two companies may jointly market their products which are complementary in nature. Chocolate companies more often tie up with toy companies. TV Channels tie-up with Cricket boards to telecast entire series of cricket matches live. Two companies, who come together in such an alliance, may produce a new product altogether. Sony Music created a retail corner for itself in the ice-cream parlours of Baskin-Robbins. b) Promotional alliance: Two or more companies may come together to promote their products and services. A company may agree to carry out a promotion campaign during a given period for the products and/or services of another company. The Cricket Board may permit Cokes products to be displayed during the cricket matches for a period of one year. c) Logistic alliance: Here the focus is on developing or extending logistics support. One company extends logistics support for another companys products and services. For example, the outlets of Pizza Hut, Kolkata entered into a logistic alliance with TDK Logistics Ltd., Hyderabad, to outsource the requirements of these outlets from more than 30 vendors all over India for instance, meat and eggs from Hyderabad etc. d) Pricing collaborations: Companies may join together for special pricing collaborations. It is customary to find that hardware and software companies in information technology sector offer each other price discounts. Companies should be very careful in selecting strategic partners. The strategy should be to select such a partner who has complementary strengths and who can offset the present weaknesses. The acid test of an alliance is greater sales at lesser cost. It is a common practice to develop organisational structures or modify them, if necessary, to support the alliances and make them successful.

Since strategic choice is a managerial ( business ) decision, care should be taken that it is not affected by bias, intuition or politics. These constraints, if allowed to prevail, will limit the choice. Progressive companies hold formal meetings involving all or most of their managers at the top level while choosing strategy and to record the criteria used. More often, a company may not have total freedom in choosing the strategy as it is dependent for its survival on one or more of the following: owners, competitors, suppliers, the Government and the community. The strategic choice is also affected by relative volatility of the market sector wherein the firm chooses to operate. If the sector is more volatile, it needs a flexible and strategic response to be more effective.

Strategic choice and its effectiveness is often restricted by various factors such as the strategies earlier followed, the attitudes of the managers to risk (most of the managers are averse to risk) and lobby for power (some managers wish to be close to the boss to garner influence) in the organisation, internal and external alliances, and so on. However, overall commitment to the chosen strategy is extremely important.

Q2.

Mr. Nandankumar wants to start a business of his own. He is seeking advice from

a consultancy firm on how to go about it. If you were an employee of this consultancy firm, how would you guide him in preparing a business plan that would suit Nandankumars 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. 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.

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: (a) (b) (c) (d) (e) (f) (g) (h) Executive Summary. Company and Product Description. Market Description. Equipment and Materials. Operations. Management and Ownership. Financial Information and Start-Up Timeline. Risks and Their Mitigation.

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. Executive Summary: In this section of your business plan, provide a description of your company, the industry you will be competing in, and the product or service you plan to offer. The executive summary may be the first and only section of your business plan that most of your audience will read. Tell the audience why the business is a great idea. Some readers will

look at this section to determine whether or not they want to learn more about a business. Other readers will look to the executive summary as a sample of the quality and professionalism of the overall plan. The executive summary should be no more than one to three pages long and should answer the following questions: Who are you? (Describe your organization) What are you planning? (Describe the service or product) Why are you planning it? (Discuss the demand and market for the service or product) How will you operate your business? When will you be in operation? (Overview of timeline) What is your expected net profit? (Discuss your projected sales and costs) Although the executive summary is the first part of your business plan, you should write it after you have written the other sections of the plan in order to include the most important points of each section. Company and Product Description: In describing your company be sure to include what type of business you are planning (homeownership development, wholesale, retail, manufacturing or service) and the legal structure (corporation or partnership). You should discuss why you are creating this new venture, referencing the goals you set at the beginning of the business planning process. Also include a description of your non-profit organization, the role it has played in developing this new venture and the on-going role, if any, it will play in operations. Give the reader a brief overview of the industry, describing historic and current growth trends. Whenever possible, provide documentation or references supporting your trend analysis such as articles from business-oriented newspapers and magazines, research journals or other publications. Include these references in the attachments of your business plan. Product or Service: After describing your company and its industry context, describe the products or services you plan to provide. Focus on what distinguishes your product or service from the rest of the market. Discuss what will attract consumers to your product or service. Provide as much detail as necessary to inform the reader about the particular characteristics of your product that distinguish it from its competition many nonprofits, for example, expect to produce higher-quality housing than otherwise exists in the area. Mention any distinctive elements in the manufacture of the product, such as being hand-made by a particular people

from a specific area. If you are providing a service, explain the steps you will take to provide a service that is better than your competition. Price: Provide a realistic estimate of the price for your product or service, and discuss the rationale behind that price. An unrealistic price estimate may undermine the credibility of your plan and raise concerns that your product or service may not be 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. 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. Market Description: In this section, you will describe how you plan to operate the business. You will present information on how you plan to create your product or provide your service, describe the staff required to operate and manage the business, discuss the equipment and materials necessary, and define the site or facility requirements, if any. A key component of the operation of your business will be your sales and marketing strategy, so you must describe how you will inform your target market about your product or service and how you will convince customers to purchase it. Production Description: Describe the steps for creating your product, from the raw material or initial stage to the finished product, packaged and ready for distribution and sale. If you plan to provide a service, describe the process of service deliver (such as the initial interview, for instance, if you are offering consulting services), assessment, research and design, and final presentation. Provide a description of any sub-contractors or external services you plan to use

in the production process. The reader of the plan may be unfamiliar with the industry, so avoid using industry jargon to describe the production process. Staffing: Describe the staff required to operate your business: discuss how many people you will need; describe the tasks they will carry out; and the skills they will need. Prepare a chart outlining the salaries and benefits you will provide to your workforce. Provide information on how you will recruit staff and provide initial and ongoing training of employees. Equipment and Materials: To manufacture your product or provide your service, what type of equipment will you need? Describe any machinery and vehicles necessary in the production, packaging and distribution of your product, including any office equipment such as computers, copiers, furniture, fixtures and telephone systems. Also discuss the types of materials you will use in the production process and describe the source and cost of those materials. Facility: Describe the type of facility in which you will house your business. Indicate the amount of building space you will need for production and administration. Also discuss any building features required for the production process such as high ceilings, specialized ventilation and heating systems, sanitized laboratory space or vehicular accessibility. If you have already identified a location and a facility that meets your requirements, describe its features. Even if you are planning to provide a service instead of manufacturing a product, you need to demonstrate that you will have adequate space for administrative functions and other activities related to the service you plan to provide . Market Description: Describe your strategy for locating your target market, informing or educating customers about your product or service and convincing them to purchase it. Provide details on the methods you will use to advertise your product, such as print media (advertisements in newspapers, magazines or trade journals), electronic media (television, radio and the Internet), direct mail, telemarketing, individual sales agents or representatives, or other approaches. Discuss the products or services features you plan to emphasize to gain the attention of your target market. Also detail how you will distribute and sell your product or service. Will you use sales agents or existing retail outlets, or directly distribute your product through a delivery service such as United Parcel Service, Federal Express or independent trucking company?

Operations: In this section of your business plan, describe the senior managers responsible for overseeing the start-up and operation of your business, their background and their responsibilities in the business. Be sure to highlight your management teams experience in managing the production, marketing and administration of similar businesses or within the selected industry and attach the resumes of each member to the plan. Be sure to provide a complete job description of any vacancies in your management team. Describe the responsibilities, the skills, the background required and the steps you plan to take to fill that key position. Ownership: What is its relationship to your existing organization? Who is on the board of directors / board of advisors of the new business and what are their backgrounds and areas of expertise? Potential investors or lenders will be interested in the ownership stake of the board of directors and also in what portion of the companys equity is available. Success is often due to ones contacts, so fully describe your business relationships with attorneys, accountants and advertising or public relations agencies, and any industry-specific services such as suppliers and distributors. Management and Ownership: In this section you will describe the financial feasibility of your planned venture and provide several financial reports and statements to document why your business will be a viable enterprise and a sound investment. At a minimum, you should provide a brief descriptive narrative for each of the following financial statements and include a copy in the attachments to your plan: Start-up budget Cash flow projection Income statement Balance sheet In preparing these statements, you may want to seek the advice of a certified public accountant (CPA). Start-up Budget: Describe the initial expenses you will incur to get your business up and running. Some items you might include in your start-up budget research and product design and development expenses, legal incorporation and licensing expenses, facility purchase or rental,

equipment and vehicle purchase or rental, and initial material or supply purchase. You can use Worksheet B as a sample format for preparing your start-up budget. Cash Flow Projection: This statement presents a month-to-month schedule of the estimated cash inflows and outflows of your business for the first year. This schedule should indicate how much money your business will have or need and when you will need it. You should describe your sources of income and capital, detailing your projected sales revenue and indicating your own or investor equity contribution, lenders, investors and other sources of capital. Itemize your projected expenses, distinguishing between the cost of goods sold (materials, supplies, production labor), overhead expenses (rent, utilities, insurance, maintenance, interest, insurance, administrative costs and salaries, legal and accounting services, marketing, taxes, fees and other ongoing operating expenses) and capital expenditures (land and buildings, equipment, furniture, vehicles, and building repair or renovation expenses). In preparing this statement, account for a gradual increase in sales from initial product introduction and any expected seasonal fluctuations in revenue projections. Income Statement: Prepare a multiyear (three- to five year) statement of projected revenue, expenses, capital expenditures and cost of goods sold. If you make assumptions about the growth of your business, provide supporting documentation such as growth patterns of similar companies or studies that forecast an industry-wide growth rate. This statement should indicate to the reader the potential of your business to generate cash and its profitability over time. For an existing business, also submit an income statement for at least three prior consecutive years. Lenders may look at this statement to determine whether your business can support the additional debt you are requesting. Balance Sheet: A start-up business probably will not have any assets or liabilities at the time you are drafting the business plan. Provide a copy of the balance sheet of the businesss sponsoring organization or individual. Describe in your narrative any assets that will be allocated to the start-up of the business. Capital Requirements: Describe the amount and type of financing you are seeking for your business. Are you looking for debt from a lender or equity from an investor? Refer to your start up budget and cash flow statement presented earlier. Discuss how and when you will draw on these funds and how they will affect the bottom line. Also describe any commitments or investments that you may have already secured.

If you are seeking investors, such as venture capitalists, describe what they will receive in return for their capital. What is the repayment period and the expected return on investment? Also discuss the nature of their ownership share and how it may change with future investments. Equity investors are looking for rates of return higher than rates offered by banks or other business lenders. The level of risk in your business and industry will help to determine the actual market rate, as will the availability of equity dollars. Check with other businesses (although not direct competitors) to see what return on investment their investors demanded. Be prepared to negotiate. And make sure you research the investment market carefully; several socially minded investment pools exist and more are in development. or lenders, describe the type of financing you are seeking: Seed Capital Short-term financing to cover start-up costs. Fixed Asset Financing Longer-term financing for property, building improvements, equipment or vehicles. The asset being purchased is usually pledged as security for the loan. Working Capital Short-term financing to cover operating expenses and to bridge gaps in cash flow. Initial Start-up Timeline: Provide a timeline of tasks and events necessary to get your business operational. Be sure to describe the current stage you are in and what steps you have taken to date. Include deadlines for task completion. Set realistic deadlines according to your capacity to complete these tasks. The following is a list of some of the steps you may wish to include: Filing legal incorporation documents Identifying and securing suitable space Designing and developing the product Obtaining required licenses or permits Securing necessary financing Leasing or purchasing equipment Hiring key staff Hiring and training of production or support staff Purchasing materials and production supplies Beginning marketing activities

 Opening Although it is impossible to know exactly what will go wrong in starting and running your business, thinking about different challenges will strengthen your plan. Potential problems could include: Insufficient public subsidy available to new home owners or residents The competition drops its prices Not enough customers Production costs exceed estimates Difficulty in finding qualified employees Environmental or governmental changes such as tax increases, additional regulations or population changes For each potential problem, discuss its likelihood and describe possible solutions or actions you might undertake to mitigate the problem. Risks and their Mitigation: Although it is impossible to know exactly what will go wrong in starting and running your business, thinking about different challenges will strengthen your plan. After you have completed all of the elements of your business plan, you should focus its presentation. A well-organized plan will assist you in communicating the most important elements of your business plan to the reader, and a persuasive plan will help you to convince the reader to invest in your business. important elements of the plan. Review the Executive Summary section of this manual for more tips on this critical introduction to your business. 3. Advertising Campaign. Decide how you will market your product. Consider your

budget and your target audience. Make up business cards with your logo on it, your name and the name of your business. Make sure that they are of the most professional quality. Utilizing print, the newspaper, the Internet, radio or TV is also wise, considering, of course, the size of your advertising budget. Here in this case more than TV, a better advertising media will be road side sign boards placed close to the auto companies for getting the deals to manufacture their spares. As TV is useful

only to reach the common man and he is not our target customer. Hence sign boards are the feasible solution and also pamphlets circulated across the pioneers. This apart personal marketing is much more suggested. 4. Preparing for Launch. Advertise for employees. This also requires adequate

planning. Think about what you look for in an employee. Be specific about the requisite skills and experience you are seeking. Then begin requesting resumes and setting up interviews, making hiring decisions based on the standards you have set.

In this case we will be looking for a few candidates in managerial position who must be good in managing things apart from minimal technical knowledge. Lower level people at the shop floor people. They need to have real time experience in the shop floor activities. The employees apart, one needs to plan on the plant and machinery as well. Thus these are all the stages that I would consider performing if incase I plan to start a manufacturing unit producing automobile components.

Q3.

(a) (b)

What is the purpose of business continuity plan? Give a short note on mitigation strategies.

Answer: (a) The Business Continuity Guideline is a tool to allow organizations to consider the factors and steps necessary to prepare for a crisis (disaster or emergency) so that it can manage and survive the crisis and take all appropriate actions to help ensure the organizations continued viability. The advisory portion of the guideline is divided into two parts: (1) the planning process and (2) successful implementation and maintenance. Part One provides stepby-step Business Continuity Plan preparation and activation guidance, including readiness, prevention, response, and recovery/ resumption. Part Two details those tasks required for the Business Continuity Plan to be maintained as a living document, changing and growing with the organization and remaining relevant and executable. Purpose of Business Continuity Plan

Recent world events have challenged us to prepare to manage previously unthinkable situations that may threaten an organizations future. This new challenge goes beyond the mere

emergency response plan or disaster management activities that we previously employed. Organizations now must engage in a comprehensive process best described generically as Business Continuity. It is no longer enough to draft a response plan that anticipates naturally, accidentally, or intentionally caused disaster or emergency scenarios. Todays threats require the creation of an on-going, interactive process that serves to assure the continuation of an organizations core activities before, during, and most importantly, after a major crisis event.

In the simplest of terms, it is good business for a company to secure its assets. CEOs and shareholders must be prepared to budget for and secure the necessary resources to make this happen. It is necessary that an appropriate administrative structure be put in place to effectively deal with crisis management. This will ensure that all concerned understand who makes decisions, how the decisions are implemented, and what the roles and responsibilities of participants are. Personnel used for crisis management should be assigned to perform these roles as part of their normal duties and not be expected to perform them on a voluntary basis. Regardless of the organization for profit, not for profit, faith-based, non-governmental its leadership has a duty to stakeholders to plan for its survival. The vast majority of the national critical infrastructure is owned and operated by private sector organizations, and it is largely for these organizations that this guideline is intended. ASIS, the worlds largest organization of security professionals, recognizes these facts and believes the BC Guideline offers the reader a user-friendly method to enhance infrastructure protection. Key Words

Business Continuity Plan, Business Impact Analysis, Crisis Management Team, Critical Functions, Damage Assessment, Disaster, Evaluation and Maintenance, Mitigation Strategies, Mutual Aid Agreement, Prevention, Readiness, Recovery/Resumption, Resource Management, Response, Risk Assessment, Testing and Training. Terminology Alternate Worksite A work location, other than the primary location, to be used when the primary location is not accessible.

Business Continuity A comprehensively managed effort to prioritize key business processes, identify significant threats to normal operation, and plan mitigation strategies to ensure effective and efficient organizational response to the challenges that surface during and after a crisis. Business Continuity Plan (BCP) An ongoing process supported by senior management and funded to ensure that the necessary steps are taken to identify the impact of potential losses, maintain viable recovery strategies and plans, and ensure the continuity of operations through personnel training, plan testing, and maintenance. Business Impact Analysis (BIA) A management level financial analysis that identifies the impacts of losing an organizations resources. The analysis measures the effect of resource loss and escalating losses over time in order to provide reliable data upon which to base decisions on mitigation, recovery, and business continuity strategies. Contact List A list of team members and key players in a crisis. The list should include home phone numbers, pager numbers, cell phone numbers, etc. Crisis Any global, regional, or local natural or human-caused event or business interruption that runs the risk of (1) escalating in intensity, (2) adversely impacting shareholder value or the organizations financial position, (3) causing harm to people or damage to property or the environment, (4) falling under close media or government scrutiny, (5) interfering with normal operations and wasting significant management time and/or financial resources, (6) adversely affecting employee morale, or (7) jeopardizing the organizations reputation, products, or officers, and therefore negatively impacting its future. Crisis Management Intervention and co-ordination by individuals or teams before, during, and after an event to resolve the crisis, minimize loss, and otherwise protect the organization. Crisis Management Center A specific room or facility staffed by personnel charged with commanding, controlling, and coordinating the use of resources and personnel in response to a crisis.

Crisis Management Planning A properly funded ongoing process supported by senior management to ensure that the necessary steps are taken to identify and analyze the adverse impact of crisis events, maintain viable recovery strategies, and provide overall coordination of the organizations timely and effective response to a crisis. Crisis Management Team A group directed by senior management or its representatives to lead incident/event response comprised of personnel from such functions as human resources, information technology facilities, security, legal, communications/media relations,

manufacturing, warehousing, and other business critical support functions. Critical Function Business activity or process that cannot be interrupted or unavailable for several business days without having a significant negative impact on the organization. Critical Records Records or documents that, if damaged, destroyed, or lost, would cause considerable inconvenience to the organization and/or would require replacement or recreation at a considerable expense to the organization. Damage Assessment The process used to appraise or determine the number of injuries and human loss, damage to public and private property, and the status of key facilities and services resulting from a natural or human-caused disaster or emergency. Disaster An unanticipated incident or event, including natural catastrophes, technological accidents, or human-caused events, causing widespread destruction, loss, or distress to an organization that may result in significant property damage, multiple injuries, or deaths. Disaster Recovery Immediate intervention taken by an organization to minimize further losses brought on by a disaster and to begin the process of recovery, including activities and programs designed to restore critical business functions and return the organization to an acceptable condition. Emergency An unforeseen incident or event that happens unexpectedly and demands immediate action and intervention to minimize potential losses to people, property, or profitability.

Evacuation Organized, phased, and supervised dispersal of people from dangerous or potentially dangerous areas. Evaluation and Maintenance Process by which a business continuity plan is reviewed in accordance with a predetermined schedule and modified in light of such factors as new legal or regulatory requirements, changes to external environments, technological changes, test/exercise results, personnel changes, etc. Exercise An activity performed for the purpose of training and conditioning team members and personnel in appropriate crisis responses with the goal of achieving maximum performance. Mitigation Strategies Implementation of measures to lessen or eliminate the occurrence or impact of a crisis. Mutual Aid Agreement A pre-arranged agreement developed between two or more entities to render assistance to the parties of the agreement. Prevention Plans and processes that will allow an organization to avoid, preclude, or limit the impact of a crisis occurring. The tasks included in prevention should include compliance with corporate policy, mitigation strategies, and behavior and programs to support avoidance and deterrence and detection. Readiness The first step of a business continuity plan that addresses assigning accountability for the plan, conducting a risk assessment and a business impact analysis, agreeing on strategies to meet the needs identified in the risk assessment and business impact analysis, and forming Crisis Management and any other appropriate response teams. Recovery/Resumption Plans and processes to bring an organization out of a crisis that resulted in an interruption. Recovery/resumption steps should include damage and impact assessments, prioritization of critical processes to be resumed, and the return to normal operations or to reconstitute operations to a new condition.

Response Executing the plan and resources identified to perform those duties and services to preserve and protect life and property as well as provide services to the surviving population. Response steps should include potential crisis recognition, notification, situation assessment, and crisis declaration, plan execution, communications, and resource management. Risk Assessment Process of identifying internal and external threats and vulnerabilities, identifying the likelihood of an event arising from such threats or vulnerabilities, defining the critical functions necessary to continue an organizations operations, defining the controls in place or necessary to reduce exposure, and evaluating the cost for such controls. Shelter-in-Place The process of securing and protecting people and assets in the general area in which a crisis occurs. Simulation Exercise A test in which participants perform some or all of the actions they would take in the event of plan activation. Simulation exercises are performed under conditions as close as practicable to real world conditions. Tabletop Exercise A test method that presents a limited simulation of a crisis scenario in a narrative format in which participants review and discuss, not perform, the policy, methods, procedures, coordination, and resource assignments associated with plan activation. Testing Activities performed to evaluate the effectiveness or capabilities of a plan relative to specified objectives or measurement criteria. Testing usually involves exercises designed to keep teams and employees effective in their duties and to reveal weaknesses in the Business Continuity Plan. Training An educational process by which teams and employees are made qualified and proficient about their roles and responsibilities in implementing a Business Continuity Plan. Vital Records Records or documents, for legal, regulatory, or operational purposes, that if irretrievably damaged, destroyed, or lost, would materially impair the organizations ability to continue business operations.

(b)

Mitigation Strategies

Devise Mitigation Strategies

Cost effective mitigation strategies should be employed to prevent or lessen the impact of potential crises. For example, securing equipment to walls or desks with strapping can mitigate damage from an earthquake; sprinkler systems can lessen the risk of a fire; a strong records management and technology disaster recovery program can mitigate the loss of key documents and data. Resources Needed for Mitigation

The various resources that would contribute to the mitigation process should be identified. These resources, including essential personnel and their roles and responsibilities, facilities, technology, and equipment should be documented in the plan and become part of business as usual. Monitoring Systems and Resources

Systems and resources should be monitored continually as part of mitigation strategies. Such monitoring can be likened to simple inventory management. The resources that will support the organization to mitigate the crisis should also be monitored continually to ensure that they will be available and able to perform as planned during the crisis. Examples of such systems and resources include, but are not limited to: Emergency equipment

Fire alarms and suppression systems Local resources and vendors Alternate worksites

 Maps and floor plans updated/changed due to construction and internal moves System backups and offsite storage.

Q4.

Distinguish between a Financial Investor and a Strategic Investor.

Any seller would want to sell his company only to a Strategic Investor. What one believes is that the strategic investor will pay much more than a financial investor. Sad to say, this is not always true, particularly for more mundane companies. Software, IT, bio-tech and nano-tech businesses may obtain seemingly obscene prices, but basic manufacturing, wholesale distribution and most service businesses are chained to counting their values in single digit multiples. The traditional strategic investor is a corporation engaged in the same or similar line of business, while the financial investor has traditionally been private equity groups (PEGs) and individuals. The differences between strategic and financial investors are numerous, but the clearest differences are found in their overall approach to acquisitions. The strategic investor wants to Buy and Hold and the financial investor tends to want to Buy Low and Exit High. The total purchase price difference is probably not more than 10% on average each has a required rate of return target, with the financial investor being entirely disciplined and the strategic investor being more prone to build in some post-acquisition synergies into their pricing models. The second part to the basic approach has to do with the exit strategy. By their very nature, investment firms must eventually sell their investment to return capital and profit to their investors. Therefore, they are in a hurry to grow the acquisition to several times its original purchase price. The strategic investor has a slower growth model (tends to reduce pricing) because their investment horizon is usually many years longer. STRATEGIC Investor For the most part, the strategic investor is a company in a similar line of business in a different market or is in need of new products and services to sell to their existing customers and visa versa. It is most often a much larger company or one which has a large financing capacity. Competitors are not strategic investors. The strategic investor finds value in the combined future of the companies and is therefore willing to consider paying some increased multiple for the future benefits. From a pricing perspective, the strategic investor may be worth 10 times earnings. By acquiring your company for 5times, your companys earnings are now worth 10

times to the buyer simple math. One might think that the strategic investor would pay more than 5times, but the hoped for synergies belong to the investor and are often not shared with the seller. Think again, that the strategic investor might simply enter your market through a de novo operation or acquire your direct competitor, rather than pay a substantial premium. Nevertheless, the paying capacity of the strategic investor is greater and transactions may be for an all cash consideration. Additionally, a stock transaction vs. an asset purchase is more likely. Strategic investors are thought to pay approximately 20% more on average than financial investors. So 6times might be the right number. And, speaking of earnings, the strategic investor may not require stable earnings to enter into a transaction, as its goal is more likely growth in market share. In our example above, the strategic investor is a corporation in the same/similar line of business. There is another type of strategic buyer these days, although their appearance is that of a Private Equity Group (PEG). A PEG may also be a strategic investor, because it owns an operating or platform company. PEGs are investment funds run by investment bankers. A private equity fund is created by investment bankers to buy and sell privately held companies. It is a limited life company (usually 10 years) in which insurance companies, pension funds and private individuals invest for higher returns. PEGs today invest in a platform company in a key growing market, and then add-on other companies to accelerate growth and profitability. The roll-ups of the mid-late 1990s were sponsored by PEGs. A typical investment profile for a PEG looking to acquire a platform or add-on company might look like this A committed, entrepreneurial, and experienced management team with a proven track record. Proven demand for differentiated products and/or services.

A diversified customer base. A well-established brand name. A definable and defensible market niche in a large and growing market.

 Demonstrated profitability or clear visibility to profitability and sustainable positive cash flow. There is one substantial difference between the Strategic PEG and a strategic investor and that is the exit strategy. The strategic investor often does not have an exit strategy. It does not want to sell the company in the foreseeable future. The Strategic PEG has to exit the investment within the life of its investment fund. Therefore, the Strategic PEG is a half and half strategic/financial investor. FINANCIAL Investor There are numerous distinctions between financial and strategic investors. As discussed above the PEG is a financial investor in some ways. Additionally, there are PEGs which specialize in leveraged buy-outs (LBOs). In an LBO the acquired company is highly leveraged to meet the purchase price. Financial investors may only put up 20% of the purchase price in cash and borrow the rest from banks and mezzanine lenders. Because of the leverage aspect of the transaction, financial investors require the following company characteristics in order to make a transaction work. Consistent earnings. Reasonably high growth rates. Effective CEO/management team. Leverageable assets and cash flows. Financial investors may also be entrepreneurial individuals looking to get into their own business. These individuals are usually limited in their financial means, require seller financing and tend to buy smaller companies. Financial investors are often limited in the amount of purchase price they offer, based on the economics of the target company (seller). Based on the assets and cash flow to be leveraged, the purchase price to be offered may be 5times earnings and require some seller financing. Even if the acquisition is an add-on to another company, the ability to finance the purchase price is a limiting factor. Perhaps this financing requirement is where financial investors got their reputation for offering lower prices.

THE STRATEGIC VALUES (VIRTUES) Irrespective of whether a company is to be sold to a strategic or financial investor, owners should know what differentiates their company from their competitors and how investors measure value beyond this years earnings. Elements of strategic value are created over time by good management and a little luck. Here are the top 10 virtues that command value in todays M&A marketplace. 1. Seasoned and Committed Management Team 2. Positioned in Growth markets 3. Attractive Market Share 4. Excellent Use of Technology 5. Recurring Revenues and Good Margins 6. Low Risk of Technological Change 7. Stable and Predictable Cash Flows 8. Loyal and Diversified Customer Base 9. Attractive Growth and Compelling Economics 10. Strong Products and Defensible Market Positions Both financial and strategic investors want the 10 virtues. In the last year or so, competition for good deals has heated to the point that financial investors look like strategic investors and visa versa. Sellers should look to both groups of investors to obtain a transaction at a satisfactory price and on workable terms. Sellers would do well to hear both sides of the story.

Q5. Give a note on enforcement of intellectual property rights. Answer: Intellectual property rights are of limited value unless they are effectively enforced. Without enforcement, there are no real deterrents for infringers or remedies for those whose rights are infringed. The legal authorities do have some role in enforcing intellectual property rights, but this is often limited, and for infringement of rights such as patents, plant breeders rights and trade secrets, you would normally have to take action yourself to take the infringing party to court. The same practical commercial considerations that apply to obtaining and managing IP rights also apply to enforcement in some cases, the possibility of taking court action could act to encourage the infringing party to take out a license to use your technology. This would save you the expense and the uncertainty of a protracted court case, and could provide you with a good financial return. The procedures for enforcement of IP rights differ widely between countries, because they have much more to do with the general legal system than other aspects of IP rights, such as examination and grant of rights by a patent office. The TRIPS Agreement has established some general principles for IP enforcement which are reflected in the laws of many countries, so this discussion will focus on the TRIPS provisions to give an overall picture of how enforcement operates. One basic distinction in enforcement lies between more those IP infringements which tend to be infringed widely, potentially by many different people and on a large commercial scale, and general IP rights. In the first category are pirated copyright works and counterfeit trade mark goods. TRIPS, for instance, specifies that the government or legal authorities need to have a more active role in dealing with these infringements than, say, for patents and plant breeders rights. So the state often has an active role in tracking down and prosecuting those who infringe copyright and trademark rights on a commercial scale, whereas for patents it is normally up to the patent holder or licensee to take an infringer to court. Enforcement Measures Required by TRIPS The TRIPS Agreement differs from earlier international intellectual property treaties in several ways; this includes having specific provisions for effective enforcement of IP rights in national laws. The main enforcement provisions in TRIPS include:

The general obligations under the TRIPS Agreement, which relate to the provision of fair enforcement procedures

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Civil remedies, including injunctions, damages and provisional measures. Criminal procedures, which are compulsory for intentional trade mark and copyright piracy on a commercial scale and optional for other kinds of intellectual property, such as patents.

Special border enforcement measures to stop counterfeit trade mark and pirated copyright material coming into a country, border enforcement measures are optional for other kinds of intellectual property, such as patents.

General Enforcement Obligations under Trips The TRIPS Agreement provides for a range of general obligations in relation to the enforcement of intellectual property rights. The purpose of these obligations is to ensure that the enforcement measures are effective, and that certain basic principles of due process are met, so that enforcement is fair and balanced, and does not impede legitimate trade. Remedies must be timely and deter further infringements TRIPS requires that enforcement procedures permit effective action against any infringement of intellectual property rights, and that the remedies available are expeditious in order to prevent infringements. A legal system that enables timely initiation and execution of legal processes is particularly important for effective enforcement of intellectual property rights because the information that intellectual property protects is often easy to copy and spread quickly. The remedies available must also be severe enough to deter further infringements. These procedures must be applied in a way that avoids the creation of barriers to legitimate trade and to provide for safeguards against their abuse. Enforcement procedures must be fair. TRIPS provides that enforcement procedures must be fair and equitable, and may not be unnecessarily complicated or costly, or entail unreasonable time-limits or delays. Decisions in enforcement cases must be based on the merits of a case. Decisions should preferably be in writing and reasoned, and be made available to the parties without undue delay. Decisions on

the merits of a case must be based only on evidence in respect of which the parties were offered the opportunity to be heard. Parties to a proceeding must have an avenue of appeal, unless the case was criminal in nature and the accused was acquitted. TRIPS does not require a special judicial system for the enforcement of intellectual property rights distinct from the normal court system. Finally, TRIPS creates no obligations with respect to the distribution of resources as between enforcement of intellectual property rights and the enforcement of law in general. Example enforcing a patented invention for making house paint. For example, imagine that you own a patent for house paint that dries very quickly. It took you 8 years to develop the process and cost you thousands of dollars to patent your invention in Australia, the US and Indonesia. Just as you started to distribute the paint yourself in Australia you found out that your paint is being sold cheaply to the painting trade in Sydney by a company trading as Cheap Paints. You also suspect that Cheap Paints are exporting tins of infringing paint overseas. Obviously you need to take legal action against Cheap Paints to enforce your rights, otherwise, there would be no market left for you to get any financial return on your invention. The kinds of remedies you could take against Cheap Paints are set out in this unit.

Q6.

Give a note on complex systems behavior and creativity? A Complex System is a system that has more than one possible future. In other

Answer:

words, it is free enough to take more than a single pre-determined path into the future, and therefore cannot be purely mechanical. Clearly, we are all complex systems by this definition, and so are the organizations, communities, economic sectors, regional economies, ecologies and global systems to which we belong and interact with. Indeed, mechanical systems really only exist as abstractions in our minds, and the systems we inhabit and try to manage are not mechanical. Yet all our science and our way of thinking about problems is based on the assumption that a company or organization comprises a set of functional components with connecting flows of goods and information. In this view, better management is often seen as simply running the machine faster or more efficiently.

But that was when life was simple and the product or service to be produced and delivered only needed to be made at a competitive cost with adequate quality. Today, we must constantly create new products and services, with additional and novel attributes, and this creative, adaptive capacity will be more important to our survival than our level of efficiency, particularly if, as Complex Systems thinking suggests, efficiency reduces creativity. Traditionally, decision making and strategy have been based on a rational set of assumptions such as:

We know our options. We know and can evaluate the (single) outcome of implementing each of them. We can ignore effects that we do not know. The environment in the future after the decision is known. There was a situation before our decision, and that there will be a situation after our decision, and that we can therefore examine the differences between them. Such reflections are typical of a cost/benefit analysis, for example, by which the outcomes of different possible decisions are compared. Yet, in a world of rapid change and uncertainty, the assumptions relied upon by this kind of reasonable behaviour are simply not true. In reality, we do not necessarily know all our options, the path the system may take, the possible dimensions that might be affected by resulting changes, or how circumstances may have changed in the mean time. In short, our view of our organisation as a machine, sitting in a fixed or at any rate predictable environment, is totally inadequate. We must instead turn to new ideas we must harness the ideas arising from Complex Systems. Complex Systems Behavior

In studying Complex Systems, initially in physics and chemistry, it became clear that the key properties of open systems, where flows of matter, energy and information can occur across their boundaries, were that they could undergo spontaneous transformations of structure and functionality. Instead of a fixed mechanical system, this showed how systems came into being, and evolved over time, changing structurally, gaining, and sometimes shedding, complexity and qualities.

The study of Complex Systems therefore revealed a co-evolutionary process of a system and its environment in which successive change and adaptation each involved two separate steps: Discovering what to do (exploration and evaluation). Doing what has been decided (implementation). And these two steps are radically different in nature.

In Complex Systems, the first step is taken by the non-average underlying elements within the system, while the second the emergence of a transformed, functioning system concerns new, effective average behavior of the elements. The successful co-evolution of a system with its environment therefore occurs through the dynamic interplay of the average and non-average behaviors within it. Successive instabilities occur each time that existing structure and organization fail to withstand the impact of some new circumstance or behavior. When this occurs, the system re-structures and becomes a different system, subjected in its turn to the disturbances from its own non-average individuals and situations. It is this dialogue between successive systems and their own inner richness that provides the capacity for continuous adaptation and change. Creativity y y y y y Everyone in business is creative. Some of most creative people are in manufacturing. They actually CREATE products that change the world. Some of the least creative people perhaps are in advertising. They spend most of their creative energy telling manufacturers that theyarent creative! Salespeople Are Creative They are natural born story-tellers. Accountants are creative.

y y

Best Creative Exercise Ever y y y y y y y y y y Write down your ideas. You have a ton every day. But most of the time, you cant remember them by the days end. Dont let spelling and grammar issues or relentless self-editing stop you. Get your ideas on paper (Let someone else edit it.) Go retro: Carry a notebook, pen, and calendar into your meetings. Look up at people. Story First, Technology Last. Dont invest in a presentation class called How to Use PowerPoint. until youve taken a class called How to Tell Stories and Connect with Your Audience.

A Simple Creative Exercise y Simplify everything. Your life, your home, your office, your desk, your processes, vision, policy, procedures.

Fixing Problems is Creative. y Your job is to fix problems, not to complain.

Brainstorming y Dont tell people that their ideas are bad, especially if you dont have a better one.

How to Lose an Audience y y y y Show your audience slides with columns of numbers. Refuse to tell them a story about the meaning of the numbers. Do not read your speech or presentation. Instead, read your audience.

How about a Show? Try giving a performance instead of merely giving a presentation. Avoid Meetings.

Do not attend more than two meetings a day, or else you will never get any real creative work done. Get Fresh Ideas. Leave the office building at least once a day. Another Lame Excuse Designers should put more of their passion into designing great work, instead of endless (boring) discussions about the superiority of the Macintosh over the PC! The Lame Excuse I cant [write/design/create] because I dont have the latest [software/hardware/ upgrade]. You cant let a machine take credit for your creativity. And you cant blame a machine for your creative failures, either. Dont Blame the Tool! y y y y y The more you become a master of your particular creative form. .the fewer tools you will use. Master carpenters use fewer tools than novices. So do cooks. Use what works.

Creativity: Use it or Lose it. y y y y Create something every day. Creativity takes place every day, not once in a while. Its not rare. Its just been mystified Own your creativity.