You are on page 1of 14

Notes for Exam

SECTION A
QUESTION 1
VISSION & MISSION
Definition
Vision is what entrepreneurs focus on, whereby they know where they want to go. Vision is a concept of what
firms can be, and it helps firms develop over time as the entrepreneur begins to realize what the firm is and
what it can become in the future. Vision is a realistic dream, which should be unique from other firms. It is
not less than 5 years; otherwise, it is called as an objective.
Mission statement defines the fundamental and unique purpose of a business and identifies its products or
services, as well as its customers. The mission of a business is defined by customers satisfaction with its
products and services. Mission is the way to achieve the vision (how to go), which requires resources. It is the
statement which has the value to be provided for the customers. It should not be longer than a paragraph.
Questions that need to be answered while formulating the mission statement are:
-

Who are the customers?

Why do the buy?

What do they buy?

Where are they located?

How can the customers be reached?

What, in the opinion of the customer, is value for money?

Benefits of Vision
1. Vision statements will be important to help communicate the goals of the plan to employees and the
public.
2. Vision statements help to describe the organization's purpose.
3. Vision statements also include aim and the organization values.
4. Vision statements give direction for employee behavior and helps provide inspiration.
5. Strategic plans may require a marketing strategy, which could include the vision statement to also
help inspire consumers to work with the organization

Benefits of Mission
1. Provides unanimity of purpose to the firm and imbue the employees with a sense of belonging and
identity
2. Spell out the context in which the organization operates and provides the employees with a tone that
is to be followed in the organizational climate.
3. Serves as focal point for individuals to identify themselves with the organizational process and give
them sense of direction
4. Translates the objectives of the organization into work structure
5. Specifies the core structure on which the organizational edifice stands
6. Provide a philosophy of existence to the employees, which is very crucial for them to have the
necessary meaning for working on a particular firm.
Examples of Vision Statements
Apple Inc.: We believe that we are on the face of the earth to make great products and thats not changing.
We are constantly focusing on innovating. We believe in deep collaboration and cross-pollination of our
groups, which allow us to innovate in a way that others cannot.
CB Software System Company: we strive to become a global software and internet company. We are
passionate in helping businesses through innovative technologies to reach and maximize their business
dreams.
Toyota: Toyota will lead the way to the future of mobility, enriching lives around the world with the safest
and most responsible ways of moving people. Through our commitment to quality, constant innovation and
respect for the planet, we aim to exceed expectations and be rewarded with a smile.
Goodwill: Every person has the opportunity to achieve his/her fullest potential and participate in and
contribute to all aspects of life. (21)
Smithsonian: Shaping the future by preserving our heritage, discovering new knowledge, and sharing our
resources with the world (17)
WWF: We seek to save a planet, a world of life. Reconciling the needs of human beings and the needs of
others that share the Earth (25)
Save the Children: Our vision is a world in which every child attains the right to survival, protection,
development and participation. (18)
Kiva: We envision a world where all people even in the most remote areas of the globe hold the power
to create opportunity for themselves and others. (26)

Leukemia & Lymphoma Society: Cure leukemia, lymphoma, Hodgkins disease and myeloma, and
improve the quality of life of patients and their families. (18)
Boy Scouts of America: To prepare every eligible youth in America to be
Examples of effective Mission statements:
Apple Inc.: Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork,
and professional software. Apple leads the digital music revolution with its iPods and iTunes online store.
Apple reinvented the mobile phone with its revolutionary iPhone and App-Store, and has recently introduced
its magical iPad which is defining the future of mobile media and computing devices.
CB Software System Company: it is through our passion and commitment to our clients that we develop
software to face real-world challenges. It is our love for and dedication to what we do that enables us to
become a better company for ourselves, for our clients, our community and the world.
Toyota: supplying the range of vehicles, parts, accessories and services to meet the requirements. Ensuring
that products are of outstanding quality, value for money and instill pride of ownership.
Nissan: "Nissan provides unique and innovative automotive products and services that deliver superior,
measurable values to all stakeholders in alliance with Renault."
Erie Insurance: "To provide our policyholders with as near perfect protection, as near perfect service as is
humanly possible and to do so at the lowest possible cost."
Nature Air: "To offer travelers a reliable, innovative and fun airline to travel in Central America."
St. Paul Fire and Marine Insurance Company: "To lead the Canadian specialty commercial insurance
industry through innovation, expertise and by providing products and services to satisfy the needs and
exceed the expectations of our customers and
Target: "Our mission is to make Target the preferred shopping destination for our guests by delivering
outstanding value, continuous innovation and an exceptional guest experience by consistently fulfilling our
Expect More. Pay Less. brand promise

SECTION 2
QUESTION 2
Growths Strategies (Dimensions of Business Growth)
The growth of the venture can be seen from various perspectives, such as:
1. Financial- growth in income, expenditure and profits
2. Strategic- growth in market share and competitive advantages
3. Organizational- growth in organizational form, process and structure
These three dimensions interact with one another and cannot be considered separately in the dynamics of
growth.
Financial Growth

It is concerned with increases in sales, the investment needed to achieve those sales, and the resulting
profits.

It also concerned with increases in what the business owns: its assets.

Growth will also bring some financial problems.

Some growth will create a need for more spending.

Of extra stocks, larger premises, new tools or additional staffs are needed; money has to be found to
pay for them.

May need to take up new loans (in the case of long term asset purchases).

Additional working capital may need to be found for short-term requirements.

Although some businesses have retained profits that can be drawn on, other may have to set up or
extend their overdraft facilities.

Businesses that do not have enough cash flow to service debt and to finance current expenses will
find themselves in trouble.

Strategic Growth

Strategic growth relates to the changes that take place in the way the organization interacts with its
environment.

This is concerned mainly with the way the business develops its capabilities in order to exploit a
presence in the marketplace.

Growth is a sign that business has been effective in competing in the marketplace.

Strategic growth relates to the changes that take place in the way the organization interacts with its
environment.

A differentiation strategy stems mainly from knowledge advantages. These arise from knowing
something about the customer, the market or the product that competitors do not know.

If the business aims not just to survive but to grow on the back of a differentiation strategy, then it
must stay in a process of constant discovery about what it is offering the market and why the market
buys it.

Mainly with the way the business develops its capabilities in order to exploit a presence in the
marketplace.

Growth is a sign that business has been effective in competing in the marketplace.

Organizational Growth

Organizational growth relates to the changes that take place in the organizational structure, process
and culture as it grows and develops.

The structure of the organization and the way that structure develops as the organization finds itself
and a reaction to the opportunities with which it is presented.

One well-explored approach to understanding how an organization defines its structure is provided
by contingency theory.

In essence, contingency theory regards the structure of an organization as dependent on


contingencies or types of factors such as organizational size, operational technology, strategy,
business environment and the role of the entrepreneur.

Intellectual Properties
Definition of Intellectual Properties:

It is any product of the human intellect that the law protects from unauthorized use by others.

To protect the property owner from others that will misuse it such as copying without acknowledge
of the authors.

It can be patent for the worldwide or only for specific countries.

Intellectual properties is very important for IT due to the amount of money that need to produce the
products is high. For example: in order to develop a software, there are so much money required.

Advantages of Protecting Intellectual property rights


1. Protection of IP rights is an incentive to human creativity
2. Promotes respect for individual artists, and enables them to earn livelihoods
3. Prevents infringement and free riding
4. IP serves as an instrument for cultural, social, economic and technological development
5. New creativity helps create sustainable and competitive businesses locally and internationally
6. IP-based industries contribute significantly to national economies
7. IP gaining importance in todays information society
IP Types

Patents

protection for technical inventions

Trademarks

protection of logos and brand names

Copyright

protection of artistic endeavors

Trade Secrets :

protection of advantageous business property

Brief explanation of the following 1. Patents

Patent provides the owner with exclusive right to hold, transfer, and license the production and sale
of the product or process.

There are several things that can get patent protection such as machines, products, plants,
composition of elements (chemical compound) and improvements on already existing items.

The objective of patent is to provide the holder with a temporary monopoly on his or her innovation
and thus to encourage the creation and disclosure of new ideas and innovations in the market place.

Design patents is for 14 years and other cases for 20 years.

Document/Grant issued by the Government for an Invention

Gives Rights to prevent others (e.g. Competitors) from exploiting the Invention

For a Fixed Duration of Time (e.g. 20 years)

In return for the Disclosure of the Invention to the Public (by the Government)

Grants holder protection from others making, using, or selling similar idea.

An exclusive rights granted by a state to an inventor in exchange for disclosure of the invention.

To exclude others from making, using, offering for sale, or selling their invention throughout the
country or importing their invention for a limited time.

A patent is legally enforceable and gives the owner the exclusive right to commercially exploit the
invention for the life of the patent

Provisional (temporary application)

Pending for 1 year, no rights conferred except patent pending status

Non-provisional / utility patent

Valid for 20 years from filing / priority date (extension available for Patent Office delays)

By claiming priority to provisional application, term can be up to 21 years

2. Trademark

It is distinctive name, mark, symbol, or motto identified with a companys product(s) and
registered at the Patent and Trademark office.

The owner has the right to use the mark or trade dress and exclude others from using it. The right
of use can be licensed or sold (assigned) to another.

To be easier for the customers for remembering and promoting the brands or products.

Examples of Trademark

Word Mark (Kleenex)

Trade Dress (distinctive product packaging, pink insulation)

Other indicia of origin (sound, scent, etc.)

Trademark must be distinctive (not generic): arbitrary, fanciful, suggestive, and descript

3. Copyright

Provides exclusive rights to creative individuals for the protection of their literately of artistic
production.

This includes idea, procedure, process, system, and method of operation, concept, principle,
discovery and many others.

It can be for books, periodical, musicals, drama, art, lectures, pictures, computer programs, sounds
recording and so forth.

literary and artistic works; novels, poems, plays, films, musical works, drawings, paintings,
photographs, sculptures, and architectural designs related rights - performing artists, producers of

phonograms, broadcasters of radio and television programs

copyright as a commercial asset to earn income

protection for emerging technologies

management of use of others copyright works

use copyright as security to gain credit and financing

copyright protection for marketing and advertising

sale or licensing of copyright

use of copyright in the public good

copyright for social, cultural and economic development (narrow the content divide)

4. Trade Secret
Certain business process and information that make company unique and has value for the
competitors.
For instances: customer lists, plan, R&D, pricing information, marketing techniques, and production
techniques, and many others.
Trade secret" means information, including a formula, pattern, compilation, program, device,
method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to

the public or to other persons who can obtain economic value from its disclosure or use; and

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

California Uniform Trade Secrets Act. 3426

Examples of Trade Secret

Recipe to Kentucky Fried Chicken

Customer lists, supplier lists, manufacturing techniques, know how, recipes, formulas, processes,
secret algorithms, inventions that you decide not to patent, etc.

Value Chain

Primary Activities
Inbound Logistics- suppliers and material acquisition etc
Operations- operating hours and method of operation adopted and equipment used
Outbound Logistics how distribution carried out including channel of distribution
Marketing & Sales method of sales and promotion etc
Service after sales and service adopted
Secondary activities
Firm Infrastructure structure of business, departments such as accounting and roles of personnel etc
Human Resource Management compensation, specialization, qualification, experiences etc
Technology Development rate of invention, innovation applied
Procurement- method of buying policies
Margin the profits derived
Using SWOT to show how the business can enhance value to customers - to be awarded higher end
of marks - how the segment can be served with etc core competence with improvement on skills and
other developments of the business
Marketing plan to look at how promotions, pricing and strategies are adopted to win customers
Capital Requirements and application of sources of funds record
Operational patterns of how operations of the company are carried to add value
To the form location, structure and branches and management and quality of workers
Strategies for short term and long term showing prospects of the business
Projected cash flow and financial statements depicting long term financial growth etc

Business Life Cycle Stages


1. New venture development
2. Start-up
3. Growth
4. Maturity
5. Decline / Harvesting
1 New venture development

This first stage consists of activities associated with the incubation and initial formation of the
venture.

The entrepreneur has taken some steps towards this goal (developed a prototype, gathered some
information, conducted a first market research, and saved some money)

2. Start-up

This stage encompasses all the foundation work needed to formally launch the business venture.

The entrepreneur puts together various resources: financial, human and information.

Different measures can be taken to protect any intellectual property owned by the firm, such as
registering a patent, a trademark, or a design.

At this stage, the founders of the venture are usually technically or entrepreneurially oriented, and
they generally disdain management activities.

Their physical and mental energies are absorbed in making and selling the new product.

3. Growth

Sustained growth is typically characterized by a strong increase in demand and sales, leading in turn
to a growing number of employees.

This go-go phase is often accelerated by technological breakthrough, aggressive or ingenious


marketing, a hungry market, sluggish competition or some combination of these.

Three basic challenges usually confront rapid-growth firms:


- Instant size: when firm double or triple in size very quickly, this in turn creates problems of
disaffection, inadequate skills and inadequate systems.
- A sense of infallibility: by virtue of their success to date, owner-managers often view their
strategies and behavior as infallible and immune from criticism.
- Internal turmoil: there is a stream of new faces, people who do not know one another and who do
not know the firm. The business founders find themselves burdened with unwanted management
responsibilities.

4. Maturity

During this period, the business is consistently able to meet its customers changing needs; internal
discipline and organizational culture are operating effectively; and production is run with maximum
efficiency.

However, this highly desirable state of affairs can quickly be lost.

The maturity stage is often characterized by increased competition, consumer indifference to the
firms products and services, and a saturation of the market.

This phase is often a swing stage, in that it precedes the period when the firm will either innovate and
move back into the growth mode or alternatively start to decline.

At this point, a crisis of leadership often occurs

The founders often resist stepping aside, even though they are probably temperamentally unsuited to
the job

Those ventures that survive the leadership crisis by installing a capable business manager usually
embark on a period of sustained growth.

5. Decline / Harvesting
Harvesting: the process entrepreneurs and investors use to exit a business and realize their investment.
There are four exit strategies:
1. Sale to financial or a strategic buyer
2. Management buyout
3. Strategic alliance and merger
4. Initial public offer
1. Sale to financial or a strategic buyer

A financial buyer can be a competitor in the industry or a business wishing to achieve vertical
integration and diversification by absorbing another business into its core business.

Financial buyers look mainly to a firms stand-alone cash-generating potential as the source of value.
Strategic buyers, unlike financial buyers, expect the acquired business to fit in with their other
holdings.

Strategic buyers seek to buy a number of businesses and then cobble them together to eliminate

redundant and excess costs and derive economies of scale wherever possible to decrease expenses
and, similarly, increase profitability.
2. Management buyout (MBO)

Management buyout is one in which a founder can realise a gain from the business by selling to
managers or existing partners in the business.

The MBO usually entails high levels of debt and, therefore, the new owner-managers must stay
clearly focused on the operating performance if they are to meet debt payments and use asset
effectively.

Three factors are generally considered essential to conducting a successful MBO:


A. the ability to borrow significant sums against the businesss assets
B. the ability to retain or attract a strong management team
C. the potential for the participants (including managements) investment to increase substantially in
value.
3. Strategic alliance and merger

If the strategic alliance takes place between competitors, it can often lead to a merger of the two
businesses later.

In this case, a new legal entity is formed.

The newly created enterprise will have a higher profile and an increased ability to continue growing.

4. Initial public offering (IPO)

Through the IPO, shares are offered for sale on a public stock exchange.

The merits of going public versus being acquired rest largely on the contention that IPOs provide
higher valuation, and therefore better returns, than can be expected from a straight sale.

However, IPO has some disadvantages:

1. There is the loss of privacy as numerous reports are required by government agencies.

2. Going public establishes the need for the board of directors to approve certain types of decisions,
imposing additional restrictions on management

3. There is significant cost associated with going public- not only is there the cost of the IPO itself,
but there are also ongoing costs associated with the provision of information required by regulators.

Franchising
Definition: semi-independent business owners pay fees and royalties to a parent company in exchange for
the right to sell its products and services under the franchisers trade name and often to use its business
format and system.

Franchise- a license to sell anothers product or to use anothers name in business or both.

Franchisor- Company that sells a franchise.

Franchisee a person who buys a franchise.

Why buy a Franchise?

Franchisees benefit from the franchisers experience.

Franchisees get a proven business system and avoid having to learn by trial-and-error.

Franchisees earn a great deal of satisfaction from their work.

Before buying, ask: What can a franchise do for me that I cannot do for myself?

Benefits of Franchising

Management training and support

Brand name appeal

Standardized quality of goods and services

National advertising program

Financial assistance

Proven products and business formats

Centralized buying power

Site selection and territorial protection

Greater chance for success

Drawbacks of Franchising

Franchise fees and profit sharing

Strict adherence to standardized operations

Restrictions on purchasing

Limited product line

Unsatisfactory training programs

Market saturation

Less freedom

Roles of Franchisor
1. Franchisor gives adequate training and knowledge to perform business independently
2. Economies of scale benefit passed from franchisor to franchisee buying, advertising etc
3. Brand name popular do to business promotion and branches awareness to customers
4. Assistance in recruitment, training of employees undertaken by franchisor.
5. Some infrastructure and assistance to set-up business provided by franchisor
Why large companies can raise capital easily
1. Performance of company open to public and rated by comparison to other firms in the same industry
2. Ability to raise capital for expansion if company performs well
3. Well managed due to tight control by government results in better performance compared to other
business ventures.
4. Larger companies in general results in bigger capital results in economies of scale on many frontiers
such as buying. Gearing, large scale production, advertising economies etc.