Master of Business Administration – MBA Semester 4

MB0036 – Strategic Management & Business Policy

Assignment Set- 1
QUS.1. Explain the different circumstances under which a suitable growth
strategy should be selected by any company to improve its performance (i.e.,
intensive, integrative or diversification growth). You may select an example of
your choice to substantiate your views .

ANS.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.

Study the following example to understand what Product Development Strategy is.

b) Integrative Growth:

It refers to the process of identifying opportunities to develop or acquire businesses

that are related to the company’s current businesses. More often, the business
processes have to be integrated for linear growth in the profits. The corporate plan
may be designed to undertake backward, forward or horizontal integration within the
industry.

If a company operating in music systems takes over the manufacturing business of its
plastic material supplier, it would be able to gain more control over the market or
generate more profit. (Backward Integration)

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

intermediaries such as wholesalers or retailers, it is forward integration. If the
company legally takes over or acquires the business of any of its leading competitors,
it is called horizontal integration(however, if this competitor is weak, it might be
counter-productive due to dilution of brand image).

c) Diversification Growth:

It refers to the process of identifying opportunities to develop or acquire businesses

that are not related to the company’s current businesses. This makes sense when such
opportunities outside the present businesses are identified with attractive returns and
that industry has business strengths to be successful. In most cases, this is planned
with new products that have technological or marketing synergies with existing
businesses to cater to a different group of customers (Concentric Diversification).

A printing press might shift over to offset printing with computerised content
generation to appeal to higher-end customers and also add new application areas
( Horizontal Diversification ) – or even sell stationery.
ANS.2. What are the components of a good Business Plan and briefly explain the

importance of each.

ANS.2.
A well-written business plan will serve as a guide through the start-up phase of the
business. It establishes benchmarks to measure the performance of your business
venture in comparison with expectations and industry standards.

The first step in planning a new business venture is to establish goals that you seek to
achieve with the business.

If one fails to establish clear goals early in the process, the organization may spend
substantial time and resources pursuing potential business ventures that may be
financially viable but do not serve the mission of the organization in other important
ways.

It is also important to establish a timeline for completing the plan.

A good business plan should contain the following sections:

- Executive summary

- Company and product description

- Market description

- Operations

- Management and ownership

- Financial information and timeline

- Risks and their mitigation

A good business plan will help attract necessary financing by demonstrating the
feasibility of your venture and the level of thought and professionalism you bring to
the task.

The first step in planning a new business venture is to establish goals that you seek to
achieve with the business. You can establish these goals in a number of ways, but an
inclusive and ordered process like an organizational strategic planning session or a
comprehensive neighborhood planning process may be best. The board of directors of
your organization should review and approve the goals, because these goals will
influence the direction of the organization and require the allocation of valuable staff
and financial resources. Your goals will serve as a filter to screen a wide range of
possible business opportunities. If you fail to establish clear goals early in the process,
your organization may spend substantial time and resources pursuing potential
business ventures that may be financially viable but do not serve the mission of your
organization in other important ways. A liquor store on the corner may be a clear
money-maker; however, it may not be the retail to assist your community desires.

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

different stages in the process of starting this new business.

ANS.3. The following are examples of goals you may seek to achieve through the
creation of a new business venture:

Revenue Generation – Your organization may hope to create a business that will
generate sufficient net income or profit to finance other programs, activities or
services provided by your organization.

Employment Creation – A new business venture may create job opportunities for
community residents or the constituency served by your organization.

Neighborhood Development Strategy – A new business venture might serve as an

anchor to a deteriorating neighborhood commercial area, attract additional
businesses to the area and fill a gap in existing retail services. You may need to find a
use for a vacant commercial property that blights a strategic area of your
neighborhood. Or your business might focus on the rehabilitation of dilapidated single
family homes in the community.

Whenever possible, goals should have quantifiable outcomes such as “to generate a
minimum of $50,000 of net income or profit within three years”; “to employ at least
15 community residents within two years in new permanent jobs at a livable wage”;
“to occupy and support a minimum of 10,000 square feet of neighborhood commercial
space”; or “to rehabilitate 50 single-family houses over three years.” Clearly defined
and quantifiable goals provide objective measurements to screen potential business
opportunities. They also establish clear criteria to evaluate the success of the
business venture.

Establish Goals

Once you have identified goals for a new business venture, the next step in the
business planning process is to identify and select the right business. Many
organizations may find themselves starting at this point in the process. Business
opportunities may have been dropped at your doorstep. Perhaps an entrepreneurial
member of the board of directors or a community resident has approached your
organization with an idea for a new business, or a neighborhood business has closed or
moved out of the area, taking jobs and leaving a vacant facility behind. Even if this is
the case, we recommend that you take a step back and set goals. Failing to do so
could result in a waste of valuable time and resources pursuing an idea that may seem
feasible, but fails to accomplish important goals or to meet the mission of your
organization.

Depending on the goals you have set, you might take several approaches to identify
potential business opportunities.

Local Market Study: Whether your goal is to revitalize or fill space in a neighborhood
commercial district or to rehabilitate vacant housing stock, you should conduct a local
market study. A good market study will measure the level of existing goods and
services provided in the area, and assess the capacity of the area to support existing
and additional commercial or home-ownership activity. This assessment is based on
the shopping and traffic patterns of the area and the demographic and socio-
economic characteristics of the community. A bad or insufficient market study could
encourage your organization to pursue a business destined to fail, with potentially
disastrous results for the organization as a whole. Through a market study you will be
able to identify gaps in existing products and services and unsatisfied demand for
additional or expanded products and services. If your organization does not have staff
capacity to conduct a market study, you might hire a consultant or solicit the
assistance of business administration students from a local college or university.
Conducting a solid and thorough market study up front will provide essential
information for your final business plan.

Analysis of Local and Regional Industry Trends: Another method of

investigating potential business opportunities is to research local and regional
business and industry trends. You may be able to identify which business or industrial
sectors are growing or declining in your city, metropolitan area or region. The
regional or metropolitan area planning agency for your area is a good source of data
on industry trends.

Internal Capacity: The board, staff or membership of your organization may possess
knowledge and skills in a particular business sector or industry. Your organization may
wish to draw upon this internal expertise in selecting potential business opportunities.

Internal Purchasing Needs / Collaborative Procurement: Perhaps, your organization

frequently purchases a particular service or product. If nearby affiliate organizations
also use this service or product, this may present a business opportunity. Examples of
such products or servicesinclude printing or copying services, travel services,
transportation services, property management services, office supplies, catering
services, and other products. You will still need to conduct a complete market study
to determine the demand for this product or service beyond your internal needs or
the needs of your partners or affiliates.
QUS.4. Explain the process of due Diligence and why it is necessary

ANS.4.

The Process of Due Diligence

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

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

First Rule:

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

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

Second Rule:

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

The DD is a process which is more structured than the preparation of a Business Plan.
It is confined both in time and in subjects: Legal, Financial, Technical, Marketing,
Controls.
QUS.5. Is Corporate Social Responsibility necessary and how does it benefit a

company and its shareholders?

ANS.5,
CSR is a concept whereby companies integrate social and environmental concerns in
their business operations and in their interaction with their stakeholders on a
voluntary basis.

The main function of an enterprise is to create value through producing goods and
services that society demands, thereby generating profit for its owners and
shareholders as well as welfare for society, particularly through an ongoing process of
job creation. However, new social and market pressures are gradually leading to a
change in the values and in the horizon of business activity.
There is today a growing perception among enterprises that sustainable business
success and shareholder value cannot be achieved solely through maximising short-
term profits, but instead through market-oriented, yet responsible behaviour.
Companies are aware that they can contribute to sustainable development by
managing their operations in such a way as to enhance economic growth and increase
competitiveness whilst ensuring environmental protection and promoting social
responsibility, including consumer interests.

In this context, an increasing number of firms have embraced a culture of CSR.

Despite the wide spectrum of approaches to CSR, there is large consensus on its main
features:

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

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

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

need to integrate the economic, social and environmental impact in their operations;
· CSR is not an optional "add-on" to business core activities – but about the way in
which businesses are managed.
Socially responsible initiatives by entrepreneurs have a long tradition in Europe. What
distinguishes today’s understanding of CSR from the initiatives of the past is the
attempt to manage it strategically and to develop instruments for this. It means a
business approach, which puts stakeholder’s expectations and the principle of
continuous improvement and innovation at the heart of business strategies. What
constitutes CSR depends on the particular situation of individual enterprises and on
the specific context in which they operate, be it in Europe or elsewhere. In view of
the EU enlargement, it is however important to enhance common understanding both
in Member States and candidate countries.
QUS.6. Distinguish between a Financial Investor and a Strategic Investor
explaining the role they play in a Company.

ANS.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, 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.
 MB0036 – Strategic Management & Business Policy
Assignment Set- 2
QUS.1. What is the purpose of a Business Plan? Explain the features of the

component of the Plan dealing with the Company and its product description.

ANS.1. A good business plan will help attract necessary financing by demonstrating
the feasibility of your venture and the level of thought and professionalism you bring
to the task.

The first step in planning a new business venture is to establish goals that you seek to
achieve with the business. You can establish these goals in a number of ways, but an
inclusive and ordered process like an organizational strategic planning session or a
comprehensive neighborhood planning process may be best. The board of directors of
your organization should review and approve the goals, because these goals will
influence the direction of the organization and require the allocation of valuable staff
and financial resources. Your goals will serve as a filter to screen a wide range of
possible business opportunities. If you fail to establish clear goals early in the process,
your organization may spend substantial time and resources pursuing potential
business ventures that may be financially viable but do not serve the mission of your
organization in other important ways. A liquor store on the corner may be a clear
money-maker; however, it may not be the retail to assist your community desires.

The following are examples of goals you may seek to achieve through the creation of
a new business venture:

Revenue Generation – Your organization may hope to create a business that will
generate sufficient net income or profit to finance other programs, activities or
services provided by your organization.

Employment Creation – A new business venture may create job opportunities for
community residents or the constituency served by your organization.

Neighborhood Development Strategy – A new business venture might serve as an

anchor to a deteriorating neighborhood commercial area, attract additional
businesses to the area and fill a gap in existing retail services. You may need to find a
use for a vacant commercial property that blights a strategic area of your
neighborhood. Or your business might focus on the rehabilitation of dilapidated single
family homes in the community.

Whenever possible, goals should have quantifiable outcomes such as “to generate a
minimum of $50,000 of net income or profit within three years”; “to employ at least
15 community residents within two years in new permanent jobs at a livable wage”;
“to occupy and support a minimum of 10,000 square feet of neighborhood commercial
space”; or “to rehabilitate 50 single-family houses over three years.” Clearly defined
and quantifiable goals provide objective measurements to screen potential business
opportunities. They also establish clear criteria to evaluate the success of the
business venture.

Establish Goals

Once you have identified goals for a new business venture, the next step in the
business planning process is to identify and select the right business. Many
organizations may find themselves starting at this point in the process. Business
opportunities may have been dropped at your doorstep. Perhaps an entrepreneurial
member of the board of directors or a community resident has approached your
organization with an idea for a new business, or a neighborhood business has closed or
moved out of the area, taking jobs and leaving a vacant facility behind. Even if this is
the case, we recommend that you take a step back and set goals. Failing to do so
could result in a waste of valuable time and resources pursuing an idea that may seem
feasible, but fails to accomplish important goals or to meet the mission of your
organization.

Depending on the goals you have set, you might take several approaches to identify
potential business opportunities.

Local Market Study: Whether your goal is to revitalize or fill space in a neighborhood
commercial district or to rehabilitate vacant housing stock, you should conduct a local
market study. A good market study will measure the level of existing goods and
services provided in the area, and assess the capacity of the area to support existing
and additional commercial or home-ownership activity. This assessment is based on
the shopping and traffic patterns of the area and the demographic and socio-
economic characteristics of the community. A bad or insufficient market study could
encourage your organization to pursue a business destined to fail, with potentially
disastrous results for the organization as a whole. Through a market study you will be
able to identify gaps in existing products and services and unsatisfied demand for
additional or expanded products and services. If your organization does not have staff
capacity to conduct a market study, you might hire a consultant or solicit the
assistance of business administration students from a local college or university.
Conducting a solid and thorough market study up front will provide essential
information for your final business plan.

Analysis of Local and Regional Industry Trends: Another method of

investigating potential business opportunities is to research local and regional
business and industry trends. You may be able to identify which business or industrial
sectors are growing or declining in your city, metropolitan area or region. The
regional or metropolitan area planning agency for your area is a good source of data
on industry trends.
Internal Capacity: The board, staff or membership of your organization may possess
knowledge and skills in a particular business sector or industry. Your organization may
wish to draw upon this internal expertise in selecting potential business opportunities.

Internal Purchasing Needs / Collaborative Procurement: Perhaps, your organization

frequently purchases a particular service or product. If nearby affiliate organizations
also use this service or product, this may present a business opportunity. Examples of
such products or servicesinclude printing or copying services, travel services,
transportation services, property management services, office supplies, catering
services, and other products. You will still need to conduct a complete market study
to determine the demand for this product or service beyond your internal needs or
the needs of your partners or affiliates.

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

Business.

ANS.2.

a) sales projections –

Present an estimate of how many people you expect will purchase your product or service.
Your estimate should be based on the size of your market, the characteristics of your
customers and the share of the market you will gain over your competition. Project how many
units you will sell at a specified price over several years. The initial year should be broken
down in monthly or quarterly increments. Account for initial presentation and market
penetration of your product and any seasonal variations in sales, if appropriate.

b) importance of creativity in Business -

. Creativity

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 they…aren’t
creative!
Salespeople Are Creative – They are natural born story-tellers.

Accountants are creative.

A Complex System is a system that has more than one possible future. In other 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.

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

strategy?

ANS.3.
The following items should be taken into account in the crisis communications
strategy:

· Communications should be timely and honest.

· To the extent possible, an audience should hear news from the organization first.

· Communications should provide objective and subjective assessments.

· All employees should be informed at approximately the same time.

· Give bad news all at once – do not sugarcoat it.

· Provide opportunity for audiences to ask questions, if possible.

· Provide regular updates and let audiences know when the next update will be
issued.

· Treat audiences as you would like to be treated.

· Communicate in a manner appropriate to circumstances:

– Face-to-face meetings (individual and group)

– News conferences

– Voice mail/email

– Company Intranet and Internet sites

– Toll-free hotline

– Special newsletter

– Announcements using local/national media.

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

Diligence while seeking investment in for your Company?

ANS.4. The Marketing Plan

Must include the following elements:

· A brief history of the business (to show its track performance and growth)

· Points regarding the political, legal (licences) and competitive environment

· A vision of the business in the future

· Products and services and their uses

· Comparison of the firm’s products and services to those of the competitors

· Warranties, guarantees and after-sales service

· Development of new products or services

· A general overview of the market and market segmentation

· Is the market rising or falling (the trend: past and future)

· What customer needs do the products / services satisfy

· Which markets segments do we concentrate on and why

· What factors are important in the customer’s decision to buy (or not to buy)

· A list of the direct competitors and a short description of each

· The strengths and weaknesses of the competitors relative to the firm

· Missing information regarding the markets, the clients and the competitors

· Planned market research

· A sales forecast by product group

· The pricing strategy (how is pricing decided)

· Promotion of the sales of the products (including a description of the sales force,
sales-related incentives, sales targets, training of the sales personnel, special offers,
dealerships, telemarketing and sales support). Attach a flow chart of the purchasing
process from the moment that the client is approached by the sales force until he
buys the product.

· Marketing and advertising campaigns (including cost estimates) – broken by market

and by media

· Distribution of the products

· A flow chart describing the receipt of orders, invoicing, shipping.

· Customer after-sales service (hotline, support, maintenance, complaints, upgrades,

etc.)

· Customer loyalty (example: churn rate and how is it monitored and controlled).

QUS.5. Distinguish between Joint Ventures and Licensing, explaining the relative

advantages and disadvantages of each.

ANS.5.
A licence is a grant of permission made by the patent owner to another to exercise
any specified rights as agreed. Licensing is a good way for an owner to benefit from
their work as they retain ownership of the patented invention while granting
permission to others to use it and gaining benefits, such as financial royalties, from
that use. However, it normally requires the owner of the invention to invest time and
resources in monitoring the licensed use, and in maintaining and enforcing the
underlying IP right.

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

For instance, licences can be exclusive or non-exclusive. If a patent owner grants

a non-exclusive licence to Company A to make and sell their patented invention in
Malaysia, the patent owner would still be able to also grant Company B another non-
exclusive for the same rights and thesame time period in Malaysia. In contrast, if a
patent owner granted an exclusive licence to Company A to make and sell the
invention in Malaysia, they would not be able to give a licence to

joint venture agreement

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

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

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

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

In working out the right vehicle for your technology, you will normally need specific
legal advice from a commercial lawyer, preferably one with experience in technology
and commercialisation in your jurisdiction. The laws governing partnerships and
companies differ considerably from one country to another, and this discussion is only
intended to give a general flavour of the various options.
A joint venture agreement involves a formal, legally binding commitment between
two or more partners to work together on a shared enterprise. It is normally created
for a specific purpose (for example, to commercialise a specific new technology) and
for a limited duration. For instance, you might sign a partnership agreement with a
manufacturing company to develop and market a product based on your invention.
Before entering into a joint venture agreement, you need to check out possible
commercial partners and make sure that the objectives of your potential commercial
partners are consistent with your objectives. In the joint venture agreement, the
partners typically agree to share the benefits, as well as the risks and liabilities, in a
specified way.