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


Explain how strategies are formulated and implemented?

Answer: The term µstrategy¶ 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.

or the product / service is in the finishing stage of the product life cycle. Each of these alternatives has to be evaluated on its merits. the environment is relatively less volatile. 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. Sometimes. it may not be profitable to continue investment in the same product or SBU. If a firm realises that some of its main product lines have outlived their lives. 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. Strategic Alliances Strategic alliances constitute another viable alternative. or all or most of its products differ in their future potential. These alliances may take any of the following forms: . It is best-suited to multiple SBU firms in times of economic transition and also when changes occur in the product / service life cycle. particularly. a combination of a few or all of these strategies may be necessary. and the product / service has reached the stability or maturity stage of the life cycle.a) Expansion strategy can be adopted in the case of highly competitive and volatile industries. However. d) Combination strategy is not a new strategy as it combines the other strategies. Any change must be contemplated considering what is to be done (Business definition) and the speed (Pace) with which it is to be done. 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. 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. Companies can develop alliances with the members of the strategic group and perform more effectively. Combination strategy is best suited when the firm finds that its product-wise performance is uneven.

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

and so on. if allowed to prevail. However. This idea usually involves the invention of a new product. 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. it needs a flexible and strategic response to be more effective. competitors. you are researching your idea. Q2.Since strategic choice is a managerial ( business ) decision. it is actually a turning point. Idea Researching. Strategic choice and its effectiveness is often restricted by various factors such as the strategies earlier followed. suppliers. the Government and the community. you are attempting to find what the level of interest is in the products (or services) you wish to market. Here in this case supposing we are to start a new venture of manufacturing auto components and also to market them. internal and external alliances. . Nandankumar wants to start a business of his own. In this stage. 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. overall commitment to the chosen strategy is extremely important. or revolves around a better way of making and marketing an existing one. 1.making reality. If you were an employee of this consultancy firm. launching a test. Answer: Every business starts out as an idea. The strategic choice is also affected by relative volatility of the market sector wherein the firm chooses to operate. He is seeking advice from a consultancy firm on how to go about it. Also. you as a business builder must refine this idea into a money. care should be taken that it is not affected by bias. These constraints. After this. We will see here in the following paragraphs different stages of achieving the same goal. Mr. You can accomplish this by a Google search on the Internet. intuition or politics. If the sector is more volatile. or conducting surveys. will limit the choice. More often. and how successful the marketer has been. While many would argue that the idea stage is not a stage at all. The object of your research is to find out who is marketing the same product or service in your area. how would you guide him in preparing a business plan that would suit Nandankumar¶s business?.marketing campaign. 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.

In the business plan you typically include following heads: (a) (b) (c) (d) (e) (f) (g) (h) Executive Summary. Management and Ownership. A solid business plan will clearly explain the business concept. Executive Summary: In this section of your business plan. Equipment and Materials. Business Plan Formulation. According to the Biz Ed website. describe the market for your product or service. Company and Product Description. it is important to consider the legal requirements of selling your product or service. 2. Operations. Tell the audience why the business is a great idea. Risks and Their Mitigation. At this stage. attract investment. examine the legal ramifications of your business. If insurance is a requirement. we are to make a research on all the auto companies which are procuring the spares from the outside vendors. their existence and also how successful they are. and the product or service you plan to offer. You must write a business plan. As Pendrith points out. The executive summary may be the first and only section of your business plan that most of your audience will read. As part of the initial research process. you need to consult with an attorney or business adviser for assistance. or if you wish to lease a building.Here as the main goal is to start a company that manufactures the auto components. such as a small business loan or grant. Also. Market Description. Pendrith advises. and establish operating goals and guidelines. provide a description of your company. prepare to budget for it. the industry you will be competing in. Some readers will . And also the competitors who are all marketing that. Know the tax laws governing your business. this is crucial if you want funding. Financial Information and Start-Up Timeline. 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. be aware of any safety laws governing you as an employer.

such as being ³hand-made by a particular people . 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. if any. provide documentation or references supporting your trend analysis such as articles from business-oriented newspapers and magazines. retail. Include these references in the attachments of your business plan. manufacturing or service) and the legal structure (corporation or partnership). Give the reader a brief overview of the industry. 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. Company and Product Description: In describing your company be sure to include what type of business you are planning (homeownership development. research journals or other publications. Focus on what distinguishes your product or service from the rest of the market. describing historic and current growth trends. 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. it will play in operations. expect to produce higher-quality housing than otherwise exists in the area. wholesale.look at this section to determine whether or not they want to learn more about a business. Also include a description of your non-profit organization. Product or Service: After describing your company and its industry context. describe the products or services you plan to provide. Whenever possible. You should discuss why you are creating this new venture. referencing the goals you set at the beginning of the business planning process. the role it has played in developing this new venture and the on-going role. Other readers will look to the executive summary as a sample of the quality and professionalism of the overall plan. Discuss what will attract consumers to your product or service. Mention any distinctive elements in the manufacture of the product.

In addition to providing a detailed description of your customer base. 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. low end or in the middle of the existing range of prices for a similar product or service. religion and family size. or information . Sources for this information may include recent data from the Bureau of Statistics. Customers: In this section of your business plan. and discuss the rationale behind that price. · Socioeconomic Status ± Measures based on individual or household annual income. race. Depending on your anticipated 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).´ If you are providing a service. Price: Provide a realistic estimate of the price for your product or service. explain the steps you will take to provide a service that is better than your competition. · Geography ± Measures based on location. gender. Place: Describe the location where you will produce or distribute your product or provide your service. surrounding amenities and other characteristics that may enhance your business. such as its accessibility.from a specific area. accessibility to your location via public transportation could affect the marketability of your product or service. Discuss the advantages of the location. you will describe the customer base or market for your product or service. Provide statistical data to describe the size of your target market. 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. state or local census data. Describe where this price positions you in the marketplace: at the high end. 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.

such as membership lists. describe the process of service deliver (such as the initial interview. as this will further validate your market assumptions. Sales Projections: Present an estimate of how many people you expect will purchase your product or service.gathered by your organization. A key component of the operation of your business will be your sales and marketing strategy. you will describe how you plan to operate the business. discuss the equipment and materials necessary. Competition: Discuss how people identified in your target market currently meet their need for your product or service. Include any relevant information regarding the growth potential for your target market if your business is expected to rely on growth. and final presentation. You will present information on how you plan to create your product or provide your service. If you plan to provide a service. Account for initial presentation and market penetration of your product and any seasonal variations in sales. for a housing business. the characteristics of your customers and the share of the market you will gain over your competition. Your estimate should be based on the size of your market. Market Description: In this section. research and design. Be sure to list the sources for your data. if appropriate. 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. Project how many units you will sell at a specified price over several years. from the raw material or initial stage to the finished product. neighborhood surveys and group or individual interviews. 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. and define the site or facility requirements. Production Description: Describe the steps for creating your product. 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. if any. assessment. packaged and ready for distribution and sale. What other businesses exist in your area that are similar to your proposed venture? For example. if you are offering consulting services). The initial year should be broken down in monthly or quarterly increments. for instance. describe the staff required to operate and manage the business. Provide a description of any sub-contractors or external services you plan to use .

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

Be sure to provide a complete job description of any vacancies in your management team. Describe the responsibilities. Be sure to highlight your management team¶s experience in managing the production. describe the senior managers responsible for overseeing the start-up and operation of your business.Operations: In this section of your business plan. . 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. Success is often due to one¶s contacts. Some items you might include in your start-up budget research and product design and development expenses. the background required and the steps you plan to take to fill that key position. the skills. At a minimum. 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 company¶s equity is available. their background and their responsibilities in the business. Start-up Budget: Describe the initial expenses you will incur to get your business up and running. so fully describe your business relationships with attorneys. facility purchase or rental. marketing and administration of similar businesses or within the selected industry and attach the resumes of each member to the plan. 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. accountants and advertising or public relations agencies. and any industry-specific services such as suppliers and distributors. legal incorporation and licensing expenses. you may want to seek the advice of a certified public accountant (CPA).

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

Set realistic deadlines according to your capacity to complete these tasks. · Fixed Asset Financing ± Longer-term financing for property. Include deadlines for task completion. describe the type of financing you are seeking: · Seed Capital ± Short-term financing to cover start-up costs. 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. building improvements. Be prepared to negotiate. describe what they will receive in return for their capital. as will the availability of equity dollars. · Working Capital ± Short-term financing to cover operating expenses and to bridge gaps in cash flow. And make sure you research the investment market carefully. 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 . several socially minded investment pools exist and more are in development.If you are seeking investors. Check with other businesses (although not direct competitors) to see what return on investment their investors demanded. The level of risk in your business and industry will help to determine the actual market rate. such as venture capitalists. The asset being purchased is usually pledged as security for the loan. 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. equipment or vehicles. Equity investors are looking for rates of return higher than rates offered by banks or other business lenders. or lenders.

thinking about different challenges will strengthen your plan. Utilizing print. of course. Consider your budget and your target audience.· Opening Although it is impossible to know exactly what will go wrong in starting and running your business. your name and the name of your business. Here in this case more than TV. you should focus its presentation. discuss its likelihood and describe possible solutions or actions you might undertake to mitigate the problem. thinking about different challenges will strengthen your plan. Make sure that they are of the most professional quality. and a persuasive plan will help you to convince the reader to invest in your business. the Internet. important elements of the plan. Advertising Campaign. Review the Executive Summary section of this manual for more tips on this critical introduction to your business. 3. Decide how you will market your product. Risks and their Mitigation: Although it is impossible to know exactly what will go wrong in starting and running your business. the newspaper. additional regulations or population changes For each potential problem. 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. After you have completed all of the elements of your business plan. As TV is useful . the size of your advertising budget. considering. a better advertising media will be road side sign boards placed close to the auto companies for getting the deals to manufacture their spares. A well-organized plan will assist you in communicating the most important elements of your business plan to the reader. Make up business cards with your logo on it. radio or TV is also wise.

Purpose of Business Continuity Plan Recent world events have challenged us to prepare to manage previously unthinkable situations that may threaten an organization¶s future. including readiness. Lower level people at the shop floor people. Be specific about the requisite skills and experience you are seeking. They need to have real time experience in the shop floor activities. Advertise for employees. Hence sign boards are the feasible solution and also pamphlets circulated across the pioneers. Part One provides stepby-step Business Continuity Plan preparation and activation guidance. 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. The employees apart. making hiring decisions based on the standards you have set. 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 organization¶s continued viability. 4. response. 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. Part Two details those tasks required for the Business Continuity Plan to be maintained as a living document. This new challenge goes beyond the mere . Preparing for Launch. (a) (b) What is the purpose of business continuity plan? Give a short note on mitigation strategies. This apart personal marketing is much more suggested. and recovery/ resumption. This also requires adequate planning. Think about what you look for in an employee. prevention. changing and growing with the organization and remaining relevant and executable. Then begin requesting resumes and setting up interviews.only to reach the common man and he is not our target customer. The advisory portion of the guideline is divided into two parts: (1) the planning process and (2) successful implementation and maintenance. Q3.

non-governmental ± its leadership has a duty to stakeholders to plan for its survival. Testing and Training. during. Business Impact Analysis. Organizations now must engage in a comprehensive process best described generically as Business Continuity. after a major crisis event. faith-based. or intentionally caused disaster or emergency scenarios. the world¶s largest organization of security professionals. Today¶s threats require the creation of an on-going. how the decisions are implemented. Evaluation and Maintenance. CEOs and shareholders must be prepared to budget for and secure the necessary resources to make this happen. This will ensure that all concerned understand who makes decisions. accidentally. and what the roles and responsibilities of participants are. Recovery/Resumption. It is no longer enough to draft a response plan that anticipates naturally. it is good business for a company to secure its assets. Critical Functions. ASIS. Readiness. Key Words Business Continuity Plan.emergency response plan or disaster management activities that we previously employed. Mitigation Strategies. to be used when the primary location is not accessible. . The vast majority of the national critical infrastructure is owned and operated by private sector organizations. Disaster. It is necessary that an appropriate administrative structure be put in place to effectively deal with crisis management. Resource Management. In the simplest of terms. Terminology Alternate Worksite ± A work location. Mutual Aid Agreement. and it is largely for these organizations that this guideline is intended. 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. Risk Assessment. interactive process that serves to assure the continuation of an organization¶s core activities before. other than the primary location. Crisis Management Team. Prevention. and most importantly. Response. Damage Assessment. Regardless of the organization ± for profit. recognizes these facts and believes the BC Guideline offers the reader a user-friendly method to enhance infrastructure protection. not for profit.

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. Contact List ± A list of team members and key players in a crisis. or local natural or human-caused event or business interruption that runs the risk of (1) escalating in intensity.Business Continuity ± A comprehensively managed effort to prioritize key business processes. and coordinating the use of resources and personnel in response to a crisis. Business Impact Analysis (BIA) ± A management level financial analysis that identifies the impacts of losing an organization¶s resources. and ensure the continuity of operations through personnel training. etc. regional. or (7) jeopardizing the organization¶s reputation. The list should include home phone numbers. products. and after an event to resolve the crisis. (2) adversely impacting shareholder value or the organization¶s financial position. Crisis ± Any global. plan testing. minimize loss. during. (6) adversely affecting employee morale. (3) causing harm to people or damage to property or the environment. 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. and otherwise protect the organization. and therefore negatively impacting its future. . cell phone numbers. and maintenance. controlling. Crisis Management ± Intervention and co-ordination by individuals or teams before. (5) interfering with normal operations and wasting significant management time and/or financial resources. and business continuity strategies. Crisis Management Center ± A specific room or facility staffed by personnel charged with commanding. recovery. or officers. pager numbers. identify significant threats to normal operation. (4) falling under close media or government scrutiny. maintain viable recovery strategies and plans.

information technology facilities. or profitability. Disaster Recovery ± Immediate intervention taken by an organization to minimize further losses brought on by a disaster and to begin the process of recovery. if damaged. legal. Critical Records ± Records or documents that. .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. destroyed. or human-caused events. warehousing. and other business critical support functions. would cause considerable inconvenience to the organization and/or would require replacement or recreation at a considerable expense to the organization. multiple injuries. Disaster ± An unanticipated incident or event. or lost. communications/media relations. maintain viable recovery strategies. property. and the status of key facilities and services resulting from a natural or human-caused disaster or emergency. technological accidents. 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. including activities and programs designed to restore critical business functions and return the organization to an acceptable condition. security. causing widespread destruction. loss. or distress to an organization that may result in significant property damage. including natural catastrophes. Emergency ± An unforeseen incident or event that happens unexpectedly and demands immediate action and intervention to minimize potential losses to people. 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. damage to public and private property. manufacturing. and provide overall coordination of the organization¶s timely and effective response to a crisis. Damage Assessment ± The process used to appraise or determine the number of injuries and human loss. or deaths.

or limit the impact of a crisis occurring. Recovery/resumption steps should include damage and impact assessments. The tasks included in prevention should include compliance with corporate policy. and behavior and programs to support avoidance and deterrence and detection. agreeing on strategies to meet the needs identified in the risk assessment and business impact analysis. 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. preclude. and supervised dispersal of people from dangerous or potentially dangerous areas. changes to external environments. Recovery/Resumption ± Plans and processes to bring an organization out of a crisis that resulted in an interruption. 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. personnel changes. 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. test/exercise results. prioritization of critical processes to be resumed. mitigation strategies. phased. technological changes. and the return to normal operations or to reconstitute operations to a new condition. . and forming Crisis Management and any other appropriate response teams. Readiness ± The first step of a business continuity plan that addresses assigning accountability for the plan.Evacuation ± Organized. conducting a risk assessment and a business impact analysis. etc.

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

Such monitoring can be likened to simple inventory management. facilities. 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 . securing equipment to walls or desks with strapping can mitigate damage from an earthquake. These resources. For example.(b) Mitigation Strategies Devise Mitigation Strategies Cost effective mitigation strategies should be employed to prevent or lessen the impact of potential crises.¶¶ Monitoring Systems and Resources Systems and resources should be monitored continually as part of mitigation strategies. a strong records management and technology disaster recovery program can mitigate the loss of key documents and data. sprinkler systems can lessen the risk of a fire. technology. and equipment should be documented in the plan and become part of µµbusiness as usual. including essential personnel and their roles and responsibilities. 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. Resources Needed for Mitigation The various resources that would contribute to the mitigation process should be identified.

The total purchase price difference is probably not more than 10% on average ± each has a required rate of return target. The traditional strategic investor is a corporation engaged in the same or similar line of business. Competitors are not strategic investors. but the clearest differences are found in their overall approach to acquisitions. By acquiring your company for 5times. The strategic investor wants to ³Buy and Hold´ and the financial investor tends to want to ³Buy Low and Exit High´. From a pricing perspective. The second part to the basic approach has to do with the exit strategy. The strategic investor has a slower growth model (tends to reduce pricing) because their investment horizon is usually many years longer. particularly for more mundane companies. 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. but basic manufacturing. your company¶s earnings are now worth 10 . Distinguish between a Financial Investor and a Strategic Investor. bio-tech and nano-tech businesses may obtain seemingly obscene prices. Q4. they are in a hurry to grow the acquisition to several times its original purchase price. Therefore. Software. Any seller would want to sell his company only to a Strategic Investor. the strategic investor may be worth 10 times earnings.· Maps and floor plans updated/changed due to construction and internal moves · System backups and offsite storage. What one believes is that the strategic investor will pay much more than a financial investor. IT. while the financial investor has traditionally been private equity groups (PEGs) and individuals. investment firms must eventually sell their investment to return capital and profit to their investors. Sad to say. 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. It is most often a much larger company or one which has a large financing capacity. 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. The differences between strategic and financial investors are numerous. wholesale distribution and most service businesses are chained to counting their values in single digit multiples. STRATEGIC Investor For the most part. By their very nature. this is not always true.

A typical investment profile for a PEG looking to acquire a platform or add-on company might look like this ± ‡ A committed. Strategic investors are thought to pay approximately 20% more on average than financial investors. rather than pay a substantial premium. It is a limited life company (usually 10 years) in which insurance companies. ‡ A definable and defensible market niche in a large and growing market. and experienced management team with a proven track record. Additionally. because it owns an operating or ³platform´ company. that the strategic investor might simply enter your market through a de novo operation or acquire your direct competitor. an asset purchase is more likely.times to the buyer± simple math. speaking of earnings. as its goal is more likely growth in market share. but the hoped for synergies belong to the investor and are often not shared with the seller. In our example above. ‡ A well-established brand name. the strategic investor is a corporation in the same/similar line of business. There is another type of strategic buyer these days. PEGs are investment funds run by investment bankers. the strategic investor may not require stable earnings to enter into a transaction. So 6times might be the right number. ‡ A diversified customer base. . entrepreneurial. ‡ Proven demand for differentiated products and/or services. Think again. PEGs today invest in a platform company in a key growing market. and then add-on other companies to accelerate growth and profitability. And. One might think that the strategic investor would pay more than 5times. pension funds and private individuals invest for higher returns. although their appearance is that of a Private Equity Group (PEG). The roll-ups of the mid-late 1990¶s were sponsored by PEGs. the paying capacity of the strategic investor is greater and transactions may be for an all cash consideration. A private equity fund is created by investment bankers to buy and sell privately held companies. a stock transaction vs. A PEG may also be a strategic investor. Nevertheless.

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

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

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

The remedies available must also be severe enough to deter further infringements. so that enforcement is fair and balanced. Enforcement procedures must be fair. such as patents. y Special border enforcement measures to stop counterfeit trade mark and pirated copyright material coming into a country. and that certain basic principles of due process are met. such as patents. which are compulsory for intentional trade mark and copyright piracy on a commercial scale and optional for other kinds of intellectual property. which relate to the provision of fair enforcement procedures y y Civil remedies. Decisions should preferably be in writing and reasoned. and does not impede legitimate trade. damages and provisional measures.y The general obligations under the TRIPS Agreement. Decisions in enforcement cases must be based on the merits of a case. The purpose of these obligations is to ensure that the enforcement measures are effective. and may not be unnecessarily complicated or costly. and be made available to the parties without undue delay. and that the remedies available are expeditious in order to prevent infringements. Criminal procedures. Decisions on . including injunctions. 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. TRIPS provides that enforcement procedures must be fair and equitable. border enforcement measures are optional for other kinds of intellectual property. or entail unreasonable time-limits or delays. Remedies must be timely and deter further infringements TRIPS requires that enforcement procedures permit effective action against any infringement of intellectual property rights. General Enforcement Obligations under Trips The TRIPS Agreement provides for a range of general obligations in relation to the enforcement of intellectual property rights. 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.

Finally. otherwise. In this view.the merits of a case must be based only on evidence in respect of which the parties were offered the opportunity to be heard. economic sectors. regional economies. Indeed. it is µfree¶ enough to take more than a single pre-determined path into the future. Parties to a proceeding must have an avenue of appeal. Example ± enforcing a patented invention for making house paint. Clearly. mechanical systems really only exist as abstractions in our minds. 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. Give a note on complex systems behavior and creativity? A Complex System is a system that has more than one possible future. we are all complex systems by this definition. For example. communities. Q6. You also suspect that Cheap Paints are exporting tins of infringing paint overseas. and therefore cannot be purely µmechanical¶. and the systems we inhabit and try to manage are not mechanical. . 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. TRIPS does not require a special judicial system for the enforcement of intellectual property rights distinct from the normal court system. the US and Indonesia. Obviously you need to take legal action against Cheap Paints to enforce your rights. It took you 8 years to develop the process and cost you thousands of dollars to patent your invention in Australia. 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. The kinds of remedies you could take against Cheap Paints are set out in this unit. better management is often seen as simply running the µmachine¶ faster or more efficiently. ecologies and global systems to which we belong and interact with. imagine that you own a patent for house paint that dries very quickly. there would be no market left for you to get any financial return on your invention. unless the case was criminal in nature and the accused was acquitted. and so are the organizations. In other Answer: words.

changing structurally. and that there will be a situation µafter¶ our decision. Yet. · We know and can evaluate the (single) outcome of implementing each of them. efficiency reduces creativity. adaptive capacity will be more important to our survival than our level of efficiency. complexity and qualities. we must constantly create new products and services. for example. the assumptions relied upon by this kind of µreasonable¶ behaviour are simply not true. sitting in a fixed or at any rate predictable environment. initially in physics and chemistry. particularly if. . this showed how systems came into being. were that they could undergo spontaneous transformations of structure and functionality. the possible dimensions that might be affected by resulting changes. we do not necessarily know all our options. energy and information can occur across their boundaries. and evolved over time. Today. Traditionally. with additional and novel attributes. · We can ignore effects that we do not know. the path the system may take. and this creative. · The environment in the future µafter¶ the decision is known.But that was when life was simple and the µproduct¶ or µservice¶ to be produced and delivered only needed to be made at a competitive cost with adequate quality. decision making and strategy have been based on a rational set of assumptions such as: · We know our options. In reality. In short. our view of our organisation as a machine. it became clear that the key properties of µopen¶ systems. and that we can therefore examine the differences between them. in a world of rapid change and uncertainty. as Complex Systems thinking suggests. by which the outcomes of different possible decisions are compared. and sometimes shedding. Such reflections are typical of a cost/benefit analysis. Instead of a µfixed¶ mechanical system. · There was a situation µbefore¶ our decision. Complex Systems Behavior In studying Complex Systems. or how circumstances may have changed in the mean time. We must instead turn to new ideas ± we must harness the ideas arising from Complex Systems. where flows of matter. gaining. is totally inadequate.

It is this dialogue between successive µsystems¶ and their own inner µrichness¶ that provides the capacity for continuous adaptation and change. subjected in its turn to the disturbances from its own non-average individuals and situations. Successive instabilities occur each time that existing structure and organization fail to withstand the impact of some new circumstance or behavior. Some of the least creative people perhaps are in advertising. the first step is µtaken¶ by the µnon-average¶ underlying elements within the system. They actually CREATE products that change the world. In Complex Systems. y y . 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. functioning system ± concerns new. And these two steps are radically different in nature. Accountants are creative. When this occurs.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). while the second ± the emergence of a transformed. They spend most of their creative energy telling manufacturers that they«aren¶t creative! Salespeople Are Creative ± They are natural born story-tellers. the system re-structures and becomes a different system. · Doing what has been decided (implementation). Some of most creative people are in manufacturing. effective µaverage¶ behavior of the elements. Creativity y y y y y Everyone in business is creative.

How about a Show? Try ³giving a performance´ instead of merely ³giving a presentation. Your life. your desk. Don¶t let spelling and grammar issues or relentless self-editing stop you. policy.Best Creative Exercise Ever y y y y y y y y y y Write down your ideas. procedures. Do not read your speech or presentation. Refuse to tell them a story about the meaning of the numbers.´ Avoid Meetings. Don¶t invest in a presentation class called ³How to Use PowerPoint´«. you can¶t remember them by the day¶s end. A Simple Creative Exercise y Simplify everything. read your audience. Instead. your home.) Go retro: Carry a notebook. not to complain. «until you¶ve taken a class called ³How to Tell Stories and Connect with Your Audience´. Brainstorming y Don¶t tell people that their ideas are bad. But most of the time. pen. Get your ideas on paper (Let someone else edit it. and calendar into your meetings. y Your job is to fix problems. How to Lose an Audience« y y y y Show your audience slides with columns of numbers. Look up at people. especially if you don¶t have a better one. your office. your processes. vision. Fixing Problems is Creative. Story First. You have a ton every day. Technology Last. .

the fewer tools you will use. And you can¶t blame a machine for your creative failures. instead of endless (boring) discussions about the superiority of the Macintosh over the PC! The Lame Excuse « ³I can¶t [write/design/create] because I don¶t have the latest [software/hardware/ upgrade]«. Creativity takes place every day. . It¶s not rare. Don¶t Blame the Tool! y y y y y The more you become a master of your particular creative form«. Use what works.´ You can¶t let a machine take credit for your creativity. So do cooks. y y y y Create something every day. not once in a while. Get Fresh Ideas.Do not attend more than two meetings a day. Another Lame Excuse« Designers should put more of their passion into designing great work. Creativity: Use it or Lose it. It¶s just been mystified ± Own your creativity. either. Leave the office building at least once a day. «. or else you will never get any real creative work done. Master carpenters use fewer tools than novices.

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