MB0036 – Strategic Management & Business Policy

Assignment Set- 1

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.

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

It refers to the process of identifying opportunities to achieve further growth within the
company’s current businesses. To achieve intensive growth, the management should first
evaluate the available opportunities to improve the performance of its existing current
businesses.
It may find three options:
· To penetrate into existing markets
· To develop new markets
· To develop new products

At times, it may be possible to gain more market share with the current products in their
current markets through a market penetration strategy. For instance, SONY introduced
TV sets with Trinitron picture tubes into the market in 1996 priced at a premium of
Rs.10,000 and above over the market through a niche market capture strategy. They
gradually lowered the prices to market levels. However, it also simultaneously launched
higher-end products (high-technology products) to maintain its global image as a
technology leader. By lowering the prices of TVs with Trinitron picture tubes, the
company could successfully penetrate into the markets to add new customers to its
customer base.

Market Development Strategy is to explore the possibility to find or develop new markets
for its current products (from the northern region to the eastern region etc.). Most
multinational companies have been entering Indian markets with this strategy, to develop
markets globally. However, care should be taken to ensure that these new markets are not
low density or saturated markets, which could lead to price pressures. Product
Development Strategy involves consideration of new products of potential interest to its
current markets (e.g. Gramophone Records to Musical Productions to CDs) – as part of a
Diversification strategy.
2. What are the components of a good Business Plan and briefly explain the
importance of each.

The format of a Business Plan is something that has been developed and refined over the
years and is something that should not be changed. Like a good recipe, a business plan
needs to include certain ingredients to make it work.

Executive Summary Section 

Every business plan must begin with an Executive Summary section. A well-written
Executive Summary is critical to the success of the rest of the document. Here is where
you need to capture the attention of your audience so that they will be compelled to read
on. Remember, it's a summary, so each and every word must be carefully selected and
presented. Use the Executive Summary section of your business plan to accurately
describe the nature of your business venture including the need that you plan to fill. Show
the reasons why people need your product or service. Show this by including a brief
analysis of the characteristics of your potential market.

The Business Section 

Be sure to include the legal name, physical address and detailed description of the nature
of your business. It's important to keep the description easy to read using common
terminology. Never assume that those reading your business plan have the same level of
technical knowledge that you do. Describe how you plan to better serve your market than
your competition is currently doing.

Market Analysis Section 

An analysis of the market shows that you have done your homework. This section is
basically a summary of your Marketing Plan. It needs to show the demand for your
product or service, the proposed market, trends within the industry, a description of your
pricing plan and packaging and a description of your company policies.

Financing Section 
The Financing section must show that you are as committed to your business venture as
you expect those reading your business plan to be. Show the amount of personal funds
you are contributing and their source. Also include the amount of capital you need and
your plan to repay this debt. Include all pertinent financial worksheets in this section:
annual income projections, a break-even worksheet, projected cash flow statements and a
balance sheet.

Management Section 
Outline your organizational structure and management team here. Include the legal
structure of your business whether it is a partnership, corporation or limited liability
corporation. Include resumes and biographies of key players on your management team.
Show staffing projection data for the next few years.
3. You wish to start a new venture to manufacture auto components. Explain
different stages in the process of starting this new business.

Every business starts out as an idea. This idea usually involves the invention of a new
product, or revolves around a better way of making and marketing an existing one. While
many would argue that the idea stage is not a stage at all, it is actually a turning point.
After this, you as a business builder must refine this idea into a money-making reality.
Here in this case supposing we are to start a new venture of manufacturing auto
components and also to market them. We will see here in the following paragraphs
different stages of achieving the same goal.

Idea Researching 
In this stage, you are researching your idea. The object of your research is to find out who
is marketing the same product or service in your area, and how successful the marketer
has been. You can accomplish this by a Google search on the Internet, launching a test-
marketing campaign, or conducting surveys. Also, you are attempting to find what the
level of interest is in the products (or services) you wish to market. Here as the main goal
is to start a company that manufactures the auto components, we are to make a research
on all the auto companies which are procuring the spares from the outside vendors. And
also the competitors who are all marketing that, their existence and also how successful
they are.

Business Plan Formulation 

You must write a business plan. As Pendrith points out, this is crucial if you want
funding, such as a small business loan or grant, or if you wish to lease a building. At this
stage, Pendrith advises, you need to consult with an attorney or business adviser for
assistance. In the business plan you typically include following heads - Executive
Summary, Company and Product Description, Market Description, Equipment and
Materials, Operations, Management and Ownership, Financial Information and Start-Up
Timeline, Risks and Their Mitigation.

Financial Planning 
Financial planning involves thinking about the financial costs of starting and maintaining
your business. According to the Biz Ed website, you should consider such issues as the
costs of running the business; the prices you wish to charge your customers; cash flow
control; and how you wish to set up financial reserves in case of an emergency or an
event causing significant loss to the business. This includes the planning of whether to
take any loans or make personal investments in the company.

Advertising Campaign 
Decide how you will market your product. Consider your budget and your target
audience. Make up business cards with your logo on it, your name and the name of your
business. Make sure that they are of the most professional quality. Utilizing print, the
newspaper, the Internet, radio or TV is also wise, considering, of course, the size of your
advertising budget. Here in this case more than TV, a better advertising media will be
road side sign boards placed close to the auto companies for getting the deals to
manufacture their spares. As TV is useful only to reach the common man and he is not
our target customer. Hence sign boards is the feasible solution and also pamphlets
circulated across the pioneers. This apart personal marketing is much more suggested.

Preparing for Launch 

Advertise for employees. This also requires adequate planning. Think about what you
look for in an employee. Be specific about the requisite skills and experience you are
seeking. Then begin requesting resumes and setting up interviews, making hiring
decisions based on the standards you have set. In this case we will be looking for a few
candidates in managerial position who must be good in managing things apart from
minimal technical knowledge. Lower level people at the shopfloor people. They need to
have real time experience in the shop floor activities. The employees apart, one needs to
plan on the plant and machinery as well. Thus these are all the stages that I would
consider performing if incase I plan to start a manufacturing unit producing automobile
components.

4. Explain the process of due Diligence and why it is necessary.

Of course, your commercial partner will need some reassurance about the quality of the
offer you are making to them. If you are involved in licensing technology or seeking
commercial support for your research you are likely to hear of ‘due diligence.’ When a
future partner is considering whether or not to license technology, to buy a share of patent
rights, or to support your research, they will need to satisfy themselves that it is a viable
proposition. The process of assessing the viability, risk, potential liabilities and
commercial prospects of a project is known as ‘due diligence.’ Indeed, if a potential
partner seems not to be interested in this kind of issues, it may actually raise questions
about their commitment to the project or the credibility of their business plan, particularly
if the relationship assumes some degree of risk and investment on their part.
Generally, due diligence will involve assessing the overall commercial operations, cash
flow, assets and liabilities of a business that is being purchased or otherwise financially
supported. You would think twice about purchasing a business if you found that it was
burdened with debts, or was about to be involved in difficult litigation, or if there were
doubts about whether it really owned its assets. The same applies to a potential
investment involving intellectual property. For instance, a potential commercial partner
would not want to invest in patented technology only to find out that patent renewal fees
have not been paid and the patent has lapsed, or to find out that the patent was being
opposed by another company, or to find that there is prior art available that calls into
question its validity. It may transpire that a student, a contractor or a visiting researcher
could actually be legally entitled to some or all of the patent rights. Even a serious level
of uncertainty or doubt could be enough to deter a potential partner, especially if they
have run into this kind of difficulty before.

Due diligence may also involve searching for information about the full range of IP rights
that might impact on the relevant technology – for instance, to check whether you have
later filed patent applications on improvements to the original patented technology, that
may limit the value of their investment in the original technology. Other intellectual
property rights – such as related trade mark or design registrations, or key trade secrets or
copyright material (such as manuals or software) – may also need to be identified or
located, as these may also affect the commercial partner’s interests in the technology. For
example, they may be unwilling to take out a licence for your patent without getting
access to the software you have developed for a related process. They may want the right
to use your trade mark in association with the patented technology.

So in a due diligence process, your commercial partner may undertake a range of checks
and need various forms of information. These may include:
• Checks on external records, such as patent registers and patent databases,
including foreign patents;
• Searches of patent databases for conflicting technology;
• Independent advice from patent attorneys on issues such as patent ownership,
patent validity and scope of patent claims;
• Checks on employment contracts, confidentiality arrangements, and contracts
with other parties that may interfere with the exercise of IP rights;
• Details of the patent prosecution such as examiners’ reports and other opinions;
• Details of any legal challenges to the patent, and the way the proceedings were
resolved;
• Checks on laboratory notebooks in the event that the validity of US patents is of
concern to the commercial partner (this also provides reassurance as to claims of
ownership of the patent);
• Surveys of the activity of competitors and owners of competing technology, and
possibilities of conflict; and
• Analysis of freedom to operate issues.

5. Is Corporate Social Responsibility necessary and how does it benefit a company

and its shareholders?

Corporate social responsibility (CSR), also known as corporate responsibility, corporate

citizenship, responsible business, sustainable responsible business (SRB), or corporate
social performance, is a form of corporate self-regulation integrated into a business
model. Ideally, CSR policy would function as a built-in, self-regulating mechanism
whereby business would monitor and ensure its support to law, ethical standards, and
international norms. Consequently, business would embrace responsibility for the impact
of its activities on the environment, consumers, employees, communities, stakeholders
and all other members of the public sphere. Furthermore, CSR-focused businesses would
proactively promote the public interest by encouraging community growth and
development, and voluntarily eliminating practices that harm the public sphere,
regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into
corporate decision-making, and the honoring of a triple bottom line: people, planet,
profit.
The definition of CSR used within an organization can vary from the strict "stakeholder
impacts" definition used by many CSR advocates and will often include charitable efforts
and volunteering.The business case for CSR within a company will likely rest on one or
more of these arguments:

Human resources 
A CSR program can be an aid to recruitment and retention, particularly within the
competitive graduate student market. Potential recruits often ask about a firm's CSR
policy during an interview, and having a comprehensive policy can give an advantage.
CSR can also help improve the perception of a company among its staff, particularly
when staff can become involved through payroll giving, fundraising activities or
community volunteering. See also Corporate Social Entrepreneurship, whereby CSR can
also be driven by employees' personal values, in addition to the more obvious economic
and governmental drivers.
Risk management 
Managing risk is a central part of many corporate strategies. Reputations that take
decades to build up can be ruined in hours through incidents such as corruption scandals
or environmental accidents. These can also draw unwanted attention from regulators,
courts, governments and media. Building a genuine culture of 'doing the right thing'
within a corporation can offset these risks.
Brand differentiation 
In crowded marketplaces, companies strive for a unique selling proposition that can
separate them from the competition in the minds of consumers. CSR can play a role in
building customer loyalty based on distinctive ethical values. Several major brands, such
as The Co-operative Group, The Body Shop and American Apparel are built on ethical
values. Business service organizations can benefit too from building a reputation for
integrity and best practice.
License to operate 
Corporations are keen to avoid interference in their business through taxation or
regulations. By taking substantive voluntary steps, they can persuade governments and
the wider public that they are taking issues such as health and safety, diversity, or the
environment seriously as good corporate citizens with respect to labour standards and
impacts on the environment
Stakeholder priorities 
Increasingly, corporations are motivated to become more socially responsible because
their most important stakeholders expect them to understand and address the social and
community issues that are relevant to them. Understanding what causes are important to
employees is usually the first priority because of the many interrelated business benefits
that can be derived from increased employee engagement (i.e. more loyalty, improved
recruitment, increased retention, higher productivity, and so on). Key external
stakeholders include customers, consumers, investors (particularly institutional
investors), communities in the areas where the corporation operates its facilities,
regulators, academics, and the media.
6. Distinguish between a Financial Investor and a Strategic Investor explaining the
role they play in a Company.

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.

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 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.
 Assignment Set-2
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.

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.

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.

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. 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.

2. Write short notes on: 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.

Your business plan is not just a funding tool, but also a blueprint for how your business
should operate. The following are steps for developing sales projections.

Estimate  For each product or service, estimate the number of people who are likely to
buy and when they will buy it. You can get this information from asking your likely
customers about their possible use of your business, or you can base your estimates on
your knowledge of the market.

Use a Calendar  Estimate your sales and number of customers served during one
week. Using the totals for a week, make projections for each month. For the first few
months, keep in mind that business will start off slowly before people become more
aware of your business. Use will most likely increase as people learn about your products
and services. Seasonal variations may affect your business as well. You will use these
numbers to project your equipment, supply and staffing needs, as well as income.

The Business Priorities are based upon six top-level objectives; these are:
• To make Business data available both to decision-makers and as much as possible
available in the public domain;
• To ensure all holders of Business information are able to participate.
• To ensure that the data available through the NETWORK are of known quality;
• To ensure that the NETWORK Gateway gives access to data on Location and species
used to inform decisions affecting Business at local, regional, national and international
levels;
• To promote knowledge, use and awareness of the NETWORK;
• To enhance the skills base and expertise needed to support and develop the
NETWORK.

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

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.

Preplanning for communications is critical. Drafts of message templates, scripts, and

statements can be crafted in advance for threats identified in the Risk Assessment.
Procedures to ensure that communications can be distributed at short notice should also
be established, particularly when using resources such as Intranet and Internet sites and
toll-free hotlines.

Official Spokesperson: The organization should designate a single primary

spokesperson, with back-ups identified, who will manage/disseminate crisis
communications to the media and others. This individual should be trained in media
relations prior to a crisis. All information should be funneled through a single source to
assure that the messages being delivered are consistent.

It should be stressed that personnel should be informed quickly regarding where to refer
calls from the media and that only authorized company spokespeople are authorized to
speak to the media. In some situations, an appropriately trained site spokesperson may
also be necessary.

4. What elements should be included in a Marketing Plan under Due Diligence while
seeking investment in for your Company?

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.
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).
Legal Details
· Full name of the firm
· Ownership of the firm
· Court registration documents
· Copies of all protocols of the Board of Directors and the General Assembly of
Shareholders
· Signatory rights backed by the appropriate decisions
· The charter (statute) of the firm and other incorporation documents
· Copies of licences granted to the firm
· A legal opinion regarding the above licences
· A list of lawsuit that were filed against the firm and that the firm filed against third
parties (litigation) plus a list of disputes which are likely to reach the courts
· Legal opinions regarding the possible outcomes of all the lawsuits and disputes
including their potential influence on the firm

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

advantages and disadvantages of each.

One basic choice is whether you should actively exploit your IP rights yourself, or to
keep your IP rights and license them to others to use, or sell or assign the rights to
another person. You can, in principle, make different choices in different countries for
exploiting IP rights for the same underlying invention. If you are based in Malaysia, you
could in theory decide to exploit your patent yourself in the East Asian region, grant a
licence a Canadian company to use the invention in North America, and sell or assign the
rights in Europe to a Danish company – whether or not this is the best approach in
practice is a different matter, of course.

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 the same 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 anyone else in Malaysia while the licence with
Company A remained in force.

Licenses are normally confined to a particular geographical area – typically, the

jurisdiction in which particular IP rights have effect. You can grant different exclusive
licences for different territories at the same time. For example, a patent owner can grant
an exclusive licence to make and sell their patented invention in Malaysia for the term of
the patent, and grant a separate exclusive licence to manufacture and sell their patented
invention in India for the term of the patent.

Separate licenses can be granted for different ways of using the same technology. For
example, if an inventor creates a new form of pharmaceutical delivery, she could grant an
exclusive license to one company to use the technology for an arthritis drug, a separate
exclusive license to another company to use it for relief of cold symptoms, and a further
exclusive license to a third company to use it for veterinary pharmaceuticals.

A license is merely the grant of permission to undertake some of the actions covered by
intellectual property rights, and the patent holder retains ownership and control of the
basic patent.

6. You wish to commercialize your invention. What factors would you weigh in
choosing an appropriate course?

The difference between licensing and selling your invention is comparable to leasing vs.
selling house. When you sell your house, you transfer your title, making someone else in
charge of and liable for the house from that point on. When you sell your invention, the
scenario is the same, except that the process is called “assigning” rather than selling.
You, the inventor would be the “assignor” and the person receiving the title or ownership
of the patent would be the “assignee.” Instead of selling, though, you may choose to rent
out your house. In this case, you retain the title to the house and give someone permission
to use it for a limited period of time. In consideration for this, they pay you on a monthly,
yearly or other basis. The terms of this lease are entirely up to you and the person leasing
your house. It is up to you to negotiate within the boundaries of the law.

When you license an invention, it’s nearly the same as leasing. You’re offering a
manufacturer, for example, the right to manufacture and sell your invention for a period
of time, and in consideration for this they pay you on a quarterly basis. In this case you
are the “licensor” and the company is the “licensee.” It is up to the parties to negotiate
the terms of the license within the boundaries of antitrust laws and other regulations that
would affect licenses and similar business arrangements.

You will generally have a better chance of licensing your invention instead of assigning
(selling) your rights for two reasons:

First, it is initially hard to ascertain what the eventual value of an invention will be. This
will almost invariably result in a win/lose situation. If the value is estimated high, the
inventor wins and the company loses. On the other hand, if the estimates are low, the
inventor loses out.

Second, companies don’t like to pay cash up front unless they absolutely have to.
Generally, when a company makes a commitment to manufacture and promote an
invention, they are already anticipating a substantial financial commitment for tooling,
manufacturing setup, engineering expenses, advance purchases of raw materials,
marketing, and promotional expenses. A company that is savvy with licensing
negotiations will state that the more money they pay the inventor up front, the fewer
resources they will have available to put into the promotion. This is a hard point to argue
against, particularly if you’re interested in the long-range commercial success of your
invention.

At this point, Inventors have often already incurred substantial initial expenses for
patenting, prototyping and research, and need to be reimbursed as soon as possible.
Therefore, the inventor can argue that the potential licensees should at least reimburse
them for these out-of-pocket expenses. After all, these are expenses the company would
have normally paid if they had developed such a product on their own. At that point, the
company may very well come back to the table and agree to reimburse you for such
initial expenses. However, they may want to make it an advance against future royalties.
Bear in mind that all negotiations are unique and this is just an example.