Professional Documents
Culture Documents
Question1. 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
a) Intensive Growth:
It refers to the process of identifying opportunities to achieve further growth within the
company’s current businesses. To achieve intensive growth, the management should first
evaluate the available opportunities to improve the performance of its existing current
businesses.
It may find three options:
· To penetrate into existing markets
· To develop new markets
· To develop new products
At times, it may be possible to gain more market share with the current products in their
current markets through a market penetration strategy. For instance, SONY introduced TV sets
with Trinitron picture tubes into the market in 1996 priced at a premium of Rs.10,000 and above
over the market through a niche market capture strategy. They gradually lowered the prices to
market levels. However, it also simultaneously launched higher-end products (high-technology
products) to maintain its global image as a technology leader. By lowering the prices of TVs
with Trinitron picture tubes, the company could successfully penetrate into the markets to add
new customers to its customer base.
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.
Study the following example to understand what Product Development Strategy is.
MICROSOFT’s New Strategy
It is called PC-plus. It has three elements:
a) Providing computer power to the most commonly used devices such as cell phone, personal
computer, toaster oven, dishwasher, refrigerator, washing machines and so on.
b) Developing software to allow these devices to communicate.
c) Investing heavily to help build wireless and high-speed internet access throughout the world
to link it all together.
Microsoft envisions a home where everyday appliances and electronics are smart. According to
Bill Gates, ‘In the near future, PC-based networks will help us control many of our domestic
matters with devices that cost no more than $ 100 each ‘.
It is also said at Microsoft that VCRs can be programmed via e-mail, laundry washers can be
designed to send an instant message to the home computer when the load is done and
refrigerators can be made to send an e-mail when there’s no more milk. Microsoft plans to give
these appliances ‘brains‘ and provide them the means to talk to each other through their
Windows CE Operating System.
b) Integrative Growth:
It refers to the process of identifying opportunities to develop or acquire businesses that
are related to the company’s current businesses. More often, the business processes have to be
integrated for linear growth in the profits. The corporate plan may be designed to undertake
backward, forward or horizontal integration within the industry.
If a company operating in music systems takes over the manufacturing business of its plastic
material supplier, it would be able to gain more control over the market or generate more profit.
(Backward Integration)
Alternatively, if this company acquires some of its most profitably operating
intermediaries such as wholesalers or retailers, it is forward integration. If the company legally
takes over or acquires the business of any of its leading competitors, it is called horizontal
integration (however, if this competitor is weak, it might be counter-productive due to dilution of
brand image).
c) Diversification Growth:
It refers to the process of identifying opportunities to develop or acquire businesses that
are not related to the company’s current businesses. This makes sense when such opportunities
outside the present businesses are identified with attractive returns and that industry has business
strengths to be successful. In most cases, this is planned with new products that have
technological or marketing synergies with existing businesses to cater to a different group of
customers (Concentric Diversification).
A printing press might shift over to offset printing with computerized content generation
to appeal to higher-end customers and also add new application areas (Horizontal
Diversification) – or even sell stationery.
Alternatively, the company might choose new businesses that have nothing to do with the
current technology, products or markets (Conglomerate Diversification).
The classic examples for this would be engineering and textile firms setting up software
development centers or Call Centers with new service clients.
Situation Analysis
Sales Improvement Strategies:
a) A supplier of computer stationery invests in a computer stationery manufacturing unit.
b) A vendor supplying engine boxes to Maruti decides to supply the same with modifications to
Hyundai.
c) A company dealing in computer floppies plans to set up a Software Technology Park.
Question2. 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.
When you create a business plan, don't attempt to recreate its format. Those reviewing this type
of document have expectations you must meet. If they do not see those crucial decision-making
components, they'll see no reason to proceed with their review of your business plan, no matter
how great your business idea.
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.
Describe the organization of your business including your management team. Also,
briefly describe your sales and marketing plan or approach. Finally include the numbers that
those reviewing your business plan want to see - the amount of capital you seek, the carefully
calculated sales projections and your plan to repay the loan. If you've captured your audience so
far they'll read on. Otherwise, they'll close the document and add your business plan to the heap
of other rejected ideas.
Devote the balance of your business plan to providing details of the items outlined in the
Executive Summary.
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. By now you're probably thinking that you don't need
Business Plan just yet. Well you do, and there is business plan building software that can help
you through this immense project. These software packages are easy to use and affordable. Use
one today and produce a professional-quality Business Plan - including all critical components -
tomorrow!
Question3. 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, as business
adviser Mike Pendrith points out. After this, you as a business builder must refine this idea into a
money-making reality. Here in this case supposing we are to start a new venture of
manufacturing auto components and also to market them. We will see here in the following
paragraphs different stages of achieving the same goal.
1. Idea Researching
In this stage, you are researching your idea. The object of your research is to find
out who is marketing the same product or service in your area, and how successful the
marketer has been. You can accomplish this by a Google search on the Internet,
launching a test-marketing campaign, or conducting surveys. Also, you are attempting to
find what the level of interest is in the products (or services) you wish to market.
Here as the main goal is to start a company that manufactures the auto
components, we are to make a research on all the auto companies which are procuring the
spares from the outside vendors. And also the competitors who are all marketing that,
their existence and also how successful they are.
As part of the initial research process, it is important to consider the legal
requirements of selling your product or service. According to the Biz Ed website,
examine the legal ramifications of your business. Know the tax laws governing your
business. If insurance is a requirement, prepare to budget for it. Also, be aware of any
safety laws governing you as an employer. Hence we are also to make a research on the
feasible area where we can start our organization and licenses that we need to take
keeping in mind the environmental factors as well.
2. Business Plan Formulation
You must write a business plan. As Pendrith points out, this is crucial if you want
funding, such as a small business loan or grant, or if you wish to lease a building. At this
stage, Pendrith advises, you need to consult with an attorney or business adviser for
assistance.
In the business plan you typically include following heads:
i) Executive Summary
ii) Company and Product Description
iii) Market Description
iv) Equipment and Materials
v) Operations
vi) Management and Ownership
vii) Financial Information and Start-Up Timeline
viii) Risks and Their Mitigation
3. 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.
4. 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 a sign board is the feasible solution and also pamphlets
circulated across the pioneers. This apart personal marketing is much more suggested.
5. 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.
Due diligence
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 license 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.
In preparing to license your technology, you should consider in advance these kind of due
diligence issues. If you can anticipate and provide comprehensive answers to these questions,
you will be able more effectively to reassure your commercial partner, and you will be in a
stronger negotiating position in negotiating license terms. It should also speed up the licensing
negotiations, and ultimately the commercialization of your intellectual property.
Question5. Is Corporate Social Responsibility necessary and how does it benefit a company
and its shareholders?
In the not so distant past, there was little difference between financial and strategic
investors. Investors of all colors sought to safeguard their investment by taking over as many
management functions as they could. Additionally, investments were small and shareholders
few. A firm resembled a household and the number of people involved – in ownership and in
management – was correspondingly limited. People invested in industries they were acquainted
with first hand.
As markets grew, the scales of industrial production (and of service provision) expanded.
A single investor (or a small group of investors) could no longer accommodate the needs even of
a single firm. As knowledge increased and specialization ensued – it was no longer feasible or
possible to micro-manage a firm one invested in. Actually, separate businesses of money making
and business management emerged. An investor was expected to excel in obtaining high yields
on his capital – not in industrial management or in marketing. A manager was expected to
manage, not to be capable of personally tackling the various and varying tasks of the business
that he managed.
Thus, two classes of investors emerged. One type supplied firms with capital. The other
type supplied them with know-how, technology, management skills, marketing techniques,
intellectual property, clientele and a vision, a sense of direction.
In many cases, the strategic investor also provided the necessary funding. But, more and more, a
separation was maintained. Venture capital and risk capital funds, for instance, are purely
financial investors. So are, to a growing extent, investment banks and other financial institutions.
The financial investor represents the past. Its money is the result of past - right and wrong -
decisions. Its orientation is short term: an "exit strategy" is sought as soon as feasible. For "exit
strategy" read quick profits. The financial investor is always on the lookout, searching for willing
buyers for his stake. The stock exchange is a popular exit strategy. The financial investor has
little interest in the company's management. Optimally, his money buys for him not only a good
product and a good market, but also a good management. But his interpretation of the rolls and
functions of "good management" are very different to that offered by the strategic investor. The
financial investor is satisfied with a management team which maximizes value. The price of his
shares is the most important indication of success. This is "bottom line" short termism which also
characterizes operators in the capital markets. Invested in so many ventures and companies, the
financial investor has no interest, nor the resources to get seriously involved in any one of them.
Micro-management is left to others - but, in many cases, so is macro-management. The financial
investor participates in quarterly or annual general shareholders meetings. This is the extent of its
involvement.
The strategic investor, on the other hand, represents the real long term accumulator of
value. Paradoxically, it is the strategic investor that has the greater influence on the value of the
company's shares. The quality of management, the rate of the introduction of new products, the
success or failure of marketing strategies, the level of customer satisfaction, the education of the
workforce - all depend on the strategic investor. That there is a strong relationship between the
quality and decisions of the strategic investor and the share price is small wonder. The strategic
investor represents a discounted future in the same manner that shares do. Indeed, gradually, the
balance between financial investors and strategic investors is shifting in favour of the latter.
People understand that money is abundant and what is in short supply is good management.
Given the ability to create a brand, to generate profits, to issue new products and to acquire new
clients - money is abundant.
Question1. 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. A liquor store on the corner may be a clear money-maker;
however, it may not be the retail to assist your community desires.
The following are examples of goals you may seek to achieve through the creation of a new
business venture:
Revenue Generation – Your organization may hope to create a business that will generate
sufficient net income or profit to finance other programs, activities or services provided by your
organization.
Employment Creation – A new business venture may create job opportunities for community
residents or the constituency served by your organization.
Neighborhood Development Strategy – A new business venture might serve as an anchor to a
deteriorating neighborhood commercial area, attract additional businesses to the area and fill a
gap in existing retail services. You may need to find a use for a vacant commercial property that
blights a strategic area of your neighborhood. Or your business might focus on the rehabilitation
of dilapidated single family homes in the community.
Whenever possible, goals should have quantifiable outcomes such as “to generate a minimum of
$50,000 of net income or profit within three years”; “to employ at least 15 community residents
within two years in new permanent jobs at a livable wage”; “to occupy and support a minimum
of 10,000 square feet of neighborhood commercial space”; or “to rehabilitate 50 single-family
houses over three years.” Clearly defined and quantifiable goals provide objective measurements
to screen potential business opportunities. They also establish clear criteria to evaluate the
success of the business venture.
Establish Goals
Once you have identified goals for a new business venture, the next step in the business planning
process is to identify and select the right business. Many organizations may find themselves
starting at this point in the process. Business opportunities may have been dropped at your
doorstep. Perhaps an entrepreneurial member of the board of directors or a community resident
has approached your organization with an idea for a new business, or a neighborhood business
has closed or moved out of the area, taking jobs and leaving a vacant facility behind. Even if this
is the case, we recommend that you take a step back and set goals. Failing to do so could result in
a waste of valuable time and resources pursuing an idea that may seem feasible, but fails to
accomplish important goals or to meet the mission of your organization.
Depending on the goals you have set, you might take several approaches to identify potential
business opportunities.
Local Market Study: Whether your goal is to revitalize or fill space in a neighborhood
commercial district or to rehabilitate vacant housing stock, you should conduct a local market
study. A good market study will measure the level of existing goods and services provided in the
area, and assess the capacity of the area to support existing and additional commercial or home-
ownership activity. This assessment is based on the shopping and traffic patterns of the area and
the demographic and socio-economic characteristics of the community. A bad or insufficient
market study could encourage your organization to pursue a business destined to fail, with
potentially disastrous results for the organization as a whole. Through a market study you will be
able to identify gaps in existing products and services and unsatisfied demand for additional or
expanded products and services. If your organization does not have staff capacity to conduct a
market study, you might hire a consultant or solicit the assistance of business administration
students from a local college or university. Conducting a solid and thorough market study up
front will provide essential information for your final business plan.
Analysis of Local and Regional Industry Trends: Another method of investigating potential
business opportunities is to research local and regional business and industry trends. You may be
able to identify which business or industrial sectors are growing or declining in your city,
metropolitan area or region. The regional or metropolitan area planning agency for your area is a
good source of data on industry trends.
Internal Capacity: The board, staff or membership of your organization may possess
knowledge and skills in a particular business sector or industry. Your organization may wish to
draw upon this internal expertise in selecting potential business opportunities.
Internal Purchasing needs / Collaborative Procurement: Perhaps, your organization
frequently purchases a particular service or product. If nearby affiliate organizations also use this
service or product, this may present a business opportunity. Examples of such products or
services include printing or copying services, travel services, transportation services, property
management services, office supplies, catering services, and other products. You will still need
to conduct a complete market study to determine the demand for this product or service beyond
your internal needs or the needs of your partners or affiliates.
Identify Business Opportunities
Buying an Existing Business: Rather than starting a new business, you may wish to consider
purchasing an existing business. Perhaps a local retail or small light manufacturing business that
has been an anchor to the local retail area or a much-needed source of jobs in the neighborhood
is for sale. Its closure would mean the loss of jobs and services for your neighborhood. Your
organization might consider purchasing and taking over the enterprise instead of starting a new
business. If you decide to pursue this option, you still need to go through the steps of creating a
business plan. However, before moving ahead, these are just a few important areas to research in
assessing the business you plan to purchase:
Be sure to conduct a thorough review of the financial statements for the past three to five
years to determine the current fiscal status and recent financial trends, the validity of the
accounts receivable and the status of the accounts payable. Are all the required licenses and
permits in place and can they be transferred to a new owner?
Also look at the quality of key employees who, because of their expertise, may need to remain
with the business.
You will also need to assess the customer or client base and determine whether its members will
remain loyal to the business after it changes hands. Another area to evaluate is the perception or
image of the business. Inspect the facilities and talk to suppliers, customers and other businesses
in the area to learn more about the reputation of the business.
At this early stage of your planning process, be sure to consult an attorney experienced in
corporation law. As a non-profit corporation, engaging in income-generating activities not
related to your mission may affect your tax-exempt status. You may also wish to protect your
organization from any liability issues connected with the proposed business activity. After you
have decided on a particular business activity, have a qualified attorney advise you on the proper
corporate structure for your new venture. In addition to qualified legal counsel, seek the expertise
of an experienced professional in that particular industry. He or she will bring valuable
knowledge and insights regarding the industry that will prove extremely useful during the
business planning process.
Advisory
You have decided on a business opportunity that meets the goals of your organization. Now
you are ready to test the feasibility of the venture and to present your business concept to the
world. A solid business plan will clearly explain the business concept, describe the market for
your product or service, attract investment, and establish operating goals and guidelines.
The first step in writing your business plan is to identify your target audience. Will this be an
internal plan the board will use to assess the feasibility and appropriateness of the business? Or
will this plan be distributed to a larger external audience such as funding sources, commercial
lenders or the community to gain financial backing and political support for the proposed
venture? The content and emphasis of the plan will shift according to the audience.
You will also need to decide who will conduct the necessary research and write the plan. The
following table lists the advantages and disadvantages of several options for getting the work
done. You might consider a combination of the options.
Creativity
Everyone in business is creative.
Some of most creative people are in manufacturing. They actually CREATE products that
change the world.
Some of the least creative people perhaps are in advertising. They spend most of their creative
energy telling manufacturers that they…aren’t creative!
Salespeople Are Creative – They are natural born story-tellers.
Accountants are creative.
Best Creative Exercise Ever
Write down your ideas.
You have a ton every day.
But most of the time, you can’t remember them by the day’s end.
Don’t let spelling and grammar issues or relentless self-editing stop you.
Get your ideas on paper (Let someone else edit it.)
Go retro: Carry a notebook, pen, and calendar into your meetings.
Look up at people.
Story First, Technology Last.
Don’t invest in a presentation class called “How to Use PowerPoint”….…until you’ve taken a
class called “How to Tell Stories and Connect with Your Audience”.
2 A Simple Creative Exercise…
Simplify everything. Your life, your home, your office, your desk, your processes, vision, policy,
procedure and everything.
Fixing Problems is Creative.
Your job is to fix problems, not to complain.
Brainstorming
Don’t tell people that their ideas are bad, especially if you don’t have a better one.
It’s only your life’s work.
Never say, “It’s not my job to be creative.”
How to Lose an Audience…
· Show your audience slides with columns of numbers.
· Refuse to tell them a story about the meaning of the numbers.
· Do not read your speech or presentation.
· Instead, read your audience.
How about a Show?
Try “giving a performance” instead of merely “giving a presentation.”
Everyone in Sales Knows…
· Tell stories.
· Don’t just provide data.
Avoid Meetings.
Do not attend more than two meetings a day, or else you will never get any real creative work
done.
Get Fresh Ideas.
Leave the office building at least once a day.
Another Lame Excuse…
Designers should put more of their passion into designing great work, instead of endless
(boring) discussions about the superiority of the Macintosh over the PC!
The Lame Excuse …
“I can’t [write/design/create] because I don’t have the latest [software/hardware/ upgrade]….”
You can’t let a machine take credit for your creativity.
And you can’t blame a machine for your creative failures, either.
Don’t Blame the Tool!
The more you become a master of your particular creative form….
….the fewer tools you will use.
Master carpenters use fewer tools than novices.
So do cooks.
Use what works.
Creativity: Use it or lose it.
Create something every day.
Creativity takes place every day, not once in a while.
It’s not rare.
It’s just been mystified – Own your creativity.
Facts and observations
Giga-investments made in the paper and pulp industry, in the heavy metal industry and in other
base industries, today face scenarios of slow growth (2-3 % p.a.) in their key markets and a
growing over-capacity in Europe.
The energy sector faces growing competition with lower prices and cyclic variations of demand.
Productivity improvements in these industries have slowed down to 1-2 % p.a .
Global financial markets make sure that capital cannot be used non-productively, as its owners
are offered other opportunities and the capital will move (often quite fast) to capture these
opportunities.
The capital markets have learned “the American way”, i.e. there is a shareholder dominance
among the actors, which has brought (often quite short-term) shareholder return to the forefront
as a key indicator of success, profitability and productivity.
There are lessons learned from the Japanese industry, which point to the importance of
immaterial investments. These lessons show that investments in buildings, production technology
and supporting technology will be enhanced with immaterial investments, and that these are even
more important for re-investments and for gradually growing maintenance investments.
The core products and services produced by giga-investments are enhanced with life-time
service, with gradually more advanced maintenance and financial add-on services.
New technology and enhanced technological innovations will change the life cycle of a giga-
investment.
Technology providers are involved throughout the life cycle of a giga-investment.
Giga-investments are large enough to have an impact on the market for which they are
positioned:
A 3, 00,000 ton paper mill will change the relative competitive positions; smaller units are no
longer cost effective.
A new technology will redefine the CSF:s for the market.
Customer needs are adjusting to the new possibilities of the giga-investment.
The proposition that we can describe future cash flows as stochastic processes is no longer valid;
neither can the impact be expected to be covered through the stock market.
Types of options
· Option to Defer
· Time-to-Build Option
· Option to Expand
· Growth Options
· Option to Contract
· Option to Shut Down/Produce
· Option to Abandon
· Option to Alter Input/output Mix
Table of Equivalences:
INVESTMENT OPPORTUNITY VARIABLE CALL OPTION
Present value of a project’s operatingS Stock price.
cash flows.
Investment costs X Exercise price
Length of time the decision may bet Time to expiry.
deferred.
Time value of money. rf Risk-free interest rate
Risk of the project. σ Standard deviation of
returns on stock
Fuzzy numbers (fuzzy sets) are a way to express the cash flow estimates in a more realistic way.
This means that a solution to both problems (accuracy and flexibility) is a real option model
using fuzzy sets.
Self Assessment Questions I
State whether the following statements are true or false:
1. The people involved in manufacturing actually create products that change the world.
2. In the rapidly changing world of global markets, e-commerce, evolving tele-communications
and internet, the secrets of Complex System evolution offer us a basis on which to reflect on the
management of our businesses.
3. Complex Systems thinking informs us how to achieve a high rate of delivery of new products
and services and rapid adaptation to changing conditions.
4. The creativity and imagination of a business will come from the dynamic interaction of
diverse individuals.
5. Efficiency of execution must precede imagination and creativity.
Question3. 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.
Question4. What elements should be included in a Marketing Plan under Due Diligence
while seeking investment in for your Company?
Question5. Distinguish between Joint Ventures and Licensing, explaining the relative
advantages and disadvantages of each.
6. You wish to commercialize your invention. What factors would you weigh in choosing an
appropriate course?