Strategic Management & Bussiness Policy MU0036 Set-1

8/8/2019 Strategic Management & Bussiness Policy MU0036 Set-1

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Master of Business Administration MBA Semester 4MB0036 Strategic Management & Business Policy

Assignment Set- 1

Question1: Explain the different circumstances under which a suitable growthstrategy should be selected by any company to improve its performance (i.e.,intensive, integrative or diversification growth). You may select an example of yourchoice to substantiate your views (10 marks).

Answer 1:Strategies to Improve Sales

There are three alternatives to improve the sales performance of a business unit, to fill the gapbetween actual sales and targeted sales:a) Intensive growthb) Integrative growthc) Diversification growtha) Intensive Growth:It refers to the process of identifying opportunities to achieve further growth within thecompanys current businesses. To achieve intensive growth, the management should firstevaluate the available opportunities to improve the performance of its existing currentbusinesses.It may find three options: To penetrate into existing markets To develop new markets To develop new productsAt times, it may be possible to gain more market share with the current products in their currentmarkets 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 overthe market through a niche market capture strategy.They gradually lowered the prices tomarket levels. However, it also simultaneously launched higher-end products (high-technologyproducts) 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 newcustomers to its customer base.Market Development Strategyis to explore the possibility to find or develop new markets for itscurrent products (from the northern region to the eastern region etc.). Most multinationalcompanies 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 orsaturated markets, which could lead to price pressures.Product Development Strategyinvolves consideration of new products of potential interest to itscurrent markets (e.g. Gramophone Records to Musical Productions to CDs) as part of aDiversification strategy.

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

MICROSOFTs New StrategyIt is called PC-plus. It has three elements:a) Providing computer power to the most commonly used devices such as cell phone, personalcomputer, 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 tolink it all together.Microsoft envisions a home where everyday appliances and electronics are smart. According to


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Bill Gates, In the near future, PC-based networks will help us control many of our domesticmatters 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 bedesigned to send an instant message to the home computer when the load is done andrefrigerators can be made to send an e-mail when theres no more milk. Microsoft plans to givethese appliances brainsand provide them the means to talk to each other through theirWindows CE Operating System.b) Integrative Growth:It refers to the process of identifying opportunities to develop or acquire businesses that arerelated to the companys current businesses. More often, the business processes have to beintegrated for linear growth in the profits. The corporate plan may be designed to undertakebackward, forward or horizontal integration within the industry.If a company operating in music systems takes over the manufacturing business of its plasticmaterial 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 suchas wholesalers or retailers, it is forward integration. If the company legally takes over or acquiresthe business of any of its leading competitors, it is called horizontal integration (however, if thiscompetitor 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 notrelated to the companys current businesses. This makes sense when such opportunities outsidethe present businesses are identified with attractive returns and that industry has businessstrengths to be successful. In most cases, this is planned with new products that havetechnological or marketing synergies with existing businesses to cater to a different group ofcustomers (Concentric Diversification).A printing press might shift over to offset printing with computerized content generation toappeal 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 thecurrent technology, products or markets (Conglomerate Diversification).

The classic examples for this would be engineering and textile firms setting up softwaredevelopment centers or Call Centers with new service clients.Situation AnalysisSales 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 toHyundai.c) A company dealing in computer floppies plans to set up a Software Technology Park.

Question 2: What are the components of a good Business Plan and briefly explain theimportance of each. (10 marks).

Answer 2:

The format of a Business Plan is something that has been developed and refined over the yearsand is something that should not be changed. Like a good recipe, a business plan needs toinclude certain ingredients to make it work.When you create a business plan, don't attempt to recreate its format. Those reviewing this typeof document have expectations you must meet. If they do not see those crucial decision-makingcomponents, they'll see no reason to precede with their review of your business plan, no matterhow great your business idea.Executive Summary SectionEvery business plan must begin with an Executive Summary section. A well-written ExecutiveSummary is critical to the success of the rest of the document. Here is where you need tocapture the attention of your audience so that they will be compelled to read on. Remember, it'sa summary, so each and every word must be carefully selected and presented.


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Use the Executive Summary section of your business plan to accurately describe the nature ofyour business venture including the need that you plan to fill. Show the reasons why people needyour product or service. Show this by including a brief analysis of the characteristics of yourpotential market.Describe the organization of your business including your management team. Also, brieflydescribe your sales and marketing plan or approach. Finally include the numbers that thosereviewing your business plan want to see - the amount of capital you seek, the carefullycalculated 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 andadd 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 theExecutive Summary.The Business SectionBe sure to include the legal name, physical address and detailed description of the nature ofyour 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 knowledgethat you do. Describe how you plan to better serve your market than your competition iscurrently doing.Market Analysis SectionAn analysis of the market shows that you have done your homework. This section is basically asummary of your Marketing Plan. It needs to show the demand for your product or service, theproposed market, trends within the industry, a description of your pricing plan and packagingand a description of your company policies.Financing Section

The Financing section must show that you are as committed to your business venture as youexpect those reading your business plan to be. Show the amount of personal funds you arecontributing and their source. Also include the amount of capital you need and your plan torepay this debt. Include all pertinent financial worksheets in this section: annual incomeprojections, a break-even worksheet, projected cash flow statements and a balance sheet.Management SectionOutline your organizational structure and management team here. Include the legal structure ofyour business whether it is a partnership, corporation or limited liability corporation.Include resumes and biographies of key players on your management team. Show staffingprojection data for the next few years.

By now you're probably thinking that you don't need Business Plan just yet. Well you do, andthere is business plan building software that can help you through this immense project. Thesesoftware packages are easy to use and affordable. Use one today and produce a professionalqualityBusiness Plan - including all critical components - tomorrow!

Question 3: You wish to start a new venture to manufacture auto components. Explaindifferent stages in the process of starting this new business. (10 marks).

Answer 3:Every business starts out as an idea. This idea usually involves the invention of a new product, orrevolves around a better way of making and marketing an existing one. While many would arguethat the idea stage is not a stage at all, it is actually a turning point, as business adviser MikePendrith points out. After this, you as a business builder must refine this idea into amoneymaking reality. Here in this case supposing we are to start a new venture ofmanufacturing auto components and also to market them. We will see here in the followingparagraphs different stages of achieving the same goal.1. Idea ResearchingIn this stage, you are researching your idea. The object of your research is to find out who ismarketing 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


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campaign, or conducting surveys. Also, you are attempting to find what the level of interest is inthe products (or services) you wish to market.Here as the main goal is to start a company that manufactures the auto components, we are tomake a research on all the auto companies which are procuring the spares from the outsidevendors. And also the competitors who are all marketing that, their existence and also howsuccessful they are.As part of the initial research process, it is important to consider the legal requirements of sellingyour product or service. According to the Biz Ed website, examine the legal ramifications of yourbusiness. Know the tax laws governing your business. If insurance is a requirement, prepare tobudget for it. Also, be aware of any safety laws governing you as an employer. Hence we are alsoto make a research on the feasible area where we can start our organization and licenses thatwe 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 asa 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 Summaryii) Company and Product Descriptioniii) Market Descriptioniv) Equipment and Materialsv) Operationsvi) Management and Ownershipvii) Financial Information and Start-Up Timelineviii) Risks and Their Mitigation

3. Financial PlanningFinancial planning involves thinking about the financial costs of starting and maintaining yourbusiness. According to the Biz Ed website, you should consider such issues as the costs ofrunning the business; the prices you wish to charge your customers; cash flow control; and howyou wish to set up financial reserves in case of an emergency or an event causing significant lossto the business. This includes the planning of whether to take any loans or make personalinvestments in the company.4. Advertising CampaignDecide how you will market your product. Consider your budget and your target audience. Makeup business cards with your logo on it, your name and the name of your business. Make sure thatthey are of the most professional quality. Utilizing print, the newspaper, the Internet, radio or TVis 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 placedclose to the auto companies for getting the deals to manufacture their spares. As TV is usefulonly to reach the common man and he is not our target customer. Hence a sign board is thefeasible 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 inan employee. Be specific about the requisite skills and experience you are seeking. Then beginrequesting resumes and setting up interviews, making hiring decisions based on the standardsyou have set.In this case we will be looking for a few candidates in managerial position who must be good inmanaging things apart from minimal technical knowledge. Lower level people at the shopfloorpeople. 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 amanufacturing unit producing automobile components.


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Question 4: Explain the process of due Diligence and why it is necessary.(10 marks).

Answer 4:Due diligenceOf course, your commercial partner will need some reassurance about the quality of the offeryou are making to them. If you are involved in licensing technology or seeking commercialsupport for your research you are likely to hear of due diligence. When a future partner isconsidering whether or not to license technology, to buy a share of patent rights, or to supportyour research, they will need to satisfy themselves that it is a viable proposition. The process ofassessing the viability, risk, potential liabilities and commercial prospects of a project is knownas 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 theirbusiness plan, particularly if the relationship assumes some degree of risk and investment ontheir 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 reallyowned its assets. The same applies to a potential investment involving intellectual property. Forinstance, a potential commercial partner would not want to invest in patented technology only tofind out that patent renewal fees have not been paid and the patent has lapsed, or to find outthat the patent was being opposed by another company, or to find that there is prior artavailable that calls into question its validity. It may transpire that a student, a contractor or avisiting researcher could actually be legally entitled to some or all of the patent rights. Even aserious level of uncertainty or doubt could be enough to deter a potential partner, especially ifthey have run into this kind of difficulty before.Due diligence may also involve searching for information about the full range of IP rights thatmight impact on the relevant technology for instance, to check whether you have later filedpatent applications on improvements to the original patented technology, that may limit thevalue of their investment in the original technology. Other intellectual property rights such asrelated trade mark or design registrations, or key trade secrets or copyright material (such asmanuals or software) may also need to be identified or located, as these may also affect thecommercial partners interests in the technology. For example, they may be unwilling to take outa license for your patent without getting access to the software you have developed for a relatedprocess. They may want the right to use your trade mark in association with the patentedtechnology.So in a due diligence process, your commercial partner may undertake a range of checks andneed various forms of information. These may include: Checks on external records, such as patent registers and patent databases, including foreignpatents; Searches of patent databases for conflicting technology; Independent advice from patent attorneys on issues such as patent ownership, patent validityand scope of patent claims;

Checks on employment contracts, confidentiality arrangements, and contracts with otherparties 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 thecommercial 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 ofconflict; and Analysis of freedom to operate issues.In preparing to license your technology, you should consider in advance these kind of duediligence 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


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stronger negotiating position in negotiating license terms. It should also speed up the licensingnegotiations, and ultimately the commercialization of your intellectual property.

Question 5.: Is Corporate Social Responsibility necessary and how does it benefit acompany and its shareholders? (10 marks).

Answer 5:Corporate social responsibility (CSR), also known as corporate responsibility, corporatecitizenship, responsible business, sustainable responsible business (SRB), or corporateperformance,[1] 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 businesswould monitor and ensure its support to law, ethical standards, and international norms.Consequently, business would embrace responsibility for the impact of its activities on theenvironment, consumers, employees, communities, stakeholders and all other members of thepublic sphere. Furthermore, CSR-focused businesses would proactively promote the publicinterest by encouraging community growth and development, and voluntarily eliminatingpractices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberateinclusion of public interest into corporate decision-making, and the honoring of a triple bottomline: people, planet, profit.

The practice of CSR is much debated and criticized. Proponents argue that there is a strongbusiness case for CSR, in that corporations benefit in multiple ways by operating with aperspective broader and longer than their own immediate, short-term profits. Critics argue thatCSR distracts from the fundamental economic role of businesses; others argue that it is nothingmore than superficial window-dressing; others yet argue that it is an attempt to pre-empt therole of governments as a watchdog over powerful multinational corporations. Corporate SocialResponsibility has been redefined throughout the years. However, it essentially is titled to aid toan organization's mission as well as a guide to what the company stands for and will uphold to itsconsumers.Development business ethics is one of the forms of applied ethics that examines ethicalprinciples and moral or ethical problems that can arise in a business environment.In the increasingly conscience-focused marketplaces of the 21st century, the demand for moreethical business processes and actions (known as ethicism) is increasing. Simultaneously,pressure is applied on industry to improve business ethics through new public initiatives andlaws (e.g. higher UK road tax for higher-emission vehicles).Business ethics can be both a normative and a descriptive discipline. As a corporate practice anda career specialization, the field is primarily normative. In academia, descriptive approaches arealso taken. The range and quantity of business ethical issues reflects the degree to which

business is perceived to be at odds with non-economic social values. Historically, interest inbusiness ethics accelerated dramatically during the 1980s and 1990s, both within majorcorporations and within academia. For example, today most major corporate websites layemphasis on commitment to promoting non-economic social values under a variety of headings(e.g. ethics codes, social responsibility charters). In some cases, corporations have re-brandedtheir core values in the light of business ethical considerations (e.g. BP's "beyond petroleum"environmental tilt).

The term "CSR" came in to common use in the early 1970s, after many multinationalcorporations formed, although it was seldom abbreviated. The term stakeholder, meaning thoseon whom an organization's activities have an impact, was used to describe corporate ownersbeyond shareholders as a result of an influential book by R Freeman in 1984.[2]


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ISO 26000 is the recognized international standard for CSR (currently a Draft InternationalStandard). Public sector organizations (the United Nations for example) adhere to the triplebottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formalact of legislation. The UN has developed the Principles for Responsible Investment as guidelinesfor investing entities.Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary depending on thenatureof the enterprise, and are difficult to quantify, though there is a large body of literatureexhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points,balanced scorecards). Orlitzky, Schmidt, and Rynes found a correlation betweensocial/environmental performance and financial performance. However, businesses may not belooking at short-run financial returns when developing their CSR strategy.

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 volunteeringCSR may be based within the human resources, business development or public relationsdepartments of an organization,[11] or may be given a separate unit reporting to the CEO or insome cases directly to the board. Some companies may implement CSR-type values without aclearly defined team or program.

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,[12] particularly within thecompetitive graduate student market. Potential recruits often ask about a firm's CSR policyduring an interview, and having a comprehensive policy can give an advantage. CSR can alsohelp improve the perception of a company among its staff, particularly when staff can becomeinvolved through payroll giving, fundraising activities or community volunteering. See alsoCorporateSocial Entrepreneurship, whereby CSR can also be driven by employees' personal values, inaddition to the more obvious economic and governmental drivers.

Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades tobuild up can be ruined in hours through incidents such as corruption scandals or environmentalaccidents. These can also draw unwanted attention from regulators, courts, governments andmedia. Building a genuine culture of 'doing the right thing' within a corporation can offset theserisks.[13]

Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separatethem from the competition in the minds of consumers. CSR can play a role in building customer

loyalty based on distinctive ethical values.[14] Several major brands, such as The Co-operativeGroup, The Body Shop and American Apparel [15 ] are built on ethical values. Business serviceorganizations 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. Bytaking substantive voluntary steps, they can persuade governments and the wider public thatthey are taking issues such as health and safety, diversity, or the environment seriously as goodcorporate citizens with respect to labour standards and impacts on the environment

Stakeholder priorities


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Increasingly, corporations are motivated to become more socially responsible because their mostimportant stakeholders expect them to understand and address the social and community issuesthat are relevant to them. Understanding what causes are important to employees is usually thefirst priority because of the many interrelated business benefits that can be derived fromincreased 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), and communities in the areas where thecorporation operates its facilities, regulators, academics, and the media.

Question 6: Distinguish between a Financial Investor and a Strategic Investorexplaining the role they play in a Company. (10 marks).

Answer 6:In the not so distant past, there was little difference between financial and strategic investors.Investors of all colors sought to safeguard their investment by taking over as many managementfunctions as they could. Additionally, investments were small and shareholders few. A firmresembled 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 singleinvestor (or a small group of investors) could no longer accommodate the needs even of a singlefirm. As knowledge increased and specialization ensued it was no longer feasible or possible tomicro-manage a firm one invested in. Actually, separate businesses of money making andbusiness management emerged. An investor was expected to excel in obtaining high yields onhis 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 hemanaged.

Thus, two classes of investors emerged. One type supplied firms with capital. The other typesupplied them with know-how, technology, management skills, marketing techniques, intellectuaproperty, 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 purelyfinancial 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 "exitstrategy" read quick profits. The financial investor is always on the lookout, searching for willingbuyers for his stake. The stock exchange is a popular exit strategy. The financial investor haslittle interest in the company's management. Optimally, his money buys for him not only a goodproduct and a good market, but also a good management. But his interpretation of the rolls andfunctions 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 ofhis shares is the most important indication of success. This is "bottom line" short termism whichalso characterizes operators in the capital markets. Invested in so many ventures andcompanies, 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 financialinvestor participates in quarterly or annual general shareholders meetings. This is the extent ofits 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 thecompany's shares. The quality of management, the rate of the introduction of new products, thesuccess or failure of marketing strategies, the level of customer satisfaction, and the educationof the workforce - all depend on the strategic investor. That there is a strong relationshipbetween 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.


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Indeed, gradually, the balance between financial investors and strategic investors is shifting infavour 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 newclients - money is abundant.

These are the functions normally reserved to financial investors:Financial Management

The financial investor is expected to take over the financial management of the firm and todirectly appoint the senior management and, especially, the management echelons, whichdirectly deal with the finances of the firm.1. To regulate, supervise and implement a timely, full and accurate set of accounting books ofthe firm reflecting all its activities in a manner commensurate with the relevant legislation andregulation in the territories of operations of the firm and with internal guidelines set from time totime by the Board of Directors of the firm. This is usually achieved both during a Due Diligenceprocess and later, as financial management is implemented.2. To implement continuous financial audit and control systems to monitor the performance ofthe firm, its flow of funds, the adherence to the budget, the expenditures, the income, the cost ofsales and other budgetary items.3. To timely, regularly and duly prepare and present to the Board of Directors financialstatements and reports as required by all pertinent laws and regulations in the territories of theoperations of the firm and as deemed necessary and demanded from time to time by the Boardof Directors of the Firm.4. To comply with all reporting, accounting and audit requirements imposed by the capitalmarkets or regulatory bodies of capital markets in which the securities of the firm are traded orare about to be traded or otherwise listed.5. To prepare and present for the approval of the Board of Directors an annual budget, otherbudgets, financial plans, business plans, feasibility studies, investment memoranda and all otherfinancial and business documents as may be required from time to time by the Board ofDirectors of the Firm.6. To alert the Board of Directors and to warn it regarding any irregularity, lack of compliance,lack of adherence, lacunas and problems whether actual or potential concerning the financialsystems, the financial operations, the financing plans, the accounting, the audits, the budgetsand any other matter of a financial nature or which could or does have a financial implication.7. To collaborate and coordinate the activities of outside suppliers of financial services hired orcontracted by the firm, including accountants, auditors, financial consultants, underwriters andbrokers, the banking system and other financial venues.8. To maintain a working relationship and to develop additional relationships with banks,financial institutions and capital markets with the aim of securing the funds necessary for theoperations of the firm, the attainment of its development plans and its investments.9. To fully computerize all the above activities in a combined hardware-software andcommunications system this will integrate into the systems of other members of the group ofcompanies.10. Otherwise, to initiate and engage in all manner of activities, whether financial or of othernature, conducive to the financial health, the growth prospects and the fulfillment of investment

plans of the firm to the best of his ability and with the appropriate dedication of the time andefforts required.Collection and Credit Assessment1. To construct and implement credit risk assessment tools, questionnaires, quantitativemethods, data gathering methods and venues in order to properly evaluate and predict thecredit risk rating of a client, distributor, or supplier.2. To constantly monitor and analyse the payment morale, regularity, non-payment andnonperformance events, etc. in order to determine the changes in the credit risk rating of saidfactors.3. To analyse receivables and collectibles on a regular and timely basis.4. To improve the collection methods in order to reduce the amounts of arrears and overduepayments, or the average period of such arrears and overdue payments.


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5. To collaborate with legal institutions, law enforcement agencies and private collection firms inassuring the timely flow and payment of all due payments, arrears and overdue payments andother collectibles.6. To coordinate an educational campaign to ensure the voluntary collaboration of the clients,distributors and other debtors in the timely and orderly payment of their dues.

The strategic investor is, usually, put in charge of the following:Project Planning and Project Management

The strategic investor is uniquely positioned to plan the technical side of the project and toimplement it. He is, therefore, put in charge of:1. The selection of infrastructure, equipment, raw materials, industrial processes, etc.;2. Negotiations and agreements with providers and suppliers;3. Minimizing the costs of infrastructure by deploying proprietary components and planning;4. The provision of corporate guarantees and letters of comfort to suppliers;5. The planning and erecting of the various sites, structures, buildings, premises, factories, etc.;6. The planning and implementation of line connections, computer network connections,protocols, solving issues of compatibility (hardware and software, etc.);7. Project planning, implementation and supervision.Marketing and Sales1. The presentation to the Board an annual plan of sales and marketing including: marketpenetration targets, profiles of potential social and economic categories of clients, salespromotion methods, advertising campaigns, image, public relations and other media campaigns.

The strategic investor also implements these plans or supervises their implementation.2. The strategic investor is usually possessed of a brand name recognized in many countries.It is the market leaders in certain territories. It has been providing goods and services to usersfor a long period of time, reliably. This is an important asset, which, if properly used, can attractusers. The enhancement of the brand name, its recognition and market awareness, marketpenetration, co-branding, collaboration with other suppliers are all the responsibilities of thestrategic investor.3. The dissemination of the product as a preferred choice among vendors, distributors, individualusers and businesses in the territory.4. Special events, sponsorships, collaboration with businesses.5. The planning and implementation of incentive systems (e.g., points, vouchers).6. The strategic investor usually organizes a distribution and dealership network, a franchisingnetwork, or a sales network (retail chains) including: training, pricing, pecuniary and qualitysupervision, network control, inventory and accounting controls, advertising, local marketing andsales promotion and other network management functions.7. The strategic investor is also in charge of "vision thinking": new methods of operation, newmarketing ploys, new market niches, predicting the future trends and market needs, marketanalyses and research, etc.

The strategic investor typically brings to the firm valuable experience in marketing and sales. Ithas numerous off the shelf marketing plans and drawer sales promotion campaigns. It developedsoftware and personnel capable of analysing any market into effective niches and of creating theright media (image and PR), advertising and sales promotion drives well suited for it. It has builtlarge databases with multi-year profiles of the purchasing patterns and demographic data

related to thousands of clients in many countries. It owns libraries of material, images, sounds,paper clippings, articles, PR and image materials, and proprietary trademarks and brand names.Above all, it accumulated years of marketing and sales promotion ideas which crystallized into anew conception of the business.Technology1. The planning and implementation of new technological systems up to their fully operationalphase. The strategic partner's engineers are available to plan, implement and supervise all thestages of the technological side of the business.2. The planning and implementation of a fully operative computer system (hardware, software,communication, intranet) to deal with all the aspects of the structure and the operation of thefirm. The strategic investor puts at the disposal of the firm proprietary software developed by itand specifically tailored to the needs of companies operating in the firm's market.


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3. The encouragement of the development of in-house, proprietary, technological solutions to theneeds of the firm, its clients and suppliers.4. The planning and the execution of an integration program with new technologies in the field,in collaboration with other suppliers or market technological leaders.Education and Training

The strategic investor is responsible to train all the personnel in the firm: operators, customerservices, distributors, vendors, sales personnel. The training is conducted at its sole expense andincludes tours of its facilities abroad.

The entrepreneurs who sought to introduce the two types of investors, in the first place areusually left with the following functions:

Administration and Control1. To structure the firm in an optimal manner, most conducive to the conduct of its business andto present the new structure for the Board's approval within 30 days from the date of the GM'sappointment.2. To run the day to day business of the firm.3. To oversee the personnel of the firm and to resolve all the personnel issues.4. To secure the unobstructed flow of relevant information and the protection of confidentialorganization.5. To represent the firm in its contacts, representations and negotiations with other firms,authorities, or persons.

This is why entrepreneurs find it very hard to cohabitate with investors of any kind.

Entrepreneurs are excellent at identifying the needs of the market and at introducingtechnological or service solutions to satisfy such needs. But the very personality traits whichqualify them to become entrepreneurs also hinder the future development of their firms. Onlythe introduction of outside investors can resolve the dilemma. Outside investors are notemotionally involved. They may be less visionary but also more experienced.

They are more interested in business results than in dreams. And being well acquainted withentrepreneurs they insist on having unmitigated control of the business, for fear of losing alltheir money. These things antagonize the entrepreneurs. They feel that they are losing theircreation to cold-hearted, mean spirited, corporate predators. They rebel and prefer to remainsmall or even to close shop than to give up their cherished freedoms. This is where nine outoften entrepreneurs fail - in knowing when to let go.

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Strategic Management & Bussiness Policy MU0036 Set-1