ASSIGNMENT- MBA SEMESTER IV

Subject code MB0036

Set 2 Subject Name: Strategic Management and Business Policy -----------------Q.1 Explain the importance of licensing and assigning IP rights? Answer: Introduction: Intellectual Property ('IP') is one of the prime considerations that drive mergers and takeovers especially in knowledge-based sectors such as biotech, high technology and the media industry. The IP owned by a company makes it an attractive target for acquisition or merger. It is also not uncommon for companies to leverage their IP to make themselves an attractive target for acquisition. This article: 1. Briefly explains the various types of IP and the rights associated thereto; 2. Studies the strategic reasons for acquisitions and mergers in the context of IP-driven transactions; 3. Explains the mechanism of mergers and acquisitions with specific reference to the flow of IPR; 4. Examines the need and importance of an IP Audit in IP-driven M&A transactions Intellectual property: Intellectual property rights ('IPRs') are rights that are generally bestowed upon the creator/originator for protecting his creative ideas or original expression. IP generally can be protected under patents, trademarks, copyrights, domain names, designs, confidential information, etc. However, for the purposes of this article we shall restrict the study of IP to patents, copyrights and trademarks. Strategic Management and Business Policy (MB0036

Patents : A patent is a protection granted to any invention that is new, not obvious and useful. It is an exclusive statutory right to use or exercise an invention granted to a person for a limited period in consideration for the disclosure of the invention. Patents are of great importance in biotech and high technology industries as the new technologies, products and processes are usually protected by patents. Copyrights : Copyright is the exclusive right granted to the owner to do or cause to do certain acts in relation to literary, dramatic, musical or artistic work, cinematography film and/or sound recording. Copyrights are of prime importance in the media and music industry as the programmes, serials, movies and musical works are protected by copyright. Similarly copyrights are of great importance in the software industry as software too is usually protected by copyright. Trademarks: Trademarks are symbols/names that differentiate the goods manufactured or otherwise dealt with by the proprietor of such symbols/names from other similar goods. Companies spend tremendous amounts of time, effort and money to promote and advertise their trademarks. Trademarks build up the goodwill of a company and are therefore highly valuable in-tangible property; e.g., the brand names Coca Cola and Marlboro are valued at $ 47 billion and the IBM brand is valued at $ 23 billion. 3. Strategic reasons for mergers and acquisitions: If a company is merely interested in obtaining the right to use a patent, copyright or a trademark, or if a company is merely interested in obtaining revenues from the IP it owns, the IP could be either assigned or licensed. A merger or takeover would burden the acquiring company with administrative, cultural, HR and other issues, apart from the inheritance of all its assets and liabilities. A licence or assignment of the above IP would seem to satisfy the requirements of both the companies, as the company that requires the intellectual property would obtain the right to use such IP and the owner of the IPR would obtain fees/royalties for licensing/assigning such IP. This is common in the technology industry where there are various licences and cross-licences of patents. The purchase of the Crocin brand by SmithKline Beecham from Duphar Interfran, purchase of the Uncle Chipps brand by Ruffles Lays, etc., are examples of transactions where a company is merely interested in obtaining a brand name. Since brand-building can be an arduous effort, involving substantial investments and with high risk of product failure, acquisition of brands is often an attractive proposition for Strategic Management and Business Policy (MB0036

companies in certain sectors. The acquisition of an established brand can significantly help a company add substantial market share at one stroke. Thus the acquisition of just the brand name/technology would seem to satisfy the needs of both the companies involved in the transaction. However, there have been various instances where instead of merely acquiring the brand names/technology, companies have chosen to merge with or acquire other companies. There could be various strategic reasons for a company to acquire or seek to be acquired by another company. As an illustrative scenario let us consider a small emerging technology company that wishes to be acquired and a large technology company that wishes to acquire it, and examine the reasons for such acquisition. A small company may wish to be acquired to seek liquidity for its founders and investors or it may seek the complementary resources and the infrastructure of a large company to enable it to grow at a faster pace. A large company may seek to acquire a smaller company (Target Company) to obtain a key technology, gain creative, technical or management talent or to eliminate a competitor or to consolidate its position in the market. A large company may adopt the acquisition route if it is a more effective means of obtaining a technology than developing such technology internally. Another common trend that is gaining ground especially in the technology sector which obtains a lot of private funding, is that of small companies preying on large companies, so as to give them a position of respectability in the market and a chunk of the market share at a price. 2. The strategic reasons for the two companies to proceed with the merger plan are tabulated below Emerging technology company Access to complementary products and markets Access to working capital Best liquidity event for founders and investors Best and fastest return on investment Faster access to established infrastructure Gain critical mass Improve distribution capacity More rapid expansion of customer base Large established company Acquire key technology Acquire a new distribution channel Eliminate a competitor Expand or add a product line Gain creative talent Gain expertise and entry in a new market Gain a time-to-market advantage Assure a source of supply

The recent acquisition of SwitchOn Networks Inc., by PMC-Sierra, Inc for $ 450 million is an example of technology driven acquisition. SwitchOn, a pioneer in wirespeed Strategic Management and Business Policy (MB0036

packet classification and inspection technology, is engaged in the business of providing standard semiconductor and software components. These enable applications such as QoS, Load Balancing, URL Switching Firewalling, etc. at wire speeds exceeding OC-48. SwitchOn had a patent pending on a technology that enabled it to build devices that are scalable in performance and the number of policies they support. PMC-Sierra has expertise in broadband communications and has worldwide technical and sales support network. The addition of SwitchOn's packet classification expertise was complementary to PMC-Sierra's broadband communications strategy and helped PMC-Sierra gain some of the best packet classification technology in the world, along with knowledgeable and talented design team of SwitchOn. The acquisition by PMC-Sierra was beneficial to SwitchOn as it could increase its customer base significantly due to PMC-Sierra's extensive market reach. Another example would be the acquisition of vEngines by Centillium Communications, a Nasdaq-listed company, for $ 43 million. vEngines is a Bangalore-based company founded in January 2000, that is a pioneer in the development of a chip-level product for voice-data networks. The acquisition was a natural culmination of mutual benefits to both vEngines and Centillium. Centillium already has a voice product and buying vEngines gave Centillium a headstart in its next generation voice product. For vEngines, this merger gave an easy introduction of its technology to the existing customer base of Centillium. The merger of AOL and Times Warner can probably be viewed as the merger of two equals, which was also driven largely by considerations of IP. AOL had built a brand, a customer base and (by Internet standards) healthy profits, but lacked ac-cess to the leading source of broad-band and content to distribute through such broadband. Times Warner had one of the largest cabletelevision system in the US and proprietary content magazines, books, movies, music, programming. The merger was beneficial to both the companies as AOL now has access to content and Times Warner has secured an outlet to market music in cyberspace. The acquisition of Tetley catapulted Tata Tea into the global arena, as Tetley is an international brand with a presence in over 44 countries. Tetley has a presence in India, Canada, the US, Australia and Europe, and is the world's second largest tea brand. The acquisition will help the Tatas obtain a big foothold in the UK and European market and use Tetley's expertise and infra-structure in sourcing teas world-wide for the Indian market. IP-Flow in mergers and acquisitions: Since the focus of this article is on the importance of IP in mergers and acquisitions, we shall not dwell too much in detail on the actual mechanics of mergers and acquisitions. However, it might be useful at this juncture to take a brief look at the effect of mergers and acquisitions on the IP. In a merger, all the assets and liabilities of the amalgamating company (the company which will get merged out of existence) get assumed by the amalgamated company (the surviving company) by operation of Strategic Management and Business Policy (MB0036

law. The Scheme of Merger or Amalgamation usually provides for this specifically, which is further validated by the order of the High Court u/s.394 of the Companies Act, 1956. Therefore, by virtue of the merger, all IP owned by the amalgamating company get assumed by the amalgamated company. The transfer of IP through a merger can be depicted diagrammatically as follows: A merges into B company A (Owns IP) -------------------------------> Surviving company (B) (IP of a becomes property of B) ( IP of A transferred to B) In a corporate acquisition on the other hand, there is no transfer of interest in the IP. Company A, which owns the IP, gets acquired by Company B and by virtue of such acquisition, Company B gets control over all assets of Company A, including its IP. Therefore, in a takeover, the ownership over the IP continues to remain with the Target Company, though the acquirer company gets effective control over the IP. It is not uncommon in this regard therefore, for acquirer companies to have the necessary corporate action taken to have the IP of the target assigned to the acquirer at a nominal price. IP audit: Since IP is a driving force in mergers and takeovers, as evidenced by the above examples, it is very essential to conduct an IP audit to ensure that the company that is being acquired is actually the owner of the IP. Such an audit is also recommended for a company as an on-going business to ensure that the IPRs are being effectively maintained and for any company that wishes to become a target for acquisition. In an IP Audit, the various IPRs stated above are analysed to, inter alia:

(1) Determine ownership of the IP (2) Ensure that there is no infringement of the IPRs of any third party (3) Examine licensing, sub- licensing, cross-licensing or any other issues that could affect the IP rights. Patent: If patents are driving the acqui-sition, it would be necessary to determine if the company has obtained a patent or whether it merely has filed for a patent. A mere patent application does not confer any property right in an 'invention'. It may also be pertinent to note that there is an increasing trend for companies to merely file for patents to enhance their ability to attract potential investors and increase valuation. Strategic Management and Business Policy (MB0036

It is advisable to conduct a patent search to verify that the patent has been registered in the name of the Target Company. It is also advisable for the acquir-ing company to examine the patent claims to determine the patentability of the invention on the touchstones of novelty, non-obviousness and utility. If a patent has already been granted, it would be necessary to ascertain if the patent has been opposed or is likely to become the subject matter of any future litigation. There could be situations where the employees have created inventions in the course of their employment with the companies, but patent applications have not yet been filed. The ownership of these inventions would be contentious in the absence of a specific agreement between the company and the employee assigning such invention/rights in such inventions to the company, because unlike in the case of copyrights, there is no statutory provision that confers ownership of patents for inventions developed while in the course of employment, on the employer.

Trademark: Trademarks may be registered or unregistered. If the Target Company claims to have a registered trademark, it would be advisable to conduct a trademark search to verify that the trademark being acquired has been registered in the name of the Target Company. If the trademark has not been registered, it would be necessary to determine if the mark can be registered as a trademark or is capable of protection (the Trade and Merchandise Marks Act, 1958 prohibits the registration of certain kinds of trademarks). The value of the trademark would depend on the strength of the mark and the ability of the mark to indicate a particular company as the originator of goods/services. If the mark consists of an invented word or is inherently distinctive, the registrability of the mark would increase. If the mark consists of a descriptive or generic word, geographical location or a common surname, the mark is prima facie not distinctive and may not be registrable. However, if the mark has achieved distinctiveness or secondary association due to extensive use, then the chances of registering such mark as a trademark, and consequently the value of the mark, would increase. It would be necessary to deter-mine if the Target Company is the owner of the trademark by conducting a trademark search in the office of the Registrar of Trademarks. If the use of the trademark by the Target Company is licensed by a third party, it would be necessary to deter-mine the scope of licence and the rights granted to the licensee, duration and grounds of termination of the licence, consequences of termination, etc. to determine the rights of the licensee in the trademark. If the Target Company has licensed the use of the trademark, the terms and conditions of such a licence should be examined to determine the control exercised by the Target Company over the mark and to check if there are any onerous clauses in the agreement which may imperil the Target's ownership over the trademark in question. Strategic Management and Business Policy (MB0036

Copyright: Registration of copyright is optional, as copyright vests automatically on creation of the copyrightable work. However, it is advisable to register copy-rights as registration is prima facie proof of ownership. If the Target Company claims to have a registered copyright, it would be advisable to conduct a search in the office of the Registrar of Copyrights to verify that the register mentions the name of the Target Company as the owner of the copyright. If there is no such registration, the acquiring company would have to determine if the work can be protected by copyright; i.e., whether the work is original and does not violate the copyright of any third party. This would be an issue that would have to be established on the basis of fact and may not be easy from a due diligence perspective. The person who creates a work becomes the first author and the copyright automatically vests with such person. Under the provisions of the Copyright Act, if a work is created by an employee of the Target Company in the course of employment, the copyright in such works would vest with the employer as it would amount to a work-for-hire/commissioned work. However, if the author is an independent contractor, i.e., there is no employer-employee relationship, it would be necessary to specifically assign the rights to the company. Similarly, by way of abundant caution, it needs to be ensured that even in case of employment, copyrights over all copyrightable works developed by the employees are assigned to the Target Company. Apart from the specific issues pertaining to each of the IPRs which have been discussed above, from a general perspective, it is also necessary to determine if the above IPRs have been licensed or sub-licensed, as this could affect the value of the IP. If the IP has been licensed to a third party, it would be necessary to determine the scope of the licence, the rights granted thereto, the conditions and consequences of termination and the royalties payable, etc., to determine if there are any restrictive conditions on use or further licensing of the IP. Further, one must never forget the importance of having to rectify the registers relation to the ownership of IP after an acquisition is completed. Post-acquisition compliances can often be as important as the pre-closing compliances, as these give fruition to the fundamental objectives of the acquisition. Therefore, acquiring companies should ensure that after the acquisition, wherever necessary and applicable, they make suitable applications and follow them up with the appropriate authorities to get ownership or licence rights over any patents, trademarks or copyright of the acquired or amalgamating company to its name. As pointed out earlier, though this issue is addressed by having an assignment effected reflecting the acquiring company as the new owner of these IPs, it is always better to have the registers relating to these IPs suitably rectified as a post-closing measure, in order to better secure the interests of the acquiring or surviving company. Conclusion: The knowledge era has witnessed the growing importance of intangible assets such Strategic Management and Business Policy (MB0036

as IPR. The emergence of a large number of companies in India who want to go up the value chain and not be mere service providers, has spurred the desire of companies to become the owners of intellectual properties. A large number of research-intensive companies have been able to develop key technologies that compete with the services of well-established and large companies. A merger of the above companies would be beneficial to both, as there would exist a synergy between the companies as they are in the same space. Since brand building can be an arduous effort, involving substantial investments, there have been several acquisition of brands as they are less timeconsuming and have a ready market. The success of the new knowledge era companies based on the strength of their IP has now forced even old economy companies which till recently did not lay much emphasis on their intangible assets to conduct IP audits to ascertain their IP and its value.

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Q 2. Assess the need for Corporate Social Responsibility with supporting instances. Answer:

Corporate social responsibility

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business) [1] is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through 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. CSR is the deliberate inclusion of public interest into corporate decision-making, that is the core business of the company or firm, and the honouring of a triple bottom line: people, planet, profit. The term "corporate social responsibility" came in to common use in the late 1960s and early 1970s, after many multinational corporations formed. The term stakeholder, meaning those on whom an organization's activities have an impact, was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984.[2] Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. CSR is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

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Approaches An approach for CSR that is becoming more widely accepted is a community-based development approach. In this approach, corporations work with local communities to better themselves. For example, the Shell Foundation's involvement in the Flower Valley, South Africa. In Flower Valley they set up an Early Learning Centre to help educate the community's children as well as develop new skills for the adults. Marks and Spencer is also active in this community through the building of a trade network with the community guaranteeing regular fair trade purchases. Often activities companies participate in are establishing education facilities for adults and HIV/AIDS education programmes. The majority of these CSR projects are established in Africa. JIDF For You, is an attempt to promote these activities in India. Many companies use the strategy of benchmarking to compete within their respective industries in CSR policy, implementation, and effectiveness. Benchmarking involves reviewing competitor CSR initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment, and how customers perceive competitor CSR strategy. After a comprehensive study of competitor strategy and an internal policy review performed, a comparison can be drawn and a strategy developed for competition with CSR initiatives.

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The business case for CSR within a company will likely rest on one or more of these arguments: Human resources A CSR programme can be an aid to recruitment and retention,[12] 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.[13] 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.[14] Several major brands, such as The Co-operative Group, The Body Shop and American Apparel[15] 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.

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Q 3. What are the obstacles faced by small business units? Explain with examples Answer:

Small business
A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships. The legal definition of "small" varies by country and by industry, ranging from fewer than 15 employees under the Australian Fair Work Act 2009, 50 employees in the European Union,[citation needed] and fewer than 500 employees to qualify for many U.S. Small Business Administration programs.[1] Small businesses can also be classified according to other methods such as sales, assets, or net profits. Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing, and online business, such as web design and programming, etc.

Size definitions
he legal definition of "small" varies by country and by industry. In the United States the Small Business Administration establishes small business size standards on an industry-by-industry basis, but generally specifies a small business as having fewer than 500 employees for manufacturing businesses and less than $7 million in annual receipts for most nonmanufacturing businesses.[1] The definition can vary by circumstance for example, a small business having fewer than 25 full-time equivalent employees with average annual wages below $50,000 qualifies for a tax credit under the healthcare reform bill Patient Protection and Affordable Care Act.[2] In the European Union, a small business generally has under 50 employees. However, in Australia, a small business is defined by the Fair Work Act 2009 as one with fewer than 15 employees. By comparison, a medium sized business or midsized business has under 500 employees in the US, 250 in the European Union and fewer than 200 in Australia. In addition to number of employees, other methods used to classify small companies include annual sales (turnover), value of assets and net profit (balance sheet), alone or in a mixed definition. These criteria are followed by the European Union, for instance (headcount, turnover and balance sheet totals). Small businesses are usually not dominant in their field of operation

Advantages of small business

A small business can be started at a very low cost and on a part-time basis. Small business is also well suited to internet marketing because it can easily serve Strategic Management and Business Policy (MB0036

specialized niches, something that would have been more difficult prior to the internet revolution which began in the late 1990s. Adapting to change is crucial in business and particularly small business; not being tied to any bureaucratic inertia, it is typically easier to respond to the marketplace quickly. Small business proprietors tend to be intimate with their customers and clients which results in greater accountability and maturity. Independence is another advantage of owning a small business. One survey of small business owners showed that 38% of those who left their jobs at other companies said their main reason for leaving was that they wanted to be their own bosses. [citation needed] Freedom to operate independently is a reward for small business owners. In addition, many people desire to make their own decisions, take their own risks, and reap the rewards of their efforts. Small business owners have the satisfaction of making their own decisions within the constraints imposed by economic and other environmental factors.[3] However, entrepreneurs have to work very long hours and understand that ultimately their customers are their bosses. Several organizations, in the United States, also provide help for the small business sector, such as the Internal Revenue Service's Small Business and Self-Employed One-Stop Resource.[

Problems faced by small businesses

Small businesses often face a variety of problems related to their size. A frequent cause of bankruptcy is undercapitalization. This is often a result of poor planning rather than economic conditions - it is common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses. For example, if the prospective owner thinks that he will generate $100,000 in revenues in the first year with $150,000 in start-up expenses, then he should have no less than $250,000 available. Failure to provide this level of funding for the company could leave the owner liable for all of the company's debt should he end up in bankruptcy court, under the theory of undercapitalization. In addition to ensuring that the business has enough capital, the small business owner must also be mindful of contribution margin (sales minus variable costs). To break even, the business must be able to reach a level of sales where the contribution margin equals fixed costs. When they first start out, many small business owners underprice their products to a point where even at their maximum capacity, it would be impossible to break even. Cost controls or price increases often resolve this problem. In the United States, some of the largest concerns of small business owners are insurance costs (such as liability and health), rising energy costs and taxes. In the United Kingdom and Australia, small business owners tend to be more concerned with excessive governmental red tape.[5] Another problem for many small businesses is termed the 'Entrepreneurial Myth' or EMyth. The mythic assumption is that an expert in a given technical field will also be Strategic Management and Business Policy (MB0036

expert at running that kind of business. Additional business management skills are needed to keep a business running smoothly. Still another problem for many small businesses is the capacity of much larger businesses to influence or sometimes determine their chances for success. examples

Problems Faced by Small Scale Entrepreneurs of the Industrial Estates of Madurai Region.
India a land striving for Unity among diversities is rich by a cultural heritage and grooming entrepreneurs. Though not big shots, most of them have established under Small Scale Industries. The SSIs being the provider of inputs to the Big Business Houses are playing a major role in the economy. SSI includes industrial undertakings in which investments in Fixed Assets in Plant & Machinery excluding Land & Buildings whether held under ownership, lease or hire purchase does not exceed 1 crore. Most of them act as ancillary to Big Business Houses. Some are tiny industries where Fixed Assets including Plant & Machinery is worth only 25 lakhs or below and yet another group concentrates on exports. Madurai, better known as the temple city of Tamil Nadu, India has many industrial estates. Based on SIDCO's manual Madurai Region includes industrial Estates of Madurai, Kappallur, Andipatti and Theni. These industrial estates emerged as a major supplier of mass consumption items like leather and leather goods, sheet metal goods, stationery, soap, detergent, domestic utensils, toothpaste & tooth powder, preserved fruits and vegetables, wooden and steel furniture, flash light torches and the like. The contribution of the small scale sector in saving foreign exchange through production of a large import substitution items cannot be under estimated. Because of this the SSI occupy a central place in the Indian economy. As entrepreneurs increased their problems as to production, marketing, infrastructure and Financing, also increased. Many people vaguely quoted it as managerial problems. Going into the details we see that: The production problems include raw material availability, capacity utilization, and storage problems. The marketing problems arises because of dealing in only one product, cut throat competition, adopting cost oriented method of pricing, lack of advertisement, not branding their products etc. The financial problems include investment risks, procurement of loan from banks and their repayment, meeting day to day expenses and the like.

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The labour problems include highly demanding employees, absenteeism lack of skilled workers and transportation of workers. Infrastructure problems also add coal to the fire. Unless and until you have the infrastructure in its place the rest of the efforts are futile. Personal problems like spending less time with family and for the whole sweat exerted the rewards have not been favorable. Though the industrial estates of Madurai Region are performing satisfactorily as far as profits are concerned, they tire a lot and rewards are not commensurate.

Above all starting up a business unit itself poses big problems. Though here in Tamil Nadu, online provisional registration is done for SSIs, and single window system is followed to save lot of time, the promoters have to travel a lot to establish and to place themselves into the shoes of directors.

Q 4. Are decision support systems beneficial in strategic management and business policies? Justify your answer. Answer:

Decision Support Systems DSS

The best decision support systems provide high-level summaries and drilldowns to details. Decision Support Systems (DSS) are a specific class of computerized information system that supports business and organizational decision-making activities. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from raw data, documents, personal knowledge, and/or business models to identify and solve problems and make decisions. Typical information that a decision support application might gather and present would be:

Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts. Comparative sales figures between one week and the next

Projected revenue figures based on new product sales assumptions Strategic Management and Business Policy (MB0036

The consequences of different decision alternatives, given past experience in a context that is described

Benefits Of DSS DSS is the abbreviated form of Decision support systems and comprises of information systems based on a network of computers. DSS also includes knowledgebased systems, which support the decision-making activities in an organization. DSS supports the management of an organization and helps them in decision making. These decisions might be changing rapidly and are not specified in advance. There are many benefits of DSS both for the management and the organization as a whole. These benefits include:

1. Helps in saving time Research has demonstrated that decision support systems help to reduce decision cycle time for an organization. DSS provides timely information, which is then used for decision making and results in enhanced employee productivity. 2. Improves efficiency Another advantage of DSS is efficient decision making, resulting in better decisions. This is because use of DSS results in quick transfer of information, better data analyses, thus resulting in efficient decisions. 3. Boosts up interpersonal communication Use of DSS in an organization helps to improve interpersonal communication between same level of employees and between management and employees. 4. Provides competitive advantage Use of decision support system in an organization provides a competitive advantage over other organizations which do not use DSS. 5.Helps in reducing cost Research and case studies reveal that use of DSS in an organization helps in making quicker decisions and reduce cost. 6.High satisfaction among decision makers In DSS computers and latest technology aids the decision making process. It thus results in higher satisfaction among decision makers, reduces frustrations among Strategic Management and Business Policy (MB0036

them, and form perceptions that superior information is being used. They gain a confidence and satisfaction that they are good decision makers. 7.Supports learning The use of DSS in an organization results in two type of learning. First managers themselves learn new concepts. Secondly, there is better factual understanding of business as well as the decision making environment. 8.Enhanced organizational control Due to the use of DSS business transaction data is easily available for monitoring the performance of employees and ad hoc querying. It thus leads to enhanced understanding of business operations for the management.

Although DSS has numerous advantages for organizations and the people involved in decision making, but should be used cautiously due to some associated disadvantages. As for instance some DSS development efforts can lead to power struggles. People fight over the authority of accessing data, thus spoiling the organizational environment. Sometimes managers may have some personal motives and may advocate the development of a particular DSS. This might harm other people and the organization as a whole. It should thus be very well and cautiously used in benefit of an organization.

Q 5. Mr. Kevin is a CFO of a multinational company. What would be his role and responsibilities in the company? Answer:

CEO:
A chief executive officer (CEO) or chief executive is the highest-ranking corporate officer, administrator, corporate administrator, executive, or executive officer in charge of total management of a corporation, company, organization, or agency, reporting to the Board of Directors and/or the Organization's Owner(s). In internal communication and press releases, many companies capitalize the term and those of other high positions, even when they are not proper nouns.

CFO:
The Chief Financial Officer (CFO) of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. (In recent years, however, the role Strategic Management and Business Policy (MB0036

has expanded to encompass communicating financial performance and forecasts to the analyst community.) The title is equivalent to finance director, commonly seen in the United Kingdom. The CFO typically reports to the Chief Executive Officer, and is frequently a member of the board of directors. ROLE OF CFO (Chief Financial Officer) TRADITIONAL ROLE OF CHIEF ACCOUNTANT The Chief Accountants used to perform several tasks which were preparing accounts, preparing budgets, operational reporting and interpreting, evaluating operating results, preparing income tax returns, establishing internal control procedures to safe-guard the companies assets. TRANSITION FROM CHIEF ACCOUNTANT TO CHIEF FINANCIAL OFFICER Due to increased governance requirement there arises a need to empower the chief accountant and to make him responsible by requiring him to sign the accounts. There comes the code of corporate governance, which makes the chief accountant powerful and more responsible. With the new role, Chief Accountant becomes Chief Financial Officer (CFO). Appointment and Approval Requirement The appointment, removal and remuneration terms and conditions of employment of the chief financial officer of a listed company shell be determined by the Chief Executive Officer with the approval of the Board of Directors. Qualification Requirement The qualification requirement is defined under the code of corporate governance that is the person appointed as the Chief Financial Officer must be Member of recognized body of professional accountants or A graduate from a recognized university or equivalent, having at least 5 years experience in handling financial and corporate affairs of a listed company. Attending Board Meetings. The Chief Financial Officer of a listed company is required to attend the meeting of the board of directors. IMPLICATION OF NEW RESPONSITBILITES The new responsibilities apply to all Chief Financial Officers of Listed Companies, Insurance Companies, Banks and DFIs. Mostly the CFO presents the financial position relating to the period which has been over, and the period which has to come that is the financial position attained and the financial projection i.e. where the organization will be. Strategic Management and Business Policy (MB0036

Responsibilities towards Board of Directors The Chief Financial Officer is required to furnish necessary and classified information to the board of directors along with his analysis and suggestions as the Chief Financial Officer attends the board meetings, any issue with financial implications is being discussed, the person likely to be most in command of these implication is on the spot and immediately available for questions. In order to strengthen and formalize corporate decision-making process, significant issues are required to be placed for the information, consideration and decision of the boards of directors by the CFO. These are: Annual business planes, cash flow projection, forecasts and long term Budgets include capital, manpower and overhead budgets along with Quarterly operating results of the company as a whole and in terms of its Details of joint ventures or collaboration agreements or agreements with Default in payment of principal and/or interest, including penalties on planes. variance analyses. operating divisions or business segments. distributors, agents, etc. late payments and other dues, to a creditor, bank or financial institution, or default in payment of public deposit. Failure to recover material amounts of loans, advances, and deposits Significant public or product liability claims likely to be made against the made by the company, including trade debts and inter-corporate finances. company, including any adverse judgment or order made on the conduct of the company. Responsibilities towards Shareholders The Chief Financial Officer is required to provide all the necessary data to be presented in the Directors Report. For this purpose Chief Financial Officer must ensure the following. The financial statement, prepared by the management of company, present fairly its states of affairs, the results of its operation, cash flows and changes in equities. Strategic Management and Business Policy (MB0036

Proper books of accounts of the company have been maintained Appropriate accounting policies have been consistently applied in preparation in financial statements and accounting estimates are based on reasonable and prudent judgment.

International accounting standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed.

The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts upon the companies ability to continue as going concern. There has been no material departure from the best practice of corporate governance as detailed in the listing regulations.

Internal And External Reporting Chief Financial Officer now has extensive responsibilities for internal and external reporting. All the information required for decision-making by the Board of Directors and Chief Executive is processed and furnished by the Chief Financial Officer. Apart from this, external reporting requirement is fulfilled by Chief Financial Officer, the accounts and financial statements are signed by the Chief Financial Officer before they are sent to concerned authorities. CCG requires that the listed companies submit their quarterly accounts to the shareholders within one month of the close of the first and third quarter of year of account. The CCG does not prescribe the time for submitting half yearly accounts to the shareholders. Here we can refer to section 245 of companies ordinance 1984 for this purpose, which requires half yearly accounts to be submitted within two months of the close of first half. The CCG requires a limited review of half yearly accounts by external auditor. Annual audited accounts are now required to be submitted within four months of the close of financial year. The Securities and Exchange Commission of Pakistan is exercising strict vigilance to ensure compliance of 4th and 5th schedule of the Companies Ordinance, 1984 and timely submission of accounts by companies. It has recently imposed penalties on Directors of nine listed companies who failed to prepare and circulate the quarterly accounts. Furthermore, fines have been imposed on chief executives. Strategic Management and Business Policy (MB0036

Q 6. Give a note on strategies that improve sales. Answer:

Five ways to increase sales even in a down economy

Guess what? All business owners want to increase sales. Astounding? Hardly. But what is surprising is that most of these owners do not utilize all five marketing strategies to increase sales. Im not referring to opening new locations, diversifying products or hiring additional salespeople Im talking about growing same store sales through marketing initiatives. Below are the five strategies to increase sales. I happily share them with all our clients, and with you, because theyre flexible, consistently productive, and can be implemented by every type of business, large or small. Best of all, four of these five strategies are often low-cost or downright free particularly important in todays economy. 1. Increase New Customers Advertising to attract new customers is a critical part of to any long-term business plan, but it also has many complexities. Advertising is expensive, media choices can be overwhelming, viewership is fragmented and down, and todays audience is jaded. A less obvious, but more significant hurdle is that in order to attract new customers you typically have to steal them away from competitors and a lot of customers arent interested in changing their habits. So, its critical that you are persistent with your efforts and compelling with your message.

Happily, there are other ways to increase sales, and theyre staring you right in the face every day: your customers. The fact is it is easier and less expensive to increase sales from existing customers than try to win over new customers. You can communicate with existing customers when they visit or through mail and email at significantly less cost and higher efficiency than shotgun advertising to the general public.

Existing customers already know, and hopefully like your products and service. You dont need to explain who you are, what kind of business you run, where you are located, what you charge, or why you are a better choice than your competitors.

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You already know about your customers (and can easily find out more), so you can focus your sales-building actions on their specific wants and needs.

So, before you place all your eggs in the advertising basket, make use of the following ways to increase sales. They are far less expensive and can be put into action quickly and easily. 2. Increase Average Sale The easiest time to increase your average sales is when your customer is already buying something, wallet in hand. Simply give them a reason to want to spend more. Perhaps you think this only works for select businesses (think Do you want fries with that?). But almost any business can up sell quality, add-on products and services, and maintenance contracts to increase the average sale. A retailer can offer a shoe tree when ringing up the wingtips, the landscaper can pre-sell a fertilizer program when laying sod, the attorney can introduce the idea of a trust when drafting a will, and yes, even the ad agency can offer sales training to accompany an upcoming campaign. Have these add-ons ready in advance, promotional materials ready, and then practice the offer. With some creativity, this approach can work for most every business. 3. Increase Frequency No matter how many times a year your customers shop at your business, increasing this number can quickly improve your bottom line. This can be done both while they are physically at your business, or by contacting them later. Incentives to return, loyalty programs, and educational programs can be handed out in person or mailed/emailed at a later date. Note: plan a full calendar of promotions it is unlikely any one offer will attract all customers to take action. Track results and make a note to repeat successful promotions in the future.

4. Increase Margin The downside to up-selling is that your customer can start to feel that doing business with you = spending a lot. To prevent this syndrome, and to add another arrow to your sales-growing quiver, find ways to reduce your costs of goods. Working with your vendor, you can negotiate a special discount on a promotional item or service. Then you can keep a greater margin when you sell at the regular price. If your negotiations are particularly successful you can pass some of the savings to your customer so they benefit as well. Best of all this strategy not only defuses your customers impression that you are expensive, but it doesnt cost your business a cent! Everyone wins! Note: dont assume your vendor will resist this approach they might need to move additional merchandise. Strategic Management and Business Policy (MB0036

5. Increase Retention Even if they claim they are 100% satisfied, you will still lose some customers. Why? Some will move, some will die you cant do anything about that. But some customers will leave simply to try something different or less expensive. The more competitors you have, the more important it is that you utilize this last strategy: increase retention by offering new products, services and promotions. Review your various products, and create excitement about those that are less known especially less expensive items. Consider menu updates, live music nights, additional services, dcor updates, educational programs or charity events. The goal is to remain fresh, exciting and relevant in your customers eye. Note: It is more difficult to win new customers than to keep existing customers. Spending a little to keep current clients will always be less expensive that spending later to replace them. Reading the menu is not the same as knowing how to cook the meal The five ways to increase sales arent new, but there are important skills to learn:

Specific creative solutions for your unique business. How to use them in unison so each strategy reinforces another.

Testing the concepts so you can see an immediate and positive effect on your sales. How to use them in an ever-changing consumer and technological environment.

Prioritizing them so future marketing initiatives are paid for by past successes.

Building all 5 into your marketing calendar so you do not miss the opportunity each provides.

Strategic Management and Business Policy (MB0036