MB0036 – Strategic Management and Business Policy

Q.1 Explain the importance of licensing and assigning IP rights

ANS

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
2. 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.

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 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.

The strategic reasons for the two companies to proceed with the merger plan are tabulated below

3.

Emerging technology company Large established 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
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 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.

4. 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 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.

5 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.

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.

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 relatin 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 suit-able 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.
6. Conclusion :
The knowledge era has witnessed the growing importance of intangible assets such 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.

Assignment forms

If students have any doubts about the meaning and effect of the assignment forms, they should
seek independent legal advice. If any student declines to assign IPR at the start of a project when
requested, whenever possible they should be offered an alternative project on which to work.

Assignment of IPR to publishers

Authors are strongly advised not to assign the IPR in their work to a publisher, but to seek a
licensing agreement for publication. It is suggested that if authors do assign their copyright to a
publisher they assert their moral rights (see above). Guidance can be obtained from the UCL
Copyright Officer.

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

Ans-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.

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.
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.

Q3 What are the obstacles faced by small business units? Explain with examples

Ans -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. 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.

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 mid-sized 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 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. 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 under price 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 E-Myth. The
mythic assumption is that an expert in a given technical field will also be 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.

* 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.

Q4 Are decision support systems beneficial in strategic management and business policies?
Justify your answer

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

Benefits Of DSS

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 knowledge-based 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 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?

Ans 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 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.

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 planes.
Budgets include capital, manpower and overhead budgets along with variance
analyses.
Quarterly operating results of the company as a whole and in terms of its
operating divisions or business segments.
Details of joint ventures or collaboration agreements or agreements with
distributors, agents, etc.
Default in payment of principal and/or interest, including penalties on 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 made by the
company, including trade debts and inter-corporate finances.
Significant public or product liability claims likely to be made against the
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
“Director’s 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.
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.
Q 6- Give a note on strategies that improve sales.

Ans-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. I’m not referring to opening new locations, diversifying products or hiring additional
salespeople – I’m 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 they’re 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 today’s 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 today’s 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 aren’t interested in changing their habits. So, it’s
critical that you are persistent with your efforts and compelling with your message.

Happily, there are other ways to increase sales, and they’re 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
don’t 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.
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
customer’s impression that you are expensive, but it doesn’t cost your business a cent! Everyone
wins!
Note: don’t assume your vendor will resist this approach – they might need to move additional
merchandise.

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 can’t 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, décor updates, educational programs or charity events. The goal is to remain fresh,
exciting and relevant in your customer’s 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 aren’t 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.