ASSIGNMENT QUESTION Correct business strategy is the vital link to ensure the success of a business venture. Explain a new business venture that you intend to undertake. Your strategic plan should cover the following considerations: * Nature of business venture * Analysis of the internal/external environment * SWOT analysis in relative comparison to current competitors * Your intended business strategy * Justification to support your intended strategy

Sound and Solid Investment

MOHAMMAD HATTA & PARTNERS INVESTMENT SERVICES (SAMPLE)

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SAMPLE

Disclaimer:
This is a sample business plan which is prepared as part of the assignment for Strategic Management Class. The reference is made to Public Gold. Some data are fictitious in order to capture the main purpose of this class that is to apply Strategic Management in business
- Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives.
CONTENTS

1. BACKGROUND OF BUSINESS VENTURE

2. EXECUTIVE SUMMARY

3. GENERAL COMPANY DESCRIPTION 4.1. COMPANY OVERVIEW 4.2. MISSION AND VISION 4.3. STRENGTHS AND CORE COMPETENCIES 4.4. CHALLENGES

4. INDUSTRY ANALYSIS
Question 1: What Are the Industry’s Dominant Economic Features?
Question 2: How Strong Are Competitive Forces?
Question 3: What Forces Are Driving Industry Change and What Impacts Will They Have? Question 4: What Market Positions Do Rivals Occupy
Question 5: What Strategic Moves Are Rivals Likely to Make Next?
Question 6: What Are the Key Factors for Future Competitive Success?
Question 7: Does the Outlook for the Industry Offer the Company an Attractive Opportunity?

5. S.W.O.T Analysis 6.5. T.O.W.S Analysis

6. BUSINESS STRATEGY

7. OPERATIONAL PLAN 8.6. SERVICE EXECUTION TIMELINE 8.7. LOCATION 8.8. PERSONNEL

1. BACKGROUND OF BUSINESS VENTURE MOHAMMAD HATTA & PARTNERS INVESTMENT SERVICES (hereinafter referred to as “MH&PIS”) will provide awareness and professional advice on the commodity investment specializing in the Gold investment to the local Malaysian market (note : jewelry is not considered as investment in this context) What is “GOLD”? a precious yellow metallic element, highly malleable andductile, and not subject to oxidation or corrosion. Symbol: Au; atomic weight: 196.967; atomic number: 79; specificgravity: 19.3 at 20°C. (http://dictionary.reference.com/browse/gold) Why invest in Gold? Besides being an obvious symbol of wealth, Gold has other significant values, usage and advantages that will boost its value proposition in the economic world. It will give Gold the upper hand against other investment proposals available in the market. Here are the fundamental reasons to invest in gold: 1. Gold is more than just another commodity, it is a currency. It is the currency that has endured the test of time. One ounce of Gold has the same ‘purchasing power’ as it was 30 years ago or even further back. In other words, it is an inflation hedge. 2. Gold is not created and controlled by governments. All of today’s other currencies (United States Dollar, Malaysian Ringgit, Japanese Yen, British Pound etc) are ‘fiat’ currencies - money that has value only because of the government regulation or law. 3. Returning to currencies backed by Gold is practical. Even the possibility that it might happen will cause the value of Gold to rise considerably. 4. Governments and central banks have been suppressing the price of Gold since 1995 by lending and selling their Gold. They will not be able to keep it up forever. Once the floodgate is opened, the price of Gold will soar (http://www.gold-eagle.com/editorials_04/evans061304.html). 5. The pressures of enormous debts will increasingly tempt the United States to inflate the US dollar so much that it will become almost worthless, in order that the debts can be easily repaid in near-worthless dollars. Gold will gain as the falling US dollar destroys trust in fiat currencies (http://www.gold-eagle.com/editorials_04/evans061304.html). 6. Gold prices have been rising steadily since 2001, when one could buy an ounce of Gold for $256, and those of us who bought Gold at that time have since enjoyed gains of over 550% in 10 years! So far, Gold is the best investment of the century, second only to Silver which has risen a jaw dropping 775% in price (http://www.whatisGold.net/). 7. Gold also has its own special place in the industrial field. Gold is the second best conductor of heat and electricity next to Silver. Gold is also able to withstand corrosive condition which proves to be beneficial in computer, aerospace and medical industries. 8. The imbalance of Gold Supply-Demand in the world market due to the scarcity of it, which is limited by nature, will definitely see that Gold price will always show bullish trend and beneficial for long term investors.

2. EXECUTIVE SUMMARY MH&PIS will provide awareness and professional advice on the commodity investment specializing in Gold investment to the local Malaysian market. The expectations of customers will be exceeded by assisting them to obtain financial freedom through Gold investment. On top of that, MH&PIS will also create awareness to the public on the significance of gold investment in the current economic turmoil, provide financial advisory and open the door to potential customers to invest in gold, and last but not least, provide professional advice on the investment method to ensure maximum return.

Gold investment has shown bullish trend over the last 10 years while fiat monies have shown otherwise. Inflation rate has also increased thus economists are all looking at commodities especially Gold to accumulate wealth and act as an inflation hedge.

External and internal analyses were conducted and result shows that it is viable for MH&PIS to enter the market as shown below. Index more than 1.5 indicates that the business environment is ideal from a profit-making standpoint.

S.W.O.T and T.O.W.S analysis show the strategies that need to be applied in order to ensure MH&PIS stays competitive in the market. MH&PIS Business Strategy is: a) Market Target - Narrow Buyer Segment (Niche Market) b) Competitive Advantage Pursued i. Focused Low-Cost Strategy ii. Focused Differentiation Strategy

3. GENERAL COMPANY DESCRIPTION

4.1 COMPANY OVERVIEW

MOHAMMAD HATTA & PARTNERS INVESTMENT SERVICES (hereinafter referred to as (“MH&PIS”) is situated in Taman Komersil Senawang, Seremban, Negeri Sembilan. It is formed by Mohammad Hatta Adam and Tuan Sarifah Aini Syed Ahmad on 5th December 2011. MH&PIS will provide awareness and professional advice on commodity investment specializing in Gold investment to local Malaysian market.

3.2 MISSION, VISION AND OBJECTIVES

Vision:
Exceed the expectations of customers by assisting them to obtain financial freedom through Gold investment.

Mission: 1. Create awareness to public on the significance of gold investment in current economic turmoil 2. Provide financial advisory and open the door to potential customers to invest in gold 3. Provide professional advice on investment method to ensure maximum return
Objectives:
1. To have RM1,000,000.00 worth of investment by 2012 year end closing 2. 90% of the investment made will generate 25% or more profit 3. To have a ratio of 1:10 (Account Manager : Account) by 2012 year end closing for better service

3.3 STRENGTH AND CORE COMPETENCIES

MH&PIS will have strong back up from Public Gold under its agent scheme. This will include support in terms of technical and after sales advisory, and priority in terms on order placement. MH&PIS owners are also committed and deeply involved in Gold investment thus in depth market study will be conducted frequently and such information will always be available for clients.

3.4 CHALLENGES

Gold investment is considered relatively new in the investment market, in the sense of awareness. MH&PIS main challenge is to create a catchy brand image, gain trust from potential clients and attracting customers towards our services.
Other investment methods and players which are currently and already established in the local market will also be a major challenge, such as: a) Public Gold agents b) Other Gold investment companies with different brand name such as Maybank Kijang Emas, UOB Gold Bullion, Kelantan Dinar Emas etc c) Unit Trust and Amanah Saham Bumiputera (ASB), and their likes

4. INDUSTRY ANALYSIS

* Question 1: What Are the Industry’s Dominant Economic Features?
In 2006, gold represented 0.2% of world wealth. At the end of 2007, it was about 0.4%. Depending on what wealth destruction is thought in 2008, it may have been 0.6%.” - Jeffrey Christian of the CPM consultancy. According to the World Gold Council’s Marcus Grubb, the current gold investment allocation stands at less than 0.6% of total global wealth, as shown in Diagram 1 below.
(http://www.moneyweek.com/investments/precious-metals-and-gems/gold-investment-has-more-room-for-growth-63944)
Diagram 1

Above diagram clearly indicates that there are a lot of rooms and opportunities to explore. The gold investment has value that always increases. The fluctuation of its value is also very small. So, we also can say that gold investment is the safest investment you can use. Diagram 2 below shows how Gold has performed for the past 10 years against S&P 500 index (Standard & Poor 500).

Diagram 2

* Question 2: How Strong Are Competitive Forces?
Porter Five Forces is used to determine the competitive intensity and therefore attractiveness of this business venture that we are embarking. Attractiveness in this context refers to the overall industry profitability. These five competitive forces are as shown in Diagram 3 below.
Diagram 3

a) Competitive Rivalry Within An Industry
Investment is one of the means to accumulate wealth. One of the popular means is via Unit Trust. However, there is a recent awareness and upsurge in demand for the precious metal market investment. What was previously made known only to a scarce group of people, are now being shared and communicated to all especially when inflation is on the rise, fiat monies buying power is depreciating and USD is no longer a reliable currency.

Diagram 4
Buyers are now in abundance and the demand has noticeably increased. Diagram 4 shows Gold Demand against Production (Supply) which clearly indicates the buyer demand is growing rapidly.
On top of that, Gold’s Return of Investment (ROI) is relatively more attractive compared to its competitors in other investment schools. It is illustrated clearly under Diagram 5. At an average, the ROI is as such: * Gold – 28% * ASB – 10.74% * Unit Trust – 19.42%

Diagram 5

b) Threats of New Entrance
This industry has proved to be profitable as long as a proper strategy and a market study are conducted diligently. However, it will require quite a significant capital to start off with this industry. This is because you are advised to have your own Gold stock in order to turn around the business.

PUBLIC GOLD PRICE (as of 10th Dec 2011)
(Inclusive all costs, Ex Penang, Malaysia) Weight | Sell Price | Buy Price | 10 gram | RM 1,916.00 | RM 1,762.00 | 20 gram | RM 3,796.00 | RM 3,568.00 | 50 gram | RM 9,445.00 | RM 8,926.00 | 100 gram | RM 18,802.00 | RM 17,862.00 | 250 gram | RM 46,785.00 | RM 44,679.00 | |
Diagram 6

Minimum advised stock keeping is 1 kilogram which is approximately RM190,000.00.

c) Threat of Substitutes
There is another precious metal in the market which is fast gaining market interest. The said product is Silver. The price is still relatively low as below.

PUBLIC GOLD PRICE (as of 10th Dec 2011)
(Inclusive all costs, Ex Penang, Malaysia) Weight | Sell Price | Buy Price | 100 gram | RM 414.00 | RM 352.00 | 250 gram | RM 1,032.00 | RM 887.00 | 500 gram | RM 2,056.00 | RM1,788.00 | 1 kilogram | RM 4,095.00 | RM 3,603.00 | |
Diagram 7

Silver will also be part of MH&PIS product of service in the near future. As of now, concentration is on Gold as the key benefits will be more presentable to target audience in terms of: * To earn potentially higher return from appreciation in the Gold price * Small difference between selling and buying price * Affordable initial purchase and subsequent investment * Gold is the best hedge against inflation * The alternative investment avenue in order to build up personal Gold portfolio which is cheaper compared to jewelry as the latter will incur additional cost on workmanship

d) Bargaining Power of Suppliers
There are two (2) options for Gold investment that is via physical Gold or Bank Account. It is advisable for potential investors to opt for physical Gold as it can actually be seen in the physical form thus it can act as how money does and be liquidated easily. Having physical gold will also allow you to exercise pawning should you are in need of urgent cash.

Gold investment is actually an oligopolistic market whereby only small pools of suppliers are available in the market and able to provide the supply.
They are namely: * Physical Gold * Maybank - Kijang Emas Gold Coin * UOB Bank – Gold Coin and Bullion * Public Fine Gold International Sdn. Bhd. Gold – Gold Coin and Bullion * Public Dinar – Gold Coin * Kelantan Dinar – Gold Coin * Bank Account * Maybank : Gold Saving Passbook Account (GSPA) * Public Bank : Gold Investment Account (GIA)

e) Bargaining Power of Buyers
Unlike fiat money, Gold price is not determined by any government thus it will very much depend on the supply-demand relationship. Investors will have to do their homework and market study before investing, and this is where MH&PIS will provide our value add. Potential investors will be equipped with the necessary information, advice and guidance to ensure their main objective is addressed and enter to market at the most suitable timing.

Competitive environment is ideal from a profit-making standpoint when the rivalry is moderate, entry barriers are high, good substitutes do not exist, and suppliers and buyers/customers are in a weak bargaining position.
Based on Porter Five Forces, MH&PIS came out with a review table and formulate it in a way that if the Supply Market Complexity result shows more than 1.5, it is viable for MH&PIS to enter the business. The final result is as per Diagram 8.

Diagram 8 * Question 3: What Forces Are Driving Industry Change and What Impacts Will They Have?
Among the main driving factor for the change of mind are monetary history of fiat money, USD currency weakening, inflation and the bullish trend of Gold itself.

Diagram 9
(http://financialindependent.blogspot.com/2011/02/latest-fd-epf-inflation-blr-and-saving.html)

What can be concluded from Diagram 9? * Saving rates is getting lower and lower thus, alternative ways are need to be identified to generate money * Fix Deposit (FD) is slightly better than Savings as it is higher than the inflation rate in most of the years. However, keep in mind that “personal inflation rate” is the thing that is needed to be looked at (not the inflation rate reported by the government!) * EPF is the best investment vehicle (of course only compared to FD and Savings) and it is catching up the Base Lending Rate (BLR) rate (but still below BLR). Withdrawing the EPF for Mutual Fund is an option as long as the mutual fund return is higher than 6%.
The erosion of the purchasing power of dollar has also contributed to the rise of Gold price. Historically, the deterioration of the dollar has been a more important determinant of the performance of Gold than traditional inflation. Gold tends to do best when the value of dollar is eroding and a significant pullback in the value of dollar has been seen versus other currencies over recent years. Please refer Diagram 10.
Diagram 10
Part of the relationship between Gold and the dollar is mechanical. As Gold is valued in dollars, a declining dollar by definition will lead to higher Gold prices. However, the relationship between Gold and dollar also reflects a second dynamic. In those periods when investors are uncomfortable with any fiat currency, including dollar, Gold is the natural beneficiary.

* Question 4: What Market Positions Do Rivals Occupy

| Maybank * Coin * GSPA | Public Gold * Coin * Bullion * GIA | Kelantan Dinar * Coin | UOB * Coin * Bullion | | | | |

Diagram 11

Diagram 11 shows that Public Gold has the most variety of products of Gold investment, the highest return of investment as it has the lowest margin spreads between 4.5%-6% and 3%-4%, for physical gold and bank account, respectively. Public Gold has its own minting and refining factory thus there is no issue in terms of product availability in the market, unlike the rest of its competitors. * Question 5: What Strategic Moves Are Rivals Likely to Make Next?
The most likely moves that rivals will take are, and not limited to: i. varying their product offerings ii. having their own minting and refining factory iii. lowering their margin spread

* Question 6: What Are the Key Factors for Future Competitive Success?
MH&PIS acknowledges what the driving factors for potential investors to go into the market, that is, without any doubt to gain profit and accumulate wealth. In doing so, they need to be well informed of the market situation and being part time investors (as some of them are working), they will need to get speedy answers and a reliable source for them to make a calculated and conscious decision before entering any investment market.

In view of that, MH&PIS will be committed and devoted to provide the best service in terms of: i. Market information - previous, present and future, so that investors will have a piece of mind when they enter the market. ii. Investment method advice – there are several ways to enter the market thus, investors’ background, objective and target will be taken into account. iii. Introduce more investment options, for example Silver and also jewelry with no workmanship cost.

* Question 7: Does the Outlook for the Industry Offer the Company an Attractive Opportunity?
Based on the answers for Question 1 to 6 above, the answer is YES

5. S.W.O.T ANALYSIS

Strength a) We are able to respond very quickly as we have no red tape, no need for the higher management approval, etc b) We are able to give really good customer care, as the current small amount of work which means that we have plenty of time to devote to customers. c) Our principal and financial advisors have strong credential and reputation within the market. d) We can change the direction quickly if we find that our marketing is not working. e) We have little overhead, thus we can offer good value to customers. f) We have several methods of Gold investment thus creating sufficient options for customers to choose from.

Weakness a) Our company has no market presence or reputation. b) We have a small number of staff. c) We are vulnerable to vital staff being sick, leaving, etc. d) Our cash flow will be very tight at the earlier stage.

Opportunities a) Our business sector is expanding, with many future opportunities for success. b) The principal has other products such as Silver and jewelry. c) Our competitors may be slow to counter attack with new products.

Threats a) Competitors have tendency to poach our competitive staff. b) A small change in focus of a large competitor might wipe out any market position we achieve.

The graphical presentation of S.W.O.T can be seen as per Diagram 12

| Helpful | Harmful | Internal | Strength * Quick in response to market changes and no red tape * Devotion to customers * Reputable principal and advisors * Create options on how to invest – investors have say on it | Weakness * New in market * Small number of staff thus vulnerable to vital staff taking leave etc * Tight cash flow | External | Opportunities * The business is new and expanding * Other products to offer * Competitors are slow to counter attack | Threats * Poaching of staff * Change of focus from competitors |
Diagram 12

Strategies need to be devised to ensure company objectives are met. TOWS Analysis is an effective way of combining: (refer Diagram 13) a) internal strengths with external opportunities and threats b) internal weaknesses with external opportunities and threats

4. 5. 6.2 T.O.W.S ANALYSIS

| | INTERNAL | | | Strength * Quick in response to market changes and no red tape * Devotion to customers * The reputable principal and advisors * Create options on how to invest – investors have say on it | Weakness * New in the market * Small number of staff thus vulnerable to vital staff taking leave etc * Tight cash flow | EXTERNAL | Opportunities * The business is new and expanding * Other products to offer * Competitors are slow to counter attack | Strength/Opportunities * Target specific potential customers * Develop a proposal on investment based on the customer’s capability | Weakness/Opportunities * Utilize technology such as the Internet to market products * Collaborate with financial institutions to provide loans for potential customers * Flexible working hours for staff as long as they meet the given target * Tight cash flow | | Threats * Poaching of staff * Change of focus from competitor | Strength/Threats * Provide options of taking in university students for practical training * Leverage on the principal for better business strategies and networking * Provide a price discount – deduct from dealer’s incentive | Weakness/Threats * Provide options of taking in university students for practical training * Enroll employees with investment courses * Subscribe online with sites that frequently update investment news |
Diagram 13

6. BUSINESS STRATEGY

Based on TOWS Analysis in Diagram 13, MH&PIS Business Strategies are: a) Market Target - Narrow Buyer Segment (Niche Market) b) Competitive Advantage Pursued a. Focused Low-Cost Strategy b. Focused Differentiation Strategy

Diagram 14

a) Market Target - Narrow Buyer Segment (Niche Market)

Gold investment will require quite a significant capital to start off with (please refer to Diagram 6). Based on Malaysian Household Monthly Income (Diagram 15), MH&PIS target market will be those with combined income of more than RM10,000.00 per month which constitute only less than 5%. The target audience will generally be the executive level (minimum), dual income parents working in private sectors and businessman/woman. This is to ensure that they are financially capable to fork out and reserve the money required for the investment.
Diagram 15 (http://voyager8.blogspot.com/2008/09/malaysian-household-monthly-income.html

Subsequent target will be those with income in the band of RM5,000.00 to RM10,000.00. There is a possibility that this group will be offered with other commodity investment, which is Silver.

b) Focused Low-Cost Strategy

T.O.W.S Analysis | Strategy and Justification | Strength/Threats | * Provide an option of taking in university students for practical training * Universities are actively looking for companies who would be able to offer the final year undergraduates some working experience. * MH&PIS can utilize their capabilities and at the same time, in return, teach them the reality of working environment. * Their analytical and tactfulness will be of great help in collecting the market data and exercise some statistical calculation. * Provide price discount – deduct from dealer’s incentive * The principal (Public Gold) provides incentives in the form of percentage (%) from the investment that a dealer/company brings in. * In order to attract potential investors, MH&PIS will give some portion of the incentive to investors so that their return is maximized and differentiate us from the rest of the competitors. | Weakness/Opportunity | * Collaborate with financial institutions to provide loans for potential customers * MH&PIS is looking at Bank Muamalat for this collaboration * This will be a win-win business proposal for both parties as MH&PIS will be able to assist the investors to make an investment loan and Bank Muamalat will increase its sales volume |

c) Focused Differentiation Strategy

T.O.W.S Analysis | Strategy and Justification | Strength/Opportunity | * Develop a proposal on investment based on the customer’s capability * Investors come from different backgrounds and financial strengths. * One of MH&PIS missions is to provide professional advice on the investment method to maximize the return. * The proposed methods are: * Buy physical gold as an asset – long term investment. * Buy low, sell high – short term investment. * Make a maximum loan and buy physical Gold – short/long term * Invest using GIA, no physical Gold (lower margin spread) * Pawn and buy more Gold . * MH&PIS has the capable resources to evaluate the customer’s financial ability and advice the best method to invest. | Strength/Threat | * Leverage on the principal for better business strategies and networking * Public Gold is an established and reputable organization with structured business strategies which MH&PIS can adopt where applicable. * Public Gold has a comprehensive training schedule and module with credible professionals conducting it | Weakness/Opportunity | * Utilize technology such as the Internet to market products * The Internet is the best communication to communicate and sell products * All product information can be downloaded and transactions can be made online * Flexible working hours for staff as long as they meet the given target * Being a new company with scarce manpower and stretch targets, MH&PIS is lenient in terms of office hours. * The nature of business itself does not confine the workforce to be in the office all the time. * Staffs are treated with respect and in return, bring in more investors to the company. * Enroll employees with relevant investment courses * All staff will be equipped with necessary knowledge to ensure that they are capable to interpret the market and advice customers accordingly. * MH&PIS can afford to send them to courses since the company is still new and adopt the culture of continuous learning. * Subscribe online with sites that frequently update investment news. * This is crucial as MH&PIS need to be on top of any issues that will have an impact to our Gold investment * On top of that, we must also be aware of any change of strategy in the market that is being applied by our competitors so that an immediate counter action can be taken. | 7. OPERATIONAL PLAN

6. 7. 8.3 EXECUTION TIMELINE

MH&PIS will follow the following service execution model to enter into Gold investment business.

Task | Execution Period | | Dec 2011 | Jan 2012 | Feb 2012 | Mar 2012 | Choosing location | | | | | Website Development | | | | | Hiring and Training Staff | | | | | Advertising | | | | | Official Launch | | | | |

8.4 LOCATION

MH&PIS will be operating in Taman Komersil Senawang, Seremban, Negeri Sembilan. It is an area surrounded by housing areas and shop lots. Maybank and unit trust agents have already had their offices there. This is actually a great opportunity as there are a lot of potential customers that have not been tapped.

8.5 PERSONNEL

MH&PIS will start with a total of 10 initial staff that includes owners as well.