Versense Tree House

7/31/2019 Versense Tree House

1/49


2/49


3/49

Versense Tree House

Manufacturing

Business Plan


4/49


5/49

Table Of Contents

COMPANY DESCRIPTION.......................................................ERROR! BOOKMARK NOT DEFINE

MISSION STATEMENT .................................................................................................................................GOALS &OBJECTIVES ................................................................................................................................BUSINESS PHILOSPHY.................................................................................................................................

TARGET MARKET ...................................................................................................................................

PHASE 1: .....................................................................................................................................................PHASE 2: .....................................................................................................................................................PHASE 3: .....................................................................................................................................................

DESCRIBING INDUSTRY: .......................................................................................................................1

FORM OF BUSINESS: ..................................................................................................................................1DESCRIBING THE PRODUCT ................................................................................................................1

FEATURES & BENEFITS OF THE VERSENSE TREEHOUSE ............................................................................1

ECONOMICS OF PLAN ............................................................................................................................1

SIZE OF THE MARKET .................................................................................................................................1POTENTIAL SHARE IN MARKET .................................................................................................................1POTENTIAL DEMAND IN THE MARKET.......................................................................................................1GROWTH POTENTIALS ...............................................................................................................................1POTENTIAL BARRIERS &RISKS .................................................................................................................1

CUSTOMER DESCRIPTION ...................................................................................................................1

DEMOGRAPHICALLY..................................................................................................................................1GEOGRAPHICALLY.....................................................................................................................................1

COMPETITION ..........................................................................................................................................1

HOW TO FACE COMPETITION .....................................................................................................................1

PROMOTIONAL STRATEGIES & BUDGET: ......................................................................................2

PROMOTIONAL STRATEGIES: .....................................................................................................................2

CASE STUDY ..............................................................................................................................................2

POWER OF NATURE IS PROFOUND ..............................................................................................................3


6/49


7/49

Company Description

Versense is a private organization producing/manufacturingtree houses & Giving your child a health place to nurture at & yourgarden a new look, The Firm intends to provide valuable customerwith customized & uniquely designed tree house conforming to theirneeds & taste giving their children a reason for spending free timeamong natural setup reducing the impact of modern day technologyon keen minds of young children.

Mission Statement

To introduce the concept of tree house in the local marketspecifically targeting younger segment, revolutionizing the conceptof tree houses an important tool for attracting younger generation tonatural environment, as a market leader with patented unique designs& features to grasp & retain maximum share in market

Goals & Objectives

Goals

The Firm Aims to prove itself as a market leader in thebusiness by grasping higher market share in first phase whichis aimed to be transitioned to later phase targetinginternational market as well thorough patented unique &classical designs with more than utilization as a tree house forchildren, making it a new way of leisure & doing work as

well.

Objectives

To target the upper middle & elite classresiding in Lahore at first phase then broadenmarket through inland & international trade(export) as well as broadening the targetaudience


8/49

To attain status of a brand with unique

patented & copyrighted designs To achieve target of annual sales of Rs.10

Million in initial 2-3 years extending it toRs.50 Million p.a. in 5 years To introduce the firm as a socially responsible

corporate entity through propagating theimportance of natural environment & effect ofgreenery & plants on human mental & physicalhealth resulting in higher performance &satisfaction.

To Make Versense Tree House one ofimportant features of every (targeted) house,

through promoting tagline that you have lawnbut no tree house Impossible!

Business Philosphy

Business has philosophy of equi-exchange that givemaximum potential value to our customer simultaneously creating avalue for business as well in terms of higher market name, lead &

share, moreover creating Sensing the Green atmosphere as asocially responsible entity.

Tagline

Nature is Important , do make bonds with it . Versense is away to make this relation stronger & Comfortable.


9/49

Target Market

The business has planned to expand the potential targetmarket in following proposed stages / phases:

Phase 1: a) Children / Student of age group between 8 to 16will specifically target with highlighting the potential benefits ofliving in a near to nature setup & its effect on human mental &physical health.

Targeting Old People to have a special place (Versense Tree House ) designed specifically in alignment of theirneeds to let them enjoy friendship of nature.

b) In First Phase geographically we will be targetingthe developed residential societies of Lahore specifically.

Phase 2: a) Propagating the idea of tree house as a healthyambiance to be in & work in, not only for children but for everymember of society to spend some of their time in such a naturalhealthy flourishing activity that is supposed to be the new way!

b) Geographically , our next phase is to go at Nationallevel

Phase 3: To launch our Brand with all its unique designs &values propositions in international market.


10/49

1

Describing Industry:

The industry in which Versense primarily falls is wood worksindustry. In Pakistan the concept of Tree House is a new one howeverthe wood works & furniture manufacturers are just an edge away todomain of tree house business.

Therefore for the sake of industry analysis the followingbusinesses will be considered:

Furniture Manufacture

Wooden Door Manufacturer

Wooden Artifacts

Wooden Arches & Roofs etc.

Form of Business:

Versense is planned to be a private (limited) corporate entityto enjoy the benefit of the structure & further more availingmaximum investment & financing opportunity. However for longterm planning the company can go for IPOs at point in time whenowners foresee much opportunity in such a structure but it will beconsidered for long run only.


11/49

1

Describing the Product

Versense Tree House , is proposed to be more than anordinary tree house but a place to build & live your dream. OurProduct is proposed to be more than of tangible nature. Secondly theproduct is featured to be customized in nature & unique in its design,Design itself being a product or property of Versense Pvt. Ltd.

Features & benefits of the Versense TreeHouse

Features

Unique & Classical designs for your Style & Comfort, whichyou cant find anywhere else

Customizable Sizes with Optional Add-Ons & extra featuresto opt for

Durability Issues are no issue

Classically made from durable water resistant Wood.

Fully secured from wind ,rain & weather effects

Constructed with keeping in mind Safety Maesures of thecustomer

Proper after sales services & maintenance

Specially designed for you by an expert Versense architect

Interior Decoration Facility also available If you have Lawn but no Tree ; Dont Worry

Economical Package with Different Payment Packages

Repair! just a Call Away

Electrification & Fixtures are part of the Package

Kitchen ,Washroom etc. You want it Have it.

Free Checkup for any Allergy to Plants & Wood beforeinstallation


12/49

1

Benefits

Your Tool to Live with Nature

Have a Healthy Mind And Body Want to Listen to the Natural Music Youve come to right

Place

A Whole new world to experience

Why not to go to picnic each day when you can make it inyour own lawn

Peace of Mind --- Is what we sale

If your children are addictive to technology--- Give themTree House

Bring Tree House In --- Your Leisure Companion


13/49

1

Economics of Plan

Size of the market

There is immense market available right now speciallyin Pakistan . No specific business is presenting such a productwhereas housing industry is on its boom for last 57 years. Now letus consider size of market as per different phases of the business asproposed

Phase 1 : Market in LahoreThe Market in Lahore for Tree House is a

golden opportunity for the market leader. New residential societiesare being developed in the city, focusing the upper middle classconstructing large houses to be effectively targeted with the concept.Similarly the opputunity of contracting with the big names of theconstruction industry could also be a way out.

Phase 2 : Pakistan as a MarketOnce brand name is established; entering

Pakistani market being a huge market is a like a gold mine for such abusiness there are plenty of urban cities & area alongwith manytourist sites that can serve as a huge potential market. Pakistan beinga rich in agriculture also gives us more opputunity to not only targeturban areas but to also go for villages with rich landlords serving aspotential target customers.

Phase 3: International Market

This again is a golden opportunity but sincethe concept already exists in market also led to potential threats &competition. However in spite of targeting the European market wecan go for middle eastern states a in initial phase to establish brandname in international market as well

Potential Market size can be estimated to be 10 to 15 % of houses in

Urban Areas with certain predetermined criteria which give us an


14/49

1

estimate of about 15000- 20000 houses in an urban center with higherto average population.

Phase 2 target market holds such urban centers in a range of about 5070 which get multiplied many a time for phase 3


15/49

1

Potential Share in Market

The concept is new in the market, in its instinctive nature

even new in global scenario as well. However Business will behaving a lead in the market both phase 1 & 2, whereas in Phase 3competition can be a potential threat but company planned to firstcapture & retain share of local market as defined in phase 1 & 2 thenafter establishing Brand name then to enter the 3rd phase

Potentially, being a market leader the major portion of marketis expected to be to gained soon which is also expected to be retainedas a predefined preference in companys strategic plan

The company do foresee upcoming competition once the ideais floated in the market however plans to gain & retain the position &benefits of leader of the idea thorough copyright & patenting thedesigns & ideas.

Potential Demand in the Market

The market is expected to have huge demand, the recentpattern of construction shows that even lower middle class isspending a considerable portion of amount in the additionalcomponents like fountains, & other decorative to the lawn ,suchproducts having mere utilization as decoration have high demandthen surely tree house proposing to be an upcoming need of thehousing societies just like having a porch or veranda will besubjected to high demand.

In reference to the first phase the target customer i.e. childrenabout more than 90% of the subject interrogated to either wishing to

have a tree house or not will answer in its favour. This signifieshigher demand, and specially for the product that is new to a marketdemand is to be created as per the defined pattern of market study.

To conclude in this regard, there is no forecast for facinglesser demand related issue, hence the demand potentials for the planare higher with no present supplier to response such demand in localmarket, therefore market show higher potential of returns.


16/49

1

Growth Potentials

The real state industry is expanding with the increase in trend

to move toward urban center & specifically due to over crowdingproblem in urban area new societies are being constructed with aconsiderable pace which is expected to continue even with higher rateprovided the potential relief in economic crisis.

However Still there is a lot of space to fill in, reflecting astraight defined rate for about 3- 5 years which is obviously expectedto grow since with construction of new residential societies, oldsocieties are also being renovated & reconstruction in older centersare being carried out with same pace.

Similarly the projection for the first phase, the lower middleclass is rapidly moving toward higher level of living yielding higherportion of population in urban areas to be potential target customer,which is also a positive potential in respect of growth.

Potential Barriers & Risks

Higher rate of inflation accompanying the higher growth

Fluctuation in prices for raw Material Uncertainty of financial sector & capital cost

Trend of investment toward conventional ideas

Ineffective implementation of Copyrights & Patents

Other Riskso General Risks

Systematic Unsystematic

o Financial Riskso

Credit Riskso Market Riskso Interest Rate Riskso Operational Riskso Liquidity Riskso Political Risks

Please refer Annexure for details


17/49

1


18/49

1

Customer Description

The Potential Customer Base for Tree House is simply anyone wholoves Nature

Basically devising & defining customer we have very simpleapproach for:

Demographically:

Phase 1: Customer will primarily be children of age group between 8to 16 & old men above 60 that have been retired & it is now theretime to take rest & have a peace of mind

Phase 2: a) Propose the Model of Tree House as a convention oftodays world of rapidly moving life with advancement in technology

therefore targeting every individual that stand at the level ofhierarchy of need to respond to such a new style of living

b) The Customer Base will be extended to professionals aswell along with targeting the tourist. We will be targeting

organizations to adopt tree house as culture & opening resorts thatprimarily feature Tree Houses.

Phase 3: Same Groups But in International Domain of Operations.

Geographically:

Phase 1: Targeting Elite Class & developed areas of Lahore likeDHA, Bahria Town, Lake City, Valencia, Raiwand Farm Houses etc.

Phase 2: Going National; targeting many large cities in Pakistan onsame ground as defined in phase 1 like; Karachi, Islamabad,Faisalabad etc. Similarly targeting tourist sites as well.

Phase 3: Going international; Specifically targeting Middle EasternCountries


19/49

1

Competition:

Since the Business in new both in its formation as well as ideatherefore no specified competition exist at national level i.e. for firsttwo phases however indirect competition do exist & needs to beconsidered as threat the following business can be potentialcompetitors to Versense .

Furniture Manufacturers

Construction Firms

Housing Societies

Local Carpenters

Local Estate Agents & Contractors

Architectures

Recreational Parks

How to Face Competition

Competitive Advantage:

Being a Market is our main Competitive advantageCoupling with Creation of Brand Name we can compete the potentialthreat with strategically planning the Marketing Plan.

Market Leader

Creating Brand Name in Market

Contracting with Construction Companies Contracting with Architectures

Patenting & Copyrighting Designs

Targeting Children through Psychological Symbolism

Introducing Versense As symbol to Tree House

Creating more than business relation with the TargetCustomers


20/49

2


21/49

2

Promotional Strategies &

Budget:

Versense Is Your Own Company , Your partner on journey

to reviving our relationship with the nature

Promotional Strategies:

Build more than a Business Relation with the target audience

Versense may develop a sample Tree House that should bekept open for visits by the target customer specially Children

Model Tree House should be Advertise thorough a MobileTree House Planted on truck to move around in targetedlocalities with special measures to develop relation with allinterested individuals ; introducing them to Versense ; takingtheir feedback , potential likeliness of designs & freemembership for model tree house visits creatingpsychological bond with Versense.

Creating a Cartoon Movie ; depicting a life of a child living inTree House ; symbolized thorough certain psycho-expressionof Versense e.g. Some sort of mark , a song or anything thatlives an expression of relation to the children ; Distribute theCDs for Free or you may arrange show on projector atdesignated play lands etc.

Proposed Budget: A reserve for about Rs.1.5 Million can beconsidered for Promotion


22/49

2

Management TeamHR

Versense Executive Board will comprise of the founding members &heads of all department in function. The structure will be as follow:

Department of Organization

Finance

Marketing

Research & Design

Procurement

Accounts

Legal Affairs

Social Relationship Affairs

Project Management

Production

However the founding members are entitle to head one or more thanone department

Technical Support & Staff

Supporto Attorneyo Engineering supporto Web Managero Horticulture Experto Interior Decoratoro Physician

Staffo Architecto AutoCAD operatoro Import Export Officer

Operational Staff


23/49

2

Production supervisor

Carpenter

Machine Worker

Polish man Carving

Helpers

Draftsman

Store Officer

Gate Keeper

HRExpense Sheet

Departmental Expense Budgets

The department budget allocation represents the expenses expected tobe incurred for development & improvement purposes

Departments Annual Budget

Finance 250000

Marketing 300000

Research & Design 275000Procurement 100000

Accounts 125000

Legal Affairs 185000

Social Relationship Affairs 175000

Project Management 175000

Production 100000

Total 1685000


24/49

2

Technical Support & Staff Expense Sheet

Support & Staff Annual Expense

Support

Attorney 220000Engineering support 250000

Web Manager 50000

Horticulture Expert 35000

Interior Decorator 125000

Physician 75000

Staff

Architect ( R & D) 420000 (35000 x 12)

AutoCAD operator 150000 (12500 x 12)Import Export Officer 150000 (12500 x 12)

Total 1475000


25/49

2

Operational Staff Expense Sheet (Wages)

Operational Staff Avg.

Req.

Monthly

Salary

Annual

SalaryProductionsupervisor

1 12000

144000

Carpenter 5 2500 (fix) 150000Machine Worker 2 9000 216000Polish man 3 4000 144000Carving 2 5000 120000Helpers 3 4000 144000Draftsman 1 6000 72000

Store Officer 1 9000 108000Gate Keeper 1 4000 48000Total 1146000

For Complete Production Staff Expense Please Refer DirectLabour Budget in Financial Plan Section


26/49

2

Design & Trademark registration planning

Versense intended to develop brand name with unique designs & newideas of living with nature ; to control the risks of loosing market incase the same designs are being produced by other competitor it isnecessary to register your design which is infact your capital assetsince we have to incur a huge amount on research & design bringingforward new product & designs of tree houses , therefore Versenseconsider it important to plan the patent & design registration to getsecured of potential theft or copy risks.( for Procedural matter refer toannexure )

Patent & Design Budget:

Patent Budget

Rs.

Patent Registration Fee 2250

Renewal of Patent after 5th year to 7thyear

3000

Renewal of Patent after 8th year to 11th

year

4500

Renewal of Patent after 12th year to15th year

6000

Renewal of Patent after 16th year to19th year

8000

Total 86000

Design Budget

Rs.Application for registration of designs 450

Application for registration of designs(WTO)

450

Application to Extend Copyright 750

Request for certificate 750

Total 2400


27/49

2


28/49

2

Exit & Growth Strategy

Versense Tree House Foresee Market Demand to have an increasingtrend for 20 year after which the legal status of designs & patent maystart becoming absolete alongwith change in technology & lifestylemay result in decline of demand or otherwise if the tree housebecomes a general trend & dropping the market share of Versense .

The following strategies can be adopted in order to face thedeclining market share or otherwise if investor want to withdraw thecapital out of business .

Exit Strategies

IPO --- transforming into Public Ltd.

Bringing new investors

Selling out Business

Converting Equity to Debt

Diverge the Line

Growth Strategies

Versense can expand horizontally into Entertainment, Hotel,Woodworks & Horticultural research Industry

Versense Tree Palace --- Hotel & Dreamland

Versense --- Tree Boy (Comics) ---- Legend of Tree Boy ---A Child Hero

Versense Tree Lodges

Versense House Designs

Versense Wooden Construction Versense Horticultural Lab

Versense Wood Pulp & Paper Products


29/49

2

Annexure


30/49

3

Annexure 1.1

Case Study 1

Power of nature is profound

"When children's cognitive functioning was compared before andafter they moved from poor- to better-quality housing that had moregreen spaces around, profound differences emerged in their attentioncapacities even when the effects of the improved housing were takeninto account," says Nancy Wells, assistant professor of design andenvironmental analysis in the New York State College of Human

Ecology at Cornell.

Wells also conducted a study that suggests the mental health of adultsimproves with a move from poor to quality housing.

Although the green-space study sample was small -- only 17 children-- the statistical findings were highly significant, says Wells. Childrenin the study who had the greatest gains in terms of "greenness"between their old and new homes showed the greatest improvements

in functioning. "The findings suggest that the power of nature isindeed profound," she says.

To conduct the study, published inEnvironment and Behavior(2000,Vol. 32, pp. 775-795), the researcher assessed the extent of naturalsurroundings around the children's old and new homes by rating, forexample, the amount of nature in the views from various rooms andthe degree of the yard's natural setting. To assess their children'sabilities to focus attention, parents answered a series of questionsfrom the Attention Deficit Disorders Evaluation Scale, a nationallystandardized measure of directed attention capacity.

"The results suggest that the natural environment may play a far moresignificant role in the well-being of children within a housingenvironment than has previously been recognized," Wells says. Shenotes that simple interventions, such as preserving existing trees,planting new trees or maintaining grassy areas, would likely have asignificant impact on children's welfare.


31/49

3

The study was funded in part by the University of Michigan and theU.S. Department of Agriculture (USDA) and its Forest Service.Wells' other study, which found a link between housing quality and

mental health, appears in the Journal of Consulting and ClinicalPsychology . Wells and her co-authors developed an observer-basedrating of quality of homes occupied by 207 low- and middle-incomewomen with at least one child. They also gauged the women's levelsof psychological distress. In addition, these measurements were usedin an urban sample of 31 low-income women before and after theymoved into a home constructed in collaboration with Habitat forHumanity.

"We consistently found that housing quality can affect mental health,

in that better-quality housing was related to lower levels ofpsychological distress, while statistically taking into account theeffects of income," says Wells. "The research suggests thatsignificantly better housing quality is linked to improvements inpsychological well-being. Such evidence is important and can beused to encourage legislators and policy-makers to promote housingimprovements for low- and moderate-income families." Theresearchers concluded that improved housing quality can benefitmental health. In addition, follow-up interviews conducted two years

later revealed that the women's levels of psychological distressremained low, suggesting that the improvements in mental health areunlikely to be a mere "honeymoon" effect.


32/49

3

Annexure 1.2

Case Study 2

Designer tree houses are a personal way to add fun and value to

your home, and they're not just for kids anymore.

When brothers Ron and John Daniels were growing up on a ranch,they built elaborate forts and tree houses to pass the time and earn theenvy of family and friends. Nowadays, not much has changed for theDaniels except that their creations sell from $7,000 to upward of$1 million and can be found in the backyards of homes all over the

world.

Once a symbol of childhood imagination and the test of a father'scarpentry prowess, tree houses are now becoming a luxurycommodity for people of all ages. Custom makers like the Danielssupply adults with a fun space for entertaining, relaxing, andworking. With proper insulation, wiring, and plumbing, aprofessional tree house can even become a livable extra bedroom forguests. For kids, designers can tailor a wonderland of imagination

that spares them from the jutting nails, creaky boards, and othersafety hazards of a homemade tree house.


33/49

3

Unsure whether the craftsmanship they learned in their youth wasenough to fuel an enterprisebut determined to give it a shottheDaniels brothers began showing a fairly basic tree-house prototype to

potential clients in 1998. "We didn't know if it would be a business,but we ended up selling 17 of them in [the first] four days," saysJohn.

Over the next eight years, their company, Daniels Wood Land inPaso Robles, Calif, worked hard to convince homeowners that treehouses could be aprofessionally designed luxuryadd-on to a home, like a spa or a remodeled kitchen. Every step alongthe way, the brothers refined their design, engineering, and

construction process, and selectively added new talent to their team.


34/49

3

Annexure 2.1

Risks of Starting Your Own Business (General

risks)

More than half of all entrepreneurial ventures fail. There are reasons that

business ventures fail, and, when we know what they are, we can avoid

them. There are risks involved with starting our own business. We could

lose a lot of money. We could become estranged from our family if we put

all our time and energy into work. We could lose our business to fire, an

earthquake, or flood. But there are risks involved with working for

somebody else, too. We mightlose our job. We might hate the job and be

miserable every day of your life. We might have to take a salary cut, or

become estranged from our family because we are traveling for weeks at a

time.

Most businesses fail because the person who started them didn't set

goals, or failed to thoroughly think through what he would do, and how he

would do it. Some entrepreneurs try to start a business without ever writing

a business plan, which is a huge mistake.

A business plan is the entrepreneur's bible, and an absolute necessity. It

not only serves as a road map for where your business will go and how

you'll get it there, it will be an important sales document when you're trying

to attract funding for your business.

If you do your homework, and adequately prepare before starting a

business, chances are good that you can make it work. And remember thatnot attempting something you really want because you're afraid of the risk

involved might be the biggest failure of all.

Risks can take two types

Systematic risk

Unsystematic risk
http://life.familyeducation.com/employment/personal-finance/47249.htmlhttp://life.familyeducation.com/employment/personal-finance/47249.htmlhttp://life.familyeducation.com/employment/personal-finance/47249.htmlhttp://life.familyeducation.com/employment/personal-finance/47249.html


35/49

3

Systematic risk

Systematic risk is the risk inherent to the entire market or entire market

segment. Interest rates, recession and wars all represent sources of

systematic risk because they affect the entire market and cannot be

avoided through diversification. This type of risk affects a broad range of

securities. Systematic risk can be mitigated only by being hedged.

Purchasing power, interest rate, and market risks fall into this category.

It refers to the movements of the whole economy. Even if we have a

perfectly diversified portfolio there is some risk that we cannot avoid and

this is the systemic risk. However, the systemic risk is not the same for allsecurities or portfolios. Different companies respond differently to a

recession or a booming economy. For example, think of the automobile

industry compared to the food industry in case of a recession. Both of them

will be affected negatively but food industry not as much as automobile

industry.

Un-systematic risk

It is specific to a company, industry, market, economy or country; it can be

reduced through diversification. The most common sources of unsystematic

risk are business risk and financial risk. Thus, the aim is to invest in various

assets so that they will not all be affected the same way by market events.

It is the antithesis of market (or systematic) risk. Thus, as portfolios become

more diversified, the unsystematic risk moves to zero because the risks of

specific securities cancel each other out. Components of unsystematic risk

include economic risk, business risk, financial risk, and accounting risk

Unsystematic risk is the security-investment risk that is not common to all

securities or the securities market, but instead is associated with the

securities of a particular issuer. Unsystematic risk affects a very specific

group of securities or an individual security. Unlike a systemic risk, un-

systemic risk can be avoided by portfolio diversification.


36/49

3

It is Opposite of Systematic Risk. Portion of an asset's risk that can be

eliminated through diversification. It results from the occurrence of random

events such as labor strikes, lawsuits, or loss of key accounts. This type of

risk is unique to a given asset. Business, liquidity, and default risks fall into

this category. It is assumed that any investor can create a portfolio in which

this type of risk is completely eliminated through diversification. In a

balanced portfolio of assets there'd be a spread between general market

risk and risks specific to individual components of that portfolio.

Other types of risks

1. Financial Risk

Portion of total corporate risk, over and above basic Business Risk, that

results from using debt. Business risk is caused by fluctuations of earnings

before interest and taxes (operating income). Business risk depends on

variability in demand, sales price, input prices, and amount of operating

leverage. Financial risk includes Default risk, which is the risk that the

borrower will be unable to make interest payments or principal repayments

on debt. The greater the firm's financial leverage , the higher is its financialrisk.

In essence financial risk is any risk associated with money.

Financial risk is the additional risk a shareholder bears when a company

uses debt in addition to equity financing. Companies that issue more debt

instruments would have higher financial risk than companies financed

mostly or entirely by equity.

2. Credit Risk

Companies carry credit risk when, for example, they do not demand up-

front cash payment for products or services. By delivering the product or

service first and billing the customer later - if it's a business customer the

terms may be quoted as net 30 - the company is carrying a risk between

the delivery and payment.
http://www.answers.com/topic/at-riskhttp://www.answers.com/topic/at-risk


37/49

3

Significant resources and sophisticated programs are used to analyze and

manage risk. Some companies run a credit risk department whose job is to

assess the financial health of their customers, and extend credit (or not)

accordingly. They may use in house programs to advice on avoiding,

reducing and transferring risk. They also use third party provided

intelligence. Companies like Moody's and Dun and Bradstreet provide such

information for a fee.

For example, a distributor selling its products to a troubled retailer may

attempt to lessen credit risk by tightening payment terms to "net 15", or by

actually selling fewer products on credit to the retailer, or even cutting off

credit entirely, and demanding payment in advance. Such strategies impactsales volume but reduce exposure to credit risk and subsequent payment

defaults.

Credit risk is not really manageable for very small companies (i.e., those

with only one or two customers). This makes these companies very

vulnerable to defaults, or even payment delays by their customers.

The use of a collection agency is not really a tool to manage credit risk;

rather, it is an extreme measure closer to a write down in that the creditor

expects a below-agreed return after the collection agency takes its share (if

it is able to get anything at all).

3. Interest rate risk

The impact of changing interest rates on a company's margin of profit is

usually called interest rate risk

Companies can use derivatives, specifically interest-rate swaps, to manage

interest-rate risk. An interest-rate swap is an agreement in which one party

promises to make fixed-interest-rate payments in exchange for floating

interest-rate payments. For a company that is holding long-term assets and

short-term liabilities, an interest-rate swap is exactly the sort of financial

instrument that will transfer the risk of rising interest rates to another party.

4. Operational Risk


38/49

3

An operational risk is a risk arising from a company's business functions

and from the practical implementation of the management's strategy.

A better definition is provided by the Basel Committee, who definesoperational risk as:

"The risk of loss resulting from inadequate or failed internal processes,

people and systems or from external events."

In many cases, credit and market risks are handled through a company's

financial department, whereas operational risk management is perhaps

coordinated centrally but most commonly implemented in different

operational units (e.g. the IT department takes care of information risks, the

HR department takes care of personnel risks, etc)

The Basel II definition talks only about operational risks or risks arising from

basic operations and practical execution of strategy, but excludes strategic

risk: i.e. the risk of a loss arising from a poor strategic business decision.

This definition also excludes reputational risk (damage to an organization

through loss of its reputation or standing) although it is understood that a

significant but non-catastrophic operational loss could still affect its

reputation possibly leading to a further collapse of its business and

organisational failure.

5. Liquidity Risk

The risk of a sudden demand for liquid funds is called liquidity risk.

Liquidity risk is financial risk due to uncertain liquidity. An institution might

lose liquidity if its credit rating falls, it experiences sudden unexpected cash

outflows, or some other event causes counterparties to avoid trading with or

lending to the institution. A firm is also exposed to liquidity risk if markets on

which it depends are subject to loss of liquidity.

Liquidity risk tends to compound other risks. If a trading organization has a

position in an illiquid asset, its limited ability to liquidate that position at short

notice will compound its market risk. Suppose a firm has offsetting cash


39/49

3

flows with two different counterparties on a given day. If the counterparty

that owes it a payment defaults, the firm will have to raise cash from other

sources to make its payment. Should it be unable to do so, it too will

default. Here, liquidity risk is compounding credit risk.

Accordingly, liquidity risk has to be managed in addition to market, credit

and other risks. Because of its tendency to compound other risks, it is

difficult or impossible to isolate liquidity risk. In all but the most simple of

circumstances, comprehensive metrics of liquidity risk do not exist. Certain

techniques of asset-liability management can be applied to assessing

liquidity risk. A simple test for liquidity risk is to look at future net cash flows

on a day-by-day basis. Any day that has a sizeable negative net cash flowis of concern. Such an analysis can be supplemented with stress testing.

Look at net cash flows on a day-to-day basis assuming that an important

counterparty defaults.

Analyses such as these cannot easily take into account contingent cash

flows, such as cash flows from derivatives or mortgage-backed securities. If

an organization's cash flows are largely contingent, liquidity risk may be

assessed using some form of scenario analysis. A general approach usingscenario analysis might entail the following high-level steps:

Construct multiple scenarios for market movements anddefaults over a given period of time

Assess day-to-day cash flows under each scenario.

Because balance sheets differ so significantly from one organization to the

next, there is little standardization in how such analyses are implemented.

Regulators are primarily concerned about systemic implications of liquidity

risk.

6. Market Risk

Market risk is the risk that the value of an investment will decrease due to

moves in market factors. The five standard market risk factors are:


40/49

4

Equity risk or the risk that stock prices will change.

Interest Rate risk or the risk that interest rates will change.

Currency risk or the risk that foreign exchange rates will change.

Commodity risk or the risk that commodity prices (e.g. grains,metals) will change.

Credit risk or the risk that credit prices/spreads will change.

7. Political Risk

Political risk is a type of risk faced by investors, corporations, and

governments. It is a risk that can be understood and managed with proper

aforethought and investment.

Broadly, political risk refers to the complications businesses and

governments may face as a result of what are commonly referred to as

political decisionsor any political change that alters the expected

outcome and value of a given economic action by changing the probability

of achieving business objectives. Political risk faced by firms can be

defined as the risk of a strategic, financial, or personnel loss for a firm

because of such nonmarket factors as macroeconomic and social policies

(fiscal, monetary, trade, investment, industrial, income, labor, anddevelopmental), or events related to political instability (terrorism, riots,

coups, civil war, and insurrection).Portfolio investors may face similar

financial losses. Moreover, governments may face complications in their

ability to execute diplomatic, military or other initiatives as a result of

political risk.

Companies may have a Chief Risk Officer who is charged with managing

political risk or, in many cases, this job falls to the Chief Financial Officer.

Political risk mitigation takes place before, during, and after an investment.

Prior to investment, businesses can perform due diligence related to local

partners and carefully word and structure their contracts. While a project is

on-going, the investor may benefit from building local political leverage

through community activities. After a risk has been realized, its effects may

be mitigated through post-hoc litigation and retaliation, as well as the


41/49

4

implementation of a previously developed contingency plan, or exit from the

market.


42/49

4

Annexure 3.1

Design Registration

1. What is a industrial design?

An industrial design is the ornamental or aesthetic aspect of

an article. The design may consist of three-dimensional

features, such as the shape or surface of an article, or of two

dimensional features, such as patterns, lines or color.

Industrial designs are applied to a wide variety of products of

industry and handicraft: from technical and medical

instruments to watches, jewelry and other luxury items; from

house wares and electrical appliances to vehicles and

architectural structures; from textile designs to leisure goods.

An industrial design is primarily of an aesthetic or visual

nature, and does not relate to the technical features of an

article.

2. Advantages of Registered Designs

The owner is able to prevent unauthorized copying or

imitation of his or her design by third parties. In

addition, as industrial designs add to the commercial

value of a product & facilitate its marketing &

commercialization, their protection helps ensure that a

fair return on investment is obtained.

Protection of industrial designs encourages fair

competition & honest trade practices. It leads to the

production of more aesthetically attractive &

diversified products, thereby broadening consumer

choice.

Industrial design protection acts as a spur to a

countrys economic development by contributing to


43/49

4

the expansion of commercial activities & by

enhancing the export potential of national product.

3. Disadvantages of Unregistered Designs

The owner is unable to prevent unauthorized copying

or limitation of his or her design by third parties.

Unprotection of industrial designs discourages unfair

competition & dishonest trade practices.

4. Who may apply for Registration?

Except in the case of an application under Section 11

of the Ordinance, any person claiming to be theproprietor of any new or original design not previously

published any where in the world may make an

application for the registration of such design in

Pakistan. Thus the applicant need not be the author of

the design.

The proprietor or creator of a design is defined in

Section 2(b) of the Ordinance, which reads as follows:

Where the author or creator of the design, for good

Consideration executes the work for some other

person, the person for whom the design is so executed;

Where a design or the right to apply a design to an

article becomes vested, whether by assignment,

transmission or operation of law, in any person other

than the original proprietor, either alone or jointly withthe original proprietor, in respect and to the extent in

and to which the design or right has been so vested,

that other person or, as the case may be the original

proprietor and that other person.

If and to the extent to which two or more person have

created the same design independently of each other,

the person whose application has the earliest filing


44/49

4

date or, if priority is claimed, the earliest validity

claimed priority date shall have the right to the

registration of industrial design, as long as the said

application is not withdrawn, abandoned or rejected;

and

In any other case, author or creator of the design as

may be assigned or as may be transferred by

succession.

The term person includes a Company Body

Corporate, Firm, partnership, etc.

5. What may not be registered?

What may not be registered: The following do not constitute

registrable designs within meaning of the Ordinance.

A design, which in the opinion of the Registrar of

Designs is not new or original.

A design which is the same as a design already

registered or published any where in the world before

the date of the application (or, in the case of anapplication claiming priority of date under Section 11,

before the priority date), or which differs from such

prior design only in immaterial details or in features

which are variants commonly used in the trade.

But under Section 6 of the Ordinance, the following is

an exception to this rule: - Where the registered

proprietor of a design registered in respect of any

article makes an application.

a. for registration in respect of one or more other

articles of the registered design, or

b. for registration in respect of the same or one or

more other articles of a design consisting of the

registered design with modifications or

variations not sufficient to alter the character

or substantially to affect the identity thereof.


45/49

4

The application shall not be refused and the

registration made on that application should

not be invalidated by reason only of the

previous registration or publication of the

registered design:

Provided that the period of registration of a

design registered by virtue of this section shall

not extend beyond the expiration of the

original and extended period of registration in

the original registered design.

A method or principle of construction, or animprovement in the construction, arrangement or

application of machinery.

Anything, which is in substance a mere mechanical

device. In other words, a design consisting features of

shape or configuration which are dictated solely by the

function which the article to be made in that shape or

configuration has to perform.

Any Trade Marks as defined in Section 2 of the TradeMarks Act, 1940.

A mere adjunction of two or more known articles of

known shape or patterns.

Copyrights in literary, dramatic, musical and artistic

work within the meaning of Copyrights Ordinance,

1962. In other words, works of sculpture, other than

casts or models used or intended to be used as models

or patterns to be multiplied by any industrial process;

wall plaques and medals; and printed mater primarily

of a literary or artistic character including book-

jackets, calendars, certificates, coupons, dressmaking

patterns, greeting cards, leaflets, maps plans,

postcards, stamps, trade advertisements, trade forms

and cards, transfers and the like.


46/49

4

A design containing a reproduction or imitation of the

armorial bearings, emblems, seals, coat-of-arms,

insignia, orders of chivalry, decorations or flags of any

country, city, borough, town, place, society, body

corporate, institution or person, or the name or portrait

of a living or dead person, unless the consent of the

appropriate official or person to the registration of

design is furnished to the Registrar.

The Pakistan Names and Emblems (Prevention of

Unauthorized Use) Act, 1957 specifically precludes

from registration as Design or Patents (Under theRegistered Designs Ordinance, 2000 and the Patents

Ordinance, 2000) the following names or emblems,

and their reproductions or imitations:

6. Who may apply for Registration?

Except in the case of an application under Section 11 of the

Ordinance, any person claiming to be the proprietor of anynew or original design not previously published any where in

the world may make an application for the registration of such

design in Pakistan. Thus the applicant need not be the author

of the design.

The proprietor or creator of a design is defined in Section

2(b) of the Ordinance, which reads as follows:

Where the author or creator of the design, for good

Consideration executes the work for some other

person, the person for whom the design is so executed;

Where a design or the right to apply a design to an

article becomes vested, whether by assignment,

transmission or operation of law, in any person other

than the original proprietor, either alone or jointly with

the original proprietor, in respect and to the extent in


47/49

4

and to which the design or right has been so vested,

that other person or, as the case may be the original

proprietor and that other person.

If and to the extent to which two or more person have

created the same design independently of each other,

the person whose application has the earliest filing

date or, if priority is claimed, the earliest validity

claimed priority date shall have the right to the

registration of industrial design, as long as the said

application is not withdrawn, abandoned or rejected;

and In any other case, author or creator of the design as

may be assigned or as may be transferred by

succession.

The term person includes a Company Body

Corporate, Firm, partnership, etc.

7. Requirements for registration of a design

An application for the registration of a design must be made

on prescribed Form, and must be accompanied by the

prescribed number of representations of the design or the

specimen of the article bearing the design and by the

prescribed fee and affidavit in accordance with Rule 63B.

If it is desired to register the same design in more than one

class, a separate application must be made in each class.


48/49

4

Annexure 3.2

What is patent?

Patent is an official document, recognized by law that confers a rightor a titleespecially the sole right to make, use or sell some invention orprocess, henceprotecting the said invention or process.5. Patent laws applicable in Pakistan

6. What Invention is patentable?

Any invention is patentable, if it is

7. Cases in which Patent will not be Granteda) For an invention, the commercial exploitation of which would beinjurious topublic order, morality, environment or the protection of human,animal andplant life.

b) For plants and animals other than micro-organismsc) For biological processes for the production of plants and animals.d) For diagnostic, therapeutic and surgical methods for the treatmentof humansand animals.e) For a new and consequent use of a known product or process.f) For a change in the physical appearance of a chemical productwhere thechemical formula or process of manufacture remains the same.

However, thisclause shall not apply to an invention that does fulfill the criterion ofpatentability.8. Who can apply for patent

An application for the grant of a patent may be submitted by any ofthe followingpersons:Patent Registration Procedure SMEDA Legal Services Cell

61. The true and first inventor or inventors of the invention


49/49

42. Assignee or successors-in-interest of the true and first inventor orinventors3. The legal representatives of any deceased person who was entitled

to file anapplication immediately before his death.NOTE: Every application shall be made in respect of one inventiononly.However an application may also be made for an improvement ormodification to themain invention. (Patent of Addition)9. Where application is not made by the Inventor

Incase an application is not made by the inventor himself, it must beendorsed by him

in the presence of two witnesses with a statement that the applicationmay be made inhis name.:

Versense Tree House

Documents

Transcript of Versense Tree House