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OCT 2009
QUESTION 1 a) Define technology entrepreneurship and entrepreneurial process. (6 marks)

Technology entrepreneurship can be defined as a form of entrepreneurship and business leadership focused on identifying high-potential, technology-intensive business opportunity for possible exploitation into new products, processes or services The entrepreneurial process in general encompasses all the cognitive (thinking) and behavioral (action) steps from the initial emergence of a rough business idea until the creation of a new business venture or the process is terminated.

b) Explain the three (3) phases of the entrepreneurial process. Illustrate using a diagram. (14 marks) Figure 1 shows the entrepreneurial process with examples of activities at each stage

The entrepreneurial process is generally composed of three key phases Phase 1: The idea generation or idea discovery phase Individual or group enter this phase by either Actively searching for business possibilities that the can offer in a better, more creative or efficient form. Discovering a solution for their own problem experienced at work, play or in the marketplace that has the potential of being shared with others who are willing to pay for the solution. In Technology entrepreneurship, this idea formation or discovery phase may be recognizable by the fact that the business idea or problem solution involves creating a new technology or adapting an existing technology. Phase2: The idea evaluation and development phase This phase is characterized by efforts to better understand what it will take to bring the idea or opportunity into a full-fledge economic activity or business In technology entrepreneurship, some key activities at this stage include doing the research and development work to invent or innovate a new technology-based product, process or service preparing the initial technology blueprint concept testing prototyping, market testing Phase 3: The idea exploitation phase This phase is generally characterized by the decision to pursue the business opportunity or not The decision at this phase can take three basic forms: proceed to exploit the opportunity abandon the current idea and go back to search for other ideas terminate the process totally and not pursue any other business ideas

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QUESTION 2 Creativity should be encouraged among team members or within an enterprise. One of the resources of a creative enterprise is motivation towards action. a) Identify five (5) other resources of a creative enterprise. (10 marks) 1. 2. 3. 4. 5. 6. Knowledge in the required domain and fields o I.e. in-depth knowledge of your industry. Intellectual abilities to recognize connections, redefine problems, and envision and analyze possible practical ideas and solutions. Inventive thinking about the problem in novel ways Motivation towards action Opportunity-oriented personality and openness to change. Contextual understanding that supports creativity and mitigates risks.

b) Describe the four (4) phases of creativity process. (10 marks) Phase 1: Background or Knowledge Accumulation  Study the background of the subject matter  This may requires extensive reading, discussion with experts, practitioners, academicians, researchers in the field, attending workshops and seminars, exploring various unrelated areas etc.  These explorations expose entrepreneurs to a variety of perspectives on the subject matter. Phase 2: The Mind Incubation Process  An individual immerse himself or herself in the data, allowing the subconscious mind to muse or ponder on the information gathered.  Sleep on it getting away from the subject matter and letting the subconscious mind working on it allows creativity to spring forth.  Incubation can be induced by: engaging in mindless activities such as painting the house or cutting grass, meditate or play sports or board games. The rationale is new ideas often emerge when we are busy doing something unrelated to the matter. Phase 3: The Idea Experience  This is when the person discovers the solution or the idea. The idea may appear out of the blue or it may come incrementally.  At this phase, the person begins to formulate the solution.  Most of the time it is difficult to tell the movement from phase 2 to phase 3.  To expedite movement to idea experience a person can try to daydream and fantasies about the project and always keep a notebook to record emergence of ideas at odd hours. Phase 4: Evaluation and Implementation  This phase is the most difficult and requires courage, discipline & perseverance.  There are a lot of possibilities of failures.  Ideas are modified and tested before the best workable idea is put into a final form and successfully implemented.

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QUESTION 3 Majid is very excited when his colleagues praised him on his new discovery about the remedial potential of betel leaves (daun sireh). He has big plans about commercializing his formula. However, after talking to several knowledgeable individuals he realized that he needs to do a feasibility study before he proceeds further with his business idea. a) Explain to Majid five (5) reasons why he would need to carry out a feasibility study. (10 marks) 1. Provide a thorough examination of all issues and assessment of probability of business success 2. 3. 4. 5. 6. Give focus to the project and outline alternatives Narrow business alternatives Surface new opportunities through the investigative process Identify reasons NOT to proceed Provide quality information for decision making

b) Highlight five (5) preliminary questions that Majid needs to address in order to evaluate the proposed business idea. (10 marks) 1. Is there a demand for the product? 2. 3. 4. 5. 6. 7. 8. Who else are producing similar products? What is needed to make the product? What are the equipment and technology needs for the proposed venture? Who will manage the business? What managerial requirements are needed? What is the cost of producing the product? What is the likely profit?

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QUESTION 4 In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product or service to market. a) Discuss the importance of NPD in terms of the survival of a business (10 marks) For Survival o Introduction of new product provides a platform for the company to compete o Companies that are able to develop and introduce new and improved products will have a distinct advantage to compete o Competition has become more intense as technological products become more complex and the technological product life-cycle getting shorter o Companies face threat of losing market share when competitors come up with their new products o Thus company have to come up with new products to ensure survival Strategy for growth o Development of new products can ensure business to grow by: o Introducing new products to existing markets o Introducing new products to new markets

b) Illustrate the typical stages of NPD process for technology ventures. (6 marks)

c) Briefly explain the purpose of carrying out test marketing in NPD process. (4 marks) o Test marketing is usually carried out prior to a full-scale launching of a new product. In test marketing, the new developed product will be introduced to a representative sample of population to assess the market s reaction o The purpose of carrying out test marketing is to predict sales and profits from a major product launch

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QUESTION 5 The intellectual creations and its inherent value can be protected from being exploited by other parties through intellectual property protection. a) Identify five (5) types of intellectual property rights. (5 marks) There are five types of IP rights which provide protection for inventions or creations against infringement by others 1. Patent 2. Copyright 3. Trademark 4. Industrial design 5. Trade secret b) List five (5) intellectual creations that are protected by copyright. Support your answer with relevant examples. (10 marks) 1. Literary works o e.g. novels, instruction manuals, computer programs, song lyrics, newspaper articles and some types of database Dramatic works o e.g. theatre presentation and stage plays Musical works o e.g. composition Artistic works o e.g. paintings, engravings, photographs, sculptures, collages, architecture, technical drawings, diagrams, maps and logos Layouts or typographical arrangements o e.g. used to publish a work for a book Recordings o e.g. jingles, sounds and films Broadcasts o e.g. documentary, live coverage of events Derivative works o e.g. producing Harry Potter movie series from the novel of the same name

2. 3. 4.

5. 6. 7. 8.

c) List five (5) legal rights of copyright owners. (5 marks) Generally, owners of copyright works have the exclusive rights to control: o The reproduction of the works in any form (including photocopying, recording etc) o The performing, showing or playing to the public o The communication to the public o The distribution of copies to the public by sale or other transfer of ownership o The commercial rental to the public.

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QUESTION 6 a) There are several reasons why a researcher may decide to sell his research and development output before applying for patent rights. Identify four (4) of these reasons. (8 marks) The researcher may decide to sell the R&D output before applying for patent rights due to ant of the following reasons. o Cost to secure a patent right is higher than the product potential value. o The new technology-based product is competing with a promising substitute product o The developed technology is already mature and facing substitution stage o High market development cost required because market is not yet ready for the product o To avoid the hassles associated with patent application

b) Identify six (6) factors that are important in determining the monetary value of a patent. (12 marks) Factor that are of importance in determining the monetary value of a patent : 1. The size of the potential market 2. The value of comparable patents 3. Validity of the patent (the risk of the promoted patent to be invalid if the inventor does not meet the statutory requirement for obtaining the patent. o Example: a. They were not the inventors b. Had published the information about the invention c. Had offered the invention for sale before the date of application 4. Determine if the patent over laps with other patents, the higher the probability that a patent may overlap with another, the lower the value of the particular patent 5. Assess how much it costs for someone to use the next best patent instead of buying or subscribing license of your patent

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QUESTION 7 a) List three (3) categories of financial resources. (6 marks) o o o o o Self, Relatives and Friends Angel Financing Government s Financial Assistance Resources from external investors Banking and Development Financial Institutions (DFIs)

b) What is pre-seed financing? (5 marks) A relatively small amount of capital is provided to an inventor or entrepreneur to prove a specific concept for a potentially profitable business opportunity that still has to be developed and proven. The funded work may involve product development (as opposed to "pure" research), but it rarely involves initial marketing.

c)

Identify and describe three (3) sources of pre-seed financing. (9 marks)

Self, Relatives and Friends During the early stage of business development, the entrepreneurs access to established sources of external finance is limited; hence, most entrepreneurs rely on their own resources, supplemented by funds from relatives and friends. The entrepreneurs own resources include not only their personal savings and assets, but also their debt capacities in obtaining limited amounts of external finance. Angel Financing For a new venture based on concepts that require lengthy development efforts, the earliest source of outside financing can be provided directly by private investors (wealthy individuals). The so-called angels , or business angels , tend to behave like business partners. They bring with them experience, knowledge and capital to the business. Government s Financial Assistance Government s financial assistance to technology-based companies can be classified into two groups: government funding schemes and grants. Most funding schemes and grants for technology venture are channeled through MAVCAP, MDeC, MTDC, MOSTI, SME Corp.

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APR 2010
QUESTION 1 Creative ideas often arise when creative people observe established solutions, practices or products and think of something new or different. a) Define creativity. (2 marks) Creativity can be defined as the production of new and useful ideas as well as the ability to discover new ways of looking at problems and opportunities. b) List five (5) examples of areas where the concept of "new" can be created. (5 marks) Creating the new y Knowledge y Products y Processes y Service y Market y Business models y Raw materials c) List three (3) resources of creativity techniques. (3 marks) 1. Problem reversal y Look at the opposite of things, see things inside out, backwards or upside down 2. Force analogy y Gain new insights by forcing a relationship between almost anything 3. Attribute listing y Break down the thing into smaller parts or characteristics and develop ideas to improve on them. 4. Mind Mapping y Start in the center of the page with the main idea, and works outward in all directions, producing a growing and organized structure composed of key words and key images. 5. Brainstorming y Generating ideas based on the principle of suspending judgments. 6. Lateral Thinking y Exploring multiple possibilities and approaches from different perspective rather than pursuing in a conventional, logical, step by step single approach. o E.g., by changing concepts and perceptions, and generating new ones. d) Sources of innovation can be originated from within the company/industry or within the social environment. Describe three (3) sources of innovation from within the company and two (2) sources of innovation from the social environment. (10 marks) Source of innovation within the company 1. Unexpected occurrence y Unexpected discovery such as penicillin 2. Incongruities y The gap between what is and what should be; arise whenever a difference exists between expectations & reality 3. Process needs y Require entrepreneurs to innovate and answer a particular needs such as time-saving devices 4. Structural change y Caused by industry and market changes due to new developments such as advances in technology.

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Source of innovation within the social environment 1. Demographic changes y For example changes in population, consumer preference and geographical locations. 2. Perceptual changes y Perceptions can be cause mood swings and major changes in ideas, for example fitness craze is resulted by perceived needs to be healthy & physical fit 3. New knowledge y The basis of development of something brand new

QUESTION 2 Briefly explain the following sources of financing: a) Angel Financing (5 marks) For a new venture based on concepts that require lengthy development efforts, the earliest source of outside financing can be provided directly by private investors (wealthy individuals). The so-called angels , or business angels , tend to behave like business partners. They bring with them experience, knowledge and capital to the business. b) Venture Capital financing (5 marks) Venture capital financing has tremendous potential in Malaysia to contribute to the growth of technology and knowledge based ventures. The formal venture capital industry in Malaysia began in 1984 with the establishment of Malaysia ventures berhad. In terms of the stages of financing, most investment made by Malaysian Venture Capital Companies (VCCs) have been in the growth/expansion stage. Investments in the seed and start-upstages are less than 10% of total investments. c) Equity financing (5 marks) Equity financing involves the sales of some of the ownership in the venture. Equity financing forces the entrepreneur to relinquish some degree of control e) Debt Financing (5 marks) Debt financing involves a payback of funds plus an interest. Debts place a burden of repayment and interest on the entrepreneurs.

QUESTION 3 a) State any three (3) reasons for conducting a feasibility study. (6 marks) y y y y y y Provide a thorough examination of all issues and assessment of probability of business success Give focus to the project and outline alternatives Narrow business alternatives Surface new opportunities through the investigative process Identify reason NOT to proceed Provide quality information for decision making.

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b) Identify four (4) main components of a feasibility study. Discuss any two (2) of the components. (14 marks) y Market Feasibility Study o An assessment of overall appeal of the market for the product or service being proposed. Aspects of market feasibility study that should be carried out include:  Product/service  Customers determining who are the customers the business wishes to serve  Market demand refer to the potential purchase that is expected from the target market. Normally it is expressed in units or ringgit.  Competitors identify who are the major competitors/ number of competitors in the market  Market share- refers to the portion of market that the business can control after taking into consideration market demand and the competitors position in the same market.

Technical Feasibility Study o Concerned with determining whether the business has the necessary technology and equipment to produce the intended product/service/ Aspects of technical feasibility study that should be carried out include:  Technology and Equipment identify the types of equipment required.  Materials identify the types quantity and quality of raw materials required  Manpower identify the technical workers required in producing the product/service  Location refer to the place where the proposed business or project is likely to be set up. Organisational Feasibility Study o Concerned with determining whether the business has to the necessary and sufficient human resource to bring a particular product. Service idea to market successfully. Aspects of organizational feasibility study that should be carried out include:  Organization structure identifies responsibilities for each job position and the relationship among those positions.  Management team refers to a group of individuals responsible to bring a product/service idea to market successfully  Compensation refers to the monetary and non-monetary rewards in various form of pay which include salary, wages, sales commission, allowances, bonus, EPF and SOCSO contributions  Supporting services refers to the assistance and service given by private agencies and government.

Financial Feasibility Study o An assessment of the financial aspect of the business. Information in the financial feasibility study should include:  Startup capital to determine the amount of startup capital required to run the venture.  Financial sources identify the sources of fund to finance the startup capital y Internal financing refers to the funds provide by family, friends, partners or shareholders. y External financing refers to funds that are available from external sources such as loans from financial institutions, ventures capital, business angel, government grants, etc.  Profitability Analysis determining whether the proposed venture is generating enough profit to make proposed venture feasible.

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QUESTION 4 Assumed you have devised a new kind of equipment which has potentially important healthcare applications and you are thinking of commercializing the invention. You plan to acquire funding from the Multimedia Development Corporation (MDeC) for building a prototype and eventually to commercialize the invention. Briefly discuss the outline of a technologybased business idea blueprint that you would prepare in order to convince MDeC. (20 marks)

QUESTION 5 a) A new product is the outcome of a product development process. Describe what can theoretically be considered as a new product. (2 marks) Any product perceived to be new in the mind of the consumers. b) Discuss two (2) main classifications of new products and support your answers using relevant examples. (18 marks) Two classifications of new products: y Completely New Product y Improvements on existing products. Completely new product y New-to-the world products o The first of its kind (new inventions) o Create new market y New to the firm (new product lines) o New to the company but not new to the market. Improvements on existing products y Addition to existing lines o Subsets to the new product lines o Perhaps targeted to different market segments y Improvements and revisions to existing products o New products to replace existing products with cosmetic and functional enhancements. y Cost reductions o Offer no new benefits to the consumer other than possibly reduced price o Provided enormous added-value to the firm (financial rewards too) y Repositioning o New applications to existing products o More to do with consumer perception rather than technical development

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QUESTION 6 a) Identify and explain four (4) criteria that must be satisfied in order for an invention to be patented. (8 marks) For an invention to be patented, it must satisfy the following criteria: 1. Functional/Technical y The invention must relate to how something works, what it does what it is made of, or how it is made New y

2.

The invention has not been publicly disclosed in any form, anywhere in the world

3.

Involve an inventive action y The invention that could not be figured out by a person with average knowledge of the technical field Industrially applicable y The invention must be capable of being made or used in an industry (it can be mass produced).

4.

b) State six (6) characteristics of information that can be classified as trade secrets. (12 marks) 1. 2. 3. 4. 5. 6. 7. Not Known outside the company Known only inside the company on a need-to-know basis Safeguarded by stringent efforts to keep the information confidential Valuable and provides the company a compelling competitive advantage Developed at great cost, time and effort Cannot be easily duplicated, reverse engineered or discovered Can last longer that the term of a patent

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QUESTION 7 a) i) Explain what is meant by commercialization of R&D. (2 marks) Refers to efforts taken to introduce new technology based product to the market with the aim of gaining commercial return ii) Identify two most common approaches through which research findings could be brought to the market. (3 marks) 1. 2. Disseminating innovation freely through academic publication such as journals and proceedings of research conference. Allowing the researcher (innovator) to monopolize the benefits of research and development in the form of intellectual properties (ip) and commercialization of the IP

b) To commercialize a technology, an innovator may decide to spin off or spin out into a new venture. Explain and differentiate both options. (10 marks) spin off Alternative to licensing and assignation, an innovator may choose to commercialize his invention through the creation of a new technology-based venture. In this context the innovator assumes the role of a technopreneur by creating a new venture from within an established organization like a university or a company In venturing into the spin-off company the technopreneur himself exploits the patent rights he had secured. Prior to venturing into a new technology-based business a technopreneur needs to develop a business plan, determines financial requirements and seeks sources of financing. spin out Besides venturing from within the established R&D institutions, universities or established business organizations the innovators may also have the option to leave the parent organization and established an independent new venture to commercialize the patent he owned. In this context the innovator assumes the role of a technopreneur by creating a new venture independently Similar to a spin-off venture, in a spin-out venture the technopreneur himself exploits the patent rights he had secured and needs to develop a business plan prior to venturing into the new venture. However, in the case of a spin-out venture the technopreneur has to bear the risk of the new venture alone.

c) Give five (5) entry barriers for a new venture to establish entry into a particular industry. (5 marks)

Factors that contribute to entry barriers are: y The cost of adopting technology in the industry y Access to distribution channel y Access to raw material y Cost inefficiency due to lack of experience y The cost of capital required to launch the new venture Some of these barriers disappear as the industry develops.

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OCT2010
QUESTION 1 a) Explain the difference between creativity and innovation. (6 marks) Creativity Defined as the production of new and useful ideas as well as the ability to discover new ways of looking at problems and opportunities. Innovation y is the ability to apply creative solutions to problems and opportunities to enhance or to enrich people s lives

b) Describe four (4) differences between incremental innovation and radical innovation.(8 marks) Incremental Innovation y Steady improvements y Based on sustaining technologies y Obedience to cultural routines and norms y Can be rapidly implemented y Immediate gains y Develop customer loyalty Radical Innovation y Fundamental rethink y Based on disruptive technologies y Experimentation and play/make-believe y Need to be nurtured for long periods y Worse initial performance potential big gains y Create new markets.

c) Besides invention, describe and give examples of another three (3) types of innovation. (6 marks)

INVENTION - Creating a totally new product, service or process. o Examples: aero planes (Wright brothers), light bulbs (Thomas Edison), personal GPS (Peter Maire) EXTENSION - Introducing different application or new use of existing product, service or process o Examples: laptop, PDAs, Walkman DUPLICATION - Creative replication of an existing concept o Examples: Franchise businesses such as Chicken Rice Shop SYNTHESIS - Combining existing concepts or factors into a new formulation or use. o Example: combining functions of a telephone, video and camera.

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QUESTION 2 a) What are "entrepreneurial opportunities"? Briefly describe four (4) characteristics of an attractive entrepreneurial opportunity. (10 marks) Entrepreneurial opportunities are defined as situations in which new products, services and processes can be introduced and sold at greater than the cost of production. Characteristics of an Attractive Opportunity 1. Timely a current need, unmet demand or problem e.g. vaccine for bird flu, drugs to prevent obesity 2. Solvable a problem that can be solved in the near future with accessible resources e.g. a cure for cancerous diseases, a more efficient public transport to reduce congestion and traffic jams Important The customer deems their problem or need important to them e.g. energy-saving air conditioner or petrol saving devices that work Profitable the customer will pay for the solution and allow the enterprise to profit e.g. security products, multi-function printers Context a favorable regulatory and industry situation e.g. on-line business transaction , genuine investment schemes that promised high returns

3.

4.

5.

b) Differentiate between "opportunity pull" and "capability push" as they relate to opportunity discovery. (10 marks) Opportunity pull Market driven y Occurs when there is a need or problem that requires a solution. y Example - The need for a pharmaceutical that can mitigate or cure the effects of AIDS. y This type of opportunity can be called opportunity pull, since the size of the opportunity draws opportunity seekers to attempt to exploit it. Capability push Technology driven y Occurs from the discovery of a capability or resource that can be applied to a problem or need. y Example- discovery of a new technology, such as digital television. y This type of opportunity can be called a capability push, since it flows from a capability or resource availability.

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QUESTION 3 Technopreneurs are advised to prepare a technology-based business idea blueprint prior to the exploitation of opportunity. a) What is a technology-based business idea blueprint? (4 marks) A technology-based business idea blueprint is a detailed written document that describes what a new product wants to accomplish. It is a detailed road map for converting ideas and vision into real, functioning, profitable and viable product. b) Inovatif Group Sdn Bhd has created a multi-purpose key chain that combines a key chain, a bottle opener, a corkscrew and a miniature scissors. Since this is a new product in the market, the company needs to prepare a business idea blueprint for the product. Define and briefly explain the important components in the marketing strategy section of the blueprint. (16 marks) The sections discussed under market analysis include: 1. Customers o Discus who the customers for the product or service are or will be. Potential customers need to be classified by relatively homogeneous groups having common, identifiable characteristics.  E.g., by major market segment. o Show who and where the major purchasers for the product or service are in the market segment. Include national regions and foreign countries, as appropriate. o Indicate whether customers are easily reached and receptive, how customers buy  E.g., wholesale, through manufactures representative, etc. 2. Market size and trends o Show the size of the current total market and the share you will have, by market segment, and/or region, and/or country for the product or service tour will offer, in units, ringgit, and potential profitability. o Describe also the potential annual growth of total market for your product or service for each major customer group, region or country, as appropriate. o Discuss the major factors affecting the market growth  E.g., industry trends, socio-economic trends, government policy, and population s shifts. o All estimates are often done for a three year period. Competition o Make a realistic assessment of the strengths and weaknesses of competitors o Compare competing and substitute products or services on the basis of market share, quality, price, performance delivery, timing, service warranties, and other pertinent features. o Compare the fundamental value that is added or created by your product or service, in terms of economic benefits to the customer and to your competitors. o Discuss the current advantages and disadvantages of the products or services and say why they are not meeting customers needs. Market share and sales o Estimate the share of the market % and the sales in units and ringgit that you will acquire in each of the next three years based on your assessment of  The advantages of your product or service  The market size and trends  Customers  Competitors and their products Market strategy o In the marketing strategy section, show how the products are going to fit into marketplace. o The important components of marketing strategy is -4Ps (AKA marketing mix)  Product  Price

3.

4.

5.

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The pricing of product is the fee that will be charged to the customer. Price is a function of your costs, competition and customers. Price can be determined by considering o The cost of producing the product o The competitors price o The value of the product based on how people perceive the product in many situations.

Place (distribution) y Selection of the appropriate distribution channel, the determination of the degree of market coverage, and the selection of the best modes of transportation Promotion y Describe the approaches the company will use to bring its product or service to the attention of prospective buyers and persuade them to buy the product or service.

Poor strategies regarding even one of the 4Ps can lead to business failure

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QUESTION 4 A "new" product may refer either to a completely new product, or improvements on existing products. a) Discuss four (4) ways in which firms may to improve on existing products. (12 marks) Addition to existing lines Subsets to the new product lines Perhaps targeted to different market segments Improvements and revisions to existing products New products to replace existing products with cosmetic and functional enhancements Cost reductions Offer no new benefits to the consumer other than possibly reduced price Provides enormous added-value to the firm (financial rewards too) Repositioning New applications to existing products More to do with consumer perception rather than technical development

b) Theoretically, it is possible to label a product as new when any changes or modifications are made to any of the product dimensions. Discuss and give examples changes in product dimensions that can create a new product. (8 marks) 1. 2. 3. 4. 5. 6. Price Brand Name Technology Features Quality Specifications Packaging

QUESTION 5 a) Managing a technology venture requires deep understanding of the life cycle of the technology. With the help of a diagram, identify the three (3) stages of technology life cycle. (8 marks)

The new invention period known as the embryonic stage. y Is characterized by a period of slow initial growth. o This is because experimentation and initial problems are worked out of the system

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The technology improvement period. y The technology improvement period is characterized by rapid and sustained growth y also known as the growth stage The mature technology period or maturity stage. y Starts when the upper limit of the technology is approached and progress in performance slows down. y This occurs when the technology reaches its natural limit.

b) Over time technology will experience six phases of market life-cycle. List the six (6) phases of the Technology Market Life-cycle. (12 marks)

1. Technology development phase y Does not recognize the technology at all y During this time the researchers are putting in much effort and utilizing significant amounts of resources to create the technology, develop proto type and testing the new technology. y Revenue is not generated and where ever possible, time spent in this phase has to be reduced. 2. Application launch phase y Technology is launched on the market as a new application i. E.g., a new product or process y One the new technology application is launched the market volume will pick up with the path of the technological progress. y It is characterized by slow beginning and followed by rapid growth 3. Application growth phase y Technology application will begin to penetrate or go deep into the market y Extend of penetration of the technology into the market will depend on the rate of innovation and the market needs of the new technology. 4. Technology mature phase y The market growth rate slows down as the technology approaches its maturity. y The market volume may reach a peak and then start to decline. 5. Technology substitution phase y Characterized by declining market volume as the technology is faced with being substituted by new technologies. y Companies that continue to utilize the old technology will begin to experience decline in market share and revenue. 6. Technology obsolescence phase y The technology application has become obsolete and has little or no value at all y Investment in the technology during this phase is not attractive.

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QUESTION 6 a) Explain why funds for technology ventures are raised in stages. (4 marks) Staging of financing allows investors to deal with the uncertainty of the validity of the idea and the untested nature of the management in the company b) Financing for technology ventures are typically tied to stages of business development. Identify the four (4) stages and discuss the types of financing that are common at each stage of business development. (16 marks)

Self, Relatives and Friends y During the early stage of business development, the entrepreneurs access to established sources of external finance is limited; hence, most entrepreneurs rely on o their own resources, o Supplemented by funds from relatives and friends. y The entrepreneurs own resources include not only their personal savings and assets, but also their debt capacities in obtaining limited amounts of external finance. Angel Financing y For a new venture based on concepts that require lengthy development efforts, the earliest source of outside financing can be provided directly by private investors (wealthy individuals). y The so-called angels , or business angels , tend to behave like business partners. They bring with them experience, knowledge and capital to the business. Government s Financial Assistance y Government s financial assistance to technology-based companies can be classified into two groups: government funding schemes and grants. y Most funding schemes and grants for technology venture are channeled through MAVCAP, MDeC, MTDC, MOSTI, SME Corp. Venture Capital (VC) Financing y VC financing has tremendous potential in Malaysia to contribute to the growth of technology and knowledgebased ventures. y The formal venture capital industry in Malaysia began in 1984 with the establishment of Malaysian Ventures Berhad. y In terms of the stages of financing, most investments made by Malaysian Venture Capital Companies (VCCs) have been in the growth/expansion stage. y Investments in the seed and start-up stages are less than 10% of total investments Banking and Development Financial Institutions (DFIs) y Banking institutions and DFIs have been providing financial facilities to small and medium enterprises (SMEs). However, commercial banks and DFIs typically do not invest in start-up technology-based companies because of the high level of risk of the business and the absence of a track record in terms of assets, profits, and positive cash flow.

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QUESTION 7 a) A technopreneur may not easily end a business venture due to certain exit barriers. List four (4) exit barriers. (4 marks) 1. Retrenchment 2. Divestment 3. Liquidation 4. Harvesting

b) Ending a business venture may require technopreneurs to adopt retrenchment and/or divestment strategies. Discuss both strategies and the conditions under which these strategies are best used. (16 marks)
1. Retrenchment y Retrenchment occurs when a business regroups by reducing cost and asset to reverse declining sales and profits. Retrenchment include activities such as: o Selling off assets to raise needed cash o Pruning product line o Closing down businesses that are performing poorly o Reducing the number of employees o Declaring bankruptcy y Retrenchment is best used when: o A business has distinctive competencies but has failed to meet its objectives o A business is plagued by inefficiency, low profitability, and poor employee morale o When a business has grown so large so quickly that major reorganization is needed Divestment y Divestment, sometimes also termed as divestiture, is a strategy to end a business y This is done cautiously by selling part of the venture for cash to be reinvested in a more promising business y Divestiture can be used when: o A business has pursued a retrenchment strategy but failed to accomplish needed improvements o A business needs more resources to be competitive than what the company can provide o When one particular division is responsible for a business s overall poor performance o When a division does not fit well with the rest of the business Liquidation y Liquidation involves the selling all of a company s assets for their tangible worth. Liquidation is a recognition of defeat y Liquidation is undertaken when both retrenchment and divestiture have been unsuccessful y Liquidation enables stockholders to minimize their losses y Liquidation may be a good strategy when: o There is a need to orderly raise cash to pay off creditors o The organization seeks to minimize losses o When an organization s only other alternative is bankruptcy Harvesting y Harvesting is a strategy pursued by a business in an effort to cash out and harvest the profit y In contrast to retrenchment, divestiture and liquidation, harvesting is associated more with the owners personal reasons for terminating the venture. These reasons may include: o Boredom and burnout o Lack of operating and growth capital o No heirs to leave the business to o Desire for liquidity o Aging and health problems o Desire to pursue other interests y By pursuing the harvesting strategy, business owners could sell out the venture for cash at market value

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