Entrepreneurship-EIP Individual Report

Table of Contents
Sr.
No.
1.
2.
3.
4.
8.
9.
10.
11.
12.
13.
14.
15.
Particulars
Introduction
Management Team
Financial Results
Strategic Entrepreneurship
Strategic Management at Justice League Inc.
Entrepreneurship at Justice League Inc.
Combination of Entrepreneurship and Strategy at
Justice League Inc.
An expanded view of Strategic Entrpreneurship
Growth Stages
Analysis of Business Performance for Year 1- Survival
Key Actions & Implications during the Year
Crunching the Market Report Figures
Marketing Efforts at Justice League Inc.
Bootstrapping
Analysis of Business Performance for Year 2- Stability
Customer Research Results
Bank Overdraft
Relocation to a Bigger Premise
Activity (Hours): Year 2
Focus on Manpower Training
Profit & Loss Report: Year 2
Analysis of Business Performance for Year 3- Growth
Marketing Blitzkrieg
Health of Justice League Inc.
Way Ahead
Investment Proposal for Private Equity Investor
Conclusion
References
Page
No.
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7
7
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9
10
12
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14
18
19
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20
21
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35
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Introduction
Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC
1
Justice League Inc, a firm jointly owned by five individuals is a virtual techassembling firm in the business of manufacturing & distributing computers
and an analysis of its business performance and decision making for a period
of 3 simulation years through SIMVENTURE business simulation software is
hereby presented in this report.
A detailed review of the companys journey through the three years along
with key decision making processes and resultant financial & operating
performance is presented herewith. An intelligent tool to test the strategic
entrepreneurship abilities of entrepreneurs, SIMVENTURE tested our
entrepreneurial conviction along with our abilities to manage resources
tactically, apply ingenuity, manage network relationships efficiently, manage
information and make the right strategic choices. These reflect on our
themes of Survival in the first year, Stability in the second and Growth in
the final year.
Management Team
Based on the Belbin Team Role model (Belbin, 1981) we formed a team of 6
diverse individuals to drive Justice League Inc. with specific Thinking Roles,
Action Roles and Social Roles defined for each member of the team.
Name
Ms. Lim
Role Name
Coordinator
Strengths & Styles

able to get others working to a shared
Shing Loo
(CO)*
aim; confident, mature - (originally called
Mr. Jorg
Shaper (SH)*
'Chairman' by Belbin)
motivated, energetic, achievement-driven,
Fuhrer
Mr. Alwyn
Plant (PL)*
assertive, competitive
innovative, inventive, creative, original,
Koay Chee
imaginative, unorthodox, problem-solving
Hua
Ms. Lim
Monitor-
serious, prudent, critical thinker, analytical
Shing Loo
Mr. Alwyn
Evaluator (ME)
Implementer
systematic, common sense, loyal,
Koay Chee
(IMP)
structured, reliable, dependable,

2
Hua
practicable, efficient (originally called
Mr. Sirsanath Resource
'Company Workers')
quick, good communicator, networker,
Banerjee
outgoing, affable, seeks and finds options,
Investigator
(RI)*
Mr. Sirsanath Team Worker
negotiator
supportive, sociable, flexible, adaptable,
Banerjee
(TW)
perceptive, listener, calming influence,
Mr. Kuah
Completer-
mediator
attention to detail, accurate, high
Shen Yang
Finisher (CF)
standards, quality orientated, delivers to
Specialist (SP)
schedule and specification

technical expert, highly focused capability
Ms. Lee Ling

Kim
and knowledge, driven by professional

standards and dedication to personal
subject area
*Kindly Note: Some of the team members were performing more than one
team-roles as Dr. Meredith Belbin has identified 9 unique clusters of behavior.
The team-roles assumed by the members of the team came naturally based on the
academic & professional backgrounds of the individuals and the following table
captures the same:
Name
Mr. Sirsanath
Qualificatio
n
BMS, M.Com
Experience
5 years - Tata Capital (Senior
Manager-Infrastructure
Banerjee
Financing/Private Equity)
Vast experience in project
financing in power sector.
Mr. Alwyn Koay
Civil
5 years - Engineer (Pre-Cast
Chee Hua
Engineer
Construction Business)
Entrepreneurial experience of
managing family run business
in the construction industry.

3
Mr. Kuah Shen
Mechanical
5 years - Engineer
Yang
Engineer
(Automobile Ancillary
Industry)
Extensive experience in
handling high value projects
in his firm which is a key
Ms. Lim Shing
BSc. Home
supplier to Toyota.
10 years - Nestle (Marketing
Loo
Sciences
Manager)
Vast experience in FMCG and
Oil & Gas industries. Also
worked in a start-up in the
Ms. Lee Ling
B.Com, CPA
past.
5 years - KPMG (Consultancy
& Tax Specialist)
Kim
Detailed knowledge of
corporate and personal
Mr. Jorg Fuhrer
Mechanical
taxation in Malaysia.
15 years (Quality Manager)
Engineer
Extensive experience in
handling high value projects
at Bertrams Chemical Plants
with international exposures
in China & Switzerland.
As a team member, I found this team to possess the much needed

heterogeneity and the cross-industry experience (Franke et al., 2008) along
with the teams core competencies matching the requirements of important
functional areas of the business (Allen, 2009) which laid a strong bedrock for
good performance of Justice League Inc.
Financial Results
The financial results achieved by Justice League Inc. at the end of the third
(final) year are testimony to the strong teamwork and operational acumen
4
demonstrated by the team which firmly believes in the 3 pillars of

entrepreneurship Human Capital, Social Capital & Financial Capital.
The company valuation of Justice League Inc. was recorded at 1,113,759
with a healthy Bank Balance of 82,093, Total Profit of 212,844 and a
Balance Sheet Value of 223,394. Following is the final performance report of
Justice League Inc. captured at the end of the simulation:
As can be observed from the above screenshot taken of the performance

report available at the end of the simulation, a spike in the shape of a hockey
stick ca be observed in the overall company value which indicates a steady
growth from the valley of death which we crossed by the end of the first
year.

5
The following screenshot of the key financial ratios of Justice League Inc. is
captured at the end of the final year:
The above financial measurements of Justice League Inc. at the end of the
third year indicates that the firm was generating revenues close to 6 times
its assets with extremely attractive ROCE levels of 61% thus making it
attractive for any Private Equity firms to consider for Growth Funding.
Further, one of the indigenous ideas proposed by me to the rest of the
Management Team of not availing any Loans & instead continuing to work on
Bank Overdraft for as long as possible proved to be extremely helpful for
Justice League Inc. From my previous experience in a Private Equity Fund, I
6
understand that a long term debt can be drag on the overall valuation of the
firm & must hence be avoided if a Private Equity investment is planned in the
near future.
Kindly Note: Detailed Profit & Loss Statement & Balance Sheet along with
future financial projections as presented in class have been duly provided in
the Appendix.
The business environment of the twenty-first century can be described in
terms of a fresh competitive setting that incorporates growing vulnerability,
diminished capacity to forecast, almost disappearing boundaries between
industry & firm, new basic structures, and an ingenious organizational
outlook. This fresh outlook can be depicted by four proficient powers:
complexity, change, contradiction & chaos (Hitt & Bettis, 1995; Reed & Hitt,
2000).
We faced these powers while running the tech-manufacturing
business of Justice League Inc. It may be safely assumed that no firm is safe
from the tremendous weights of these strengths. Mintzberg (1994) argued
that it is strategic thinking that amalgamates the ingenuity & imagination
of an entrepreneur and the vision for firms future.
Strategic Management at Justice League Inc.

We adopted the string of thoughts placed by Kuratko (Audretsch, Kuratko
2009) and formulated plans for efficiently managing outer opportunities &
dangers pertaining to our firms internal assets and flaws for effective long
term planning & execution. As argued by Schendel, the approach towards the
fundamental activities of a firm shapes the progress and advancement of the
firm which provides a background for Strategic Management in the firm for
building & executing strategies to drive the firms operations. (Hofer &
Schendel, 1978)

7
As rightly pointed out by Hitt, Ireland & Hoskisson (Hitt et al., 2009) strategic
plan for Justice League Inc. was influenced by many factors such as type of
industry, complexity of operations and abilities of the management team.
Entrepreneurship at Justice League Inc.

In order for Justice League Inc. to succeed & reach the targeted company
valuation, we needed to take initiatives, accept the risks & possible failures
and seize socio-economic opportunities to convert resources into profits.
(Shapero, 1975)
Thus, we commenced a passionate journey towards formulating & executing
indigenous ideas and innovative solutions with the fluidic process of
foresight, construction & transformation (Kuratko, 2009)
We found a competitive space in the ICT business for Justice League Inc. to
create wealth in SIMVENTURE and tried to disrupt the dominant business
practices of competition by modifying our product & pricing to the needs of
the markets leading to the creation of firms value.
Integration of Entrepreneurship and Strategy at Justice

League Inc.
An unique blend of Strategy & Entrepreneurship was witnessed we
conceptualized the venture and were making important resource allocation
choices wherein we experienced the concept of dominant logic as
proposed by Bettis (Bettis & Prahalad, 1995) which gave us a sense of the
predominant mindset which helped us to drive the systems & processes of
the firm. From the vast information bank made available to us by market &
competitor research, it was this dominant logic that enabled us to filter &
interpret the data to our advantage. As repeatedly explained in class, it was
critical for us to be dynamic even about the dominant logic in order to
promote entrepreneurship and continuous improvement in the firm. (Morris,
Kuratko, and Covin, 2008)
8
One example of visible strategic entrepreneurship in the firm is that although

we managed reasonable profit margins on our product by outsourcing
distribution activities to the professionals, we continuously negotiated with
multiple partners for distribution in the final attempt but ended up not
awarding the contract to anyone to capitalize on the higher margins that we
could earn by handling the distribution activities ourselves by using the right
marketing techniques.
Researchers
believe
that
although
activities
that
may
be
termed
entrepreneurial are prevalent in old businesses, entrepreneurship is often not

the core of all functions in such business (Covin and Miles, 2007). On the
other hand, we wanted entrepreneurship to provide a theme and direction
for Justice League Inc. and strongly believed that while strategy could decide
the destination and means for the firm to achieve that destination, it is
entrepreneurship that will decide the speed at which we get there.
An expanded view of Strategic Entrepreneurship

Strategy
Designing the scope of Justice League
Inc.
Managing the resources of Justice
League Inc.
Developing Competitive Advantages
over other firms.
Advantage seeking behaviors
Entrepreneurship
Creating newness in products

Creating units at Justice League Inc.
Organizational renewal
Opportunity seeking behaviors

9
Balancing exploration and

exploitation at Justice League Inc.
Balancing resources between
exploration & exploitation
Continuous streams of innovation
& ingenuity
Figure: Strategic Entrepreneurship: A value-creating intersection between

strategy and entrepreneurship
Source: Adapted from (Ireland,
Webb, 2007)
The above figure illustrates the concept of strategic entrepreneurship as one

which is advantage seeking as well as opportunity seeking (Ireland, Hitt, &
Sirmon, 2003). We were wary of the findings of Steffens, Davidsson, and
Fitzsimmons who studied the 3500 small firms to correlate growth &
profitability and cautioned the aggressive pursuit of growth in younger firms.
This was one of the primary reasons why we opted to cater to the ICT market
instead of the Corporations despite letting go the opportunity of instant
growth.

10
Figure: Model of Strategic Entrepreneurship

Source:
(Ireland, Hitt, & Sirmon, 2003)
We consciously adopted this process based approach proposed by Ireland,
Hitt, & Sirmon, (2003) for Justice League Inc. as we understood that
managing the venture strategically was equally important as being creative
in our decision making. As strategic entrepreneurs, we were less worried with
issues that can be called as emergencies, but were more focused on market
relevance and success in the long run. (Dr. Frank Lasch, Research Director,
GSCM-Montpellier Business School, France).
Growth Stages
While numerous researchers in the past have created business cycle models
for firms across the world in the past, most of them use the classical
business size vs. firm maturity dimensions for the same. However
Churchill (Churchill, 1983) argues that such models fail to capture the critical
incubation stage in a firms early stage, ignore various factors such as
diversification of the firm, value added to the products, variability in the
products, number of locations, etc. Further, these models assume that a firm
must travel through all these stages or die trying. However, the evolution of
the Business cycle as witnessed in the case of Justice League Inc. too, is
visible, wherein the firm first struggles for Existence, inches towards Survival
and only then succeeds to break-even. Once off the ground and into the
11
profits, then the options are only two: either registering further growth
towards a self-sufficient business or opting for an exit-strategy.
Figure: Growth Stages

Source: Churchill, 1982
During the three years of SIMVENTURE, we realized that the development
stage of any firm determines the challenges that the managers have to face.
Therefore, knowing the precise stage of the firm in the Growth cycle and
being able to rightly predict the future plans places all stakeholders of the
firm in a better position to braces themselves for the future.

12
Analysis of Business Performance for Year 1Survival

The
first
year
of
operations
is
one
of
entrepreneurial
chaos
and
SIMVENTURE truly tests the strategic & entrepreneurial ability of the

management team by challenging the participants in all areas including
research, marketing, finance and production capabilities.
As discussed by Murphy and Edwards (2003), the initial phase of any venture
must pass through the valley of death wherein the entrepreneur will face
an excessive demand for cash but limited ability to raise funds due to lack of
vintage and proven performance of the business.
Figure: Valley of Death

Source: Murphy, L. M., & Edwards, P. L. (2003). Bridging the valley of death:
Transitioning from public to private sector financing. Golden, CO: National
Renewable Energy Laboratory.
In order to sustain the business of Justice League Inc. during this valley of
death we took a series of calculated steps that had a positive result at the
end of Year 1.

13

Actions
Market and Competition
Research Commissioned
In-House Bookkeeping selected
Target segment changed to

Small ICT Companies
Created new product design,
quality, performance, features
and style & price
Offered a discount of 5% to
customers
Training courses were arranged
for the User (i.e. the
management team)
Moved to handling this business
full time & self-salary of 1,500
Direct marketing campaigns,
purchase of database &
participation in ICT exhibition
Availed Grant & Bank Overdraft
of 50,000
Relocated to 800 sq. ft.
Business Centre costing 1,000
per month
Employed 4 full time staff with
reasonable production skills
Changed credit control strategy for
phone reminder in 2 & 3 months
overdue & legal action legal action in
Implications
This gave us a benchmark to redesign
and price our product as per the market
requirements & competition.
As we had a finance professional in the
management team, we decided to
handle bookkeeping ourselves.
After reviewing the market research, we
decided to target the small ICT segment.
This segment promised moderate
volumes & reasonable margins.
Aligned our product to the requirements
of the market
As a product launch strategy, we decided
to market our product by offering
discounts to our customers to entice
them to buy from us.
This was very important as the
management team must have good
knowledge of the product before going
forward.
Generates confidence in private equity
investors whom we would approach in
future.
These were instrumental in ramping up
enquiries for the newly formed business
& were cost effective too.
The overdraft facility allowed the
business enough liquidity to finance its
current assets.
Anticipating a growth in sales, it was a
wise decision to move to a bigger space
to prevent any downtime.
Strategy to employ manpower with
reasonable skills and investing in training
activities proved to be cheaper than
hiring personnel with advanced skill sets.
Constant reminders helped in reduction
of collection period thus helping the
working capital position of the business.

14
the 4th week.

Purchased standard tools &
furniture & upgraded to
platinum gradually
Balanced mix of in-house &
outsourced production method
maintained
With growing production, it became

important for the firm to invest in tools &
furniture for its employees.
The mix helped us to avoid investments
in expensive fixed assets too early.
In house press release added to the

Press Release
visibility of the venture without any
expenses.
As can be witnessed from the above table, financial efforts coupled with
dynamic dominant logic in running the business helped the management
team to successfully drive the venture out of the valley of death.
Crunching the Market Report Figures

While market research is of utmost importance to understand the market
requirements, it is we believe it is equally important to decipher the correct
meaning of any market report to be able to predict the business impact of
each element provided in any market research. Following is a snapshot of the
market report presented to us by SIMVENTURE:

15
We tabulated this data in the following table in order to arrive at the

expected sales volume that we can expect from each of the market
segments:
Segment
s
Corporatio
ns
Engineeri
ng
Companie
s
Solo
Business
Service
Companie
s
Small ICT
Siz
e
Order
Freque
ncy
Pri
ce
(L)
Pri
ce
(H)
Price
M
Pric
e
(ME
D)
Ord
er
size
Est
order
size
Est
Order
Value
204
11
650
710
800
725
13
8,679
6,292,4
73
155
8
32
460
510
550
505
5,258
2,655,4
16
490
2
30
510
560
650
580
5,882
3,411,7
92
125
7
32
420
470
420
420
4,242
1,781,7
98
297
10
650
710
850
680
6,415
4,362,3
36

16
Profession
al
Services
320
6
23
610
660
650
630
5,018
3,161,3
95
The expectations of each of the segments were also captured in the below
table:
Segments
Corporations
Engineering
Companies
Solo Business
Service
Companies
Small ICT
Professional
Services
Quality
7
Performance
4
Feature
5
Style
8
Price
5
Tabulating the above information made us realize the pros & cons of each
market segment such as the segment with the highest size had the lowest
order size, the with the highest estimated order value is the smallest in size,
etc. and we were able to make an informed decision to make our choice.

17
We obtained the following Competition Report for our venture:
Based on the specifications provided by competition, we modified our

product design as follows:

18
After ascertaining the cost that we will incur to manufacture the product, we
priced our product as follows:

19
With healthy margins and competitive pricing, our product was ready to take
on the competition and we managed the following operational performance
for the rest of the year:
Justice League Inc: Operational Performance
Enquiries
Sales Quantity
Order Count
Component Stock
Order Quantity
Product Stock
Sales Count
Production

20
As can be seen from the above figure, we managed to convert 80.5% of our
orders into sales this year and maintained no inventory which reduced our
requirement of funding. Further, most of the production was done in house
thereby safeguarding our profit margins.
Our performance was congruent to the findings of Zott & Amit (2008) which
highlights the importance of a balanced mix of Cost Leadership and Product
Novelty.
Marketing Efforts at Justice League Inc.

The marketing efforts of Justice League Inc. were inspired by the findings of
Stokes (2000) where he suggested that entrepreneurial marketing targets
the customers directly through informal gatherings such as trade fairs, etc.
which is why we participated in the first possible exhibition for ICTs.
Figure: Entrepreneurial Marketing vs. Traditional Marketing

Source: Stokes, D. (2000)
In support of the findings of Stokes, but on a more holistic level, AbdulMohsin, Abdul-Halim, and Ahmad (2012) in their studies argued that firms
must be market-oriented where data from customers & competitors must be
systematically collected & analyzed and the marketing mix of our product
must be accordingly tweaked.
21
Bootstrapping
Being a finance professional with experience in a Private Equity fund, I was
given charge of the financial performance of Justice League Inc. Being a
startup, the natural tendency was to be as frugal as possible and use our
own equity prior to borrowing any debt. While we did avail the bank overdraft
facility despite it being slightly costlier than the loan, our logic was that we
pay interest on the overdraft only when we use it unlike the loan whose
interest servicing will start immediately & the loan itself will be deducted
from the overall company valuation. Needless to say, we availed the grants
that were easily available promptly.
Profit & Loss Report: Justice League Inc.
Sales Income
Cost of Sale
Design
Research
Miscellaneous
Cumulative Profit
Other Income
Gross Profit
Training
Sales and Marketing
Total Expenses
Total Income
Wages
Rent
Finance
Net Profit

22
Although Year 1 ended with a negative cumulative profit of 4651, we were

confident that we are nearing the end of the valley of death and will soon
be in profits in Year 2, based on our steady enquiries, strong order books and
strategic direction of our management team.
Analysis of Business Performance for Year 2- Stability

As explained earlier using the Growth Stages model developed by Churchill
(1983), the second year of operations was all about survival and stability
which could be achieved by a mix for rapid marketing efforts and robust
production systems and at the same time keeping an eye on the market for
any changes or upcoming requirements.

Actions
Extensive training for the User
and Employees
Consultant commissioned to
carry out customer research
Bank Overdraft of 300,000
Relocation to 2500 sq. ft. at

Business Centre
Negotiations with Distributors

Continued Direct Marketing
Efforts
Purchased Premium Tools
Implications
All personnel were trained to be proficient
in production as we wanted to keep as
much production in-house as possible.
Cost effective methods such as CDs were
used for trainings.
The purpose of customer research is to
obtain a feedback from customers to
ascertain if any changes in the marketing
mix are required.
The working capital gap foreseen was
bridged by availing a further bank
overdraft of 300,000. Part of this money
would also be used for relocation to larger
capacity.
The business center would cater to the
growing demands that current production
capabilities will not be able to cater to.
Continuous engagement with big
distributors like Harton Brothers & Rad
kept us abreast of any possible deals that
we could strike with them.
Yields steady flow of enquiries as more
customers become aware of our product.
As in-house production was of great

23
Bookkeeping contracted out
Modification of Working Hours
Hired 3 more candidates to

increase the total number of
employees to 6
Press Releases by Consultants
importance to us, we found it logical to

invest in premium tools for our personnel.
As the finance expert on the
management team was handling a larger
role performing multiple duties,
bookkeeping was decided to be
outsourced.
Depending on the stress levels of the
User, production requirement, etc. the
working hours were modified frequently
to keep stress levels under control &
optimize productivity.
With ever growing order books and
continuous growth in production
requirements, more helping hands proved
to be very effective.
We hired professional consultants to write
& releases press releases for Justice
League Inc. which made it further popular
amongst the customers.
Customer Research Results

24
The customer research carried out by a consultant provided extremely

encouraging results which proved that our product was well accepted in the
market. With over 85% customers approving the price of our product, we
anticipated the growth trend of our orders to continue. As argued by Lumpkin
& Dess (1996), pro-activeness is a critical entrepreneurial trait and must be
looked upon as a continuum. Based on this thought process, we projected
the growth in the sales of our product to continue & realized that we will
need larger space to continue production for the same.
Bank Overdraft
While we were making upfront payments to our Creditors, the average time
that our debtors took to pay us continued to be in the range of 45-60 days.
This caused a situation where the firm was running dangerously low on cash.
To bridge this gap and we decided to draw a second round of Bank Overdraft
upgrading our limit to 300,000. In line with the Pecking Order Theory, Frank
25
& Goyal (2005) argue that firms prefer external financing over internal
sources of funds and thats why we decided to go for a Bank loan. Further, in
line with the Agency Theory, we did not want to give ownership of Justice
League Inc. to investors at this stage of the life cycle as we believed our
Company valuation is poised to rise rapidly. Further, agency issues such as
false corporate budgeting, unfair bonuses, etc. (Jensen, 2001) might creep
into the business with the introduction of additional equity investors at this
stage.
Although there are contrarian theories to the Pecking Order Paul, Whittam
and
Wyper
(2007),
who
focus
on
wealthier
investors
helping
the
entrepreneur to lower commitments that come attached with more liabilities,

Justice League Inc. was generating enough cash which when paired with the
Bank Overdraft limit was enough to not only run its business operations but
also take care of its capital expenditure requirements. Therefore, we decided
to go ahead with the Bank Overdraft to move to a bigger space for additional
production as well as cater to our working capital requirements.
Relocation to a Bigger Premise

One of the many sign of entrepreneurial success is when the current
premises fall short of space for operations and we were definitely not
complaining being in this situation. Thanks to our dynamic dominant logic,
we had already seen this coming and were well in time to move to a bigger
premise at the Business Centre. Once relocated, we started managing our
entire production by ourselves which meant no out outsourcing whatsoever
and very meaty margins. Coupled with our healthy order book which kept the
enquiry phone ringing, this in my view was one of the key reasons for the
success of Justice League Inc. This movement was completely funded by
internal accruals and Bank Overdraft & no loans were taken for the same.
Activity (Hours): Year 2

26
Producti
on
Idle
Support
Purchasing
Premises
Sales
Production
Misc
Finance
Marketing
Quality
Training
Research
Design
Recruitment
As can be observed from the above pie chart, most of the time spent in Year
2 has been in production activities followed by purchasing, recruitment and
training.
As described by Churchill (1983), in this phase, the organization is yet small.
There is very little development of systems and earning modest income on
invested capital and time. The true test at this stage is generate enough
capital to fund growth of the firm to a sufficiently large size based on the
product offerings and industry dynamics to earn an build a viable and
sustainable business in the long run.
Focus on Manpower Training

Having achieved at least a Proficient level training in almost all key areas of
the business, we started training our manpower relentlessly. Our strategy
was to hire people with basic skills and train them as per our requirements
instead of hiring expensive resources.

27

28

29
As the business gained traction, we hired six resources and trained them to
expert level in production and provided reasonable training in the other
areas as well. This gave us a solid platform of human resource which was
ready to deal with the sudden growth in the demand of our product that we
were expecting.
Profit & Loss Report: Year 2

30
Year 1
Year 2
Although the cumulative cash flow position of Justice League Inc. was in the
negative in Year 2 (primarily due to accrual income yet to be received from
debtors), the business had achieved cumulative profits of 76,903 in Year 2
which puts the firm in a very healthy cash position in Year 3.
As can be seen from the above graph, the sales of the venture had grown
exponentially from Year 1 in Year 2 and profit margins had been maintained
at viable levels. The fact that there were yet no borrowings made by the firm
made the balance sheet stronger and the Justice League Inc. poised for
strong valuations at the end of Year 3.
Analysis of Business Performance for Year 3- Growth

31
The third year of business operations of Justice League Inc. witnessed rapid
growth in the business supported by the platform that we had built for the
firm in the preceding years which subsequently led to the targeted company
valuation of crossing 1.1 million.
Although contracting the sales activities to distributors could have been an
easier option to rapidly increase the sales of our venture, we decided to
protect our profit margins and opting for direct marketing instead of
contracting out the same.

Actions
Training for all Employees
Direct Marketing Campaign
Large advertisements in local

paper created by consultant
Purchased large stands at ICT
exhibitions
New Press Releases by
consultant
ICT Fast trade event booked
Re-negotiation of contract with

distributors
Another customer research
carried out by consultant
Implications
Updated the skill sets of employees to
effectively cater to the increased
demand for our product.
The direct marketing efforts continued to
provide steady enquiries for Justice
League Inc.
We realized that advertisements were
leading to better and faster results as
the same provided a mass reach within
the shortest time period.
We believe that ICT exhibitions gave us
the right opportunity to portray our
brand directly to the target audience.
We hired a professional for quality press
releases so in order to increase the
overall brand equity.
Trade events were for the purpose of
increasing visibility of our brand which
resulted in additional enquiries.
Continuous engagement with big
distributors like Harton Brothers, Norman
& Rad kept us abreast of any possible
deals that we could strike with them.
To be sure that are product offerings are
still aligned with the market, we
commissioned another customer

32
research which went on to yield positive

results.
Marketing Blitzkrieg
It was not for no reason that the number of enquiries that Justice League Inc.
received in Year 1 was 125 and the same in Year 3 rose to 489. Exponential
to the growth in enquiries, the order quantity rose from 462 items in Year 1
to a staggering 1949 items in Year 3. This kind of growth would not have
been possible without the relentless marketing efforts of the management
team which included direct marketing campaign, large advertisements in
local papers, large stands at ICT exhibitions, ICT Fast trade event and press
releases.
Order Book Fundamentals
Year 1
Year 2
Year 3
As can be seen from the above figure, Justice League Inc. was able to match
its production capabilities with the increase in demand for the product and
therefore retained a healthy profit margin till the end of SIMVENTURE.
As observed by Wu (2007), and experienced by us while running the
computer business on SIMVENTURE, there is little or no direct correlation
between the performance of a start-up and the resources available to the
33
start up. As in our case where we continued to evaluate various alternatives

to distribution of our products, start-ups are known to enter strategic
alliances to obtain essential resources. Start-ups can that have learning and
dynamism as their core values are seen to have been performing better in
areas of resource configuration and resource integration. Inspired by this
chain of thought, we chose to outsource critical marketing efforts such as
press releases and large media adverts to experts as we simply did not have
the requisite skills and time to be able to generate the same results.
Health of Justice League
While the only challenge we were facing in running the business was in terms
of credit control as the debtors were taking significant time to make
payments, we were reluctant to up the ante against them as we had earlier
experiences a dip in sales during the practice simulation when we tried to
pressurize our debtors to pay up faster. We realized that this is a business
34
reality and we bridged the gap caused by this by means of availing a higher
Bank overdraft facility.
In terms of product design, our continuous customer researched proved that
the product is in line with the expectation s of the market and no major
change is required in the product design or pricing.
Another area that we focused on was the stress levels of the entrepreneur as
we believed that the entrepreneur is the key to all activities and only a
refreshed & happy entrepreneur will be able to run the business efficiently.
For this purpose, we allocated generous monetary compensation for the
entrepreneur, trained him from time to time, adjusted the time & efficiency
levels of the entrepreneur to realistic levels and provided 6 skilled helping
hands to him to primarily handle production so that he can focus on the
balance management functions.
Comparative: Profit & Loss Statement
Year 1
Year 2
Year 3
With a firm focus on sales, we agree with the view presented by Cespedes,
Dougherty & Skinner (2013) in MIT Sloan Management Review that to
improve capacity of the sales force, the management needs to get the sales
team to work harder (make more calls, maintain a healthy sales pipeline,
etc.), however to increase close rates (quantity sold by the sales force) and
35
to catalyze the sales cycles, managers must filter the right deals in the
opportunity spectrum and manage such opportunities effectively. Armed with
the market & competition research reports, we were able to devote more
resources to the truly vital activities.
With a firm control on the cost overheads of Justice League Inc., we were
able to manage reasonable profit margins and strong company valuations at
the end of Year 3.
Way Ahead
As rightly captured by Mullins & Komisar (2010), many businesses that are
successful are not what their founders envisioned them to be. Its a wellknown fact that if large firms like PayPal, Starbucks or Google would have
held to their original business plans, we would have perhaps never known of
their existence.
We therefore wanted to test the tenacity of the business model of Justice
League Inc. before approaching a private equity investor and obtained a
sales projections made by Samsung for its shipments in the near future. The
figures revealed the following:
Figure: Samsung Shipment Forecast (2012)
Source:
Market Research

36
As can be observed from the from the above shipment forecast of Samsung,
the computer business (PC) is at the far end of the maturity phase in the
product life cycle and can be termed as a sunset industry where the chances
of decline are high.
Figure: Industry Life Cycle of PC Industry
Source:
Market Research
It was therefore be critical for the management team to evaluate
diversification into a different business where in order to sustain the business
and generate interest in the Private Equity investor.
After intense brainstorming and several iterations, we came up with the idea
of related diversification into production of virtual reality (VR) devices called
Eduvisor that could be used in various industries such as academics,
hospitals, training & development, military, etc. and conducted secondary
market research to better understand the growth opportunities for the
product. The following statistics summarize the growth opportunity of our
product Eduvisor in the market:

37
Figure: Forecast revenue of VR products

Source:
Statista
Encouraged by the statistics, we decided to focus on a phased diversification
to Eduvisors for a specific target market within one region. Our research
revealed that there are 10,466 education institutes in Malaysia and Eduvisors
would be highly useful in such education institutes where students can view
distant/remote objects/places which they may find practically difficult to visit
physically. We decided to target only 1% of the education institutes (i.e. only
115 institutes), sell only 30 pieces of Eduvisors to each institute in the first
year of operations and strive to gradually increase our market share over a
period of time. On a conservative basis, we decided to invest 1 year in
research & development and launch the product commercially by 2019.

38
In terms of production capabilities, we plan to import these products from

China at a price of 128 per piece (including shipment charges and
assembling costs) and sell them at a price of 224 per piece in the Malaysian
market (which is lower than the price of competing products such as Oculus
Rift) as generate healthy operating profit margins in of more than 55%.
With the introduction of the new product line, we forecast the business mix
of Justice League Inc. to evolve in the future as follows:
3799
730
2016
1745
2017
1943
2018
Computers
1943
2019
2137
2020
4179
2351
2021
Eduvisors
Figure: Business Mix Forecast of Justice League Inc.

It is evident from the forecasted business mix of Justice League Inc. that the
growth of our firm will be driven by increasing sales of Eduvisor which will
compensate for the computer business which we forecast will stagnate in the
next couple of years.
We could either raise debt from Banks to fund the introduction of Eduvisor to
our product line or raise Private Equity funds for the same and we decided to
go with the latter as we concurred with the arguments placed by Whittam &
Wyper (2007) that value addition in terms of significant enhancement of core

39
competencies that an external investor can bring to the firm is instrumental

to achieve competitive advantages for the firm.
Individually, I believed that related diversification made great sense at this
juncture in order to ensure business sustainability of Justice League Inc. and
specifically keeping in mind that we were looking to pitch for Private Equity
investments in Justice League Inc. by the end of Year 3.
Amalgamating our earlier business performance with the future business
possibilities based on the opportunities provided by the introduction Eduvisor
to our product lines, following are projections of key financial ratios to be
presented to the Private Equity investor in order to attract PE investments for
the round of business cycle at Justice League Inc.
Gross Profit (%)

Net Profit (%)
Debt/Equity
Current Ratio (%)
Return on Equity (%)
Figure: Projections of Key Financial Ratios of Justice League Inc.

As can be observed from the above figure, 2018 -2019 is going to be another
valley of death or year of cash burn for Justice League Inc. as the
company spends heavily on investments for Research & Development
activities and setting up the fundamentals for the introduction of the new
product line Eduvisor. However, the commercial launch of same is expected
40
to re-stabilize the financial position of Justice League Inc. and offer attractive
Return on Equity to all shareholders of the firm. At the same time, we
believed that our philosophy of not raising debt will help us add value the
shareholders and enhance company valuation significantly.
Investment Proposal for Private Equity Investor

Armed with a track record of the successful computer business carried out by
Justice League Inc. and a promising business plan of related diversification
into a new product line, we presented the following commercial terms to the
Private Equity investor:
Parameters
Particulars
Amount Required
100,000
Form of Capital
Equity
End Use
New Product Development
Proposed Equity Dilution
10%
Proposed Valuation of Equity Investor in

2021
352,796
Net Present Value of New Venture
290,001
Proposed Return to Equity Investor
218% ( in 3 years)
Other Benefits to Equity Investor
Non-Executive Director
Exit Options
Strategic Buy Out
By the end of our pitch, the PE investor was impressed with the business
performance of our computer business and willingness to diversify into a
promising yet meaningful new product line which had the essence of human,
financial and social capital. Although the PE investor indicated further
negotiations on the proposed equity dilution, overall the proposal was found
to be winning business idea and our efforts were much appreciated.

41
Conclusion
The importance of dynamic dominant logic (Morris, Kuratko, and Covin,
2008) and strategic entrepreneurship (Ireland, Hitt, & Sirmon, 2003) in
running a startup venture are certainly my most valuable takeaways from
this enterprise. Dynamic entrepreneurship encourage entrepreneurs to
modify their product offerings in response to changing market requirements.
For instance, when Pizza Hut started its business in India it was known for its
relaxed atmosphere and friendly table service. However, as the casual dining
sector of India became congested by formidable competitors such as
Dominos by 2005, Pizza Hut rejuvenated and leveraged its resources to
build a better upscale dining experience for its customers. This was
instrumental to protect Pizza Huts market share and got Pizza Hut in the
league of Indias most trusted food brands. With this philosophy in mind, the
management team of Justice League Inc. too entrepreneurial risks in many
instances yet having a firm long term strategy in place and company
valuations in mind.
Also, we learnt to appreciate the spirit of team-work and collective learning
and sharing of information (Sung & Choi, 2012) which promotes creativity
and adds an element of incredulity to decisions made for the firm. Personally,
I am a firm believer of the Kirks Space model (Kirkham et al, 2009) which
segments the available opportunities based on our capabilities and our
knowledge of the problem and the right alignment of the two in my view is
the key ingredient for achieving entrepreneurial success.
I wish to conclude my report by thanking Prof. Chris Mahon for including
SIMVENTURE in the Entrepreneurship in Practice module which gave us a
sense of dealing with unexpected scenarios in the platform which simulates
real world business environment to a great extent and at the same time
getting us to prepare a detailed investment pitch for potential investors to a
42
new idea which provided the perfect setting for us to blend ingenuity and
strategy.
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46

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Table of Contents

Strengths & Styles

aim; confident, mature - (originally called

imaginative, unorthodox, problem-solving

serious, prudent, critical thinker, analytical

systematic, common sense, loyal,

structured, reliable, dependable,

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

practicable, efficient (originally called

Mr. Sirsanath Resource

outgoing, affable, seeks and finds options,

perceptive, listener, calming influence,

standards, quality orientated, delivers to

schedule and specification

Ms. Lee Ling

and knowledge, driven by professional

Mr. Alwyn Koay

5 years - Engineer (Pre-Cast

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Mr. Kuah Shen

Ms. Lim Shing

Ms. Lee Ling

Mr. Jorg Fuhrer

As a team member, I found this team to possess the much needed

demonstrated by the team which firmly believes in the 3 pillars of

As can be observed from the above screenshot taken of the performance

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

We faced these powers while running the tech-manufacturing

Strategic Management at Justice League Inc.

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Entrepreneurship at Justice League Inc.

Integration of Entrepreneurship and Strategy at Justice

One example of visible strategic entrepreneurship in the firm is that although

entrepreneurial are prevalent in old businesses, entrepreneurship is often not

An expanded view of Strategic Entrepreneurship

Creating newness in products

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Balancing exploration and

Figure: Strategic Entrepreneurship: A value-creating intersection between

The above figure illustrates the concept of strategic entrepreneurship as one

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Figure: Model of Strategic Entrepreneurship

Figure: Growth Stages

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Analysis of Business Performance for Year 1Survival

SIMVENTURE truly tests the strategic & entrepreneurial ability of the

Figure: Valley of Death

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Key Actions & Implications during the Year

Target segment changed to

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

the 4th week.

With growing production, it became

In house press release added to the

Crunching the Market Report Figures

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

We tabulated this data in the following table in order to arrive at the

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

We obtained the following Competition Report for our venture:

Based on the specifications provided by competition, we modified our

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Prepared by: Sirsanath Banerjee; Student ID Number: 014803; MBA: NUBSUNMC

Justice League Inc: Operational Performance