Risk Management in New Business Ventures

3081.1.2 : Managing Risk
The graduate utilizes evidence-based techniques to make strategic decisions.
3081.1.3 : Elements of Business Strategy
The graduate applies appropriate business practices to formulate recommendations that impact organizational effectiveness.
INTRODUCTION

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Today’s business environment requires competency in managing risk and in selecting a business strategy based on a company’s internal and external analyses. In this task, after reviewing the scenario, you will discuss the market entry risk/reward ratio; analyze the company’s strengths, weaknesses, opportunities, and threats (SWOT); and recommend a business strategy. As you complete the task, think about past projects you may have worked on that required evaluating risks and conducting risk analyses.
SCENARIO

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A U.S. fishing boat manufacturer is known throughout the United States for its innovative approach to product design, lean manufacturing, and responsive customer service since its start three years ago. The mission statement of the company is “We will provide the most innovative customer-driven design and growth in the industry.” The founders’ ideals for the company are described in the vision statement: “We will be the most sustainable company in the industry.” The company’s ethical statement that guides all conduct and decision-making is “We will make decisions that are sustainable for customers and the environment.”

The company’s founders have created an organizational culture of innovation. They have provided incentives for employees’ creative ideas and created testing laboratories where customers use the products and provide design feedback. The founders have also invited innovators in other industries, such as gaming and information technology, to improve on the designs. The founders have cultivated a company culture in which employees and founders are considered equal partners. The company structure is decentralized, and all employees can access the founders at any time for collaboration, shared decision-making, or relationship building. All company decisions are evaluated by all employees to ensure that everyone is committed to the decisions.

The company has identified an emerging global market opportunity in India for its products. Successful sales in India could represent a critical moment for the company if the company establishes strategic partnerships that will increase the likelihood of product success. The founders hope to capture profits and market share and expand into other parts of Asia within the first year of selling products in India.

Research indicates market potential for the company’s sales in India because of the importance of the fishing industry in the country. Fishing and aquaculture are primary industries in the coastal regions of India. Economic zones have been established to support the over 14 million people who are an important part of the fishing industry. This industry makes up 1% of the nation’s gross domestic product and 6.56% of global fish exports (Department of Fisheries, 2019).

The company’s goal of the market expansion into India is to be the first foldable fishing boat manufacturer reaching the country. An origami-inspired foldable fishing boat is the company’s most popular product. This boat comes designed as a plastic carrying case that unfolds into the water like an origami paper boat. This boat is suitable for uses in calm water, and the boat can be recycled. The product retails for U.S.$200.

Traditional fishers use nonmechanized boats, which would be ideal for the foldable boat’s entry into the market. Laws and regulations surrounding the use of nonmechanized boats favor importing foldable boats, which would be easy for fishers to carry from home to the water. The business climate in India is open to new partnerships to improve the fishing experience for those who preserve the natural ecosystem with nonmotorized boats. The National Fisheries Development Board (NFDB) promotes the use of natural fishing equipment to reduce disruption to the fishing ecosystem in India (National Fisheries Development Board, n.d.).

The U.S. boat manufacturer’s founders met with the NFDB to request an endorsement for their foldable boats because of the product’s sustainable design and net-zero environmental impact. The founders discovered that the NFDB would only endorse the boat if it was made of plastics used in India, in order to reduce the waste products in the nation’s landfills.

This endeavor would require the U.S. company to make a significant investment in India. The company would need to purchase or build a manufacturing facility, or it would need to contract with a facility owner to secure a manufacturing location. It would need to employ Indian workers. Lastly, the company would have to manufacture a new foldable boat made from used plastics in India with an environmentally friendly waterproof coating.

The new foldable boat could be designed in several ways, and the company would need to test a series of paper products and waterproof coatings to determine which would be suitable for fishers in India. The fishers range in age from 13 to 70, so the design would need to be comfortable and portable enough for all fishers in this target group.

The company decides to hire Indian fishers to help design the product to reach this market. These fishers will provide qualitative, open-ended conversations and data that will be valuable in communicating the product’s features and benefits to other fishers. The product will be tested by a variety of fishers that represent different sectors of the fishing industry, different regions, and different cultural segments. Testing will provide generalizable, qualitative data about the product use and effectiveness.
REQUIREMENTS

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IMPORTANT: Please be sure to use the Template and Tip Sheet that matches your Assessment Code (You can find your Assessment Code on your main course page under the Assessments heading). This Template is for Assessment Codes NNM2 and QBM2!

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Task 2 Template

Course/Assessment Code: C714 v.4 (NNM2) and D081 v.4 (QBM2)
Student Name:
Student ID:
Date:
Program Mentor Name:

A. Discuss at least “two” potential risks the company in the given scenario encounters in entering the new market (India), including a detailed description of the impact to the company (Unit 3: Module 3, Page 21).

1. Risk #1:
2. Risk #2:

In blue I included some context from page 21

Risk in the Business Context
The notion of risk is inextricably linked to uncertainty, but the concepts are not synonymous. Risk (intuitively and formally) has to do with consequences, both positive and negative. It involves having more than two possible outcomes (uncertainty). Uncertainty also creates opportunities for gain and the potential for loss. Nevertheless, if no possibility of a negative outcome arises at all, even remotely, then the situation is not considered as having risk (only uncertainty).1

Preventable risks stem from events or activities internal to the organization that are within its control and capability to avoid. These types of risks do not offer strategic benefit to the company. Examples of risks in this category include risks from unethical behavior, breakdowns in operational processes, lack of due diligence or oversight, lack of compliance processes, inadequate documentation or quality assurance, or failure to establish procedure (or follow established procedures). Strategic risks, such as those that drive innovation, are also controllable but deliver potential value to an organization.
Uncontrollable risks are external to the organization. While the organization can take steps to mitigate their impact, these types of risks are not within its sphere of control. For example, while a construction company should be aware of macroeconomic and local trends to forecast demand, it could mitigate the effects of—but not control—the subprime mortgage crisis between 2007 and 2010
Internal and External Risks

Internal and external risks to organizations include the following:
• Financial loss: These risks relate to potential economic losses that can result from poor allocation of resources, changes in interest rates, shifts in tax policy, increases or decreases in the price of commodities, or fluctuations in the value of currency.3
• Operational risks: Operational risks relate to the ongoing day-to-day business activities of the organization.4 These risks can arise due to choices about design and use of processes to create and deliver goods and services. They can include production errors, substandard raw materials, and technology malfunctions.3
• Personnel risks: These risks relate to an organization’s employees, arguably its most important resource. Dependence on key personnel can be a risk, particularly for smaller businesses. Other examples include risks from work conflicts, unethical behavior (such as embezzlement or misuse of intellectual property), or physical hazards.
• Strategic business planning: These are risks that arise from the investments an organization makes to pursue its mission and objectives. They are often associated with competition and can include macroeconomic risks (the alignment of buyers and sellers consistent with the principles of supply and demand), transaction risks (the operational risks from merger and acquisition activity, divestitures, or partnerships), and investor relations risk (the risks associated with communicating effectively or ineffectively with the investment community).3 Strategic risks also relate to lack of alignment between the marketing and product strategy and customer needs.
• Legal risks: These risks stem from the threat of litigation or ambiguity in applicable laws and regulations (including whether they are likely to change). These threats create uncertainty in the steps an organization should take to address its obligations to customers, employees, suppliers, stockholders, communities, and governments.3
• Project planning: Project-planning risks can relate to a variety of factors, including technical capability, budget, scheduling, review cycles, contractual risks, environmental factors, and resourcing availability. Some risks have high impact to projects while others may have low impact.
• Reputational risk and branding: These risks involve damage to the perception of a company’s brand or reputation through negative publicity (lawsuits, social media, regulatory violations, and so on) that can impact revenue. This may be linked to controllable events, such as a data breach stemming from inadequate security processes or uncontrollable events.

B1. Conduct a SWOT analysis of the company in the scenario by identifying and explaining at least two “internal” strengths (Unit 4: Module 5).

1. Strength #1:
2. Strength #2:

B2. Conduct a SWOT analysis of the company in the scenario by identifying and explaining at least two “internal” weaknesses (Unit 4: Module 5).

1. Weakness #1:
2. Weakness #2:

B3. Conduct a SWOT analysis of the company in the scenario by identifying and explaining at least two “external” opportunities (Unit 4: Module 5).

1. Opportunity #1:
2. Opportunity #2:
   B4. Conduct a SWOT analysis of the company in the scenario by identifying and explaining at least two external threats (Unit 4: Module 5).
3. Threat #1:
4. Threat #2:

C. Identify “two” strategic recommendations for the company in the given scenario that are based upon the SWOT analysis results in Parts B1 through B4 (Unit 4: Module 4, Page 30). Please note: You must choose two strategic recommendations taught in the course material on Page 30.

1. Strategic Recommendation #1:
2. Strategic Recommendation #2:

The below screenshot has page 30 recommendations this refers to

C1. Justify “one” strategic recommendation from part C by explaining in detail the “benefits” of the recommendation to the company.

1. Strategic Recommendation Justification:

D. References

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