WOU - PPT TEC210 Technopreneurship Unit 5

School of Science and Technology
wou.edu.my
Technopreneurship
TEC210/05
wou.edu.my
Unit 5: Business Strategies, Model and Ethics
Table of Content
5.1 Strategies for Technology 5.3 Legal and Ethical
Innovation Consideration
 Innovation strategies  Legal requirements for your
 Defensive innovation strategies business
 Generic strategies  Ethical considerations for

technopreneurs
5.2 Business Model Canvas
 Developing code of ethics / code
 Business model definitions of conduct
 Business model canvas
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5.1 Strategies for Technology Innovation
Introduction
Innovation • Pioneering (or first mover) strategy

• Follower (or late entry) strategy
strategies
Defensive • Locking in customer strategies
innovation • Locking out competitor strategies

• Sustaining proprietary standards strategy
strategies
• Product market focus strategies

Generic • Opportunity and risk-focused strategies (Prospectors,
Defenders, Reactors and Analysers)
strategies • Time-based (industry and competitors-focused) strategies
Figure 5.1: Summary of strategies for technology innovation

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Innovation strategies
1. Pioneering (or first mover) strategy
 According to Robinson and Fornell (1985), the first-mover
advantages come from 4 sources of market advantages:
a. Relative marketing mix advantage
b. Relative consumer advantage
c. Relative direct cost advantage
d. Technical leadership
2. Follower (or late entry) strategy
 The main benefits are:
a. It allows market uncertainty to disapper
b. Learning from the pioneer’s mistakes and success
c. Introduction of superior manufacturing techniques
d. Introduction of products with superior design attribute.
Innovation strategies
e. Fine-tuning of marketing efforts.
• Often branded as imitators
• Imitations can be divided into two forms:
i. Pure imitation: a simple one-way transfer of knowledge.
ii. Reflective imitation: an elevated strategy that goes far
beyond simple copying and transfer of knowledge.

Defensive innovation strategies
1. Locking in customers
 A firm can increase switching costs if it is able to improve the
appeal of its products by matching the needs of customers more
closely.
2. Locking out competitors
 A firm can lock competitors by taking steps that restrict access to
key activities in the value chain.
3. Sustaining proprietary standards
 A firm can increase barriers to entry through their network of
suppliers and manufacturers.
 Those proactive strategies involve a varying degree of three sub
elements:
a. Blocking
b. Running
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a. Blocking
• An act to stop competitors entering the industry or to limit the
effectiveness of their entry.
• Blocking can be achieved by:
i. Maintaining, enhancing and sustaining unique
capabilities.
ii. Protecting knowledge sources.
iii. Signalling intent to stay and compete fiercely in the
market.
iv. Increasing commitment by scaling to reap economies of
scale, as well as signaling intent to remain in the industry.
b. Running
• Trying to keep ahead of competitors through continuous
innovations.
c. Teaming up
• The opposite of blocking strategy.
• Instead of preventing entry, it attracts entry.
• The rational is the relative gains such as:
i. Allows a frim to win the battle for dominant design
ii. Stimulating market demand
iii. Building capabilities
iv. Second source effect
v. Access to markets.

Generic strategies
1. Product and market-focused strategies
 The main focus is to develop products and markets to capture a
superior competitive position.
a. Cost reduction (cost leadership)
A firm with the lowest cost is able to accrue higher returns or
greater market share, or both.
b. Differentiation
By adding value, differentiation is able to create customer loyalty
and lower customers’ sensitivity to price.
c. Niching (focus strategy)
A firm is able to attain superior returns by recognizing and
positioning itself in subsectors of the market where competition is
less intense.

Generic strategies
2. Opportunity and risk-focused strategies
 According to Miles and Snow (1978), the strategy topology is made
up prospectors, defenders, reactors and analysers with two
orientations; risk-taking and risk-adverse.
Risk-taking orientation Risk-averse orientation

 Prospectors  Defenders
 Analysers  Reactors
a. Prospectors (risk-taking orientation)

 Continuously search for market opportunities
 Test the potential responses to emerging trends
 Creators of new trends through product & market innovation
 Very sensitive to potential opportunities.
Generic strategies
b. Defenders (risk-adverse orientation)
 Firms that have a narrow products domain.
 Secure a niche in niche a relatively-stable products and
services area.
 Offer high quality, superior services and lower prices
 Serve their current domains
 Do not seem to be at the forefront of development in their
industry.

Generic strategies
c. Analysers (risk-taking orientation)
Firms that operate in two types of product market domain, namely
the stable product market and the changing product market
domain.
In the stable product market In a changing domain, the top
domain, these firms operate management will monitor their
regularly and efficiently competitors for new ideas and
through formalised structures rapidly adopt those ideas that
and processes. show great potential for
growth.

Generic strategies
d. Reactors (risk-adverse orientation)
Firms that encounter change and uncertainty in an environment
but are unable to respond effectively.
 Short of consistency in product market orientation
 Neither aggressive nor risk-taking in maintaining established
product and markets
 Adjust their products as a last resort
 Frequently, fall into an unpleasant cycle of responding
inappropriately to environmental changes and uncertainty.

Generic strategies
3. Time or industry-focused strategies
 These strategies are dependent on the timing of entry into a
market at a point in the evolution of the industry when structural
conditions are favourable.
Competitive Pioneer Fast follower Late follower
orientation
Time First entrant Early entrant, Late entrant,
Outpacer Outpacer, Leapfrog
Opportunity Prospectors Prospectors, Defenders, Reactors,
/ risk Analysers, Imitators
Imitators
Product Differentiator, Differentiator, Differentiator,
market Offensive strategist Low cost, Low cost,
Hybrid Hybrid
Table 5.1 Interrelationship between the strategy types

Business model definitions
 A business model describes the rationale of how a firm creates,
delivers, and captures values.
 You can use the process of developing a business model to better
understand the customers in terms of customers’ wants, needs and
willingness to pay.
 One of the famous business modelling techniques is called Business
Model Canvas, developed by Osterwalder and Pigneur (2010).

Business model canvas
Figure 5.2 Nine blocks of Business Model Canvas

Nine components of the Business Model Canvas:
1. Value proposition
Key questions:
a. What do you offer to the market?
b. What specific products/services do you offer each customer segment?
c. What customer needs does the value proposition cover?
d. Are your service levels different for different customers?

 Value proposition canvas
• It is tool which can help ensure that a product or service is
positioned around customer values and needs.

2. Customer segments
Key questions:
a. Who do you create value for?
b. Can you group them according to:
i. What you offer?
ii. What channels you communicate and distribute your offer?
iii. The relationships you keep with them?
iv. The profitability of each segment?

3. Distribution channels
Key questions:
a. What do you offer to the market?
b. What is the specific bundle of products and services that you offer to
each of your customer segments?
c. Which customer needs does each value proposition cover?
d. Do you offer different service levels to different customer segments?
e. What is the best way to distribute your products and services?
f. How should you communicate and engage your potential customers?

4. Client relationships
Key questions:
a. How do you develop and maintain different types of client relationship
in your business model (e.g., more or less intense, more or less
personal)?
b. How resource-intensive is each of these client relationships in terms of
time consumption and other costs?
c. For each client segment, which client relationship types and
mechanisms do you develop and maintain?
d. What type of customer service and support should you establish?

5. Key resources
Key questions:
a. What are the key resources you rely on to run your business model?
b. How do these resources relate to your value propositions and their
corresponding customer segments, channels and relationships?
c. What resources do not add value to the company?

6. Key activities
Key questions:
a. What are the main activities you operate to run your business model?
b. Which key resources do they rely on?
c. Which value propositions, channels or relationships do they contribute
to?

7. Key partners (partner network)
Key questions:
a. Which partners and suppliers do you work with?
b. Which key resources do they relate to?
c. What is the cost/impact of partnering?
d. Which value proposition, channels or relationships do they contribute
to?

8. Revenue flows
Key questions:
a. What are your revenue streams?
b. What are the revenue streams from each customer segment and value
proposition?
c. How much does each revenue stream contribute to the overall
revenues in terms of percentages?

9. Cost structure
Key questions:
a. What are the most important costs in your business model?
b. Can the cost requirement be easily connected to a business model
building block?
c. Can costs be calculated for each customer segment?

5.3 Legal and Ethical Considerations
Legal requirement for your business
 Some of the laws and regulations:
1. Requirements for registering a business.
2. Local laws that govern business operations.
3. Guidelines that govern the health/care of employees/customers.
4. The tax code for small business operations.
5. Codes of conduct relevant to specific industries, sectors or
professionals.
 Some of the facilities or incentives for start-up:
1. Grants to set up a small business.
2. Microfinance opportunities.
3. Tax relief.
4. Recognition in the community, etc.
5. Legal aid.

Naming a business
 A business name can only include the term “enterprise” for a sole
proprietorship or partnership while a private limited company is
registered as “Sdn. Bhd.” and the best are:
1. Reflects the production and services you provide to clients.
2. Can be easily understood by potential clients.
3. Has marketing values.
4. Can potentially be employed as a registered trademark in the
future.

Government regulations and your business
• The Companies Commission of Malaysia (Suruhanjaya Syarikat
Malaysia, SSM) is a statutory body formed under an Act of Parliament
that regulates corporate business affairs in Malaysia.
• The main purpose of SSM is to serve as an agency to incorporate
companies and register businesses, as well as to provide company and
business information to the public.

Licenses and regulations
 Some example of different types of licenses:
1. Trader’s license
2. Certificate of occupancy/permission
3. Liquor license
4. Tour guiding license
5. Vehicle operation license

Tax
1. Sales and services tax (SST)
Two components:
a. Services tax
 Levied and paid in conjunction with taxable services provided in
and supported by any taxable individual in Malaysia.
 A single-stage tax with a rate of 6%.
 Not required for imported or exported services.
 No input exemption mechanism included
b. Sales tax
 levied on goods manufactured or imported into Malaysia and
excluded for exported manufactured goods.
 Tax rate is at 5%, 10%, or on a specific rate or exempt.
 Single-stage tax imposed at one stage in the supply chain.
Tax
2. Business/Corporate tax requirement
Required for private and public limited companies meeting certain
criteria but for the enterprise, it will be declared as individual tax.
Type of company Chargeable Corporate
income tax rate (%)
Resident or non-resident company Any amount 24%
Resident company (SMEs): First 17%
 With paid-up capital of RM2.5 million or less, and RM600,000
gross business income of RM50 million or less. Excess of 24%
 That does not directly or indirectly control another RM600,000
company with more than RM2.5 million paid-up
capital.
 That is not directly or indirectly controlled by
another company with more than RM2.5 million
paid-up capital.
Table 5.2 Chargeable corporate tax for YA 2020 (Biztory, 2020)

Tax
Malaysia corporate tax deductions
• Within 7 months after the end of a company’s assessment year, Form C
will be filed, tax repayable is made in 30 days, and advance tax paid in
access will be returned.
• Some of the deductible corporate taxes are:
1. Current year business losses
2. Prospecting expenditure/pre-operational business expenditure
3. Approved donations/gifts/contributions
4. Zakat
5. Claim for loss under Group Relief provision.

Ethical consideration for technopreneurs
 Ethics refers to the moral principles or a set of values held by an
individual or a group.
 In some organisations, the business leaders may even decide to provide
a list of ethical practices in the form of a code of conduct to deal with
issues like:
1. Compliance with laws, rules and regulations.
2. Conflicts of interest.
3. Dealings with the public.
4. Health and safety within the workplace.
5. Competition and fair dealings.
6. Discrimination and harassment.
7. Environmental management.
8. Proper use of company assets.
Ethical consideration for technopreneurs
9. Payments to external providers or politicians.
10. Confidentiality.
11. Financial management and reporting.
12. Trustworthiness.
 Ethical behaviour is merely making good business decisions based on an

established “code of ethics”.
 Technopreneurs should establish a written code of ethics that serves as
a framework for decisions to be made by technopreneurs, as well as the
employees.

Developing code of ethics / code of conduct
 The code of ethics is formulated for the following aims:
1. To establish a standard of ethical behaviour for directors based
on trustworthiness and values that can be accepted, are held or
upheld by any one person.
2. To uphold the spirit of responsibility and social responsibility in
line with legislation, regulations and guidelines for administrating
a company.
 Items for consideration when developing the code of ethics:
1. Identify the general principles that will lead to fair business
practices.
2. Identify the values that will guide your interaction with customers
and employees.
3. Check with your industry association for basic standards to follow,
such as the Companies Act 2016 for company directors or Board
of Engineers (BoM) for engineering practices.
4. Allow for the fact that ethical questions do not always have a
unique, faultless answer.
5. Write out specific statements that will assist you and the others
in making day-to-day ethical decisions.
 The code of ethics will apply to all types of business operations

including:
1. Handling cash and cheques from customers.
2. “Negotiating” special prices for a friend without permission.
3. Accepting gifts from suppliers and business associates.
4. Selling damaged merchandise.
5. Warranties on products.
6. Returning merchandise to suppliers.
7. Handling shoplifters.
8. Accounting procedures for cash sales.
9. Employee theft.
10. Insurance coverage adequate to protect the business and its
employees.
11. Checking in the merchandise after receiving from suppliers.
12. Keeping the premises clean and free from harmful substances or
germs.
13. Handling employee performance problems.
14. Telling customers the truth.

7. Handling shoplifters.
8. Accounting procedures for cash sales.
9. Employee theft.
10. Insurance coverage adequate to protect the business and its
employees.
11. Checking in the merchandise after receiving from suppliers.
12. Keeping the premises clean and free from harmful substances or
germs.
13. Handling employee performance problems.
14. Telling customers the truth.

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School of Science and Technology

 Generic strategies  Ethical considerations for

3 TEC210/05 Technopreneurship wou.edu.my

Innovation • Pioneering (or first mover) strategy

Defensive • Locking in customer strategies

innovation • Locking out competitor strategies

• Product market focus strategies

Figure 5.1: Summary of strategies for technology innovation

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Risk-taking orientation Risk-averse orientation

a. Prospectors (risk-taking orientation)

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Table 5.1 Interrelationship between the strategy types

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Figure 5.2 Nine blocks of Business Model Canvas

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Table 5.2 Chargeable corporate tax for YA 2020 (Biztory, 2020)

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 Ethical behaviour is merely making good business decisions based on an

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 The code of ethics will apply to all types of business operations

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