This book is motivated by a desire to communicate the essentials of business strategy, with financial and related topics, to technical professionals. Specifically, the intended audience comprises engineers and other technical specialists of various disciplines who are: contemplating starting their own business; interested in undertaking a management buyout or buy-in in the context of an existing business; finding that their role merits the description of 'corporate entrepreneur', leading a new business unit forward and exposed to many of the challenges of the entrepreneurial venture but without the direct risk and upside associated with owning the venture; finding that they are increasingly working in teams comprising executives from a number of functional areas; interested in becoming more familiar with the commercial aspects of the organisation with which they are associated. Engineers are usually well placed to understand business issues. Their education and professional training emphasise a strong quantitative approach, based largely on the adage that if one cannot quantify an issue then it is not fully understood. Much of the required skill set for business also includes the ability to deal with quantitative issues, primarily those relating to finance.

Starting and developing a business is usually undertaken in order to achieve the personal ambitions of the founder entrepreneur or team. Going successfully through the entrepreneurial process and creating a business of value is obviously a source of immense satisfaction, added to which is the large financial gain that can be realised from a successful venture.

This chapter presents strategic business design. In the business environment, the initial business design approach may be top down. A business that has a clear role in the marketplace and which will be around for some time is required. The top down approach is concerned very much with undertaking an industry analysis, at least in sufficient depth to be able to see the main factors involved in building a successful business, and seeing how the venture will fit within that industry as it evolves.

Having mapped out the relationships and the heart of the design approach, key aspects of the entity being designed needs to be considered. Getting the right attitudes and culture into an organisation, and establishing the correct organisational structure principles, avoids the costly issues of change management at a later stage. There is a large body of current ideology associated with manufacturing and other areas within the organisation, and it is important that the company is imbued with best practices in these areas from an early stage. Installing information systems and setting up organisational structures is also best undertaken as early as possible. Putting full scale implementations of systems into a very small organisation may be impractical, but the important task is to ensure that no action is taken which will make future implementations of these systems unduly difficult as the business grows.

Finance is perhaps the key issue in management of the business. Sometimes it is very easy to fall into the trap of thinking that if there is a good product, well sold, then the financial aspects of business will fall into place. Nothing could be further from the truth. The fundamental purpose of a business is to create value for its shareholders. A business may well be assigned additional objectives such as job creation, economic development or other social goals, but it must create value if it is to be able to undertake these worthy additional goals in any continuing fashion. Business is thus about value creation for the investors; they put in cash, and expect a return on this investment. Timing expectations for the return may vary significantly; some will expect to get a stream of income perhaps every half year by way of regular dividends while others will hope to get a considerable lump sum from sale of the business (or a significant part of it) at some time in the future. Naturally, a business often has to address issues going beyond the narrow shareholder interests. Staff, customers, suppliers, lenders and the local community will all have a vested interest in its success, but their needs are usually also best served if the company is successful and profitable for shareholders.

Businesses usually require significant equity capital, particularly if they are funding product development or marketing programs or if they are expanding rapidly. Firms in the venture capital business, wealthy individuals, and indeed stock exchanges, can be appropriate sources of such funding. Before seeking to raise equity capital from such sources, it is appropriate to look at other means of building up the equity base of the business.

Alliances come in several forms, and include arrangements such as distributorship agreements, technology sharing and licence arrangements, joint ventures and shared buying groups. The objectives of parties in entering into an alliance are furtherance of their individual objectives, and alliances may continue to exist only for as long as they continue to bring benefit. Alliances may be tactical in nature, as when two companies come together to form a consortium to bid for a large project, or they may be strategic, designed to be in place for a longer, perhaps indeterminate, timescale. Small companies can be motivated to enter into alliances with larger companies to exploit the distribution channels offered by the larger partner, and larger companies may seek to draw smaller companies into alliances to gain access to unique technology or other strengths. Alliances may be formed for market development purposes or for defensive purposes. The company repelling an attack from a newcomer will seek to control potential partners in a wide range of areas, from suppliers to downstream distribution channels, to other potential partners offering complementary services. Understanding the true motivation behind those seeking alliances is thus important.

Acquisitions can be a key element in corporate development. A catalogue of acquisition types outlines the issues involved in this chapter. Acquisition types include financial acquisition and strategic acquisition.

A very large part of the available pool of venture capital funding in recent years has gone towards purchase of businesses by their managers (management buyouts), or to purchase of businesses by managers with an established track record (management buy-ins). There have also been various hybrid arrangements where existing management has been augmented by incoming management with specific experience complementing the existing team. The term BIMBO (buy-in management buyout) has become common in the industry to describe the full range of transactions of these types.

In the commercial world, there is a constantly competitive environment. The game is ongoing, without the predictability expected from physical systems. Being able to play the game effectively requires very good judgment, under conditions of limited knowledge. Every business has its own rules, sometimes to be observed and sometimes to be consciously broken, but always to be known. It may be convenient to go with the conventional wisdom in an industry concerning margin structures and commissions, or elect to come in as the innovator in this area and upset long standing arrangements, but the consequences of actions must be known. Every business area has its stars, those who continue to do better than other companies, with the performance usually being accounted for by numerous areas of attention to detail. Hence, when entering an established industry, investors will usually place a premium on the detailed commercial industry knowledge that it likely to be possessed by the executive who has had successful profit and loss responsibility for a division or a business in the area. When entering a new business or seeking to upset the applecart in an established business, then of course the skill set can be quite different. The office superstore industry in the United States was, for example, started by executives from the supermarket industry, using these skills to revolutionise an established industry with new business models.

This has been a tour of the business landscape, seeking to communicate the main issues associated with business to technical professionals, specifically engineers. The focus has naturally been on entrepreneurs and management teams, but much of the analysis and presentation is also relevant to those having to manage business units in larger corporations. In this case the issues are often the same, but the upside and downside associated with actual ownership of the business are not there, except in a contained form expressed by rewards in the form of bonuses and other career advancement issues.