ENGG 1320

Engineers in the Modern

World
Business Plan I
by Yong-Hong KUO
Department of Industrial and Manufacturing Systems Engineering
Engineers? Businessmen?
Launching Your Next Big Idea
To start a new product or service?
We will guide you through the essential steps to launch your product/service.
Preparation for Your
Business
1. Set targets to achieve by a certain stage
2. Analyze the industry market
3. Define the details of your product/services
4. Determine your team and agreements between partners
5. Create a solid marketing strategy
6. Develop a comprehensive financial plan
=> Persuade investors for funding
Outline of a Business Plan
1 Executive Summary 2 Market Analysis
Objectives and Mission Market Needs Analysis
Brief Descriptions of … Market Segmentation
Industry Analysis
IP Investigation
Demand Forecasting
Business and Competitor Analysis

3 Product or Service Description 4 Strategy and Implementation

5 Financial Plan 6 Management Summary
Cost
Profit
Projected Revenue
Let's have some fun before we start…
Would you like to watch the following movies?
If you have a budget to choose only one, which one will you watch?
The Key to Captivating
Investors:
Executive Summary
An executive summary serves as a concise summary of a lengthy
document, such as a business plan, report, or proposal.
“The executive summary of a business plan is designed to capture the
reader’s attention and briefly explain your business, the problem you are
solving, the target audience, and key financial information."
“If the executive summary lacks specific information or does not capture
the attention of the reader, the rest of the plan might not be read.”
- Ross Kimbarovsky, CEO and founder of Crowdspring
Components of an
Executive Summary
Mission
Company History and Management
Products or Services
The Market
Competitive Advantages
Financial Projections
Startup Financing Requirements

Forbes Advisor (2022), "Business Plan Executive Summary Example & Template"
<https://www.forbes.com/advisor/business/business-plan-executive-summary/>
Accessed September 13, 2023
Examples of Mission

To organize the To give people the To inspire and nurture To make it easy to do
world's information power to build the human spirit – one business anywhere.
and make it universally community and bring person, one cup and
accessible and useful. the world closer one neighborhood at
together. a time.
Example of an Executive Summary

Forbes Advisor (2022), "Business Plan Executive Summary Example & Template"
<https://www.forbes.com/advisor/business/business-plan-executive-summary/>
Accessed September 13, 2023
Example of an Executive Summary

Forbes Advisor (2022), "Business Plan Executive Summary Example & Template"
<https://www.forbes.com/advisor/business/business-plan-executive-summary/>
Accessed September 13, 2023
Market Needs Analysis
The market needs information are obtained from secondary data and primary
data:
Secondary data: Existing information that was previously gathered for a
purpose other than the study at hand
Primary data: New information that is collected for a particular purpose
Market Basket Analysis
Find out items that are frequently purchased together
Analyze the buying habits of customers
Discounts can be given, or the items can be put together in pairs to
increase the income
Market Basket Analysis
Market Basket Analysis
Association Rule Mining
One of the data mining techniques, i.e. the extraction of useful
knowledge from a large set of raw data
Finding interesting relationships among a large set of data items
Analyzing business transaction records for supporting decision making
processes
Association rule is to describe the relationship between different items
that will appear at the same time
The rule is composed of two parts: Condition and Result
Form of rule: IF(Condition), THEN(Result)
Example
Movie A → Movie B
i.e., If the customers buy DVD of movie A, then they buy DVD of
movie B at the same time.
Measures of Association Rule Mining
(Example) – Rule 1
Consider Rule 1: IF Gender = Female, THEN Insurance Promotion = Yes
Rule Confidence:
IF Gender = Female, 7 records fulfill the conditions
THEN Insurance Promotion = Yes, 6 records fulfill the result
Confidence= 6/7 = 86%
Measures of Association Rule Mining
(Example)
To understand the Inter-relationship between 2 attributes in database
Examples of rules
Rule 2
IF Gender = Female & Age ≥ 40, THEN Insurance Promotion = Yes
In the above, Gender = Female & Age ≥ 40 is an itemset, while Insurance Promotion = Yes is
an item.
Rule 3
IF Gender = Female, THEN Magazine Promotion = Yes & Watch Promotion = Yes
In the above, Gender = Female is an item, while Magazine Promotion = Yes & Watch
Promotion = Yes is an itemset.
Measures of Association Rule Mining
(Example) – Rule 3
Consider Rule 3: IF Gender = Female, THEN Magazine Promotion = Yes & Watch Promotion = Yes
Rule Confidence:
IF Gender = Female, 7 records fulfill the conditions
THEN Magazine Promotion = Yes & Watch Promotion = Yes, 3 records fulfill the result
Confidence= 3/7 = 43%
Finding Association Rules by Apriori
Algorithm
Apriori Algorithm
Only frequent itemsets (i.e. itemsets that often appear in the transaction) will be used to generate
association rules
How to determine whether an item or an itemset is frequent?
Check the support count (i.e. # of occurrences) of the item or itemset
If the support count is larger than or equal to the predefined min. support count, it is frequent
If it cannot satisfy the min. support count, it is infrequent and will be pruned
Apriori Algorithm
If an itemset is frequent, then all of its subsets must also be frequent
Example
A, B, C and D are defined as an item
Grouping one or more items into a set → itemset
If {B,C,D} is a frequent itemset, Then, {BC}, {BD}, {CD}, {B}, {C}, and {D} must
also be frequent.
Apriori Algorithm (Example)
Nine transactions are made in Order ID Items chosen in the order
the supermarket, Apriori is used
to find out any association rules 001 A, B, E
based on the data recorded. 002 B, D
Five items in the orders 003 B, C
A: Beer 004 A, B, D
B: Snacks
C: Juice 005 A, C
D: Instant noodles 006 B, C
E: Soft drinks 007 A, C
008 A, B, C, E
009 A, B, C
Apriori Steps (Example)
1a.Transactional data of nine customers in the Items Support counts
supermarket are scanned to form such a table
in order to find out the frequency of A 6
occurrence of different items in transactions
(Support Counts, s.c.) B 7
1b.Support counts are compared with the C 6
minimum support counts threshold (min s.c.,
is set to be 2 in this case). If s.c.<min. s.c., the D 2
corresponding items will be pruned E 2
Apriori Steps (Example)
2a. Remaining items are merged to Itemset Support counts
form an itemset with 2 items,
possible itemset are shown AB 4
2b. Scan for support counts of AC 4
these itemset in the transactional AD 1
data
2c. Compare the s.c. of itemset AE 2
with min. s.c. prune off the s.c. < BC 4
min. s.c. BD 2
BE 2
CD 0
CE 1
DE 0
Apriori Steps (Example)
3a. Generation of itemset with 3 Itemset
items. Itemsets containing pruned
parent itemset(s) are being pruned ABC (AB, AC, BC)
too ABE (AB, AE, BE)
3b.Scan the transactional data for BCD (BC, BD, CD)
s.c. of each itemset

3c. Compare the s.c. of itemset

with min. s.c. Itemset Support counts
ABC 2
ABE 2
Find Useful Rules in Itemsets
If the minimum confidence threshold is set to be 90%, rules with 90% in rule confidence are defined as
useful rules
Segmentation
Segmentation is a group of customers defined by certain common
characteristics.
Demographics - objective social and economic facts about people.
Geographics - based on market segments where consumers live or
where businesses are located.
Psychographics - psychological characteristics of consumers, such as
attitudes, opinions, beliefs, interests, personality, lifestyle, political
affiliation, and personal preferences.
Cluster Analysis
The table below shows an investigation by an insurance company about their customers’ information:
Name Age Income Investment Insurance
Package
John 50 50,000 A, B, C Y
Tom 25 32,500 A Y
Mary 30 15,000 Nil N
Paul 48 13,000 Nil Y
The marketers can segment customer groups based on similar buying patterns, or discover distinct
groups of their customers
Then use the discovered knowledge to develop targeted marketing programs
To attract target customers for the promotion of service and product
Clustering analysis is used to solve this problem as a data mining tool
Targeted Marketing
Customers with similar characteristics, such as interest, income level and spending, can be grouped
together as a cluster
Clustering is a division of data into groups of similar objects.
Each group, called a cluster, consists of objects that are similar among themselves.
K-means Algorithm
Step 1: Given n data points, initialize k cluster centers (mean values)
Step 2: Assign each point to the cluster with the mean closest to that
point
Step 3: Update the mean for each cluster
Step 4: Repeat Steps 2-3 until the means of clusters no longer change
K-means: Example
Suppose a fitness center has collected a sample of Member ID Hrs spent on
nine customers to study their habits of exercising exercise /month
The table shows how many hours they spend on
exercise within a month 001 2
We will partition the customers into two clusters 002 4
(k=2)
003 10
004 12
005 3
006 20
007 30
008 11
009 25
K-means Steps
1.Two clusters K1 and K2 respectively are
established and randomly assigned two means as
m1=3, m2=4
2.Find out the distances between each point and
the means.
Take Member 004 as an example:
d(004,m1) = |12-3|=9;
d(004,m2) = |12-4|=8;
Assign each point to the cluster with the mean
closest to that point.
K-means Steps (Cont.)
3. Repeat step 2 to find out Member Hrs d(i,m1) d(i,m2) Cluster
the distances between the ID spent on
points and the cluster means. exercise
The results obtained at
Iteration 1 are: 001 2 1 2 K1
K1={001,005}, 002 4 1 0 K2
K2= 003 10 7 6 K2
{002,003,004,006,007,008,
009} 004 12 9 8 K2
005 3 0 1 K1
006 20 17 16 K2
007 30 27 26 K2
008 11 8 7 K2
009 25 22 21 K2
K-means Steps (Cont.)
4. Use the values in K1 and K2 to Member Hrs d(i,m1) d(i,m2) Cluster
update the cluster means m1 ID spent on
and m2: exercise
m1= (2+3)/2 =2.5, 001 2 0.5 14 K1
m2=(4 + 10 + 12 +
20+30+11+ 25)/7 =16 002 4 1.5 12 K1
5. Repeat step 2 after the means 003 10 7.5 6 K2
are updated, results for Iteration
2 are shown in the table 004 12 9.5 4 K2
K1={001,002,005} 005 3 0.5 13 K1
K2= 006 20 17.5 4 K2
{003,004,006,007,008,009}
007 30 27.5 14 K2
008 11 8.5 5 K2
009 25 22.5 9 K2
K-means Steps (Cont.)
6. Repeat steps 2-4, Stop when the means of the clusters no longer change.
The elements of the clusters and means are:
Iteration 3: K1={001,002,005}, K2={003,004,006,007,008,009}; m1=3, m2=18
Iteration 4: K1={001,002,003,005}, K2={004,006,007,008,009}; m1=4.75, m2=19.6
Iteration 5: K1={001,002,003,004,005,008}, K2={006,007,009}; m1=7, m2=25
Iteration 6: K1={001,002,003,004,005,008}, K2={006,007,009}; m1=7, m2=25
The final result has identified two segments of members:
Exercising less (K1): {001,002,003,004,005,008}
Exercising more(K2): {006,007,009}
K-means Algorithm
Similarly, the objects with more attributes can also
be grouped by the k-means method. Their
dissimilarities can be measured in terms of
distance measures such as Euclidean distance.
•For example: Euclidean distance
Distance d(A,B ) = ∑ (x − x )
p
i=1 ​
A
i ​
B 2
i​ ​

where coordinates of A and B are p -dimensional

vector with coordinates (x , x , … x ) and
A
1
A
2
A

(x , x , … x ) respectively.
​ ​

p ​

B B B
1 ​

2 ​

p ​
Example
Using Euclidean distance, cluster
customers with these attributes x 1

and x :
​

2 ​

Customer x1 ​
x2 ​

1 1.0 1.5
2 1.0 4.5
3 2.0 1.5
4 2.0 3.5
5 3.0 2.5
6 5.0 6.0
Example (Cont.): Iteration 1
Step 1: Choose a value for k = 2.
Randomly choose k points as cluster centers, for example, m1= customer 1 and m2 = customer 6
i.e., m1(x ) = 1; m1(x ) = 1.5; m2(x ) = 5; m2(x ) = 6
1 ​

2 ​

1 ​

2 ​

Step 2: Assign objects to their closest cluster center.

Customer Distance(m1, customer) Distance(m2, customer)
1 0.00 6.02
2 3.00 4.27
3 1.00 5.41
4 2.24 3.91
5 2.24 4.03
6 6.02 0.00
Example (Cont.): Iteration 1
Step 3: Update the cluster mean for each cluster.
Cluster 1 = {1,2,3,4,5} and Cluster 2 ={6}
m1(x ) = 1.8; m1(x ) = 2.7
1 ​

2 ​

m2(x ) = 5; m2(x ) = 6
1 ​

2 ​

Step 4: Repeat steps 2-3 until the cluster means do not change.
Example (Cont.): Iteration 2
Step2:
Customer Distance(m1, customer) Distance(m2, customer)
1 1.44 6.02
2 1.97 4.27
3 1.22 5.41
4 0.83 3.91
5 1.22 4.03
6 4.57 0.00
Step 3: Update the cluster mean for each cluster.
Cluster 1 = {1,2,3,4,5} and Cluster 2 ={6}
m1(x ) = 1.8; m1(x ) = 2.7
1 ​
2 ​

m2(x ) = 5; m2(x ) = 6
1 ​

2 ​

Since the clusters are as same as the previous ones → algorithm stops.
Example:
Violent Crime Rates by US State
In addition to customer segmentation, suppose that you may wish to look into possible locations to offer
your services. You are concerned about the crime rates in different states…

Source:
Datanovia <https://www.datanovia.com/en/blog/clustering-example-4-steps-you-should-know/>
Targeting
Compares the defined segments and then focus on the most attractive
group (Primary target audience, PTA)
PTA: customers you believe are most likely to buy at a price that
preserves your margins and with a frequency that reaches your target
revenues.
Focus most of your attention on PTA
It is wise to identify secondary target audience (STA) in case the PTA
does not meet expectations
Industry Analysis
Understanding the industry landscape is crucial to the success of the
product/service.
For example, we may wish to understand
Market size and growth potential
Industry trends and patterns
Competitive landscape and market share
Barriers to entry and potential challenges
Sources of information we may consider:
Industry publications and reports (e.g., McKinsey reports, KPMG insight)
Government statistics and data (e.g., Data.GOV.HK, Data.gov)
Trustworthy databases (e.g., Statista)
Market research firms (e.g., Nielsen, Gartner)
Associations and conferences (e.g., IEEE, IATA)
Market Trends
By analyzing market trends, we can gain valuable insights into customer
preferences, emerging technologies, and industry shifts. Here are a few key
points to consider:
1. Identify emerging opportunities: Stay ahead of the curve by
identifying new trends, such as changing consumer behaviors or
technological advancements, that present opportunities for growth.
2. Assess competitive landscape: Understand the competitive landscape
and how the proposed product/service can differentiate itself in the
market. Analyze the strengths and weaknesses of your competitors to
position your product/service strategically.
3. Anticipate customer needs: By studying market trends, you can
anticipate customer needs and preferences, allowing you to tailor your
product/ service to meet their demands.
4. Monitor industry challenges: Keep an eye on potential challenges or
threats in the industry. This could include regulatory changes, economic
downturns, or disruptive technologies. Understanding these challenges
will help you develop contingency plans.
Example: Rise of Telehealth
Due to Covid-19, there has been a dramatic rise of of telehealth thus far for both mental and physical
health concerns.

SOURCE: KFF and Epic Research analysis of Cosmos data

<https://www.kff.org/mental-health/issue-brief/telehealth-has-played-an-outsized-role-meeting-mental-health-
needs-during-the-covid-19-pandemic/>
Product Conceptualization
Product conceptualization is the process of transforming ideas into
tangible products that meet customer needs.
The key steps involve
Ideation: generating and exploring ideas for potential products
Market research: understanding customer needs, market trends,
and competition
Prototyping: creating prototypes to test and iterate on product
concepts
Validation: gathering feedback, conducting user testing, and refining
the product concept
Product/Service Search
Product search typically involves the following steps
Define the product requirements and specifications
Utilize online platforms and marketplaces to search for existing products
or services
Attend trade shows and exhibitions to discover new products and
services
Network with industry professionals and/or professional organizations
Evaluate product quality, pricing, and reliability before making a decision
Product search ensures that the product/service to be launch aligns with
quality standards, pricing expectations, and reliability factors, leading to a
successful product/service launch.
Intellectual Property
Intellectual property (IP) refers to creations of the mind, such as
inventions, designs, logos, and artistic works, that can be legally
protected.
Trademarks: These protect brand names, logos, and slogans that
distinguish your products or services from others.
Patents: These protect inventions and provide exclusive rights to
their creators for a limited period of time.
Copyrights: These protect original works of authorship, such as
books, music, and artwork.
Trade Secrets: These protect confidential and valuable business
information, such as formulas, processes, and customer lists.
IP Investigation
Intellectual property protection is critical to the success of your business.
Here are some key steps to take when investigating IP:
Identify all IP associated with your business, including trademarks,
patents, copyrights, and trade secrets
Conduct a thorough search of existing IP to ensure your business is not
infringing on the rights of others
Develop a plan to protect your own IP, including filing for patents or
trademarks if necessary
Consider working with an IP attorney to ensure your business is fully
protected
By conducting a thorough investigation of your intellectual property, you can
ensure that your business is legally protected and positioned for success.
Trademark
A trademark is a unique symbol, logo, word, phrase, design, or combination thereof that identifies and
distinguishes a product or service from others in the market.
Trademarks help consumers identify and associate products or services with a particular brand,
ensuring quality and consistency.
Trademarks are legally protected IP assets, granting exclusive rights to the owner and preventing
others from using similar marks in the same industry.
Trademarks can be registered with government authorities, such as Intellectual Property Department,
to obtain enhanced legal protection and recognition.
Trademarks build brand recognition, establish customer trust, and create a unique market position,
leading to increased customer loyalty and competitive advantage.
Patent
A patent is a legal document that grants exclusive rights to an inventor or
assignee to prevent others from making, using, or selling an invention or
innovation for a limited period of time.
Patents encourage innovation and creativity by providing inventors with
a financial incentive and legal protection for their inventions.
Common types of patents: utility patents and design patents , each with
its own set of requirements and protections.
To obtain a patent, an invention must be novel, non-obvious, and useful,
and meet other criteria set by the relevant patent office.
Patents provide inventors with a competitive advantage, increased
market share, and licensing opportunities, and can also be used as
collateral for financing.
Patents have a limited lifespan and are subject to expiration, maintenance
fees, and legal challenges.
Example: Apple iPhone Patent
Copyright
Copyright is a legal protection granted to the creators of original works
of authorship, such as literary, artistic, musical, or dramatic works,
providing exclusive rights to reproduce, distribute, display, perform, and
create derivative works.
Copyright protects the expression of ideas, not the ideas themselves,
and covers various forms of creative works, including books, paintings,
songs, films, software, and more.
Copyright protection is automatic upon the creation of the work, without
the need for registration or formalities, although registration can provide
additional benefits.
Copyright owners have the exclusive right to control and monetize their
works, license their use, and take legal action against infringement.
Copyright protection generally lasts for the life of the creator plus a
certain number of years after their death, varying depending on the
jurisdiction.
Fair use is a legal doctrine that allows limited use of copyrighted material
without permission for purposes such as criticism, commentary,
education, and research.
Contract
A contract is a legally binding agreement between two or more parties,
setting forth the terms and conditions of their relationship, including the
ownership, use, licensing, and protection of intellectual property assets.
Contracts provide clarity and certainty in business relationships, ensuring
that both parties understand their obligations and rights regarding
intellectual property.
There are various types of contracts related to intellectual property,
including non-disclosure agreements (NDAs), licensing agreements, joint
development agreements, and assignment agreements, among others.
Intellectual property contracts should include key provisions, such as
ownership, scope, duration, termination, enforcement, warranties,
indemnification, and dispute resolution mechanisms, among others.
Intellectual property contracts must comply with relevant laws,
regulations, and industry standards, and should be reviewed by legal
counsel to ensure their validity, enforceability, and protection of the
parties' interests.
Intellectual property contracts provide businesses with legal protection
and certainty, allowing them to monetize and protect their intellectual
property, and to establish and maintain successful business relationships.
IP Search
Intellectual Property Department <https://esearch.ipd.gov.hk/>
United States Patent and Trademark Office <https://www.uspto.gov/>
Google Patents <https://patents.google.com/>
Reference
Forbes Advisor (2022), "Business Plan Executive Summary Example & Template"
<https://www.forbes.com/advisor/business/business-plan-executive-summary/> Accessed
September 13, 2023
Acknowledgement
Dr. Yao CHENG, Department of Industrial and Manufacturing Systems Engineering