“I nvesting in Africa’s Future”

College of Business, Peace, Leadership and Governance

INSTITUTE OF PEACE, LEADERSHIP AND GOVERNANCE

COURSE TITLE: PIP 504 – TECHNOLOGY TRANSFER. IP ASSET MANAGEMENT AND

SMEs

FINAL EXAMINATION

Date: Monday 4 April 2022

LETURERS: Prof C. Ncube, Prof R. Mafoti and Dr M. Sibanda

INSTRUCTIONS
1. Answer ALL questions in section A.

2. Total mark allocation: 100 marks [Section A Answer all questions (40 percent),
Section B Answer ONE question (30 percent) and Section C Answer TWO
questions (30 percent)]

3. The marks allocated to each question are shown at the end of the question.

4. Credit will be awarded for logical, systematic and neat presentations.

5. Materials. This is an “open book” examination. You may refer to your textbook,
class notes, class assignments, readings and handouts.

6. Corrections. No corrections will be made to the examination questions once the

exam is distributed. If there is a typo or ambiguity in a question, state your
assumption and answer accordingly.
 SECTION A: [Module 10] - answer ALL questions –PROF C. NCUBE

You are working an Intellectual Property (IP) advisor in the Ministry of Small Businesses in
your country, in which role you provide support services to small and medium sized
enterprises (SMEs).

Question 1

You have been approached three friends, Tom, Dick and Harry, for advice on the following
facts: They established their business as a partnership in January 2021 and decided to
name it TDH Cyber Services. It operates in an urban farming community in a large city
hosting several higher education institutions (HEIs). They have 6 part-time employees, who
are all students at the nearby university’s Computer Science department. They also work
full-time in the business. One of their projects is to create a mobile phone application (‘app’)
for use by farmers to (1) share knowledge about crop growing, (2) price and (3) market their
local produce primarily for the HEIs’ residences for catering for students. They collect the
farmers’ knowledge through informal interviews with them and the app also allows the
farmers to post tips on various topics such as pest control and irrigation. They make the app
available for free and make revenue from advertising by businesses that sell pesticides,
provide irrigation and other agricultural support services.

(a) Advise them as to all intellectual property issues which arise out of this scenario. Pay
specific attention to how they may best build an IP portfolio in alignment with their
business strategy. (15 marks) [maximum word count: 900 words/3 pages]
(a) Intellectual Property Issues and Building an IP Portfolio:
1. Trademarks:
• The business name "TDH Cyber Services" can be protected as a trademark. Advise
on conducting a trademark search to ensure availability and registering the trademark
to prevent others from using a similar name in the same industry.
2. Copyright:
• The mobile app's source code, design, and content are subject to copyright protection.
Advise on documenting the creation date and considering copyright registration for
additional protection.
3. Trade Secrets:
• Information collected from farmers through informal interviews is valuable. Implement
confidentiality agreements with employees and consider trade secret protection for the
unique insights gathered.
4. Patents:
• Evaluate if any novel and non-obvious aspects of the app or its functionalities are
eligible for patent protection. Patents could be considered for innovative features or
 algorithms.
5. Contracts and Licensing:
• Create contracts with part-time employees clearly stating that intellectual property
developed during employment belongs to the company.
• Establish licensing agreements with advertisers for the use of their content in the app.
6. Domain Names:
• Secure the domain name associated with the app to prevent cybersquatting.
7. Privacy and Data Protection:
• Implement privacy policies and ensure compliance with data protection regulations,
especially when collecting user data through the app.
8. Ongoing IP Audits:
• Conduct regular IP audits to identify new intellectual property and reassess the IP
portfolio's alignment with the business strategy.
9. IP Awareness Training:
• Educate employees about the importance of intellectual property and their role in
protecting and respecting it.
10. Business Strategy Integration:
• Align the IP strategy with the overall business strategy, ensuring that IP assets
contribute to the company's growth and competitive advantage.
11. Collaborations and Partnerships:
• Explore collaborations with agricultural experts or research institutions to enhance the
app's content and features.
12. Enforcement Strategy:
• Develop a strategy for enforcing IP rights, including monitoring competitors and taking
legal action if necessary.

(b) One of the part-time employees working for TDH Cyber Services submitted his letter
of resignation on 1 March 2022, giving one month’s notice of his resignation.
Consequently, his last day at work was 31 March 2022. In the resignation letter he
advised Tom, Dick and Harry that they should desist from using the app he had worked
on, with the other students, claiming that the idea was his and any future use would
constitute infringement of his IP and he would sue them. Alternatively, he has
suggested that he is willing to license his IP to them for a royalty to be calculated at
the rate of 25% of advertising revenue from the app. Advise Tom, Dick and Harry on
the validity of these claims by their former employee. (10 marks) [maximum word
count: 600 words/2 pages]

(b) Validity of Former Employee's Claims:

1. Ownership of IP:
 • Review employment contracts and agreements to determine the ownership of intellectual
property developed during employment. If the employee worked on the app as part of his
duties, the IP likely belongs to the company.
2. Non-Disclosure Agreements:
• If the employee signed a non-disclosure agreement or confidentiality clause, emphasize
that he is bound by these agreements even after resignation.
3. License Calculation:
• Evaluate the reasonableness of the 25% royalty rate proposed by the former employee.
Compare it to industry standards and assess whether it reflects the actual contribution of
the employee's IP to the app's success.
4. Legal Advice:
• Seek legal advice to assess the strength of the former employee's claims and the
enforceability of any agreements in place.
5. Negotiation:
• Consider negotiating with the former employee to reach a fair resolution. This may
involve offering a reasonable compensation or addressing concerns through alternative
means.
6. Alternative Solutions:
• Explore alternative solutions, such as modifying the app to remove the contested features
or offering credits to acknowledge the former employee's contribution.
7. Litigation Risks:
• Assess the risks and costs associated with potential litigation. Consider the potential
impact on the business and explore mediation or arbitration as alternative dispute
resolution methods.

8. Evidence of Contribution:
• Gather evidence of the collaborative nature of app development, including the
contributions of other team members and the overall teamwork involved.
9. Acknowledgment and Recognition:
• Consider acknowledging the former employee's contribution without admitting to
ownership claims. Recognition may address concerns without compromising IP rights.
10. Legal Recourse:
• If negotiations fail, consult with legal counsel to explore potential legal actions to protect
the company's interests. This may involve seeking a declaratory judgment affirming the
company's ownership.
11. IP Assignment Clauses:
• Emphasize any explicit IP assignment clauses in employment contracts that state the
company's ownership of intellectual property created during employment.
12. Company Policies:
 • Highlight company policies that address IP ownership and the obligation of employees
to disclose and assign innovations to the company.
13. Employee's Intent:
• Consider the intent behind the employee's actions. If the app was developed within the
scope of employment and in line with company goals, the employee's claims may lack
merit.
14. Future Protections:
• Strengthen future employment contracts by clearly outlining IP ownership, obligations,
and consequences in case of disputes.
15. Mediation and Arbitration:
• Propose mediation or arbitration as alternative dispute resolution mechanisms to avoid
lengthy and costly litigation.
16. Risk Mitigation:
• Assess the potential impact on the company's reputation, user trust, and business
operations. Mitigate risks by finding an amicable solution.
17. Legal Opinion:
• Obtain a legal opinion on the strength of the former employee's claims and the likelihood
of success in legal proceedings.
18. Public Relations Strategy:
• Develop a public relations strategy to manage the company's image during the dispute,
ensuring transparency and maintaining stakeholder confidence.

In summary, Tom, Dick, and Harry should carefully evaluate the legal foundation of the former
employee's claims, explore negotiation avenues, and, if necessary, take appropriate legal
actions to protect the company's intellectual property.
Question 2

Your Head of Department has instructed you to prepare a memorandum for the Minister of
Small Businesses, advising her of the main aspects that an effective IP support centre for
small businesses should cater for or deal with.

Prepare the memorandum. Your advice must seek to address the main challenges faced by
innovative SMEs in a developing or least developed country in Africa in using the IP System.
(15 marks) [maximum word count: 900 words/3 pages]
Memorandum
To: Minister of Small Businesses
From: [Your Name]
[Your Position]
[Date]
Subject: Main Aspects of an Effective IP Support Centre for Small Businesses
I. Introduction
Small and Medium-sized Enterprises (SMEs) play a crucial role in fostering innovation,
economic growth, and job creation. However, these enterprises often face challenges in
navigating the Intellectual Property (IP) system. Establishing an effective IP support center
tailored to the needs of innovative SMEs in a developing or least developed country in Africa
is essential for addressing these challenges and unlocking the full potential of SMEs.
II. Key Challenges Faced by Innovative SMEs
1. Lack of IP Awareness:
• SMEs often lack awareness of the importance of IP and how it can contribute to their
growth. An effective IP support center should prioritize educational programs to
enhance IP literacy among SMEs.
2. Limited Resources:
• Resource constraints pose a significant challenge for SMEs in pursuing and
protecting their intellectual property. The support center should provide cost-effective
solutions and explore funding mechanisms to assist SMEs in IP management.
3. Complex IP Processes:
• The complexity of IP processes, including registration and enforcement, can be
overwhelming for SMEs. The support center should simplify these processes, offer
guidance, and provide practical assistance to streamline IP-related tasks.
4. Lack of Tailored IP Strategies:
• SMEs often struggle to develop and implement tailored IP strategies aligned with their
business goals. The support center should offer personalized consultations to help
SMEs identify and protect their unique IP assets.
5. Enforcement Challenges:
• SMEs face difficulties in enforcing their IP rights, especially in cross-border scenarios.
The support center should facilitate collaboration with relevant authorities and offer
 guidance on enforcing IP rights effectively.
III. Main Aspects of an Effective IP Support Centre
1. Education and Training Programs:
• Develop comprehensive IP education and training programs to raise awareness
among SMEs about the importance of IP and how it can be leveraged for business
success.
2. Affordable IP Services:
• Offer cost-effective IP services, including assistance with patent, trademark, and
copyright registrations. Explore partnerships with IP offices and organizations to
reduce costs for SMEs.
3. IP Strategy Development:
• Provide consultancy services to help SMEs develop customized IP strategies aligned
with their business objectives. This includes identifying, protecting, and
commercializing their intellectual property.
4. Access to Funding:
• Establish mechanisms to connect SMEs with funding opportunities for IP-related
activities. This may involve collaborations with financial institutions, government
agencies, and international organizations.
5. Simplified Processes:
• Streamline and simplify IP processes to make them more accessible for SMEs. Offer
guidance on navigating registration procedures and provide templates and resources
for easier compliance.
6. Cross-Border Support:
• Develop initiatives to address cross-border IP challenges, including harmonization of
IP regulations, cooperation with international IP offices, and support for SMEs
engaging in cross-border trade.
7. Collaboration with Stakeholders:
• Foster collaboration with government agencies, legal professionals, industry
associations, and educational institutions to create a holistic support ecosystem for
SMEs.
IV. Conclusion
An effective IP support center for small businesses should be tailored to the unique
challenges faced by innovative SMEs in a developing or least developed country in Africa.
By addressing the identified challenges and focusing on education, affordability, strategy
development, funding access, simplified processes, cross-border support, and collaboration,
the center can empower SMEs to harness the benefits of the IP system for sustainable
growth.

SECTION B: IP ASSET MANAGEMENT, STRATEGIC PLANNING, TECHNOLOGY

TRANSFER AND LICENSING: EXAM- PROF. R. MAFOTI
 3. How can IP Assets be indirectly exploited. Give details of the advantages and

drawbacks? (30 marks)

Indirect Exploitation of Intellectual Property (IP) Assets

Indirect exploitation of IP assets involves utilizing IP rights in a strategic manner to gain

benefits from ownership without directly investing in production and marketing. This

approach often involves licensing, franchising, merchandising, and other mechanisms

that allow third parties to utilize the IP for their own purposes.

Licensing

Licensing is a common method of indirectly exploiting IP assets. In a licensing

agreement, the owner of the IP (licensor) grants permission to another party (licensee) to

use the IP in exchange for a royalty fee. This allows the licensor to monetize their IP

without having to invest in the production and marketing of the products or services that

utilize it.

Types of Licenses

The specific type of license used for IP exploitation depends on the nature of the IP

asset, the desired market reach, and the risk tolerance of the IP owner. Some of the

most common types of licenses include:

Exclusive License: An exclusive license grants the licensee the sole right to use the IP asset

within a specified territory and for a defined period. The licensor retains ownership of the IP

but cannot grant any other licenses for the same use within the specified territory and time

frame.

Non-Exclusive License: A non-exclusive license allows the licensor to grant multiple

licenses for the same IP asset, enabling the IP to be exploited in a broader market. The

licensee has the right to use the IP but does not have exclusive rights.

Sole License: A sole license grants the licensee the right to use the IP asset within a

specified territory and for a defined period, but the licensor can still use the IP itself within that

territory and time frame.

 Advantages of Licensing:

• Generates revenue without direct investment in production and marketing

• Expands the reach of the IP to a wider market

• Provides expertise and resources from the licensee

Drawbacks of Licensing:

• Less control over the use of the IP

• Potential for licensees to exploit the IP without adequate compensation

• Reliance on the licensee's success

Franchising

Franchising is a specialized form of licensing that involves the transfer of a complete

business model, including IP rights, to a franchisee. The franchisor provides training,

support, and marketing to the franchisee, who operates the business under the

franchisor's brand and guidelines.

Advantages of Franchising:

• Rapid expansion of the brand and market presence

• Generation of royalties and franchising fees

• Benefit from the franchisee's local knowledge and expertise

Drawbacks of Franchising:

• Less control over the franchisee's operations

• Potential for brand damage due to poor franchisee performance

• Dependence on the success of the franchisor's brand

Merchandising

Merchandising involves the commercial exploitation of a well-known brand, character, or

symbol to sell products or services that are not directly related to the original IP. This is

often seen with popular toys, movies, television shows, and video games.

Advantages of Merchandising:

• Generates revenue from a wider range of products and services

• Expands brand awareness and recognition

 • Provides opportunities for cross-promotion and collaboration

Drawbacks of Merchandising:

• Potential for dilution of the brand image

• Difficulty in maintaining quality control over licensed products

• Reliance on the popularity of the original IP

Selling-Out (Assignment) the Technology Developed In-House

Selling-out or assignment involves the transfer of all ownership rights to the IP asset to a

third party in exchange for a lump sum payment. This approach provides the IP owner

with a one-time cash infusion but eliminates any future revenue streams from the IP

asset.

Advantages of Selling-Out:

• Generates immediate cash flow

• Eliminates the need to manage and exploit the IP asset

• Allows the IP owner to focus on other core competencies

Drawbacks of Selling-Out:

• Loss of ownership and control over the IP asset

• Forfeiture of potential future revenue streams

• Limitation on future opportunities related to the IP asset

4. Discuss the importance of evaluation of IP Assets. (30 marks)

The evaluation of intellectual property (IP) assets is a crucial process for businesses
that own or use IP assets. IP assets represent a significant portion of a company's
value, and accurately valuing these assets is essential for making informed decisions
about their development, acquisition, protection, and utilization.

Importance of IP Valuation
IP valuation plays a vital role in various aspects of business operations:
1. Strategic Decision-Making
Accurate IP valuation provides businesses with the necessary information to
make informed decisions about the development, acquisition, and protection of
their IP assets. It allows businesses to identify their most valuable IP assets and
prioritize investments accordingly.
 2. Financial Reporting and Transactions
IP valuation is essential for financial reporting purposes, as it enables
companies to accurately represent the value of their IP assets on their balance
sheets. This accurate representation is crucial for attracting investors, obtaining
loans, and ensuring fair market valuations during mergers and acquisitions.
3. Licensing and Royalty Agreements
IP valuation is a critical component of negotiating licensing and royalty
agreements. It helps businesses determine the appropriate compensation for
the use of their IP assets, ensuring that they receive fair value for the licenses
they grant.
4. Dispute Resolution and Litigation
In cases of IP infringement or disputes over IP ownership, accurate IP valuation
plays a key role in determining damages and compensation. It provides a
reliable basis for resolving conflicts and ensuring that businesses are
adequately compensated for any losses incurred due to IP infringement.
5. Tax Considerations
IP valuation can have significant implications for tax purposes. Businesses can
potentially reduce their tax liability by correctly valuing their IP assets and taking
advantage of tax deductions or exemptions related to IP investments.

Factors Affecting IP Valuation

The value of IP assets is determined by a variety of factors, including:
1. Strength of IP Protection
The strength and scope of IP protection, such as patents, trademarks, and
copyrights, significantly impact the value of the asset. Stronger protection
provides greater security and exclusivity, increasing the asset's value.
2. Commercial Viability
The commercial viability of the IP asset, meaning its potential to generate
revenue or reduce costs, is a major determinant of its value. IP assets with clear
market opportunities and strong competitive advantages command higher
valuations.
3. Lifespan of Protection
The duration of IP protection, such as the patent term or copyright protection
period, affects the asset's value. Longer protection periods provide more time to
exploit the asset and generate returns, increasing its value.
4. Market Demand and Supply
The market demand and supply for similar IP assets influence their valuations.
Assets in high demand and limited supply tend to command higher valuations.
5. Costs of Development and Maintenance
The costs associated with developing, maintaining, and protecting the IP asset
also affect its valuation. Assets with lower costs and higher potential returns are
generally more valuable.
Approaches to IP Valuation
There are three primary approaches to valuing IP assets:
1. Market-Based Approach
This approach compares the IP asset to similar assets that have been sold or
licensed in the market. It involves analyzing comparable transactions and
relevant market data to determine the fair market value of the asset.
2. Cost-Based Approach
This approach estimates the cost of replacing or replicating the IP asset. It
considers the expenses incurred in developing, acquiring, and maintaining the
asset, providing a lower bound for its value.
3. Income-Based Approach
This approach estimates the future income that the IP asset is expected to
generate. It involves discounting the projected future cash flows to their present
value, reflecting the asset's potential to generate returns over time.

Conclusion
The evaluation of IP assets is an essential process for businesses that rely on
intangible assets for their competitive advantage and long-term success. It provides
valuable insights for making informed decisions about IP development, acquisition,
protection, and utilization. By accurately valuing their IP assets, businesses can
maximize their financial returns, manage risks effectively, and strengthen their overall
business performance.

5. Can developing countries benefit from IPR? Please Discuss. (30 marks)

SECTION C: Innovation and Entrepreneurship – Dr M. SIBANDA

6. Reflect on the work of Christensen et al, in the Prosperity Paradox and

insights in the article Avoiding the Prosperity Paradox, answer the following
questions: [15 Marks]
a. How is innovation defined in the Prosperity Paradox? [2 Marks]

In the Prosperity Paradox, innovation is defined as the creation of solutions that

address the needs of nonconsumers. Nonconsumers are individuals who, due to
various barriers such as cost, access, time, or skill, are excluded from existing markets.
Innovations, according to Christensen et al., aim to unlock latent demand by providing
affordable and accessible alternatives to these nonconsumers.

b. What are the differences, if any between invention and innovation? [1 Mark]

Invention refers to the creation of a new idea, product, or process, often involving the
discovery of something entirely new.

On the other hand, innovation involves the practical application and implementation
of inventions to bring about positive change, usually in the form of new products,
services, or business models. In simpler terms, invention is the initial idea or creation,
while innovation is the successful introduction and adoption of that idea in the market.

c. Discuss and differentiate the different types of innovations described by

Christensen et al? [3 Mark]

Christensen et al. describe three types of innovations: sustaining, efficiency, and

market-creating innovations.

Sustaining Innovations

These improve existing products or services, often meeting the needs of current
consumers. They enhance features, performance, or quality but do not necessarily
create new markets.

Efficiency Innovations

These focus on delivering existing products or services at lower costs, aiming to

improve efficiency and accessibility for consumers.

Market-Creating Innovations

The key focus is on addressing the needs of non-consumers, creating entirely new
markets by making products or services more affordable, accessible, and appealing to
a broader audience.

d. Provide examples of these different types of innovations in Africa [3 Mark]

Sustaining Innovation

Upgrades to mobile phone models, introducing improved features or design.

Efficiency Innovation

The use of mobile money services, such as M-Pesa in Kenya, which enhances the
efficiency of financial transactions.

Market-Creating Innovation

The development of off-grid solar solutions, like M-KOPA Solar in East Africa,
addressing the energy needs of nonconsumers who lack access to traditional power
sources.
 e. In your own words, in half a page to a page, discuss with reasons which one type
of innovation is the most important for fostering economic development? [6
Mark]

Addressing Unmet Needs

Market-creating innovation focuses on identifying and fulfilling the needs of

nonconsumers who are often marginalized or underserved. By addressing previously
unmet needs, it creates new markets and expands economic opportunities.

Inclusive Economic Growth

Unlike sustaining or efficiency innovations, market-creating innovations have the

potential to reach a broader segment of the population. This inclusivity in economic
participation contributes to more equitable growth, reducing disparities between
different socio-economic groups.

Job Creation

The introduction of new markets through innovative solutions necessitates the growth
of businesses and industries. This, in turn, leads to increased demand for a diverse
range of skills, fostering job creation and reducing unemployment rates.

Entrepreneurial Ecosystem

Market-creating innovations often give rise to vibrant entrepreneurial ecosystems. As

new markets emerge, entrepreneurs are inspired to develop and provide
complementary goods and services, contributing to a dynamic and resilient business
environment.

Economic Resilience

Markets created through innovation are often more resilient to economic shocks.
Diversification of economic activities, especially those targeting nonconsumers, can
fortify a nation's economic foundation, making it more robust in the face of external
challenges.

Social Impact

Market-creating innovations have the potential to bring about significant social

change. They can improve living standards, healthcare, and education by making
essential products and services more accessible, ultimately enhancing the overall well-
being of the population.

7. (a) In less than one page, discuss the relevance of intellectual property,
innovation, and entrepreneurship in economic development with reference to
 developments outside Africa. Provide no more than three contextual arguments
why this has become very important for Africa. (10 Mark)

Intellectual property (IP), innovation, and entrepreneurship collectively play a pivotal role
in economic development globally. These elements form a symbiotic relationship,
fostering growth, competitiveness, and sustainability in various economies.

Relevance of Intellectual Property, Innovation, and Entrepreneurship Globally:

1. Economic Growth Catalyst:

• Innovation as a Driver: Innovation, often fueled by entrepreneurship, is a

primary driver of economic growth. Nations with vibrant entrepreneurial
ecosystems and a focus on innovation tend to experience increased productivity
and competitiveness.

• IP Protection: Intellectual property rights, including patents, copyrights, and

trademarks, provide a framework for safeguarding innovations. This protection
encourages inventors and entrepreneurs to invest time and resources, fostering a
conducive environment for economic development.

2. Global Competitiveness:

• Technological Advancements: Countries that invest in innovation and protect

intellectual property are better positioned to lead in technological advancements.
This enhances their global competitiveness across industries, attracting foreign
investments and fostering international collaborations.

• Entrepreneurial Ecosystems: Robust entrepreneurial ecosystems, supported by

policies promoting innovation and protecting IP, create fertile ground for startups
and businesses to thrive. This dynamism contributes to a nation's competitive edge
in the global market.

3. Job Creation and Resilience:

• Job Opportunities: Entrepreneurship, driven by innovation, is a significant job

creator. Startups and small businesses contribute substantially to employment
opportunities, driving down unemployment rates and enhancing societal well-
being.

• Resilience in Economic Downturns: Economies that prioritize innovation and

entrepreneurship tend to be more resilient during economic downturns.
Diversified, innovative sectors can adapt to changing circumstances, minimizing
the impact of recessions.
 Contextual Arguments for Africa:

1. Leapfrogging Through Innovation:

• Unique Challenges: Africa faces unique socio-economic challenges. Embracing

innovation allows the continent to leapfrog traditional development stages, finding
novel solutions to issues like healthcare, agriculture, and infrastructure.

• Tech-Driven Solutions: Entrepreneurship and innovation in sectors like fintech

and agritech provide opportunities for Africa to address specific challenges.
Mobile banking, for example, has rapidly expanded financial inclusion across the
continent.

2. Youthful Demographics and Entrepreneurship:

• Youthful Population: Africa has a predominantly young population.

Encouraging entrepreneurship among the youth harnesses their energy and
creativity, potentially leading to groundbreaking innovations.

• Job Creation: With a focus on entrepreneurship, Africa can address its

unemployment challenge by empowering young people to create their own
businesses. This not only generates income but also contributes to local economic
development.

3. Global Collaboration and Sustainable Development:

• International Partnerships: By actively participating in the global innovation

landscape, Africa can attract foreign investments, foster international
collaborations, and tap into knowledge-sharing networks.

• Sustainable Development Goals (SDGs): Innovation and entrepreneurship

aligned with sustainable development goals can position Africa as a leader in
environmentally conscious and socially responsible business practices, appealing
to global markets.

In conclusion, the interplay between intellectual property, innovation, and entrepreneurship is a

cornerstone for economic development worldwide. For Africa, leveraging these elements
provides a pathway to overcome challenges, empower the youth, and position the continent as a
global player in sustainable and innovative development.

(b) Describe a business model according to Osterwalder. (5 Marks)

A business model, as conceptualized by Alexander Osterwalder, is a strategic

blueprint that articulates how a company operates, creates value, and sustains itself
in the market. Rather than a static business plan, Osterwalder's approach is dynamic,
 adaptable, and encapsulated in the Business Model Canvas (BMC). This canvas
serves as a visual representation, fostering a holistic understanding of how different
elements interconnect to propel the business forward.

Osterwalder's business model framework emphasizes a customer-centric approach,

acknowledging that successful businesses fundamentally provide value to their
customers. The model spans beyond mere product or service offerings, extending to
customer relationships, key partnerships, and revenue generation mechanisms. It
underscores the interconnectedness of various facets, urging businesses to consider
the synergies and trade-offs within their operations.

Crucially, Osterwalder's business model concept is not a rigid, exhaustive list of

components but rather a flexible guide that prompts strategic thinking. It encourages
businesses to explore and iterate on different facets, aligning them coherently with
the overarching mission and objectives. This adaptability is particularly significant
in a dynamic business environment, where shifts in technology, consumer behavior,
or market conditions necessitate continuous evolution.

The visual nature of the Business Model Canvas enhances communication and
comprehension across stakeholders. By condensing complex business strategies onto
a single canvas, Osterwalder facilitates a shared understanding among team
members, investors, and partners. This simplicity aids in swift decision-making and
the ability to convey the essence of the business model concisely.

In summary, Osterwalder's business model concept is a strategic framework that

prioritizes value creation, adaptability, and interconnectedness. The Business Model
Canvas, as a visual tool, encapsulates this philosophy, urging businesses to view
their operations holistically and encouraging an agile approach to navigate the
dynamic business landscape.

8. Chapter 5 from the book Zero to One by Peter Thiel [part of your compulsory
reading material], deals with the business of PayPal which is detailed Chapter
5 from. (15 Marks)

i. Define the problem that PayPal sought to address (2)

The problem PayPal sought to address was the inefficiency and delay in
online payments, especially in the context of online auctions like those on
eBay. Traditional methods, such as mailing checks, took 7 to 10 days to
arrive, causing delays in transactions.

ii. Articulate the innovative idea the founders of PayPal came up with. (2)
 The innovative idea was to provide a platform that made buying and selling
on eBay at least 10 times better. PayPal allowed buyers to pay as soon as
an auction ended, ensuring quick transactions. Sellers received their
proceeds immediately, and the system provided assurance that funds were
good.

iii. How does PayPal make money? (2)

PayPal makes money primarily through transaction fees. It charges fees for
receiving money, especially in the context of online transactions and
payments. Additionally, it may charge fees for currency conversions and
other premium services.

iv. Who were the competitors at the time and what was PayPal’s response
to these competitors? (2)

Competitors at the time included traditional methods like mailing checks

and possibly other online payment systems. PayPal's response was to
offer a significantly faster and more convenient solution. By providing
immediate payment processing and quick fund transfers, PayPal outpaced
traditional methods and sought to establish itself as the preferred choice
for online transactions.

v. What new business models threaten the PayPal business? (2)

New business models, such as innovative payment apps, digital wallets,
and cryptocurrencies, pose potential threats to PayPal. These models
leverage advancements in technology to offer alternative and potentially
more efficient ways of conducting financial transactions, challenging
PayPal's traditional dominance.

vi. Do a Business Model Canvas (BMC) for PayPap (5)

Business Model Canvas (BMC) for PayPal:

1. Customer Segments:
• Online Shoppers
• Freelancers and Small Businesses
• Online Merchants
• Individuals Sending Money to Family or Friends
2. Value Proposition:
• Convenient and Secure Online Payments
• Instant Money Transfer
• Buyer and Seller Protection
• Seamless Cross-Border Transactions
3. Channels:
• Online Platform (Website and Mobile App)
• Integration with E-commerce Websites
• Partnerships with Financial Institutions
• API for Developers
4. Customer Relationships:
• Customer Support (Online Chat, Email, Phone)
 • Educational Resources for Users
• Fraud Protection and Dispute Resolution
• Personalized User Notifications
5. Revenue Streams:
• Transaction Fees (Percentage of Transaction Amount)
• Currency Conversion Fees
• Fees for Expedited Transfers
• Merchant Services Fees for Businesses
6. Key Resources:
• Advanced Fraud Detection Technology
• Secure Payment Infrastructure
• Skilled Customer Support Team
• Strategic Partnerships with Banks and Financial Institutions
7. Key Activities:
• Processing Online Payments
• Fraud Detection and Prevention
• Continuous Enhancement of User Interface
• Partnering with E-commerce Platforms
8. Key Partnerships:
• Partner Banks and Financial Institutions
• E-commerce Platforms (e.g., eBay, Shopify)
• Software Developers and Third-Party Integrators
• Government Regulatory Bodies
9. Cost Structures:
• Technology Infrastructure Maintenance
• Customer Support and Service Costs
• Marketing and Promotion Expenses
• Regulatory Compliance and Security Measures
• Partnership and Integration Costs

9. (a) Founded in August 2008, Airbnb is described as an online marketplace and

hospitality service that enables people to lease or rent short-term lodging.
These include vacation rentals, apartment rentals, homestays, hostel beds, or
hotel rooms. The company does not own any lodging but acts as a broker
between people with rooms or lodgings that they wish to rent out for extra cash.
For every booking that is made through its platform, it receives percentage
service fees from both guests and hosts. According to the company public
records, it now has over 3,000,000 lodging listings in 65,000 cities and 191
countries. The cost of the lodging is set by the host; however the company
provides a standards framework to guide this. Users access its services either
via a website or an app on their phones. (8 Marks)

i. Using the information you have been provided, prepare a Business

Model Canvas (BMC) for Airbnb (5)

Customer Segments:

1. Budget Travelers: Individuals seeking affordable lodging options.

 2. Bleisure Travelers: Professionals combining business trips with leisure.

3. Locals Looking for Extra Income: Residents interested in renting out their
properties.

4. Unconventional Travelers: Adventurous individuals seeking unique and non-

traditional accommodations.

Value Propositions:

1. Simple Booking Process: User-friendly and efficient booking system.

2. Wide Range of Private Homes: Diverse accommodation options for varied

preferences.

3. Competitive Prices: Affordability compared to traditional hotels.

4. Convenience of Living Like a Local: Authentic travel experiences and

cultural immersion.

Channels:

1. Word of Mouth: Recommendations from satisfied users.

2. Social Media: Utilizing platforms for marketing and engagement.

3. Travel Bloggers: Collaborations with influencers for promotion.

Customer Relationships:

1. Self-Service: Empowering users to navigate and use the platform

independently.

2. Customer Support: Assistance for queries, issues, and dispute resolution.

Revenue Streams:

1. Booking Fees: Charges for each confirmed booking.

2. Affiliate Marketing: Earnings through partnerships with affiliated businesses.

Key Resources:

1. Community of Hosts and Guests: Building a network of users.

2. Platform: Technological infrastructure supporting the booking system.

3. Developers and Other Staff: Skilled professionals maintaining and improving

the platform.

Key Activities:

1. Maintain the Platform: Regular updates and improvements.

 2. Provide Customer Support: Addressing user concerns and inquiries.

3. Conduct User Research: Gathering insights for platform enhancement.

Key Partnerships:

1. Investors: Financial support for business growth.

2. Travelers: Building a loyal user base.

3. Hosts: Collaborating with property owners.

4. Insurance Companies: Offering travel-related insurance.

5. Payment Providers: Ensuring secure and seamless transactions.

Cost Structure:

1. Platform Development and Maintenance: Investment in technology.

2. Marketing: Expenses for promoting the platform and acquiring users.

ii. What are Airbnb’s key intellectual property assets (2)

Trademarks
Airbnb's brand name, logo, and associated visual elements are likely protected by
trademarks. These trademarks distinguish Airbnb from other businesses in the industry
and contribute to brand recognition. The unique design and stylization of the Airbnb
logo are examples of trademarked elements.

Copyrights
Copyright protection may extend to Airbnb's original content, including website design,
marketing materials, and any creative works produced by the company. This protection
helps prevent unauthorized use or reproduction of Airbnb's creative assets.

(c) With use of an illustration describe what is at the core of the Lean Startup Model
according to Eric Ries? What do you need to do in order to start the process of
learning? (7 Marks)
Core of Lean Startup Model
At the core of the Lean Startup Model by Eric Ries is the "Build-Measure-Learn"
feedback loop. This loop emphasizes a systematic and iterative approach to product
development and business creation.

Illustration:
Lean Startup Model - Build-Measure-Learn

Build:
The process starts with building a Minimum Viable Product (MVP), a simplified
version of the product with essential features.
The MVP is developed rapidly and efficiently, focusing on delivering the core value
proposition.

Measure
After building the MVP, it is released to a small segment of the target audience or the
market.
Key metrics are measured and analyzed to gauge the MVP's performance and user
engagement.

Learn:
Insights and feedback gathered from the measurement phase are thoroughly
analyzed.
Learning from real user interactions and market response helps in making informed
decisions.

Starting the Learning Process:

To initiate the learning process in the Lean Startup Model, you need to:

1) Define Hypotheses:
Clearly articulate hypotheses related to critical aspects of your business model.
Formulate these hypotheses in a way that allows for falsifiability through experiments.

2) Test Hypotheses:
Develop experiments based on the hypotheses to systematically validate or invalidate
them.
Experiments should be designed with specific criteria for success or failure.

3) Collect Data:
Implement experiments and collect relevant data on user behavior, preferences, and
other key metrics.
Use both qualitative and quantitative data to get a comprehensive understanding.

4) Analyze Results:
Thoroughly analyze the results of experiments, focusing on what worked, what didn't,
and why.
Look for patterns, trends, and unexpected insights that contribute to learning.
 5) Iterate and Pivot:
Based on the learning from the analysis, iterate on the product, business model, or
strategy.
Be open to pivoting – making significant changes based on the insights gained.

6) Repeat the Loop:

Engage in the Build-Measure-Learn loop continuously, refining the product and
business model.

Each iteration brings the opportunity for enhanced learning and improvement.
This continuous cycle of building, measuring, and learning is fundamental to the Lean
Startup Model and is essential for achieving product-market fit and sustainable
business growth.
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