PART 4 - RESEARCH & DEVELOPMENT

In any industry, research and development plays a vital role in a company's future existence. This realization is even more important in industries engaging in technology products. The following items comprise J&B's research and development budget:

As shown above, the majority of the R&D budget comprises salaries. The reason being - talent of human resources are used more in the technology industry rather than capital assets. Moreover, when a need for a new software product has been established, the Company's R&D staff members will create it on their computers.

An additional R&D budget of $25,000, $10,000, and $10,000 for year one, two and three respectively has been established. These funds will be used for such things as; training, market testing of new products, attending conferences, seminars and trade shows, purchases of resource material, market research, hiring additional casual laborers, and product testing.

The remaining topics to be addressed under this section include:

A. - Future Products (idea concepts):

In total, J&B is investing a total of $346,299 in Research and Development over its three year forecasted period. Please note, the Company's forecasted financial statements consider this investment, however, the statements do not consider the sale of any future products - and still a profit is projected in each forecasted year. Below briefly discusses various idea concepts that may, if feasible, materialize into future products and opportunities.

Selling Advertising Space
J&B's initial software product as well as future training products can be used as an adverting media for various organizations, businesses and financial institutions. For instance, a national office equipment manufacturer such as "Canon" may buy advertising space from J&B. Their advertisements would be placed on the top, the side and the bottom of various pages throughout our business training software. As consumers read the training information, they will undoubtedly see Canon's advertisements.

Any national business, organization, or financial instruction whose products or services are geared towards new and existing business owners would benefit from buying advertising space on our training software. For instance, in the above example, Canon would see the benefit in advertising on our training software since new and existing businesses require office equipment. Computer manufacturers, software manufacturers, telecommunication services, office supply retailers, automobile manufacturers, national economic development organizations, credit card companies, transportation and delivery services, banks, national law firms, insurance firms, and accounting firms all rely on new and existing businesses and therefore may see the benefit in advertising on our training software. Please refer to Appendix # 8 for a listing of potential advertisers.

Forecasting Financial Statements Software
Many people find forecasting financial statements a tedious and difficult task. Although, the Company's initial product provides users with detailed training on how to construct forecasted financial statements, it does not, however, alleviate the excessive time required in developing such statements. As a result, J&B plans to research and develop software that will automatically construct a new or expanding businesses' forecasted income statement, balance sheet, cash flow statement, ratios, and break-even point. Individuals would simply fill in an "assumptions section" and their computer would automatically develop the above forecasted statements and analysis.

Business Simulator:
A business simulator is a computer program used to improve an individual's business skills in areas of cash management, ordering materials, production, quality control, wages disbursement, financial statements, setting prices, setting promotional campaigns, and so on. Business simulators allow individuals to form their own fictitious company and compete with other fictitious companies for industry sales and market share. Participants of the simulation would be given complete details of the industry, the product being sold, simulation parameters and all restrictions placed on the industry as a whole. Each week, for example, participants would fill out "Decision Sheets" which essentially outlines their company's strategies in terms of inventory control, quality control, hiring and firing, maintenance, advertising, etc. A computer compares each company's decision sheet and produces an "output sheet" indicating each company's financial position.

Most existing business simulators are purchased by universities and colleges to assist in training their Commerce Students. A new market, however, might include Internet users. Here participants could pay a nominal fee to compete with others for monthly prizes (office supplies, office equipment and cash). The idea concept has already been developed, however, further research is needed to determine its feasibility.

Internet Web-Site
J&B will create a Web-Page that will be used in the initial stages to promote the Company's initial product. As the Company grows, however, we plan to expand our web-page content to possibly include such items as an entrepreneurship newsgroup, problem solving cases, a small business publicity column, downloadable software, business tips, training in business mathematics, on-line business trivia, an on-line business board game, an on-line business simulator, an on-line surveying newsgroup, and an equity investors' newsgroup. These augmented products will be closely reviewed and researched to determine their feasibility.

Sample Business Plans
Most aspiring entrepreneurs have never developed or even seen a business plan in its entirety. As a result, many of these individuals seek-out sample business plans to help them in creating their own. J&B is currently researching the feasibility of developing a software package that contains hundreds of sample business plans. At this point, we have assess to over 400 sample plans, spanning all major industries. This initiative will require five typists for a five month period. The typed material would than be transformed into a computer software format. The development of this product is expected to take a total of seven months.

Products Geared Towards Existing Business Owners
J&B's initial product will be geared towards individuals wanting to start their own business. With a few product alterations, however, the Company could develop a new business training software package for existing home-based business owners. The U.S. market size of this segment is estimated at 25 million, making it very attractive and thus, justifying further research and development. As it currently stands, this initiative is classified as Urgent and development is expected to commence as earlier as May 200W.

Communication's Software
The Company will research the possibility of developing other software products that allow new and existing business owners to create their own customized brochures, pamphlets, promotional kits, letterhead, and business cards, for example. Computer and printer capabilities have certainly improved over the past few years, making it easier to produce high quality marketing devices such as the ones listed above. Serious consideration will be given to this initiative since the number of home-based businesses currently stands at 25 million.

Distribution Rights
In the initial stages, J&B proposes to eliminate all distribution channels by offering our products exclusively through mail order. Only when the Company is in the position to directly complete with larger, more financially sound organizations, will it entertain the idea of expanding its distribution channels to include computer retailers, office supply retailers, financial institutions, and economic development organizations. If alternative distribution channels are selected, all functions of the Company's marketing mix will change (IE Price, Product, Place and Promotions). Such changes would certainly increase corporate costs as well as end consumer costs.

One method of increasing our distribution coverage, without drastically changing our marketing mix would be to sell the distribution rights our customers. Moreover, customers who purchase our training software may automatically receive the right sell it to others. In essence, these people would promote the product and J&B would act as their product supplier.

Finding alternative and inexpensive distribution channels is and will continue to be a priority of J&B Incorporation.

Selection Process of Future Products
With the marketplace becoming more demanding, competition becoming fiercer, and development and marketing costs soaring, present and future product life cycle times generally require more thorough evaluation before selecting new items to develop. Below briefly discusses J&B's New Product Development Process.

PHASE 1. - Idea Screening
The purpose of the screening phase is to spot good ideas and drop poor ones as soon as possible. Management and the research department will begin this phase by creating a list of idea concepts. Each idea will be briefly analyzed and deemed as either a potential opportunity or as a limited opportunity. All ideas having a limited opportunity status will be discarded while the ideas having potential opportunity will be further reviewed. At the end of this phase, only one idea concept is selected to continue through the new product development process.

PHASE 2 - Concept Development
In phase two, the selected "idea concept" will be developed into a product concept. A product concept is a detailed version of the idea in meaningful consumer terms. Moreover, management and the research department will develop a variety of potential product features and functions.

PHASE 3 - Concept Testing
The potential product features and functions, developed in Phase two, will then be tested with a group of target consumers. Since an actual product will not be developed at this point, testing must be presented through word or picture descriptions. Testing may occur by means of focus groups, seminars, questionnaires, or individual interviews to name a few. The testing will also ask participants for suggestions regarding other possible product features and functions.

PHASE 4 - Marketing Strategy Development
After the Company tests the product concept with target consumers, it will have gathered a great deal of information needed to develop an initial marketing strategy. The initial marketing strategy will consist of three parts;

• Part one (1) of the marketing strategy statement will describe the target market, the planned product positioning, sales forecasts, market share, and profit goals for the first three years.

• Part two (2) of the marketing strategy statement will address the product's planned price, distribution, and marketing budget for the first three years.

• Part three (3) of the marketing strategy statement will describe the planned long-run sales and profit goals, and a marketing mix strategy over time.

PHASE 5 - Business Analysis
After management has decided on the product concept and marketing strategy, it can better evaluate the attractiveness of the proposal. This would involve a review of sales, costs, and profit projections to determine whether they satisfy the Company's objectives.

PHASE 6 - Product Development
If the product concept passes the business analysis phase, it moves into product development. This Phase calls for a large jump in investment. Here management, the R&D department and outside entities develop the product concept into a physical product or prototype (Until this point, the product concept will have existed only in a word description, a drawing or a crude mockup). In developing the prototype, J&B must ensure that it meets the following criteria;

1. consumers see it as having the key features described in the product concept statement;
2. it performs safely under normal use; and
3. it can be produced for the budgeted cost

When the prototype has been developed, it will be tested to ensure it operates efficiently and as expected. If any problems are found, they will be corrected and prototype testing will commence once again.

PHASE 7 - Market Testing
If the product passes functional and consumer testing, the next step is Market Testing. Market Testing is the stage where the product and marketing program are introduced into more realistic settings. Market Testing allows the Company to gain experience with marketing the product, to find potential problems, and to learn where more information is needed before going to the great expense of full introduction. The basic purpose of market testing is to test the product itself in REAL market situations. However, market testing will also allows J&B to test its entire marketing program. (the positioning strategy, advertising, distribution, pricing, branding, packaging, and budget levels). After the testing is complete, J&B will use the results to adjust the product's initial sales and profit forecasts.

PHASE 8 - Commercialization
If the Market Testing shows positive results, the product will enter into the final stage - Commercialization. During this phase, J&B will make a variety of decisions such as the following;

1. It is the "right" time to offer the product. If not, when should it be introduced;
2. Where will the product be launched - one region or several regions;
3. To whom will the product be promoted and distributed to (if not mass);
4. How will the product be introduced into the market place (marketing mix);

After these decisions have been made, J&B will begin implementing its action plan. Results will be monitored and recommendations made on a continuous bases. The New Product Development Process is now complete and the entire process begins with another idea concept.

Management and the Research Department will play an active and continuous role in generating product ideas, screening ideas, developing and testing idea concepts, creating marketing strategies and feasibility analysis, product development, market testing and the commercialization of all selected products. The implementation of a new product must meet the following criteria;

• all new products must provide financial benefit;
• must possess a relatively low investment;
• must result in a positive return on investment;
• must fit with our present strategy;
• feasibility to develop and produce must be apparent;
• must be relatively low risk products; and
• must show intended results within two months