Describe specific characteristics of what is transferred in the transaction

You must describe the important characteristics of what is transferred in a transaction. The transferred item will often be a product or a service. The description should address both the expected market value and what you anticipate the transferred item will contribute to the business. For example, you should specify whether the transferred item is used in primary activities, meaning value-creating operations, or in support activities.

The description of the characteristics of the transferred item should be based on the type of asset, such as:

• For tangible items, specific characteristics may include quality, capacity, or reliability.
• For services, specific characteristics may include the nature of the service, job description, or scope.
• For intangibles, specific characteristics may include the category (e.g., trademark, logo) or degree of legal protection (e.g., patent).

Describe the economic circumstances of the transaction parties and the market

In the market analysis, you describe the conditions that influence pricing and market dynamics where the transaction takes place. The broader analysis can serve as a useful starting point, but in this section, you link the description of market conditions more specifically to the transaction you are delineating.

Examples of factors that may be important to describe are:

• Geographical location
• Market size
• Barriers to entry (new markets)
• Level of competition (e.g., number of suppliers/demanders)
• Competitive position of the buyer and seller (e.g., new entrants, market leaders, small/large)
• Purchasing power in the market
• Regulation (e.g., prohibitions, mandates, quota regulations, tariff barriers)
• Economic cycles

Describe the business strategies

You must describe the business strategies of the group and the company and how these strategies affect the transaction (pricing and terms).

Business strategies are long-term plans to achieve business goals. All strategies involve deliberate choices to maximise the return on capital invested in the group.

The group and the company may have a range of strategies depending on both the characteristics of the product and the various market conditions/economic circumstances under which the business operates. Examples of strategies are innovation, market penetration, and diversification.

 The following questions can help identify the business strategies:

• Are you the sole supplier/distributor/manufacturer within the group?
• Do you engage in one or more types of transactions?
• Is the current transaction part of an innovation or product development?
• Does the current transaction target a new market or an established one?
• What is the risk profile of the group, and what is the risk profile of the company?