The business planning process
Change strategy depending on outcome of evaluation
Strategic review and plan Stakeholder analysis
Vision, mission and objectives
Environmental analysis
Analysis of the firm
Industry and competitor analysis SWOT analysis
Chapters 4 to 10
Product and portfolio analysis Generation of strategic options
Marketing plan Market analysis and strategy
Market forecasting
Chapters 11 and 12
Operational plan
Chapter 13
Model the business
Chapter 14 to17
Evaluate and select strategy
Chapter 18
Examine funding issues
Chapter 19
Perform risk analysis
Chapter 20
Present and approve the business plan
Chapter21
Implement the business plan
Chapter 22
The business planning process
Change strategy depending on outcome of evaluation
Strategic review and plan Stakeholder analysis
Vision, mission and objectives
Environmental analysis
Analysis of the firm
Industry and competitor analysis
SWOT analysis
Product and portfolio analysis Generation of strategic options
Marketing plan Market analysis and strategy
Market forecasting
Operational plan Model the business Evaluate and select strategy Examine funding issues Perform risk analysis Present and approve the business plan Implement the business plan
Time management matrix
URGENT
NOT URGENT
Quadrant I
Quadrant II
Crises Pressing problems Deadline driven projects
Relationship building Identifying opportunities Business planning
Important
Quadrant III
Quadrant IV
Some reports Some meetings Popular activities
Tidying the desk Some mail Pleasant activities
Not important
The strategic review and strategic planning process Stakeholder analysis Vision, mission and objectives
Analysis of the firm
Environmental analysis Industry and competition analysis
Product/portfolio analysis
SWOT analysis
Strength
Opportunities
Weaknesses
Threats
Generation of strategic options Evaluate and select strategy Implement strategy Monitor and review
Stakeholder analysis Stakeholder
Expectation and objectives
Power and influence
Commonality and conflict
Shareholders
Share price growth, dividends
Appoint board
Conflict: bargaining with staff
Lenders
Interest and principal to be repaid, maintain credit ratings, risk averse
Can enforce loan covenants
Similar to shareholders, but not in financial crisis
Directors and managers
Success on CV, salary, share options, job satisfaction
Make most decisions, have detailed information
Some alignment with shareholders if rewards are linked to profits or share price
Staff and unions
Salary, job security, job satisfaction
Customer experience, strike, staff turnover
Conflict: bargaining with shareholders
Suppliers
Long-term orders, payment
Pricing, quality
Conflict: generally seek high prices
Customers
Reliable supply of goods and/or services
Revenue is derived from customers
Seek low prices
Community
Environment, local impact, local jobs
Indirect, local planning, opinion leaders
Often same as staff
Government
Operate legally, tax receipts, jobs
Regulation, subsidies, taxation, planning
Diverse, balancing
PEST analysis POLITICAL
ECONOMIC
•Privacy laws relating to personal information such as location-based nformation enabled by mobile technologies •Availability, conditions and price of additional radio spectrum for wireless service providers •Competition law in relation to mergers between network providers •Competition law in relation to mergers between networks and content suppliers •Regulation of access to the "local loop”
•Consolidation or exit within the mobile telecoms sector •Consolidation within the broadband market •Access charges to the "local loop" from the owners of "last mile of copper" to the home •Rate of economic growth and changes in consumer spending •Interest rates •Availability of credit •Inflation •Exchange rates •Costs of laptop computers
SOCIAL AND DEMOGRAPHIC
TECHNOLOGICAL
•Penetration of laptop computers •Continuing popularity of social networking sites •Available leisure time •Home working/teleworking •Demand for television and video delivered on the move •Attitudes towards the use of mobile devices in public places •Acceptance of advertising supported services on mobile •Rate of adoption of new technologies and services •Demand for gaming services on small-screen devices •Acceptance and growth of e-commerce on mobile phones •The perceived value of a single customer bill for fixed and mobile services
•Increased data speeds on fixed DSL and cable networks Developments in data speeds over mobile networks в Developments and roll-out of alternative mobile data technologies such as WiFi and WiMAX •The costs of meeting the capacity demands on mobile networks Increased battery life to support more sophisticated mobile devices •Security and virus concerns for mobile devices •Software application developments and an increasing range of applications developed for both fixed and mobile devices
The impact/uncertainty matrix
LOW
Uncertainty
HIGH
Business impact LOW
HIGH
•Demand for gaming services on small-screen devices •Security and virus concerns for mobile devices •Acceptance of advertising supported services on mobile devices •Continuing popularity of social networking sites •Inflation •Exchange rates •Interest rates •Increased battery life to support more sophisticated mobile devices
•Penetration of laptop computers among consumers •Software application development and an increased range of applications developed for both fixed and mobile devices •Developments and roll-out of alternative mobile data technologies such as WiFi and WiMAX •Availability, conditions and price of additional radio spectrum for wireless service providers •Demand for television and video delivered on the move •Rate of adoption of new technologies and services
• Homeworking/teleworking • Attitudes towards the use of mobile devices in public places • Available leisure time • Availability of credit • Rate of economic growth and changes in consumer spending • Regulation of access to the "local loop" • Increased data speeds on fixed DSL and cable networks • Competition law in relation to mergers between network providers • Competition law in relation to mergers between network providers and content suppliers • The perceived value of a single customer bill for fixed and mobile services
•Access charges to operators for access to the "local loop" •Costs of laptop computers •Developments in data speeds over mobile networks •Costs of meeting capacity constraints on mobile networks •Privacy laws relating to personal information such as location-based information enabled by mobile technologies •Consolidation or exit within the mobile telecoms sector •Consolidation or exit within the broadband market •Acceptance and growth in e-commerce on mobile phones
Potential development paths Environmental factor
Path 1
Path 2
Penetration of laptop computers among consumers
Laptops replace desktop PCs in the home but remain a shared family purchase
Everyone has a laptop in the same way that everyone has a mobile phone
Software application development
Few compelling applications are developed for converged networks
A plethora of small software developers create a vast range of compelling applications
Roll-out of alternative mobile data technologies
WiFi and WiMAX networks remain limited to key public places such as airports and hotels
WiMAX and WiFi are extended to provide wide area coverage in major cities
Availability, conditions and price of additional radio spectrum
Spectrum is available on a technology neutral basis and at low prices
Spectrum is available on a technology neutral basis and prices are high
Demand for television and video delivered on the move
Customers do not like watching television and video clips on small screens
Demand for small video clips such as YouTube is high on mobile devices but longer programmes are not popular
Rate of adoption of new technologies and services
New technologies are adopted in line with historic take-up rates
The speed with which new technologies are adopted accelerates
Path 3
WiMAX networks are rolled out in all cities and towns
Customers consume demand on mobile devices in the same way they consume it on the PC and television
Initial scenario matrix
Penetration of laptop computers
PATH 1
Laptops replace desktop PCs in the home but remain a shared family purchase Few compelling applications are developed for converged networks
PATH 2
Software application development
PATH 1
PATH 2 Everyone has a laptop in the same way that everyone has a mobile phone
Few compelling applications are developed for converged networks
Laptops replace desktop PCs in the home but remain a shared family purchase
Everyone has a laptop in the same way that everyone has a mobile phone
A plethora of small software developers create a vast range of compelling applications
A plethora of small software developers create a vast range of compelling applications
Analysis of the firm
Component
Analytical concepts and tools employed
Resource based view
Key differentiators and unique selling points VRIO analysis Core competencies
Configuration of resources
Value add analysis Value chain Value system
Resource audit •Operations resources •Human resources •Organizational resources •Financial resources
Identification of resources Resource utilization Effectiveness of deployment
Resource-based model or sustainable competitive advantage Management strategic choices •Resource identification •Resource development/protection •Resource deployment
Key resources Tangible assets
Intangibl e assets
Capabilities
Sustainable competitive advantage
Value Barriers to duplication
Appropriability
Value to customers
Superior performance
Marker performance
Customer performance
Source: Fahy, J. and Smithee, A., "Strategic Marketing and the Resource Based View of the Firm", Academy of Marketing Science Review, Vol. 1999, No. 10,1999
VRIO analysis framework
Resource characteristics Valuable
No
Rare
Costly to imitate
Strategic implications
Organization exploits it
Competitive implication
Impact on economic performance
SWOT category
Below normal
Weakness
No
Competitive disadvantage
-
-
Yes
No
-
Competitive parity
Normal
Weakness or strength
Yes
Yes
No
Temporary competitive advantage
Above normal
Strength and core competence
Yes
Yes
Yes
Sustainable competitive advantage
Above normal
Yes
Strength and long-term core competence
The four dimensions of core competence
Qualifications
Norms and values Organizational competence
Managerial competence
Source: Leonard-Barton, D., "Core Capabilities and Core Rigidities: A Paradox in Managing New Product Development", Strategic Management Journal, Vol. 13, 1992.
The value chain
Support activities
Firm infrastructure Human resource management Technology development
Primary activities
Procurement Inbound logistics
Operations
Outbound logistics
Marketing and Service sales
Source: Porter, M.E., Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, 1985
Value chain based on Hofer and Schendel 100%
Customer care Outbound logistics
Value added
Sales and marketing Production Inbound logistics Purchasing R&D
The value system
Supplier value chains
Firm value chains
Channel value chains
Buyer value chains
Industry maturity: competitive position matrix
Strong Favourable Tenable Weak
COMPETITIVE POSITION
Domina nt
STAGES OF INDUSTRY MATURITY
Embryonic
Growth
Mature
Ageing
Fast growth Start-up
Fast growth Attain cost leadership Renew Defend position
Defend position Attain cost leadership Renew Fast growth
Defend position Focus Renew Grow with industry
Start-up Differentiate Fast growth
Fast grow Catch-up Attain cost leadership Differentiate
Start-up Differentiate Focus Fast growth Start-up Grow with industry Focus
Find niche Catch up Grow with industry
Differentiate Focus Catch-up Grow with industry
Harvest, catch up Hold niche, hang in Find niche
Turnaround Focus Grow with industry
Turnaround Retrench
Attain cost leadership Renew Focus
Harvest, hang in Find niche, hold niche
Differentiate Grow with industry
Renew, turnaround Differentiate, focus Grow with industry
Find niche Hold niche Hang in Grow with industry Harvest Retrench Turnaround
Harvest Turnaround Find niche Retrench
Divest Retrench
Withdraw Divest
Withdraw
Strategic movement of portfolio products and cash
High Low
RATE OF MARKET GROWTH %
Product development pipeline
High
Low RELATIVE MARKET SHARE (LOG)
Cash movement
Product movement
Industry maturity: competitive position matrix COMPETITIVE POSITION
Medium Low
INDUSTRY ATTRACTIVENESS
High
Strong
Average
Weak
1 Protect position
2 Invest to build
3 Built selectively
• Invest to grow at maximum rate • Focus effort on maintaining strength
• Challenge for leadership •Built selectively on strengths •Reinforce vulnerable areas
•Specialise around limited strengths •Seek ways to overcome weaknesses •Withdraw if indications of sustainable growth are lacking
4 Built selectively
5 Selectivity/manage for earnings
6 Limited expansion or harvest
•Protect existing programme •Concentrate investment in segments where profitability is good and risks are relatively low
•Look for ways to expand without high risk; otherwise minimise investment and rationalise operations
7 Protect and refocus
8 Manage for earnings
9 Divest
•Manage current earnings •Concentrate on attractive segments •Defend strengths
•Protect position in most profitable segments •Upgrade product line •Minimise investment
•Sell at time that will maximise cash value •Cut fixed costs and avoid investment
•Invest heavily in most attractive segments •Built up ability to counter competition •Emphasise profitability by raising productivity
Decline saturatio n ment
Maturity/ Shake-out Growth Develop
STAGE IN PRODUCT/MARKET EVOLUTION
Hofer matrix COMPETITIVE POSITION
Strong Average Weak
Analysis of the firm •VRIO analysis •Key differentiators and USPs •Value add analysis •Value chain •Value system •Resource audit Operations Human Organizational Financial
Internal
SWOT analysis Positive
Negative
Strengths
Weaknesses
Market analysis Product, portfolio and matrix analysis
External
Environmental analysis •PEST Industry and competitor analysis •5 forces •Competitor analysis •KSF analysis •Industry life cycle
Relevance Opportunities
Threats
Generating strategic options
BASIS COMPETITIVE ADVANTAGE
STRATEGY DIRECTION
METHOD OF STRATEGY IMPLEMENTATION
Generic strategies
Alternative directions
Alternative methods
Cost leadership Differentiation Cost focus Differentiation focus
Development strategies - Market penetration - Product development - Market development - Diversification Withdrawal Do nothing - Harvesting - Exit
Internal development Acquisition Joint development
Source: Adapted from Johnson, G. and Scholes, K. Exploring Corporate Strategy, Prentice-Hall, 1989
Generic strategies
Broad target Narrow target
COMPETITIVE SCOPE
COMPETITIVE ADVANTAGE
Lower cost
Differentiation
1. Cost leadership
2. Differentiation
За. Cost focus
Source: Porter, M.E., Competitive Advantage, Free Press, 1980
3b. Differentiation focus
Strategies and required skills and resources
Focus
Differentiation
Overall cost leadership
Generic strategy
Required skills and resources
Organization requirements
•Substantial capital investment and access to capital •Process engineering skills •Intense supervision of labour •Products designed for ease in manufacture • low-cost distribution system
•Tight cost control •Frequent, detailed cost-control reports •Incentives based on meeting strict quantitative targets
•Strong marketing abilities •Product engineering •Creative flair •Strong capability in basic research •Corporate reputation for quality or technology leadership •Long tradition in the industry or unique combination of skills drawn from other businesses • Strong co-operation from channels
•Strong co-ordination among functions in R&D, product development and marketing •Subjective measurement and incentives instead of quantitative measures •Amenities to attract highly skilled labour, scientists, or creative people
Combination of the above policies directed at the particular strategic target
Combination of the above policies directed at the particular strategic target
Alternative strategic directions for business development
New
Existing
Market penetration
Product development
New
Market development
Diversification
Low
High
Low SCOPE FOR LEVERAGE
SCOPE FOR LEVERAGE
Existing
High
MARKET/CUSTOMER GROUPS
PRODUCT
Marketing strategy process
Market/customer analysis
Market segmentation
Market targeting
Marketing mix
Market positioning
Selling versus marketing concept
STARTING POINT
/
THE . SELLING CONCEPT
THE MARKETING CONCEPT
Production
Target market
FOCUS
Products
Customer needs
Sown; Kotler, P., Marketing Management, Prentice-Hall, 1997
MEANS
ENDS
Selling and promotion
Profit through Sales volume
Integrated marketing
Profit through customer satisfaction
Model of buyer behaviour in consumer markets
Marketing stimuli
Product Price Place Promotion
Other stimuli
Economic Technological Political Cultural
Buyer's characteristics
Cultural Social Personal Psychological
Buyer's decision process
Problem recognition Information search Evolution Decision Post-purchase behaviour
Buyer’s decisions
Product choice Brand choice Retailer choice Purchase timing Purchase amount
The marketing mix
PRODUCT
Design Features Quality Quantity Variations Packaging Brand Service
PRICE
List price Discounts Credit terms Repeat purchase Payment method
PROMOTION
Advertising Direct marketing Sales promotion Coupons Bundling Joint promotion Loyalty programmes Public relations
PLACE
Geography Channels Retailers Opening times Order taking Fulfillment Delivery
Market forecasting and planning for the business plan
Addressable/potential market
Sales volumes
Firm's volume market share
Firm's prices
Prices Firm's revenue
Market value Firm's cost of sales
Firm's gross margin
Stages in making a market forecast Define the market to be forecast Define the required forecast intervals and forecast horizon Establish time and financial resources available to make forecast Select the appropriate forecasting technique Gather data and size the existing and potential market Make the forecast in form of a time series and document assumption Test forecast for reasonableness and benchmarking Iteration Presentation
Identifying the addressable market
Sufficient income 30% of population
Total population 100%
Addressable market 19.2% of population
Aged 18+ 64% of population
Functional structure
Board of directors
Sales and marketing
Production
GEO
Finance and accounting
Purchasing
Logistics
Human resources
General admin
Divisional structure
Head office
Central services: finance, human resources
Division A
Division Đ’
Division C
Division D
Division E
Function 1
Function 1
Function 1
Function 1
Function 1
Function 2
Function 2
Function 2
Function 2
Function 2
Function 3
Function 3
Function 3
Function 3
Function 3
Function 4
Function 4
Function 4
Function 4
Function 4
Function 5
Function 5
Function 5
Function 5
Function 5
Matrix structure Finance and accounting
Board of directors
GEO Human resources General admin
Sales and marketing
Product A Product Đ’ Product C
Production
Purchasing
Logistics
Free cash flow
Operating profit Less changes in working capital Less equity tax paid Less capital expenditure
Free cash flow Holders of debt
+
Holders of equity
=
Enterprise value
Free cash flow to equity Operating profit Less changes in working capital
Less tax paid after interest Less capital expenditure Less interest and principal
Holders of debt
=
Value of debt
+ FCF to equity holders
Holders of equity
=
Equity value
Enterprise value
Sources of finance Sources of finance
Debt and other source of finance
Equity (long-term)
Internally generated
New issues
Long-term e.g. debentures, bonds
Sources of long-term finance
Mediumterm e.g. finance leases
Short-term e.g. trade credit
Special purpose e.g. government grants
Sources of short-and medium-term finance
From business plan to implementation plan
BUSINESS PLAN
Strategy Marketing plan High-level operational plan Financial plan
IMPLEMENTATION PLAN
Detailed organization chart Detailed job descriptions Procedures/manuals Operational budget Control systems