• Business development means different things to different people. Thats why it is appropriate to define the term beforehand.• For some it simply means prospection, to others it can mean developing a new product or technology, while to others it can mean investing or divesting corporate assets.• All have their own right to claim that their activity is business development, thats why it is necessary to dissect the term.
Business development is about bringing discontinuity into the normal operations of an organization. Its about bringing, doing or developing new things the organization didnt do before. Business development is a phrase that can be used in ambiguous ways. Strictly speaking, business development is the act of identifying, planning to pursue and pursuing business opportunities in the marketplace. Business development strategies focus on creating plans for making a profit by following specific avenues of business activity.
ProspectingBUSINESS DEVELOPMENT BASIC Marketing Financing Customer Development
The first step in business development is to monitor the external environment, as well as the internal workings of the company in question, looking for business opportunities. Opportunities can come in a variety of forms. Perhaps a new technology promises to change the way an industry operates. Perhaps a new generation of youth is fueling growth for new product segments. Perhaps there is a profitable market segment that is being underserved by the business community. All of these signs and more can reveal solid business opportunities 6
After identifying and selecting an opportunity to pursue, business planners must create a marketing plan for developing products and services, stimulating demand in the marketplace and getting the products into the hands of customers. Management Fundamentals - Chapter 6 7
Developing a new line of business requires money. Existing businesses expanding their operations into a new line of business can find themselves at an advantage over startups as they likely have cash on hand and solid credit reputations to finance new investments. Smaller businesses must plan more extensively and pursue a number of different avenues to obtain the financing needed to enter a new line of business. Management Fundamentals - Chapter 6 8
Developing customers is vital to developing your business over time. Guide your customers through first-time purchases, to repeat purchases and eventually to brand preference and habitual purchasing to leverage the power of word-of-mouth advertising. Turning customers into champions for your brand by providing them with exceptional quality and service, as well as unique and unforgettable experiences, Management Fundamentals - Chapter 6 9
A business development plan provides guidance and direction for an organization. Business development plans provide guidance to organizations in purpose, including mission, vision and values, as well as product or service, target audience and the strategies they will use to achieve success. Successful business development plans include a situation analysis, a SWOT analysis and clearly outlined goals, objectives, strategies and tactics. The plan provides guidance for all members of the organization.
The beliefs and values shared by people who work in an organisation ◦ How people behave with each other ◦ How people behave with customers/clients ◦ How people view their relationship with stakeholders ◦ People‟s responses to energy use, community involvement, absence, work ethic, etc. ◦ How the organisation behaves to its employees – training, professional development, etc.
May be driven by: Vision – where the organisation wants to go in the future Mission Statement – summary of the beliefs of the organisation and where it is now
May be reflected in: ◦ Attitude and behaviour of the leadership ◦ Attitude to the role of individuals in the workplace – open plan offices, team based working, etc. ◦ Logo of the organisation ◦ The image it presents to the outside world ◦ Its attitude to change
What corporate culture do you think the following businesses have managed to develop?NikeMcDonaldsThe Body ShopVirgin GroupCopyright: Joshua2150, alexbol alexallied fadaquiqa,http://www/sxc.huhttp://www.sxc.hu
First Stage of Strategic Planning may involve: Futures Thinking ◦ Thinking about what the business might need to do 10–20 years ahead Strategic Intents ◦ Thinking about key strategic themes that will inform decision making Taking time to think and reflect “The thicker the planning may be more important than many document, the more useless businesses allow time for! it will be” Copyright: Intuitives, http://www.sxc.hu ◦ (Brent Davies: 1999)
The Vision ◦ Communicating to all staff where the organisation is going and where it intends to be in the future ◦ Allows the firm to set goals Aims and Objectives: ◦ Aims – long term target ◦ Objectives – the way in which you are going to achieve the aim
Example: Aim may be for a chocolate manufacturer to break into a new overseas market Objectives: ◦ Develop relationships with overseas suppliers ◦ Identify network of retail outlets ◦ Conduct market research to identify consumer needs ◦ Find location for overseas sales team HQ
Once the direction is identified: Analyse position Develop and introduce strategy Evaluate: ◦ Evaluation is constant and the results of the evaluation feed back into the vision
Strengths – identifying existing organisational strengths Weaknesses – identifying existing organisational weaknesses Opportunities – what market opportunities might there be for the organisation to exploit? Threats – where might the threats to the future success come from?
Political: local, national and international political developments – how will they affect the organisation and in what way/s? Economic: what are the main economic issues – both nationally and internationally – that might affect the organisation? Social: what are the developing social trends that may impact on how the organisation operates and what will they mean for future planning? Technological: changing technology can impact on competitive advantage very quickly!
Examples: Growth of China and India as manufacturing centres Concern over treatment of workers and the environment in less developed countries who may be suppliers The future direction of the interest rate, consumer spending, etc. The changing age structure of the population The popularity of „fads‟ like the Atkins Diet The move towards greater political regulation of business The effect of more bureaucracy in the labour market
Developed by Michael Porter: forces that shape and influence the industry or market the organisation operates in. ◦ Strength of Barriers to Entry - how easy is it for new rivals to enter the industry? ◦ Extent of rivalry between firms – how competitive is the existing market? ◦ Supplier power – the greater the power, the less control the organisation has on the supply of its inputs. ◦ Buyer power – how much power do customers in the industry have? ◦ Threat from substitutes – what alternative products and services are there and what is the extent of the threat they pose?
Changing strategy will impact on the resources needed to carry out the strategy: Specifically the impact on: ◦ Land – opportunities for acquiring land for development – green belt, brownfield sites, planning regulations, etc. ◦ Labour – ease of obtaining the skilled and unskilled labour required ◦ Capital – the type of capital and the cost of the capital needed to fulfil the strategy
Data from sales, profit, etc. used to evaluate the progress and success of the strategy and to inform of changes to the strategy in the light of that Information from a wide variety of sources can help to measure and inform the impact and direction of the strategy. data Copyright: Mad7986, http://www.sxc.hu
Competitive Advantage – something which gives the organisation some advantage over its rivals Cost advantage – A strategy to seek out and secure a cost advantage of some kind - lower average costs, lower labour costs, etc.
Market Dominance: Achieved through: ◦ Internal growth ◦ Acquisitions – mergers and takeovers New product development: to keep ahead of rivals and set the pace Contraction/Expansion – focus on what you are good at (core competencies) or seek to expand into a range of markets?
Price Leadership – through dominating the industry – others follow your price lead Global – seeking to expand global operations Reengineering – thinking outside the box – looking at news ways of doing things to leverage the organisation‟s performance
◦ Internal business level strategies – Downsizing – selling off unwanted parts of the business – similar to contraction Delayering – flattening the management structure, removing bureaucracy, speed up decision making Restructuring – complete re-think of the way the business is organised
IntrapreneurIs a person who is innovative andenterprising within a business? This persondevelops new ways of doing things andidentifies new opportunities for businessdevelopment.
Characteristics of enterprising people1. Independent - They wish to be in charge and in complete control2. Confidence – They believe in their ideas & have the confidence to carry them through3. Analytical – they collect all relevant information, analyse it, then make decisions4. Motivated – they have a high need for achievement & personal satisfaction5. Ambitious – entrepreneurs do things differently; they come up with new ways of doing/making things. They use their imagination to do this.6. Ruthless – concerned with achieving their own aims at any consequence7. Good communicator – being able to competently relate to suppliers, customers, employees8. Leader – get along well with people, able to accept criticism, they can get people to work together on teams9. Opportunistic – being on the look out for a gap in the market and seizing the opportunity.10. Realistic – they recognise they’re own limitations & seek advice when needed
Skills of an Enterprising Person1. Inner control – taking control of your own situation, not wanting other to influence your life.2. Planning & setting goals – setting both short & long-term goals. Plans must be drawn up to achieve these goals, i.e. SWOT analysis of a firm3. Innovation – applying new ideas to situations where they have not been applied before. E.g. Brainstorming4. Decision-making – An entrepreneur must be a good decision maker, choices must be considered, information must be analysed and then a decision made.5. Human Relation – they must be able to manage people to achieve individual behaviour that will enhance the effectiveness of the business.6. Reality perception – seeing things as they really are and being aware of employee’s and customers needs. There is little point in thinking that customers are satisfied with the firm’s products if they are dissatisfied.7. Networking – working with other people and establishing contacts in the business community with people whose knowledge and expertise might prove useful
1. It creates new business, with increased employment2. It brings about an increased standard of living for the community3. Local businesses will thrive as workers will have more disposable money4. People will then live in the area5. Other firms will spend more money on raw materials, services that the area provides6. It also bring about increased revenue for the govt from the success of firms, e.g. tax revenue
What is entrepreneurship? What is special about small businesses? How does one start a new venture? What resources support entrepreneurship and business development? Management - Chapter 6 47
Entrepreneurship ◦ Strategic thinking and risk-taking behavior that results in the creation of new opportunities for individuals and/or organizations. Entrepreneurs ◦ Risk-taking individuals who take actions to pursue opportunities and situations others may fail to recognize or may view as problems or threats. Management - Chapter 6 48
Entrepreneurs are … ◦ Founders of businesses that become large-scale enterprises. ◦ People who: Buy a local franchise outlet Open a small retail shop Operate a self-employed service business ◦ People who introduce a new product or operational change in an existing organization. Management - Chapter 6 49
Typical characteristics of entrepreneurs: ◦ Internal locus of control ◦ High energy level ◦ High need for achievement ◦ Tolerance for ambiguity ◦ Self-confidence ◦ Passion and action-orientation ◦ Self-reliance and desire for independence ◦ Flexibility Management - Chapter 6 50
Typical entrepreneurial backgrounds and experiences: ◦ Parents were entrepreneurs or self-employed. ◦ Families encouraged responsibility, initiative, and independence. ◦ Have tried more than one business venture. ◦ Have relevant personal or career experience. ◦ Become entrepreneurs between 22 and 45 years of age. ◦ Have strong interests in creative production and enterprise control. ◦ Seek independence and sense of mastery. Management - Chapter 6 52
Reasons for women becoming entrepreneurs: ◦ Being motivated by a new idea. ◦ Doing for themselves what they were already doing for other employers. ◦ Seeking a pathway to opportunity. Management - Chapter 6 53
Common myths about entrepreneurs: ◦ Entrepreneurs are born, not made. ◦ Entrepreneurs are gamblers. ◦ Money is the key to entrepreneurial success. ◦ You have to be young to be an entrepreneur. ◦ You must have a degree in business to be an entrepreneur. Management - Chapter 6 54
Small businesses … ◦ Ones with 100 or fewer employees. ◦ Independently owned and operated. ◦ 50 percent of the private labour force works in small businesses. ◦ Are established by: Starting a new business. Buying an existing business. Buying and running a franchise. Management - Chapter 6 55
Entrepreneurship and the Internet … ◦ The Internet offers numerous entrepreneurial opportunities. Online buying and selling Dot-com businesses ◦ Businesses are limited only by personal creativity. ◦ Business-to-Business (B2B) ventures are possible. Management - Chapter 6 56
International business entrepreneurship … ◦ Provides strategic opportunities for small businesses. ◦ Creates exporting and importing opportunities. ◦ Supported through appropriate governmental and non-governmental organizations. Management - Chapter 6 57
Family businesses … ◦ Owned and financially controlled by family members. ◦ Largest percentage of businesses worldwide. ◦ Can provide an ideal business situation. ◦ Problems unique to family businesses: Family business feud Succession problem Management - Chapter 6 58
Reasons for small business failures: ◦ Lack of experience ◦ Lack of expertise ◦ Lack of strategy and strategic leadership ◦ Poor financial control ◦ Growing too fast ◦ Insufficient commitment ◦ Ethical failure Management - Chapter 6 59
Important issues in new venture creation: ◦ Does the entrepreneur have good ideas and the courage to give them a chance? ◦ Is the entrepreneur prepared to meet and master the test of strategy and competitive advantage? ◦ Can the entrepreneur identify a market niche that is being missed by other established firms? ◦ Can the entrepreneur identify a new market that has not yet been discovered by existing firms? ◦ Can the entrepreneur generate first-mover advantage by exploiting a niche or entering a market before competitors? Management - Chapter 6 61
Questions that keep a new venture focused on its customers … ◦ Who is your customer? ◦ How will you reach key customer market segments? ◦ What determines customer choices to buy or not buy your product/service? ◦ Why is your product/service a compelling choice for the customer? ◦ How will you price your product/service for the customer? ◦ How much does it cost to make and deliver your product/service? ◦ How much does it cost to attract a customer? ◦ How much does it cost to support and retain a customer? Management - Chapter 6 62
Life cycle of entrepreneurial firms ◦ Birth stage ◦ Breakthrough stage ◦ Maturity stage Each stage poses different managerial challenges and requires different managerial competencies. Management - Chapter 6 63
Basic items that should be included in a business plan: ◦ Executive summary ◦ Industry analysis ◦ Company description ◦ Product and services description ◦ Market description ◦ Marketing strategy ◦ Operations description ◦ Staffing description ◦ Financial projection ◦ Capital needs ◦ Milestones Management - Chapter 6 66
Forms of legal ownership ◦ Sole proprietorship ◦ Partnership General partnership Limited partnership Limited liability partnership ◦ Corporation ◦ Limited liability corporation (LLC) Management - Chapter 6 67
Financing the new venture ◦ Sources of outside financing Debt financing Equity financing ◦ Equity financing alternatives Venture capitalists Initial public offerings Angel investors Management - Chapter 6 68
Promoting entrepreneurship in large enterprises ◦ Intrapreneurship ◦ Skunkworks Business incubators Small Business Development Centers Management - Chapter 6 69
Prepare a business development plan either take a company where you work or you create a new company. Assignments shall be made in the class and all are required to make a presentation of the respective business development Basic items that should be included in a business plan: ◦ Industry analysis ◦ Company description ◦ Mission ◦ Vision ◦ Product and services description ◦ Marketing Plan Customer Profile Competitor Promotion Pricing SWOT Analysis ◦ Operations Plan Production Staff operation and training Product Design and development ◦ Financial projection Profit and loss projection Cash flow forecast Capital Needs ◦ Milestones Management Fundamentals - Chapter 6 70