0
Toolbox

DEVELOPING A
STRATEGIC BUSINESS
PLAN
Capability platform: assessment of sources of
competitive advantage (1/2)
                                                ...
Extremely relevant
Capability platform: assessment of                                                                     ...
Competitor capability comparison
                                                                           Competitors
  ...
Porter’s 5 Forces of Competitive
Position Diagram

                  New Market
                   Entrants




       Sup...
Porter 5 Forces
Porter’s 5 Forces of Competitive
Position version #2
Porter’s 5 Forces of Competitive
Position #3                       Entry Barriers
                                  Econom...
Forces at work framework
                                                                                         2. Deter...
Ninety ways to measure
    demand (6 x 5 x 3)
                                    World
   Geographical
      Level       ...
Strategic Planning Link with
Marketing Planning
     Businesses that succeed do so by creating and keeping customers.

  ...
Strategic vs. Marketing Plans
    Strategic planning is concerned about the overall direction of the

    business.
    ◦...
Key issues in strategic and
marketing planning?
    The following questions are key in the marketing and strategic

    p...
Situation Analysis
    Internal Analysis—company; capability etc.

    External Analysis—customers, market

    definiti...
SWOT
                      Internal Environment
          Strengths                      Weaknesses
World class product   ...
SWOT ANALYSIS
                                                                Opportunities/Threats

                     ...
SWOT Analysis is still a useful
Tool
TOWS matrix
                            Strengths              Weaknesses

   Opportunities          S-O strategies       ...
PEST analysis
    A scan of the external macro-

    environment in which the company
    wants to operate (or operates) ...
PEST Analysis - market, business, proposition, etc.
POLITICAL                                  ECONOMIC
•                 ...
PEST or SWOT
    A PEST analysis most commonly measures a market; a

    SWOT analysis measures a business unit, a propos...
Structure-conduct-performance (SCP)
     model
                      Industry                          Producers



     E...
Definition of risks
                  Definition


                  • Risk of loss due to changes in industry and competi...
Management


    Management, control and evaluation

Five disciplines – Peter Senge
    Personal Mastery:

    ◦ Aspiration involves formulating a coherent picture of the res...
Five disciplines – Peter Senge
    Shared Vision:

    ◦ Establishes a focus on mutual purpose.
    ◦ People learn to nou...
Five disciplines – Peter Senge
    Systems Thinking:

    ◦ People learn to better understand
      interdependency and c...
Project management - processes
Project management – a process
Project management – process
chain
Project management – risk
analysis
Success Keys - Deployment
             Deployment - Completing the Plan
            Success                  Failure
>Assi...
Success Keys - Communication

              Deployment - Communicating
           Success                              Fai...
Success Keys - Implementation
                           Implementing - I
           Success                              ...
Success Keys - Implementation

                         Implementing - II
           Success                            Fa...
Success Keys - Measurement

                Strategic Measurement - I
            Success                  Failure
Assign ...
Success Keys - Measurement

                   Strategic Measurement - II
            Success                             ...
Success Keys - Evaluation
                             Evaluation
             Success                              Failur...
Best Companies Spend more time
     on Forward Planning than Historical
     Analysis




Achieving Agility Through a New ...
Benefits of Rolling Forecasts
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Developing A Strategic Business Plan Part 2 (Pages 37 75)

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Transcript of "Developing A Strategic Business Plan Part 2 (Pages 37 75)"

  1. 1. Toolbox DEVELOPING A STRATEGIC BUSINESS PLAN
  2. 2. Capability platform: assessment of sources of competitive advantage (1/2) Example • BHP’s low-cost mines Physical asset • Telecomm/media company with rights Location/quot;spacequot; radio spectrum Privileged assets • Avon’s representatives Distribution/sales network • Coca-Cola Brand/reputation • Pharmaceutical company with a quot;wonder Patent Necessary drug‖ capabilities in order to • quot;Favored nationquot; status with a key Relationship with quot;licensequot; succeed in allocator minister in liberalizing economy the industry • 3M with new products Innovation • McDonald’s with QSC&V Cross-functional Distinctive coordination competencies • J&J with branded consumer health products Market positioning • Emerson Electric’s Best Cost Producer Cost/efficiency program management • P&G brand management program Talent development
  3. 3. Extremely relevant Capability platform: assessment of Somewhat relevant sources of competitive advantage (2/2) Irrelevant Segments BU Overall A B C Physical asset Location/quot;spacequot; Privileged assets Distribution/sales network Brand/reputation Necessary Patent capabilities in order to Relationship with quot;licensequot; succeed in the allocator industry Innovation Cross-functional coordination Distinctive competencies Market positioning Cost/efficiency management Talent development Step 2: Assess your overall position relative to Step 1: Ensure that these are the the capabilities required to succeed in the industry. capabilities required to succeed in the Also, determine if these capabilities are relevant to industry. Use this list as a thought the segments you serve starter, add and delete as you see appropriate
  4. 4. Competitor capability comparison Competitors BU Overall A B C • Physical asset • Location/quot;spacequot; Privileged • assets Distribution/sales network • Brand/reputation Necessary Patent capabilities in order to Relationship with quot;licensequot; succeed in allocator the Innovation industry Cross-functional coordination Distinctive competencies Market positioning Cost/efficiency management Talent development Step 3: Compare the strengths and weaknesses of your competitive position vs. the necessary skills
  5. 5. Porter’s 5 Forces of Competitive Position Diagram New Market Entrants Supplier Competitive Buyer Power Power Rivalry Product & Technology Development
  6. 6. Porter 5 Forces
  7. 7. Porter’s 5 Forces of Competitive Position version #2
  8. 8. Porter’s 5 Forces of Competitive Position #3 Entry Barriers Economies of Scale Brand Identity Rivalry Determinants Capital Requirements Industry Growth Fixed Costs New Product Differences Entrants Determinants of Supplier Power Brand Identity Switching Costs Exit Barriers Supplier Volume Impact Forward Integration Industry Competitors Suppliers Buyers Intensity of Rivalry Determinants of Buyer Power Buyer Concentration Determinants of Buyer Volume Substitution Threat Backward Integration Relative Price Performance Substitutes Switching Costs
  9. 9. Forces at work framework 2. Determinants of barriers to entry 1. Determinants of supplier power • Economies of scale • Differentiation of inputs • Proprietary product differences • Switching costs of suppliers and firms in the • Brand identity industry • Switching costs • Presence of substitute inputs • Capital requirements • Supplier concentration • Access to distribution • Importance of volume to supplier • Absolute cost advantages • Cost relative to total purchases in the industry 2. New entrants – Proprietary learning curve • Impact of inputs on cost or differentiation – Access to necessary inputs • Threat of forward integration relative to threat – Proprietary, low-cost product design of backward integration by firms in the industry • Government policy 5. Industry competitors • Expected retaliation 1. Suppliers 3. Buyers Intensity of rivalry 3. Determinants of buying power • Bargaining leverage 5. Rivalry determinants – Buyer concentration vs. firm • Industry growth • Fixed (or storage) cost/value added concentration 4. Substitutes – Buyer volume • Intermittent overcapacity – Buyer switching costs relative to firm • Product differences • Brand identity switching costs 4. Determinants of – Buyer information • Switching costs substitution threat – Ability to backward integrate • Concentration and balance • Relative price performance of – Substitute products • Informational complexity substitutes – Pull-through • Diversity of competitors • Switching costs • Price sensitivity • Corporate stakes • Buyer propensity to substitute – Price/total purchases • Exit barriers – Product differences – Brand Identity – Impact on quality perception – Buyer profits – Decision makers' incentives
  10. 10. Ninety ways to measure demand (6 x 5 x 3) World Geographical Level Region Country Territory Client Total sales Sector sales Company’s sales Product Product lines Level Product config Product items Short Medium Long term term term Timing Level
  11. 11. Strategic Planning Link with Marketing Planning Businesses that succeed do so by creating and keeping customers.  They do this by providing better value for the customer than the competition.  Marketing management constantly have to assess which customers they are  trying to reach and how they can design products and services that provide better value (―competitive advantage‖). The main problem with this process is that the ―environment‖ in which  businesses operate is constantly changing. So a business must adapt to reflect changes in the environment and make  decisions about how to change the marketing mix in order to succeed. This process of adapting and decision-making is known as marketing  planning. Key Strategic Business Marketing Regional Industry Account Sales Plan State Plan Plan Plan Plan Plan Plan Plan
  12. 12. Strategic vs. Marketing Plans Strategic planning is concerned about the overall direction of the  business. ◦ It is concerned with marketing, of course. ◦ But it also involves decision-making about production and operations, finance, human resource management and other business issues. The objective of a strategic plan is to set the direction of a  business and create its shape so that the products and services it provides meet the overall business objectives. Marketing has a key role to play in strategic planning, because it is  the job of marketing management to understand and manage the links between the business and the ―environment‖. Sometimes this is quite a straightforward task. ◦ For example, in many small businesses there is only one geographical market and a limited number of products (perhaps only one product!). ◦ However, consider the challenge faced by marketing management in a multinational business, with hundreds of business units located around the globe, producing a wide range of products. ◦ Keeping control of marketing decision-making in such a complex situation calls for well-organised marketing planning.
  13. 13. Key issues in strategic and marketing planning? The following questions are key in the marketing and strategic  planning process: ◦ Where are we now? ◦ How did we get there? ◦ Where are we heading? ◦ Where would we like to be? ◦ How do we get there? ◦ Are we on course? A marketing plan helps to:  ◦ The ability of a business to achieve profitable sales is impacted by dozens of environmental factors, many of which are inter-connected ◦ Identify sources of competitive advantage ◦ Gain commitment to a strategy ◦ Get resources needed to invest in and build the business ◦ Inform stakeholders in the business ◦ Set objectives and strategies ◦ Measure performance
  14. 14. Situation Analysis Internal Analysis—company; capability etc.  External Analysis—customers, market  definition, industry structure SWOT Analysis  ◦ Strengths, Weaknesses, Opportunities & Threats ◦ Identify & prioritize major problems and opportunities: selection of key issues Based on the firm’s core  competencies, decide on future options
  15. 15. SWOT Internal Environment Strengths Weaknesses World class product Technical support Financial resources Internal processes Know-how Channels network External Environment Opportunities Threats Water & Energy crises Competitors market share Environment awareness Euro X Dollar Productivity improvement Technology development
  16. 16. SWOT ANALYSIS Opportunities/Threats • How are demand and supply expected to NEUTRALIZE evolve? THREATS • How do you expect the industry chain economics to evolve? • What are the potential major industry discontinuities? YOUR • What competitor BUILD ON CONVERT BUSINESS actions do you expect? STRENGTHS OPPORTUNITIES Strengths/ Weaknesses • What are your BU’s Surfaces potential assets/competencies ADDRESS opportunities/threats arising that solidify your WEAK- from factors external to the competitive position? NESSES business • What are your BU’s assets/competencies that weaken your competitive position? Can be used as a thought starter for competitive analysis and internal assessment
  17. 17. SWOT Analysis is still a useful Tool
  18. 18. TOWS matrix Strengths Weaknesses Opportunities S-O strategies W-O strategies Threats S-T strategies W-T strategies S-O strategies pursue opportunities that are a good fit to the companies strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.
  19. 19. PEST analysis A scan of the external macro-  environment in which the company wants to operate (or operates) and can be expressed in terms of the following factors: ◦ Political ◦ Economic ◦ Social ◦ Technological
  20. 20. PEST Analysis - market, business, proposition, etc. POLITICAL ECONOMIC • • ecological/environmental issues home economy situation • • current legislation home market home economy trends • • future legislation overseas economies and trends • • European/international legislation general taxation issues • • regulatory bodies and processes taxation specific to product/services • • government policies seasonality/weather issues • • government term and change market and trade cycles • • trading policies specific industry factors • • funding, grants and initiatives market routes and distribution trends • • home market lobbying/pressure groups customer/end-user drivers • • international pressure groups interest and exchange rates • • wars and conflict international trade/monetary issues SOCIAL TECHNOLOGICAL • • lifestyle trends competing technology development • • demographics research funding • • consumer attitudes and opinions associated/dependent technologies • • media views replacement technology/solutions • • law changes affecting social factors maturity of technology • • brand, company, technology image manufacturing maturity and capacity • • consumer buying patterns information and communications • • fashion and role models consumer buying mechanisms/technology • • major events and influences technology legislation • • buying access and trends innovation potential • • ethnic/religious factors technology access, licencing, patents • • advertising and publicity intellectual property issues • • ethical issues global communications
  21. 21. PEST or SWOT A PEST analysis most commonly measures a market; a  SWOT analysis measures a business unit, a proposition or idea. Generally speaking a SWOT analysis measures a business  unit or proposition, whereas a PEST analysis measures the market potential and situation, particularly indicating growth or decline, and thereby market attractiveness, business potential, and suitability of access - market potential and 'fit' in other words. PEST analysis uses four perspectives, which give a logical  structure, in this case organized by the PEST format, that helps understanding, presentation, discussion and decision- making. PEST analysis can be used for marketing and business  development assessment and decision-making, and the PEST template encourages proactive thinking, rather than relying on habitual or instinctive reactions.
  22. 22. Structure-conduct-performance (SCP) model Industry Producers External S C P tructure onduct erformance shocks Feedback • Technology Economics of demand Marketing Finance • Availability of substitutes • Pricing • Profitability breakthroughs • Changes in • Differentiability of products • Volume • Value creation • Rate of growth • Advertising/promotion government Technological progress • Volatility/cyclicality • New products/R&D policy/regulations Employment objectives – Domestic • Distribution Economics of supply – International • Concentration of producers Capacity change • Import competition • Expansion/contraction • Diversity of producers • Entry/exit • Fixed/variable cost structure • Acquisition/merger/ divestiture • Capacity utilization Vertical integration • Entry/exit barriers • Forward/backward integration • Vertical joint ventures Industry chain economics • Bargaining power of input • Long-term contracts suppliers Internal efficiency • Bargaining power of customers • Cost control • Logistics • Process R&D • Organization effectiveness
  23. 23. Definition of risks Definition • Risk of loss due to changes in industry and competitive Business risk environment, as well as shifts in customer preferences • Risk due to changes in regulatory environment (e.g. Regulatory risk deregulation) • Risk due to major changes in technology Technology risk • Risk of failures due to business processes and Integrity risk operations or people’s behavior, either intentional (e.g. fraud) or unintentional (e.g. errors) • Risk of loss due to changes in the political, social, or Macroeconomic economic environments risk
  24. 24. Management Management, control and evaluation 
  25. 25. Five disciplines – Peter Senge Personal Mastery:  ◦ Aspiration involves formulating a coherent picture of the results people most desire to gain as individuals, alongside a realistic assessment of the current state of their lives today. ◦ Learning to cultivate the tension between vision and reality can expand people's capacity to make better choices, and to achieve more of the results that they have chosen. Mental Models:  ◦ Reflection and inquiry skills is focused around developing awareness of the attitudes and perceptions that influence thought and interaction. ◦ By continually reflecting upon, talking about, and reconsidering these internal pictures of the world, people can gain more capability in governing their actions and decisions.
  26. 26. Five disciplines – Peter Senge Shared Vision:  ◦ Establishes a focus on mutual purpose. ◦ People learn to nourish a sense of commitment in a group or organization by developing shared images of the future they seek to create, and the principles and guiding practices by which they hope to get there. Team Learning:  ◦ Group interaction. ◦ Through techniques like dialogue and skillful discussion, teams transform their collective thinking, learning to mobilize their energies and actions to achieve common goals, and drawing forth an intelligence and ability greater than the sum of individual members' talents.
  27. 27. Five disciplines – Peter Senge Systems Thinking:  ◦ People learn to better understand interdependency and change, and thereby to deal more effectively with the forces that shape the consequences of our actions. ◦ Systems thinking is based upon a growing body of theory about the behavior of feedback and complexity - the innate tendencies of a system that lead to growth or stability over time. ◦ To help people see how to change systems more effectively and how to act more in tune with the larger processes of the natural and economic world.
  28. 28. Project management - processes
  29. 29. Project management – a process
  30. 30. Project management – process chain
  31. 31. Project management – risk analysis
  32. 32. Success Keys - Deployment Deployment - Completing the Plan Success Failure >Assign roles and responsibilities >No accountability for deployment >Establish priorities >Too many goals, strategies, or objectives - no apparent priority >Involve mid-level management as >Plan in a vacuum-functional focus active participants >Think it through - decide how to >No overall strategy to implement manage implementation >Charge mid-level management with >Make no attempt to link with day-to-day aligning lower-level plans operations >Make careful choices about the >Not being thorough-glossing over the contents of the plan and form it will details take
  33. 33. Success Keys - Communication Deployment - Communicating Success Failure Assign roles and responsibilities No accountability Communicate the plan constantly Never talk about the plan and consistently Recognize the change process Ignore the emotional impact of change Help people through the change process Focus only on task accomplishment
  34. 34. Success Keys - Implementation Implementing - I Success Failure Assign roles and responsibilities No accountability Involve senior leaders Disengagement from process Define an infrastructure Unmanaged activity Link goal groups Fragmented accomplishment of objectives leads to sub-optimization Phase integration of Force people to choose between implementation implementation and daily work; too actions with workload many teams Involve everyone within the No alignment of strategies organization
  35. 35. Success Keys - Implementation Implementing - II Success Failure Allocate resources for Focus only on short term need for implementation resources Ignore or avoid change Manage the change process No measurement system Evaluate results Hide mistakes/lay blame; Share lessons learned; limited/no communication acknowledge successes through open and frequent communication
  36. 36. Success Keys - Measurement Strategic Measurement - I Success Failure Assign roles and responsibilities No accountability Use measurement to understand Sub-optimization: focus only on the organization efficiencies Use measurement to provide a Use measures that provide no real consistent viewpoint from which to information on performance; use gauge performance too many measures Use measurement to provide an Use measurement to focus on the integrated, focused view of the bottom-line only future
  37. 37. Success Keys - Measurement Strategic Measurement - II Success Failure Use measurement to communicate Use measurement to control policy (new strategic direction) Update the measurement system Never review measures Use measurement to provide Fail to use measurement to make quality feedback to the strategic strategic, fact-based decisions; use management process only for control
  38. 38. Success Keys - Evaluation Evaluation Success Failure Assign roles and responsibilities No accountability Recognize when to update the plan Poor timing and not recognizing external forces Modify strategic planning process to Rigid application of strategic accommodate the more mature planning process; ignore lessons organization learned from previous efforts Ignore impact of new leaders Incorporate new leaders into the strategic planning process Don't use measurement Integrate measurement with strategic information planning Shortcut the process Use experienced strategic planning facilitators
  39. 39. Best Companies Spend more time on Forward Planning than Historical Analysis Achieving Agility Through a New Approach to Forecasting In today’s turbulent economy, rolling forecasts are proving to be an important new tool in changing the way budgeting and planning has traditionally been handled. Mary Brandel
  40. 40. Benefits of Rolling Forecasts
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