1. PAGE 1
November 1, 2012
Presented by: Andrew Blake, BMOS, CMA

2. PAGE 2
Introduction/Agenda
What is Strategy?
Strategic Planning Structure
Types of Analysis
What can a Strategy do for you?
Conclusion

3. PAGE 3What is Strategy? Structure Analysis ConclusionWhat’s in it for you?
Strategy is the creation of a unique and valuable
position, involving a different set of activities. It
involves proper Placement, Perception,
Persistence.
Examples of different strategies:
• Serving a few needs of many customers (ex. Jiffy Lube)
• Serving broad needs of few customers (ex. Berkshire
Hathaway)
• Serving broad needs of many customers in a narrow
market (Carmike Cinemas)

4. PAGE 4
Strategy involves:
 Strategic Positioning
 Creating Sustainable Competitive Advantage
 Creating “fit” amongst the company’s resources
 Corporate Culture
 Making trade-offs – choosing what NOT to do
 Operating Efficiencies
What is Strategy? Structure Analysis ConclusionWhat’s in it for you?

5. PAGE 5What is Strategy? Structure Analysis What’s in it for you? Conclusion

6. PAGE 6What is Strategy? Structure Analysis What’s in it for you? Conclusion

7. PAGE 7What is Strategy? Structure Analysis What’s in it for you? Conclusion
Competitive Advantage means: What are we as a
company good at? Better than anyone else!
Competitive Advantage is
 Not Operational
 Can Change
 Can Be Reviewed
Example: Wal-Mart’s Distribution System
The Key to creating a SUSTAINABLE Competitive Advantage is
finding that area, and making it the focus of the business.

8. PAGE 8What is Strategy? Structure Analysis What’s in it for you? Conclusion
Resource Optimization means: Using the resources the
company has with the fit of the company’s strategy.
Doing so makes the strategy more sustainable and
forming a competitive advantage.
Example: Southwest Airlines compared to other Airline
companies

9. PAGE 9What is Strategy? Structure Analysis What’s in it for you? Conclusion
Corporate Culture can have one of the biggest impacts for
implementing or derailing a strategy !
The corporate culture must:
 Fit with the strategy
 Buy-in to the strategy
 Have ownership of the strategy
Only then can they be accountable to it and make it a
success
Example: The previous Daimler-Chrysler partnership

10. PAGE 10What is Strategy? Structure Analysis What’s in it for you? Conclusion
Some Competitive activities are NOT compatible. Hence
making trade-offs are necessary for successful strategy
implementation
For example: a low cost strategy does not lend itself well
for premium product sales
Example: Maytag’s product line additions

11. PAGE 11What is Strategy? Structure Analysis What’s in it for you? Conclusion
In the past operating efficiencies were a form of
competitive advantage, now they are tablestakes.
Some examples of operating efficiencies:
 Technology
 Cost Control
 Value Chain Analysis
Although these are not in itself an advantage, they are still
absolutely necessary for strategy implementation and
business operations.

12. PAGE 12What is Strategy? Structure Analysis What’s in it for you? Conclusion
Strategic Planning involves completing a review of all
facets of the company in order to create a strategy that
answers:
 What are we good at? What are we not so good at?
 What is going on in the industry?
 Where do we fit into the industry?
 What is our focus?
 What initiatives can we take? Are they profitable?
 How do I put these plans into place?

13. PAGE 13What is Strategy? Structure Analysis What’s in it for you? Conclusion
A Comprehensive Strategy Plan includes:
 A Situational Analysis
 Analysis of Major Initiatives
 Recommendations
 Implementation Plan
 Financial Forecasts

14. PAGE 14What is Strategy? Structure Analysis What’s in it for you? Conclusion
A Situational Analysis includes:
 A review of the Vision/Mission of the company
 Strategic Goals
 Stakeholder Preferences
 Resources available/constraints
 Financial Statement Analysis
 Company Strengths, Weaknesses
 The Industry, and Industry Opportunities, and Threats

15. PAGE 15What is Strategy? Structure Analysis What’s in it for you? Conclusion
This Analysis includes a full review of different strategic
alternatives such as:
 Qualitative Pros/Cons relating to all areas of the
situational analysis
 Quantitative Pros/Cons such as how much will this
cost, is it profitable

16. PAGE 16What is Strategy? Structure Analysis What’s in it for you? Conclusion
The Recommendations list the strategic alternatives and
recommends pursuing them or not, as well as justifying
the rationale why. Often a decision matrix is used to
help.
Criteria
Nothern
Ontario
Mine
GeoCopper
Exploration Smelter Sell Zinc
BC Hydro
Power Plant
NPV $28 Million
$34 -($1236)
Million
$32 – ($6)
Million
($32 - 73
Million) $155 Million
Investment $240 million $50 million $230 million NA $125 million
Strategic Fit
Increase
Proven
Copper
Reserves
ROI of 10%
Meets
Stakeholder
Preferences Split Split
Overall
Decision Matrix

17. PAGE 17What is Strategy? Structure Analysis What’s in it for you? Conclusion
Implantation Planning is the Who, What, When, Where,
and How of the Strategic Plan. This includes:
 A review/recommendation of minor
alternatives/operational issues
 An action plan/timeline of who does what, when
 Formalized plan for addressing as many company
needs as feasible

18. PAGE 18What is Strategy? Structure Analysis What’s in it for you? Conclusion
Financial Forecasts take into account all areas of the chosen
strategy and initiatives undertaken. This gives an idea
of where the company will be projected to be (based on
the assumptions) once the strategy is implemented. It
can include any of:
 Forcasted Income Statement
 Forecasted Statement of Cash Flows
 Forecasted Balance Sheets
 Forecasted Budgets

19. PAGE 19What is Strategy? Structure Analysis What’s in it for you? Conclusion
Within the Situational Analysis and Initiative Analysis,
there are many types of Analysis that can be done to give
valuable information about the company.
Some examples include:
• Financial Statement Analysis
• Benchmarking
• Operational Analysis
• Contribution Margin
• Market Share
• Product Composition
• Net Present Value

20. PAGE 20What is Strategy? Structure Analysis What’s in it for you? Conclusion
Example
Metric Ratio Brightstar
2011 2010 2009
Benchmark
2010 2011 2009
Liquidity Current
Quick
Solvency Debt to
Equity
Profitability
ROS
Asset
Management
DSO
Inv. Turns
.19 0.38 0.22 0.16 0.12 0.14
21.9% 23.2% 13.8% 24.6% 27.4% 18.9%
43.9 35.4 21.7 34.6 25.3 19.6
5.9 7.3 12.9 5.8 6.0 7.3
2.3 3.4 5.7 7.9 3.8 3.9
1.8 2.2 4.6 7.2 3.1 3.2

21. PAGE 21What is Strategy? Structure Analysis What’s in it for you? Conclusion
Operations can include: Production process, Workforce
Management, Value-Chain Analysis.

22. PAGE 22What is Strategy? Structure Analysis What’s in it for you? Conclusion
Contribution Margin helps determine what products are
profitable and at what sales volume are products profitable.

23. PAGE 23What is Strategy? Structure Analysis What’s in it for you? Conclusion
Market Share explains where the company is compared to
others in the industry.

24. PAGE 24What is Strategy? Structure Analysis What’s in it for you? Conclusion
Product Composition explains what the company is good
at selling.

25. PAGE 25What is Strategy? Structure Analysis What’s in it for you? Conclusion
Often Major Initiatives take more than 1 year to evaluate. A
Net Present Value takes into account discounting future cash
flows to create a value for today for direct comparison.
Appendix 6 - BC Hydro
(In $Millions, except salesprice/Kilowat) 2012 2013 2014-25 2026 2012 2013 2014-25 2026
Financial Summary (NPV) Yr 0 Yr 1 Yr 2 Yr 3-14 Residual Yr 0 Yr 1 Yr 2 Yr 3-14 Residual
Initial Investment in Hydro Plant (125) (250)
Total Power Produced
Ownership Interest (5%)
Power Consumed
$0.087 $0.090
3%
constant
growth
$0.128 $0.087 $0.090
3%
constant
growth
$0.128
Kilowatts Sold (000's) 306 306 306 306 676 676 676 676
IRR = 20%
Sales 26.72 27.53 402.37 39.25 59.04 60.81 888.89 86.70
Operating Costs 2.67 2.75 40.24 3.92 5.90 6.08 88.89 8.67
Cost Savings by not purchasing power (5.38) (5.54) (80.9) - (5.38) (5.54) (80.9) -
Net Change in Cash Flow (prior to tax) 29.43 30.31 443.07 35.32 58.51 60.26 880.94 78.03
Taxes RATE= 25% (7.36) (7.58) (110.77) (8.83) (14.63) (15.07) (220.23) (19.51)
After Tax Cash Flow 22.07 22.73 332.30 26.49 43.88 45.20 660.70 58.52
Discretionary Cashflows (DCF):
Annual DCF (125) 22.07 22.73 332.30 26.49 (250) 43.88 45.20 660.70 58.52
PV of DCF WACC= 10% (125) 20.06 18.79 150.86 90.59 (250) 39.89 37.35 299.94 200.14
Cumulative PV of DCF: (125) (104.94) (86.15) 64.71 155.30 (250) (210.11) (172.75) 127.19 327.33
Notes:
5% Ownership (Investment: $125M) 10% Ownership (Investment: $250M)
7,400 Gigawatts/ annually 7,400 Gigawatts/ annually
370 Gigawatts / Annually 370 Gigawatts / Annually
64 Gigawatts 64 Gigawatts
Sales Price / Kilowatt (3% growth/yr)
All excess power is sold
BMC usage remains constant at 64 Gigawatts until 2025 then drops to zero (reflected in residual calc)

26. PAGE 26What is Strategy? Structure Analysis What’s in it for you? Conclusion
Strategy formulation and planning is NOT an easy task.
Often it can:
• Use Significant Resources – Time, Money
• Be Emotional – People have vested interests
• Be Biased – depending on the sources
• Be Incomplete – often areas are overlooked
Even after decisions are made, often the most overlooked
part is the implementation and evaluation of the strategy
on an ongoing basis.
A Comprehensive Plan does not guarantee success rather it
gives all the tools and information needed for it!

27. PAGE 27What is Strategy? Structure Analysis What’s in it for you? Conclusion
To create a Comprehensive Plan and have all the needed
information gathered and utilized correctly can also be
very challenging.
Having a Facilitator guide the Management team through
the evaluation of the company, the strategy formulation
process, and the subsequent alternative review, decision,
and implementation can be vital to a successful strategy.

28. PAGE 28What is Strategy? Structure Analysis What’s in it for you? Conclusion
A Plan provides an opportunity for:
• An unbiased view of the company and industry
• An outsiders perspective
• Financial information to backup recommendations
• A way to concisely order all the competing perspectives
A Facilitator provides all the above, as well as:
• Professional Experience and Expertise
• Ongoing support throughout the process
• A Tailored process structure and Implementation to give
the best chance of success

29. PAGE 29What is Strategy? Structure Analysis What’s in it for you? Conclusion
Align
For
Success
Evaluate All
Areas of the
Company
Successfully
Implement
Strategy
Evaluate
Strategic
Alternatives
Outline Goals
Creating a Strategic Plan will:

30. PAGE 30What is Strategy? Structure Analysis What’s in it for you? Conclusion