Guide to Business Planning


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The Business Plan, The Business Planning Process, Strategic Planning, Analysing The Environment, Analysing The Firm, Industry And Competitor Analysis, Product And Portfolio Analysis, SWOT Analysis, Generating Strategic Options, Market Analysis And Strategy , Market Forecasting, The Operational Plan, Model The Business, Accounting Principles, Completing The Financial Statements, Reviewing The Financial Statements, Evaluating Strategic Options, Funding Issues, Risk Analysis, Presenting The Business Plan And Obtaining Approval, Implementing The Business Plan, Sayeed Alam, 9910479355

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Guide to Business Planning

  1. 1. GUIDE TO BUSINESS PLANNING Sayeed Alam +91-9910479355 [email_address]
  2. 2. Table of Contents <ul><li>The Business Plan </li></ul><ul><li>The Business Planning Process </li></ul><ul><li>Strategic Planning </li></ul><ul><li>Analysing The Environment </li></ul><ul><li>Analysing The Firm </li></ul><ul><li>Industry And Competitor Analysis </li></ul><ul><li>Product And Portfolio Analysis </li></ul><ul><li>SWOT Analysis </li></ul><ul><li>Generating Strategic Options </li></ul><ul><li>Market Analysis And Strategy </li></ul><ul><li>Market Forecasting </li></ul><ul><li>The Operational Plan </li></ul><ul><li>Model The Business </li></ul><ul><li>Accounting Principles </li></ul><ul><li>Completing The Financial Statements </li></ul><ul><li>Reviewing The Financial Statements </li></ul><ul><li>Evaluating Strategic Options </li></ul><ul><li>Funding Issues </li></ul><ul><li>Risk Analysis </li></ul><ul><li>Presenting The Business Plan And Obtaining Approval </li></ul><ul><li>Implementing The Business Plan </li></ul>
  3. 3. The Business Plan <ul><li>Always contains a number of common themes. </li></ul><ul><li>“ Tells a story&quot; and explains how the business will achieve its objectives in a coherent, consistent and cohesive manner. </li></ul><ul><li>Focused on the needs of the customer. </li></ul><ul><li>Will identify the market, its growth prospects, the target customers and the main competitors. </li></ul><ul><li>Based upon a credible set of assumptions and should identify the assumptions to which the success of the business is most sensitive. </li></ul><ul><li>Should identify the risks facing the business, the potential downsides and the actions that will be taken to mitigate the risks. </li></ul><ul><li>Should describe what makes the business different from its competitors: its source of competitive advantage and how it will be sustained in the longer term. </li></ul><ul><li>Should describe the experience and track record of the management team, and, within larger organizations, the plan should have the support of those in the different functions who will be involved in implementing it. </li></ul><ul><li>Should identify the funding being sought from potential investors. </li></ul>
  4. 4. A Good Business Plan Checklist: <ul><li>Tells a coherent, consistent and cohesive, customer focused story </li></ul><ul><li>Clearly defines the market, its prospects, the customers, suppliers and competitors; </li></ul><ul><li>Contains credible business planning assumptions and forecasts; </li></ul><ul><li>Describes How The Business Will Achieve Sustainable Competitive Advantage; </li></ul><ul><li>Identifies the assumptions to which the business is most sensitive, the potential risks and any mitigating actions; </li></ul><ul><li>Is supported by those that must implement it; </li></ul><ul><li>Contains a description of the individuals involved in managing the business; </li></ul><ul><li>Identifies the funding requirement for the business. </li></ul>
  5. 5. The Business Planning Process
  6. 6. The Business Planning Process-2
  7. 7. Strategic Planning <ul><li>Is aimed to achieve a sustainable competitive advantage that will deliver healthy profits. </li></ul><ul><li>Analyses the optimum fit between a business's resources and opportunities and takes into account how a business may, or will, need to adapt to thrive in a changing competitive environment. </li></ul><ul><li>Focuses on the medium-to longer-term future of a business, generally a time horizon of three to five years, or occasionally up to ten years. </li></ul><ul><li>Involves setting goals that stretch the business, but the strategic planning element of a business plan should focus on the tangible and concrete rather than the aspirational elements. </li></ul><ul><li>Is the foundation on which the business plan is built. </li></ul><ul><li>Must fit with the overall strategy of the existing business. </li></ul>
  8. 8. A Strategic Plan should: <ul><li>Be feasible considering internal and external constraints; </li></ul><ul><li>Lead to a long-term competitive advantage; </li></ul><ul><li>Add value for stakeholders; </li></ul><ul><li>Be sustainable in the long term; </li></ul><ul><li>Be adaptable to cope with a changing environment. </li></ul>
  9. 9. Analysing The Environment <ul><li>Involves examining forces such as government economic policy, attitudinal changes among consumers and the development of new technology, to predict the environment in which a business may have to operate. </li></ul><ul><li>Environmental factors may be &quot;macro&quot;, such as the level of inflation, interest rates and exchange rates, or &quot;micro&quot;, such as local business taxes, flooding or the creation of a new road or rail link. </li></ul><ul><li>For the business plan, the skill lies in determining which factors currently have an impact on the business or may do so in the future, and understanding what the impact is likely to be. </li></ul><ul><li>Requires an ability to think beyond your current frame of reference in order to identify all the future influences on the business. </li></ul><ul><li>A PEST analysis of Political, Economic, Social and Technological factors will reveal many of the external environmental influences on a business's performance. </li></ul>
  10. 10. Analysing The Firm <ul><li>Analyzing a business, or firm, is to identify its resources and explore how these resources are used to contribute to its competitive advantage. </li></ul><ul><li>Firms that allocate and deploy their resources in the most efficient manner are likely to achieve a greater return on capital employed than those that do not. </li></ul><ul><li>The analysis of the firm should answer the question: &quot;What do we have that competitors do not have and cannot replicate?&quot; </li></ul><ul><li>The configuration of resources can also be a source of competitive advantage. If a business configures its resources optimally, it will have a competitive advantage over its rivals. </li></ul><ul><li>The resource audit covers operational (tangible and intangible), human (capabilities) and financial resources. The objective of the resource audit is to identify resources and ascertain how efficiently resources are utilised and how effectively they are deployed. </li></ul>
  11. 11. Industry And Competitor Analysis <ul><li>Is done to develop a sound strategic plan for an existing or a new business </li></ul><ul><li>Necessary to understand the industry in which the business will operate and the competitive forces within that industry. </li></ul><ul><li>Questions to be answered include the following: </li></ul><ul><ul><li>What is the current size and what are the major trends in the industry? </li></ul></ul><ul><ul><li>What are the main competitive forces? </li></ul></ul><ul><ul><li>Who are the competitors and what are their relative strengths? </li></ul></ul><ul><ul><li>How should the strategy be adapted to respond to changes in the industry? </li></ul></ul><ul><li>The industry overview sets the scene for the readers of the business plan. </li></ul><ul><li>The industry life cycle analysis provides an understanding of the degree of maturity of the industry. </li></ul><ul><li>Structural analysis should include at least a short review of suppliers, buyers and the threat from new entrants and substitution, as well as a scan of competitors together with their strengths and weaknesses. </li></ul><ul><li>The main competitors should be analysed in more detail using a key success factor ranking. </li></ul>
  12. 12. Product And Portfolio Analysis <ul><li>Is conducted to investigate the competitive position of your business's products or strategic business units (SBUS) in the context of market development. </li></ul><ul><li>By displaying products or a portfolio of products in a matrix fashion, insight is gained into the strategic position of the products, the likely direction in which they are developing, the cash flow implications and pointers as to what strategies should be pursued. </li></ul><ul><li>The analytical approaches are: </li></ul><ul><ul><li>Experience curve and scale economies </li></ul></ul><ul><ul><li>Product life cycle stage analysis </li></ul></ul><ul><ul><li>Growth-share matrix </li></ul></ul><ul><ul><li>Directional policy matrix </li></ul></ul><ul><ul><li>Hofer matrix </li></ul></ul><ul><li>Portfolio analysis is mostly relevant for existing, larger businesses with multiple products. </li></ul><ul><li>Matrix displays are helpful in making strategic decisions about the allocation of limited cash resources among a portfolio of products. </li></ul><ul><li>Some products require further cash investments, some generate cash and others may have to be divested. This is an input into the generation of strategic options. </li></ul><ul><li>Matrix displays can be generated for your business as well as for competitors. </li></ul><ul><ul><li>Can be used to make strategic comparisons between your business and competitors. </li></ul></ul><ul><ul><li>Allows you to anticipate likely strategic moves by competitors and plan your own moves. </li></ul></ul>
  13. 13. SWOT Analysis <ul><li>The analysis of Strengths, Weaknesses, Opportunities and Threats brings together the results of the analysis of the firm (internal), the environmental analysis (external) and the portfolio analysis. </li></ul><ul><li>Allows you to look at the strengths and weaknesses in the context of the opportunities and threats. </li></ul><ul><li>Implicit in the SWOT analysis is the aim of achieving the optimum match of a firm's resources with the environment in order to gain sustainable competitive advantage by: </li></ul><ul><ul><li>building on a firm's strengths; </li></ul></ul><ul><ul><li>reducing weaknesses or adopting a strategy that avoids weaknesses; </li></ul></ul><ul><ul><li>exploiting opportunities, particularly using the firm's strengths; </li></ul></ul><ul><ul><li>reducing exposure to or countering threats. </li></ul></ul><ul><li>Should be short and simple; complexity and over-analysis are to be avoided. </li></ul><ul><li>Is easily understood and communicated and can fit on one page. </li></ul><ul><li>Could be used to carry out a quick strategic review. </li></ul><ul><li>Involves discussion among managers or key people in a business. </li></ul>
  14. 14. Generating Strategic Options <ul><li>is approached in three steps: </li></ul><ul><ul><li>The basis for achieving competitive advantage. </li></ul></ul><ul><ul><li>Exploring alternative strategic directions. </li></ul></ul><ul><ul><li>Alternative methods to employ in pursuit of a strategic direction. </li></ul></ul><ul><li>When the options have been generated they should be screened (qualitative filtering), and those that survive the screening process should be subjected to detailed financial analysis (quantitative ranking). You should opt for the strategies that produce the greatest return on investment. </li></ul>
  15. 15. More…. <ul><li>By next week…. </li></ul><ul><li>Keep reading… </li></ul><ul><li>Thank you. </li></ul>