How to build BP - MENAITECH workshop 2-2

How to build Your Business Plan : 

How to build Your Business Plan Khawla AlShurafa 16, February 2008

Why Three Apples? : 

Why Three Apples?

Why Three Apples? : 

Why Three Apples?

Why Three apples : 

Why Three apples Business Plan Three Basics

What is more important Plan or Planning? : 

What is more important Plan or Planning?

Workshop Papers : 

Workshop Papers Strategic management Concepts Environmental Scanning Mission & vision Goals Develop strategies SWOT & TOWS PEST Competitive Driving forces Marketing Plan Financial Plan Financial factors Management Business Review Business Plan outline Actions Plan Business Plan Mistakes Business Plan web sites Objectives Risk Assessment

Dynamic Balancing of Your Business Wheel : 

Dynamic Balancing of Your Business Wheel Customer STRATEGY Innovation Finance Processes If your business wheel is unbalanced, it will roll neither far nor fast. More information at 1000ventures.com: “Balanced Approach to Business Systems”

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The Tree of Business From Strong Roots To Superior Results Marketing, Selling, Servicing, Partnering Vision, Values, Capabilities, Resources © 2006 Vadim Kotelnikov Strategies, Organization, Processes, Innovation © Vadim Kotelnikov “For every thousand hacking at the leaves of evil, there is one striking at the root.” – Henry David Thoreau Strengthen Your Roots “Profits should be a reflection not of a corporate greed but a vote of confidence from society that what is offered by the firm is valued.” – Konosuke Matsushita Deliver Superior Value “Vision without action is a daydream. Action without vision is a nightmare.” – Japanese proverb Live Your Vision More information at 1000ventures.com: “The Tree of Business”

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“If you don’t know where you’re going, it doesn’t matter which road you take.” . . .anonymous

Strategic Management Model : 

Strategic Management Model

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Vision & Mission Strategy Formulation External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

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Refresh

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Write Your Dream In Life? In ?

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To accomplish great things, we must not only act, but also dream; not only plan, but also believe

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Vision Statement – What do we want to become? Mission Statement – What is our business? Key Terms

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"Leaders inspire people with clear visions of how things can be done better." The best leaders do not provide a step-by-step instruction manual for workers. The best leaders are those who come up with new idea, and articulate a vision that inspires others to act. Create and project a clear vision Articulate a few clear stretch goals for your company Make sure you have the very best people to carry your vision out. More information at 1000ventures.com: “Vision, Mission, Goals” Articulate Your Vision

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Examples of a Corporate Vision

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Refresh

MenaItech Vision : 

MenaItech Vision To provide the highest quality and most comprehensive enterprise level HR solutions that fit the MENA region’s requirements, utilizing the latest technologies and best HR business practices

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Peter Drucker: -- Think through the overall mission of a business. Ask the key question: “What is our Business?” Mission

Mission Statement : 

Mission Statement Purpose/reason for organization Promotes shared expectations Communicates public image Who we are; what we do; what we aspire to

MenaItech Mission : 

MenaItech Mission To provide HR solutions that maximize the return on the human capital investment for all MenaITech customers by providing accurate and reliable management information, improving access to information, and reducing costs of operating the HR solution.

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Mission-driven pursuit of specified results more than one year out Long-term Objectives

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Long-term Objectives Essential for ensuring the firm’s success Provide direction Aid in evaluation Create synergy Focus coordination Basis for planning, motivating, and controlling

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Means by which long-term objectives are achieved Strategies

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The Three Hierarchical Levels of Strategy Corporate Strategy Business you should be in Business Strategy Tactics to beat the competition Functional Strategy Operational methods to implement the tactics More information at 1000ventures.com: “Enterprise Strategy”

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The Organization Life Cycle concentration Integration Diversification Retrenchment

STRATEGY FORMULATION : 

Identify Mission Derive Objectives Identify Alternative Strategies Evaluate Alternatives Select Preferred Alternatives STRATEGY FORMULATION

Competitive Strategies : 

Competitive Strategies Source: “Competitive Advantage”, Michael Porter – producing and marketing a good quality product or service at a lower cost than your competitors. Cost Leadership – creating a product or service that is perceived as being unique "throughout the industry". Differentiation – addressing a "focused" segment of the marketplace, product form or cost management process Focus 1000ventures.com

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Strategies Some Examples Geographic expansion Diversification Acquisition Market penetration Retrenchment Liquidation Joint venture

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Short-term milestones that firms must achieve to attain long-term objectives Annual Objectives

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Means by which annual objectives will be achieved Policies

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Strategy Implementation Annual Objectives Policies Employee Motivation Resource Allocation

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Strategic Management achieves a firm’s success through integration –– Management MIS Production/Operations Finance/Accounting Marketing Research & Development

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Most difficult stage Mobilization of employees & managers Interpersonal skills critical Consensus on goal pursuit Strategy implementation

Strategy ImplementationSuccess Rates and Major Impeding Factors : 

Strategy ImplementationSuccess Rates and Major Impeding Factors Adapted from “Strategic Management”, Alex Miller, 1998 More information at 1000ventures.com: “Strategic Management”

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Strategy Evaluation Internal Review External Review Performance Metrics Corrective Actions

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Strategy Evaluation Final Stage of Strategic Management Subject to future modification Today’s success no guarantee of future success New & different problems Complacency leads to demise

And In Conclusion:Plan-Do-Check-Act : 

And In Conclusion:Plan-Do-Check-Act .P. considers both the preplanning and strategic planning processes; .D. encompasses both the deployment and implementation of the plan; .C. tracks progress, measures results and outcomes, and evaluates all three. .A. feeds the evaluation back to the system and either adjusts or standardizes the system based upon that feedback.

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Strategic Planning New Dynamic Model for the New Era of Rapid Change Planning Implementation TRADITIONAL STATIC MODEL Effective if change cycle is longer than duration of your project Planning (+ adapting + anticipating) Planned Results NEW DYNAMIC MODEL Effective if change cycle is shorter than duration of your project External Change: technology x market x competition Results Planned Modified New Internal change: learning x capabilities Implementation © Vadim Kotelnikov More information at 1000ventures.com: “Strategic Planning”

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Refresh

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Internal: Culture Structure Resources Task-environment Societal-environment Legal Physical Technological Social Economic Suppliers Customers Distributors Competitors Organization Environment

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Largely beyond the control of a single organization Opportunities and Threats (External)

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Opportunities & Threats (External) Analysis of Trends: Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors

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Process of conducting research and gathering and assimilating external information Environmental Scanning (Industry Analysis)

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Controllable activities performed especially well or poorly Strengths & Weaknesses (Internal)

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Strengths & Weaknesses (Internal) Typically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development Computer Information Systems Culture Structure

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Internal Factors Performance Metrics Financial Ratios Industry Averages Survey Data Assessing the Internal Environment

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SWOT Analysis 1000ventures.com Internal External

A word of caution, : 

A word of caution, SWOT analysis can be very subjective. Do not rely on it too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors. So use it as guide and not a prescription!

Simple rules for successful SWOT analysis : 

Simple rules for successful SWOT analysis be realistic about the strengths and weaknesses of your organization analysis should distinguish between where your organization is today, and where it could be in the futures be specific. Avoid grey areas. always analyse in context to your competition i.e. better than or worse than your competition keep your SWOT short and simple. Avoid complexity and over analysis SWOT is subjective.

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Refresh

MenaItech SWOT : 

MenaItech SWOT

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Refresh

What is PEST Analysis? : 

What is PEST Analysis?

Porter’s ModelFactors That Determine Competitiveness Within an Industry : 

Porter’s ModelFactors That Determine Competitiveness Within an Industry 1000ventures.com Substitutes New entrants Suppliers Buyers Threat of substitutes Bargaining power of suppliers Threat of new entrants Bargaining power of buyers Source: “Competitive Strategy”, Michael E. Porter

Analysing the environment - Five Forces Analysis : 

Analysing the environment - Five Forces Analysis Five forces analysis helps the marketer to contrast a competitive environment.

The threat of entry. : 

The threat of entry. Economies of scale. The high or low cost of entry Ease of access to distribution channels Cost advantages. Will competitors retaliate? Government action How important is differentiation?

The power of buyers : 

The power of buyers This is high where there a few, large players in a market If there are a large number of undifferentiated, small suppliers The cost of switching between suppliers is low

The power of suppliers : 

The power of suppliers The power of suppliers tends to be a reversal of the power of buyers. Where the switching costs are high Power is high where the brand is powerful. There is a possibility of the supplier integrating forward Customers are fragmented (not in clusters) so that they have little bargaining power

The threat of substitutes : 

The threat of substitutes Where there is product-for-product substitution Where there is generic substitution (competing for the currency in your pocket) We could always do without e.g. cigarettes.

Competitive Rivalry : 

Competitive Rivalry This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. This is why it is always seen in the centre of the diagram.

Financial Analysis : 

Financial Analysis Financial Ratios are Important – Ration Analysis Liquidity ratios Profitability ratios Activity ratios Leverage ratios

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Financial Analysis Basic Steps Historical income statements/balance sheets Compare historical statements over time Calculate changes individual items-cumulative Change as percentage and absolute amount Adjust for inflation if significant factor

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Z = 1.2x1 + 1.4x2 + 3.3x3 + 0.6x4 + 1.0x5 where x1 = Working capital divided by total assets. x2 = Retained earnings divided by total assets. x3 = Earnings before interest and taxes divided by total assets. x4 = Market value of equity divided by total liabilities. x5 = Sales divided by total assets. Z = Overall index of corporate fiscal health. Altman’s Bankruptcy Formula

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Z<1.81 significant credit Problem Z>3.00 Healthy Organization 1.81<Z<3.00 ????????????????? Altman’s Bankruptcy Formula

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Refresh

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The largest retailer, discount store chain in the world (Sales $345 b 2007 FY & 1.9 m associates) Global company since 1991 (2007 > 6,700 stores) Masters of Cost leadership Strategy Three operating SBUs Overview & Current Situation

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SBUs growth & Percent of total sales

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Current Financial Performance

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Current Financial Performance *CSSI: Comparable Store Sales Increase in USA

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1. Growth (USA) via related (concentric) Diversification with Focused Horizontal Growth portfolio (outside USA) via: a- Internal development of new stores type (high quality up-scale goods, image & profits) to fit urban locations b- Acquisition of local chains (having such image or specialty chains) c- Focus locations portfolio choice (Expand in NA, China, India & Slow growth in Europe) b- Establish JV (instead of Acquisition) Recommended Strategy

Business Plan : 

Business Plan

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“What we think, know, or believe in is, in the end, of little consequence. The only consequence . . . is what we do..” (Haines, 1995)

What is a Business Plan? : 

What is a Business Plan? A business plan is a written description of the goals and objectives of the business and how they are going to be achieved. It includes the mission of the business along with the production, organizing, marketing, and financing intentions.

Why need Business Plan? : 

Why need Business Plan? 1. To Map the Future 2. To Support Growth and Secure Funding 3. To Develop and Communicate a Course of Action 4. To Help Manage Cash flow 5. To Support a Strategic Exit

PLAN YOUR PLAN : 

PLAN YOUR PLAN Believe it or not, part of planning your plan is planning what you'll do with it

PLAN YOUR PLAN : 

PLAN YOUR PLAN Do you intend to use your plan to help you raise money? Do you intend to use your plan to start up new Business? Do you anticipate showing your plan to suppliers to demonstrate that you're a worthy customer? Do you intend to use your plan to help you understand your organization situation?

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Do you need to make revenue estimate (by defining your market -- who your customers will be -- and the percentage of the market you can expect to reach)? Do you need to an estimate of your start-up costs? Do you intend to use your plan to attract talented employees?

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Refresh

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Job Interview

How Effective Is the Business Plan? : 

How Effective Is the Business Plan? How effective a Business Plan is depends on how well the following questions are answered: Who are we? What do we do? What do we have to offer? Why will someone pay for our products/service? What resources do we have? Where are we going? What do we need to get there? Why will we be successful? Why should someone participate or invest? How will we measure performance?

Key Components of a Business Plan : 

Key Components of a Business Plan The business plan covers areas: Executive Summary The Industry, the Company, and the Products Market Research and Analysis Marketing Plan Operating Plan Management Team Financial Plan

Executive Summary : 

Executive Summary Always “ Leave it until the End” Business name Business Location What Product or services you sell Purpose of Plan

The Industry, the Company, and the Products : 

The Industry, the Company, and the Products This section of the business plan describes the business venture in a detailed but concise manner. You must clearly describe: The nature of the industry The proposed business The product the business plans to offer

The Industry : 

The Industry Present the current status and outlook for the industry in which the business will operate. New products and developments New markets and customers General trends affecting the business Identify sources of information used to describe trends

The Company : 

The Company Write a detailed description of the proposed business venture, the products and services it will offer, and the principal customers. Mission statement with goals and objectives Ownership and legal form of the company Reasons why the business will be successful

The Products or Services : 

The Products or Services Describe in detail the products or services to be sold, as well as the application of the product or service. Benefits to the customers Competitive advantages Unique features Current state of development

Market Research and Analysis : 

Market Research and Analysis This section of the business plan presents enough facts obtained through market research and analysis to determine if the product or service has a substantial market in a growing industry despite a competitive market. Customers Market Size and Trends Competition Market Share and Sales

Types of Market Research : 

Types of Market Research PRIMARY RESEARCH = DO IT YOURSELF: Observation Surveys Interviews SECONDARY RESEARCH = USE EXISTING DATA: Public Library College or Universities Chamber of Commerce Business Publications Trade Shows The Internet Census Information Sales Tax Data

Types of Market Analyses : 

Types of Market Analyses The information obtained through primary and secondary research techniques can be analyzed in a variety of ways. Economic Trend Analysis Political and Social Analysis Customer Analysis Market Potential Analysis Competitive Analysis

Customers : 

Customers Identify your target market and develop a customer profile. Demographic profile Lifestyle patterns Expectations

Competition : 

Competition List the strengths and weaknesses of competitive products and services and list the companies that supply them. Identify and list current and future competitors Assess the competition on the basis of price, quality, performance, service, etc. Discuss advantages and disadvantages of competing products or services

Market Share and Sales : 

Market Share and Sales Summarize what it is about your product or service that will make it sell in the face of current and future competition. Identify and list major customers and estimate potential sales Estimate share of the market Estimate sales in units and dollars for the next two to five years

Marketing Plan : 

Marketing Plan This section of the business plan describes the company’s marketing goals and objectives and how they will be achieved. Overall Market Strategy Pricing Sales Tactics Advertising and Promotion Packaging Marketing Plan Outline

Overall Market Strategy : 

Overall Market Strategy Describe the general marketing philosophy and strategy of the company. Derived from market research and analysis results Include discussion of markets targeted for sales promotions List short-term and long-term marketing objectives Discuss specific marketing tactics

Sales Tactics : 

Sales Tactics Describe specific actions that will be taken to generate sales and distribute the product or service to customers. Analyze effectiveness of everything available within the sales system List channels such as salespeople, agents, dealers, and direct mail services Describe methods that will be used to distribute products to customers Describe merchandising techniques

Advertising and Promotion : 

Advertising and Promotion Describe approaches the company will use to bring the product or service to the attention of the target market. List advertising methods along with benefits and costs Discuss promotional efforts and strategies Publicity

Marketing Plan Outline : 

Marketing Plan Outline A marketing plan outline is a useful tool for pulling together information related to the marketing plan. The marketing plan outline should include information on the following: Marketing situation Marketing objectives Marketing Strategies Budget Action plan Evaluation

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Operational Plan Detailed information on development specifics such as who might be supplying your products, how will it be shipped, personnel and resources management. © COPYRIGHT 2004 BANGKOK BUSINESS CHALLENGE®

Financial Plan : 

Financial Plan Important Assumptions Key Financial Indicators Break-even Analysis Projected Profit and Loss Projected Cash Flow Projected Balance Sheet Business Ratios

What to Avoid in Your Business Plan : 

What to Avoid in Your Business Plan Place some reasonable limits on long-term, future projections. (Long-term means over one year.) Better to stick with short-term objectives and modify the plan as your business progresses. Too often, long-range planning becomes meaningless because the reality of your business can be different from your initial concept.

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Avoid optimism. Do not ignore spelling out what your strategies will be in the event of business adversities. Use simple language in explaining the issues. Make it easy to read and understand. Don't depend entirely on the uniqueness of your business or even a patented invention.

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One by One , Step by Step

What are the key steps to preparing Action Plan? : 

What are the key steps to preparing Action Plan? Step 1. Take (you're Targets of Financial, Marketing, Sales…) , Group strategies and tactics. Detail the activities necessary to achieve each outcome.

What are the key steps to preparing Action Plan? : 

What are the key steps to preparing Action Plan? Step 2: Create an action plan, An action plan has five elements : Outcomes Activities Resources Responsibilities Timeline

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Step 3 :For each activity identify resources, responsibilities and timelines. Step 4: Review your plan. Step 5 :For each year or new project create a new action plan.

You're Action Plan is SMART, How? : 

You're Action Plan is SMART, How? Specific Measurable : Achievable: Realistic: Time specific :