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Chapter 3Designing a Competitive Business
Model and Building a Solid Strategic Plan
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Competitive Advantagethe combination of factors that sets a small business apart from its competitors and gives it a unique position in the market that is superior to its rivals.
It is the differentiating factor that makes customers want to buy from your business rather than from your competitors.
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Building a Competitive AdvantageProducts they sell: what is unique about the products
the company sells?
Service they provide: what services does (or can) the
company provide to deliver added value and a superior experience for customers?
Pricing they offer: some small businesses differentiate
themselves using price
Way to sell: including extended hours, internet, home
pick-up/delivery
Values to which they are committed: creating good
for society and the environment
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Strategic Management
Strategic Management involves developing a game plan to guide a company as it strives to accomplish its vision, mission, goals and objectives, and keeps it from straying off its desired course.
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The Strategic Management ProcessStep 1 - Develop a clear vision and translate it
into a meaningful mission statement vision.
A mission statement is an enduring declaration of a company’s purpose that addresses the first question of any business venture: “What business am I in?”
Vision provides direction, determines decisions, inspires people, and allows for perseverance in the face of adversity.
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The Strategic Management Process
Step 2 - Assess the Company’s Strengths and Weaknesses
Strengths are positive internal factors that a company can use to accomplish its mission, goals and objectives. (ex. special skills or knowledge, loyal customers, positive public image, )
Weaknesses are negative internal factors that inhibit a company’s ability to accomplish its mission, goals and objectives. (ex. lack of capital, shortage of skilled workers, inferior location)
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The Strategic Management ProcessStep 3 - Scan the Environment for Significant
Opportunities and Threats Facing the Business
Opportunities are positive external options that a firm can exploit to accomplish its mission, goals and objectives.
Threats are negative external forces, such as new competitors, government mandates regulating business, economic recession, technology advances making a product obsolete, etc.
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The Strategic Management ProcessStep 4 - Identify the Key Factors for Success in
the Business
Opportunities are positive external options that a firm can exploit to accomplish its mission, goals and objectives.
Threats are negative external forces, such as new competitors, government mandates regulating business, economic recession, technology advances making a product obsolete, etc.
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The Strategic Management Process
Step 5 - Analyze the Competition
Direct Competitors - offer the same products and services
Significant Competitors - some of the same products and
services, and there is competition in several key areas
Indirect Competitors - the same or similar products or
services only in a small number of areas
A Competitive Profile Matrix is a tool that allows a business to evaluate their company against major major competitors using the key success factors (KSF - see step 4) for that market.
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The Strategic Management Process
Step 6 - Create Company Goals and Objectives
Goals - the broad, long-range attributes a business seeks to
accomplish; they tend to be general and sometimes even abstract
Objectives - more specific targets of performance, commonly
addressing areas such as profitability, productivity, growth and other key aspects of a business.
Objectives are - specific, measurable, assignable, realistic yet
challenging, timely and written down.
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The Strategic Management ProcessStep 7 - Formulate Strategic Options and Select
the Appropriate Strategies
Strategy - a road map of the actions an entrepreneur draws up to fulfill
a company’s mission, goals and objectives
Cost Leadership Strategy - a strategy in which a company
strives to be the low-cost producer in the industry
Differentiation Strategy - a strategy in which a company seeks
to build customer loyalty by positioning its goods or services in a unique or different fashion.
Focus Strategy - a strategy in which a company selects one or more
market segments; identifies customers’ special needs, wants and interests, and approaches them with a good or service designed to excel in meeting those needs, wants and interests.
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The Strategic Management Process
Step 8 - Translate Strategic Plans into Action Plans
Implementing a strategy successfully requires both a process that fits a company’s culture and the right people committed to making that process work.
Divide the strategic plan into projects, defining each by its purpose, scope, contribution, resource requirements and timing.
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The Strategic Management Process
Step 9 - Establish Accurate Controls
Balanced scorecards - are a set of multi-dimensional
measurements that give managers a quick yet comprehensive picture of the company’s overall performance.
Balanced scorecards looks at a business from five important perspectives:
Customer Perspective
Internal Business Perspective
Innovation and Learning Perspective
Financial Perspective
Corporate Citizenship