how to build bp - menaitech workshop 2-2-08

8/9/2019 How to Build BP - MENAITECH Workshop 2-2-08

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How to build Your Business Plan

Khawla AlShurafa16, February 2008


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Why Three Apples?


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Why Three Apples?


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Why Three apples

Business

PlanThreeBasics


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What is more importantPlan or Planning?


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Workshop Papers

PEST

FinancialPlan


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Dynamic Balancing of YourBusiness Wheel

Customer

STRATEGY

Innovation

Finance Processes

If yourbusinesswheel is

unbalanced,it will roll

neither farnor fast.

More information at 1000ventures.com:Balanced Approach to Business Systems
http://www.1000ventures.com/business_guide/crosscuttings/bizsys_main.htmlhttp://www.1000ventures.com/business_guide/crosscuttings/bizsys_main.html


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The Tree of BusinessFrom 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 theleaves of evil, there is one strikingat the root. Henry David Thoreau

Strengthen Your Roots

Profits should be a reflectionnot of a corporate greed but avote of confidence from societythat what is offered by the firmis 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
http://www.1000ventures.com/business_guide/business_tree.htmlhttp://www.1000ventures.com/business_guide/business_tree.html


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If you dont know where youre

going, it doesnt matter which

road you take.. . .anonymous


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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 alsodream; not only plan, but alsobelieve


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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 ofhow things can be done better." The bestleaders do not provide a step-by-stepinstruction manual for workers. The best

leaders are those who come up with new idea,and articulate a vision that inspires others toact.

Create and project a clear vision

Articulate a few clear stretch goals for yourcompany

Make sure you have the very best people tocarry your vision out.

More information at 1000ventures.com: Vision, Mission, Goals

Articulate Your Vision
http://www.1000ventures.com/business_guide/crosscuttings/vision_mission_strategy.htmlhttp://www.ge.com/oac/appliance.htmhttp://www.1000ventures.com/business_guide/crosscuttings/vision_mission_strategy.html


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GE We bring good things to life.

FordMotor Co

To become the world's leading consumer company forautomotive products and services.

Microsoft To enable people and businesses throughout the world to realizetheir full potential.

Examples of a Corporate Vision


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Refresh


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MenaItech Vision

To provide the highest quality andmost comprehensive enterprise levelHR solutions that fit the MENA

regions requirements, utilizing thelatest technologies and best HRbusiness practices


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Peter Drucker: -- Think throughthe overall mission of a

business. Ask the key question:What is our Business?

Mission


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Mission Statement

Purpose/reason for organization

Promotes shared expectations Communicates public image

Who we are; what we do; what

we aspire to


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MenaItech Mission

To provide HR solutions that maximizethe return on the human capital

investment for all MenaITechcustomers by providing accurate andreliable management information,improving access to information, and

reducing costs of operating the HRsolution.


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Mission-driven pursuit of specifiedresults more than one year out

Long-term Objectives


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Long-term Objectives

Essential for ensuring the firmssuccess

Provide direction

Aid in evaluation

Create synergy

Focus coordination

Basis for planning,

motivating, andcontrolling


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Means by which long-term objectives

are achieved

Strategies


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The Three Hierarchical Levels of Strategy

CorporateStrategy

Business you should be in

Business StrategyTactics

to beat the competition

Functional StrategyOperational methods

to implement the tactics

More information at 1000ventures.com: Enterprise S
http://www.1000ventures.com/business_guide/mgmt_inex_stategy.htmlhttp://www.1000ventures.com/business_guide/mgmt_inex_stategy.html


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Introductionstage

Growthstage

Maturitystage

Declinestage

Industrysales

Industryprofits0

Revenue

Time

The Organization Life Cycle

concentration Integration Diversification Retrenchment


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IdentifyMission

DeriveObjectives

IdentifyAlternative Strategies

EvaluateAlternatives

SelectPreferred Alternatives

STRATEGY FORMULATION


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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.co


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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 willbe achieved

Policies


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Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation


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Strategic Managementachieves a firms success

through integration

Management

MIS

Production/OperationsFinance/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 Implementation


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Strategy ImplementationSuccess Rates and Major Impeding Factors

Adapted from Strategic Management, Alex Miller, 1998

10%

50%

100%Planned implementation according to

strategic plan

Actual implementation as reported bymanagers themselves

Actual implementation as estimated by

outside observers

More information at 1000ventures.com:Strategic Man
http://www.1000ventures.com/business_guide/strategy_implementation.htmlhttp://www.1000ventures.com/business_guide/strategy_implementation.html


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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

Todays success no guarantee of futuresuccessNew & different problemsComplacency leads to demise

And In Conclusion:


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And In Conclusion:

Plan-Do-Check-Act

.P. considers both the preplanning andstrategic planning processes;

.D. encompasses both the deployment

and implementation of the plan;.C. tracks progress, measures results

and outcomes, and evaluates allthree.

.A. feeds the evaluation back to thesystem and either adjusts orstandardizes the system based upon

that feedback.

i l i


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Strategic PlanningNew Dynamic Model for the New Era of Rapid

Change

Planning Implementation

TRADITIONAL STATIC MODELEffective if change cycle is longer than duration of your project

Planning (+ adapting + anticipating)

PlannedResults

NEW DYNAMIC MODEL

Effective if change cycle is shorter than duration of your project

External Change: technology x market x competition

ResultsPlannedModifiedNew

Internal change: learning x capabilities

Implementation

Vadim Kotelnikov More information at 1000ventures.com: Strategic Planning
http://www.1000ventures.com/vk.htmlhttp://1000ventures.com/business_guide/crosscuttings/planning_strategic.htmlhttp://1000ventures.com/business_guide/crosscuttings/planning_strategic.htmlhttp://www.1000ventures.com/vk.html


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Refresh


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Organization Environment


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Internal:Culture

StructureResources

Task-environment

Societal-environment

Legal

Physical

Technological

Social

Economic

DistributorsCompetitors

Organization Environment


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Largely beyond the control of a singleorganization

Opportunities and Threats(External)


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Opportunities & Threats(External)

Analysis of Trends:

Economic

Social Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

Environmental Scanning


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Process of conducting research andgathering and assimilating externalinformation

Environmental Scanning(Industry Analysis)

St th & W k


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Controllable activities performedespecially well or poorly

Strengths & Weaknesses(Internal)

St th & W k


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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 InternalEnvironment


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SWOT Analysis

1000ventures.co

Build on STRENGTHS

What is your competitive advantage?

What are your core competences?

What are your distinctive capabilities?

Other strengths

Exploit OPPORTUNITIES

What trends may impact your business?

How can you exploit external changes?

How to turn problems into opportunities?

Other opportunities

Revolve WEAKNESSES What are your weak point?

What problems do you have?

What necessary expertise do you lack?

Other weaknesses

Avoid THREATS What obstacles do you face?

What your competitors could do?

What could damage your business?

Other threats

Internal External

A d f i


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A word of caution,

SWOT analysis can be very subjective. Donot rely on it too much.

Two people rarely come-up with the samefinal version of SWOT.

TOWS analysis is extremely similar. Itsimply looks at the negative factors first inorder to turn them into positive factors.

So use it as guide and not aprescription!

Simple rules for


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Simple rules forsuccessful SWOT analysis

be realistic about the strengths and weaknesses of yourorganization

analysis should distinguish between where your organizationis today, and where it could be in the futures

be specific. Avoid grey areas.

always analyse in context to your competition i.e. betterthan or worse than your competition

keep your SWOT short and simple. Avoid complexity andover analysis

SWOT is subjective.


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Refresh


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MenaItech SWOT


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Refresh


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What is PEST Anal sis?


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What is PEST Analysis?

Porters Model


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Factors That Determine Competitiveness Within an Industry

1000ventures.co

INDUSTRY

COMPETITORS

Intensity of rivalry

Substitutes

New entrants

Suppliers Buyers

Threat ofsubstitutes

Bargainingpower of

suppliers

Threat of newentrants

Bargainingpower ofbuyers

Source: Competitive Strategy, Michael E. Porter

Analysing the environment -


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Analysing theFive Forces Analysis

Five forces analysis helps the marketer tocontrast a competitive environment.

The threat of entry


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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


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The power of buyers

This is high where there a few, largeplayers 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


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The power of suppliers

The power of suppliers tends to be areversal 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 supplierintegrating forward

Customers are fragmented (not in clusters)

so that they have little bargaining power

The threat of substitutes


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The threat of substitutes

Where there is product-for-product substitution

Where there is genericsubstitution (competing for thecurrency in your pocket)

We could always do without e.g.cigarettes.

Competitive Rivalry


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Competitive Rivalry

This is most likely to be high whereentry is likely; there is the threat ofsubstitute products, and suppliers andbuyers in the market attempt tocontrol.

This is why it is always seen in thecentre of the diagram.

Financial Analysis


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Financial Analysis

Financial Ratios are Important

Ration Analysis

Liquidity ratios

Profitability ratios

Activity ratiosLeverage ratios


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Financial AnalysisBasic Steps

1. Historical income statements/balance

sheets2. Compare historical statements over

time

3. Calculate changes individual items-cumulative

4. Change as percentage and absoluteamount

5. 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 dividedby total assets.

x4 = Market value of equity divided by totalliabilities.

x5 = Sales divided by total assets.

Z= Overall index of corporate fiscal health.

Altmans Bankruptcy Formula


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Z3.00 Healthy Organization

1.81


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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

SBUs growth & Percent of total sales


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SBUs growth & Percent of total sales

Wal-M Stores Sams Club Wal-MartInternational

No% TotalSales

No% TotalSales

No% TotalSales

2007 3443 65.6 % 579 12.1% 2757 22.3%

2006 3289 67.9% 567 12.9% 2181 19.2%

2005 3151 68.1% 551 13.2% 1480 18.7%

% Noincrease

2007/20059.3 5.1 86.3

Current Financial Performance


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PM% ATO ROA% ROE% LTD b$

2007 3.6 2.44 8.8 22 27.2

2006 3.6 2.58 9.3 22.9 26.4

2005 3.6 2.72 9.8 23.1 20.1

2004 3.5 2.77 9.7 22.4 17.1

2003 3.5 2.74 9.6 21.8 16.5

2002 3.2 2.81 9.0 20.7 15.6

2001 3.1 3.0 9.3 23.0 12.5

2000 3.3 3.06 10.1 25.5 13.7



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Net Sales $b CSSI*% Stock price

2002 201.2 6 56.98

2003 226.5 5

2004 252.8 4

2005 281.5 3

2006 309 3

2007 345 2 46.37

*CSSI: Comparable Store Sales Increase in USA

R d d S


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1. Growth (USA) via related (concentric) Diversification withFocused 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


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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?


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What is a Business Plan?

A business plan is a writtendescription of the goals andobjectives of the business and how

they are going to be achieved. Itincludes the mission of the businessalong with the production,organizing, marketing, and financingintentions.

Why need Business Plan?


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Why need Business Plan?

1. To Map the Future

2. To Support Growthand Secure Funding

3. To Develop andCommunicate a Course ofAction

4. To Help Manage Cashflow

5. To Support aStrategic Exit

PLAN YOUR PLAN


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PLAN YOUR PLAN

Believe it or not, part of planning

your plan is planning what you'll dowith it

PLAN YOUR PLAN


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PLAN YOUR PLAN

Do you intend to use your plan to help youraise money?

Do you intend to use your plan to start upnew 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 youunderstand your organization situation?


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Do you need to make revenue estimate (by defining yourmarket -- 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 toattract talented employees?


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Refresh


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Job Interview

How Effective Is the


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Business Plan? How effective a Business Plan is depends

on how well the following questions areanswered: 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


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y pPlan

The business plan covers areas:1. Executive Summary

2. The Industry, the Company, and the Products

3. Market Research and Analysis

4. Marketing Plan

5. Operating Plan

6. Management Team

7. Financial Plan

Executive Summary


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Executive Summary

Always Leave it until the End

1.Business name

2.Business Location3.What Product or services yousell

4.Purpose of Plan

The Industry, the Company, and


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The Industry, the Company, andthe Products

This section of the business plandescribes the business venture in adetailed but concise manner. You

must clearly describe:The nature of the industry

The proposed business

The product the businessplans to offer

The Industry


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y

Present the current status and outlook for the industry inwhich 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


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p y

Write a detailed description of the proposedbusiness venture, the products and services itwill 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


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Describe in detail the products or services to be sold, aswell as the application of the product or service.

Benefits to the customers

Competitive advantages

Unique features

Current state of development

Market Research and Analysis


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y

This section of the business plan presents enough factsobtained through market research and analysis todetermine if the product or service has a substantialmarket in a growing industry despite a competitivemarket.

Customers

Market Size and Trends

Competition

Market Share and Sales

Types of Market Research


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yp

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


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The information obtained through primary andsecondary research techniques can be analyzed in avariety of ways.

Economic Trend Analysis

Political and Social Analysis

Customer Analysis

Market Potential Analysis

Competitive Analysis

Customers


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Identify your target market and develop acustomer profile.

Demographic profile

Lifestyle patterns

Expectations

Competition


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p

List the strengths and weaknesses of competitiveproducts and services and list the companies thatsupply them.

Identify and list current and future competitors

Assess the competition on the basis of price,quality, performance, service, etc.

Discuss advantages and disadvantages ofcompeting products or services

Market Share and Sales


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Summarize what it is about your product orservice that will make it sell in the face ofcurrent and future competition.

Identify and list major customers andestimate potential sales

Estimate share of the market

Estimate sales in units and dollars for thenext two to five years

Marketing Plan


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This section of the business plan describes the companysmarketing goals and objectives and how they will beachieved.

Overall Market Strategy

Pricing

Sales Tactics

Advertising and Promotion

Packaging

Marketing Plan Outline

Overall Market Strategy


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Describe the general marketing philosophy and strategyof the company.

Derived from market research and analysis results

Include discussion of markets targeted for salespromotions

List short-term and long-term marketing objectives

Discuss specific marketing tactics

Sales Tactics


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Describe specific actions that will be taken to generate sales anddistribute the product or service to customers.

Analyze effectiveness of everything available within thesales system

List channels such as salespeople, agents, dealers, anddirect mail services

Describe methods that will be used to distribute productsto customers

Describe merchandising techniques

Advertising and Promotion


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Describe approaches the company will use tobring the product or service to the attention ofthe target market.

List advertising methods along with benefitsand costs

Discuss promotional efforts and strategies

Publicity

Marketing Plan Outline


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A marketing plan outline is a useful tool for pulling togetherinformation related to the marketing plan. The marketing planoutline should include information on the following:

Marketing situation

Marketing objectives

Marketing Strategies

Budget

Action plan

Evaluation

Operational Plan


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Operational Plan

Detailed information ondevelopment specifics such as

who might be supplying yourproducts, how will it be shipped,personnel and resources

management.

COPYRIGHT 2004 BANGKOK BUSINESS CHALLENGE

Financial Plan


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Important Assumptions

Key Financial Indicators

Break-even Analysis

Projected Profit and Loss

Projected Cash Flow

Projected Balance Sheet

Business Ratios

What to Avoid in YourBusiness Plan


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Business Plan

Place some reasonable limits on long-term, future projections. (Long-termmeans over one year.) Better to stickwith short-term objectives and modify

the plan as your business progresses.Too often, long-range planningbecomes meaningless because the

reality of your business can bedifferent from your initial concept.


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Avoid optimism. Do not ignore spelling out what your

strategies will be in the event ofbusiness adversities.

Use simple language in explaining theissues.

Make it easy to read and understand.

Don't depend entirely on theuniqueness of your business or even apatented invention.


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What are the key steps topreparing Action Plan?


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preparing Action Plan?

Step 1.

Take (you're Targets of Financial,

Marketing, Sales) , Groupstrategies and tactics.

Detail the activities necessary toachieve each outcome.

What are the key steps topreparing Action Plan?


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preparing Action Plan?

Step 2: Create an action plan, An actionplan has five elements :

1. Outcomes

2. Activities3. Resources

4. Responsibilities

5. Timeline


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Step 3 :For each activity identifyresources, responsibilities and timelines.

Step 4: Review your plan.

Step 5 :For each year or new projectcreate a new action plan.

You're Action Plan is SMART,H ?


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How?

Specific

Measurable :

Achievable:

Realistic:

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