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MAE 400: The Engineering Profession

The Bridge Between

EngineeringCoursework

IndustrialApplication

Session 21

• Business Plans• Strategic Planning/SWOT Analysis

Types of Plans

• Business Plans– Typically for new businesses

• Strategic Planning– Developing business plan for an existing

business

Business Plans

For The Real World

Why a Business Plan?

• Strategic Guide

• Obtaining Lenders

• Attracting Investors

Strategic Guide

• Where Do You Want To Go?• How Are You Going to Get There?• What are Market Niches?• How Much is it Going to Cost?• Greatest Profit Opportunity?

Lender Expectations

• Good Business Track Record• Ability to Repay• Staying Power• Collateral

Investor Expectations

• Competitive Advantage• Huge Market• Strong Management Team• Strong Marketing and Sales Plan• Some Skin in the Game• Obscene Return• Exit Strategy

• Shark Tank

Entrepreneurs Start Businesses:

• To Capitalize on an Invention• To Pursue a Passion• To Be Their Own Boss• To Get Rich

---All Need an Exit Strategy

Exit Strategies

• Selling the Business• Transferring the Business to a Family Member• Taking the Company Public• Being Acquired by a Larger Company

Funding Sources:

• Savings• Friends and Family• Angel Investors• Venture Capitalists• Financial Institutions / Banks

Business Plan Content

• Executive Summary• Company Description• Product/Services Description• Industry Overview• Market Analysis• Competitors

Business Plan Content- cont.

• Customers• Marketing and Sales Plans• Development• Operations• Management

Executive Summary• A mini-business plan in one or two

pages

• Highlights the most important points of your business plan

• It is NOT an introduction to the plan

• It must grab your reader, and entice him/her to read further

Executive Summary

• Identify the company, its background, structure and location

• Describe what the company does, and the market it serves

• Describe the market potential for the company’s products and services, market trends, etc.

Executive Summary

• Outline the backgrounds and experience of the top management team

• Describe the funding required, the purposes for which it will be used, the collateral available (if for a lender), and the expected outcomes

Company Overview

• Brief Company Introduction

– Vision and Mission statements

– Location, size, history

– Market and products

– Overview of company capabilities

– Objectives

VISION

VISION IS A DREAM

VISION IS A DREAM WITH A DEADLINE

IT IS A PICTURE OF FUTURE THAT PULLS US INTO THE FUTURE

A VISION STATEMENT IS AN ATTEMPT TO CAPTURE THAT DREAM IN WORDS

“WHERE THERE IS NO VISION, PEOPLE PERISH.”

Solomon

WHEN ASKED, WHAT WOULD BE WORSE THAN BEING BLIND, HELEN KELLER REPLIED :

“IT WOULD BE DEFINITELY WORSE TO HAVE 20/20 EYESIGHT AND NO VISION, THAN TO BE BLIND, BUT HAVE THAT VISION.”

VISION

A VISION STATEMENT TELLS US WHERE WE ARE GOING.

VISION STATEMENT, TO BE WORTH ANYTHING, HAVE TO DIFFERENTIATE A COMPANY FROM THE COMPETITION.

OUR VISION MUST CONNECT WITH THE HEARTS AND DREAMS OF OUR PEOPLE.

VISION

FROM AN ORGANIZATIONAL PERSPECTIVE, VISION HAS TO HAVE FIVE COMPONENTS :

A SENSE OF WORTHINESS.

AN ABILITY TO INSPIRE.

AN INVITATION TO SHARE.

CLEAR AND UNDERSTANDABLE DETAIL.

ACHIEVABILITY.

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

3M INNOVATION - “THOU SHALL

NOT KILL A NEW PRODUCT IDEA”.

ABSOLUTE INTEGRITY.

RESPECT FOR INDIVIDUAL INITIATIVE AND PERSONAL GROWTH.

TOLERANCE FOR HONEST MISTAKES.

PRODUCT QUALITY AND RELIABILITY.

“OUR REAL BUSINESS IS SOLVING PROBLEMS.”

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

HEWLETT PACKARD

Cont ...

TECHNICAL CONTRIBUTION TO FIELD IN WHICH WE PARTICIPATE-“WE EXIST AS A CORPORATION TO MAKE CONTRIBUTION.”

RESPECT AND OPPORTUNITY FOR HP PEOPLE, INCLUDING THE OPPORTUNITY TO SHARE IN THE SUCCESS OF THE ENTERPRISE.

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

HEWLETT PACKARD

Cont ...

CONTRIBUTION AND RESPONSIBILITY TO THE COMMUNITIES IN WHICH WE OPERATE.

AFFORDABLE QUALITY FOR HP CUSTOMERS.

PROFIT AND GROWTH AS A MEANS TO MAKE ALL OF THE OTHER VALUES AND OBJECTIVES POSSIBLE.

Cont ...

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

IBM

Cont ...

GIVE FULL CONSIDERATION TO THE INDIVIDUAL EMPLOYEE.

SPEND A LOT OF TIME MAKING CUSTOMERS HAPPY.

GO THE LAST MILE TO DO THINGS RIGHT, SEEK SUPERIORITY IN ALL WE UNDERTAKE.

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

JOHNSON & JOHNSON

Cont ...

THE COMPANY EXISTS “TO ALLEVIATE PAIN AND Disease.”

“WE HAVE A HIERARCHY OF RESPONSIBILITIES; CUSTOMERS FIRST, EMPLOYEES SECOND, SOCIETY AT LARGE, THIRD AND SHAREHOLDERS FOURTH.”

INDIVIDUAL OPPORTUNITY AND REWARD BASED ON MERIT.

DECENTRALIZATION = CREATIVITY + PRODUCTIVITY.

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

BOEING

Cont ...

BEING ON THE LEADING EDGE OF AERONAUTICS; BEING PIONEERS.

TAKING HUGE CHALLENGES AND RISKS.

PRODUCT SAFETY AND QUALITY.

INTEGRITY AND ETHICAL BUSINESS.

TO “EAT, BREATHE AND SLEEP THE WORLD OF AERONAUTICS.”

MISSION

A CLEAR AND COMPELLING STATEMENT THAT SERVES TO UNIFY EFFORTS OF AN ORGANIZATION.

IT MUST STRETCH AND CHALLENGE THE ORGANIZATION AND YET BE ACHIEVABLE.

IT MUST TRANSLATE ABSTRACTNESS OF PHILOSOPHY INTO TANGIBLE, ENERGISING AND FOCUSED GOAL THAT DRAWS THE ORGANIZATION FORWARD.

MISSION

MISSION STATEMENT MUST ANSWER FOLLOWING QUESTIONS

WHAT IS THE REASON FOR BEING?

WHAT IS THE BASIS PURPOSE?

WHAT BUSINESS ARE WE IN?

WHAT IS UNIQUE OR DISTINCTIVE ABOUTAN ORGANIZATION?

WHAT DOES IT STAND FOR?

Examples of Mission Statements

• Anheuser-BuschThe mission of Anheuser-Busch is to:

Be the world’s beer company

Enrich and entertain a global audience

Deliver superior returns to our shareholders

Examples of Mission Statements

• “Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.”

Examples of Mission Statements

• Kellogg CompanyKellogg is a global company committed to building long term growth in volume and profit and to enhancing its worldwide leadership position by providing nutritious food products of superior value.

• Southwest Airlines• Our mission is dedication to the highest quality of

customer service delivered with a sense of warmth, friendliness, individual pride and company spirit.

Examples of Mission Statements• Office Depot

Our mission is to be the most successful office products company in the world.

• Avis Rent A CarTo ensure a stress-free rental experience by providing safe, dependable vehicles and special services designed to win the customers’ loyalty.

Planning Hierarchy• The hierarchy of business planning follows the

following guidelines:• Vision Very long term• Core Values & Beliefs Change seldom,

if ever• Purpose Should last at

least 100 years• Mission Changes when

mission is accomplished, usually 5 to 15 years

• Strategy Revised annually, then recast with new mission

• Tactics In constant flux to adjust to changing market dynamics

Business Plan continued Location, Size, History

• Where is company headquarters?

• Where are other operations

• Number of people, facility square footage

• When did company start, how has it grown

Products/Services

• Products / Services– What does it do?– Uniqueness– Competitive Advantage

• Technology– Brief description– Applications

• Commercialization Status– Brief overview

Industry Overview

• Industry Definition and Description– Major players within the industry

– Factors driving dynamics

– New products and developments

• Legislation and Policies Driving the Industry• Historical and Future Trends

Market Analysis

• Market Definition– Primary Market

– Secondary Markets

• Market Size and Trends– Current total revenues

– Predicted annual growth rate

Customers

• Customer Characteristics– Who are they?

– Why do they buy?

– Need satisfied by the product/service

– How is the need currently filled?

– What are the alternatives?

– Who makes the decision to buy?

– How frequently do they purchase?

Competitors

• Direct Competitors– Who are they?

– Size and product breadth

– Revenues and profitability

– Strengths and weaknesses

– Market shares

• Indirect Competitors

Customers

• Customer Characteristics– Who are they?

– Why do they buy?

– Need satisfied by the product/service

– How is the need currently filled?

– What are the alternatives?

– Who makes the decision to buy?

– How frequently do they purchase?

Marketing and Sales Plans

• Statement of Opportunity• Marketing and Sales Objectives• Existing Customers• Potential Customers

– Prospects targeted

– How prospects will be targeted and qualified

Marketing Strategies

• Product/Service Strategy• Pricing Strategy• Distribution Strategy• Advertising and Promotion Strategy• Sales Strategy• Marketing and Sales Forecasts

Marketing and Sales Plans

• Marketing Programs– Direct Mail– Trade Shows– Advertising– Internet– Publicity/Public Relations– Marketing Budget

• Pricing– Basis for targeted price point– Margins and profitability by volume levels

Marketing and Sales Plans

• Sales Plan– Sales force structure – (direct or reps)

– Sales expectations/quotas

– Margins given to intermediaries

– Service and warranties

– Sales Budget

– Organizational chart indicating planned growth

Development

• R & D Plan– Objectives

– Milestones and current status

– Difficulties and risks

– Staffing

– R & D Budget and assumptions

Operations

• Manufacturing/Production Plan– Objectives

– Facilities

– Staffing

– Subcontractors

– Quality Control

– Budget / Operating Expenses

Management

• Company Organization• Management Team• Administrative Expenses

Management Team

• President• VP Finance• VP Sales• VP Marketing• VP Manufacturing• Board of Advisors – important in starting a

business

Personnel

• Human Resource Plan– Staffing Objectives

– Organizational Structure

– 3-5 year growth plan

– Budget

Summary of Financials

• Financial Objectives– Time to Cash Flow Positive

– Time to profitability

• Financial Assumptions• Capital Requirements• Exit Scenario

Financials

• Pro-forma Cash Flow Projections• Pro-forma Profit & Loss Statements• Pro-forma Balance Sheet

• (Pro-forma = expected as if financial data)

Offering

• Investment Requirements• Pro-forma Valuation of Business• Offer

Appendices

• Resumes of Key Management• Patent Information• Customer List• Testimonials• Supplemental Financial Spreadsheets• References

Strategic Planning• SWOT Analysis

SWOT stands for – Strengths– Weaknesses

– Opportunities– Threats

Internal Business Situation

External Business Situation

SWOT Analysis

• A key part of Business Acumen is arriving at a business strategy based on the outside and inside situations that confront the business.

• The process starts by defining the goal. The SWOT analysis is then used to help develop a strategy for achieving the goal.

SWOT Analysis• A SWOT is usually displayed as a 4-sector chart

Strengths• • •

Weaknesses• • •

Opportunities• • •

Threats• • •

Breakthrough

Failure

SWOT Analysis

• After the SWOT chart is made, the analystshould find a strategy that plays to the businesses strengths while accommodating its weaknesses.

• Similarly, the strategy should take advantage of the outside opportunities while mitigating potential outside threats.

Questions?

Homework

• None except continue work on your major project

• HW9 Financial statements due Session #24 (Monday)