university of sunderland bm205 entrepreneurship for mba students business plan lecture 6

University of Sunderland BM205

EntrepreneurshipEntrepreneurship for MBA Studentsfor MBA Students

Business Plan

Lecture 6

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[Company Name]

Business Plan

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Mission Statement

• A clear statement of your company’s long-term mission. Try to use words that will help direct the growth of your company, but be as concise as possible.

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The Team

• List CEO and key management by name

• Include previous accomplishments to show these are people with a record of success

• Summarize number of years of experience in this field

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Market Summary

• Market: past, present, & future:– Review those changes in market share,

leadership, players, market shifts, costs, pricing, or competition that provide the opportunity for your company’s success.

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Opportunities

• Problems and opportunities:– State consumer problems, and define nature of

product/service opportunities created by those problems.

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Business Concept

• Summarize key technology, concept or strategy on which your business is based

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Competition

• Summarize competition

• Outline your company’s competitive advantage

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Goals & Objectives

• Five-year goals– State specific measurable objectives – State market share objectives– State revenue/profitability objectives

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Financial Plan

• High-level financial plan that defines pricing assumptions, and reviews yearly expected sales and profits for the next three years.

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Resource Requirements

• Technology requirements

• Personnel requirements

• Resource requirements– Financial, distribution, promotion, etc.

• External requirements– Products/services/technology required to be

purchased outside company

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Risks & Rewards

• Risks– Summarize risks of proposed project

• Addressing risk– Summarize how risks will be addressed

• Rewards– Estimate expected pay-off, particularly if seeking

funding

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Key Issues

• Near term– Isolate key decisions and issues that need

immediate or near-term resolution

• Long term– Isolate issues needing long-term resolution– State consequences of decision postponement

• If you are seeking funding, state specifics

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PLANNING AND STRATEGY

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Organizational Goals

• Purposes of Goals– Provide guidance and a unified direction for people in the

organization.– Have a strong effect on the quality of other

aspects of planning.– Serve as a source of

motivation for employees of the organization.

– Provide an effective mechanism for evaluation and control of the organization.

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Kinds of Goals

• By Level– Mission statement is a statement of an organization’s

fundamental purpose.– Strategic goals are goals set by and for top

management of the organization that addresses broad, general issues.

– Tactical goals are set by and for middle managers; their focus is on how to operationalize actions to strategic goals.

– Operational goals are set by and for lower-level managers to address issues associated with tactical goals.

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Different Goal Setting Processes in Organizations

Source: Barney, Jay B. and Ricky W. Griffin.

The Management of Organizations. Copyright © 1992 by Houghton Mifflin Company. Used with permissions.

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Kinds of Plans

• Strategic Plans– A general plan outlining resource allocation, priorities,

and action steps to achieve strategic goals. The plans are set by and for top management.

• Tactical Plans– A plan aimed at achieving the

tactical goals set by and for middle management.

• Operational Plans– Plans that have a short-term focus.

These plans are set by and for lower-level managers.

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The Nature of Strategic Management

• Strategy– A comprehensive plan for accomplishing an

organization’s goals.• Strategic Management

– A way of approaching business opportunities and challenges–a comprehensive and ongoing management process aimed at formulating and implementing effective strategies.

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The Components of Strategy

• Distinctive Competence– Something an organization does exceptionally well.

• Scope– Range of markets in which an organization will compete.

• Resource Deployment– How an organization will

distribute its resources across the areas in which it competes.

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Types of Strategic Alternatives

• Business-level Strategy– The set of strategic alternatives that an organization

chooses from as it conducts business in a particular industry or a particular market.

• Corporate-level Strategy– The set of strategic alternatives that an

organization chooses from as it manages its operations simultaneously across several industries and several markets.

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Types of Strategic Alternatives (cont’d)

• Strategy Formulation– The set of processes involved in creating or determining

the organization’s strategies; it focuses on the content of strategies.

• Strategy Implementation– The methods by which strategies are executed within the

organization; it focuses on the processes through which strategies are achieved.

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TheRelationships

ofStrategies

by

OrganizationalLevel

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SWOT Analysis

• Strengths• Weaknesses• Opportunities• Threats

MissionAn organization’s fundamental purpose

Best Strategies

SWOT AnalysisTo formulate strategies that support the mission

Those that support the mission and• exploit opportunities and strengths• neutralize threats• avoid (or correct) weaknesses

Internal AnalysisStrengths(distinctivecompetencies)

Weaknesses Threats

External AnalysisOpportunities

Figure 3.2

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Using SWOT Analysis to Formulate Strategy (cont’d)

• Evaluating Organizational Weaknesses– Organizational weaknesses are skills and capabilities

that do not enable an organization to choose and implement strategies that support its mission.

– Weaknesses can be overcome by:• investments to obtain the strengths needed.• modification of the organization’s mission

so it can be accomplished with the current workforce.

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• Evaluating Organizational Weaknesses (cont’d)– Competitive disadvantage is a situation

in which an organization fails to implement strategies being implemented by competitors.

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• Evaluating an Organization’s Opportunities and Threats– Organizational opportunities

are areas in the organization’s environment that may generate

high performance.– Organizational threats are areas

in the organization’s environment that make it difficult for the organizationto achieve high performance.

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Porter’s Generic Strategies

• Differentiation strategy– An organization seeks to distinguish itself from

competitors through the quality of its products or services.

• Overall cost leadership strategy– An organization attempts to gain competitive advantage

by reducing its costs below the costs of competing firms.• Focus strategy

– An organization concentrates on a specific regional market, product line, or group of buyers.

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Strategies Based on Product Life Cycle

• The Product Life Cycle

Introduction

Time

Stages

Growth Maturity Decline

High

Low

Sal

es V

olum

e

Figure 3.3

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Formulating Corporate-Level Strategies

• Diversification– The number of businesses an organization is engaged in

and the extent to which these businesses are related to one another.

• Single Product Strategy– A strategy in which an organization manufactures one

product or service and sells it in a single geographic market.

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Related Diversification

• Related Diversification– A strategy in which an organization operates in

several different businesses, industries, or markets that are somehow linked.

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Related Diversification (cont’d)

• Advantages of Related Diversification– Reduces organization’s dependence on any one

of its business activities and thus reduces economic risk.

– Reduces overhead costs associated with managing any one business through economies of scale and economies of scope.

– Allows an organization to exploit its strengths and capabilities in more than one business.

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Formulating Corporate-LevelStrategies (cont’d)

• Unrelated Diversification– A strategy in which an organization operates

multiple businesses that are not logically associated with one another.

– Advantages• Stable corporate-level performance over time due to

business cycle differences among the multiple businesses.

• Resources can be allocated to areas with the highest return potentials to maximize corporate performance.

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Formulating Corporate-LevelStrategies (cont’d)

• Unrelated Diversification (cont’d)– Disadvantages

• Strategy does not usually lead to high performance due to the complexity of managing a diversity of businesses.

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Managing Diversification

• Major Tools for Managing Diversification– Portfolio management techniques

• Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.

– One important portfolio management technique• The BCG Matrix

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Managing Diversification (cont’d)

• BCG Matrix

– A method of evaluating businesses relative to the growth rate of their market and the organization’s share of the market.

– The matrix classifies the types of businesses that a diversified organization can engage as:

• “Dogs” have small market shares and no growth prospects.

• “Cash cows” have large shares of mature markets.

• “Question marks” have small market shares in quickly growing markets.

• “Stars” have large shares of rapidly growing markets.

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The BCG Matrix

Relative market share

Cash cows Dogs

High

Low

High Low

Questionmarks

Stars

Mar

ket

gro

wth

rat

e

Figure 3.4

Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970.

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university of sunderland bm205 entrepreneurship for mba students business plan lecture 6

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