how to build bp - menaitech workshop 2-2-08
TRANSCRIPT
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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 $345 b 2007 FY & 1.9 m associates)
Global company since 1991 (2007 > 6,700 stores)
Masters of Cost leadership Strategy
Three operating SBUs
Overview & Current Situation
SBUs growth & Percent of total sales
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SBUs growth & Percent of total sales
Wal-M Stores Sams Club Wal-MartInternational
No% TotalSales
No% TotalSales
No% TotalSales
2007 3443 65.6 % 579 12.1% 2757 22.3%
2006 3289 67.9% 567 12.9% 2181 19.2%
2005 3151 68.1% 551 13.2% 1480 18.7%
% Noincrease
2007/20059.3 5.1 86.3
Current Financial Performance
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Current Financial Performance
PM% ATO ROA% ROE% LTD b$
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
Current Financial Performance
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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: