strategic planning: strategies, tactics, and competitive dynamics

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

CHAPTER 9Strategic Planning: Strategies, Tactics, and Competitive Dynamics

CHAPTER SUMMARY

Strategic planning is long-term planning that focuses on the organization as a whole. To determine how far into the future they should plan, managers should use the commitment principle. Strategy is the end result of strategic planning. Strategic management is the process of ensuring that an organization possesses and benefits from the use of an appropriate organizational strategy. It consists of five sequential and continuing steps: (1) environmental analysis, (2) the establishment of organizational direction, (3) strategy formulation, (4) strategy implementation, and (5) strategic control.

In order to perform an environmental analysis, a manager must understand how the general, operating, and internal environments affect organizational performance. The components of the general environment are: economic, social, political, legal, and technological. The operating environment is the level of the organization's external environment that contains components that normally have relatively specific and immediate implications for managing the organization. The internal environment from a management viewpoint includes planning, organizing, influencing, and controlling within the organization.

Two important stages during the establishment of organizational direction are the development of (1) the organizational mission and (2) the organizational objectives. Once these are established, strategy formulation occurs. The tools for developing strategies include: (1) critical question analysis, (2) SWOT analysis, (3) the Boston Consulting Group Growth-Share Matrix, (4) the GE Multifactor Portfolio Matrix, and (5) Porter's model for industry analysis. The fourth step of the strategy management process is the implementation of the strategy.

The successful implementation of strategy requires four skills: (1) interacting skills, (2) allocating skills, (3) monitoring skills, and (4) organizing skills. The last step, strategic control, focuses on ensuring that all steps of the strategic management process are appropriate, compatible, and functioning properly. Tactical planning should reflect strategic planning. Tactical planning focuses on what to do in the short-term to help the organization achieve the long-term objectives determined by strategic planning. As managers move from lower to upper management, they spend more time on strategic planning and less time on tactical planning.

LEARNING OBJECTIVES

1. Definitions of both strategic planning and strategy

2. An understanding of the strategic management process

3. A knowledge of the impact of environmental analysis on strategy formulation

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4. Insights into how to use critical question analysis and SWOT analysis to formulate strategy

5. An understanding of how to use business portfolio analysis and industry analysis to formulate strategy

6. Insights into what tactical planning is and how strategic and tactical planning should be coordinated

7. An awareness of how competitive dynamics can influence an organization’s financial performance

Chapter’s Target Skill:Strategic planning skill: The ability to engage in long-range planning that focuses on the organization as a whole.

CHALLENGE CASESAMSUNG PLANS FOR THE FUTURE

The Challenge Case highlights the competitive course recently taken by Samsung. Developing a new course of this sort is actually part of Samsung’s strategic planning process. The material in this chapter explains how developing a competitive strategy fits into strategic planning and discusses the strategic planning process as a whole. Major topics included in this chapter are (1) strategic planning, (2) tactical planning, (3) comparing and coordinating strategic and tactical planning, and (4) competitive dynamics. “ See all related teaching notes for Challenge Case in the Management Skill Activities”

EXPLORING YOUR MANAGEMENT SKILL: PART 1

CHAPTER OUTLINE

I. CHALLENGE CASE: SAMSUNG PLANS FOR THE FUTUREA. The Challenge Case highlights the new competitive course taken by Samsung .

II. STRATEGIC PLANNINGA. Fundamentals of Strategic Planning

1. Defining Strategic Planninga. Strategic planning is long-term planning that focuses on the organization as a

whole.b. The commitment principle states that managers should commit funds for

planning only if they can anticipate, in the foreseeable future, a return onplanning expenses as a result of the long-range analysis.

2. Defining Strategy

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a. Strategy is a broad and general plan developed to reach long-term organizational objectives.

B. Strategic Management (See Figure 9.1)1. Strategic management is the process of ensuring that an organization possesses

and benefits from the use of an appropriate organization strategy.2. The process of strategy management is generally thought to consist of five

sequential and continuing steps:a. Environmental analysisb. Establishing organizational directionc. Strategy formulationd. Strategy implementatione. Strategic control

C. Environmental Analysis (Figure 9.2)1. Environmental analysis is the study of the organizational environment to

pinpoint environmental factors that can significantly influence organizationaloperations.

2. The General Environment a. The general environment is the level of an organization’s external

environment that contains components normally having broad long-term implications for managing the organization.

b. Components usually include economic, social, political, legal, andtechnological areas.1. The Economic Component

a. The economic component indicates how resources are being distributed and used within the environment.

2. The Social Componenta. The social component describes the characteristics of the society

in which the firm exists. Two important features are demographics (statistical characteristics of a population) and social values.

3. The Political Componenta. The political component indicates the part that contains the

elements related to government affairs.4. The Legal Component

a. The legal component contains the rules or laws that society’s members must follow.

5. The Technology Componenta. The technology component includes new approaches to

producing goods and services.

3. The Operating Environment a. The operating environment is the portion of the external environment including customers, competition, labor, suppliers, and international issues.

1. The Customer Componenta. The customer component is composed of factors relating to those

who buy the firm’s goods and services.

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2. The Competition Componenta. The competition component concerns those with whom the firm

must battle in order to obtain resources. 3. The Labor Component

a. The labor component is composed of factors influencing the supply of workers available to perform needed organizational tasks.

4. The Supplier Componenta. The supplier component entails all variables related to the

individuals or agencies that provide firms with resources needed to produce goods or services.

5. The International Componenta.The international component refers to the international

implications of organizational operations such as other countries' laws, culture, economics, and politics.

4. The Internal Environment

a. The organization’s environment existing within the organization and normally having immediate and specific implications for managing the organization.

b. Components include marketing, finance, and accounting. From aspecific management viewpoint, it includes planning, organizing,influencing, and controlling within the organization.

D. Establishing Organizational Direction1. Determining Organizational Mission

a. Organizational mission is the purpose for which or the reason why an organization exists.

2. Developing a Mission Statementa. A mission statement is a written document developed by management that describes and explains what the mission of an organization actually is.

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CLASS DISCUSSION HIGHLIGHT: Modern Research and Planning SkillThe Influence of the Industry Environment

Students should understand that industry does play an important role in firm performance. As discussed in Porter’s five-forces model, industry factors such as supplier and buyer power affect the ability of a firm to make money. The current research is a major step in quantifying the numerical effect of industry on performance. Student responses will vary from 10 to 60 or so percent because they would look at the examples of industries (such as the airlines and pharmaceuticals) that exhibit average profitability quite different from others.

Responses will also vary with respect to the effect of industry on performance across countries. The key reasons are two: in some countries, a small number of firms may dominate their industry in such a way that they are immune to its effects. The second is that in some countries, a specific industry may be in its infancy that the structure is not well formed and so may have only a marginal influence on firm performance.


3. The Importance of Organizational Mission a. Helps increase probability of an organization's success for several reasons:

1. Helps management to focus human effort in a common direction.2. Serves as a sound rationale for allocating resources.3. It pinpoints broad but important job areas within an organization.

4. The Relationship Between Mission and Objectivesa. Useful organizational objectives must reflect and flow naturally from an organizational mission.

E. Strategy Formulation: Tools1. Strategy formulation is the process of determining appropriate courses of action

for achieving organizational objectives and thereby accomplishing organizational purpose.

2. Critical question analysis asks four basic questions:a. What are the purposes and objectives of the organization?b. Where is the organization presently going?c. In what kind of environment does the organization now exist?d. What can be done to better achieve organizational objectives in the future?

3. SWOT analysis matches internal organizational strengths and weaknesses with external opportunities and threats. a. SWOT is an acronym for Strengths and Weaknesses and environmental Opportunities and Threats.

4. Business Portfolio Analysis is the development of business-related strategy based primarily on the market share of a business and the growth of markets in which businesses exist

5. The BCG Growth-Share Matrixa. The Boston Consulting Group Growth-Share Matrix includes the following quadrants:

1. Stars are SBUs having a high share of the high-growth market andtypically need large amounts of cash to support their rapid and significant growth.

2. Cash cows are SBUs having a large share of a market that is growing

only slightly. They provide cash to meet financial needs in otherorganizational areas.

3. Question marks are SBUs having a small share of a high-growthmarket. Uncertainty exists about whether to invest more cash inorder to get a larger market share.

4. Dogs are SBUs having a relatively small share of a low-growthmarket. They tend to drain cash resources. (See Figure 9.4)

b. The first step in using the BCG Growth-Share Matrix is identifying the organization’s strategic business units (SBUs).1. A strategic business unit (SBU) is a significant organizational

segment that is analyzed to develop organizational strategy aimed at generating future business or revenue.

6. The GE Multifactor Portfolio Matrix

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a. The GE Multifactor Portfolio Matrix, helps managers develop organizational strategy based on market attractiveness and business strengths. (Figure 9.5)

7. Porter’s Model of Generic Strategiesa. Porter’s Model of Generic Strategies

1. The model outlines the positioning choices that a firm has to compete in its industry

F. Strategy Formulation: Types1. Differentiation

a. Differentiation is a strategy that focuses on making an organization more competitive by developing a product(s) that customers perceive as being different from competitors’ products.

2. Cost leadership focuses on making an organization more competitive byproducing its products more cheaply than its competitors.

3. Focus emphasizes making an organization more competitive by targeting aparticular customer.

4. Sample Organizational Strategies a. Growth

1. A strategy adopted by management to increase the amount ofbusiness that an SBU is currently generating.

2. Stabilitya. A strategy seeking to maintain or slightly improve the amount ofbusiness an SBU is generating.

3. Retrenchmenta. A strategy through which management attempts to strengthen orprotect the amount of business an SBU is generating.

4. Divestiturea. A strategy generally adopted to eliminate an SBU that is notgenerating a satisfactory amount of business and has little hope ofdoing so in the near future.

G. Strategy Implementation1. Strategy implementation is the fourth step of the strategic management process,

putting formulated strategy into action.2. There are four basic skills:

a. Interacting skillb. Allocating skillc. Monitoring skilld. Organizing skill

H. Strategic Control1. Strategic control is the last step and involves monitoring and evaluating the

strategic-management process as a whole to ensure that it is operating properly.

III. TACTICAL PLANNINGA. Tactical planning is short-range planning that emphasizes current operations of

various parts of the organization.B. Comparing and Coordinating Strategic and Tactical Planning

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1. Managers must remember several basic differences between strategic planning and tactical planning:

a. Since upper-level managers generally have a better understanding of theorganization as a whole than lower-level managers, and since lower-level managers generally have a better understanding of the actual day-to-day organizational operations than upper-level managers, strategic plans are usually developed by upper-level management, and tactical plans are usually developed by lower-level management.

b. Since strategic planning emphasizes analyzing the future, and tactical planningemphasizes analyzing the everyday functioning of the organization, factors

uponwhich to base strategic plans are usually more difficult to gather than facts uponwhich to base tactical plans.

c. Since strategic plans are primarily based upon a prediction of the future, and tactical plans are primarily based upon known circumstances that exist within the organization, strategic plans generally are less detailed than tactical plans.

d. Since strategic planning focuses on the long run, and tactical planning focuses on the short run, strategic plans cover a relatively long period of time, while

tactical plans cover a relatively short period of time. (See Table 9.3)

IV. COMPETITIVE DYNAMICSA. Competitive dynamics refers to the process by which firms undertake strategic and

tactical actions and how competitors respond to these actionsB. There are three primary factors that influence a firm’s action or reaction:

awareness, motivation, and capabilityC. Awareness refers to how mindful a company is of its competitor’s actions.D. Motivation refers to the incentives that an organization has to take actionE. Capability refers to a firm’s ability to undertake an action

CHALLENGE CASE AND CHALLENGE CASE SUMMARYSAMSUNG PLANS FOR THE FUTURE

The Challenge Case highlights the new competitive course taken by Samsung since the Asian currency crisis of 1997. Today, Samsung is the world’s largest manufacturer of LCD televisions and computer chips and second to Nokia in cell phones. It operates 167 subsidiaries in a variety of industries, employs more than 161,000 people, and operates in nearly 200 cities.

Until 1997, Samsung was not what it is like today. It was called Samsung Electric and was best known as a second-tier manufacturer of low-priced and marginal quality small appliances. The Asian currency crisis of 1997 forced it to consider strategic planning seriously and reshape itself.

As competition in the consumer electronics industry increases, Samsung will need to continue thinking strategically. It has to determine what needs to be done to ensure continuing success three to five years into the future. The end result of this thinking will be a strategy – a broad plan that outlines what must be done to reach long-range objectives and carry out the organizational purpose of the company.

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DISCUSSION QUESTIONS

1. For Samsung’s management, is adding a solar and wind power unit a strategic management issue? Explain

Yes, because in developing a plan to compete with other solar and wind power companies it must determine what it hopes to have accomplished and what portion of the market it will have in three to five years’ time. In addition, it must consider its portfolio of businesses and how this business fits in.

2. Give three factors in Samsung’s internal environment that management should be assessing in determining the company's organizational direction. Why are these factors important?

Student answers will vary. Three factors of the internal environment that must be considered are marketing, finance, and accounting. Marketing is important because it differentiates Samsung’s products from other products carried in the stores. Finance is important to ensure the availability of needed resources in order to venture into a whole new area and be competitive. Accounting creates budgets, and thus serves as both a planning and a controlling tool.

3. Using the business portfolio matrix, categorize the new solar and wind power unit as a dog, question mark, star or cash cow. From a strategic planning viewpoint, what do you recommend that Samsung do as a result of this categorization? Why?

According to the business portfolio matrix, the solar and wind power business is a “question mark” It is uncertain how much management should invest in it to gain that required profitability. They should closely monitor the costs and benefits and do alternatives if this business heads toward becoming a “dog.” The goal for management is to create a “star” from this new venture.

Management Skills ActivitiesUNDERSTANDING STRATEGIC PLANNING CONCEPTS

Essay Questions1. Describe the five steps involved with the strategic management process. In your opinion,

which step is most important?(1) The first step of the strategic management process is environmental analysis, the study

of the organizational environment to pinpoint environmental factors that can significantly influence organizational operations.

(2) The second step is establishing organizational direction. Through an interpretation of the environment, managers can determine in which direction an organization should move. Then the mission statement, a written document which explains what the organization is trying to accomplish, can be created.

(3) The third step is strategy formulation, the process of determining appropriate courses of action for achieving organizational objectives and, thereby, accomplishing

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organizational purpose. Tools for developing strategies include critical question analysis, SWOT analysis, business portfolio analysis, and Porter's Model for Industry Analysis.

(4) The fourth step is strategy implementation, putting formulated strategies into action.(5) The final stage is strategic control, the process of monitoring and evaluating the

strategy management process as a whole in order to make sure that it is operating properly.

Student responses will vary according to which step is the most important.

2. Compare and contrast the different strategy formulation tools. In your opinion, which tool is best suited for large organizations? Explain.

The tools include: critical question analysis, SWOT analysis, business portfolio analysis, and Porter’s Model for Industry Analysis.

The critical question analysis includes asking four basic questions: 1. What are the purposes and objectives of the organization? 2. Where is the organization presently going? 3. In what kind of environment does the organization now exist? 4. What can be done to better achieve organizational objectives in the future?

The SWOT analysis allows the manager to match the external environmental opportunities and threats with the internal environment’s strengths and weaknesses. A proper match will allow the firm to be more effective and efficient. The strength and weakness portion of SWOT allows the manager to look at the strengths and weaknesses of the firm—they determine what the organization can do. An analysis of external opportunities and threats tells managers what the company might do. Matching the two segments should provide a reasonable direction for what the firm should do given its particular situation.

Business portfolio analysis is a strategy development tool which utilizes two factors to indicate potential business strategies. The two factors are: (1) relative market share and (2) market growth rate. The appropriate strategy is determined by the organization's position in a four-cell matrix. Organizations should develop a balanced portfolio of high risk, high return and low risk, steady return ventures just as in investment portfolios. High risk, low return items should be involved.

Porter’s model suggests that in order to develop effective organizational strategies, managers must understand and react to forces within an industry that determine an organization's level of competitiveness within that industry.

Student responses will vary according to which tool is best suited for large organizations however a combination of all four is probably the best.

3. Describe how an organization might use the BCG Growth-Share Matrix to evaluate its different strategic business units. Now, explain how an organization might use the GE Multifactor Portfolio matrix to evaluate its strategic business units.

BCG Growth Share Matrix utilizes the following labels to evaluate its different SBU’s:.

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"Stars" indicate high market growth rate in which the firm has a high market share. These will someday become the "cash cows." "Cash cows" are units that have a slow market growth rate, but the organization controls a large portion of the market. These units generate large positive cash flows which may be used in other units. "Question marks" are high growth industries in which the firm is a minor competitor. If the firm can become a major competitor, these units will become "stars." "Dogs" are units which are characterized by slow or no market growth, and the firm is a small competitor relative to the market leader. These units are a drain on organizational resources. Several important factors are not included in business portfolio analysis. Factors such as the overall market potential; strengths and weaknesses of the firm; seasonal and cyclical variation; and social, political, and ecological pressures are not examined.

The GE Multifactor Portfolio Matrix was designed to be more complete that the BCG Growth-Share Matrix. There are three major differences: (1) the plotting of each SBU according to industry attractiveness, (2) the plotting of each SBU according to business strengths, and (3) the graph shows not only an SBU's location on the graph, but also its size and the portion of the market each has captured.

4. Describe Porter’s generic business strategies and provide an example of each strategy.The model suggests that in order to develop effective organizational strategies, managers must understand and react to forces within an industry that determine an organization's level of competitiveness within that industry. Differentiation is a strategy focused on making an organization more competitive by developing a product or products that customers perceive as being different from products offered by competitors. Cost leadership is a strategy that focuses on making an organization more competitive by producing products more cheaply than competitors can. Focus is a strategy that emphasizes making an organization more competitive by targeting a particular customer.

5. Describe Porter’s Five Forces model. Why do organizations use Porter’s Five Forces?Porter’s Five Forces model is a framework utilized for industry analysis and business strategy development. The five forces that determine the competitive intensity and therefore attractiveness of a market are: the threat of substitute products, the threat of established rivals, the threat of new entrants, the bargaining power of suppliers, and the bargaining power of customers.

6. From your local newspaper or a national publication like BusinessWeek or Wall Street Journal, choose a company featured in the news. Then, analyze the company’s actions. In your opinion, how did competitive dynamics play a role in the company’s recent behavior?

The big consumer business news in November, 2010 was the imminent launch of the new Xbox with the Kinect feature by Microsoft. Students can research about the competitive dynamics in the video console industry with Xbox Kinect being a reaction to the wildly successful Nintendo Wii.

EXPLORING YOUR MANAGEMENT SKILL: PART 2

Your Management Skills Portfolio

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‘Strategic Planning at the Washington Post’1. Perform an environmental analysis for the Washington Post Company. Which

segment of the environment is causing the company’s problem(s)?Encourage students to visit Washington Post’s website (www.washingtonpost.com) to glean additional information. The external environment is causing the company’s problems. In particular, the emergence of the Internet and forms of digital news threaten the existence of the traditional newspaper industry. Also, in November, 2010, the company faced issues in its Kaplan unit.

2. Based on this analysis, develop a mission statement for the company. Also, develop three objectives that will help the company fulfill its mission.

Student responses will vary however the mission statement is the purpose for which, or the reason why an organization exists. The mission statement helps management focus human effort in a common direction and serves as a rationale for allocating resources. Student responses for the three objectives will vary however, organizational objectives should reflect and flow from the purpose of the organization expressed in the mission statement.

3. Review Porter’s generic strategies. Which one of these strategies would you recommend for the Washington Post Company? Explain.

Porter’s generic strategies include: differentiation which is a strategy focused on making an organization more competitive by developing a product or products that customers perceive as being different from products offered by competitors. Cost leadership is a strategy that focuses on making an organization more competitive by producing products more cheaply than competitors can. Focus is a strategy that emphasizes making an organization more competitive by targeting a particular customer. Students’ perceptions of which strategy they would recommend will vary.

4. Which of the four strategy implementation skills do you think will be most important for the company as it moves forward? Why?

Student responses will differ based upon individual perceptions of which skill is the most important. The interacting skill is the ability to manage people during implementation. The allocating skill is the ability to provide the organizational resources necessary to implement

a strategy. The monitoring skill is the ability to use information to determine whether a problem has arisen that is blocking implementation. The organizing skill is the ability to create throughout the organization a network of people who can help solve implementation problems as they occur.

Experiential ExercisesMichael Dell, the CEO of Dell Computers, has contacted your group for consulting purpose. In particular, Dell is concerned about the current state of the personal computer industry. He would like your group to use Porter’s Model for Industry Analysis to analyze the personal computer industry. What are the most important factors affecting each of the five forces in Porter’s model? After performing this analysis, describe the most important threat. In addition, describe whether or not your group finds the personal computer industry attractive. Responses:

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Porter’s Model for Industry Analysis suggests that in order to develop effective organizational strategies, managers must understand and react to forces within an industry that determine an organization's level of competitiveness within that industry. The most important factors which affect each of the five forces in Porter’s model will vary by student. However, the computer industry is extremely competitive and affected by several of the forces.

Student responses will vary according to what is the most important threat. Some examples would include: threat of substitute products, the threat of established rivals, and the threat of new entrants.

Student responses will vary as to whether their group finds the personal computer industry attractive. It is highly competitive but lucrative.

Experiential Exercises: You and Your Career

SWOT analysis represents an important tool for your strategic planning skill. Using SWOT analysis, top executives can better understand the strengths and weaknesses of their organization as well as the opportunities and threats in the external environment. Suppose you are interviewing for a position in an organization. How might SWOT analysis help you prepare for an interview? Now suppose you have just started working at an organization. How might SWOT analysis help you better understand your position and role in the organization?

This is a good exercise for students because it will help them in their job search as well as in career management. Student responses will vary.

CASES

UNILEVER REVITALIZES ITS MISSION AND STRATEGY

1. How effectively do you think Unilever’s mission statement establishes the company’s direction and important values? What changes, if any, would your recommend, and why?

The mission statement is general enough, “add vitality to life,” that management can interpret it to support a variety of initiatives aimed at the well-being of its customers. It also is effective in differentiating Unilever from its rivals.

Student responses will vary. Some students may have had no trouble with how this mission statement is so broad for some many products. Other students might feel that the statement gives managers the flexibility to compete in an ever-changing environment.

2. Identify one or more of Unilever’s strengths, weaknesses, opportunities, and threats. How might Cescau use the strengths to counteract the threats?

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Strengths are its profitability and deep pockets. Because it is so big, some of its brands might not be getting the support needed which could be a weakness. With an expanding global economy there is a vast opportunity for such an international company. There are scores of threats from other huge companies like Procter & Gamble, Colgate-Palmolive, and Nestle. By continuing the focus on the 400 more lucrative brands, Cescau can maintain the large cash inflow needed for advertising and other resources to battle the competition. Factors in both the internal and the external environment will determine whether these strategies will remain successful ones.

3. Where would on the BCG matrix would you place Unilever’s 400 remaining brands? Where would you place any newly developed products being introduced? Explain.

The remaining brands will constitute “Cash Cows” and perhaps some “Stars.” Newly developed products will be “Question Marks” until they prove consistently profitable.

VIDEONET EXERCISEStrategic Planning: Nom Nom

VIDEO HIGHLIGHTS

Nom Nom is food truck that sells banh mi, Vietnamese sandwiches, in the Los Angeles area. Prior to the actual launch of the business, Nom Nom’s owners created a website and other electronic links to the venture, creating buzz with photos and descriptions of their as-yet non-existent products. Response for Nom Nom was so great that the truck sold out completely within 30 minutes of its first day of operation. Nom Nom has never looked back. It has become a key player in the cultural lives of many local Angelenos, with movie companies, reality shows, TV and newspaper reporters all clamoring to jump on the Nom Nom bandwagon. Currently Nom Nom owners plan to expand to “brick and mortar” restaurants, and are looking into franchising their business. The film is done mainly in interview form, with co-owners David Stankulas and Jennifer Green talking about their venture.

Discussion Questions

1. Do the special advantages of having a restaurant on a truck outweigh the disadvantages for the owners of Nom Nom? Explain.

Although answers will vary, students should be able to see that in the particular case of Nom Nom, the advantages seem to outweigh the disadvantages. The disadvantages—which include cramped conditions and extremely small storage space—make it exceptionally difficult for the truck to operate as a restaurant. However, the advantages of being a truck, which include novelty, mobility, being perceived as “adorable,” and being able to cash in on the food truck craze, have all worked together to make Nom Nom a success. As owner David Stankunas says, Nom Nom wouldn’t have been nearly as successful initially had it been an ordinary restaurant, rather than a truck.

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2. What was the strategy of Stankunas and the other owners of Nom Nom when they began the venture? How has this strategy changed or evolved?

The owners never planned on being limited to a single truck. Their plan was to begin with one truck and build their brand. Once the brand was established, the owners thought they would move on to obtaining additional trucks, establish “brick and mortar” restaurants, then finally franchise their business. Those plans have recently changed, as the phenomenal success of Nom Nom has made it seem likely that they will acquire “brick and mortar” restaurants far ahead of schedule. Franchising the operation may not be too far beyond that.

3. How does owner David Stankunas feel about planning a business? What advice does he give for would-be entrepreneurs?

Stankunas is not a believer in overplanning, spending a lot of time creating formal business plans, or calculating such things as theoretical cost estimates. Instead, Stankunas advocates a position of “just do it” and “build it, and they will come.” He thinks it is more important to make steady progress on one’s entrepreneurial plans than to spend too much time trying to anticipate possible problems, since there is no way to predict the future. Stankunas cites his own experience in creating a company website before there was an actual company as evidence of the success of his approach. That preliminary work not only created “buzz” for the venture, it also helped solidify ideas in Stankunas’s own mind about what Nom Nom was and what it wasn’t. So when the venture finally got launched, the owners had a clear view of what they were actually creating.

Internet ActivityVisit Nom Nom’s Web site at nomnomtruck.com. Browse the menu, check out the photos, read the Twitter! Check out the “About” link. How did the company get their unique name? The Web site states that Locations & hours are subject to change without notice. For our most up-to-date hours please follow us on twitter!. What do you think of this unique business strategy? List some of the pros and cons of this strategy.

The company describes how it got its name in the “About” section of the web page:

“An onomatopoeical adjective based on the sound emitted when something is “oh so tasty” (either through hunger or flavorological value) that one gnaws through it without regard to cleanliness or etiquette. This sort of ravenous eating will often result in an “om nom nom nom” noise being emitted from the eater.”

The Twitter connection is most likely to keep its demographic engaged. The downside is that it may not appeal to those who are not into Twitter.

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http://twitter.com/nomnomtruck