Business Flanning. and Market Strategy

Transcription

1 Business Flanning and Market Strategy E. K. Valentin Weber State University dsage Los Angeles [ London New Delhi Singapore Washington DC

2 Contents Preface xiii PART I: THE BIG PICTURE 1 1 Business Flanning and Market Strategy in a Nutshell 2 Why Plan? 6 What Should Business Plans Cover? 7 What Is Our Market Strategy? 7 Which Customers Comprise Our Target Market? 7 What Is Our Value Proposition? 8 What Is Our Business Model? 8 What Market and Marketing Objectives Do We Seek? 9 What Is the Market Outlook? 9 How Will We Implement Our Strategy? 9 What Resources Will We Need? 9 What Financial Results Can Be Expected? 9 How Will Progress and Performance Be Monitored? 9 What Are Some Common Types of Business Plans? 10 How Do Corporate and Business Flanning Interact? 10 What Can You Learn from This Book That You May Not Learn Elsewhere? 11 What Do the Remaining Chapters Cover? 12 Some Good Advice Before Moving On 13 2 Market Strategy: The Business Plan s Cornerstone 15 Strategy from Two Perspectives 16 Strategy and the Game of Business 16 Strategy and Business Ecology 16 Fit and Competitive Advantage 16 Sustainability 17 Transparency 18 Accessibility 18 Exploitability 19

3 Durability 19 Summing Up 19 Competitive Advantage and Market Definition 20 Porter's Generic Advantages 21 Cost Advantages 21 Economies of Scale 21 Economies of Scope 23 Economies of Experience 24 Bargaining Power and Volume Discounts 24 VerticaL Integration 25 Differentiation Advantages 25 Bases of Differentiation 25 Vertical and Horizontal Differentiation 26 Illusory Functional Differentiation 26 Feasibility of Differentiation 27 Positioning 27 A Word of Caution 28 Operational Effectiveness and Competitive Advantage 28 Competitive Advantage from Another Angle 30 Size 30 Access 32 Flexi bi Ii ty 32 Porter's Generic Strategies 34 Cost Leadership (Cost Advantage, Broad Scope) 34 Cost Focus (Cost Advantage, Narrow Scope) 34 Differentiation (Differentiation Advantage, Broad Scope) 34 Differentiation Focus (Differentiation, Narrow Scope) 35 Extreme Differentiation Focus: One-to-One Strategy 35 Strategie Decisions, Commitment, and Timing 36 Remember This 37 Mini Case: Ford's Model T A Classic Lesson in Strategy 39 Mini Case Questions Devising a Business Model 43 Q Grip: A Case in Point 43 Delimiting a Venture's Scope 45 Identifying the Generic Business Model 45 Value Chains 45 Value Shops 46 Mediators 46 Virtual Businesses 46 Franchised Businesses 46 Licensing Agreements 47 Other Businesses 47

4 Turning the Generic Business Model into a Specific Business Model 47 Formulate a Value Proposition 47 Define the Businesses in 3D 49 Flow-Chart the Model 50 Remember This Getting a Handle on Costs and Financial Prospects 53 Getting Started 53 Estimating Expenditures on Capital Items 54 Estimating Operating Expenditures 54 Human Resources 55 Materials and Goods for Resale 57 Other Operating Expenditures 58 Outsourcing and Cost 58 Conducting Financial Reality Checks 58 Payback Analysis 58 Breakeven Analysis 60 Remember This Strategie Business Flanning from Top to Bottom 64 Market Strategy and the Business Model 64 Translating Market Strategy into Objectives, Activities, and Required Resources 65 Functional Plans and Programs 66 Strategy and Tactics 66 Internal, Vertical, and Horizontal Coherence 68 Goals and Objectives 68 Participation in the Flanning Process 69 More about Marketing Plans 69 Target Marketing, Positioning, and the Marketing Mix Revisited 69 Further Considerations: Transactional or Relational Marketing 70 Marketing Flanning Tasks 70 A Summary of Essential Topics 72 Remember This Managing the Flanning Process 74 Three Approaches to Strategizing and Business Flanning 75 Forecast-Driven Flanning 75 Template-Driven Flanning 76 Argument-Centered Flanning 77

5 Argumentation and Flanning 78 Structuring the Flanning Process 79 Flanning and the Human Element 81 Personal Factors 81 Motivation 81 Cognition 82 Emotion 84 Group Dynamics 84 Corporate Culture 85 A Word of Caution about Expertise 85 Remember This PART II: ADVANCED PERSPECTIVES AND DETAILS 89 7 Creating Shareholder Value by Creating Customer Value 90 Shareholder Value as a Function of Customer Value, Cost, and Competition 90 Customer Value (CV) and Net Customer Value (NCV) 91 Cost and Value Added 92 Competition and Price 92 Further Considerations 92 Customer Value and Customer Selection 92 Cost and Sales Volume 94 Competition and Price 94 Compete, Cooperate, or Invest in Politics 94 Cooperation 94 Investing in Politics 96 More about Customer Value 96 Value from a Consumer Perspective 96 Value from a Business-to-Business Perspective 97 Value from a Reseller Perspective 98 More about Choosing and Retaining Customers 99 Mass Marketing 99 Target Marketing 100 Bases for Segmenting Markets 101 Segmenting Markets: Two Practical Approaches 103 Selecting Target Segments 105 Positioning in Brief Review 105 Expeditionary Marketing and Customer Selection 105 More about One-to-One Marketing and Customer Retention 106

6 Remember This Situation Analysis Concepts and Frameworks 110 Situation Analysis in Overview 111 Competitor Profiling 111 Market Demand Assessment 113 From Demand Assessment to Sales Forecasting 114 The SWOT Approach to Situation Analysis 115 Strengths and Weaknesses of SWOT Analysis 115 Conspicuousness of Strategically Significant Particulars and Their Implications 116 Interdependencies Among SWOTs 116 Categorization and Strategie Insight 116 Further Limitations of the SWOT Framework 117 Making the Most of SWOT Analysis 117 Advancing Situation Analysis 120 Examining the Internal Situation 120 Internal Examination from a Resource-Based View 121 Operational Effectiveness 123 Appraising the External Environment 123 The Immediate Environment from Porter's Five Forces Perspective 123 Rivalry 124 The Threat of New Entrants 124 The Threat of Substitutes 125 Bargaining Power of Buyers 125 Bargaining Power of Suppliers 125 The Immediate Environment from a Value Net Perspective 126 Appraising the Peripheral Environment 129 Changes in Market Size 130 Demographic Shifts 130 Population Growth 130 Societal, Political, and Economic Forces 131 Fads 131 Learning 131 Technological Innovations 132 Technological Innovation and Product Displacement 132 Technological Innovation and Cost Structure 132 Network Externalities 133 Strategie Probing 133 Prospective Ventures: Poaching 134 Prospective Ventures: Pioneering 135 Defensive Vulnerability Probing 136

7 Vulnerability Probing and Market Definition Established Businesses: Offensive Probing Penetration Market Development Product Development Diversifikation Additional Growth Possibilities Concluding Comments Remember This Reporting Situation Analyses A Few Reporting Guidelines A Note on Netflix VOD Historical Perspectives on Netflix Branching Out Similarities and Differences between the Two Businesses The Impact of Copyright Law Competitive Economics of DVD Rentals Competitive Economics of VOD Report A: SWOT Formatting Report B: Freeform Formatting Strengths and Weaknesses of the Two Reports Remember This 9 Coping With Uncertainties Two Flanning Vignettes Vignette I: Top Shape Vignette II: Boomtown USA Narrowing Knowledge Caps to Reduce Uncertainty Explaining Assumptions and Claims to Reduce Uncertainty Constructing Scenarios to Cope with Uncertainty Sensitivity Analysis and Downside Risk Assessment Sensitivity Analysis Downside Risk Assessment A Note about Options Remember This Projecting Financial Results and Needs A Note on Cash Flow A Template for Reporting Financial Projections

8 More about Pro Formas PART III: WRITING UP AND FOLLOWING UP Writing and Pitching a Business Plan 182 Writing a Business Plan 183 Writing Executive Summaries 183 Crafting the Body 184 Nature of the Venture 185 Situation Analysis 186 Market Strategy 187 Marketing 187 Functional Matters not Addressed Elsewhere 187 Major Capital Expenditures and Leases 187 Implementation 187 Expected Financial Results 187 Risk 188 Appendices 188 A Few Writing Tips 188 Conduct a Final Review 189 Pitching a Business Plan 190 Remember This Raising Capital and Choosing a Business' Legal Structure 193 Raising Capital 194 Personal Resources 194 Funds without Strings Attached: Free Money 195 Funds with Some Strings Attached 195 Non-Personal Sources with Lots of Strings Attached 196 Angels and Venture Capitalists 196 Conventional Business Loans 197 Government Guaranteed Business Loans 197 Choosing a Business' Legal Structure 198 Remember This Monitoring Performance 201 Variance Analysis 202 Financial Performance in Context 202

9 Multi-Phase Performance Monitoring and Measuring 205 Contribution Analysis 206 Market Share as a Performance Metrie Appendix: A Sample Business Plan for Lynn's Hair in Style 210 Preface 210 Background 210 Lynn's Hair in Style Business Plan Index About the Author