1. Entrepreneurship for MBA Students
Business Plan
Lecture 6

2. [Company Name]
Business Plan

3. 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.

4. 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

5. 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.

6. Opportunities Problems and opportunities:
State consumer problems, and define nature of product/service opportunities created by those problems.

7. Business Concept
Summarize key technology, concept or strategy on which your business is based

8. Competition Summarize competition
Outline your company’s competitive advantage

9. Goals & Objectives Five-year goals
State specific measurable objectives
State market share objectives
State revenue/profitability objectives

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

11. Resource Requirements
Technology requirements
Personnel requirements
Resource requirements
Financial, distribution, promotion, etc.
External requirements
Products/services/technology required to be purchased outside company

12. Risks & Rewards Risks Addressing risk Rewards
Summarize risks of proposed project
Addressing risk
Summarize how risks will be addressed
Rewards
Estimate expected pay-off, particularly if seeking funding

13. Key Issues Near term Long 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

14. PLANNING AND STRATEGY

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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.

21. 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.

22. 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.

23. The Relationships of Strategies by Organizational Level

24. SWOT Analysis Strengths Weaknesses Opportunities Threats Mission
An organization’s fundamental purpose
Best Strategies
SWOT Analysis
To formulate strategies that support the mission
Those that support the mission and •
exploit opportunities and strengths
neutralize threats
avoid (or correct) weaknesses
Internal Analysis
Strengths
(distinctive
competencies)
Weaknesses
Threats
External Analysis
Opportunities
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Figure 3.2

25. 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.

26. Using SWOT Analysis to Formulate Strategy (cont’d)
Evaluating Organizational Weaknesses (cont’d)
Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

27. Using SWOT Analysis to Formulate Strategy (cont’d)
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 organization to achieve high performance.

28. 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.

29. Strategies Based on Product Life Cycle
The Product Life Cycle
Introduction
Time
Stages
Growth
Maturity
Decline
High
Low
Sales Volume
Figure 3.3

30. 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.

31. Related Diversification
A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.

32. 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.

33. Formulating Corporate-Level Strategies (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.

34. Formulating Corporate-Level Strategies (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.

35. 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

36. 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.

37. The BCG Matrix Relative market share Cash cows Dogs High Low Question
marks
Stars
Market growth rate
Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970.
Figure 3.4