Designing a Competitive Business Model and Building a Solid Strategic Plan
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Transcript of Designing a Competitive Business Model and Building a Solid Strategic Plan
1Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Designing a Competitive Business Model and Building a Solid Strategic Plan
2Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
A Major Shift . . .A Major Shift . . .. . . From financial capital to . . . From financial capital to
intellectual capital.intellectual capital. HumanHuman StructuralStructural CustomerCustomer
3Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Strategic ManagementStrategic Management Is crucial to building a successful Is crucial to building a successful
business. business. Involves developing a game plan to Involves developing a game plan to
guide a company as it strives to guide a company as it strives to accomplish its mission, goals , and accomplish its mission, goals , and objectives, and to keep it on its objectives, and to keep it on its desired course.desired course.
4Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Strategic Management Strategic Management and Competitive and Competitive
AdvantageAdvantage Developing a strategic plan is Developing a strategic plan is
crucial to creating a crucial to creating a sustainable sustainable competitive competitive advantageadvantage, the aggregation of , the aggregation of factors that sets a company factors that sets a company apart from its competitors apart from its competitors and gives it a unique position and gives it a unique position in the market that is superior in the market that is superior to its competition.to its competition.
Example: Blockbuster VideoExample: Blockbuster Video
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Key: Core CompetenciesKey: Core Competencies Unique set of capabilities a company Unique set of capabilities a company
develops in key areas, such as superior develops in key areas, such as superior quality, customer service, innovation, quality, customer service, innovation, team-building, flexibility, team-building, flexibility, responsiveness, and others that allow it responsiveness, and others that allow it to vault past competitors. to vault past competitors. They are what a company does best. They are what a company does best. Best to rely on a Best to rely on a natural advantage natural advantage (often (often
linked to a company’s “smallness”).linked to a company’s “smallness”). Examples: Netflix and Tom’s of MaineExamples: Netflix and Tom’s of Maine
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Building a Sustainable Competitive AdvantageBuilding a Sustainable Competitive Advantage
Superior value for customers
Sustainable competitive advantage
Capabilities
Core competencies
Skills
Lessons learned
7Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Strategic Management Strategic Management ProcessProcess
Step 1Step 1. Develop a vision and . Develop a vision and translate it into a mission translate it into a mission statement.statement.Step 2Step 2. Assess strengths and . Assess strengths and weaknesses.weaknesses.Step 3Step 3. Scan environment for . Scan environment for opportunities and threats.opportunities and threats.Step 4Step 4. Identify key success factors. Identify key success factors..
8Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Strategic Management Strategic Management Process Process
Step 5.Step 5. Analyze competition Analyze competition.. Step 6Step 6. Create goals and objectives.. Create goals and objectives. Step 7Step 7. Formulate strategies. Formulate strategies.. Step 8Step 8. Translate plans into actions. Translate plans into actions.. Step 9Step 9. Establish accurate controls. Establish accurate controls..
(continued)(continued)
9Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 1: Step 1: Develop a VisionDevelop a Vision andand
Create a Mission Create a Mission StatementStatement Vision – the result of an Vision – the result of an
entrepreneur’s dream of entrepreneur’s dream of something that does not exist yet something that does not exist yet and the ability to paint a and the ability to paint a compelling picture of that dream compelling picture of that dream for everyone to see. for everyone to see.
A clearly defined vision:A clearly defined vision: Provides directionProvides direction Determines decisionsDetermines decisions Motivates peopleMotivates people
10Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 1: Develop a Vision Step 1: Develop a Vision andand
Create a Mission Create a Mission StatementStatement Addresses question: “What Addresses question: “What
business are we in?”business are we in?” The mission is a written The mission is a written
expression of how the company expression of how the company will reflect an entrepreneur’s will reflect an entrepreneur’s values, beliefs, and vision – more values, beliefs, and vision – more than just “making money.”than just “making money.”
Serves as a “strategic compass.” Serves as a “strategic compass.” Examples: Chick-fil-A and Examples: Chick-fil-A and
Starbucks. Starbucks.
11Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 1: Develop a Vision Step 1: Develop a Vision andand
Create a Mission Create a Mission StatementStatement Survey of employees: 89 Survey of employees: 89
percent of employees say their percent of employees say their companies have a mission companies have a mission statementstatementbut…but…
Only 23 percent of workers Only 23 percent of workers believe their company’s believe their company’s mission statement has become mission statement has become a way of doing business!a way of doing business!
12Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 2: Assess Company Step 2: Assess Company Strengths Strengths
and Weaknessesand Weaknesses StrengthsStrengths
Positive internal factors a Positive internal factors a company can draw on to company can draw on to accomplish its mission, goals, accomplish its mission, goals, and objectives.and objectives.
WeaknessesWeaknesses Negative internal factors that Negative internal factors that
inhibit a company’s ability to inhibit a company’s ability to accomplish its mission, goals, accomplish its mission, goals, and objectives.and objectives.
13Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 3: Scan for Step 3: Scan for Opportunities Opportunities
and Threatsand Threats OpportunitiesOpportunities
Positive external factors the Positive external factors the company can exploit to accomplish company can exploit to accomplish its mission, goals, and objectives.its mission, goals, and objectives.
ThreatsThreats Negative external factors that Negative external factors that
inhibit the firm's ability to inhibit the firm's ability to accomplish its mission, goals, and accomplish its mission, goals, and objectives.objectives.
The Power of External The Power of External Market ForcesMarket Forces
Competitive Economic
Political and Regulatory
Technological
Social and Demographic
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Step 4: Identify Key Step 4: Identify Key Success FactorsSuccess Factors
Key success factors: Key success factors: controllable variables that controllable variables that determine the relative determine the relative success of market success of market participants. participants.
The keys to unlocking the The keys to unlocking the secrets of competing secrets of competing successfully in a particular successfully in a particular market segment.market segment.
Example: John H. Daniel Example: John H. Daniel CompanyCompany
Identifying Key Success Identifying Key Success FactorsFactors
List the skills, characteristics, and core List the skills, characteristics, and core competencies that your business must possess if it is competencies that your business must possess if it is to be successful in its market segment.to be successful in its market segment.Key Success FactorKey Success Factor How Your Company How Your Company
RatesRates1.1. Low 1 2 3 4 5 6 7 8 9 Low 1 2 3 4 5 6 7 8 9
10 High10 High2.2. Low 1 2 3 4 5 6 7 8 9 Low 1 2 3 4 5 6 7 8 9
10 High10 High3.3. Low 1 2 3 4 5 6 7 8 9 Low 1 2 3 4 5 6 7 8 9
10 High10 High4.4. Low 1 2 3 4 5 6 7 8 9 Low 1 2 3 4 5 6 7 8 9
10 High10 High5.5. Low 1 2 3 4 5 6 7 8 9 Low 1 2 3 4 5 6 7 8 9
10 High10 HighConclusions:Conclusions:
17Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 5: Analyze Step 5: Analyze CompetitorsCompetitors
NFIB study: Small business NFIB study: Small business owners believe they operate in a owners believe they operate in a highly competitive environment highly competitive environment and the level of competition is and the level of competition is increasing.increasing.
Yet, 97 percent of all U.S. Yet, 97 percent of all U.S. businesses do businesses do notnot systematically systematically track the progress of their key track the progress of their key competitors. competitors.
86.3% 83.4%
51.0% 48.5%39.7% 39.4% 37.7% 34.4%
0.0%
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Competitive Strategy
How Small Businesses Compete
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Step 5: Analyze Step 5: Analyze CompetitorsCompetitors
Analyzing key competitors allows an Analyzing key competitors allows an entrepreneur to:entrepreneur to: Avoid surprises from existing Avoid surprises from existing
competitors’ new strategies and competitors’ new strategies and tactics.tactics.
Identify potential new competitors and Identify potential new competitors and the threats they pose.the threats they pose.
Improve reaction time to competitors’ Improve reaction time to competitors’ actions.actions.
Anticipate rivals’ next strategic moves. Anticipate rivals’ next strategic moves.
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Step 5: Analyze Step 5: Analyze CompetitorsCompetitors
Techniques do Techniques do notnot require unethical require unethical behavior:behavior: Monitor industry and trade publications.Monitor industry and trade publications. Talk to customers and suppliers.Talk to customers and suppliers. Regularly debrief employees, especially sales Regularly debrief employees, especially sales
representatives and purchasing agents.representatives and purchasing agents. Attend trade shows and conferences and study Attend trade shows and conferences and study
competitors’ sales literature.competitors’ sales literature. Watch for employment ads from competitors to Watch for employment ads from competitors to
get an idea about their plans for the future. get an idea about their plans for the future. Conduct patent searches for patents Conduct patent searches for patents
competitors have filed. competitors have filed. Get EPA reports that provide information Get EPA reports that provide information
about the factories of competing about the factories of competing manufacturers.manufacturers.
21Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 5: Analyze Step 5: Analyze CompetitorsCompetitors
Techniques do Techniques do notnot require unethical behavior: require unethical behavior: Learn about the kinds of equipment and raw Learn about the kinds of equipment and raw
materials competitors are importing from the materials competitors are importing from the Journal of Commerce Port Import Export Reporting Journal of Commerce Port Import Export Reporting ServiceService..
Buy competitors’ products and “benchmark” them. Buy competitors’ products and “benchmark” them. Get competitors’ credit reports.Get competitors’ credit reports. Check out the reports publicly held competitors Check out the reports publicly held competitors
must file with the SEC. must file with the SEC. Investigate UCC reports. Investigate UCC reports. Check out the resources in your local library.Check out the resources in your local library. Use the World Wide Web to learn more about Use the World Wide Web to learn more about
competitors.competitors. Visit competing businesses to observe their Visit competing businesses to observe their
operations.operations.
23Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Knowledge ManagementKnowledge Management The practice of gathering, organizing, The practice of gathering, organizing,
and disseminating the collective and disseminating the collective wisdom and experience of a company’s wisdom and experience of a company’s employees for the purpose of employees for the purpose of strengthening its competitive position. strengthening its competitive position.
Knowledge management involves:Knowledge management involves: Taking inventory of the special knowledge Taking inventory of the special knowledge
the people in the company possess. the people in the company possess. Organizing that knowledge and Organizing that knowledge and
disseminating it to those who need it. disseminating it to those who need it.
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Is Setting Goals and Is Setting Goals and ObjectivesObjectives
Really Important?Really Important?““Would you tell me, please, which way I Would you tell me, please, which way I
ought to go from here?” said Alice.ought to go from here?” said Alice.““That depends a good deal on where you That depends a good deal on where you
want to get to,” said the Cheshire cat.want to get to,” said the Cheshire cat.““I don’t much care care where.…” said I don’t much care care where.…” said
Alice.Alice.‘‘Then it doesn’t matter which way you Then it doesn’t matter which way you
go,” said the cat.go,” said the cat. - Lewis Carroll’sAlice in Wonderland
25Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 6: Create Step 6: Create Company GoalsCompany Goalsand Objectivesand Objectives Goals - broad, long-range Goals - broad, long-range
attributes to be accomplished. attributes to be accomplished. ““BHAGs”BHAGs”
Objectives - more detailed, specific Objectives - more detailed, specific targets of performance that are targets of performance that are S.M.A.R.T.S.M.A.R.T. SSpecificpecific MMeasurableeasurable AAttainablettainable RRealistic (yet challenging)ealistic (yet challenging) TTimelyimely
26Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 7: Formulate Step 7: Formulate StrategiesStrategies
Strategy - a road map of the actions Strategy - a road map of the actions an entrepreneur draws up to achieve an entrepreneur draws up to achieve a company’s mission, goals, and a company’s mission, goals, and objectives. It is the company’s game objectives. It is the company’s game plan for gaining a competitive plan for gaining a competitive advantage.advantage.
Three basic strategies:Three basic strategies:
Strategy?
Cost leadership
Differentiation
Focus
Three Strategic Three Strategic OptionsOptions
Competitive AdvantageCompetitive Advantage
Target Target MarketMarket
IndustryIndustry
NicheNiche
Uniqueness PerceivedUniqueness Perceived by the Customerby the Customer
Low CostLow CostPositionPosition
Differentiation
Low Cost
Differentiation Focus
CostFocus
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Cost LeadershipCost Leadership Goal: to be Goal: to be thethe low-cost producer in the low-cost producer in the
industry (or market segment).industry (or market segment). Low-cost leaders have an advantage in Low-cost leaders have an advantage in
reaching buyers who buy on the basis of reaching buyers who buy on the basis of price, and they have the power to set the price, and they have the power to set the industry’s price floor.industry’s price floor.
Works well when:Works well when: Buyers are sensitive to price changes.Buyers are sensitive to price changes. Competing firms sell the same commodity Competing firms sell the same commodity
products.products. A company can benefit from economies of scale.A company can benefit from economies of scale.
Example: JetBlue AirlinesExample: JetBlue Airlines
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DifferentiationDifferentiation Company seeks to build customer loyalty Company seeks to build customer loyalty
by positioning its goods or services in a by positioning its goods or services in a unique or different fashion.unique or different fashion.
Idea is to be special at something Idea is to be special at something customers value.customers value.
Key: Build basis for differentiation on a Key: Build basis for differentiation on a distinctive competence, something that distinctive competence, something that the small company is uniquely good at the small company is uniquely good at doing in comparison to its competitors. doing in comparison to its competitors.
Examples: Urban Outfitters and the Ice Examples: Urban Outfitters and the Ice Hotel Hotel
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FocusFocus Company selects one or more customer Company selects one or more customer
segments in a market; identifies customers’ segments in a market; identifies customers’ special needs, wants, or interests; and then special needs, wants, or interests; and then targets them with a product or service targets them with a product or service designed specifically for them.designed specifically for them.
Strategy builds on Strategy builds on differencesdifferences among market among market segments.segments.
Rather than try to serve the total market, Rather than try to serve the total market, the company focuses on serving a niche (or the company focuses on serving a niche (or several niches) within that market. several niches) within that market.
Examples: Cereality and Flutter Fetti Fun Examples: Cereality and Flutter Fetti Fun Factory Factory
31Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 8: Translate Step 8: Translate StrategiesStrategies
into Action Plans into Action Plans Survey of senior executives: Survey of senior executives:
Companies achieved only 63 percent Companies achieved only 63 percent of the results in their strategic plans. of the results in their strategic plans.
Create projects by defining:Create projects by defining: PurposePurpose ScopeScope ContributionContribution Resource requirementsResource requirements TimingTiming
32Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Step 9: Establish Step 9: Establish Accurate ControlsAccurate Controls
Plan establishes the standards Plan establishes the standards against which actual against which actual performance is measured. performance is measured.
Entrepreneur must:Entrepreneur must: identify and track key identify and track key
performance indicators.performance indicators. take corrective action.take corrective action.
33Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Balanced ScorecardsBalanced Scorecards A set of measurements unique to a A set of measurements unique to a
company that includes both financial company that includes both financial and operational measuresand operational measures
Gives managers a quick, yet Gives managers a quick, yet comprehensive, picture of a comprehensive, picture of a company’s overall performance.company’s overall performance.
34Chapter 3: Strategic Plan Copyright 2008 Prentice Hall Publishing
Balanced ScorecardsBalanced Scorecards Four Perspectives:Four Perspectives:
Customer: How do customers see us?Customer: How do customers see us? Internal Business: At what must we Internal Business: At what must we
excel?excel? Innovation and Learning: Can we Innovation and Learning: Can we
continue to improve and create value?continue to improve and create value? Financial: How do we look to Financial: How do we look to
shareholders? shareholders?
The Balanced Scorecard Links Performance The Balanced Scorecard Links Performance MeasuresMeasures
Financial PerspectiveGoals Measures
Customer PerspectiveGoals Measures
Internal Business PerspectiveGoals Measures
Innovation and Learning PerspectiveGoals Measures
How do customersHow do customerssee us?see us?
How do we lookHow do we lookto shareholders?to shareholders?
At what must weAt what must weexcel?excel?
Can we continue toCan we continue toimprove and createimprove and createvalue?value?