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Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Designing a Competitive Designing a Competitive Business Model and Business Model and
Building a Solid Strategic PlanBuilding a Solid Strategic Plan
Designing a Competitive Designing a Competitive Business Model and Business Model and
Building a Solid Strategic PlanBuilding a Solid Strategic Plan
CHAPTER CHAPTER 33
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 2Ch. 3: Business Model and Strategic Plan
A Major Shift . . .A Major Shift . . .
From financial capital to intellectual From financial capital to intellectual capitalcapital
HumanHuman StructuralStructural CustomerCustomer
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 3Ch. 3: Business Model and Strategic Plan
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 objectives, and to keep it on its desired course.it on its desired course.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 4Ch. 3: Business Model and Strategic Plan
Strategic Management and Strategic Management and Competitive AdvantageCompetitive Advantage
Developing a strategic plan is crucial to Developing a strategic plan is crucial to creating a sustainable creating a sustainable competitive competitive advantageadvantage, the aggregation of factors , the aggregation of factors that sets a company apart from its that sets a company apart from its competitors and gives it a unique competitors and gives it a unique position in the market that is superior to position in the market that is superior to its competition. its competition.
Example: Shiftwise – temporary nursing Example: Shiftwise – temporary nursing
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 5Ch. 3: Business Model and Strategic Plan
Building a Competitive Building a Competitive AdvantageAdvantage
Consider four aspects of a small Consider four aspects of a small company:company:
1.1. Products they sellProducts they sell
2.2. Service they provideService they provide
3.3. Pricing they offerPricing they offer
4.4. Way they sell Way they sell
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 6Ch. 3: Business Model and Strategic Plan
Key: Core CompetenciesKey: Core Competencies
Unique set of capabilities a company develops Unique set of capabilities a company develops in key areas, such as superior quality, in key areas, such as superior quality, customer service, innovation, team-building, customer service, innovation, team-building, flexibility, responsiveness, and others that flexibility, responsiveness, and others that allow it to vault past competitors. allow it 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: Jobster and Advanced Composite Examples: Jobster and Advanced Composite
MaterialsMaterials
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 7Ch. 3: Business Model and Strategic Plan
Building a Sustainable Building a Sustainable Competitive AdvantageCompetitive Advantage
Superior value for customersSuperior value for customers
Sustainable competitive advantage
Sustainable competitive advantage
CapabilitiesCapabilities
Core competencies
Core competencies
SkillsSkills
Lessons learned
Lessons learned
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 8Ch. 3: Business Model and Strategic Plan
Strategic Management Strategic Management ProcessProcess
Step 1 Step 1 Develop a vision and translate it Develop a vision and translate it into a mission statementinto a mission statement
Step 2 Step 2 Assess strengths and Assess strengths and weaknessesweaknesses
Step 3 Step 3 Scan environment for Scan environment for opportunities and threatsopportunities and threats
Step 4 Step 4 Identify key success factorsIdentify key success factors
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 9Ch. 3: Business Model and Strategic Plan
Strategic Management Strategic Management Process Process
Step 5Step 5 Analyze competitionAnalyze competition
Step 6Step 6 Create goals & objectivesCreate goals & objectives
Step 7Step 7 Formulate strategiesFormulate strategies
Step 8Step 8 Translate plans into actionsTranslate plans into actions
Step 9Step 9 Establish accurate controlsEstablish accurate controls
(continued)(continued)
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 10Ch. 3: Business Model and Strategic Plan
Step 1: Step 1: Develop a VisionDevelop a Vision and and Create a Mission Statement Create a Mission Statement
Vision – the result of an entrepreneur’s Vision – the result of an entrepreneur’s dream of something that does not exist dream of something that does not exist yet and the ability to paint a compelling yet and the ability to paint a compelling picture of that dream for everyone to picture of that dream for everyone to see. see.
A clearly defined vision:A clearly defined vision: Provides directionProvides direction Determines decisionsDetermines decisions Motivates peopleMotivates people Allows for perseverance in the face of adversityAllows for perseverance in the face of adversity
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 11Ch. 3: Business Model and Strategic Plan
Step 1: Develop a Vision andStep 1: Develop a Vision and Create a Mission StatementCreate a Mission Statement
Addresses question: “What business Addresses question: “What business are we in?”are we in?”
The mission is a written expression of The mission is a written expression of how the company will reflect an how the company will reflect an entrepreneur’s values, beliefs, entrepreneur’s values, beliefs, and vision – more than just and vision – more than just “making money.”“making money.”
Serves as a “strategic compass.” Serves as a “strategic compass.” Example: Chick-fil-AExample: Chick-fil-A
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 12Ch. 3: Business Model and Strategic Plan
Step 1: Develop a Vision andStep 1: Develop a Vision and Create a Mission StatementCreate a Mission Statement
Elements of a mission statement:Elements of a mission statement: PurposePurpose of the company: What are we of the company: What are we
in business to accomplish?in business to accomplish? BusinessBusiness we are in: How are we going we are in: How are we going
to accomplish that purpose?to accomplish that purpose? ValuesValues of the company: What principles of the company: What principles
and beliefs form the foundation of the and beliefs form the foundation of the way we do business? way we do business?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 13Ch. 3: Business Model and Strategic Plan
Step 2: Assess Company Step 2: Assess Company Strengths and WeaknessesStrengths and Weaknesses
StrengthsStrengths Positive internal factors a company Positive internal factors a company
can draw on to accomplish its mission, can draw on to accomplish its mission, goals, and objectives.goals, and objectives.
WeaknessesWeaknesses Negative internal factors that inhibit a Negative internal factors that inhibit a
company’s ability to accomplish its company’s ability to accomplish its mission, goals, and objectives.mission, goals, and objectives.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 14Ch. 3: Business Model and Strategic Plan
Step 3: Scan for Opportunities Step 3: Scan for Opportunities and Threatsand Threats
OpportunitiesOpportunities Positive external factors the company Positive external factors the company
can exploit to accomplish its mission, can exploit to accomplish its mission, goals, and objectives.goals, and objectives.
ThreatsThreats Negative external factors that inhibit Negative external factors that inhibit
the firm's ability to accomplish its the firm's ability to accomplish its mission, goals, and objectives.mission, goals, and objectives.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 15Ch. 3: Business Model and Strategic Plan
The Power of External The Power of External Market ForcesMarket Forces
Competitive
Competitive
EconomicEconomic
Political and Regulatory
Political and Regulatory
Technological
Technological
Social and Demographic
Social and Demographic
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Step 4: Identify Step 4: Identify Key Success FactorsKey Success Factors
Key success factors (KSFs): factors that Key success factors (KSFs): factors that determine the relative success of market determine the relative success of market participants. participants.
The keys to unlocking the secrets of The keys to unlocking the secrets of competing successfully in a competing successfully in a particular market segment.particular market segment.
Example: John H. Daniel CompanyExample: John H. Daniel Company
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 17Ch. 3: Business Model and Strategic Plan
Identifying Key Success FactorsIdentifying Key Success Factors
List the skills, characteristics, and core competencies List the skills, characteristics, and core competencies that your business must possess that your business must possess
to be successful in its market segment.to be successful in its market segment.
Key Success FactorKey Success Factor How Your Company RatesHow Your Company Rates
1.1. Low 1 2 3 4 5 6 7 8 9 10 HighLow 1 2 3 4 5 6 7 8 9 10 High
2.2. Low 1 2 3 4 5 6 7 8 9 10 HighLow 1 2 3 4 5 6 7 8 9 10 High
3.3. Low 1 2 3 4 5 6 7 8 9 10 HighLow 1 2 3 4 5 6 7 8 9 10 High
4.4. Low 1 2 3 4 5 6 7 8 9 10 HighLow 1 2 3 4 5 6 7 8 9 10 High
5.5. Low 1 2 3 4 5 6 7 8 9 10 HighLow 1 2 3 4 5 6 7 8 9 10 High
Conclusions:Conclusions:
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 18Ch. 3: Business Model and Strategic Plan
Step 5: Analyze CompetitorsStep 5: Analyze Competitors
NFIB study: Small business owners NFIB study: Small business owners believe they operate in a highly believe they operate in a highly competitive environment and the competitive environment and the level of competition is increasing.level of competition is increasing.
Yet, 97 percent of all U.S. businesses Yet, 97 percent of all U.S. businesses do do notnot systematically track systematically track the progress of their key competitors. the progress of their key competitors.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 19Ch. 3: Business Model and Strategic Plan
FIGURE 3.3 How Small Businesses CompeteBased on: William J. Dennis, Jr., National Small Business Poll: Competition
(Washington, DC: National Federation of Independent Businesses, 2003), Vol. 3, Issue 8, p. 1.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
Competitor AnalysisCompetitor Analysis Direct competitorsDirect competitors
Offer the same products and servicesOffer the same products and services Customers often compare prices, features and Customers often compare prices, features and
deals among these competitors when they shopdeals among these competitors when they shop
Significant competitorsSignificant competitors Offer some of the same or similar products or Offer some of the same or similar products or
servicesservices Product or service lines overlap but not completelyProduct or service lines overlap but not completely
Indirect competitorsIndirect competitors Offer same or similar products in only a small Offer same or similar products in only a small
number of areasnumber of areas
3 - 20Ch. 3: Business Model and Strategic Plan
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 21Ch. 3: Business Model and Strategic Plan
Step 5: Analyze CompetitorsStep 5: Analyze Competitors
Analyzing key competitors allows an Analyzing key competitors allows an entrepreneur to:entrepreneur to: Avoid surprises from existing competitors’ Avoid surprises from existing competitors’
new strategies and tactics.new strategies and tactics. Identify potential new competitors and the Identify potential new competitors and the
threats they pose.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.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 22Ch. 3: Business Model and Strategic Plan
Step 5: Analyze CompetitorsStep 5: Analyze Competitors
Techniques do Techniques do notnot require unethical behavior: require unethical behavior: Monitor industry and trade publications.Monitor industry and trade publications. Talk to customers and suppliers.Talk to customers and suppliers. Debrief employees, especially sales 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 competitor’s employment ads.Watch for competitor’s employment ads. Conduct patent searches for patents competitors Conduct patent searches for patents competitors
have filed. have filed. Get EPA reports for the factories of competing Get EPA reports for the factories of competing
manufacturers.manufacturers.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 23Ch. 3: Business Model and Strategic Plan
Step 5: Analyze CompetitorsStep 5: Analyze Competitors
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 Internet to learn more about competitors.Use the Internet to learn more about competitors. Visit competing businesses to observe their Visit competing businesses to observe their
operations.operations.
(continued)
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 24Ch. 3: Business Model and Strategic Plan
Competitive Profile MatrixCompetitive Profile Matrix
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 25Ch. 3: Business Model and Strategic Plan
Is Setting Goals & ObjectivesIs Setting Goals & ObjectivesReally Important?Really Important?
““Would you tell me, please, which way I ought Would you tell me, please, which way I ought to go from here?” said Alice.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 where.…” said Alice.I don’t much care where.…” said Alice.
‘‘Then it doesn’t matter which way you go,” Then it doesn’t matter which way you go,” said the cat.said the cat.
- Lewis Carroll’s- Lewis Carroll’s Alice in WonderlandAlice in Wonderland
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 26Ch. 3: Business Model and Strategic Plan
Step 6: Create Company GoalsStep 6: Create Company Goalsand Objectivesand Objectives
GoalsGoals: Broad, long-range attributes to be : Broad, long-range attributes to be accomplished. accomplished.
““BHAGs”BHAGs” ObjectivesObjectives: More detailed, specific targets : More detailed, specific targets
of performance that are S.M.A.R.T.of performance that are S.M.A.R.T. SSpecificpecific MMeasurableeasurable AAssignablessignable RRealistic (yet challenging)ealistic (yet challenging) TTimelyimely
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 27Ch. 3: Business Model and Strategic Plan
Step 7: Formulate StrategiesStep 7: Formulate Strategies
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. objectives.
It is the company’s game plan for It is the company’s game plan for gaining a competitive advantage.gaining a competitive advantage.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 28Ch. 3: Business Model and Strategic Plan
Step 7: Formulate StrategiesStep 7: Formulate Strategies
Three basic strategies:Three basic strategies:
Strategy?
Cost Leadership
Cost Leadership
Differentiation
Differentiation
Focus
Focus
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 29Ch. 3: Business Model and Strategic Plan
FIGURE 3.4 Three Strategic Options
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 30Ch. 3: Business Model and Strategic Plan
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 advantages:Low-cost leaders have advantages: Reaching buyers who buy on the basis of priceReaching buyers who buy on the basis of price
The power to set the industry’s price floor.The power to set the industry’s price floor.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 31Ch. 3: Business Model and Strategic Plan
Cost LeadershipCost Leadership
Cost Leadership works well when:Cost Leadership 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: Anytime FitnessExample: Anytime Fitness
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 32Ch. 3: Business Model and Strategic Plan
DifferentiationDifferentiation Company seeks to build customer loyalty by Company seeks to build customer loyalty by
positioning its goods or services in a unique positioning its goods or services in a unique or different fashion.or different fashion.
Idea is to be special at something customers Idea is to be special at something customers value.value.
Key: Build basis for differentiation on a Key: Build basis for differentiation on a distinctive competence, something that the distinctive competence, something that the small company is uniquely good at doing in small company is uniquely good at doing in comparison to its competitors. comparison to its competitors.
Examples: Vosges-Haut Chocolate, Ice Hotel, Examples: Vosges-Haut Chocolate, Ice Hotel, and Indigenous Designsand Indigenous Designs
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 33Ch. 3: Business Model and Strategic Plan
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 the Strategy builds on the differencesdifferences among among market segments.market segments.
Rather than try to serve the total market, the Rather than try to serve the total market, the company focuses on serving a niche (or company focuses on serving a niche (or several niches) within that market. several niches) within that market.
Example: American Plume and Fancy Example: American Plume and Fancy FeatherFeather
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 34Ch. 3: Business Model and Strategic Plan
Step 8: Translate StrategiesStep 8: Translate Strategies into Action Plans into Action Plans
Survey of senior executives: Survey of senior executives: Companies achieved only 63% of the Companies achieved only 63% of the results in their strategic plans.results in their strategic plans.
Create projects by defining:Create projects by defining: PurposePurpose ScopeScope ContributionContribution Resource requirementsResource requirements TimingTiming
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 35Ch. 3: Business Model and Strategic Plan
Step 9: Establish Accurate Step 9: Establish Accurate ControlsControls
Plan establishes the standards Plan establishes the standards against which actual performance is against which actual performance is measured. measured.
Entrepreneur must:Entrepreneur must: Identify and track key performance Identify and track key performance
indicators.indicators. Take corrective action.Take corrective action.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 36Ch. 3: Business Model and Strategic Plan
Balanced ScorecardsBalanced Scorecards
A set of measurements unique to a A set of measurements unique to a company that includes both financial and company that includes both financial and operational measuresoperational measures
Gives managers a quick, Gives managers a quick, yet comprehensive, yet comprehensive, picture of a company’s picture of a company’s overall performance. overall performance.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 37Ch. 3: Business Model and Strategic Plan
Balanced ScorecardsBalanced Scorecards
Five Perspectives:Five Perspectives:1.1. Customer: How do customers see us?Customer: How do customers see us?
2.2. Internal Business: At what must we excel?Internal Business: At what must we excel?
3.3. Innovation and Learning: Can we continue Innovation and Learning: Can we continue to improve and create value?to improve and create value?
4.4. Financial: How do we look to shareholders?Financial: How do we look to shareholders?
5.5. Corporate Citizenship: Do we meet our Corporate Citizenship: Do we meet our responsibility to society as a whole, the responsibility to society as a whole, the environment, the community, and other environment, the community, and other external stakeholders? external stakeholders?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 38Ch. 3: Business Model and Strategic Plan
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 39Ch. 3: Business Model and Strategic Plan
ConclusionConclusion
The strategic planning process:The strategic planning process:
BeginsBegins with the nine steps. with the nine steps.
BecomesBecomes more efficient each time. more efficient each time.
TeachesTeaches entrepreneurial entrepreneurial discipline for a higher discipline for a higher chance of survival.chance of survival.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3 - 40Ch. 3: Business Model and Strategic Plan
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of
the publisher. Printed in the United States of America.