Business planning primer

BUSINESS PLANNING

PLANNING – THE COMPONENTS

Strategic

Plan

Financial Goal

Customer Goal

Processes Goal

Learning & Growth

Analysis

ExternalPEST

Internal

Ratios

Risks

Budgets

Value Chain

TOWS or SWOT

Growth

Opportunities

Marketing & Sales,

Service Plan

Customer or Market

Targets

How Reach Them?

The Four P’s

Operations

Plan

(Processes)

Inbound Logistics

Operations

Outbound logistics

HR Plan

Financial

Plan

Forecasts

F/C Cash Flow

P & L

Budgets

3-5 Yrs

Strategic KPI’s Operational

KPI’SFinancial KPI’sMarketing

KPI’S

Business Plan

EXTERNAL ANALYSIS

Industry Profitability

Driving ForcesOutlined two key objectives

Explain how they are changing the industry

Key Success FactorsOutline the two most important factors

Explain why they are necessaryShow industry specificity

Industry Profile •Industry Definition •Size •Growth Rate •Stage in Life Cycle •Number of Companies •Customers (Number of Buyers) •Ease of Entry/Exit •Capital Requirements •Economies of Scale •Experience Curve

Competitor Profile & Strategic Groups

•Two Independent dimensions •Where and how competitors fit the dimensions •Outline Key Competitors or Groups in terms of: • Name • Products • Current Strategy • Strategic Intent • Other Strategic Information

Porter’s Five Forces •Threat of new Entrants •Buyer Power

•Who are they?•Supplier Power

•Who are they?•Substitute Power

•What are they?•Rivalry

TOISSUES

INTERNAL ANALYSIS

Strategic Profile •Company NameWhich Industry it operates in•Vision•Mission•Goals•Size•Structure•Business Segments•Products / Markets & Industries (Current NOT historical) •Corporate Level Strategy•Business Level Strategy

Financial Analysis•Profitability•Liquidity•Gearing Ratios

•Strategic Implications (THE SO WHAT!)•Any other relevant information•Overall financial situation

VRIO / Value Chain•Key SCA’s, •TCA’s•CD’s •Problems caused by these

•Justify why they are this type of CI

•Identify and justify any Core Competencies (Or lack of them)

ISSUESKey Internal and External Issues

Articulated why they are important to the organisationRanked in order of the overarching issue being your issue followed on with your other

issuesLINKED TO YOUR ANALYSIS

FROM EXTERNAL ANALYSIS

STRATEGY DEVELOPMENTPotential Strategies

•Develop and Outline 2 strategies•Explain how they solve the issues•Linked to the analysis

Decision Criteria•Explain key reasons for one strategy over another•Included a detailed appendix table on decision criteria which:

• Includes key decision criteria (Financial Outcomes; Solves Issues)

• Shows a points scale• Explains the points scale• Justifies why each strategy received its

respective score

Recommended Strategy•Outlined the Chosen Strategy•Explained What’s good about it•Discussed Financial Implications•LINKED TO ANALYSIS

Industry Analysis

Segments

Driving Forces

Key Success Factors

ISSUESInternal & External

Mission & Goals

Corporate and

Business Strategy

Culture

INPUTS FROM LINKING TO

VISION

Mission & Goals

Corporate and Business

Strategy

Culture

STRATEGY IMPLEMENTATION

Action Plan•Explained key steps regarding implementation•Given the financial cost/benefit of each stage•LINKED TO THE ANALYSIS•Included a detailed table in the appendix which gives sufficient information

• Who, What, When, Deliverables, Key time points, SMART goals. Project management.

Conclusion•Sum up the benefits that your strategy brings to the company

•SELL IT AND CONCLUDE

EXECUTIVE SUMMARY

Risk Assessment

Overall Implications

Any other models/headings/sectio

ns as appropriate PRESENTATION:Defence against any objectionsWhat questions may be raised

Final Report PublicationSignoff – Project start

7

REMEMBER

SO.....

SO WHAT.....

WHAT NOW......

There may be a gap in the

market. BUT, is there a

market in the gap

PEST

Political Economic Social Technical

Sometimes PESTLE (PEST + Legal and Environment)

SWOT

Strengths Weaknesses Opportunities Threats

StrengthsThings that are

good now, maintain them, build on

them and use as leverage

WeaknessesThings that are

bad now, remedy, change or stop them.

OpportunitiesThings that are good

for the future, prioritize them,

capture them, build on them and

optimize

ThreatsThings that are

bad for the future, put in plans to

manage them or counter them

POSITIVE/ HELPFULto achieving the goal

NEGATIVE/ HARMFULto achieving the goal

INTER

NA

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infa

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fact

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of

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org

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EX

TER

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infa

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envir

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ent

NOTE

A PEST analysis most commonly measures a

market; A SWOT analysis measures

a business unit, a proposition or idea.

THE MARKETING MIX (4 PS)

Success in the marketplace depends upon the best combination of the following elements:

The Marketing Mix

Product Price Place (distribution)

Promotion

ObjectivesFeatures/optionsRange/styles/

sizesQualityService LevelGuarantee/

WarrantyBranding Packaging

ObjectivesStrategies/

policiesCostsDiscountsAllowancesGeographical

considerations

Credit facilities

ObjectivesChannels

chosenExtent of

coverageWholesalingRetailingTransportationLocation

ObjectivesBudgetAdvertisingSales promotionPublic relationsPersonal sellingDirect

marketing

BOUNDARY SCANNING

3. The marketing oriented phase:

Research •Customers needs and wants

Develop•The product or service•Matching customer needs and wants

Provide •The product or service they want

BOUNDARY SCANNING

What are my competitors doing What is the Market doing What is happening overseas What will the impact be here Economy

National Global

THE DIFFERENT TYPES OF MARKETS

The three main categories are:

1. Consumer 2. Organisational or business 3. International

SEGMENTING WHO ARE MY CUSTOMERS?

When dividing a large market into sub-markets several segmentation methods may be utilised

Segmentation ExampleAn antique shop may deliberately locate in an up-market suburb thus segmenting

geographically (location) psycho graphically (lifestyle) and behaviourally– informing customers when new

pieces of Royal Doulton become available

THE SEGMENTATION PROCESS

Ways of segmenting an organisational market by:

Geographics – same as consumer markets

Account characteristics – size, loyalty, credit rating

Buying behaviour – purchase formality and criteria, factors of importance

Product usage – assist firms operation, used in production process

WHERE DO I FIND IT ALL?

http://www.stats.govt.nz/tools_and_services/tools/business-toolbox.aspx

UNDERSTANDING CONSUMER BEHAVIOUR

THE USE OF PROMOTIONAL TOOLS – ‘PUBLIC RELATIONS’

Public relations tools – “used to create good will and understanding”

Publicity: news worthy items about the organisation and is not paid for (remember the definition of advertising)

Sponsorship: can be leveraged to be seen as a supporter of a worthy cause (environmental, social responsibility)

Prepared material: newsletters, house magazine, financial reports

Trade shows: variety of expos/fairs to promote image Hospitality events: Entertaining the Media or trade

evenings Media training/grooming/speech-writing:

promoting the right executive approach

THE MARKETING PLAN- CONTROL AND EVALUATION

The evaluation and control aspects of the Marketing plan should include critical key performance indicators (KPI’s) to measure and monitor the marketing plan

Target Market

Surveying Customers Conducting Market Research

Analysing Sales Figures

The Marketing Mix

Product KPI’sProduction spot checks for efficiencyQuality control check on product

Promotion KPI’sAdvertisingChecking advertising proofs on timeMonitoring sales after advertising

Sales PromotionMonitoring sales during and after promotion

Personal SellingNoting individual staff sales

Price KPI’sChecking competitors price Noting Competitor advertising

Place KPI’sShopping at competitors storesCounting in store customer foot traffic

CHANNEL LENGTH TYPES (HOW DO I GET TO MARKET)

Producer Consumer

Producer Retailer Consumer

Producer Wholesaler Retailer Consumer

Producer Agent Wholesaler Retailer Consumer

Types of distribution channels for the consumer market

PRICING CONSIDERATIONS

A number of factors influence the selection of a price

Influences On PriceSelection

Organisational

Market Place

Firms overall Objectives Marketing CostsProduction CostsDistribution CostsPromotional Costs

Total Costs

Marketing Objectives

Competitors pricing strategy Market Supply and Demand

Legal regulatory requirements Level of value to customer

THE INFLUENCE OF COST AND MARKETPLACE FACTORS ON PRICE

Consumer perception: Price may indicate degree of quality?

“If consumers believe extra benefits will be gained by paying more, and those benefits are important to them, then a higher price can be asked for”

ANALYSING COST AND MARKETPLACE FACTORS ON PRICE

Costs: Total costs are made up of fixed costs and variable costs. Fixed costs are those which in theory remain constant,

regardless of the level of production activity – rent, rates, insurance, salaries of administrators (overheads). Even when no production is taking place, these costs will continue.

Variable costs are those which vary according to the level of production and include direct labour and materials.

Not only should the above costs be taken into account when price setting, so also should R&D and set-up costs.

PRICING STRATEGIES, TECHNIQUES AND ADJUSTMENTS

Cost-related pricing techniques: Two basic methods can be used to

calculate a price on the basis of costs when setting a price:

1. Cost-plus method – most common in the retail sector entails adding a standard mark-up to the cost of goods to provide a profit margin.

Different categories will historically adopt different mark-ups – supermarkets will use 1%-2% for some lines while food service may use 100%-300%!

PRICING STRATEGIES, TECHNIQUES AND ADJUSTMENTS

Cost Plus Pricing Continued…Mark ups are determined by: The speed of stock turn overie fast turnover of stock and lower margins

supermarkets),slow turnover of stock and higher margins Product type ie cars vs clothes The cost pricing formula is:

Cost + Mark Up = Sales Price

PRICING STRATEGIES, TECHNIQUES AND ADJUSTMENTS

Break-even pricing:

Rossini Pasta produce a variety of convenience meals. These meals are sold for $8.00 each. Annual fixed costs (overheads) amount to $35,000 and variable costs (direct material and labour) are $3.50 per meal. The number of meals that need to be produced and sold to break-even, is calculated as follows:

Fixed costs Price – variable costs, therefore:

$35,000 = $35,000 = 7,778 meals($8.00 - $3.50) $4.50

BREAKEVEN – A QUICK ATTEMPT

FIXED COSTS Rent $ Machinery

Sewing Machines – Computers etc. Finance $ Depreciation $

TOTAL $ Power $ Phone $ Survival Income $ Admin

Marketing setup costs $ Printing costs $ Office Equipment $

TOTAL $

TOTAL FIXED COSTS $__________

VARIABLE COST

Fabric # of meters x cost per metre $(Include an allowance for wastage - offcuts etc. say 10%)

Labour Hours at $ per Hour $

Accessories / Ancillary Items Thread, Buttons, Trim, Lace $

Machine Wear Maintenance per month/max garments $

Packaging / Labelling $ Freight to Customer $_________

TOTAL VARIABLE COST $

BREAKEVEN CALCULATION

FIXED COST $ Variable Cost $ Sell Price (Excl GST) $ Margin per unit $

(Sell – Variable)

Unit Sales to Fixed = _______ = Break Even SELL

SO, Breakeven Units X Sell = required Turnover in $What if we drop the sales price by 20% or even 30% (i.e. End of season)

BUDGETED SALES

Prepare three budgets Worst Case scenario (Break even?) Best Case Scenario (The Dream Result!) Most likely (Mid point)

The “Most Likely” Budget is done after the worse and best case scenarios.