Strategic and Business Planning Workbook for those planning to introduce a new enterprise in rural and regional Australia. Fresh Fields
Strategic and Business Planning Workbook for those planning to introduce a new enterprise in rural and regional Australia.
Fresh Fields
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Fresh Fields – Strategic and Business Planning Workbook i
Strategic and Business Planning Workbook for those planning to introduce a new enterprise in rural and regional Australia.
Fresh Fields
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ii Fresh Fields – Strategic and Business Planning Workbook
Fresh Fields: Strategic and Business Planning Workbook for those planning to introduce a new enterprise
May 2008
RIRDC Publication No 07/147 RIRDC Project No UQ-108A
© 2008 Rural Industries Research and Development Corporation.
All rights reserved.
ISBN (174151 5432) ISSN 1440-6845
The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances.
While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication.
The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors.
The Commonwealth of Australia does not necessarily endorse the views in this publication.
This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to the RIRDC Publications Manager on phone 02 6271 4165.
Authors Contact Details
Mr David Milstein MIMC MAITD Dr Rob Fletcher David Milstein & Associates The University of Queensland ABN: 50 782 447 419 School of Land and Food
7 Gunyah Street Gatton College Lutwyche QLD 4030 LAWES QLD 4345 Phone: (07) 3857 8202; 0407 211 192 Phone: (07) 5460 1311 Fax: (07) 3357 6572 Fax: (07) 5460 1112 Email: [email protected] Email: [email protected]
In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form.
RIRDC Contact Details
Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600
PO Box 4776 KINGSTON ACT 2604
Phone: 02 6271 4100 Fax: 02 6271 4199 Email: [email protected]. Web: http://www.rirdc.gov.au
Published in May 2008 Printed on environmentally friendly paper by Canprint
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Fresh Fields – Strategic and Business Planning Workbook iii
Foreword
The ”Fresh Fields: Strategic and Business Planning Workbook” was developed for those planning to add value to a new or existing product or service. The workbook is designed to help primary producers and others in rural industries develop, implement and continuously review plans to successfully commercialise innovative industry ideas.
This project was funded from RIRDC Core Funds which are provided by the Australian Government.
This report, an addition to RIRDC’s diverse range of over 1700 research publications, forms part of our Rural People and Learning Systems R&D program, which aims to enhance human capital and facilitate innovation in rural industries and communities.
Most of our publications are available for viewing, downloading or purchasing online through our website:
n downloads at www.rirdc.gov.au/fullreports/index.html
n purchases at www.rirdc.gov.au/eshop
Peter O’Brien Managing Director Rural Industries Research and Development Corporation
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iv Fresh Fields – Strategic and Business Planning Workbook
Acknowledgments
The questionnaires in this workbook are in part based upon Future Focus. The Future Focus questionnaires were developed with funds provided by the Commonwealth and Queensland State Governments under the Small Business Professional Development Program. Aspects of the questionnaire have also been adopted from “Lions and Gazelles” and permission from the authors is acknowledged.
Aspects of the Planning Section are based upon original material developed by David Milstein & Associates in association with Primary Business Solutions Pty Limited. Permission to reproduce the material is acknowledged.
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Fresh Fields – Strategic and Business Planning Workbook v
Table of contents
Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Fresh Fields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Research checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Question 1 What do you want to achieve? . . . . . . . . . . . . . . . . . . . . . . . . 3
Question 2 Is there a need in the marketplace for the product? . . . . . . . . . 8
Question 3 Are you able to produce your product in commercial quantities?. . 15
Question 4 What are your human resources? . . . . . . . . . . . . . . . . . . . . . . 16
Question 5 What are your accounting and financial resources? . . . . . . . . 17
Question 6 What legal considerations do you need to be aware of? . . . . . 18
Question 7 What is your business structure? . . . . . . . . . . . . . . . . . . . . . . . 18
Question 8 Do you have the necessary information about financing? . . . . 19
Question 9 Do you have a plan for risk management? . . . . . . . . . . . . . . . 20
The Strategic Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Part 1 Strategic aspects of the plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 1 The Core Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2 Understanding your business and its operating environment . . . 40
Section 3 Priority areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4 Goal setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5 Assigning strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6 Setting objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7 The Implementation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Part 2 The Operational Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Part 3 The Financial Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
The Budget and cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Other financial considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Putting it all together . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Appendix 1 Assessing trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Appendix 2 Trends predicted to impact on the Australian business environment . . . 69
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Fresh Fields – Strategic and Business Planning Workbook 1
Fresh Fields
Are you looking for Fresh Fields? Have you decided to add value to your existing product/services or have you come across a new product/service that you think will increase the profitability of your business?
If this is you, then you are possibly seeking answers to questions like the following1:
n How do I make my idea happen?
n Do I have what it takes?
n How do I get money?
n How much will I have to invest before I get a return?
n Why will anyone buy this product or service?
n How do I sell it?
n Why will customers choose to buy from me and not my competitors?
n What are the rules?
n How do I run it?
n What alliances do I need?
n What sort of profit will I be able to make?
n How long before breakeven?
n How long before a positive cash flow?
The Fresh Fields process will assist you to answer questions like these by guiding you through the steps needed.
Step 1 Use the Research Checklist to do some researchThe checklist will lead you through a series of questions including:
n What do you want to achieve?
n Is there a need in the marketplace for the product?
n Are you able to produce your product in commercial quantities?
n What are your human resources?
1 Adopted from a list developed by the Department of Agriculture, Forestry and Fisheries Australia and available at the following website: http://www.affa.gov.au/agribiz.
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2 Fresh Fields – Strategic and Business Planning Workbook
The purpose of the checklist questions and your answers is to help you focus on those aspects of your feasibility study that you have not yet completed but which you need to consider in order to complete your Strategic Business Plan (as described in this workbook).
Step 2 Complete your Strategic Business PlanThis segment of the workbook will provide you with a three-part framework to complete your own Strategic Business Plan. In doing so, it helps you to consider the strategic, operational and financial aspects of your plan. This step draws on your answers from the Research Checklist. Time frames for reviewing different aspects of your plan are suggested in the development sections of the workbook.
Step 3 Implement your plan and continuously review progress
Once you’ve developed your Strategic Business Plan, the next step is to confidently put it into action!
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Fresh Fields – Strategic and Business Planning Workbook 3
Research checklist
The purpose of the checklist questions and your answers is to help you focus on those aspects of your feasibility study that you have not yet completed but which you need to consider in order to complete your Strategic Business Plan (as described in this workbook).
Question 1 What do you want to achieve?
What is your business idea?
What problem/s are you seeking to solve?
How will this venture solve these problems?
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4 Fresh Fields – Strategic and Business Planning Workbook
Personal considerations
Are you personally ready to progress and grow?
The following set of questions is designed to help you satisfy yourself that your goal is sustainable progress.
Indicate with a ✔ your preferred response
Yes Maybe No
1 2 3 4 5
I am building my business for the future.
I enjoy the satisfaction of:
n being independent
n increasing my personal net worth
n taking calculated risks
I am happy/able to devote significant energy and resources to improve the business
I plan to be in this business in three years’ time
I plan to be in this business in five years’ time
I am always looking for new ideas
I am always receptive to new ideas and am prepared to consider spending money on them if they will improve my business
Total your score
Are you ready for progress that will achieve a sustainable future for yourself and your family? (Answer “No” if you have an overall score above 15)
Yes No
Are you the type?
n Are you keen to be involved in creating and making a success of this new business venture?
n Are you going into this business venture for the right reasons?
n Do you want the business to be a successful long term venture?
n Do you understand the business that you have in mind?
n Have you had any experience in the industry which you will be operating?
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Fresh Fields – Strategic and Business Planning Workbook 5
n Do you have the skills to operate and manage the business?
n Are you prepared to learn the things that you need to learn?
n Are you prepared to take on the responsibility of making sure that things are done on time and properly?
Can you afford to start the new venture?
n Have you prepared a statement of assets and liabilities?
n Do you have sufficient funds for your other business and personal needs until this business venture starts generating a surplus?
n How much money can you put into the new business venture?
n What income support can you continue to receive from your existing farm and other businesses?
n Do you qualify for any government support?
n What security can you offer for a loan?
What can you bring to the business?
What experiences have you had that will benefit the new business?
What interests do you have that will benefit the new business?
What are the things that you will need to improve if you want to benefit the new business?
To help you determine your strengths and identify aspects that need attention please complete the following questions.
What are your personal talents?
To rate yourself in relation to your ability to perform the tasks set out in the table below, please answer the following questions:
Do you Yes No
communicate effectively?
handle stress?
negotiate skilfully?
manage time effectively?
motivate others?
handle disputes effectively?
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6 Fresh Fields – Strategic and Business Planning Workbook
What are your business management capabilities?
To rate yourself in relation to your business management capabilities please answer the following questions:
Do you have good management skills in the areas of: Yes No
strategic planning?
business planning?
quality assurance?
financial management?
financial analysis?
risk management?
marketing?
human resources?
computers?
e-mail and Internet?
What other resources do you bring to the business?
Yes No in place not yet
1 2 3 4 5
Knowledge about producing the value added product
Knowledge of the market
Access to capital
Access to people with needed skills in
n marketing
n manufacturing
n packing
n storage
n transport
n QA
Access to raw materials
Access to needed training programs
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Fresh Fields – Strategic and Business Planning Workbook 7
What will be your competitive advantage?
Resource
Competitive advantage
Yes No
Location
Water access – if required
Production capabilities
Communication skills
Capacity to expand
Level of debt
Management capabilities
Return on investment
People
n skills
n motivation
n willingness to learn
n flexibility
Uniqueness of new product idea
Income sources
Knowledge about the supply chain for the new product idea
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8 Fresh Fields – Strategic and Business Planning Workbook
Question 2 Is there a need in the marketplace for the product?
Industry information
What do you know about the industry that you will be involved in?
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
In which industry will you be operating?
What information do you have/need about this industry?
n gross profit margins
n key players in the supply chain
n terms offered to customers
n the names and addresses and terms of credit of suppliers
n average sales/turnover
n level of export
n image in the market place-domestic
n image in the market place-export
n quality standards
Do you know about the services offered by business associations and others?
Indicate with a ✔ on the scale, the most appropriate words to describe the industry in which your new business will operate
1 2 3 4 5
Trendy Conservative
Capital Intensive Labour Intensive
Few competitors Large number of competitors
Customers easy to define Customers difficult to define
Image important Image unimportant
High profit margins Low profit margins
Location unimportant Location important
No special selling skills required Special selling skills required
Limited promotion required Heavy promotion required
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Fresh Fields – Strategic and Business Planning Workbook 9
The market
Your market
Indicate with a ✔ your preferred response
Yes No
1 2 3 4 5
Have you defined the market by:
n size – how big is it?
n geographic location – where is it?
n age, sex, income level, interests and taste preferences
n the buying procedures, tolerance specifications, QA standards and use
Do you know who the key players in the value chain are?
Do you know where you plan to position your venture in the market in terms of price and quality?
What image will best suit the new business?
Characteristics of the market
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What do you know about the market?
How profitable is it?
How big is it, expressed in annual sales?
How rapidly has it grown in the last two years?
How rapidly it is expected to grow in the next five years?
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10 Fresh Fields – Strategic and Business Planning Workbook
Your product’s features
Indicate with a ✔ your preferred response
Yes No
1 2 3 4 5
Do you know what competing products are available?
Have you already grown/produced your product?
Do you know what is different and unique about the product you offer?
Do you know how your product will compete in terms of:
n price?
n the use to which it is put?
n terms of payment?
n method of distribution?
n customer accessibility?
n customer awareness?
n customer satisfaction?
n depth of range?
Can you sustain this uniqueness?
Can you add value to the basic product in the longer term?
Do you know what the status of your product’s life cycle is?2
Product acceptance
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
Have you tested your product in the market?
What do people think of your product?
Will it help if I brand the product?
What are the acceptable product specifications?
2 Products pass through a number of phases during their lifetime. It is often easier to achieve rapid growth during the earlier stages of its life. When growth slows (i.e. total demand starts to slow), growth in market share is often difficult and expensive. Growth during the decline stage of a product is, in most cases unlikely in the long term.
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Fresh Fields – Strategic and Business Planning Workbook 11
Promotion and advertising
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What forms of promotion will best suit this type of product?
What do the following forms of advertising cost?
n Direct mail
n Newspapers
n Magazines and trade journals
n Brochures
n Radio
n Television
n Sponsorship
Pricing
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
On what basis will you set prices?
n same as competitors
n cost plus
n price taker
Will you have a high or low gross margin?
Packaging and distribution
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What sort of packaging will you need?
What will this packaging cost?
How will you product reach the customer?
How will your product reach the end-user?
What will your distribution costs be?
What alternative distribution methods can you use?
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12 Fresh Fields – Strategic and Business Planning Workbook
Your potential customers
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What do they buy?
Why do they buy?
Where do they buy?
How often do they buy?
What pre-and after sales service do they expect?
How can you add value in their minds?
Your product’s supply chain
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What do you know about your product’s supply chain?
Who are members of the supply chain?
Who is/are the supply chain manager/s?3
How will you add value to others in the supply chain?
How can others in the chain add non-monetary value to you?
Which firm/s in the supply chain export?
Your readiness to participate in a supply chain4
Yes No
1 2 3 4 5
Are you willing to develop and commit your business to long term relationships with others in the supply chain?
Are you prepared to develop relationships based on mutual trust?
3 Lambert and Cooper define supply chain management as “the integration of key business processes from end-user through original suppliers that provides products, services and information that add value for customers and other stakeholders”.
4 Based on Anthony J. Dunne: Supply Chain Management: Fad, panacea or opportunity? School of Natural and Rural Systems Management, The University of Queensland, OCCASIONAL PAPER VOLUME 8 NUMBER 2, 2001.
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Fresh Fields – Strategic and Business Planning Workbook 13
Your potential competitors
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
Who are your competitors?
Where are they located?
On what basis do they compete?
n price?
n the use to which it is put?
n terms of payment?
n method of distribution?
n customer accessibility?
n customer awareness?
n customer satisfaction?
n depth of range?
What do they offer a customer that is better or different?
How easy is it for new competitors to enter the market?
Breakeven sales
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
Do you know what level of sales will be required to breakeven?5
5 “Breakeven sales” is important because it shows the minimum level of sales required to pay all costs. Sustained sales below this level will result in failure of the venture.
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14 Fresh Fields – Strategic and Business Planning Workbook
Export sales
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What do you know about the product’s export potential and how to go about exporting?
Will the product have export potential?
Who can you ask for export information?
Will you sell your product yourself or can you get others to sell it on your behalf?
If you use agents, on what basis will you pay others to sell on your behalf?
Do firms in your supply chain export?
Do you know the requirements that you will have to meet in order for your product to be accepted into the country to which you propose exporting?
Do you know how to arrange shipping and customs clearance?
Does the country to which you plan to export have the necessary facilities (e.g. cold chain facilities) needed to ensure that your product reaches your customers in pristine condition?
Do you have the QA system required by the overseas market?
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Fresh Fields – Strategic and Business Planning Workbook 15
Question 3 Are you able to produce your product in commercial quantities?
Indicate with a ✔ your preferred response
Yes No
1 2 3 4 5
Do you know how long it will it take to make/grow the new product?
Do you know the capacity of your resources? How much can you produce?
Will you have the right equipment?
Can you subcontract production?
Do you know the expansion capacity of the equipment?
Will you have the appropriate QA system?
Are people skilled to use the equipment safely?
Are people skilled to maintain/repair the equipment?
Where do you have to have the equipment serviced/repaired?
Do you have a safe and secure place to keep your equipment and crop?
Do you know how your production process can provide you with a competitive advantage?
Do you know what production system is most cost-effective for the proposed business?
Will it be more appropriate to set up your production system for jobbing or flow production?
Do you have appropriate arrangements to deliver product to market?
Do you know how to secure intellectual property rights?
Do you need to do ongoing research and development?
Where can you get help to do ongoing research?
Have you been able to secure raw materials?
Do you know if the raw materials can meet your specifications?
Have you been able to secure packaging materials?
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16 Fresh Fields – Strategic and Business Planning Workbook
Question 4 What are your human resources?
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
What task/s will need to be undertaken in the new business?
What skills will be needed to do these things?
Do you know many people will be working in the new business?
Do you know where and how to select staff?
What awards will apply?
Who will prepare job descriptions?
How many people will be full time? Part time? Casual?
Where will people be trained?
What government support is there for training?
Do you need to have any special permission to undertake this business?
Will the premises have approval from an Occupation, Health and Safety point of view?
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Fresh Fields – Strategic and Business Planning Workbook 17
Question 5 What are your accounting and financial resources?
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
Do you know what record keeping books you need/will need?
Do you know how to keep records or where to get an accountant who understands your new business?
Do you know how to cost the product?
Do you know how much money you will need to purchase:
n plant and equipment?
n additional land?
n fixtures and fittings?
n office furniture and equipment?
n motor vehicles?
n supplies of raw materials/stock-in-trade?
n bonds and deposits?
n legal and accounting fees?
n stationery (including letter heads, business cards, invoices etc.)?
n marketing resources?
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Question 6 What legal considerations do you need to be aware of?
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
Do you need to seek advice on the laws that affect:
n trade marks and patents?
n warranties and guarantees?
n sales?
n debt recovery?
n employment of staff?
n advertising and promotion?
n occupational health and safety?
n labelling and packaging?
n storage and use of materials?
n requirements of working with food?
n registration of a business name?
n registration of a business?
n taxation?
n GST?
n Business Activity Statement?
Question 7 What is your business structure?What form of business structure do you propose using and do you have information about the advantages and disadvantages of each?
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
Limited company
Sole trader/partnership
Trading trust
Co-operative
Company not for profit
Yes No
Have you registered a business name?
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Fresh Fields – Strategic and Business Planning Workbook 19
Question 8 Do you have the necessary information about financing?
Indicate with a ✔ your preferred response
Have Don’t have information information
1 2 3 4 5
n Banks
n Cooperatives
n Credit union
n Own capital
n Finance companies (leasing/hire purchase)
n Venture capital
Capital Required Funds Secured Type of funds Shortfall
Capital Equipment Specify
Working capital Specify
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20 Fresh Fields – Strategic and Business Planning Workbook
Question 9 Do you have a plan for risk management?Critical success factors will influence the success of the venture. What are the factors that could make or break your new venture? The examples provided below may not apply to you, but there may be others! (Indicate with a ✔ your preferred response.)
Critical success factor
Have Don’t have backup strategy backup strategy
1 2 3 4 5
Product – e.g. product failure
Production – e.g. essential equipment or raw materials unavailable; new technologies make product or production process obsolete or uncompetitive
Marketing – e.g. price cutting by competitors; sales projections not achieved
Human resources – e.g. staff with specialist skills unavailable
Legal – e.g. permits not approved
Business structure – e.g. partners fail to materialise/ pull out of the venture
Financial – e.g. running out of money before securing orders; unexpected currency fluctuations
Do you have back-up strategies if these do not go according to plan?
What will underpin successful achievement of your plans? Who will collect the information that I need? How long will it take you to get the information?
Critical success factors
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Fresh Fields – Strategic and Business Planning Workbook 21
The Strategic Business Plan
The planning framework The planning process has two phases. The first phase, “Setting directions”, helps you to understand your business and the environment in which it operates. The second phase, “Making it happen”, describes the actions that you will be taking to implement your targets. This is depicted below:
The planning process
Priorities for action GoalsCore
Strategy
Phase 1. Setting directions
Phase 2. Making it happen
Business
Environment
Priorities for action
Priorities for action
Priorities for action Priorities for action
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22 Fresh Fields – Strategic and Business Planning Workbook
A Strategic Business Plan combines both of these phases and consists of three components:
1. The Strategic Aspect
This describes the intent of the business, where it will be positioned in the market to take advantage of opportunities, the customer base and how the proposed product/s or service/s will add value for them. It identifies what factors are critical to the success of the new enterprise and your existing business, sets priorities and goals; develops strategies to achieve the goals and sets objectives which will determine if the goals have been achieved. The strategic elements of the plan include:
n The Core Strategy
n Understanding your business and its operating environment
n Priority areas
n Goal setting
n Assigning strategies
n Setting objectives
n The Implementation Plan
2. The Operational Plan
This is the short term plan linking your marketing, production, and human resource policies and activities. Combining these areas is necessary to achieve your business goals. The elements of an operational plan are:
n The Marketing Plan
n The Production Plan
n The Human Resource Plan
3. The Financial Plan
This generally consists of a balance sheet, profit and loss statement and cash flow statement and normally covers a three year period. The chief aspect to consider when developing a financial plan is your budget and cash flow. Other financial considerations include start up capital, breakeven analysis, return on investment, sources of funds and types of loans.
The table below outlines some of the core questions associated with different aspects of the business plan. NOTE: As you work through the workbook, you may need to answer the exercises for both your new enterprise and for your existing business.
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Questions to consider during the planning process
Aspect of the Plan Core Questions for Resolution
Rationale Why do you have a need for action? Are you doing it for the right reasons?
Core Strategy
What is your current Core Strategy?
What is your strategic intent (purpose and reason for the business)?
What is your market positioning in relation to:
n your business’s scope of operations?
n your target markets and customers?
n your product scope?
n your value proposition to customers (i.e. what is special or important about you in the eyes of customers)?
n your sources of sustainable uniqueness (i.e. what makes you different from others)?
What set of values will you use to guide the future of your business?
What factors underpin the success of your business?
What are your growth targets? (How do you want to grow? How do you measure growth in economic and/or personal and/or societal terms?)
Business Operating Environment
How successful are you at the moment?
What do you do well?
What could you improve?
What is the state of the industry?
What will the future look like?
What is changing?
What is causing change?
How will change affect your business?
Future Core Strategy
How well placed are you to manage the future?
Will your current Core Strategy be effective in the future?
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Priority Areas for Action
What changes have been identified in your business operating environment that could have a critical impact if not addressed (your priorities)?
What are the key opportunities and threats that must be addressed?
What goals do you seek to achieve for the priority areas you have chosen?
How will your new venture help achieve your goals?
Strategy Options
What strategies are needed to take advantage of strengths and opportunities, and minimise threats?
What will prevent you implementing these strategies?
What strategies do you need to counter these balancing forces?
What are the key outcomes that must be achieved by each strategy (your objectives)?
Implementation program
How will the strategies be executed (your action/operational plan)?
What needs to be done, when, by whom and with what resources?
The following three parts of the workbook will help you develop the strategic, operational and financial aspects of your strategic business plan. Start building your business plan by completing the Research Checklist and then moving on into Fresh Fields!
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Part 1 Strategic aspects of the planStrategic aspects of the plan consider a number of sections having to do with different areas of business planning:
Section 1 The Core Strategy
Section 2 Understanding your business and its operating environment
Section 3 Priority areas
Section 4 Goal setting
Section 5 Assigning strategies
Section 6 Setting objectives
Section 7 The Implementation Plan
Each section has a number of exercises to lead you step-by-step through the process. The information you compiled in the Research Checklist will help you complete the exercises in this and all following parts of the workbook.
Section 1 The Core Strategy
The Core Strategy attempts to answer the following questions:
n What is your purpose?
n Where are your opportunities?
n Where do you look for them?
n Which markets do you serve?
n Where are you located on the supply chain?
n Who are your customers?
n Why do customers prefer to buy from you?
n How do you create/add value for your customers?
n What are your unique and sustainable advantages over others?
n What value system determines how you do business?
n What are the critical success factors for the business?
Elements of the Core Strategy that you will develop include:
Step 1 Strategic intent (the purpose of the business)
Step 2 Market positioning
Step 3 The values that drive your business
Step 4 Factors critical to the success of the business
Step 5 Growth targets
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To assist you in describing your Core Strategy, you will be lead through a process that helps you define each element and then (in Step 6) you will be provided with the opportunity to consolidate this information into one statement.
Step 1 Strategic intent (the purpose of the business)
Your strategic intent or “purpose” describes the reason for your business – NOT the reason why you are contemplating making changes to the way you run your business.
Write your business’s strategic intent in the space provide below.
My business aims to
Because it will enable me to
NOTE: Have you described the short term or the long term? Is it just wishful thinking?
Step 2 Market positioning
This aspect of your plan deals with the choices you need to make with respect to the strategic aspects of marketing.
Within this step there are seven factors which need to be considered to help determine how you plan to position the business in the marketplace:
n The scope of your business
n Customers and markets
n End-users
n Your market/s
n Product scope
n Benefits to customers
n Sources of sustainable uniqueness
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To develop a market positioning statement, each of these factors will first be defined separately and then (in Step 2.8) consolidated.
Step 2.1 The scope of your business
The scope of your business defines VERY broadly the industry in which the business will operate. For example, if you plan to write plays, your business scope is lifestyle enhancement NOT entertainment. Similarly if you provide counselling support, your business scope is well being, NOT mental health.
The scope is depicted below:
Write your business’s proposed scope in the space provided below.
NOTE: Is your new product/service exploiting opportunities in the same or a different field of interest? A different market? A different market segment?
Market: FoodH
ealth
Foo
dsFa
st F
oods
Marketsegments
Scope: Lifestyle enhancement
Field of Interest
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28 Fresh Fields – Strategic and Business Planning Workbook
Step 2.2 Customers and markets
Think about and describe your customers – NOT the end-user.
Fill in the table describing your existing customers and your potential customers.
Existing Potential
Geographic Where are your customers located? How are you going to communicate with your customers? How are you going to do business with your customers?
Demographic Are customers in an industrial market or consumer market?
If customers are in a consumer market:n How old are they?n What gender are they?n What is their income level?
Psychographic Why do customers make purchases? What need are customers seeking to satisfy? What are customer’s personality traits? How will your product/service enhance customers’ lifestyle?
Buyer behaviour Where do customers buy? How often do customers buy? What benefits are customers seeking? What standard of quality do customers expect? How loyal are customers?
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Step 2.3 End-users
Think about the end-users of your product or service – NOT the customer.
Fill in the table describing the existing and potential end-users of your product or service.
Existing Potential
Geographic Where are they located? How are you going to communicate with them?
Demographic Are end-users in an industrial market or consumer market?
If they are in a consumer market:n How old are they?n What gender are they?n What is their income level?
Psychographic Why do they make purchases? What need are they seeking to satisfy? What are their personality traits? How will your product/service enhance their lifestyle?
End-user/buyer behaviour Where do they buy? How often do they buy? What benefits are they seeking? What standard of quality do they expect? How loyal are they?
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Combine Steps 2.2 and 2.3 and fill in the table below to describe your customer base and the end-user of your product/service.
Your customer base
The end-user of your product/service
Step 2.4 Your market/s
Where do you plan to position yourself in the market in your field of interest?
Will your market be domestic, national or international?
Place an “X” on the line indicating your response to the following questions.
How big do you plan to be?
Small Medium Large
How will you price your product or service?
Cheap Medium Expensive
What standard of quality will you set?
Low Medium High
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To assist you to define your price/quality position, mark with an “X” your current position on the graph below. Mark with an “O” where you plan to be in the future.
What will your image be in the market? Do you plan to be a market leader or follower?
Place an “X” on the line indicating where you see your image in the market.
Market follower Market leader
Do you have the skills and other resources necessary to develop or further develop your market? Review the answers you provided in the Research Checklist.
Use PRODUCT/SERVICES vs MARKETS Grid 1 to identify where you will be operating, in terms of your product/service and the market that you will be serving.
Quality High
Price High Price Low
Quality Low
Grid 1
Mar
kets
Products/Services
Existing New
New
Exis
ting
MarketPenetration
Product/ServiceDevelopment
MarketDevelopment
Diversification
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Use PRODUCT/SERVICES vs MARKETS Grid 2 to help define the PRIMARY SKILLS required for each strategy.
Step 2.5 Product scope
Have you clearly identified a need? Why will consumers buy your product/service? Product/service scope describes the range of product/services that you have e.g. dried, fresh.
Now describe the product scope.
NOTE: Remember to consider other factors, such as: Do you plan to cover the full range? Do you have the capacity to meet demand for the full range?
Grid 2
Mar
kets
Products/Services
Existing New
New
Exis
ting Market
PenetrationMARKETING
Product/ServiceDevelopment
R&D MARKETING
MarketDevelopmentMARKETINGFINANCIAL
DiversificationR&D
NEW TECHNOLOGIES FINANCIAL
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Step 2.6 Benefits to customers
This step relates your products to the benefits that customers are seeking. These benefits may be delivered by the core product, the actual product or by what is known as the augmented product. Examples62 of these different types of products are shown below for furniture made from bush timber:
People will buy your product or service because you are able to satisfy a need. Creating value for your customer is one of the paramount reasons for being in business (the other is of course, to help you achieve your own goals!).
The concept of “creating value for your customer” must be distinguished from the concept of “value adding”. The former refers to the process of positive exchange and the latter to activities that add economic value to a product – usually a commodity.
For example, you run goats. You decide to build your own feedlot and abattoir to process the animal further. These activities value add to your previous product – the live animal. You develop your feedlot and abattoir using the latest technology which will enable you to guarantee quality of supply. To your customer, this is essential. You are not merely providing a product, but guaranteeing a product attribute and this is important to your customer. Now you are adding value by providing your customer with something valuable!
Benefits thus describe the attributes of your product/service that customers regard as valuable (i.e. provides them with benefits) and on which they are prepared to spend money. The benefits to them are a function of the needs or wants that they are seeking to satisfy.
6 Kotler et al., Marketing.6th Edition.2004.pp 389-400.
Core Benefit Conversation piece
Actual Product
Features
StylingQuality
Warranty
After-SaleService
eg timber care
Core Product
Augmented Product
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Value is thus measured by the extent to which their need is satisfied. This is depicted below:
Below are some possible adjectives/traits to help you define the benefits that you will bring to your customers. You may also think of others.
n Innovative
n Integrity
n Loyalty
n Value for money
n Collaborative
n Quality product/service
n Efficient
n Reliable
n Commitment
n Flexible
n Care for the environment
n Consistency of supply
To do this step effectively, you will need to value map your product/service. This is done by researching your potential customers to find out which attributes are important to them, and which you can satisfy. Those needs that you can satisfy, but which existing or future competitors cannot, contribute to your business’s sustainable uniqueness (see Step 2.7 below).
Now describe the benefits of your product/service to customers
NOTE: How do you know that you have the attributes in the description above? If you are introducing new products/services into new markets, how do you know that you will continue to have these attributes?
Why do people buy goods or services?
People as individuals have needs
Value is created when needs are satisfied
Acknowledgements: Lyon and de Bono (2003) Marketing without Money. Pennan Publishing. Rob Robson, CEO, Harvest Fresh Cuts.
Organisations of people have needs
Individual Needs Organisational Needs
Value is measured by the extent to which a perceived need is satisfied.The following are typical yardsticks by which value is measured.
Physical Self ActualisationEsteemSocialSafety Economic
ProfitEnvironmentSustainable
SocialGood place to work. Good
corporate citizen.
Quality of life
ChoiceAvailability
SelfFulfilment
SelfImportance
Relativeprice
QualityConsistency
UsefulnessFit for
PurposeConven-
ience
Social &EnvironmentalResponsibility
Reliability of supply
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Before moving onto the next step, consider the following assumptions73 that people make:
n Customers will buy our product because we think it's a good product.
n Customers will buy our product because it's technically superior.
n Customers will agree with our perception that the product is "great".
n Customers run no risk in buying from us instead of continuing to buy from their past suppliers.
n The product will sell itself.
n Distributors are desperate to stock and service the product.
n We can develop the product on time and on budget.
n We will have no trouble attracting the right staff.
n Competitors will respond rationally.
n We can insulate our product from competition.
n We will be able to hold down prices while gaining share rapidly.
Have you made the same assumptions, or are your answers based on practical research?
Step 2.7 Sources of sustainable uniqueness
The sources of sustainable uniqueness are very important assets in the business and, if properly exploited, provide the competitive edge to your business. These will be established when assessing the business’s internal operating systems – see Section 2 below.
Step 2.8 Consolidate your information
Now describe your market and your position in the market.
NOTE: Are these descriptions realistic in terms of the skills and resources that you have or have access to?
7 Based on: Anon: Some Dangerous Implicit Assumptions Harvard Business Review July-August 1995.
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Step 3 The values that drive your business
Below is a list of values48 to help you describe your own. In the following box, list five that you feel best describe the principles by which you live.
n Integrity
n Truth
n Honesty
n Honour
n Fairness
n Justice
n Courage
n Fun
n Humour
n Happiness
n Fulfilment
n Worthwhile
n Innovation
n Free thinking
n Loyalty
n Commitment
n Co-operation
n Trust
n Teamwork
n Obedience
n Individuality
n Purposefulness
n Efficiency
n Value
n Hard working
n Well organised
n Initiative
n Flexibility
n Excellence
n Quality
n Power
n Control
n Care of the Environment
n Creativity
n Self Control
My most important values in order of importance – the values that I would not change no matter what!
Why?
Why?
Why?
Why?
Why?
NOTE: Why wouldn’t you change the values?
To provide a cohesive base for action, the values of your management group should be similar to your own. Not all members can be expected to share all common values, but they should share enough to enable them to be motivated to work together for you.
8 Adopted from Dairying Beyond 2000. Version 2. September 1999 p 58.
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Step 4 Factors critical to the success of the business
Insert in the following table between one and five aspects of the business that you believe are critical for you to achieve your Strategic Intent: (Categories offered are examples only.)
Category Critical factor/s
Leadership and business management skills Are you able to set a clear direction for the business? Are you able to motivate others to help you achieve it? Do you have the management skills, especially marketing skills that may be necessary to successfully commercialise your expanded/changed business?
Laws/regulations Are there any laws or regulations that could prevent the business being successful? e.g. environment management requirements or workplace health and safety
Market factors Is the market dominated by powerful competitors? Is your service threatened by interstate imports?
Technology Is your product/service reliant on a new technology?
Supply chain Are you able to meet the requirements set by others in your supply chain?
Human resources Do you have access to the skills needed? Do you need good business networks?
Management skills Will you have access to critical management skills?
Financial Do you have sufficient operating capital?
Other
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Now describe your business’s critical success factors.
Existing business
New venture
NOTE: What will you do if your assumptions are wrong?
Step 5 Growth Targets
Growth targets represent the quantifiable and qualified targets that you plan to hit if your plan is successful. While targets include those of an economic nature, they can also include personal and societal targets. Examples of different targets include:
Economic targets
n Return on Investment
n Turnover
n Market share
n Number of clients
n Number of new products/services
n Breadth of product/service range
n Level of employment
Personal targets
n Level of income
n Retirement date
n Succession plan/family role
n Business structure
Societal targets
n Support of the environment
n Employees’ conditions of employment
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Now describe your business’s growth targets.
Economic targets
Personal targets
Societal targets
Step 6 Consolidate your information
Now summarise your Core Strategy, covering each of the characteristics set out above.
Strategic Intent
Position in the market Your business’s scope
Position in the market
Target markets and customers
Product scope
Benefit to customers
Sources of sustainable uniqueness
Values that drive your business
Factors critical to the success of the business
Growth targets:
n economic
n personal
n societal
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Section 2 Understanding your business and its operating environment
To understand (and assess) new directions, it is important to consider them within the context of their environment. Their environment has two aspects – your existing business and the business environment in which the new enterprise will operate.
Knowledge of the current status of the environment is important for assessing the early prospects for the plan. However, longer term prospects are dependant upon changes in the business environment. These changes can be anticipated to some extent by tracking them. Some changes can be identified as emerging trends. Some changes will occur which are more difficult to anticipate (discontinuities). The latter are difficult to predict but they can have a profound effect on the business if they impact on the venture’s success factors described above. Where resources are limited, it is advisable to concentrate on developing contingency plans to address possible changes to at least the critical factors for the business.
The following three steps will help you understand your business operating environment:
Step 1 Profile your current business/resources
Step 2 Research and define the current status of the industry
Step 3 Assess trends and their possible impacts and consequences
The basic analysis is described in the following sections. The processes required for longer term planning are set out in Appendices 1 and 2.
Step 1 Profile your current business/resources
In this step you will analyse your current business operations/resources, separating strengths from weaknesses and define your sustainable uniqueness i.e. what gives you an ongoing edge over your competitors?
Step 1.1 Strengths and weaknesses
Below is a list of different strengths and weaknesses. Use them to help answer the questions in this step.
n Resources n Willingness to Learn
– Financial n Flexibility
– Other Skills n Location
– Management Skills n Networks
– Marketing and Promotion Skills n Knowledge about customers and competitors
– Communication Skills n Operating systems
– Technical skills n Up to date information
n Motivation to Act n Other?
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Questions to ask when thinking of strengths and weaknesses include:
n What can you do better than others in this industry?
n What can you do differently?
n What are the things that you do now that you can do better?
Now fill in the table below, identifying what you are really good at and where there is room for improvement.
Aspect of the business Strength Area for improvement
NOTE: On what basis have you made your decisions? Are they your opinions or those of others? How did you get the facts on which you based your decisions? Are industry performance benchmarks available and have you compared your performance to others in the industry?
Step 1.2 Your sustainable uniqueness
Some people refer to this as “competitive advantage”. That term has been redefined as “sustainable uniqueness” to better reflect modern business practice which emphasises collaboration within and along the supply chain. To identify your sustainable uniqueness, ask yourself which aspect/s and resources of your business will provide you with an edge over your competitors on an ongoing basis?
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Now complete the following table identifying those resources contributing to your business’s sustainable uniqueness.
Resource
Sustainable uniqueness
Yes No
Farm size
Soil type
Location
Rainfall
Water access
Production capabilities
Communication skills
Capacity to expand
Level of debt
Management capabilities
Pest management practices
Equipment
Return on investment
People
n Skills
n Motivation
n Willingness to learn
n Flexibility
Other income sources
n On farm
n Off farm
Uniqueness of new product/service idea
Knowledge about the supply chain for the new product/service idea
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Now describe your sustainable uniqueness in the table below.
NOTE: How can you sustain this uniqueness? What will you do if it is not sustainable or ceases to be unique?
Step 2 Research and define the current status of the industry
Complete the following table to help you define the industry
Factor Current position
Customers and markets
Size Is the industry large enough to enable you to sell your product/service at a reasonable profit?
Growth rate Will demand for the product/service grow at a rate that will allow for new entrants in the market and yet continue to allow you to make a reasonable return on your investment?
Ease of entry into the market What makes it easy for others to enter the market? What prevents others from entering the market?
Product differentiation How do people differentiate their products? Why?
Product life cycle How mature is the domestic market? How mature are export markets?
Product acceptance How long will it take for new product/service to gain acceptance in the market?
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Factor Current position
Customer and end-user characteristics How are customers and end-users categorised? (see Sections 2.2 and 2.3 above)
Promotion strategies How do competitors promote their product/service? Which are the successful strategies?
Pricing strategies What pricing strategies are used in the industry? Who sets prices? How quickly do competitors react to price changes/discounts? Is discounting common?
Image in the market place – domestic What is the image of the industry in the mind of customers and consumers? If it is not positive, what needs to be done to change the image? How expensive will it be to change the image?
Threats from imports How likely is it that cheaper imports will exploit opportunities you plan to create?
Image in the market place – export What is the image of the industry in the mind of customers and consumers? If it is not positive, what needs to be done to change the image? How expensive will it be to change the image?
Export opportunities Have opportunities been established?
Competitors and the nature of competition
Number of competitors Are there existing competitors? If yes, how will they react to a new entrant (you)? Is the market likely to become oversupplied with competitors? Are competitors likely to agree to collaborate for everyone’s advantage?
Operating systems: (e.g. Production and Marketing Processes and Operations, Supply Chains, Business Relationships)
Critical success factors What are the secrets to success/failure?
Technology What technologies are required to produce, process, package and distribute your product? Are they readily available?
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Factor Current position
Availability of human skills What skills are required and how readily available are they?
Capital intensive/labour intensive Does the industry require heavy investment in equipment? Is the work reliant on a large labour force? Is the labour available when required?
Level of profitability – gross profit What are the likely GP margins?
Level of profitability – return on investment What return on investment is likely? Will this meet your expectations?
Importance of location Is location important? Why?
Nature of supply chain How many supply chains are there in the industry? How long is the supply chain? How closely do players in the supply chain work together?
Quality standards What quality standards are in place? How affordable is it to achieve these standards? How important is quality in the marketplace? How important is product safety in the marketplace?
Step 3 Assess trends and their possible impacts and consequences
What are the major trends that could impact on the business? For ease of analysis, trends are grouped into categories called domains. Trend analysis is of greater significance, when the risk of change is significant i.e. the likelihood of the change occurring is high AND the impact of the change is likely to be significant.
Typical trends currently identified, include:
Social
Demographic trends such as
n population growth
n urbanisation
n aging populations in the OECD countries
n education levels (the “knowledge revolution”)
n autonomy of women and minorities
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Technological
n biotechnology
n information technology
n communication
Economic
n globalisation
n e-commerce
n industry convergence (supply chains)
n the network economy
n workforce changes
n ethical marketing
Environmental
n biodiversity
n global warming
n sustainability
n green clean up
n environmental impact management
n emission control
Political
n conservative politics
n increased number of democracies
n intergenerational equity
n prospects for war and peace
The procedure to assess trends and determine their potential impact on the business is set out in Appendix 1. This information is used to select priority areas for actioning in the Strategic Plan. Detailed examples of these suggested trends are set out in Appendix 2.
Now complete the exercises in Appendix 1 assessing the impact and opportunities that might arise for your business due to major trends.
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Section 3 Priority areas
The priority areas will be unique for each venture. They can be classified into two categories, those that:
1. create opportunities to build upon the enterprise’s sustainable uniqueness and/or address internal weaknesses
2. impact on any of the business’s critical success factors (see Section 1, Step 4).
It is likely that your priority areas will cover no more than the following six categories. It may be appropriate to develop strategies covering some or all of the sub-categories.
Marketing
Market niche (market sector/sub sector that you operate in)
What segment of the market will the business focus on? Define the segment in terms of type of customer and their needs, price and quality.
Market position
Where will the business be positioned in the market in terms of size and quality? e.g. high quality/high price.
Market and customer management
How will the business communicate with customers and consumers? (advertising and promotion)
Competitors
Who are your key competitors?
Quality
Quality could include awards won, landmark buildings designed, client testimonials, etc. What are the quality standards required by customers in the proposed market niche?
Environmental Stewardship
Can the business demonstrate that it is not contributing to environmental degradation?
Relationships
External
How will the business interact with other members of the supply chain?
How will the business interact with Competition?
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Internal – Management and Human Resources
Management skills
Management styles
Employment of non-family management
Skills development for management and staff
Production
Level of output
Use of technology
Quality standards
Impact on the environment
Resource management
Financial/profitability
Return on investment – ROI
Financial risk
Growth
Financial risk can be defined by the certainty with which the business is able to meet its operating commitment, pay interest on loans and have the ability to support growth through increased borrowings.
The priority areas relating to ROI and financial risk will provide the framework for the objectives in your business plan. A typical set could include:
n earnings per share of 25 per cent
n a return on investment of 20 per cent
n gross profit margins of 30 per cent
n a current ratio of 2:1
n a ratio of 1:1 of owner’s equity to borrowed funds
Personal Goals
What do you personally want to achieve from the new business?
A typical set of personal goals could include:
n improved financial security
n increased personal wealth
n new challenges
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Not all your personal goals will be related to the business. None the less you should state them in writing because you need to take them into account because they will affect the priority areas that you set for the business.
How will you measure achievement of your personal goals?
A typical set of objectives to meet the foregoing personal goals could include:
n I want to increase my net worth by 50 per cent over the next three years.
n I want to expand my business interests by twenty percent within three years.
n I want to retire within seven years
Selecting priority areas
It is impractical to select more than five priority areas. Use the following criteria to select the five most important priority areas if you have too many:
n Is it critical for achieving the CORE STRATEGY?
n Will it ensure/enhance your SUSTAINABLE UNIQUENESS?
n Will it ensure/enhance your MARKET POSITION AND IMAGE?
n Will it ensure/enhance access to required SKILLS?
n Will it improve the QUALITY of the PRODUCT/SERVICES?
n Will it increase TURNOVER/PROFITS?
n Does it address the CRITICAL SUCCESS FACTORS for the business?
Set out in the table below your priority areas (e.g. establish the market; ensure funding for all resources; production of product that meets QA standards of quality and safety).
Priority Area Reason for selecting the priority area
1.
2.
3.
4.
5.
Having selected your priorities, it is necessary to decide what you want to achieve in addressing the priority. This is goal setting, which is covered in Section 4.
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50 Fresh Fields – Strategic and Business Planning Workbook
Section 4 Goal setting
What are you seeking to achieve in each priority area? The goals that you set for each priority area will answer this question.
Complete Table 1 setting out the goal for each priority area
Table 1
Priority area Goal
1.
2.
3.
4.
5.
Section 5 Assigning strategies
Strategies are the activities that must be undertaken if goals are to be achieved. Although they are each directly linked to a specific strategic imperative, each individual strategy should take account of the issues identified when analysing the business environment.
What are the key STRATEGIES to achieve your goals i.e. how do you plan to achieve them?
Use Table 2 to describe your strategies for achieving each goal.
Table 2
Priority area*
Goal
Strategy
Strategy
Strategy
Strategy
Priority area
Goal
Strategy
Strategy
Strategy
Strategy
Priority area
Goal
Strategy
Strategy
Strategy
Strategy
* Use the priority areas and goals from Table 1. Extend the table as needed.
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Section 6 Setting objectives
Objectives provide measurable targets, or milestones, to assess progress of the strategies towards achievement of the business’s goals. Unlike goals, which are general directions, objectives have specific performance measures. They also answer the question “Why are you implementing the Strategy?”
Setting objectives allows accountability to be built into the Strategic Plan. Objectives should be:
Specific
A Measurable outcome (e.g. by 20 per cent)
Actionalble
Realistic
Within a Time deadline!
Each strategy determined in Section 5 must have its own objectives. Where appropriate, assign both short and long term objectives to each strategy.
Use Table 3 to describe your objectives.
Table 3
Strategy Objective
Short Term
Longer Term
Do your objectives have Specific topic/s?
Do your objectives have Measurable outcomes?
Are your objectives Actionable?
Are your objectives Realistic?
Do your objectives have Time deadlines?
Strategy Objective
Short Term
Longer Term
Do your objectives have Specific topic/s?
Do your objectives have Measurable outcomes?
Are your objectives Actionable?
Are your objectives Realistic?
Do your objectives have Time deadlines?
Extend the table as needed.
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Tables 1, 2 and 3 can now be consolidated into Table 4.
Table 4
Priority area 1:
Goal:
Strategy Objective
1.1 Short Term Longer Term
1.2 Short Term Longer Term
Extend the table as needed.
NOTE: This concludes the Strategic aspects of the Business Plan. If you do not plan to prepare an Operational Plan (Part 2 below) you should prepare an Implementation Plan (Step 7 below). This will provide you with a detailed roadmap of what is required, as well as a control system that will enable you to manage implementation of the strategic component of the Business Plan.
Section 7 The Implementation Plan
What things need to be done to implement the strategic aspects of the plan? You’ll need to answer questions such as:
n How will you market your product/services?
n How will you produce them?
n Who will do the work?
n How will you allocate tasks?
n Who will take responsibility for doing what?
n How long will it take?
n How will you know that you are on target?
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These questions are answered in the operational aspects of the plan – see Part 2 below. If you do not intend to do a full Business Plan, your Strategic Plan requires an Implementation Plan to facilitate its execution. There are two steps to making an Implementation Plan:
1. List all the activities/actions (STRATEGIES) that have to be undertaken to achieve the plan.
2. List or each activity:
n what action is required
n how will it be done
n who is responsible for undertaking the activity
n by when they will have to complete it
An outline of an Implementation Plan is set out below.
Implementation Plan
Priority area 1:
Goal:
Strategy 1.1:
Task ID
Action required (What needs to be done / what has to be delivered)
How (How the task is to be performed + the resources required) By whom By when
Extend this table as needed for each priority area and each strategy.
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Part 2 The Operational Plan The Operational Plan is a short term plan linking your marketing, production, and human resource policies and activities. Combining these areas is necessary to achieve your business goals. The elements of an operational plan are:
n The Marketing Plan
n The Production Plan
n The Human Resource Plan
Their relationship to the strategic aspects of the plan and to each other and the budget is summarised below.
Detailed diagrams of how each of the separate plans can be developed are shown in Figures 1-3 below. These plans provide the information to enable you to prepare the budget and cash flow and should be completed in the order depicted above, although they may need to be modified because of constraints created/imposed by other aspects of the business. Each plan is developed using the same general steps as follows:
Marketing Plan Production Plan Human Resource Plan
Step 1 Research Research Research
Generate information Generate information Generate informationStep 2
Forecast and set sales targets
Forecast and setproduction targets
Forecast and sethuman resource targets
Step 3
Develop the marketing plan
Develop a production plan
Develop ahuman resource plan
Step 4
Step 5
The Business Plan
The annual budget
Develop the marketing plan
Based on Business Review and Planning produced by the Small Business Development Corporation of Victoria 1985
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Step 1 Research
Start with gathering the knowledge you need. Has your research given you enough information to prepare your forecasts (be they marketing, production or human resource in nature) with confidence?
Step 2 Generate information
Collected data needs to be processed to convert it into useful information. This requires some form of analysis. The form of the analysis required will be determined by the nature of the data and type of information needed.
Step 3 Forecast and set targets
Calculating sales targets that will give you the level of profit you require. A formula to calculate breakeven is provided in Part 3 The Financial plan.
To set sales targets you need to know your fixed costs, your gross profit margin and the profit desired. With this information, use the following formula:
Sales target = fixed costs + profit x 100 gross profit margin
A worked example:
Your fixed costs are $55 000 Your gross profit margin is 33.33% Your desired profit is $5 000
Sales target = $55 000 + $5 000 x 100 33.33
Sales target = $60 000 x 100 33.33
Sales target = $180 000
NOTE: The sales targets must be integrated with both the production and human resource targets.
Step 4 Develop the plan
Details to be considered when developing each of these plans are set out in Figures 1-3 below.
Step 5 Integrate the plan into the Business Plan and the Budget
Ensure that the three plans logically complement one another before commencing the budget. That is, ensure that production targets are able to meet projected sales targets – or that other steps have been taken to cover any production shortfalls.
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The market■ Who ■ Why■ When ■ How much■ WhereCompetitionWhy does the customer prefer me?Trained personnelRegulations
Step 1
Step 2
Step 3
Step 4
Step 5
Based on Business Review and Planning produced by the Small Business Development Corporation of Victoria 1985
The Marketing Plan
Research
Information
Sales targets
Marketing plan
The Business Plan
The annual budget
Production capacity
$$$$ and units
■ Market niche ■ Promotion■ Product range ■ Advertising■ Pricing ■ Publicity■ Credit ■ Packaging■ Purchasing ■ Customer service
Figure 1
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Size of field/sSeasonality issuesGrowing time/sPlant sizeLayoutWork flowStock controlWater availabilityQA SystemsTrained peopleRegulations
Step 1
Step 2
Step 3
Step 4
Step 5
Based on Business Review and Planning produced by the Small Business Development Corporation of Victoria 1985
The Production Plan
Research
Information
Production targets
Production plan
The Business Plan
The annual budget
Sales targets from the marketing plan
Units
■ Location ■ QA systems■ Size ■ Workflow■ Layout ■ Trained people■ Stock control
Figure 2
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Number of people requiredFull/Part time/CasualTypes of skillsTraining requiredTraining availableTraining schemes availableAwards and conditionsOH&S and other Regulations
Step 1
Step 2
Step 3
Step 4
Step 5
Based on Business Review and Planning produced by the Small Business Development Corporation of Victoria 1985
The Human Resource Plan
Research
Information
Human resource targets
Human resource plan
The Business Plan
The annual budget
Marketing plan and production plan
Number of people & the skills they need
■ WHO to recruit ■ WHEN to recruit■ WHERE to recruit ■ Job descriptions■ Conditions of service ■ Training■ Organisational structure
Figure 3
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Part 3 The Financial PlanThe Financial Plan generally consists of a balance sheet, profit and loss statement and cash flow statement and normally covers a three year period. The chief aspect to consider when developing a financial plan is your budget and cash flow. Other financial considerations include start up capital, breakeven analysis, return on investment, sources of funds and types of loans.
The Budget and cash flow
The budget is an operational plan expressed in dollars and cents. Many accounting packages have templates that enable you to prepare the budget. It is normal to prepare the first year of the budget on a monthly basis, with the second and subsequent years prepared on a quarterly or even an annual basis.
An important benefit of the budget is to enable you to check performance against plan. If major changes occur to your forecasting assumptions, it may be necessary to revise your budget “mid-stream”.
The following questions are intended to provide you with a reality check for your budget and its ability to provide you with an effective management control system.
n Do you need both a budget and cash flow?
n Will the budget provide you with the income and profit that you need?
n Do you have enough money to run the venture until it generates a positive cash flow?
n What will happen if there are big changes to:
– sales levels or prices?
– the cost of seed or other materials such as packaging or fertiliser?
– wages?
– water?
– transport?
n Will you be able to repay loans that you may need to borrow?
n Do you understand the difference between a cash flow budget and a profit and loss budget in regards to:
– timescale?
– non-cash expenses?
– purchase of capital items?
n If the budget has been prepared/will be prepared by your accountant, do you understand:
– the profit and loss statement?
– the balance sheet?
– the cash flow?
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Other financial considerations
Start up capital and cashflow
Consider the following:
n Do you have enough money to run the venture until it generates a positive cash flow?
n Do you know what sources of capital are available to you and the requirements for each source?
n When planning your cash requirements, have you ensured that you have allowed for unexpected expenses?
n How are you going to finance start up capital needs?
n Do you understand the concept of overtrading and its impact on Cash flow?
n Do you know at what rate additional funds will be needed as the business grows?
Breakeven analysis
The “breakeven” sales value is important because this shows the minimum level of sales required to pay all costs. Sustained sales below this level will result in failure of the venture. This is demonstrated in the chart below.
20018016014012010080604020
20 40 60 80 100
Breakeven analysis
Sale
s an
d C
ost $
Thousands (units) produced and sold
Breakeven Point
Fixed Cost Line(Loss)
Sales Line
(Profit)
Variable Cost Line
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Do you understand the importance of breakeven? Breakeven is calculated in two steps. First, calculate your gross profit margin using information on the percentage mark-up on cost. Second, use this gross profit margin value together with your fixed costs to find your breakeven sales target.
Step 1 Calculate your gross profit margins
Gross profit margin = % markup on cost x 100 100 + markup on cost
A worked example:
We grow for $1.00 and we sell for $1.50 Per cent markup on cost is 50
Gross profit margin = % markup on cost x 100 100 + % markup on cost
Gross profit margin = 50 x 100 100 + 50
Gross profit margin = 5000 150
Gross profit margin = 33%
Step 2 Calculate breakeven sales targets using gross profit margins
Breakeven = fixed costs x 100 gross profit margin
A worked example
Your fixed costs are $55 000 Your gross profit margin 33.33%
Breakeven sales target = $55 000 x 100 33.33
Breakeven sales target = $55 000 x 100 33.33
Breakeven sales target = $165 000
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Return on investment
Questions to consider when thinking of your return on investment can be critical. Do you know what return on investment the shareholders in your business require? Do you know what return on investment venture capitalists require?
Return on investment (ROI) is calculated using net profit, fixed asset and net working capital (current assets minus current liabilities) as follows:
ROI = net profit (after interest and tax)* x 100 fixed assets + networking capital
* If the business is a company it is usual for the rate of return to be based on profits after tax. If an individual or a partnership owns the business, the rate of return is based upon profit before tax since taxation is not paid by the business, but by the individual.
Sources of funds
Consider any or all of the following:
n Your own funds
n Banks
n Finance Companies
n Merchant banks
n Credit Unions
n Private finance
n Finance Broker
n Creditors
What lenders look for
Lenders seek to minimise risk they are concerned about the following:
n The riskiness of the venture
n The ability of the business to repay the loan
n Your ability and skills
n How much money you have put into the business
n Projections consistent with industry norms
n Realistic growth projections
n Realistic evidence of a need for the product/service in the marketplace
n Do you know how to present your proposal to enable lenders to answer these questions?
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n Have you included the following:
– Personal resume of key people involved in the project, business resume, details of solicitor and accountant – to demonstrate management capabilities
– Marketing plans that demonstrate that a need has been identified such as how big the market is, competitors and the market’s growth potential
– Financial plans (Profit and Loss Statement and Balance Sheet – including assumptions) and cash flow forecast – to demonstrate ability to repay the loan and the riskiness of the venture
– Statement of assets and liabilities – to provide security
– Details of your own investment in the equity (shares) of the business
– A statement of how much you will need and for how long.
Types of loan/s
Do you know which of the following type/s of loan/s best suit your needs? Consider a range of loan types:
n Overdrafts – generally short-term in nature with no fixed repayment schedule. Payable on demand.
n Short-term financing – usually available for a year or less. This type of financing is often used for working capital to cover operating expenses, seasonal slack periods, build up of stocks or to finance debtors.
n Medium-term financing – for periods of one to five years and is usually used to fund equipment if leasing is not an option. It can also be used to finance working capital needs during growth periods.
n Long-term financing – for periods exceeding five years. Normally used for high value assets like land and buildings.
n Bridging finance – temporary finance used to bridge the start of a project until long-term funds have been arranged.
n Debt factoring – a form of working capital finance. A factoring agency provides cash against sales made. Generally an expensive form of financing.
n Suppliers credit – the cheapest form of financing. Should be negotiated in advance.
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Putting it all together
Some do’s and don’ts n Do go into the venture for the right reasons.
n Don’t start from scratch unless you have some special skills and a solid market research study behind you.
n Do establish sound relationships with others in your supply chain.
n Don’t incur commitments until you have raised the necessary finances to cover them.
n Do plan the venture out in detail by constructing detailed financial statements
n Don’t enter legal documents – including lease agreements – until you have consulted your solicitor.
n Do have business proposals from others involved in the supply chain vetted by your accountant and solicitor.
n Don’t let your financial or quality assurance (QA) records get into a muddle.
n Do be prepared to learn – you and your staff.
n Don’t be reluctant to seek and use expert advice where necessary.
n Do remember that insurance should be part of your risk management strategy.
n Don’t assume that the venture will look after itself once it starts to get established – you need to manage growth.
n Do remember that first and foremost, your business is there to satisfy customer needs.
Now that you’ve worked out the strategic, operational and financial aspects of the Strategic Business Plan for your venture, the next thing to do is to confidently put it into action!
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Appendix 1 Assessing trends
What changes are occurring in the business environment?What are the major trends that could impact on the business? For ease of analysis, trends are grouped into categories called domains. There are five domains. Examples of each include:
Social
Demographic trends such as
n population growth
n urbanisation
n aging populations in the OECD countrie
n education levels (the “knowledge revolution”)
n autonomy of women and minorities
Technological
n biotechnology
n information technology
n communication
Economic
n globalisation
n e-commerce
n industry convergence (supply chains)
n the network economy
n workforce changes
n ethical marketing
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Environmental
n biodiversity
n global warming
n sustainability
n green clean up
n environmental impact management
n emission control
Political
n conservative politics
n increased number of democracies
n intergenerational equity
n prospects for war and peace
Examples of trends suggested by leading futurists95 are set out in Appendix 2.
Assessing the impact of these trends
What changes will these trends bring about? How will these changes impact on the business in the longer term? What changes are essential for you to address? It is impractical to address all trends. It is therefore necessary to identify and prioritise them.
STEP 1 Identify changes that could impact on the Critical Success Factors or which could open up new opportunities.
From your experience, choose six trends that you believe may impact on your business. Assess the impact of each trend by asking the following questions for each trend:
1. What will happen if the event occurs?
2. What won’t happen if the event occurs?
3. What will happen if the event doesn’t occur?
9 The compilation is based on the following publications produced by the Queensland Department of Primary Industries: Consumer Focus. July 2000. Volume 1. Economic Trends. Implications and Opportunities. Business Briefs Series. Environmental Trends. Implications and Opportunities. Business Briefs Series. Political Trends. Implications and Opportunities. Business Briefs Series. Social Trends. Implications and Opportunities. Business Briefs Series.
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Trend Impact
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
1
2
3
Now, how will the above trends create opportunities to build upon the enterprise’s sustainable uniqueness and/or address internal weaknesses?
Opportunities
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STEP 2 Select priority areas
Now list the opportunities or issues that must receive the highest priority.
Priorities
These priorities must be addressed if the business it is to remain viable in the long term.
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Appendix 2 Trends predicted to impact on the Australian business environment
To make it easy to follow the trends, analysts group them in the following categories or domains:
n Social
n Technological
n Economic
n Environmental
n Political
What are the likely changes in the environment in which business is going to operate? The following trends have been suggested by leading futurists106:
Social trends
Population growth
The world’s population is growing by 80 million people per year, putting an increasing pressure on all natural resources. About 98 per cent of the population growth will be in developing countries, which are already having trouble feeding their people.
Under-population
Declining birth rates will lead to a marked decline in population in the developed world. In some developed countries, downward pressures on populations will be off-set by increased immigration.
Age-quake
In developed countries, populations are aging as birth rates fall and people live longer.
10 The compilation is based on the following publications produced by the Queensland Department of Primary Industries: Consumer Focus. July 2000. Volume 1. Economic Trends. Implications and Opportunities. Business Briefs Series. Environmental Trends. Implications and Opportunities. Business Briefs Series. Political Trends. Implications and Opportunities. Business Briefs Series. Social Trends. Implications and Opportunities. Business Briefs Series.
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Implications
n Although populations may fall, economies in most developed countries will keep growing. Higher productivity will mean higher per capita incomes and consumption.
n Aging populations tend to be associated with urbanisation and conservative politics.
n Patterns of public expenditure will change, reflecting the needs of older people.
n Markets for the goods and services needed by older people will grow.
n Urbanisation will skew public expenditure (towards urban services and infrastructure) and change patterns of private consumption
n More women will run businesses or take paid jobs.
n Women will achieve even greater economic and social autonomy.
n There will be strong growth in the market for the types of goods and services that affluent, autonomous women demand.
n People will be forced to come to terms with cultural diversity.
n Australia will become even more culturally diverse. With careful management, cultural diversity could help Australia compete in world markets.
n There could be 20 mega cities in Asia by 2025 with a population of 400 million. This is equivalent to one-eighth of the world’s current population.
n To feed the world’s projected population, the world must produce more food during the thirty years 2000–2030 than it has in the whole of human history.
n More refugees from poverty stricken and war-torn countries may seek refuge in developed countries, including Australia.
n There will be more spending on travel, self-education, and cultural activities, golfing and boating, while spending on toys and video games will fall.
n Many older people will stay in the work force longer, often part-time or in consulting capacities. The distinction between working life and retirement may become blurred and in developed countries the average age of effective retirement may increase to 75 years.
n If the age of effective retirement increases, the length of ”life-long education” may also increase.
n An increasing proportion of public and private expenditure will be on goods, services, housing and infrastructure needed by urban populations.
n People in rural and regional areas will find it difficult to compete with their urban cousins for scarce public sector resources.
n Population pressure and its impacts on environmental issues, such as global warming, will mean that cities will come under increased scrutiny for sustainable development.
n ‘Eco-cities’ will focus on ecologically sustainable urban development, with minimal environmental impact from hazards such as pollution.
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n Women have less time to spend on traditional jobs such as preparing meals and other household chores.
n Women will remain the main purchasers of food.
n The demand for in-home services, such as cleaning, gardening, child and pet care will continue to increase rapidly.
n For meals eaten at home, women will want nutritious food that requires little preparation.
n In a global economy, ethnic diversity will be a comparative advantage. It encapsulates:
– knowledge of business networks and experience in overseas business practices
– linguistic and cultural skills
– understanding of the particular needs and preferences of people in foreign markets.
n Opportunities will continue to emerge for the domestic sale of high-value and value-added products customised to meet the needs of multicultural consumers.
Technological trends n The rate at which communication technologies are advancing and converging will
increase, creating a much more interconnected world.
n Networks of people, businesses, governments and other organisations will be global networks, crossing linguistic and geographic boundaries.
n Companies will do more supply chain management to reduce costs, match products to markets and find more value-adding opportunities.
Implications
n The more businesses and people connected to networks the more valuable those networks will become.
n Cooperatives, joint ventures and vertical integration of supply chains will become the norm for those who survive in globalised economies.
n Business may need to re-think the definition of ”competitor”. Currently many businesses tend to see any other business in the same industry as a competitor – and a threat. The new technology might make it easier to create non-threatening networks of competitors.
n Some businesses will need to reassess what is their most valuable product. Some companies already provide free core products or services. In order to be able to sell valuable auxiliary products and services.
n While large and multinational companies are best positioned to take advantage of the benefit of e-commerce, small to medium sized businesses can streamline costs, build business relationships, and shorten supply chains.
n Small but entrepreneurial sellers will be able to reach customers they never knew existed and resourceful buyers will find many new suppliers.
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n Businesses that understand the way supply chains are developing, are clever and resourceful and are prepared to cooperate with fellow businesses could benefit through the development of clusters and other cooperative arrangements.
n Enterprises all along the chain that practise effective supply chain management will achieve better economies of scale, market intelligence and feedback, quality control and continuity of supply.
n Some costs will also be reduced through electronic commerce (e-commerce) particularly in business-to-business transactions.
Economic trends
Consumer trends
n The more affluent people become, the more they are willing to pay to maintain the environment.
n Consumers in general have more access than ever to information and worldwide happenings via mass communications; ease of travel and, in particular, the Internet.
n Consumer and special interest groups are having an increasing influence on national and international policies across all industries.
n Increasingly, industries are shifting from being product driven to being consumer driven.
n Competitive success will require access to the most current consumer information.
n Consumers increasingly demand that goods and services are marketed in an ethical and environmentally responsible way.
n Changing consumer lifestyles are driving new demands across the spectrum of products and services. Quality and price are no longer the key attributes in purchasing decisions – health, convenience, ethical and environmental implications are all considered.
n Consumers are increasing their demand for convenience, or time-saving measures.
n As people become more comfortable with the Internet and businesses realise the value of trading ”on-line”, e-commerce will become the main method of trade in goods and services.
n Internet security, authentication and quality of service problems are likely to have been solved.
Implications
n The Internet will be more easily accessible through better programming, faster modems and greater security for credit card users. At the same time the delivery of customer orders based on sophisticated logistics that do not currently exist could emerge.
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n Psychographic factors (purchasing motivations, attitudes, lifestyles, feelings and a willingness to try new products) will continue to pose serious challenges to mass market retailing.
n Convenience will increasingly mean “the ability to accomplish a greater number of tasks during a single shopping trip”. To meet shoppers’ demand for ”one-stop” shopping, supermarkets are starting to incorporate new services, such as banks, florists, pharmacies and video rental.
n Home shopping is expected to increase with consumers ordering by phone, fax, or even via their home computer after looking at a catalogue or visiting a web-site.
n Competition will be tough, and small to medium-sized businesses must differentiate themselves in the global marketplace to avoid competing on price with large multinational firms.
n The cost of carrying stock will fall as virtual customers replace real customers.
The knowledge revolutionn Futurists are predicting that the ”Information Age” will give way to the ”Knowledge Age”.
n Countries are evolving and becoming knowledge-based societies that are characterised by:
– well-educated, self-motivated, networked individuals
– innovative businesses that are well attuned to their customer’s needs and staffed with highly educated workers valued as ”human capital”
– organisations with an external knowledge focus and an organisational culture that enshrines life-long learning
– social infrastructure that maximises opportunities for individuals and businesses to be innovative, learn and develop knowledge-age skills and access knowledge-age services.
n Knowledge constantly makes itself obsolete hence the need for continuing, life-long education.
Implications
n Knowledge is one of the main drivers of prosperity. It leads to increased innovation, especially in the development of new technologies.
n Knowledge-based industries and those with a high degree of technological innovation are emerging as economic leaders.
n Traditional industries will be enhanced by the application of technologies such as biotechnology, information-communication technology, nanotechnology and sensor technology.
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n Manufacturing will be enhanced with the application of integrated processing technologies that apply sensor technology, micro-processing, information-communication and biotechnology.
n Retail and services will use knowledge to better service customers; maintain market and supply chain information; and foster procurement and distribution efficiencies.
Environmental trends
Environmental consciousness
People everywhere are worried about the degradation of the environment. Businesses and governments are responding to these concerns. In developed countries, environmental consciousness is becoming mainstream.
Sustainable development
With increased environmental consciousness comes a focus on sustainable development. Sustainable development is human development – financial, economic and social – harmony with the natural environment.
Intergenerational equity
This is the idea that each generation must leave the natural environment to future generations in as good if not better condition than they themselves received it.
Global warming
People are becoming more concerned about global warming, the result of excessive carbon dioxide and other greenhouse gas emissions and the removal of vegetation which absorbs and stores these gases.
Alternative energy
World wide, over the next 20 years, energy demands are likely to grow by 65 per cent. To meet the growth in demand in a sustainable manner, sources of energy that do not rely on fossil fuels or nuclear energy are being developed.
Implications
n More international, national and local laws will be passed to force people and organisations to respect and protect the environment.
n Companies are realising that, to preserve their reputation and brand names, they need to be more environmentally responsible.
n Altered wind and rainfall patterns; rising sea levels; regional and seasonal warming are predicted.
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n Some weeds, insects and diseases may spread towards the poles, threatening production and eco-systems in high latitudes.
n More carbon dioxide in the atmosphere may boost the productivity of some crops and reduce it for others
n There will be an increased trade in Greenhouse Credits
n International agreements such as the Kyoto Protocol will increase the pressures on national governments to encourage the development of alternative sources of energy.
n There will also be increasing pressures for the efficient use of fossil fuels and renewable sources of energy.
n Governments may resort to taxes or penalties on polluters and use the proceeds to help fund new energy technologies. These pressures may also create incentives for investment in alternative energy sources
n There will be economic pressures on households to reduce energy consumption:
n Some predictions are for all homes to be ”energy smart” by 2050.
n Computers will monitor and minimise energy use.
n Food, land and water security will become even more critical issues. Conflicts (and even wars) could result from disputes over water.
Political trends
Dictatorships to democracies
For the first time in history, a majority of the world’s people live in democracies. The decline of undemocratic political systems, which is expected to continue, is related to the globalisation of media and markets and the information technology revolution, as well as to urbanisation, mass education and improved literacy.
War and peace
There is cautious optimism that the 21st century will be more peaceful than the 20th century.
International law
Treaties and other forms of international law, governing the behaviour of national and sub-national governments, industries, non-governmental organisations and ordinary people, will proliferate.
National Sovereignty
International law, free market forces and the Internet will continue to diminish the power of locally elected bodies. Countries, regions and individuals will become increasingly subject to international authorities and powerful lobby groups that can change local decisions.
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Implications
n Futurists think that democratisation may be associated with:
– increasing political and social stability
– long-term, soundly based economic development
– freer markets
– less domestic regulation
– less corruption.
n The scope and coverage of international law is likely to expand, as nation states, companies and private citizens begin to see that the world needs rules and regulations which transcend the perspective and interests of individual countries.
n Global mainstream ideals may challenge the economic and social policies of many governments and countries with distinctive cultural traditions. The erosion of national sovereignty means that governments will often have less scope to intervene to protect or promote the interests of their people.
n Multinational companies and investors with commercial interests to defend may threaten local communities and industries and even challenge national sovereignty.
n Countries will remain subject to free trade agreements.
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