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Business Plan OutlineBusiness Plan Outline

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• Executive Summary • Company Description

– Including product/service & technology/core knowledge

• Industry Analysis & Trends• Target Market• Competition • Strategy/Business Model• Marketing and Sales Plan • Production/Operations Plan

Technology PlanManagement & Organization Social ResponsibilityDevelopment & MilestonesFinancials

Including Capital Requirements & Financial Statements

Appendix

http://www.fox.temple.edu/cms_research/institutes-and-centers/innovation-entrepreneurship-institute/http://www.fox.temple.edu/cms/wp-content/uploads/2012/03/2011BYOBBTemplate.pdfWrite a Business Plan…In No Time by Frank Fiore

Opening DiscussionOpening Discussion

• Do you really know what makes a product or service unique in a market? Do you think customers know the difference?

• What market would you like to compete in? How well do you know that market? Who are the key players in that market?

• Do you know all the possible places you might get your raw materials, supplies, data, etc.? Do you know who or where your competition might get theirs from and at what cost, time or quality?

• Do you have a roadmap for products, services, features, etc.? If so, what justification(s) did you use to generate the list? How does this compare with others in that market or industry?

• Does the Internet change anything in regard to these questions?• Pick a business… articulate who their competition is and what you

think they are doing to compete. Do you think they could do better? If so, how? Why? Why not?

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Strategy FunnelStrategy Funnel

4

Customer &Benefits

CompetitiveDynamics

CompetitiveSpace

Segment, SizeChannels

Strategic Positioning

ValueProposition

IndustryStructure

Environmental Trends

IndustryMarket

PerceptualSpace

This has been in Fox decks for a while. I stared at this for a long time and didn’t understand it for a long time. Now I get it

Why Strategy FunnelWhy Strategy Funnel

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Industry Structure

Competitive Space

Competitive Dynamics

Strategic Position

Define Understand Address Develop

Customer Segment, Size, Channel

Perceptual Space

Value Proposition

Who Where HowWhat &

How Much

Competitive Analysis

INDUSTRY

COMPETITION

POSITION

Market vs. IndustryMarket vs. Industry

• MARKET: the area of economic activity in which buyers and sellers come together and the forces of supply and demand affect prices

• INDUSTRY: a distinct group of productive or profit-making enterprises

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INDUSTRY

Discussion: Compare / contrast

Market StructuresMarket Structures

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Market Structure

Seller Buyer

Entry Barriers Number Entry Barriers Number

Perfect No Many No Many

Monopolistic No Many No Many

Oligopoly Yes Few No Many

Oligopsony No Many Yes Few

Monopoly Yes One No Many

Monopsony No Many Yes One

Why are we talking about this?

INDUSTRY

Porter’s Generic Value ChainPorter’s Generic Value Chain

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Inbound Logistics Operations Outbound

LogisticsMarketing

& Sales Service

Primary Activities

Firm InfrastructureFirm Infrastructure

Human Resource ManagementHuman Resource Management

Technology DevelopmentTechnology Development

ProcurementProcurement

Support Activities

INDUSTRY

More Simply…More Simply…

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Technology / Purchasing / Product People / Management Infrastructure / Logistics / Distribution

Improving the chain…•Can your suppliers add value?•Can you add value to supply?

• If so, where?•Can you add more?

• If so, where?•Will your customers notice?

Sample Inputs:

Service

Does your product or service add value sufficient to justify the margin?

Suppliers Company Customers

INDUSTRY

From Value Chains to MarketsFrom Value Chains to Markets

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Value Suppliers Company Customers

• As underlying processes become more complex, supply chains often evolve into chains of firms that interact through negotiated transactions or markets - rather than chains of functions managed internally

• Note how the margin divides (and multiplies)

INDUSTRY

Markets & IndustriesMarkets & Industries

• Each cluster of competitors is an industry, industry segment or strategic group

• Supply chains and industries evolve over time – as do their rules, cultures, technologies and sources of value

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INDUSTRY

Book Selling Commerce ChainBook Selling Commerce Chain

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Packager

Author Agent Publisher

Forest

Products

Paper

ProducerPrin

ter

Wholesaler Retailer

INDUSTRY

Sales Groups

Promotions

Book Selling Commerce ChainBook Selling Commerce Chain

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Packager

Author Agent Publisher

Forest

Products

Paper

ProducerPrin

ter

Wholesaler Retailer

Sales Groups

$0.50 $0.05 $3.50

$0.45

$1.25

$1.00 $5.50

Promotions

$0.375

$0.375

$12.00

INDUSTRY

Book Selling Commerce ChainBook Selling Commerce Chain

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Packager

Author Agent Publisher Wholesaler Retailer

Sales Groups

Direct Marketing

Harper & Row

Barnes & Nobel

Ingram

INDUSTRY

Industry StructureIndustry Structure

• Industries are clusters of firms that serve the same function in a commerce chain. These sets of firms operate in the same space and compete to control enough space to capture value.

• Industries all have structure, history, trajectories and competitive dynamics that constrain entry options – and are shaped in part by macro-environmental conditions.

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INDUSTRY

Stakeholder AnalysisStakeholder Analysis

• Stakeholder– Any person or organization that is impacted

• Analysis– Who/what is impacted and by how much

• Who– Customers, suppliers, owners, workers, community groups,

government• What

– Finance, time, product, supply, margin, market share• When

– How often is the impact felt and for how long• Response

– What can/should/will they do about it

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INDUSTRY

Exercise Exercise

• Who sells what to whom?– Ask industry informants, look at customer and supplier

lists, read trade journals, search the Internet• Draw what you see • Circle your industry

– Be sure to include a functional cluster of firms• Identify sources of competition

– Direct competitors from within the industry– Indirect competitors from related supply chains or

industry• Note the supply market• Note the demand market

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Draw the chain, Identify your industry… INDUSTRY

COMPETITION

Porter’s RivalryPorter’s Rivalry

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New Entrants

Substitutes

BuyersSuppliers Industry Rivalry

• How are you positioned as compared to:– Possible new

entrants– Existing suppliers– Likely substitutes for

your product– Buyers that (don’t)

know what they want

• How will customers react to changes?

COMPETITION

Rivalry Example: Physical Bookstores

Rivalry Example: Physical Bookstores

• New Entry is local– Store locations– Warehousing costs

• Suppliers can be locked up– Exclusivity arrangements– Direct from authors or printers

• Substitutes abound– Amazon– Electronic books– Library

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What has happened to this industry? Why? What would you have done?

COMPETITION

New EntrantsNew Entrants

• Industries that are hard to enter are cozy for insiders, but also often attractive to outsiders longing for the value being shared by so few.

• Barriers to entry make it harder for newcomers to play.– Fierce reaction by incumbents (e.g. lawsuits over IP)– Capital (e.g. building a chip foundry)– Economies of scale (e.g. building a sales network)– Existing customer loyalty (e.g. Coke)– Application stickiness (e.g. learning curve or cost)

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COMPETITION

Buyer PowerBuyer Power

• Some attractive industries feature disorganized, small customers, with little purchasing and negotiating power– How has the Internet changed this?– What about a niche?

• Buyers gain power when:– They are large, relative to the seller (e.g. superstores)– They are organized (e.g., a coop)– It is easy to switch to another supplier (e.g., when

products are standard… try comparing mattresses or house brands)

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COMPETITION

SubstitutesSubstitutes

• Number– Industries with few substitute products are more

attractive than those with many substitutes• Opportunity

– Effective substitutes can often provide opportunities for upstarts

• Threat– Just the threat has impact…weakest of the forces – except

during times of high demand or fast change, when interlopers may see opportunities

• Industry killers– Netflix to video store, Amazon to book stores

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COMPETITION

Supplier PowerSupplier Power

• Attractive industries feature small and disorganized suppliers

• Suppliers gain power when:– They are large, relative to the buyers. (e.g. Alcoa).– It is difficult for buyers to switch to competing

suppliers. (e.g. custom products, proprietary information)

– They pose a credible threat of integrating forward and taking over the buyers’ functions (e.g. direct sale or drop ship)

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COMPETITION

RivalryRivalry

• Attractive industries are controlled by monopolies or gentlemanly oligopolies. – On the other hand, the more the players, and the more

equally matched, the closer the industry approximates “perfect competition” and minimum profits.

• Rivalry is reduced when:– Power is concentrated – Competitors can truly differentiate.– It is easy to exit.– Demand is stable and predictable.– Regulation takes the edge off.

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COMPETITION

STEEP AnalysisSTEEP Analysis

• How do these forces effect your business?

• Understand your operating environment– Community, local

politics, unions• How is your

organization positioned to handle this– Structure,

competencies, finance• How do you compare

with your competition?

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Social

Technical

Economic

Ecologic

Political

OperatingEnvironment

Organization

Also:-PEST: Political, Economic, Social, Technology-SLEPT: Social, Legal, Economic, Political, Technology-STEER: Social, Technology, Economic, Ecologic, Regulatory-STEEPLE: Social, Technology, Economic, Environmental, Political, Legal, Ethical

COMPETITION

Profit Pools: Retail Bookselling

Profit Pools: Retail Bookselling

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Pape

r

Auth

or

Publisher

40%

100%

DistributorRetailerO

pera

ting

Mar

gin

Share of Industry Revenue

* completely made up #’s / %’s

What do we learn?•Where would you like to compete?•Who makes the most?•What else do we need to know?

COMPETITION

Competitive AnalysisCompetitive Analysis

• Competitors are the firms that compete to serve the same customers in the same marketplace.

• Competitors can compete directly (cars) or indirectly (bicycles, mass transit).

• Competition happens on two levels:– Product or service competition

• Competition at the level of the value proposition and marketing (covered in the first workshop)

– Company competition• Competition at the level of company strategy

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POSITION

Company Competitive AnalysisCompany Competitive Analysis

• How does each firm compete– Ex. quality, service, price, features

• How effective is each – Ex. feature list, comparative quality

• How strong or powerful– What resources do they control? Are other’s able to

compete? (e.g. market structure, exclusivity)

• How aggressive– How hard do they compete? What’s their trajectory?

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POSITION

Think back to the value

chain!

Competitors TableCompetitors TableOrganizes competitors using crucial dimensions of competition, plus effectiveness, power, trajectory, likely changes...

Market Share

Quality

CostEffective

-nessAggres-siveness

Competitor 1 15% H H M

Competitor 2 25% L L H very

Competitor 3 5% M M L

Competitor 4 20% L L H slipping

Competitor 5 15% M M H

Power

M

H

L

H

L

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POSITION

What other variables might you use?

Competitor Response ProfileCompetitor Response Profile

Future GoalsVision statement

Managerial behavior

Critical Assumptions

Key beliefsBlind spots

Response ProfileSatisfied or ambitious?

Likely next moves?Vulnerabilities?Sensitive spots?

(What will provoke retaliation?)

Current StrategyPrice, quality, distribution,

resources

CapabilitiesStrengths & weaknesses

Drivers Abilities

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POSITION

Strategic GroupsStrategic GroupsP

rice

Selection

Fast Food

Upscale Chains

Diners/Family Style

Groups of firms that pursue similar strategies with similar resources

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POSITION

Gartner’s Magic QuadrantGartner’s Magic Quadrant

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Ex

ecu

tio

n

Vision

LeadersChallengers

Niche Players VisionariesOther Possible Quadrants…•Satisfaction vs. Importance•Urgent vs. Importance•Quality vs. Cost•Risk vs. Value

POSITION

GARTNER MAGIC QUADRANTGARTNER MAGIC QUADRANT

• Gartner rates vendors upon two criteria: completeness of vision and ability to execute. – Leaders score higher on both criteria; the ability to execute and

completeness of vision. Typically larger industry developed businesses with vision and potential for expansion.

– Challengers score higher the ability to execute and lower on the completeness of vision. Typically larger, settled businesses with minimal future plans for that industry.

– Visionaries score lower on the ability to execute and higher on the completeness of vision. Typically smaller companies that are unloading their planned potential.

– Niche players score lower on both criteria: the ability to execute and completeness of vision. Typically new additions to the Magic Quadrant, or market fledglings.

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POSITION

Dynamic Competitor AnalysisDynamic Competitor Analysis

• While useful, the competitor table and the strategic groups are essentially static.

• It is critical to make guesses about the future -- especially about when trends might stop and the ground might shift, and when new competitors might rise, or existing ones die.

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POSITION

Exercise: Competitor AnalysisExercise: Competitor Analysis

• Make a competitors table, including:– market share– how they stack up on crucial dimensions of value– effectiveness (star the most competent ones)– resources (underline richest ones)– aggressiveness (arrows to indicate trajectories)

• Note any natural groupings• Note any likely changes

– New entrants, mergers, exits?

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POSITION

ReviewReview

• Industry– How is it structured, where is the value created

and at what margins?

• Competition– Who are they, what value to their bring and how

strong is the competition?

• Position– Where do you fit and on what criteria will you

compete?

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BIBLIOGRAPHYBIBLIOGRAPHY

• Andersen Business Consulting interview, Summer 2001. • Richard D’Aveni, Hypercompetition (Free Press: 1994).• Craig Fleisher & Babette Bensoussan, Strategic & Competitive Analysis: Methods &

Techniques for Analyzing Business Competition (Upper Saddle River, NJ: Prentice Hall, 2003)• Jay Galbraith, “Strategy & Organization Planning” in Human Resource Management (Spring-

Summer 1983) for Supply Chain.• Pankaj Ghemawat, Strategy and the Business Landscape (Prentice Hall, 2001).• Robert Hamilton lecture notes, 1998.• Robert Hamilton, E. Eskin, M. Michael, "Assessing Competitors: The Gap between Strategic

Intent and Core Capability", International Journal of Strategic Management-Long Range Planning, Vol. 31, No. 3, pp. 406-417, 1998

• TL Hill lecture notes, 1999, 2001, 2002.• J. D. Hunger & T.L. Wheelan, Essentials of Strategic Management (Prentice Hall, 2001).• Philip Kotler, Marketing Management, 9th Edition, (Prentice Hall, 1997).• Sharon Oster, Modern Competitive Analysis, 2nd Edition (Oxford University Press, 1994), for

Porter and other economics-based strategy.• Henry Mintzberg & James Brian Quinn, Readings in the Strategy Process, 3rd Edition (Prentice

Hall, 1998).• Michael Porter, Competitive Advantage (Free Press, 1985).• Michael Porter, “What is Strategy?” Harvard Business Review (November-December 1996).• Wikipedia, Gartner Magic Quadrants, Market Definitions February 2011

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