Chapter 5

Building a Solid Strategic Plan

and
Crafting A Business Plan
Building a Strategic Plan

• Entrepreneurs must be able to adapt to changes

in the marketplace/space.
• Strategic planning is a tool that can help: it
involves developing a game plan to guide the
company as it works to accomplish its vision,
mission, goals, and objectives and to keep it
from straying off course.
• It’s crucial to building a successful business.
 3-
3

A Major Shift . . .

From financial capital to intellectual capital:

• Human
• Customer
• Social
 • Developing a strategic plan is crucial to creating
a sustainable competitive advantage, the
aggregation of factors that sets a company
apart from its competitors and gives it a unique
Strategic position in the market that is superior to its
competition.
Management • Example:
&
Competitive
Advantage

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Building a Competitive Advantage

• Consider five aspects of a small company:

1. Products they sell
2. Service they provide
3. Pricing they offer
4. Way they sell
5. Values to which they are committed

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Key: Core Competencies

• Unique set of capabilities a company develops

in key areas, such as superior quality, customer
service, innovation, team-building, flexibility,
responsiveness, and others that allow it to vault
past competitors.

• They are what a company does best.

• Best to rely on a natural advantage (often
linked to a company’s “smallness”).
 • A consortium of international investors has taken an 85
percent stake in Egyptian electronic bill
presentment and payment platform Fawry for $100
million.

• The consortium - comprising of the Egyptian-American

Fawry sells Enterprise Fund (EAEF), Helios Investment
Partners (Helios acting on behalf of funds it advises) and
major stake for the MENA Long-Term Value Fund (MENA LTV) -
announced the acquisition yesterday.
$100M
• http://www.wamda.com/2015/11/consortium-of-
investors-acquires-major-stake-in-fawry-for-100m

• 12 Nov 2015
Building a Sustainable Competitive Advantage

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Capabilities

Lessons Sustainable Superior value

Core competitive
learned competencies for customers
advantage

Skills
 Step 1 Develop a vision and translate it into a mission statement
Step 2 Assess strengths and weaknesses
Step 3 Scan environment for opportunities and threats
Step 4 Identify key success factors
Strategic Step 5 Analyze competition
Management Step 6 Create goals & objectives
Step 7 Formulate strategies
Process Step 8 Translate plans into actions
Step 9 Establish accurate controls
Step 1:
Develop a Vision and Create a Mission Statement

• Vision – the result of an entrepreneur’s dream of something

that does not exist yet and the ability to paint a compelling
picture of that dream for everyone to see.
• A clearly defined vision:
• Provides direction
• Determines decisions
• Motivates people
• Define optimal desired future state
• Oxfam: A just world without
poverty

• Uber : We ignite opportunity

by setting the world in motion
Apple

• We believe that we are on the face of the earth to make

great products and that's not changing.

We are constantly focusing on innovating. We believe in the

simple not the complex. We believe that we need to own
and control the primary technologies behind the products
that we make, and participate only in markets where we
can make a significant contribution. We believe in saying no
to thousands of projects, so that we can really focus on the
few that are truly important and meaningful to us. We
believe in deep collaboration and cross-pollination of our
groups, which allow us to innovate in a way that others
cannot. And frankly, we don't settle for anything less than
excellence in every group in the company, and we have the
self-honesty to admit when we're wrong and the courage to
change. And I think regardless of who is in what job those
values are so embedded in this company that Apple will do
extremely well."- Tim Cook, CEO of Apple
Step 1:
Develop a Vision and Create a Mission Statement

 Addresses question: “What business are we in?”

The mission is a written expression of how the company

will reflect an entrepreneur’s values, beliefs,
and vision – more than just
“making money.”

 Serves as a “strategic compass.”

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Step 1:
Develop a Vision and Create a Mission Statement

• Elements of a mission statement:

• Purpose of the company: What are we in
business to accomplish?
• Business we are in: How are we going to
accomplish that purpose?
• Values of the company: What principles
and beliefs form the foundation of the way
we do business?

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 Apple Mission Statement :
“Apple designs Macs, the best personal computers
in the world, along with OS X, iLife, iWork and
professional software. Apple leads the digital music
revolution with its iPods and iTunes online store.
Apple has reinvented the mobile phone with its
revolutionary iPhone and App Store, and is defining
the future of mobile media and computing devices
with iPad.”

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Coca Cola Mission statement :
“To refresh the world - in mind, body and
spirit… To inspire moments of optimism -
through our brands and actions… To create
value and make a difference everywhere we
engage”

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Step 2:
Assess Company Strengths and Weaknesses

• Strengths
• Positive internal factors a company can
draw on to accomplish its mission, goals,
and objectives.
• Weaknesses
• Negative internal factors that inhibit a
company’s ability to accomplish its mission,
goals, and objectives.

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Step 2:
Assess Company Strengths and Weaknesses

• Opportunities
• Positive external factors the company can
exploit to accomplish its mission, goals, and
objectives.
• Threats
• Negative external factors that inhibit the
firm's ability to accomplish its mission,
goals, and objectives.

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Step 3 : Scan environment for opportunities and threats
PEST
Step 4: Identify Key Success Factors

• Key success factors (KSFs): factors that

determine the relative success of market
participants.
• The keys to unlocking the secrets of competing
successfully in a particular market segment.

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 What is
important for
you ?
 Identifying Key Success Factors
List the skills, characteristics, and core competencies
that your business must possess
to be successful in its market segment.
Key Success How Your Company Rates
Factor
1. Low 1 2 3 4 5 6 7 8 9 10 High
2. Low 1 2 3 4 5 6 7 8 9 10 High
3. Low 1 2 3 4 5 6 7 8 9 10 High
4. Low 1 2 3 4 5 6 7 8 9 10 High
5. Low 1 2 3 4 5 6 7 8 9 10 High
Conclusions:
Step 5: Analyze Competitors

• NFIB study: Small business owners believe they

operate in a highly competitive environment
and the level of competition is increasing.

• Yet, 97 percent of all U.S. businesses do not

systematically track the progress of their key
competitors.

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 Competitor Analysis
• Direct competitors
• Offer the same products and services
• Customers often compare prices, features and deals among
these competitors when they shop
• Significant competitors
• Offer some of the same or similar products or services
• Product or service lines overlap but not completely
• Indirect competitors
• Offer same or similar products in only a small number of
areas
Step 5: Analyze Competitors

Analyzing key competitors allows an entrepreneur

to:
• Avoid surprises from existing competitors’ new
strategies and tactics.
• Identify potential new competitors and the
threats they pose.
• Improve reaction time to competitors’ actions.
• Anticipate rivals’ next strategic moves.
Step 5: Analyze Competitors

❑Techniques do not require unethical behavior:

❑ Talk to customers and suppliers.
❑ Attend trade shows and conferences and study competitors’ sales
literature.
❑ Watch for competitor’s employment ads.
❑ Learn about the kinds of equipment and raw materials competitors
are importing from joint connections
❑ Buy competitors’ products and “benchmark” them.
❑ Use the Internet to learn more about competitors.
❑ Visit competing businesses to observe their operations.
Competitive Profile Matrix
Is Setting Goals & Objectives Really Important?

“Would you tell me, please, which way I ought to go from here?”
said Alice.
“That depends a good deal on where you want to get to,” said
the Cheshire cat.
“I don’t much care where.…” said Alice.
‘Then it doesn’t matter which way you go,” said the cat.

- Lewis Carroll’s
Alice in Wonderland
Step 6: Create Company Goals and Objectives

• Goals: Broad, long-range attributes to be accomplished.

• Google: Organize the world's information and
make it universally accessible and useful

• Objectives: More detailed, specific targets of

performance that are S.M.A.R.T.
• Specific
• Measurable
• Assignable
• Realistic (yet challenging)
• Timely
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Step 6: Create Company Goals and
Objectives

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Step 7: Formulate Market Entry Strategies

Strategy - a road map of the actions an

entrepreneur draws up to achieve a company’s
mission, goals, and objectives.

It is the company’s game plan for gaining a

competitive advantage.

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Step 7: Formulate Market Entry Strategies

Three basic strategies:

Cost Leadership

Strategy? Differentiation

Focus
 Cost Leadership
 Goal:
To be the low-cost producer in the industry
(or market segment).
 Low-cost leaders have advantages:
 Reaching buyers who buy on the basis of price
 The power to set the industry’s price floor.
 Cost Leadership works well when:
 Buyers are sensitive to price changes.
 Competing firms sell the same commodity
products.
 A company can benefit from economies of scale.

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 Differentiation
• Company seeks to build customer loyalty by
positioning its goods or services in a unique or
different fashion.
• Idea is to be special at something customers
value.
• Key: Build basis for differentiation on a
distinctive competence, something that the
small company is uniquely good at doing in
comparison to its competitors.
• Examples: Siwa - Alamien

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 Focus
• Company selects one or more customer
segments in a market, identifies customers’
special needs, wants, or interests, and then
targets them with a product or service designed
specifically for them.

• Strategy builds on the differences among market

segments.

• Rather than try to serve the total market, the

company focuses on serving a niche (or several
niches) within that market.

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Step 8: Translate Strategies into Action Plans

Survey of senior executives:

Companies achieved only 63% of the results in their strategic
plans.

 Create projects by defining:

 Purpose
 Scope
 Contribution
 Resource requirements
 Timing
Step 9: Establish Accurate Controls

• Plan establishes the standards against which

actual performance is measured.
• Entrepreneur must:
• Identify and track key performance
indicators.
• Take corrective action.

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Balanced Scorecards

• A set of measurements
unique to a company that
includes both financial
and operational
measures
• Gives managers a quick,
yet comprehensive,
picture of a company’s
overall performance.

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 Five Perspectives:
1. Customer: How do customers see us?
2. Internal Business: At what must we excel?
3. Innovation and Learning: Can we continue
Balanced to improve and create value?
4. Financial: How do we look to
Scorecards shareholders?
5. Corporate Citizenship: Do we meet our
responsibility to society as a whole, the
environment, the community, and other
external stakeholders?
Key performance indicators

• A Key Performance Indicator is a measurable value that

demonstrates how effectively a company is achieving key
business objectives. Organizations use KPIs at multiple
levels to evaluate their success at reaching targets
• Key performance indicators (KPIs) measure a company's
success versus a set of targets, objectives, or industry peers.
• KPIs can be financial, including net profit (or the bottom
line, gross profit margin), revenues minus certain expenses,
or the current ratio (liquidity and cash availability)
 KPIs
Review
Business plan
Benefits of Creating a Business Plan
• Business plan:
• A written summary of:
• An entrepreneur’s proposed business venture
• The operational and financial details
• The marketing opportunities and strategy
• The managers’ skills and abilities
• A business plan is the best insurance against
launching a business destined to fail or
mismanaging a potentially successful company.
 • Remember: No one can create your plan for
you.
• Potential lenders want to see financial
Guidelines for projections, but they are more interested in the
strategies for reaching those projections.
Preparing a • Show how you plan to set your business apart
Business Plan from competitors; don’t fall into the “me too”
trap.
• Identify your target market and offer evidence
that customers for your product or service exist.
 1. Guiding the company by charting its future
course and defining its strategy for following
Essential it.
Functions of a 2. Attracting lenders and investors who will
provide needed capital.
Business Plan
 1. The Reality Test – proving that :
• A market really does exist for your product or
service.
• Indicators reflect a welcoming business environment
2. The Competitive Test – evaluates:
A Plan Must • An enterprise position relative to its competitors.

Pass Three • Management’s ability to create an enterprise that

will gain an edge over its rivals.

Tests 3. The Value Test – proving that:

• A venture offers investors or lenders an attractive
rate of return or a high probability of repayment.
• You can actually build or provide it for the cost
estimates in the plan.
Why Take the Time to Build an
Entrepreneurship ( Business ) Plan?

• Although building a plan does not

guarantee success, it does increase your
chances of succeeding in business.
• A plan is like a road map that serves as a
guide on a journey through unfamiliar,
harsh, and dangerous territory.
• Don’t attempt the trip without a map!
 • Title Page and Table of Contents
• Executive Summary
• Mission and Vision Statement
• Description of a Firm’s Product or Service
• Business and Industry Profile
Key Elements • Competitor Analysis
• Marketing Strategy
of a Business • Entrepreneurs’ and Managers’ Resumes
•
Plan •
Plan of Operation
Pro Forma (Projected) Financial Statements
• The Loan or Investment Proposal
 • The executive summary is a written version of
“the elevator pitch”
• A Good elevator pitch provides:
• Context
Executive • Benefit
• Target customers
Summary
• Point of differentiation
• Clincher
 • Who are the company’s key competitors?
• What are there strengths and weaknesses?
• What are their strategies?
Competitor • How successful are they?
Analysis • What distinguishes the entrepreneur’s product
or service from others already in the market,
and how will these differences produce a
competitive edge?
 • Show customer interest
• Prove that target customers actually need or
want the product or service.
Marketing • Document market claims
Strategy • Support market size and growth rates with
facts.
 • Address:
• Target market
• Advertising and promotion
Marketing • Market size and trends
• Location
Strategy
• Pricing
• Distribution
 • Describe the benefits customers get from the
Product or product or service
• A feature is a descriptive fact about a product
Service or service.
Description • A benefit is what the customer gains from the
product or service feature.
 • First impressions count! Use an attractive cover.
• Checks for errors.
• Make it visually appealing.
• Include a table of contents with page numbers.
Tips for a • Make it interesting!
• Show that it will make money.
Good Business • Use spreadsheets for realistic financial
Plan forecasts.
• Include cash flow projections.
• Keep the plan “crisp.”
• Tell the truth.
 • The time allotted for presenting is usually less
than 20 minutes, so it’s important to rehearse
and be prepared.
• A basic presentation should cover:
The Pitch: • Your company and its products and services.
Presenting the • The problem to be solved.
• A description of your solution to the
Plan problem.
• Your company’s business model.
• Your company’s competitive edge.
 • Prepare
• Practice your delivery and then practice some
more.
• Demonstrate enthusiasm about the business
Tips for but don’t be overly emotional.
Making the • Focus on communicating the dynamic
opportunity your idea offers and how you
Pitch plan to capitalize on it.
• Hook investors quickly with an up-front
explanation of the new venture, its
opportunities, and the anticipated benefits to
them.
 • Use visual aids.
• Follow the 10/20/30 rule for PowerPoint
presentations.
Tips for • Explain how your company’s products or
Making the services solve some problems and emphasize
the factors that make your company unique.
Pitch • Offer proof.
• Hit the highlights.
• Keep the presentation “crisp.”
 • Avoid the use of technical terms that will be
above most of the audience.
• Remember to tell lenders and investors how
they will benefit.
Tips for • Be prepared for questions.
• Anticipate questions and prepare for them in
Making the advance.
Pitch • Focus your answers on what’s important to
lenders and investors.
• Follow up with every lender and investor to
whom you make a presentation.
 • The “5 Cs” of Credit
What Lenders 1. Capital
2. Capacity
and Investors 3. Collateral
Look for in a 4. Character
Business Plan 5. Conditions
 • The strategic planning process:
• Begins with the nine steps.
• Becomes more efficient each time.
• Teaches entrepreneurial discipline for a higher
Conclusion chance of survival.
• Business Plan steps and contents

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Video 5.1

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Thank you