Class II

1. Class II • Assignment 1 – discussion and review • Chapter 2 - Strategic Management & Planning • Chapter 9 – Business Plan • Submit/Discuss Business Concepts & Names • Review Class 3 Expectations

2. Assignment 1 • Are they ready to enter the commercial field? • Timing – should they start now or wait for retirement? • Do they need a short-term plan? • How can they determine if there is enough of a market for their product? • What (if any) differences are there for each of their hobbies in respect to potential sales & profits?

3. Strategic Managementand the Entrepreneur

4. A Major Shift . . . . . . From financial capital to intellectual capital. • Human • Structural • Customer

5. Strategic Management • Is crucial to building a successful business. • Involves developing a game plan to guide a company as it strives to accomplish its mission, goals , and objectives, and to keep it on its desired course.

6. Is Strategic Planning Really That Important? • Study of 500 small companies: • One of the most significant factors in distinguishing growing companies from those in decline: use of a written business plan. • Another study: • Only 12% of small companies had a long-range plan in writing.

7. Market Feasibility • Are there customers who want what you’re selling? • What business will you be in? • What trends are happening in your industry and around you? • Who will be your customers? • Who will be your competitors? • Why will people buy from you instead of your competitors?

8. Strategic Management and Competitive Edge • Developing a strategic plan is crucial to creating a competitive advantage, the aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market. • Example: Adventurous Traveler Bookstore

9. 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).

10. Strategic Management Process 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.

11. Strategic Management Process ... (continued) Step 5: Analyze competition. Step 6: Create goals & objectives. Step 7: Formulate strategies. Step 8: Translate plans into actions. Step 9: Establish accurate controls.

12. Step 1: Develop a Vision and Create a Mission Statement • Vision – an expression of what an entrepreneur stands for and believes in. • A clearly defined vision: • Provides direction • Determines decisions • Motivates people

13. Step 1: Develop a Vision andCreate a Mission Statement • Mission - addresses question:"What business are we in?” • A written expression of how the company will reflect the owner’s values, beliefs, and vision. • Sets the tone for the entire company and guides the decisions people make. • Example: Fetzer Vineyards http://www.fetzer.com/

14. In-Class Exercise • Follow the instructions on the handout to begin developing a mission statement for your business. Begin on your own, then as a group share your ideas and select the best bits from the individual work. Each group will need to elect/appoint a spokesperson to share their results with the class.

15. Step 2: Assess Company Strengths and Weaknesses • Strengths • Positive internal factors that contribute to accomplishing the mission, goals, and objectives. • Weaknesses • Negative internal factors that inhibit the accomplishment of the mission, goals, and objectives.

16. Step 3: Scan for Opportunities and Threats • Opportunities • Positive external factors the company can employ to accomplish its mission, goals, and objectives. • Threats • Negative external factors that inhibit the firm's ability to accomplish its mission, goals, and objectives.

17. External Market Forces Technological Competitive Economic Political and Regulatory Social and Demographic

18. Step 4: Identify Key Success Factors • Key success factors: relationships between a controllable variable and a critical factor that influence a company’s ability to compete in the market. • The keys to unlocking the secrets of competing successfully in a particular market segment.

19. 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. • anticipating rivals’ next strategic moves.

20. Step 5: Analyze Competitors Techniques do not require unethical behavior: • Monitor industry and trade publications. • Talk to customers and suppliers. • Listen to employees, especially sales representatives and purchasing agents. • Attend trade shows and conferences.

21. Step 5: Analyze Competitors Techniques do not require unethical behavior: • Study competitors' literature and "benchmark" their products and services. • Get competitors' credit reports. • Check out the local library. • Use the World Wide Web to learn more about competitors. • Visit competing businesses to observe their operations.

23. Knowledge Management • The practice of gathering, organizing, and disseminating the collective wisdom and experience of a company’s employees for the purpose of strengthening its competitive position. • Knowledge management involves: • Taking inventory of the special knowledge the people in the company possess. • Organizing that knowledge and disseminating it to those who need it.

24. Step 6: Create Company Goalsand Objectives • Goals - broad, long-range attributes to be accomplished. • “BHAGS” – one factor that sets apart successful companies from unsuccessful ones. • Objectives - more detailed, specific targets of performance that are S.M.A.R.T. • Specific • Measurable • Assignable • Realistic (yet challenging) • Timely

25. Cost leadership Differentiation Strategy? Focus Step 7: Formulate Strategies • Strategy • A “road map” that guides a company through a turbulent environment as it seeks to fulfill its mission, goals, and objectives. • A game plan for winning. • Three basic strategies:

26. Three Strategic Options Competitive Advantage Low Cost Position Uniqueness Perceived by the Customer Differentiation Low Cost Industry Target Market Differentiation Focus Cost Focus Niche

27. Cost Leadership • Goal: to be the low-cost producer in the industry or market segment. • Advantages: • reaching buyers who buy on the basis of price. • power to set the industry’s price floor. • Works well when: • buyers are sensitive to price changes. • when competing firms sell the same commodity products. • when a company can benefit from economies of scale.

28. Differentiation • Company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion. • Idea is to be unique at something customers value. • Key: Build basis for differentiation on a core competency, those things that the small company is uniquely good at doing in comparison to its competitors. • Example: East Bank Club

29. 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 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. • Example: Clown Shoes and Props

30. Step 9: Translate Strategies into Action Plans • Create projects by defining: • Purpose • Scope • Contribution • Resource requirements • Timing

31. Step 10: Establish Accurate Controls • The plan establishes the standards against which actual performance is measured. • Entrepreneur must: • identify and track key performance indicators. • Take corrective action.

32. Ethics, Social Responsibility, and the Entrepreneur

33. Business Ethics • The fundamental moral values and behavioral standards that form the foundation for the people of an organization as they make decisions and interact with stakeholders.

34. Key Stakeholders External Stakeholders Customers Special Interest Groups Unions Internal Stakeholders Employees Investors Board of Directors Management Creditors Suppliers Government General Public

35. Three Levels of Ethical Standards • The law • The policies and procedures of the organization • The moral stance individuals take when faced with decisions not governed by formal rules

36. 5 Approaches to Ethics • Utilitarian – greatest good for the greatest number • Right approach – individual’s right to choose for him/herself; does the action in question respect the moral rights of everyone? • Justice approach – equals should be treated equally, unequals unequally • Common good approach – respects freedom of individuals to pursue their own goals, but also considers goals shared in common • Virtue approach – make a value decision based on answers to questions such as: • What kind of person should I be? • What will promote the development of character within myself and my community

37. Three Styles of Management • Immoral management - driving force is greed. • Amoral management - does not consider ethical impact on others. • Moral management - sees the law as a minimum standard of behavior.

38. Maintaining Ethical Standards • Create a company credo. • Develop a code of ethics. • Enforce the code fairly and consistently. • Conduct ethical training.

39. Maintaining Ethical Standards • Hire the right people. • Perform periodic ethical audits. • Establish high standards of behavior...not just rules.

40. Maintaining Ethical Standards • Set an impeccable ethical example at all times. • Create a culture that emphasizes two-way communication. • Involve employees in establishing ethical standards.

41. Social Responsibility • Social responsibility - the awareness by a company’s managers of the social environmental, political, human, and financial consequences its actions produce.

42. Business has a Social Responsibility to... • the environment • employees • customers • investors • the community

43. Crafting a Winning Business Plan

44. A Business Plan Is… • a systematic evaluation of a venture’s chances for success. • a way to determine the risks facing a venture. • a game plan for managing a business successfully. • a tool for comparing actual and target results. • an important tool for attracting capital.

45. The Business Plan:Two Essential Functions • Business plan – a written summary of: • an entrepreneur’s proposed business venture • its operational and financial details • its marketing opportunities and strategy • its managers’ skills and abilities • It serves two essential functions: • Guiding the company by charting its future course and defining its strategy for following it • Attracting lenders and investors who will provide needed capital

46. A Business Plan • A plan is a reflection of its creator. • Sometimes the primary benefit of preparing a plan is the realization that a business idea just won’t work! • The real value in preparing a plan is not as much in the plan itself as it is in the process of creating it.

47. Why Take the Time to Build a 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!

48. Key Elements of a Business Plan • Executive summary • Mission statement • Company history • Business and industry profile • Business strategy • Description of products/services

49. Features vs. Benefits • Feature – a descriptive fact about a product or service (“an ergonomically designed, more comfortable handle”). • Benefit – what a customer gains from the product or service feature (“fewer problems with carpal tunnel syndrome and increased productivity”).

50. Key Elements of a Business Plan (continued) • Marketing strategy