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Unformatted text preview: TR2201 Entrepreneurial Marketing KWOK Ying Yao [email protected] Designing a CHAPTER 3 Competitive Business Model and Building a Solid Strategic Plan Intellectual Capital A major shift from financial capital to intellectual capital Human Structural Customer Ch. 3: Business Model and Strategic Plan 3-3 Apple development tool kit- develop an application and apple does the rest Human- skills and knowledge Structural- unique processes organizationally Customers- easier to keep track of customers, emphasize on customers as intellectual capital, built up a customer base Companies invest in your company- they look at your customer base too 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. 3-5 Steps you do to create a competitive advantage Ch. 3: Business Model and Strategic Plan Strategic Management and Competitive Advantage 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 position in the market that is superior to its competition. SUSTAINABLE Good ideas are likely to be duplicated in time- hence it is important to create a competitive advantage and ensure it is sustainable Possible to do branding? I.e.- suckling pig example Constant need to come up with new ideas Ch. 3: Business Model and Strategic Plan 3-6 Building a Competitive Advantage Consider four aspects of a small company: 1. Products they sell 2. Service they provide 3. Pricing they offer 4. Way they sell Ch. 3: Business Model and Strategic Plan 3-7 Is your product unique to set you apart from your competitors? i.e. bottled water- nice design, adding in of flavor and vitamins-pink dolphin 7/11 charging a premium: 24 hours, hot water dispenser, differentiate themselves through the service they provide Price differentiation is not desirable because it ultimately leads to lower prices- (but good for consumers :) Home delivery? 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"). Ch. 3: Business Model and Strategic Plan 3-9 Financial strength is not a competency, it is a competitive advantage But financial management is a competency, especially in export and import businesses because exchange rate is fluctuations There is a need to manage your money. You buy raw materials from different counties Natural advantage- small and flexible, may not be able to identify small niches and react fast enough for large companies Building a Sustainable Competitive Advantage Capabilities Capabilities Lessons Lessons learned learned Core Core competencies competencies Sustainable Sustainable competitive competitive advantage advantage Superior value Superior value for customers for customers Skills Skills Retaining lessons learnt- good to have a system to retain knowledge that employees who have come and gone have learnt APPLE- Steve jobs where everything needs to go through him and around him Ch. 3: Business Model and Strategic Plan 3 - 11 Strategic Management Process Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8 Step 9 Develop a vision and translate it into a mission statement Assess strengths and weaknesses Scan environment for opportunities and threats Identify key success factors Analyze competition Create goals & objectives Formulate strategies Translate plans into actions Establish accurate controls Ch. 3: Business Model and Strategic Plan 3 - 12 Vision- the dream of the company (i.e. I want to be the biggest company in this industry in Singapore) Incorporates values- how you are going to achieve this goal Mission statement- things you do to achieve your vision 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 Allows for perseverance in the face of adversity 3 - 14 Ch. 3: Business Model and Strategic Plan 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." Example: Chick-fil-A 3 - 15 Ch. 3: Business Model and Strategic Plan For example a charitable organization that may have the technology to build something that can be very profitable, but it does not tally with its vision- charity not profit. So a vision actually also determines the company's direction Vision- to motivate employees Nus vision- towards a global knowledge enterprise- seems like a business and not an institution of higher learning A leading global university centered in Asia, influencing the future Vision and mission statements- need to be bought by the employees 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? Ch. 3: Business Model and Strategic Plan 3 - 17 Step 2: Assess Company Strengths and Weaknesses Strengths SWOT analysis 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. 3 - 18 Ch. 3: Business Model and Strategic Plan Step 3: Scan for Opportunities and Threats 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. 3 - 19 Ch. 3: Business Model and Strategic Plan The Power of External Market Forces Technological Technological Competitive Competitive Economic Economic Political and Political and Regulatory Regulatory Ch. 3: Business Model and Strategic Plan Social and Social and Demographic Demographic 3 - 20 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. Ch. 3: Business Model and Strategic Plan 3 - 21 Cost- able to provide the service at a profit Turn around time- i.e. laundry service- low cost but get you get back your clothes fast? Speed Accuracy- i.e. laundry example Convenience store- it must be conveniently located Inventory management- stock critical goods- instant goods etc. Staffing- do you have a back-up plan? What if employees call in sick? Identify areas that are essential and important for your business Is dcor important for a convenience store? Nah, probably convenience right? Things that are important to your customers STARBUCKS- buying of excellent service, luxury feeling? Selling of a lifestyle. A place for meetings. Key success factor- making of the place as conducive as possible But for coffee places that aim to deliver superb coffee- key success factorto make the best coffee. What is important to you in your business? 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 Factor 1. 2. 3. 4. 5. How Your Company Rates Low 1 2 3 4 5 6 7 8 9 10 High Low 1 2 3 4 5 6 7 8 9 10 High Low 1 2 3 4 5 6 7 8 9 10 High Low 1 2 3 4 5 6 7 8 9 10 High Low 1 2 3 4 5 6 7 8 9 10 High Conclusions: To be successful in your business, what do you need to do? Rank yourself and your competitors to see whether 3 - 23 you can compete with them Ch. 3: Business Model and Strategic Plan 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. There is always a need to look at your competitors. How to protect yourself from possible competition? Need to TRACK COMPETITION Bubble tea example: low cost, no high technology, low barriers to entry Have a strategic management plan to ensure you have a competitive advantage 3 - 24 Ch. 3: Business Model and Strategic Plan FIGURE 3.3 How Small Businesses Compete Based on: William J. Dennis, Jr., National Small Business Poll: Competition (Washington, DC: National Federation of Independent Businesses, 2003), Vol. 3, Issue 8, p. 1. Ch. 3: Business Model and Strategic Plan 3 - 25 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 Be guarded against the 3 levels of competition Ch. 3: Business Model and Strategic Plan 3 - 26 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. Ch. 3: Business Model and Strategic Plan 3 - 27 Google android which has been used by Samsung etc. but suddenly your supplier has become your competitor when Google bought Motorola Os2 by ibm, which suddenly became a competitor of Microsoft from its buyer Competitors can come from anywhere Step 5: Analyze Competitors Techniques do not require unethical behavior: Monitor industry and trade publications. Talk to customers and suppliers. Debrief employees, especially sales representatives and purchasing agents. Attend trade shows and conferences and study competitors' sales literature. Watch for competitor's employment ads. Conduct patent searches for patents competitors have filed. Get syndicated reports for competitors Ch. 3: Business Model and Strategic Plan 3 - 29 Step 5: Analyze Competitors Techniques do not require unethical behavior: Learn about the kinds of equipment and raw materials competitors are importing from the Journal of Commerce Port Import Export Reporting Service. Buy competitors' products and "benchmark" them. Get competitors' credit reports. Check out the reports publicly-held competitors must file with the SEC. Investigate UCC reports. Check out the resources in your local library. Use the Internet to learn more about competitors. Visit competing businesses to observe their operations. 3 - 30 Ch. 3: Business Model and Strategic Plan Competitive Profile Matrix Know where you are weak in so you know where to improve on Ch. 3: Business Model and Strategic Plan 3 - 31 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 3 - 32 Ch. 3: Business Model and Strategic Plan Step 6: Create Company Goals and Objectives Goals: Broad, long-range attributes to be accomplished. Be daring but be realistic "BHAGs" Objectives: More detailed, specific targets of performance that are S.M.A.R.T. Specific Measurable Assignable Realistic (yet challenging) Timely 3 - 33 Ch. 3: Business Model and Strategic Plan Step 7: Formulate 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. Ch. 3: Business Model and Strategic Plan 3 - 34 Step 7: Formulate Strategies Three basic strategies: Cost Cost Leadership Leadership Strategy? Differentiation Differentiation Focus Focus Ch. 3: Business Model and Strategic Plan 3 - 35 Focus/niche- not big enough, but identify some part of the market where the big competitors are not interested in (best most of the time) Cost leadership- produce with lower cost so that you can sell your products at a lower price, hence getting more customers and earning more profits (economies of scale) Differentiation- produce something different FIGURE 3.4 Three Strategic Options But difficult to be a niche player and have low cost. Because there are little economies of scale to be tapped on Ch. 3: Business Model and Strategic Plan 3 - 37 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. Ch. 3: Business Model and Strategic Plan 3 - 38 Cost Leadership 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. Ch. 3: Business Model and Strategic Plan 3 - 39 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. Ch. 3: Business Model and Strategic Plan 3 - 40 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. Ch. 3: Business Model and Strategic Plan 3 - 41 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 Ch. 3: Business Model and Strategic Plan 3 - 42 Best roasting equipment, best espresso machine, a steady supply of good beans, build up credibility Niche Instead of copying large players, think of something different, because you cannot compete with large players with the same strategy 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. Groupon example Ch. 3: Business Model and Strategic Plan 3 - 44 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. Ch. 3: Business Model and Strategic Plan 3 - 45 Balanced Scorecards Five Perspectives: 1. 2. 3. Customer: How do customers see us? Internal Business: At what must we excel? Innovation and Learning: Can we continue to improve and create value? 4. Financial: How do we look to shareholders? 5. Corporate Citizenship: Do we meet our responsibility to society as a whole, the environment, the community, and other external stakeholders? Ch. 3: Business Model and Strategic Plan 3 - 46 Ch. 3: Business Model and Strategic Plan 3 - 47 Conclusion The strategic planning process: Begins with the nine steps. Becomes more efficient each time. Teaches entrepreneurial discipline for a higher chance of survival. Ch. 3: Business Model and Strategic Plan 3 - 48 ...
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This note was uploaded on 01/18/2012 for the course TR 3001 taught by Professor Kok during the Spring '08 term at National University of Singapore.

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