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    Business plan outline

    Executive Summary Company Description

    Including product/service

    & technology/coreknowledge

    Industry Analysis &Trends

    Target Market

    Competition Strategy/Business Model Marketing and Sales Plan Production/Operations

    Plan

    Technology Plan

    Management &Organization

    Social Responsibility

    Development & Milestones

    Financials Including Capital

    Requirements & FinancialStatements

    Appendix

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    Strategy funnel industry side

    Customer &

    Benefits

    CompetitiveDynamics

    CompetitiveSpace

    Segment,SizeChannels

    StrategicPositioning

    ValueProposition

    Industry

    Structure

    Environmental Trends

    IndustryMarket

    PerceptualSpace

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    Industry-side goal

    Describe, in detail, the competitive, industry, andenvironmental landscape in which your firm will

    operateto find a defensible space you might occupy.

    0

    10

    20

    30

    40

    50

    60

    70

    Return on

    Equity (%)

    Business Landscape

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    Business as supply chain

    Financial Management

    People Management

    Dig clay Throw clay into pots Sell pots

    Technology

    Infrastructure & Logistics

    R & D

    The supply chain traces processes and transformations. As thesebecome more complex, they tend to differentiate into variousfunctions.

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    Business as value chain

    Dig clay Throw clay into pots Sell pots Margin

    The value chain maps value added andcaptured onto the supplychain. Each step in the supply chain contributes different amountsof value.

    Effective management involves both identifying new sources ofvalue and tying together pieces to create more than the sum of theparts.

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    Markets & industries

    Each cluster of competitors is an industry, industry segment orstrategic group

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

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    Book selling commerce chain

    Author Publisher Wholesaler ReaderRetailerAgent

    Sales groups

    Direct marketing

    Packager

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    Book selling value chain

    Author Publisher Wholesaler ReaderRetailerAgent

    Sales groups

    Packager

    $0.50

    Promotions

    $0.05

    $0.50

    $1.00

    $0.375

    $5.50

    $1.25

    $0.375

    $10.00$3.50

    From trade sales, a publisher might keep 7% for salaries etc though the amountsand percentages do increase with print runs and cover prices.

    From direct mail, a publisher might keep 12.5% or so, but without as many economiesof scale (since so much goes to logistics).

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    Exercise:Draw the chain,identify your industry

    Who sells what to whom? Ask industry informants Look at customer and supplier lists

    Look at industry magazines Draw what you see Circle your industry

    The related functional cluster of firms

    Identify sources of competition direct competitors from within the industry indirect competitors from related supply chains

    Note the supply market Note the demand market

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    I. Environmental Scanning:STEEP analysis

    Macro-environment

    Economic

    Forces

    Ecological

    Forces

    Socio-culturalForces

    TechnologicalForces

    PoliticalForces

    Firm/Organization

    StructureCulture

    CompetenciesResources

    Operating

    Environment

    TradeAssociation

    Regulators

    Union/employees

    Competitors

    Creditors Suppliers

    Customers

    Communities

    Stockholders

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    Stakeholders shape theoperating environment

    Macro-environment

    Firm/Organization

    StructureCulture

    CompetenciesResources

    Operating

    Environment

    TradeAssociation

    Regulators

    Union/employees

    Competitors

    Creditors Suppliers

    Customers

    Communities

    Stockholders

    Economic

    Forces

    Ecological

    Forces

    Socio-culturalForces

    TechnologicalForces

    PoliticalForces

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    Stakeholder management

    Importance to Firm

    Low Average HighLow

    Averag

    e

    High

    Influence

    onI

    niti

    ative

    SH1SH3

    SH2

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    II. Industry structure

    Industries are clusters of firms that serve the same function in acommerce chain. These sets of firms operate in the same space andcompete to control enough space to capture value.

    Industries all have structure, history, trajectories and competitivedynamics that constrain entry options and are shaped in part bymacro-environmental conditions.

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    Industry power: Bookstores

    Threat from Substitutes:High: multimedia, web

    distribution

    Suppliers Power:Reduced but still

    significant

    Threat from New EntrantsMinimal at scale eg.

    warehousing, leases

    Buyers Power:Mild local

    monopoly but options

    Rivalry:

    Oligopoly

    Other Stakeholders:Minimal domestic,some international,

    financial concerns

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    2. Substitutes

    Industries with few substitute products aremore attractive than those with many

    substitutes. Effective substitutes can often provide

    ways in for upstarts.

    The threat of substitutes is often theweakest of the forces -- except duringtimes of high demand or fast change, wheninterlopers may see opportunities.

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    3. Buyer power

    Attractive industries feature disorganized,small customers, with little purchasing andnegotiating power.

    Buyers gain power when: They are large, relative to the seller

    (superstores). They are organized (eg., a coop). It is easy to switch to another supplier (eg., when

    products are standard). They could integrate backwards and so take over

    a supplier.

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    4. Supplier power

    Attractive industries feature small anddisorganized suppliers.

    Suppliers gain power when: They are large, relative to the buyers. (Alcoa).

    It is difficult for buyers to switch to competingsuppliers. (Custom products, proprietary

    information). They pose a credible threat of integrating

    forward and taking over the buyers functions.

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    5. Rivalry

    Attractive industries are controlled by monopoliesor gentlemanly oligopolies. On the other hand, the more the players, and the more

    equally matched, the closer the industry approximatesperfect competition and minimum profits.

    Rivalry is reduced when: Power is concentrated (C4 Index ) Competitors can truly differentiate.

    It is easy to exit. Demand is stable and predictable. Regulation takes the edge off.

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    Profit pools

    OperatingM

    argin

    Acquisition Funding Servicing 100%0

    20%

    Share of Industry Revenue

    Banking

    OperatingM

    argin

    Funding Servicing 100%0

    20%

    Share of Industry Revenue

    Banking

    Acquisition

    Operating margin:Industry reports, interviews

    Share:Profit amount x total sales in sub-segment

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    While useful, the five forces, value chainand profit pool models are essentially static.

    It is critical to make guesses about thefuture -- especially about when trendsmight stop and the existing power structureshift. STEEP and technology life cycle

    analyses can help with this. If you need a more dynamic model, ask me

    later about the 4 Arenas analysis.

    Industry dynamics

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    Exercise:Industry power structure

    Threat from

    Substitutes

    SuppliersPower

    Threat fromNew Entrants

    BuyersPower

    Rivalryof

    Firms

    Power of other

    Stakeholders

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    Company competitive analysis

    How does each firm compete? Quality, service, low price, something else?

    How effective is each? How well designed are they to compete as they do? How powerful?

    What resources do they control? Money, people,

    influence... How aggressive? How hard do they compete? Whats their

    trajectory?

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    Competitor response profile

    Future Goals

    Vision statement

    Managerial

    behavior

    Critical

    Assumptions

    Key beliefs

    Blind spots

    Response ProfileSatisfied or ambitious?

    Likely next moves?

    Vulnerabilities?

    Sensitive spots?(What will provoke

    retaliation?)

    Current Strategy

    Price, quality,

    distribution,

    resources

    Capabilities

    Strengths &

    weaknesses

    Drivers Abilities

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    Competitors table

    Organizes competitors using crucialdimensions of competition, plus effectiveness,power, trajectory, likely changes...

    Market

    ShareQuality Cost Effective-

    ness

    Aggres-

    siveness

    Competitor1 15% H H M

    Competitor2 25% L L H very

    Competitor3 5% M M L

    Competitor4 20% L L H slipping

    Competitor5 15% M M H

    Power

    M

    H

    L

    H

    L

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    Groups of firms that pursue similarstrategies with similar resources

    Strategic groups

    Price

    Selection

    Fast Food

    Upscale Chains

    Diners/Family Style

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    Example: Variation on GartnersMagic Quadrant

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