Business Planning and Market Strategy

E.K. Valentin

• Publisher: SAGE Publications, Inc
• Year: 2014
• ISBN:
  9781483323831
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Entrepreneurial Market Strategy and Business Planning covers all the essential topics found in most planning texts, guidelines, and templates. However, it also provides insights not found in other planning texts – insights students and executives need to develop sound and convincing market strategies and business plans that enable businesses to succeed in a world that is becoming increasingly competitive.

This brief book keeps the fun in planning butnot by dumbing down the planning process and planning issues. Instead, it concisely lays out critical issues and affords insights into their resolution. It tells intelligent readers not only what they should look at and do, but also what they should look for and why. Rather than reducing the planning process to a mechanistic, step-by-step "how to" instructions, this text provides practical guidelines for applying strategic management and marketing concepts to business planning. This text aims to help readers identify critical issues and think about them deliberately so they can make informed, sound, defensible strategic decisions. Further, it depicts marketing and business plans as proposals that must be backed by compelling logic and coherent arguments, something that can be accomplished by making strategic decisions throughout the process.

PART I

The Big Picture

The six chapters that comprise Part I provide an overview of business plans, planning, and market strategy. If you are eager to write a business plan, you can get started right after reading them.

C H A P T E R 1

Business Planning and Market
Strategy in a Nutshell

Business is a good game—lots of competition and a minimum of rules. You keep score with money.

—Nolan Bushnell

[P]lanning is necessary precisely because we cannot forecast.

—Peter F. Drucker

Most firms plan, but few firms have yet mastered strategic market planning.

—Derek F. Abell and John S. Hammond

Firms come in many shapes and sizes. Some are global titans, while others are minuscule startups that have yet to make a sale. And while some companies concentrate on a single line of goods or services, others diversify. Utah Woolen Mills, for example, is a humble single-outlet retailer, mostly of fine clothing for men and women. Yamaha, in contrast, is a giant conglomerate whose various business units make and market motorcycles, snowmobiles, watercraft, audio equipment, musical instruments, and more.

In everyday language, a business is any enterprise that strives to earn a profit. But in the vernacular of strategic management, a business is a venture that has the following characteristics:

1. Its activities focus on a single type of good or service, which may be defined narrowly (e.g., pianos) or broadly (e.g., musical instruments).

2. It operates for profit, usually in a competitive market or industry.

3. It is managed by an executive who is empowered to make major decisions and is held directly accountable for financial performance.

4. It operates independently or is readily capable of it.

Accordingly, a single business may constitute an entire company, such as Utah Woolen Mills; or it may be one of several strategic business units (SBUs), such as Yamaha’s musical instruments division, that form a multi-business corporation.

Box 1-1

Is Netflix One Business or Two?

Whether a business venture is best defined broadly or narrowly is not always clear. Broad business definitions reveal commonalities among various offerings and activities; narrow definitions highlight differences.

Netflix, for example, can be defined broadly as a business that obtains and distributes entertainment content, such as movies and television shows, to its customers, or subscribers. The company’s traditional business is renting movies on DVD by mail, but its video streaming service has grown so much that it now accounts for much of Netflix’s revenue.

Even though both services can be described as centering on acquiring and distributing entertainment content, almost everything about DVD rentals by mail differs from video streaming. For instance, copyright laws affect the two businesses very differently, and the distribution capabilities required have little in common. Consequently, defining DVD by mail and video streaming as distinct businesses works best for most planning and other managerial purposes.

Nevertheless, the two services do have something in common and do enjoy some competitive advantages that would have been lost had Netflix sprung up as two independent companies. Therefore, looking at DVD rentals and video streaming as separate businesses first and as one afterwards seems most informative and useful.

Most planning tools and guidelines introduced in this book apply as much to the business units of multi-business firms as they do to independent businesses. Moreover, they apply equally to established enterprises, ideas for brand new startups, ventures on the frontiers of technology, and lines of commerce that have endured for centuries. In large part, they also apply to not-for-profit organizations that compete for customers they call voters, patients, donors, students, or the like.

Executives who want to grow their businesses usually have a few ideas about moving forward. Often, they sense opportunities to use their business’ distinctive capabilities or strategic assets as springboards for expanding a product line or entering a new market.

Netflix cofounder Reed Hastings, for example, recognized both the opportunity and the threat that video streaming posed. He sensed that, just as Netflix’s DVD-by-mail service had largely displaced video rental stores, video streaming could supplant DVDs by mail and, perhaps, DVDs altogether. Accordingly, Hastings used streaming technology to add video on demand (VOD) to Netflix’s offering. By that time, Netflix had accumulated two very important leverageable assets: a well-known brand name and a customer base of several million readily accessible subscribers. Branching out into VOD looked like a no-brainer; nevertheless, VOD may yet be the end of Netflix.¹ More about that later.

As is typical of entrepreneurs, Reed Hastings had some fascinating ideas he had to pursue: first, DVD rentals by mail; then, VOD. Intriguing ideas also drove Walmart’s Sam Walton and Dell’s Michael Dell to found their companies. Mr. Walton, an observant former J.C. Penney employee, felt compelled to give discount retailing a try in small-town America. Mr. Dell, in contrast, was a passionate computer whiz who, as a teenager, discovered he could build three PCs for the price IBM charged for one. Soon after graduating high school, he set out to challenge the global giant IBM.

Occasionally, eager entrepreneurs search for business ideas knowing only that they want to be entrepreneurs. If you are among them, look for opportunities to better serve people or organizations whose needs or preferences are not satisfied by available offerings. Alternately or additionally, look for ways to compete on price, as Sam Walton did, without sacrificing profits or compromising performance.

Much good advice for discovering business opportunities resides on the web. To find it, just search for generating business ideas. Neal Lurie’s posted advice, for example, includes the following:²

• Reflect on what you love doing and what you understand much better than most people. After that, ponder the kinds of businesses that would enable you to pursue your passions profitably and use your expertise to gain a market foothold.

• Think about problems you have encountered to which you found no satisfactory solution. What kinds of gizmos or services have you looked for that you could not find?

• Which of your gizmos and gadgets should be easier to use or be more useful?

• Think about applying a successful business idea in new ways or in new places. For instance, so-called big-box stores are all based on the same general idea: Buy in volume, minimize frills, and pass a portion of the savings on to customers. This idea has been applied to home improvement products (Home Depot and Lowe’s), office supplies stores (Office Depot, Office Max, and Staples), home entertainment and electronics (BestBuy), and more. Further, the big-box business model closely resembles Kmart’s, Walmart’s, Costco’s, and Sam’s Club’s. Although many big-box chains now clash head on, most began in different geographic markets and expanded until they ran into each other.

Box 1-2

The Brick Clip®: A Simple Solution
to a Simple Problem

To be successful, new products need not be complicated or solve complex problems. Take the Brick Clip®, for example. It solves a problem for people who want to hang the likes of pictures, wreaths, or Christmas stockings from brick fireplaces, but do not want to drill holes for hooks. The Brick Clip® provides an economical and very effective solution to their problem. As shown, the device can be clipped onto a brick with ease and can be moved or removed without leaving a trace. Millions of Brick Clips® have been sold.

Sources: http://www.google.com/patents/US4337915 and http://brickclip.com.

Give Neal Lurie’s advice a try. If you do, ideas that pique your interests and stir your entrepreneurial passions should come to mind.

The ensuing chapters have much more to say about what to look for when searching for viable business opportunities. As you read them, keep in mind that, when it comes to launching or operating a business, much can be learned from books and need not be learned firsthand from experience. Learning purely from experience by trial and error often is unduly painful and quite unnecessary. Nevertheless, experience is invaluable both in running a business and in formulating a business plan, which is ample reason for writing one.

Even if you develop a business plan just for practice, you are apt to gain insights into critical aspects of market analysis, strategy, and business in general that you otherwise would miss. Because writing a business plan is among the most valuable learning experiences available to future executives and entrepreneurs, this book often refers to your venture, your plan, your strategy, and so forth with the expectation that you are, or soon will be, engaged in formulating a business plan.

This introductory chapter lays a foundation for the remainder of this book by answering the following questions:

• Why plan?

• What should business plans cover?

• What are some common types of business plans?

• How do corporate and business planning interact?

• What can you learn from this book that you may not learn elsewhere?

• What do the ensuing chapters cover?

WHY PLAN?

“Look before you leap” is good advice that captures the essence of planning. Although every business ends up competing somewhere somehow, many new ventures, as well as established enterprises, perish because too little thought was given in advance to the many factors and forces that underlie success and failure. Indeed, the business graveyard is littered with enterprises that fell victim to ill-conceived choices or drifted into oblivion like rudderless ships. This fact explains why institutions and individuals capable of providing capital generally insist on seeing a business plan before they will part with their money or approve funding.

Sound planning is the alternative to drifting. It entails envisioning a course of action, mapping it out, and justifying it with credible data, perceptive analyses, plausible assumptions, and cogent logic. A business plan is the product of planning. Although it may exist only in someone’s mind, from hereon, consider it a document that serves as an organization’s roadmap and tells readers why money neede...

Table of contents

• Cover page
• Halftitle
• Dedication
• Title Page
• Copyright
• Contents
• Preface
• PART I: THE BIG PICTURE
• PART II: ADVANCED PERSPECTIVES AND DETAILS
• PART III: WRITING UP AND FOLLOWING UP
• Appendix: A Sample Business Plan for Lynn’s Hair in Style
• Index
• About the Author
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