Managers within a strategic business unit or small organisation can make use of a variety of strategic techniques ideas and tools as part of the business planning process. Critically review the value of the main tools that exist to determine the most appropriate bases of competitive advantage including Porter’s thinking on generic strategies.
STRATEGIC BUSINESS PLANNING.
With the ramified economic changes and complex business structure, each and every organization needs to use the strategic planning and process to strengthen its business process. The planning process is the effective tool to generate effective core competency in the product differentiation and cost leadership strategy. Planning processes for business involves several strategic techniques. There are several tools that are required to extend competitive advantage to business. These tools are not specific to any business function because business planning is not core to a single function. Any organisation can gain success that it wants if the customers are satisfied with the value that they enjoy on their spending. The value that is extended to the customers is states the firm’s competitive advantage in the industry where the firm is placed and is operating (Bell, Dyck, and Neubert, 2017).
The Porter’s quote after analysing the competitive advantage stated, “"Competitive advantage grows fundamentally from the value a firm is able to create. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset higher prices." He further added a fundamental stating, "A firm is profitable if the value it commands exceeds the costs involved in creating the product. Creating value for buyers that exceeds the cost of doing so is the goal of any generic strategy. Value, instead of cost, must be used in analysing competitive position… “. Focusing upon the quote that Porter laid, one concluding thought can be framed that for an organisation to create value its return generated on capital in form of revenues has to be higher than its expenses, i.e. the cost of capital (Ouma, and Oloko, 2017). It is analysed that if company could develop core competency in the market then it could easily attract more clients in market to buy their offered products and services in market.
According to Porter, skimming the highest level of profits is the basis for an organisation to earn a position that is over average from the rest of the players in the industry. Porter has suggested that three generic strategies are required to pursue the above discussed competitive advantage, namely, differentiation, cost leadership and focus (Belton, 2017). For an organisation that is at “learning stage” any of the strategy among differentiation and cost leadership can foster competitive advantage. Along with the two strategies above organisation has to keep itself focused upon a particular aspect rather than focusing on a huge array.
Porter’s easiest strategy to understand is Cost leadership. According to (Lotayif, 2016), porter five forces are used to assess the market external factors which helps company to evaluate the marketing strategies and market factors. As the name suggests, this strategy states being the producer that works by moving down the learning curve, i.e. by being the producer with lowest costs. The aim is achieving economies of scale by taking advantage of every opportunity available. However, the important point to remember is lowering down the costs but not the quality. The product sold must be par with what competitors are offering, but at a lower price (Salavou, 2015). On the other hand, differentiation strategy doesn’t focus on being the cost leader but on being a product server with unique attributes. The performance has to be best as compared to the competitors. Any attribute or attributes other than costs have to be improved to attract a particular section of market. The aim is to work upon a significant attribute to target customers. The selection of one strategy among the two discussed depend upon whether the market chosen is price sensitive or not (Lotayif, 2016).
The third strategy, focus, is not about costs or any attribute of product but about selection of a particular section that the organisation wants to target. The focus strategy works on gaining a competitive advantage in its targeted market. The competitive advantage though could be gained by working upon any of the alternate strategy discussed as now. The following table shows the way these strategies can be placed to obtain competitive advantage:
These strategies alone are not enough in the dynamic environment to gain the competitive advantage. Along with them technology acts as the greatest influencer. Innovation can be introduced by the help of bringing technological improvements. Porter has stated that, "Change in the way office functions can be performed is one of the most important types of technological trends occurring today for many firms, though few are devoting substantial resources to it." this is mainly on account of globalisation that the organisations tend to be dynamic according to the markets. Other than the thirst to strive larger profit shares, the organisations are required to prepare themselves for the five different forces exerting influence in the markets. Porter has named them as, ‘threat from new entrants’, ‘threat of substitutes’, ‘rivalry among existing competitors’, ‘supplier’s bargaining power’, and ‘buyer’s bargaining power’.
Other than Porter’s generic strategies the other strategic tools required for business planning process are also discussed that are highly valuable when competitive advantage is strived to be achieved. To understand the entity’s macro environment for planning purpose the organisations use PESTLE analysis tool. PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental. The changing dynamics can be synchronised by the organisation by the use of this tool (Policy, 2016). These are the factors that cast an effect upon the demand and supply forces of the organisation. Through this analysis the organisation can analyse the internal areas that require change. The industrial growth and decline patterns can be analysed by the managers to identify the areas in business that require solid strategic planning. However, this tool lacks at the part where the qualitative aspects it deals have to be quantified to business requirements. An appropriate measure can never be gathered (Abbott, 2015).
SWOT analysis on the other hand stands for STRENGTHS, WEAKNESSES, OPPORTUNITIES and THREATS. Both internal and external factors are analysed. The organisation gets insights into the opportunities that it can exploit to come an edge over the competitors. These opportunities come from the external factors (Bohari, Hin, and Fuad, 2017). Similarly, the threats that can hit the entity’s performance are also observed. These are counted in the external influencing factors. The internal factors that comprises of entity’s strengths and weaknesses can also be identified. All these factors when studied together can help in identifying the current position and the ways it can improvise its position. The entity comes to a position where it can use its strengths to overcome weaknesses and even find newer opportunities to be at a competitively advanced position. The threats are also identified beforehand to strategize ways to overcome them (Phadermrod, Crowder, and Wills, 2019).
Another tool in the same category is resource-based view (RBV). This tool emphasises upon the thought that the performance that any organisation does and the competitive advantage it holds are all dependent and specifically determined by the resources that it possess. According to this study the heterogeneity of the strategic decisions that different organisations take is because of the heterogeneity of the resources they possess (Steiner, et. al 2017). Further it is only because of the heterogeneity of the resources that an organisation can gain competitive advantage over the other. These resources determine the competencies, capabilities and assets that the entity possesses. These resources somehow enable the entity to enable the cost advantage or differentiation strategy earlier discussed (Villasalero, 2017).
Irrespective of the different advantages that the different tools offer or the significant value attached to each of them, the decision of application of any particular tool is dependent upon the type and size of the organisation (Kellermanns, et. al 2016). Even if the internal determinants are overlooked, the industry of operation and the various related market factors also at times helps the managers in deciding the tools they need for strategic planning. Depending upon the suitability and the intensity of the factors that influence the organisation, any particular strategic tool is chosen. However, any single tool is never stringently applied. With the need of the hour, the demands change and the organisations sort to another method to acquire competitive advantage.
The word strategy is obtained from a Greek word ‘stratēgia’, which means, "art of troop leader; office of general, command, general ship." Under the uncertain conditions strategy is required by businesses to reach their goal(s). Strategy is required for the achievement of any goal because the resources that are required are basically limited in terms of their availability. Strategy setting is kind of a full-fledged process involving, setting of goals, determination of actions required to achieve the goals, and acquiring the resources that are required to execute the decided course of action. Mainly two activities make up a strategy, i.e. strategic thinking and strategic planning and two processes typically sums it up i.e. formulation and implementation (Grant, 2016).
Different researchers have defined strategy in different manner. Some defined it as a “stream of decisions” against taking it as planning (Burgelman, et. al 2018). While some have argued that strategy involves the attempts that humans make to get "desirable ends with available means" and that "strategy is about shaping the future" (Aldulaimi, 2015). Others have also argued that strategy is, "a system of finding, formulating, and developing a doctrine that will ensure long-term success if followed faithfully" (Dehtiarova, 2018).
Strategy if seen from a broader perspective is all about a technique or type that helps in solving a given problem. The underlying structure of the good strategy to be adopted is referred to as kernel by Professor Richard P. Rumelt. According to him, this kernel is divided in three components being, diagnosis, guiding policy and action plans (Meiser, 2016).
Throughout your study of this module you
will be required to develop a robust checklist of review issues
that would be helpful in conducting an analysis of a business plan.
Whenever funds are required to be raised for any existing or new business, a business plan is certainly required to be formulated. This business plan has to be formulated including several points in a specified format. When a business plan constitutes of all the requisite details is in a better position to attain focus of the targeted investors and help in smooth implementation (Burns, 2016). The following checklist is prepared to analyse the issues that are must to be present in a business plan and that are often analysed:
Executive summary lays the most important foundation of the complete business plan. A synopsis of the whole business plan is included in the executive summary. The synopsis relates to management competencies, company details, market opportunities and financial projections. Specific details about the financial projections comprise of revenues, expenses, profits, funding pattern, and etc. The executive summary if rich in terms of information enables the investors to get an insight about the organisation and its business plan without having the need to read it thoroughly. An overview of the products, mission and objectives is also included in the executive summary (McKeever, 2016).
It is accompanied with the list of the work which would be undertaken in the research. It shows the list of heading with page numbers which makes easy for the readers to analysis and evaluate the undertaken work in determined approach.
This section is meant to provide in brief the history of the organisation that is presenting the business plan. The details about the formation of the organisation, achievements, and legal status are provided. The past performance is indicated by the organisation in the business plan to get the investors an idea into the way the organisation might head in near future. A brief insight into the ownership of the organisation is also provided in this section. The way the business is run and liabilities are held by the owners is stated. The company’s financial position is also presented in this section to enable the investors look into the position of assets and liabilities of the company. A complete analysis about the industry is also provided along with company (Rose, 2016).
This section specifically provides details about what the company is offering for sale to the customers. The origin of the products and their production processes are often mentioned by the organisation for the investors to understand. However, the products need not be tangible thing for every company. For the service providing organisations, the product becomes the services that they offer. These products are presented along with the brand names to give specific details. Therefore, this section reveals core details of the products undertaken in the research. Mentioning of the brand name helps in differentiating the products from the products offered by other organisations (Evans, 2015).
This segment discusses about the market in which the organisation operates. The details regarding the different segments that the organisation seems to approach are mentioned. Among the identified segments, the details about the target market are also provided in this section. There is a description about the market size that the organisation seems to capture. There is a description of the data relating to the customers that are to be targeted. A reasoning of the basis which will make the customers buy the products is provided (Morrell, 2017). The diagnosis part of analysing the market and affecting factors explains the nature of the challenge that is to be faced, guiding policy describes the way in which the challenge can be dealt and the action plan finally layouts the coherent actions that can implement out the guiding policy
Not only the target market segments and targeted customers, but the strategy that the company opts to be consistent in delivering the quality to retain its targets are mentioned. This strategy places the company at a competitive edge to the other business plans.
This section of the business plan provides the details relating to the different areas that exert competition to the organisation. The competition could be direct or indirect as well. There is a complete analysis relating to the strengths and weaknesses of the direct and indirect competition. In this section itself, the company mentions about the advantage that it have over its competitors to excel in the provided market area (Paley, 2017). It is analysed that if company wants to sustain its business in market then it will have to create core competency in cost leadership and product differentiation strategy in long run.
Through the marketing plan placed in the business plan of the whole documentation, the organisation seeks to highlight the visibility of their work and tactics. The straight strategy that the organisation seeks to opt is described. The sales strategy that is defined here also provides details regarding the competitive factors of the organisation. The organisation’s manner in which it takes the leads identified from the market are specifically discussed in this section. The kind of relationship that the organisation sought to maintain with its customers is mentioned. Some organisations even strive to present the sales forecast in this section itself. This helps in syncing the sales strategy of the organisation with the forecasts of the entity (Dolan, 2017).
However, here in this section it is important for the organisations to incorporate the promotional plans that the organisation maintains to attract and call for new customers. It is also important for the entity to specify the manner and the channels through which they can make their products reach their customers. However, it gets important to present the pricing strategy and the relation of the pricing strategy with the competing industry (Shelton, 2017).
In the operation plan dual information is presented including, processes that are key to operations and the future milestones for achievement. The key operational process comprises of the details of the routine functions of the organisation. These functions shall help in clarifying the way the organisation shall conduct business. The milestone section shall provide the details about the quantifiable goals that the organisation wants to achieve in the near future time (Scarborough, 2016).
The goals need not to be profit specific, but also include details relating to the product launches, partnership executions, store launches, and etc.
The background and the other details regarding the members that formulate the management are provided. The roles and designations assigned to each member of the management team are mentioned. The tenure of each management individual is also mentioned. It is too important to mention the qualifications of the people that frame the management of the organisation. In case the organisation comprises of a Board of Directors, the details regarding to them including every necessary detail is also mentioned in this section (Nicholas, and Steyn, 2017). The payroll and remuneration attached with each managerial post and to the directors’ post is also stated in this section of the business plan. A figurative table at times is used to show the remuneration part that is attached either to specific tenure of work or activity level.
The financial plan comprises of the details of the assumptions firstly that the organisation have used in preparation of all the projected financials and other details. The assumptions relate to different financial elements that are necessary to be used, but cannot be known with certainly beforehand. The projected financial statements that the organisation forecasts for its coming operational years are represented. These statements include, projected cash flow statement, projected balance sheet, projected income statement and even the break even analysis at times. Based upon these projected statements, some trends for the business are also presented for the coming years by calculating ratios for different areas. This financial analysis shows the funding pattern and sources very clearly. For the organisations that are thinking to use equity funding, they usually talk about their exit strategies in this section (Ekanem, 2017).
This section of the whole business plan is pretty much formulated to highlight and bring conformity in the information that is provided in the rest of the business plan. For the projected financial statements that are briefly presented in the earlier sections in the report are discussed in detail in the appendix section. This section is meant for all the supporting documents of the entire business plan (Argenti, 2018).
Follow the link below and you will
find several complete business plans.
In the classroom briefing
you will be allocated one plan to concentrate on.
Critically analyse this document using
the checklist you have developed.
Comment in particular on the strengths and limitations of the plan and the degree to which it meets the needs of its target audience.
Indicative word limit:
no more than 3,000 words excluding appendices.
THE PLAN CHOSEN IS AN AGRICULTURAL FARM BUSINESS PLAN OF BOTANICAL BOUNTY.
As earlier discussed executive summary is a synopsis of the entire business plan and helps in looking the entire business model at a glance. This shows the real outcome of the undertaken research and what possible actions could be taken by company to strengthen its business functions and value chain activities.
The botanical Bounty’s business plan has a well segmented section of executive summary. The strengthening point about the organisation’s executive summary is the way things are presented with proper headings. Different headings shown have content dealing with key to success, product range, market, management team and the financial plan. All the broad categories are grouped together to be read at a glance. Along with them the objectives and mission statement is also attached.
However, the only limitation is non-inclusion of any disclaimer about the uncertainty of the events and financial results projected in the business plan.
This section contains details about the company’s origin, history and past, present and future plans (Cross, Belich, and Rudelius, 2015).
Botanical Bounty has been running its business on international level and having vision to increase its overall market share to 20% in international level. It has provided the same under heading company summary by further using the sub headings company history and company ownership. The idea behind the incorporation has been mentioned along with the name of founder, i.e. Susan and David Nealon. The company’s operation as an L.L.C. is also specified. The most strengthening aspect about the company’s company summary section is presentation of past performance in both graphical and tabulated form. There hardly seems any problem with this section (Liu, et al. 2015).
As mentioned above this section provides the range of products along with the brand name under which they are sold by the company. Company has focused on developing the competency in the product differentiation strategy. It helps company to increase its overall market share by selling more products to clients (Díaz-Pérez, and Bethencourt-Cejas, 2016).
The different products that Botanical Bounty offers are specifically mentioned in the product section. Along with the names of the product, their specific features are also described. This is done in order to make certain things clear regarding the benefit of using the products as well as creating a sensitive zone for their products. The scientific as well as routine uses and recommendations of the products the organisation offers are well described (Luan, and Shu, 2016).
However, the only limitation in the whole description is the lack of the process that the organisation follows to develop or to originate the products that they offer for sale. There is certain ambiguity in the production pattern. The inbound and outbound activities of the company is strengthen by using the advance technologies and system process which helps it to strengthen its business process in effective manner (Tkaczynski, and Rundle-Thiele, 2019).
This segment details out the targeted market segments and the strategy opted to function in the target market. It is analysed that Botanical bounty has successfully segmented its market into three segments namely, Supplement companies, Processors, and Nurseries/Garden Centres. Proper financial data for the different segments is presented with the company’s strategy to target them. The end use that each segment makes of the products purchased from the organisation is also briefly mentioned. There is no visible loophole in the provided scenario (Juska, 2017). Further the details about the industry are also provided in this section. Company could analyse the internal and external factors for analysing the forcing factors and changing client’s need in market. This will help company to customize its offered goods and services in the particular market segment. Therefore, as per the above discussion and study, it is evidence that it is necessary to maintain organizational marketing strategy to strengthen the market sales (Tkaczynski, and Rundle-Thiele, 2019). As setting up particular marketing style, cultivate the organizational culture, vision and strengthen the business functioning of organization in long run. Organizational marketing strategies helps sales employees in working smoothly without any issues and inconvenience. In the whole analysis related to the Botanical Bounty, it has been clearly observed that they have adopted transformational leadership style for motivating the sales employees and it is not that beneficial for the organization because it has some advantages as well as disadvantages. Idealized influence is very helpful when it comes to behaving ethical in an organization marketing activities. Botanical Bounty always tries to inspire all the employees to enhance the cultural values in the organization for goal accomplishment. It provides some rewards and appreciations to the sales employees to inspire them in a good way (Juska, 2017).
The kind of direct and indirect competition extended towards the organisation is provided in this section. Botanical Bounty has focused on reducing the price of its offered products and services so that it could attract more clients in market. This shows that company could easily strengthen its business process for the sustainable business factors. However, company has also used advance technologies and system process to strengthen its inbound and outbound activities so that it could keep its business different and customized as per the clients need and demand (Asiedu, 2016).
Botanical Bounty has presented the form of competition that the organisation faces in form of the size of the other farms. The group mapping strategy is also used by Botanical Bounty to evaluate the rival’s offering and competing its business as per the client’s need and demand in market (Nijssen, 2017). The pattern of buying that is followed by the different customers is also presented. Nonetheless, this buying behaviour helps company to strengthen its business process and developing its overall market functions in effective manner. The strength lies in terms of a deeper market research that is made by the company. This shows how company has developed its business process and customized its offered services as per the client’s need and demand in market. However, the only limitation is not mentioning the name of the prominent agricultural farm producers who might act as competition. This has been considering as one of the biggest drawback for the business process of the organization. However, by integrating its offline and online marketing strategy, company could easily attract more clients in market and could strengthen its business process in effective manner (Scarborough, 2016).
The marketing plan is accompanied with the systematic long term strategies which focuses on analysing the market and integrating the marketing strategies to strengthen the overall business process as per the affecting market factors. Market segmentation of company is a division of the market that divides customers with similar needs or product requirements in one group for lending market (Kotler, and Armstrong, 2015).. In another way, it is the segmentation of the mass market in groups, each of which has similar needs. The purpose of the market segmentation is to customize the offered products and services in market as per the client’s need and demand (Khan, 2015).
The marketing plan incorporate details into the marketing and sales strategy. There is an inclusion of certain forecasts also relating to the sales. Marketing plan helps in assessing the possible market factors which could directly and indirectly affect the business process of the organization and could also help in developing the core competency in market for the product different strategy Company needs to use advertisement through holding seminars, sponsoring events and radio as its traditional marketing method and Facebook and Twitter as its digital methods to grab potential clients in particular season to attract more clients in market (Judge, 2018).
Botanical Bounty has offered a detailed strategy into the company’s marketing and sales area. The reason why the organisation thinks to have a competitive edge is also disclosed in that section. Along with them the company has mentioned about the sales forecast it predicts for the coming future. The same is represented in graphical manner even. Demographic segmentation of Australian and New Zealand Bank is related to segmentation of the market that has been segmented as per the race, gender, family size, ethnicity, religion, income, age, and education. Company offers different type of products and services in market considering the race, gender, family size, ethnicity, religion, income, age, and education (Jiang., Habib, and Gong, 2015).
There is a lack of detail regarding the way the promotion of the organisation is going to take place. If company could use the effective promotional strategy then it will help in increasing the overall outcomes and assessing the competitive edge in market. It is one of the marketing factor which helps in keeping the business one step ahead in the market (Gepp, and Kumar, 2015).
The details about the company’s routine operations and the predicted goals that seem achievable are provided. This is accompanied with the changes in the inbound and outbound activities plans which focuses on assessing the business issues and program which company could take to strengthen its value chain activities. Botanical Bounty needs to assess its operational plan based on the inbound and outbound activities which helps it to develop competitive advantage in market. This operational plan also helps in reducing the overall cost of the business and developing core competency in market. This has shown how well company has strengthen its business in market (Geng, Bose, and Chen, 2015).
Botanical bounty has represented its milestones for the future time very well in the operational plan. This has helped Company to re-engineer its value chain activities as per the future demand and client’s need in market. They are presented both in tabulated as well as graphical manner. However, there is a missing area of the routine operations that the organisation shall be performing. Till date the business had been operating for the purpose of hobby only. However, to commence the same at a commercial level certain changes in the work pattern are expected which however are not mentioned (Flood, Jagadish, and Raschid, 2016).
The details about the people at the managing position with their remuneration are provided in this section. This shows the amount of compensation give to management and directors of the company. The management summary shows the details, education and remuneration and other compensation given to directors for operating the business functions (Burnsand Dewhurst, 2016).
Botanical Bounty’s business plan describes about the owners David and Susan. Every detail relating to their education, profession to their role in the organisation is mentioned in the management summary. Along with it, the designation they shall hold in the organisation is also specified in the section. Apart from the details relating to the work division and designation, the payroll that is attached to them along with other personnel being the Grower and labourers is also specified (Burns, 2016). The annual report of Botanical Bounty shows that directors and management of the company is given the certain amount which is determined only passing the resolution in general meeting. Since marketing in an important aspect of an organization, it is also imperative to know the marketing tools that play a major role in the development or running of that organization. By tools, we mean strategies, techniques and materials. The majority of the organizations like Bounty Company focuses on different marketing tools like direct mail, direct messages, market research, and very importantly advertising that boosts the sales of the company (Armstrong, et al. 2015).
The projected financial statements are disclosed along with underlying assumptions. However, in order to prepare the projected financial statements of the company, management needs to assess the past results of the income statement, balance sheet and cash flow statements of company. This financial plan helps in evaluating the cash inflow and outflow in business. Botanical Bounty has presented the projected financial statements in a proper format and has also disclosed the assumptions that it has made in framing these financial statements. The funding pattern is also properly disclosed. There are several funding sources available for Botanical Bounty such as issue of the share capital, debt funding, private capital funding and bank loan. However, while raising funds from the market, Botanical Bounty needs to assess the financial leverage and cost of capital of the business. This will be helpful for the organization to evaluate the financial plan. However, the only issue is zero discussion about any remote chance of introducing equity mode of finance in business. Company needs to assess the cost of capital and financial leverage associated with the issue of the equity capital for fund raising (Armstrong, et al. 2015).
The prepared financial plan provided an effective comprehensive financial information related to initial capital required to operate the newly undertaken project for the business. The financial product cost of the business would be based on the fixed and variable expenses of the company. The financial plan provides that 30% of the initial project investment capital will be raised by issue of the debt capital and bank loan and rest of the 70% of the project capital will be raised by issue of the more equity share capital in market (Flood, Jagadish, and Raschid, 2016)..
The funding is the required capital for the investment purpose which company needs to take to finance the newly undertaken project.
This financial plan funding will be used to raise the initial capital of 700,000 DM $ out of which 30% is financed by issue of debentures and raising funds from banks. In addition to this, rest of the funds are raised by issue of the share capital in market. The venture capitalist (Gepp, and Kumar, 2015).
After assessing all the details and discussion given in the work, it could be inferred that financial projection plan of the company should be based on the last year financial data. It has been evaluated that marketing plan of the company focuses on analysing the internal and external factors which may affect the business process functioning of the organization. Nonetheless, company focuses on evaluating the market needs and clients requirement so that it could customize its products and services as per the client’s need and demand in market.
The appendix section of the Botanical Bounty has complete details regarding the financial statements that have been used in the entire plan. The details have been provided on a monthly basis in the appendix for a year. However, there is some confusion relating to the year for which the projections are mentioned in the appendix.
Graphical presentation of the income statement
Cash flow projection
Income statement analysis
After assessing the report, it could be inferred that the financial projection plan of the company is based on the past quantified results of the company. In addition to this, marketing plan of the company has been strengthen by integrating the offline and online marketing plan. The core competency of the company has been developed by using the PESTLE and SWOT analysis technique. It also helps in developing the core competency in cost leadership and product differentiation strategy in market. This will not only strengthen the market share of the company but also helps in increasing the overall sales. However, the main demerit of this plan is that it is accompanied with the assumptions and uncertain factors which may change due to the changing economic factors. Company has also not used the project escalation amount while preparing or formulating the projected financial statement of company.