Designing a Competitive

Business Model and Building a

Solid Strategic Plan

CHAPTER 3: STRATEGIC
Copyright 2008 PLAN
Prentice Hall Publishing
1
A Major Shift . . .
. . . From financial capital to intellectual
capital.
◦ Human
◦ Structural
◦ Customer

CHAPTER 3: STRATEGIC PLAN 2

Copyright 2008 Prentice Hall Publishing
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.

CHAPTER 3: STRATEGIC PLAN 3

Copyright 2008 Prentice Hall Publishing
 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.
Example: Blockbuster Video

CHAPTER 3: STRATEGIC PLAN 4

Copyright 2008 Prentice Hall Publishing
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”).
Examples: Netflix and Tom’s of Maine

CHAPTER 3: STRATEGIC PLAN 5

Copyright 2008 Prentice Hall Publishing
 Building a Sustainable Competitive Advantage

Capabilities

Sustainable Superior value

Lessons Core competitive
learned competencies for customers
advantage

Skills

CHAPTER 3: STRATEGIC PLAN 6

Copyright 2008 Prentice Hall Publishing
 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.

CHAPTER 3: STRATEGIC PLAN 7

Copyright 2008 Prentice Hall Publishing
 Strategic Management Process
(continued)

Step 5. Analyze competition.

Step 6. Create goals and objectives.
Step 7. Formulate strategies.
Step 8. Translate plans into actions.
Step 9. Establish accurate controls.

CHAPTER 3: STRATEGIC PLAN 8

Copyright 2008 Prentice Hall Publishing
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

CHAPTER 3: STRATEGIC PLAN 9

Copyright 2008 Prentice Hall Publishing
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.”
Examples: Chick-fil-A and Starbucks.

CHAPTER 3: STRATEGIC PLAN 10

Copyright 2008 Prentice Hall Publishing
Step 1: Develop a Vision and
Create a Mission Statement
Survey of employees: 89 percent of employees say their companies
have a mission statement
but…
Only 23 percent of workers believe their company’s mission
statement has become a way of doing business!

CHAPTER 3: STRATEGIC PLAN 11

Copyright 2008 Prentice Hall Publishing
Step 2: Assess Company Strengths
and Weaknesses
Strengths
◦ 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.

CHAPTER 3: STRATEGIC PLAN 12

Copyright 2008 Prentice Hall Publishing
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.

CHAPTER 3: STRATEGIC PLAN 13

Copyright 2008 Prentice Hall Publishing
The Power of External Market Forces

Technological

Competitive Economic

Political and Social and

Regulatory Demographic
 Step 4: Identify Key Success
Factors
Key success factors: controllable
variables that determine the
relative success of market
participants.
The keys to unlocking the secrets
of competing successfully in a
particular market segment.
Example: John H. Daniel Company

CHAPTER 3: STRATEGIC PLAN 15

Copyright 2008 Prentice Hall Publishing
Identifying Key Success Factors
List the skills, characteristics, and core competencies that your
business must possess if it is to be successful in its market segment.
Key Success Factor How Your Company Rates
1. Low 1 2 3 4 5 6 7 8 9 10 High
2. Low 1 2 3 4 5 6 7 8 9 10 High
3. Low 1 2 3 4 5 6 7 8 9 10 High
4. Low 1 2 3 4 5 6 7 8 9 10 High
5. Low 1 2 3 4 5 6 7 8 9 10 High
Conclusions:
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.

CHAPTER 3: STRATEGIC PLAN 17

Copyright 2008 Prentice Hall Publishing
 Pr
ov Percent of Small Companies
id Citing Each Element as a
in
g "Significant Portion" of its
hi
gh
es Competitive Strategy
t po
O ss
ib
ffe le

10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%

0.0%
M r in qu
ai g al
Em nt b ity
pl a in
et
te
Ta oy in rs
rg in
g g er
m
86.3%

et
in m i vi
ce
g ax ni
m
m im al
is um ov
se
d
83.4%

or u se
er
he
O po o ft
ad
ffe or
rin ly ec
g se hn
m rv ol
og
or ed
U e y
si ch cu
ng oi st
51.0% 48.5%

un ce om
iq s er
ue an s
m d
ar se
ke le
tin ct
io
g n
Com petitive Strategy
How Small Businesses Compete

O ap
ffe pr
r in oa
g ch
lo es
w
er
pr
39.7% 39.4% 37.7%

ic
es
34.4%
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.

CHAPTER 3: STRATEGIC PLAN 19

Copyright 2008 Prentice Hall Publishing
Step 5: Analyze Competitors
Techniques do not require unethical behavior:
◦ Monitor industry and trade publications.
◦ Talk to customers and suppliers.
◦ Regularly debrief employees, especially sales
representatives and purchasing agents.
◦ Attend trade shows and conferences and study competitors’
sales literature.
◦ Watch for employment ads from competitors to get an idea
about their plans for the future.
◦ Conduct patent searches for patents competitors have filed.
◦ Get EPA reports that provide information about the factories
of competing manufacturers.

CHAPTER 3: STRATEGIC PLAN 20

Copyright 2008 Prentice Hall Publishing
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 World Wide Web to learn more about competitors.
◦ Visit competing businesses to observe their operations.

CHAPTER 3: STRATEGIC PLAN 21

Copyright 2008 Prentice Hall Publishing
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.

CHAPTER 3: STRATEGIC PLAN 23

Copyright 2008 Prentice Hall Publishing
Is Setting Goals and
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 care where.…” said Alice.
‘Then it doesn’t matter which way you go,” said the
cat.
- Lewis Carroll’s
Alice in Wonderland

CHAPTER 3: STRATEGIC PLAN 24

Copyright 2008 Prentice Hall Publishing
Step 6: Create Company Goals
and Objectives
Goals - broad, long-range attributes to be
accomplished.
◦ “BHAGs”

Objectives - more detailed, specific targets of

performance that are S.M.A.R.T.
◦ Specific
◦ Measurable
◦ Attainable
◦ Realistic (yet challenging)
◦ Timely

CHAPTER 3: STRATEGIC PLAN 25

Copyright 2008 Prentice Hall Publishing
 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.
Three basic strategies:
Cost leadership

Differentiation
Strategy?

Focus
CHAPTER 3: STRATEGIC PLAN 26
Copyright 2008 Prentice Hall Publishing
 Three Strategic Options

Competitive Advantage
Uniqueness Perceived Low Cost
by the Customer Position

Industry Differentiation Low Cost

Target
Market
Differentiation Cost
Niche
Focus Focus
Cost Leadership
Goal: to be the low-cost producer in the industry (or
market segment).
Low-cost leaders have an advantage in reaching buyers
who buy on the basis of price, and they have the power
to set the industry’s price floor.
Works well when:
◦ Buyers are sensitive to price changes.
◦ Competing firms sell the same commodity products.
◦ A company can benefit from economies of scale.
Example: JetBlue Airlines

CHAPTER 3: STRATEGIC PLAN 28

Copyright 2008 Prentice Hall Publishing
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.
Examples: Urban Outfitters and the Ice Hotel

CHAPTER 3: STRATEGIC PLAN 29

Copyright 2008 Prentice Hall Publishing
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.
Examples: Cereality and Flutter Fetti Fun Factory

CHAPTER 3: STRATEGIC PLAN 30

Copyright 2008 Prentice Hall Publishing
Step 8: Translate Strategies
into Action Plans
Survey of senior executives: Companies achieved
only 63 percent of the results in their strategic
plans.
Create projects by defining:
◦ Purpose
◦ Scope
◦ Contribution
◦ Resource requirements
◦ Timing

CHAPTER 3: STRATEGIC PLAN 31

Copyright 2008 Prentice Hall Publishing
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.

CHAPTER 3: STRATEGIC PLAN 32

Copyright 2008 Prentice Hall Publishing
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.

CHAPTER 3: STRATEGIC PLAN 33

Copyright 2008 Prentice Hall Publishing
 Balanced Scorecards
Four Perspectives:
◦ Customer: How do customers see us?
◦ Internal Business: At what must we excel?
◦ Innovation and Learning: Can we continue to improve and create value?
◦ Financial: How do we look to shareholders?

CHAPTER 3: STRATEGIC PLAN 34

Copyright 2008 Prentice Hall Publishing
The Balanced Scorecard Links Performance Measures

Financial Perspective How do we look

Goals Measures to shareholders?

How do customers At what must we

see us? excel?

Customer Perspective Internal Business Perspective

Goals Measures Goals Measures

Innovation and Learning Perspective

Goals Measures

Can we continue to
improve and create
value?
 Thank you
for your kind attention!

FACILITATOR
TEHRIM IQBAL
tehrimiqbal@cuivehari.edu.pk