Business Plan Components

1. Business Plan Components

2. Market and Marketing Strategy • Market definition • Market share projection • Positioning strategy • Pricing strategy • Distribution strategy • Promotion plan

3. Market Section • Fundamental intent • Detailed, defensible description of the market being addressed by the business’ product or service • Market definition analysis: narrowing definitions from total market to feasible market

4. The Narrowing Process • Starts with brief description of total general market • Size • Geography • Growth prospects • Type • Niche • Perfectively competitive • Monopolistic • General type and level of competition

5. Narrowing Process (2) • Transitions quickly to more narrow target market • Narrows down total market through segmentation to total addressable market • Segmentation factors can be geography, customer attributes, product orientation • Solar panels for pool heating: focus would be on number of pool users in geographies with significant sun exposure • Definition of target market critical for advertising • Playskool advertises toys on Nickelodeon • Target market characterized in terms of size, structure, growth prospects and market potential

6. Narrowing Process (3) • Next, further narrow by defining feasible market within target market • Example: • Microbrewery case: plans to brew premium lager beer • Total feasible market determined by number of drinkers of premium pilsner beers in target market • Feasible market the portion of market capturable given perfect environmental conditions and little competition

7. Market Share • Market share projection a subjective estimate • Basis is highly targeted and competitive distribution, pricing, promotional strategies • Microbrewery case: even with large number of drinkers of premium pilsners forming total feasible market, distribution network has to reach them at a market acceptable and competitive price point • Customers have to be made aware of availability and purchase points • Share projection required in plan though • Make it defensible

8. Market Share (2) • Factors underpinning market share • Industry growth • Increases number of customers • Conversion of users (from feasible market) • Affected by new product adoption cycle • Early pioneer users • Early users • Early majority users • Late majority users • Late users • Again, key is make it defensible • Granular detail helps

9. Who Are Competitors? • Beware of the conclusion: We have no direct competitors; or worse: We have no competitors • Usually signifies a shallow-thinking entrepreneur • Competition is good • It validates the market • It validates business models • It drives value creation for customers • No competition is not good • Maybe there isn’t a market • Maybe the economics are such that it’s not really a good opportunity • Maybe there isn’t an effective business model

10. Competition - Types • Direct • Easily identifiable • Coke - Pepsi • Crispy Kreme – Dunkin Donuts • Honda Motorcycle – Harley Davidson • Indirect • Less easily identifiable • Coke – Bottled Water • Crispy Kreme – Breakfast Burrito • Honda Motorcycle – Schwinn Bike • Obtuse, but still a competitor • Sometimes difficult to identify • Coke – Fresh Fruit • Crispy Kreme - GHFC • Honda Motorcycle – RTS Bus

11. Competitive Analysis • Purpose • Determine strengths & weaknesses of market segment competitors • Scope out strategies that will provide distinct advantages • Determine developable barriers to prevent new competitor entries • Scope out exploitable weaknesses for product development cycle

12. Competitive Analysis (2) • Process • Identify current and potential competition • Two approaches • Customer driven approach – group competitors by degree to which they contend for customers’ expenditures • Strategy driven approach – group according to various competitive strategies showcasing what motivates them • Analyze strategies to identify vulnerability areas • Examine competitors’ strengths & weaknesses

13. Positioning Business • Positioning strategy defines how you want product perceived by customers and competitors • Kobe Bryant and OJ Simpson, for example, both lost endorsement base in close proximity to court cases • Driven by variables tied to: • Motivations and requirements of target customers • Customer need fulfilled by product • Competitor factors • Competitor positioning • Competitive advantages of product

14. Pricing • Precepts of pricing strategy • Prices must cover costs • Prices established to assure sales • Resist pricing against competitive action • Price to sell • Prices must reflect product utility, longevity, maintenance, end use

15. Pricing (2) • Methods of establishing pricing • Competitive • Used frequently upon entering market where product differentiation difficult • Cost-based • Assures costs covered and gross margin attained • Value-based • Establishes price reflective of value created for customer

16. Distribution • Defines the process of moving product from factory to end user • Distribution strategy will reflect industry norms, size of market, internal resources • Types • Direct Sales • Positives: focused, controlled sales • Negatives: fixed cost • OEM • Your product a subsystem component of another’s, and their distribution used • Positives: leverages sales capability • Negatives: high customer concentration

17. Distribution (2) • Types (cont) • Manufacturer’s reps • Agency sales people that handle complementary products • Positives: pay for performance • Negatives: effectiveness; focus on high volume products • Video broadcast example • Brokers • Third party distributors who deal direct with retailers and end users • Positives: broad coverage and can deliver volume • Negatives: expensive

18. Distribution (3) • Types (cont) • Internet • B-to-B; B-to-C • Positives: scale • Negatives: technical sell difficult; driving traffic difficult and expensive • Wholesale distributors • Retail distributors • Direct mail

19. Promotion Plan • Follows structuring of distribution strategy • Defines controlled distribution of communication targeted to sell product or service • Panera Bread targets restaurants as upscale, unique - artwork on walls, classical music in background – all to create sense of tranquility (and willingness of patrons to pay upscale prices for food offered

20. Promotional Plan (2) • Elements of communication effort • Advertising • Which media • Packaging • McDonald’s arches on fries • FedEx wrapping on packages • Public relations • Sales promotion • Coupons, special offers • Think of the oil changes ads