LESSON 2 – EXCUTIVE SUMMARY, ENVIRONMENT ANALYSIS, AND BUSINESS

DESCRIPTION

EXECUTIVE SUMMARY

Although the executive summary is commonly the last section to be written after all
other major parts have been completed, it is the next major part of the business plan after the
introduction. It points out the overall highlights of the business plan as well as bird’s eye view of
its sections. However, the executive summary must not, in any manner, provide a summary of
the different major sections of the business plan. It must be written in a simple language that
can be easily understood and at the same time attract the attention and influence the decision of
the reader.

Investors, creditors, and other significant parties usually proceed to the details usually
proceed to the details of the business plan once they find the executive summary interesting,
convincing, and worthy of further reading. Although there is no standard format as to its sections
and contents, the executive summary must include the following sections:

1. Vision, mission, goals, and objectives of the business

2. Business model
3. Business and product position
4. Wealth improvement approaches
5. Parties supporting the business

VISION, MISSION, GOALS, AND OBJECTIVES

At the very outset, the business plan must depict the fundamental characteristics,
nature, philosophical values, identity, and image of the business. These important concerns are
embodied in the vision, mission, goals, and objectives (VMGO) of the business. The VMGO
must be clearly stated and easily understood. They must be reviewed and revisited at least
every three years to determine whether they are still reasonable and achievable in view of the
rapid changes in the business community.

BUSINESS MODEL

Business Model Template

BUSINESS MODEL
Partner Key Offer Customer Customer
network Activities Relationship Segments

Key Distribution
Resources Channels

Cost structure Revenue statements

Figure 6.2.1. Sample Business Model

Figure 6.2.2. Sample Perceptual Map (Segmentation Study Guide)

 The business model defines the perspective of the business in terms of its structure,
production, operation, and financial activities that will lead to the achievement of the VGMO.
There is no standard model that will exactly fit all types of business because they have different
strengths and weaknesses, infrastructures, networks, and value propositions. The business
model must basically reflect certain innovations that will indicate the competitiveness of the
business in the industry. It must define how the business gives importance to its relations with
customers, creditors, supplies, and internal human resources.

BUSINESS AND PRODUCT POSITION

The business and product position will help determine how the business defines its
course and the process of accumulating wealth. It tells the size of the market and the target
market share of the business and product. The business and product position must be able to
convince the readers that the proposed business has a competitive advantage in the market.

WEALTH IMPROVEMENT APPROCHES

This section of the executive summary describes the methodologies or approaches that
will be taken by the business in order to

1. Maintain a competitive advantage,

2. Position the business in the market,
3. Improve the market share, and
4. Maximize the utilization of resources.

This section also includes a brief discussion of the marketing policies and financial
operations of the business, and the profitability level of the industry and of the business.
Standard benchmarks are good indicators in assessing the economic performance of the
business.

PARTIES SUPPORTING THE BUSINESS

The last section of the executive summary is a description of the parties that strongly
support the business. The parties that have a direct relationship with the business are as
follows:

1. Consumers
2. Creditors
3. Suppliers
4. Employees and staff

Relevant information about individuals and parties that support the business is important
since the proposed business may conduct transactions with them later.

The executive summary must cover at least three pages but must not go beyond five pages.
An executive summary that is either too short or too long may discourage the reader to continue
reading.

ENVIRONMENTAL ANALYSIS
 The next major part or section of the business plan after the executive summary is the
environmental analysis. It is a strategic tool that helps determine the external and internal
factors affecting the performance of the business. These factors may be political, economic,
social, or technological in nature. The environmental analysis may consist of at least 20 pages
including the graphical representations, tables, and computations. The environmental analysis
section is considered the heart of the business plan.

Since the business that you intend to open in this entrepreneurial course is considered
small in terms of capitalization, the industry analysis will focus mainly on the consumers and
competitors. The presence of the consumers, after all, is the ultimate reason for the existence of
any business endeavor.

In today’s competitive business environment, an environmental analysis is already a

necessity. It is perceived as the basic element for business survival. It may consist of global
analysis, societal analysis, and industry analysis,

GLOBAL ANALYSIS

The environmental analysis section may begin with a description of the global business
situation to provide enough knowledge about the global perspective or horizon if the business. A
common mistake in this section is describing a business entity that operates in the global
environment because a global analysis evaluates the business trend in the worldwide market.
As a future entrepreneur, you should not devote the whole section of the global analysis by
simply describing the business trends, for example, in the whole Asian region, in European
communities, or even in mainland USA. Remember that it is not the business trend that has the
most significant bearing on the global analysis but rather the possible business opportunities or
ideas that the global business trend offers.

The trend in the global market is the result of what happened in the past, while a
possible business idea is the expected event that may happen in the future. Investors are more
interested in what will happen in the future. The global trend simply acts as an indicator of any
favorable sign for a business idea. However, there is a direct relationship between these two
concepts. Once the world market is properly described, the business opportunities that the
global trend provides must also be described. The reader, therefore, must be convinced that is
its worth to exploit the business idea or opportunity based on the global business trend.

SOCIETAL ANALYSIS

After describing and possibly convincing the reader of the bright business prospect in the
world market, the next step is to present the societal analysis and determine the different
variables affecting the societal environment. These variables include

1. Political forces,
2. Economic forces,
3. Socioeconomic forces,
4. Technological forces,
5. Ecological forces, and
6. Legal forces.

Most business plans fall to mention the probable levels of effects of the various forces to the
proposed business, and the frequency of occurrence of the environmental factors. They simply

Figure 6.2.2. Sample Perceptual Map (Segmentation Study Guide)

describe the different variables or forces. A mere description of the various environmental
factors does not provide any brilliant idea to the reader. The societal analysis must tell how the
environmental forces affect the proposed business and how great their effects are.
Assuming that you consider the interest rate and disposable income as economic
variables that may affect on the proposed new business, the description of the analysis may
appear as follows:

Economic environment. The prevailing interest rate given by most commercial and
industrial banks ranges between 10 and 12 percent and is expected to increase to 15 percent
within a two-year period because of the new monetary policy of the Bangko Sentral nf Pilipinas
(BSP). The move of the BSP has a substantial or very high effect on the financial operation of
businesses that have high financial leverage. However, since the start-up capital requirements
of the new business will be funded solely by the owners, the interest rate may appear to have a
low effect on the proposed business.

The disposable income of Filipino consumers, according to the latest data released by
the National Economic Development Authority and the National Statistics Office, has
substantially increased which has been attributed mainly to the new salary rates of all
employees, both public and private, coupled with the high remittances of overseas contract
workers. It is expected that the remittances will continue to increase at the rate of 10 percent for
the next 6 to 8 years. This present trend on the disposable income may appear to have a very
high favorable effect on the operations of new businesses.

INDUSTRY ANALYSIS

The third level of environmental analysis is the industry analysis. The industry analysis
basically involved three important related tasks as follows:

1. Conducting a critical evaluation of the forces in the industry that affect the proposed
business
2. Evaluating the probable position of the business in the industry
3. Determining the most appropriate strategy that may be adopted by the proposed
business

Conducting a Critical Evaluation

Conducting a critical evaluation is the most delicate, tedious, and difficult task in industry
analysis. There are some business plans that do not even show any indications that a critical
analysis has been conducted, but rather, the evaluation appears to be a mere play of words.
Nevertheless, not all forces in the industry, even in the societal analysis, must be analyzed and
described. Only those forces that are deemed to have substantial effects, either positive or
negative, to the proposed business must be critically analyzed and properly described.

The industry analysis in all instances must not fail to evaluate and describe the target
consumers and the competitors. Data and information on these important forces in the industry
are usually the results of research work. Research work on the target consumers applies the
concepts of market segmentation, market targeting, and market positioning to determine the
total demand of the industry. Research work on the competitors identifies the total expected
supply. The gap between the consumer demand and the competitor supply represents the
unsatisfied demand.
 The unsatisfied demand may be considered the market share of the proposed business
under the following conditions:

1. The proposed business has the capability to produce the product.

2. There are no expected new entrants to the industry other than the proposed business.

The industry analysis needs substantial work in the process of establishing the projected
demand and supply.

The demand and supply analysis, also called the consumer and competitor analysis, is
the backbone or the foundation of all other analyses. Where there are no consumers or buyers
of the product, the business will never be created. The presence of the consumers is the
ultimate reason for the existence of any business endeavor.

The entrepreneur must choose the scanning tools that best suit his/her business
venture.

Evaluating the Business Position

After conducting a critical analysis of the factors in the industry environment that
primarily affect the proposed business, the next step is to evaluate the possible business
position in the industry. This deals with market share and growth. Entrepreneurs may use a
perceptual map, also called positioning map, to help them understand their position against
their competitors in the market. It shows how the consumers respond to their products and
services.

The sample perceptual map shows a comparison among competing products in the
market, their attributes, and the age and gender of their target consumers.

Low in
Pepsi Max
Coke Zero caffeine Coke
Pepsi
Male, 15-30
Diet Coke
Female, 30- years
50 years
Pepsi Light

Low in sugar High in sugar

30-50 years

5-15 years Fanta

30-50 years
7 up
Figure 6.2.2. Sample Perceptual Map (Segmentation Study Guide)

Low in
caffeine
Determining the Most Appropriate Business Starategy

The last important