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MAE 400: The Engineering Profession

Session 21
Business Plans
Strategic Planning/SWOT Analysis

Industrial
Application

Engineering
Coursework
The Bridge Between

Types of Plans
Business Plans
Typically for new businesses

Strategic Planning
Developing business plan for an existing
business

Business Plans
For The Real World

Why a Business Plan?


Strategic Guide
Obtaining Lenders
Attracting Investors

Strategic Guide

Where Do You Want To Go?


How Are You Going to Get There?
What are Market Niches?
How Much is it Going to Cost?
Greatest Profit Opportunity?

Lender Expectations

Good Business Track Record


Ability to Repay
Staying Power
Collateral

Investor Expectations

Competitive Advantage
Huge Market
Strong Management Team
Strong Marketing and Sales Plan
Some Skin in the Game
Obscene Return
Exit Strategy

Shark Tank

Entrepreneurs Start Businesses:

To Capitalize on an Invention
To Pursue a Passion
To Be Their Own Boss
To Get Rich

---All Need an Exit Strategy

Exit Strategies

Selling the Business


Transferring the Business to a Family Member
Taking the Company Public
Being Acquired by a Larger Company

Funding Sources:

Savings
Friends and Family
Angel Investors
Venture Capitalists
Financial Institutions / Banks

Business Plan Content

Executive Summary
Company Description
Product/Services Description
Industry Overview
Market Analysis
Competitors

Business Plan Content- cont.

Customers
Marketing and Sales Plans
Development
Operations
Management

Executive Summary
A mini-business plan in one or two
pages
Highlights the most important
points of your business plan
It is NOT an introduction to the plan
It must grab your reader, and entice
him/her to read further

Executive Summary
Identify the company, its background,
structure and location
Describe what the company does, and the
market it serves
Describe the market potential for the
companys products and services, market
trends, etc.

Executive Summary
Outline the backgrounds and
experience of the top management
team
Describe the funding required, the
purposes for which it will be used, the
collateral available (if for a lender), and
the expected outcomes

Company Overview
Brief Company Introduction
Vision and Mission statements
Location, size, history
Market and products
Overview of company capabilities
Objectives

VISION

VISION IS A DREAM

VISION IS A DREAM WITH A DEADLINE

IT IS A PICTURE OF FUTURE THAT PULLS


US INTO THE FUTURE

A VISION STATEMENT IS AN ATTEMPT


TO CAPTURE THAT DREAM IN WORDS

WHERE THERE IS NO VISION,


PEOPLE PERISH.

Solomon

WHEN ASKED, WHAT WOULD BE


WORSE THAN BEING BLIND,
HELEN KELLER REPLIED :
IT WOULD BE DEFINITELY
WORSE TO HAVE 20/20 EYESIGHT
AND NO VISION, THAN TO BE
BLIND, BUT HAVE THAT VISION.

VISION

A VISION STATEMENT TELLS US


WHERE WE ARE GOING.

VISION STATEMENT, TO BE WORTH


ANYTHING, HAVE TO DIFFERENTIATE A
COMPANY FROM THE COMPETITION.

OUR VISION MUST CONNECT WITH THE


HEARTS AND DREAMS OF OUR PEOPLE.

VISION
FROM AN ORGANIZATIONAL PERSPECTIVE,
VISION HAS TO HAVE FIVE COMPONENTS :

A SENSE OF WORTHINESS.

AN ABILITY TO INSPIRE.

AN INVITATION TO SHARE.

CLEAR AND UNDERSTANDABLE DETAIL.

ACHIEVABILITY.

CORE IDEOLOGIES IN THE


VISIONARY COMPANIES

3M

INNOVATION - THOU SHALL


NOT KILL A NEW PRODUCT IDEA.

ABSOLUTE INTEGRITY.

RESPECT FOR INDIVIDUAL INITIATIVE AND


PERSONAL GROWTH.

TOLERANCE FOR HONEST MISTAKES.

PRODUCT QUALITY AND RELIABILITY.

OUR REAL BUSINESS IS SOLVING


PROBLEMS.

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

Cont

HEWLETT PACKARD

TECHNICAL CONTRIBUTION TO FIELD IN


WHICH WE PARTICIPATE-WE EXIST AS
A CORPORATION TO MAKE
CONTRIBUTION.

RESPECT AND OPPORTUNITY FOR HP


PEOPLE, INCLUDING THE OPPORTUNITY
TO SHARE IN THE SUCCESS OF THE
ENTERPRISE.

...

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

HEWLETT PACKARD

Cont

Cont

...

CONTRIBUTION AND RESPONSIBILITY


TO THE COMMUNITIES IN WHICH WE
OPERATE.

AFFORDABLE QUALITY FOR HP


CUSTOMERS.

PROFIT AND GROWTH AS A MEANS TO


MAKE ALL OF THE OTHER VALUES AND
OBJECTIVES POSSIBLE.

...

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

IBM

GIVE FULL CONSIDERATION TO THE


INDIVIDUAL EMPLOYEE.

SPEND A LOT OF TIME MAKING


CUSTOMERS HAPPY.

GO THE LAST MILE TO DO THINGS


RIGHT, SEEK SUPERIORITY IN ALL WE
UNDERTAKE.

Cont

...

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

Cont

JOHNSON & JOHNSON

THE COMPANY EXISTS TO ALLEVIATE PAIN


AND Disease.

WE HAVE A HIERARCHY OF
RESPONSIBILITIES; CUSTOMERS FIRST,
EMPLOYEES SECOND, SOCIETY AT LARGE,
THIRD AND SHAREHOLDERS FOURTH.

INDIVIDUAL OPPORTUNITY AND REWARD


BASED ON MERIT.

DECENTRALIZATION = CREATIVITY +
PRODUCTIVITY.

...

CORE IDEOLOGIES IN THE VISIONARY COMPANIES

Cont

BOEING

BEING ON THE LEADING EDGE OF


AERONAUTICS; BEING PIONEERS.

TAKING HUGE CHALLENGES AND RISKS.

PRODUCT SAFETY AND QUALITY.

INTEGRITY AND ETHICAL BUSINESS.

TO EAT, BREATHE AND SLEEP THE


WORLD OF AERONAUTICS.

...

MISSION
A

CLEAR AND COMPELLING STATEMENT THAT


SERVES TO UNIFY EFFORTS OF AN
ORGANIZATION.

IT

MUST STRETCH AND CHALLENGE


THE ORGANIZATION AND YET BE
ACHIEVABLE.

IT MUST TRANSLATE ABSTRACTNESS


OF PHILOSOPHY INTO TANGIBLE,
ENERGISING AND FOCUSED GOAL THAT
DRAWS THE ORGANIZATION FORWARD.

MISSION
MISSION STATEMENT MUST ANSWER
FOLLOWING QUESTIONS

WHAT IS THE REASON FOR BEING?

WHAT IS THE BASIS PURPOSE?

WHAT BUSINESS ARE WE IN?

WHAT IS UNIQUE OR DISTINCTIVE ABOUT


AN ORGANIZATION?

WHAT DOES IT STAND FOR?

Examples of Mission Statements


Anheuser-Busch
The mission of Anheuser-Busch is to:
Be the worlds beer company
Enrich and entertain a global audience
Deliver superior returns to our shareholders

Examples of Mission Statements


Apple designs Macs, the best personal
computers in the world, along with OS X,
iLife, iWork and professional software.
Apple leads the digital music revolution
with its iPods and iTunes online store.
Apple has reinvented the mobile phone
with its revolutionary iPhone and App
Store, and is defining the future of mobile
media and computing devices with iPad.

Examples of Mission Statements


Kellogg Company
Kellogg is a global company committed to building
long term growth in volume and profit and to
enhancing its worldwide leadership position by
providing nutritious food products of superior value.
Southwest Airlines
Our mission is dedication to the highest quality of
customer service delivered with a sense of warmth,
friendliness, individual pride and company spirit.

Examples of Mission Statements


Office Depot
Our mission is to be the most successful office
products company in the world.

Avis Rent A Car


To ensure a stress-free rental experience by
providing safe, dependable vehicles and special
services designed to win the customers loyalty.

Planning Hierarchy
The hierarchy of business planning follows the
following guidelines:
Vision
Very long term
Core Values & Beliefs
Change seldom,
if ever
Purpose
Should last at
least 100 years
Mission
Changes when
mission is accomplished,
usually 5 to 15 years
Strategy
Revised annually, then
recast with new mission
Tactics
In constant flux to adjust to
changing market dynamics

Business Plan continued


Location, Size, History

Where is company headquarters?


Where are other operations
Number of people, facility square footage
When did company start, how has it grown

Products/Services
Products / Services
What does it do?
Uniqueness
Competitive Advantage

Technology
Brief description
Applications

Commercialization Status
Brief overview

Industry Overview
Industry Definition and Description
Major players within the industry
Factors driving dynamics
New products and developments

Legislation and Policies Driving the Industry


Historical and Future Trends

Market Analysis
Market Definition
Primary Market
Secondary Markets

Market Size and Trends


Current total revenues
Predicted annual growth rate

Customers
Customer Characteristics

Who are they?


Why do they buy?
Need satisfied by the product/service
How is the need currently filled?
What are the alternatives?
Who makes the decision to buy?
How frequently do they purchase?

Competitors
Direct Competitors

Who are they?


Size and product breadth
Revenues and profitability
Strengths and weaknesses
Market shares

Indirect Competitors

Customers
Customer Characteristics

Who are they?


Why do they buy?
Need satisfied by the product/service
How is the need currently filled?
What are the alternatives?
Who makes the decision to buy?
How frequently do they purchase?

Marketing and Sales Plans

Statement of Opportunity
Marketing and Sales Objectives
Existing Customers
Potential Customers
Prospects targeted
How prospects will be targeted and qualified

Marketing Strategies

Product/Service Strategy
Pricing Strategy
Distribution Strategy
Advertising and Promotion Strategy
Sales Strategy
Marketing and Sales Forecasts

Marketing and Sales Plans


Marketing Programs

Direct Mail
Trade Shows
Advertising
Internet
Publicity/Public Relations
Marketing Budget

Pricing
Basis for targeted price point
Margins and profitability by volume levels

Marketing and Sales Plans


Sales Plan

Sales force structure (direct or reps)


Sales expectations/quotas
Margins given to intermediaries
Service and warranties
Sales Budget
Organizational chart indicating planned growth

Development
R & D Plan

Objectives
Milestones and current status
Difficulties and risks
Staffing
R & D Budget and assumptions

Operations
Manufacturing/Production Plan

Objectives
Facilities
Staffing
Subcontractors
Quality Control
Budget / Operating Expenses

Management
Company Organization
Management Team
Administrative Expenses

Management Team

President
VP Finance
VP Sales
VP Marketing
VP Manufacturing
Board of Advisors important in starting a
business

Personnel
Human Resource Plan

Staffing Objectives
Organizational Structure
3-5 year growth plan
Budget

Summary of Financials
Financial Objectives
Time to Cash Flow Positive
Time to profitability

Financial Assumptions
Capital Requirements
Exit Scenario

Financials
Pro-forma Cash Flow Projections
Pro-forma Profit & Loss Statements
Pro-forma Balance Sheet
(Pro-forma = expected as if financial data)

Offering
Investment Requirements
Pro-forma Valuation of Business
Offer

Appendices

Resumes of Key Management


Patent Information
Customer List
Testimonials
Supplemental Financial Spreadsheets
References

Strategic Planning
SWOT Analysis
SWOT stands for
Strengths
Weaknesses
Opportunities
Threats

Internal Business Situation

External Business Situation

SWOT Analysis
A key part of Business Acumen is arriving
at a business strategy based on the
outside and inside situations that confront
the business.
The process starts by defining the goal.
The SWOT analysis is then used to help
develop a strategy for achieving the goal.

SWOT Analysis
A SWOT is usually displayed as a 4-sector chart

Bre
akth
rou
gh

Strengths

Opportunities

Weaknesses

Threats

F
ai
lu
re

SWOT Analysis
After the SWOT chart is made, the analyst
should find a strategy that plays to the
businesses strengths while
accommodating its weaknesses.
Similarly, the strategy should take
advantage of the outside opportunities
while mitigating potential outside threats.

Questions?

Homework
None except continue work on your major
project
HW9 Financial statements due Session
#24 (Monday)