• Market oriented Business Developers use business plans to

substantiate their business models.

• Business model essentially is a narrative tool, wheras the
business plan provides the qualifying numbers and actual tasks
and processes needed for the business model to work
• Business model includes many of the critical assumptions for
the business plan’s context. As such the business plan is a
logical continuation of the business model and serves as an
important tool, roadmap and means of communication for the
business venture.
• Business plan is a way for the business developer to demonstrate that all
relevant aspects of the proposed business opportunity have been
properly analysed and thought through.
• In essence, the business developer applies the business plan to reduce
uncertainty with respect to the viability and likely success of an
opportunity in a world where the `liability of newness ‘ as well as
various ways of cheating and deceit are prevalent.
 Business models
• It all begins with a business idea.
• A business idea is any concrete thought for the increase of
turnover .
• A business model is an answer to the simple question : how do
we make money from a business opportunity ?
 Contd… Business models
• Business model is typically not enough, as business developers, in
additional, need solid contextual knowledge about the customers and
industry dynamics as well as the ability to convey a credible story to
their CEO/ board/ shareholders.
• A Business Developer also needs to prepare a business plan to
accompany the business model when the business opportunity is
presented to the CEO / board.
 Business Developer should ask :
• What are the necessary tasks and processes to be performed
for this business opportunity and who should carry them out ?

consider whether activities should be :

• Performed within the organization
• Conducted with partners or strategic alliances
• Left to be purchased on the product-markets
Building blocks of a good business model
1) Superior
customer
value
proposition

The good 2) Key

4) Value
appropriation business external and
internal

model resources

3) Key tasks
and
processes
 Building blocks
of a good business model
1) Superior customer value generation
2) Key internal and relational resources
3) Key tasks and processes
4) Value appropriation
--------------------------------------------------------
`Superior’ means compared to competitors
Resources : financial, physical, human, etc.
Processes : such as manufacturing, etc.
 Therefore, definition of :
a good business model
• A business model is made up of the set of interdependent tasks
and processes that an organization performs with its key
internal and relational resources in the pursuit of delivering
superior customer value and appropriating value
• A sound and credible business model is an important pre-
requisite for a sound business plan.
• How does a Business Developer arrive at a credible business
model ? The good business model answers a list of questions
( given in next 4 slides)
Questions for business model
 Questions for business model
1) Superior customer value creation:
- What do our customers value ?
- Who are our customers and target market ?
- What value proposition do we offer our customers?
- Do our customers understand our value proposition
2) Key internal and relational resources
- What resources and capabilities are necessary and sufficient to
deliver superior customer value ?
- Who holds these resources ?
- Which resources should be acquired from partners or
alliances ?
3) Key tasks and processes
- What tasks and processes are necessary and sufficient to
deliver superior customer value
- Who holds these tasks and processes ?
- How do we reach our customers ?
- How do we relate to them?
4) Value appropriation
- How do we make money in this business ?
- What is the underlying economic logic that explains
how we can deliver value to customers at an
appropriate cost ?
- At a general level, what is our revenue model
( volume x price)
- At a general level, what is our cost structure ( direct
and indirect cost driven by the key resources and
activities)
 Novelty centred business model
Novelty centred business model design focusses on new ways
of conducting economic exchanges among a firm stakeholder.
Novelty, in this context, refers to connecting previously
unconnected parties, to linking transaction participants in new
ways or to designing new transaction mechanisms.
Example eBay, Amazon, Quikr, OLX, etc.
 Efficiency centred business models:
• Imitate competitive offerings, but in a more efficient way.
Example : customer is happy when the same perceived quality
of the product or service can be purchased at a lower price. Eg.
D-Mart. ( it can be because of lower inventory cost)
 Business models and
business level strategy
• Business model is predominantly customer oriented. ( creating
and delivering value to customer)
• Business Level Strategy is predominantly competitor oriented (
how to deal with competition in order to be different in a
better way)
 Business models and
business level strategy
• Since the business model for a new growth opportunity is
often designed for an untested market, the knowledge held by
the firm, is limited.
• Strategy on the other hand builds on relatively more reliable
information.
 Business models and
business level strategy
• Two companies may use same business model but different
strategies. Example Walmart in USA was using same business
model as Kmart, but was more successful, because Walmart
was opening stores in small towns, which everybody else was
ignoring.
 Business Plan
• A business plan is a formal statement describing why, when
and how the business developer intends to implement a
strategic initiative or growth opportunity.
• Its major components are
- A marketing plan
- An organization plan and
- A Finance plan
• Marketing plan : explains how we deliver superior customer
value in our target markets
• The organization plan explains how and with whom we
orchestrate our resources and activities to create and deliver
superior customer value
• Finance plan explains how we finance our operations and
appropriate their value generation.
• The business plan consequently provides the analytical support and
qualification for the business model of the business opportunity.
• Business plan’s length and degree of detail generally correspond to the
complexity and comprehensiveness of the business’ tasks and
processes.
• The business plan is often supported by marketing plan, organization
plan, finance plan, production plan, etc.
• Writing a business plan on the basis of thorough analyses to
support business model serves
1) An initial significant step to determine whether to continue or
discontinue the ongoing effort to commercialize the business
idea
2) If the decision is to continue the business plan is a powerful
tool for directing the implementation
Format of Business Plan
 Format of Business Plan
1) Executive summary
a) Business model
2) Company overview
a) Corporate Governance
b) Start-up summary
c) Company location and facilities

contd….
 Contd… Format of Business Plan
3) Situation overview
a) Market summary
b) SWOT analysis
c) Main competitors
d) Key success factors
4) Market strategy (plan)
a) Target market (s)
b) Positioning
c) Marketing mix contd….
 Contd…. Format of Business Plan
5) Organisational design
a) Management team
b) Organizational structure
c) Controls and implementation

contd…
 Contd…. Format of business plan
6) Financial statements
a) Critical assumptions and scenarios
b) Key financial indicators
c) Breakeven analysis (and required
investment)
d) Projected profit and loss
e) Projected cash flow
f) Projected balance sheet
g) Performance ratios
How to read and craft
a Business plan
 NEW PRODUCT DEVELOPMENT

• Whether a company is new OR a going-concern, the activity of new product development is

a NECESSITY in business.
• The subject of new product development is multi-disciplinary i.e. R&D, Finance, Marketing,
Channel, Operations, Purchase, Vendors, etc. are involved.
• But marketing dept has to take the lead right from ‘identifying the need’ to ‘successful
commercialization’  all the other dept/functions have to cooperate.

• Why are new products required?

1. Inherent nature of human mind is to keep on finding alternates/choices/substitutes.
2. Competition from substitutes/industry is ever increasing due to which each product
has a limited life-cycle  therefore new products compensate the lost sales !
3. Radical changes happen in technology  if you don’t change then someone else will
do it first and your survival may be at stake !!
 1. Introduction

How are new products started?

1. The company may acquire another company manufacturing the product or providing the
services.
2. The company may acquire required technology/patent.
3. The company may buy licence or franchise from another company.
4. In-house development in own labs or R&D.
5. Contract with independent - researchers / R&D labs / institutes.

• Most companies however pursue the development through both internal & external
sources.
• All R&D cannot happen in-house, therefore, external help is required.
• And Innovation/R&D is extremely essential; cannot be fully out-sourced !
 1. Introduction

What constitutes new products?

• New products include  All improved products, modified products, new brands.

1. New product first time in the world

2. New product for an established market

3. Additions to the existing lines – size, flavour, colour, etc.

4. Improvements in products’ performance – better, faster, cleaner, cheaper, easier, etc.

5. Repositioning – existing products targeted to newer segments/markets.

• Only 5% of the new products are innovative and first time in the world.
• 95% new products are included in category no. 2-5.
 2. Issues concerning new product development

The trade-off involved in the development of new products:

Why are new product required What is the cost involved

Changing consumers’ needs & tastes Very expensive
New technologies Uncertainty
Increased competition Time consuming
Shortened life-cycles High failure rate
 2. Issues concerning new product development

Why do the new products fail?

• A senior executive might have pushed the favourite idea inspite unfavourable market
research findings.
• The basic idea may be good but the market-size is over estimated.
• Product not well designed.
• Product incorrectly positioned in the market.
• Not properly advertised.
• Overpriced!
• Competitor fights back harder than expected.
 2. Issues concerning new product development

What are the impediments in new product development process?

• Shortage of ideas in some businesses: eg. Steel, cement, electricity.
• Excessive fragmented markets: recovery is difficult.
• Too many regulations: especially reg health, safety, emissions/environment; in industries
like – pharma, industrial equipment, chemicals, automobiles, toys, among others.
• Its expensive process !
• Trade-off between ‘faster’ or ‘better’: whether early entry in the market OR wait for
competitors’ initiative and launch superior products learning from the others’ experience.
• Even if a company is both faster & better, there is a risk of competitors copying the
products and sell cheaper !
 2. Issues concerning new product development
Estimated cost of finding one successful new product launch
 3. Conducive organisational set-up

1. Effective leadership
• Ultimately the top management is responsible for the development of new products.

• Top management should define the domain of new products and provide direction to the
whole process.
• Should encourage ‘ideas’ generation.

• Specific criteria for acceptance of the new-product ideas  especially in large companies
where few thousand ideas may spring up every month !
• Most important, budget should be created, without which nothing is possible  the moot
question being how much budget is enough?  more the better as % of sales
 3. Conducive organisational set-up

2. Effective organisational structure

• One of the most important initiatives of the top management is to establish conducive
organisational structure and teamwork.
• Top management should also develop and guide a organisation culture which encourages
creativity, ideas generation and other activities required for new-product development.
• One of the most common causes of the new-product failure is ineffective organisation and
teamwork.
• Depending of the size of the company, model of the new-product organisation may be
selected as following;
 3. Conducive organisational set-up
2. Effective organisational structure
S.no. Type Features
1 Product managers Smaller companies; product managers handle the
additional responsibility of new-products
2 New-product Medium-size companies have a separate person
managers responsible for the development of new-products
3 New-product Larger companies have multi-functional team wherein
committees experts from each dept are involved for faster decision
making and coordination.
4 New-product Above committees may be temporary  may be converted
department into a permanent dept to emphasise their authority
5 New-product Highly innovative companies like – 3M, Dow, Google, have
venture teams such teams which operate like “intrapreneurs” empowered
to develop new businesses
 3. Conducive organisational set-up
3. Effective development system
S.no. Type
1 Sequential product
development
2 Simultaneous product
development
3 Stage-gate system
Features
Old system: new products are pushed !
Starts with R&D  Operations  Marketing  Customers
Results in blame-game within the dept. and customer is
upset
To smoothen the inter-dept interactions, a cross-functional
team is formed. Japanese cos. like Sony, Toyota, Canon, are
pioneers. Customers are brought in early in the process to
expedite.
Pioneered by 3M which manufactures over 60,000
products.
…. Next slide…
 3. Conducive organisational set-up
3. Effective development system

*Stage-gate system
‐ The cross-functional team works with a project leader.
‐ Innovation/development process is divided in many stages and the criteria to be
fulfilled is pre-decided.
‐ End of the stage i.e. the gate is controlled by a committee of senior executives.
‐ After each stage, the committee reviews and assesses the progress and provides go-
ahead to the next stage.
‐ They also sanction the resources based on the requirement/progress.
‐ Decision of the committee : GO / KILL / HOLD / RECYCLE
‐ Advantages : strong discipline, clarity of objective & deliverables, transparent system.
 4. New product development process

The whole process comprises of eight stages:

1. Idea generation

2. Screening

3. Concept development & testing

4. Marketing strategy

5. Business analysis

6. Product development

7. Market testing

8. Commercialisation
4. New product development process: flow chart
 PRODUCT LIFE CYCLE (PLC)

• PLC = Product Life Cycle

• Each product / company / business / industry has got a certain finite life !
• During a product’s life, the company changes its marketing strategy from time to time.
• What are the major changes during a product’s life time?
1. Economic condition i.e. macro-economy
2. Technology
3. Competitors and their strategies
4. Buyers’ interest & requirements

• Consequently a company must plan marketing strategies based on the above changes
during various stages in the product’s life cycle.
• Most of the strategies work towards extending the product’s life & maximising the returns
before the product is finally discarded !!
1. Introduction of PLC
 1. Introduction of PLC

• PLC (definition) : It is a diagrammatic representation of the sales history of a product with

sales in y-axis and time in x-axis; portraying distinct ‘stages’.
• Why is it important to break-down the cycle in various ‘stages’ ?
• Because each ‘stage’ has a distinct set of:
1. Opportunities
2. Problems
3. Marketing strategies
4. Profit potential
• The PLC asserts the following:
1. Products have limited life with multiple ‘stages’
2. Each stage pose different challenges
3. Profits rise & fall !
4. Each stage requires different set of strategies i.e. – marketing, financial,
manufacturing, purchasing, personnel.
 1. Introduction of PLC

• A company could formulate better marketing plans based on  the correct analysis of the
current stage & the upcoming stage !

• Most common shape of a PLC : ‘S’ shaped curve

• Four stages:

S.n Stage Sales Profit Expenses

o.
1 Introduction Slow increase Yet to start Very high initial
investment
2 Growth Rapid increase Rapid increase High marketing costs
3 Maturity Slow increase and Stability and slight Stable
stability reduction
4 Decline Drop Drop Cost cutting!
 1. Introduction of PLC

• The exact ‘shape’ of the curve may vary depending upon the industry or radical changes in
the technology.
• The duration of each stage also depends on the industry and competition.
• Also designating stage borders is somewhat arbitrary !
• However the shape & the stage-border should NOT be an “issue”  more important is the
fundamental understanding of the sales figures & market dynamics  and then suitably
modifying the marketing strategies

• Brands have a very long life but with product upgrades. Eg. Samsung mobile, Surf excel
• Commodities have very long life. Eg. Steel, Cement, Electricity
• Short life usually for pharma drugs, software apps
• Very long tail for appliances both consumer & industrial. Early adopters leave the product
but laggards continue buying
2. Rationale for the PLC
 2. Rationale for the PLC

• During introduction: the sales is low because the product is new and it takes time to create
awareness, interest and purchase. (innovators start buying)
• Growth stage: If the product is satisfactory more buyers are drawn in (early adopters start
buying)
‐ Usually this is the time when competitors enter the market and ramp-up adoption!
‐ Now the product is well entrenched in the outlets/consumers’ mind and the sales
increase further (early majority start buying)
• Maturity stage: sales reaches its peak as the late majority start buying.
‐ By now innovators & early adopters might have already done repeat purchases.
‐ Satisfaction and Loyalty sets in OR if dissatisfied they switch over !!
‐ Finally the laggards too start buying
• Decline stage: sales start reducing as there is no new potential buyer.
‐ Existing buyers continue repeat purchase based on the steady consumption.
‐ Market size does not grow further whereas the competition is intense.
 3.1 Introduction stage : characteristics

• Sales is slow in this stage because it takes time to create awareness in the market, generate
interest in the customer and initiate trials.
• It also takes a lot of time for supply logistics, fill the retail outlets, fill the dealer pipelines.
• A lot of investment in R&D and operations has happened.
• There is no profit yet since sales is low and expenses in sales promotion, advertisements &
logistics are very high.
• Most important marketing activity induce  trial of the product & secure distribution in
the outlets
• There are hardly any competitors as yet !
• Price is on the higher-side to absorb the high cost and investment !
• Product is the basic-version with no refinements as yet.
• Technological & operational issues are not yet fully mastered.
 3.1 Introduction stage : marketing strategies

Price-Promotion 2x2 matrix

 3.1 Introduction stage : marketing strategies

Price-Promotion 2x2 matrix

S.no. Strategy type characteristics Suitable when

1 Rapid skimming High price, high promotion Market is virgin and able to pay the high
price. Some competition present.
2 Slow skimming High price, low promotion Market size limited. Less/nil competition.
Maximum profit.
3 Rapid penetration Low price, high promotion Fastest penetration to ensure largest
market share. Market is large but
customers are price-sensitive.
4 Slow penetration Low price, low promotion Market is large with some competition.
Customers are price-sensitive but aware
of the product.
 3.1 Introduction stage : marketing strategies
Product-Market expansion strategy
 3.1 Introduction stage : marketing strategies

Stages of competitive cycle

 3.1 Introduction stage : marketing strategies

Stages of competitive cycle

Insights from the model:

• Even though sales increases in the growth stage, the market share reduces due to increase
in competition.
• Capacity share reduces due to addition of new facilities.
• Production cost reduces due to learning effect.
• To begin with price was never an issue. As competition increases the price premium
reduces and reduces to NIL during commodity stage.
• Absolute figures of Sales & Profit will be maximum in commodity competition stage.
• Margin will be highest in competitive penetration stage.
 3.2 Growth stage : characteristics

• These are the best times for the company as the product is firmly entrenched in the
market.
• Sales increases rapidly
• Price could be maintained at higher side since competition is in nascent stage.
• Margins are highest since marketing costs are reducing and operational costs reduces due
to “learning curve” effect.
• Overall the profits increase rapidly.
• Competitors start entering but are much behind as far as their progress is concerned.
• Product is the basic-version but now upgrades & refinements start.
• Technological & operational issues are now fully mastered.
 3.2 Growth stage : marketing strategies

1. Improvement of product quality

2. Product upgrade – add features, improve styling, packaging, offering, etc.
3. Add new models, versions i.e. provide choice by adding flanker products
4. Enter new market segments
5. Strengthen distribution & start new distribution channels
6. Change the narrative of the advertisements from ‘create awareness’ to ‘assert preference’
7. Consider price reduction to discourage new competitors entering the market
 3.3 Maturity stage : characteristics

• Usually the longest of all the stages in most industries.

• Most products we see around are in stage of maturity.
• Therefore most of the marketing management theories and research is most relevant for
the maturity stage.

• Since this is the longest stage, it is further subdivided into three phases:
1. Growth maturity – sales growth rate declines
2. Stable maturity – sales flattens based on per capita consumption because of market
saturation and market-share equilibrium.
3. Decaying maturity – absolute figure of sales reduces as customers switch-over to
competitors, to substitutes or drop in consumption.
 3.3 Maturity stage : characteristics

• The slowdown in the sales creates overcapacity in the industry  leads to increased
competition  widespread price reduction  increase in marketing expenses i.e. advt &
promotions  increase in R&D/Engg budget to upgrade the products  this squeezes the
profit from both the sides !
• The above situation when continues for years then starts showing its ill-effects  industry
goes for a shake out  weaker players withdraw  large corporates having a criteria of
minimum profitability also step back  the industry eventually consists of well entrenched
players who strive to gain competitive advantage

• Such players are of two types:

1. Large firms who are high volume & low cost players; gaining competitive advantage
through – Quality leader, Cost leader and Service leader.
2. Smaller firms i.e. low volume & premium price, catering to niches while being – market
specialist, product specialist and customizing firms.
3.3 Maturity stage : characteristics
 3.3 Maturity stage : marketing strategies

1)Market modification i.e. expand the market

• Volume = no. of brand users X average usage frequency

• Increase the no. of brand users through;

1. Convert non-users : eg. credit card
2. Enter new market segments : eg. Bajaj started motorcycle
3. Win competitors’ customers : eg. Coca-Cola vs Pepsi cola

• Increase average usage frequency through;

1. More frequent use : toothpaste in the night
2. More consumption each time : large spoon full of butter
3. New & more varied uses : food item as ingredient displaying several recipes
 3.3 Maturity stage : marketing strategies
2)Product modification
1.QUALITY IMPROVEMENT
• Increasing functional performance of the product – its durability, reliability, speed, taste.
• “New and improved” machine tool or car or detergent
• “Stronger, bigger or better” grocery or soap

2.FEATURE IMPROVEMENT
• Add new features – size, weight, materials, additives, accessories, safety, etc.
• Eg.: safety feature in washing m/c or kitchen appliances

3.STYLE IMPROVEMENT
• Improving aesthetic appeal through the cosmetic look or feel
• Eg.: new car models, branded clothing, holiday package
 3.3 Maturity stage : marketing strategies

3)Marketing-mix modification
1. Price : would price cut attract new customers? List price to be lowered or some
promotional activity? OR is it better to increase the price to signal higher quality?
2. Distribution: more display space in the outlets? Add more outlets? Add new types of
distribution channels?
3. Advertising: should the advertising budget be increased? Should the timing and frequency
be altered? Should the message be altered? Should the media be changed/added?
4. Sales promotion: should promotion be stepped up? In which form – warranties or gifts or
lucky coupon?
5. Personal selling: should the no. of sales persons be increased? Should the quality of sales
persons improved? Should the areas/territories be re-designed?
6. Services: can deliveries be sped up? Increase technical assistance? Should the after-sales
services be improved?
 3.4 Decline stage : characteristics

• Most product sales eventually declines!

• How fast it declines? Whether sales becomes zero or petrifies at a low level?  such detail
depend upon the product / industry / macroeconomy
• Reason of sales decline:
1. Technological advances
2. Consumer shifts in tastes
3. Increased competition
• All the above lead to overcapacity  more competition  price cuts  profit erosion !!!
• As sales and profits decline;
1. Some firms withdraw from the market
2. Remaining firms may reduce the number of product offerings
3. Smaller segments & weaker channels are abandoned
4. Budget for advt & promotions is further reduced
5. Prices are reduced to stay relevant in the market !
 3.4 Decline stage : characteristics

• Most companies do not have a well thought strategy during decline stage;
1. Most top executives are not willing to accept the decline; have false hopes of recovery
and continue investing in the products/brands
2. Entrepreneurs attach sentiments to their ‘old time bread winner’ products and are not
willing to accept the decline

• There may be a strong reason to retain a weak product line;

1. It supports in sales of other profitable products
2. The company has no better use of money !

• Other disadvantages, of loss-making products, which financial accounting cannot highlight:

1. Disproportionate management time & energy
2. Spoils company’s image which may damage the prospects of other products
3. Delays the aggressive search for potential future bread winner products !
 3.4 Decline stage : marketing strategies

1)Identify the weak products

• Develop a system to identify the weak products
‐ A review committee comprising ALL functional experts to assess and confirm
‐ Fix up criteria in terms of market share, absolute figures of sales, margins, ROI, etc.
• The product manager’s/Marketing manager’s views are taken regarding short-term sales &
profits.
• The review committee makes the final choice – leave it alone / modify its marketing / drop
it

2)Leave it alone
• To decide to continue without any change !
• Usually such choice is made when the management is confident of revival due to aid from
external factors like – macroeconomic event, technological change, major competitor
closing down, etc.
 3.4 Decline stage : marketing strategies

3)Determining marketing strategies

• In case a major competitor abandons the market  the remaining firms compete to attract
the customers of the withdrawing firm  the remaining firms enjoy increased sales &
profits
• If a company decides to continue in the market then the available strategies are:
* pl check out the next slide !

4)The drop decision

• Closing down operations, production, etc. is one part of the drop decision
• Elaborate thought has to be given to ;
1. Brand value, strong distribution and residual goodwill  could it be sold to a smaller
firm?
2. Sell/alternate usage of plant, machinery, assets
 3.4 Decline stage : marketing strategies

3)Determining marketing strategies

S.no. strategy purpose
1 Increase investment To dominate or strengthen its competitive
position
2 Maintaining investment and Maintain status-quo until uncertainties are
other activities resolved
3 Case to case investment • Stop investments in loss-making product
decisions lines /customers/channels
• Increase investments & FOCUS in lucrative
niches !
4 Harvesting or milking Stop fresh investments and promptly recover
CASH wherever possible
5 Divesting Quickly sell-off the business, brands &
goodwill, plant /assets / machinery, etc.
5. Introduction of PLC : Demand life cycle & Technology life cycle
5. Introduction of PLC : Demand life cycle, Technology life cycle, Product cycle