My .edu



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Your

Company

 

Business PLAN

 

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CEO’s:

Ben Dover

Sue Emhall

Harry Pit

Contents

(I) Mission & Vision Statement ……………………..

(II) Situation Analysis

Market Structure:

Consumer Segments & Product Attribute Preferences...

Consumer Pricing & Positioning Expectations …………

Consumer Demand …………………………………………..

Demand Analysis: Revenue Potentials ………………….

Company Situation

Financials ……………………………………………………..

Production ……………………………………………………

Marketing ……………………………………………………

(III) SWOT Analysis………………………………..

(IV) Strategic Planning

Growth & Competitive Strategies ……………………….

Functional Strategy – Objectives / Tactics ………….

Marketing ……………………………………….

Production …………………………………….

Financial ………………………………………..

(V) Tactical Decisions FY2009 ……….

Note- also could list Table of Tables

Note on tables—every table should be numberd, titled & analyzed—re: key fact(s) and application(s)

I

Mission & Vision Statement

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Who you are, what you offer & want to achieve…..

Mission or purpose is a precise description of what an organization does… It is a definition of “why” the organization exists … An organization's mission is its reason for existing.

A "mission statement" describes the business in terms of goods, markets, services, and client needs.

The "mission statement" should define an organization's ultimate strategic intent for profitability, growth, market share, and building competitive advantage

Vision is a statement about what your organization wants to become …

A compelling description of the state and function of the organization once it has implemented and achieved the strategic plan…

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II

Situation Analysis

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The systematic collection and study of past and present data to identify trends, forces, and conditions with the potential to influence the performance of the business and the choice of appropriate strategies. [pic]

Full article >>>_

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Market Structure:

How the market is organized (segments, competition), influenced (pest factors) & operates--

What Consumers:

• Want to buy- product benefits & attributes

• How much they want to buy (demand)

• How much they want to pay (pricing intervals)

Company Situation

How the Company is organized & situated to operate within the defined market structure & dynamic….

Company Situation- Financials

| | |

Financial Ratios Answer 5 key Questions

1) How liquid is your firm? plan & allocate enough cash to cover your production & inventory carrying costs....

2) How profitable is your Firm? = ROE, ROA, ROS

3) How effectively are you utilizing your assets? = asset turnover (sales/assets) The higher the better= more efficient use of assets

4) How are you financing your assets?= Leverage= assets/equity (1.8-2.8 optimal--- depends on Competitive strategy)

5) Are you providing your owners an adequate return on their investment ? = ROE & EPS

Margins Analysis:

 Working Capital:

Current Ratio = 3.09

Leverage = 2.01

Assets/Equity

Wealth Creation

• Cumulative Profits =

• Free Cash Flow

Market Capitalization

Company Situation- Production-- Assess the efficiencies & effectiveness of your plant utilization, inventory management, automation and capacity --Good numbers for plant utilization? At least 100%---150% to 180% even better (as long as it doesn't end up in a warehouse as excess inventory) …Inventory positions? ...About 10% worth of sales is a good benchmark for inventory

|Sales/Employees | |

|Profit/Employee | |

|Turnover Rate | |

|  | |

|    |Threshold Sales/ |

|Target Profit/ |    |

| |Target Sales/ |

|  | |

|  |  |

|Employee |Employee |

| |  |

|Year 1 |Employee |

|  | |

|$10,000 |Year 1 |

| |$80,000 |

|Year 2 |  |

|  |$160,000 |

|$12,000 | |

| |Year 2 |

|Year 3 |$90,000 |

|  |  |

|$14,500 |$180,000 |

| | |

|Year 4 |Year 3 |

|  |$100,000 |

|$17,500 |  |

| |$200,000 |

|Year 5 | |

|  |Year 4 |

|$21,500 |$112,500 |

| |  |

|Year 6 |$225,000 |

|  | |

|$26,000 |Year 5 |

| |$125,000 |

|Year 7 |  |

|  |$250,000 |

|$32,000 | |

| |Year 6 |

|Year 8 |$140,000 |

|  |  |

|$39,000 |$280,000 |

| | |

| |Year 7 |

| |$157,500 |

| |  |

| |$315,000 |

| | |

| |Year 8 |

| |$177,500 |

| |  |

| |$355,000 |

| | |

Capacity Analysis

Company Situation- Marketing-

evaluate your:

Marketing mix- against consumer product expectations & brand evaluations

Overall Competitiveness in the market-- your products vs. competitors offerings

Consumer Report

The Consumer Report helps to understand “the need to design quality products” and “the importance of adequate pricing, sales budget and promotion budget decisions”. This analysis lists what customers want and how important each product characteristics is to them. When analyzing the Consumer Report, you can see your products thru the o customers eyes and where there is a room for improvement.

III

SWOT Analysis

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IV

Strategic Planning

Growth & Competitive Strategies

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|Generic Competitive Strategies |

|Top of Form | |

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|Cost Leader with Product Life Cycle Focus | |

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|Differentiation with Product Life Cycle Focus | |

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|Broad Cost Leader | |

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|Broad Differentiation | |

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|Niche Cost Leader (Low Technology) | |

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|Niche Differentiator (High Technology | |

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|Bottom of Form | |

Strategic Planning

Growth Strategies

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Competitive Strategy=Broad Differentiation:

Maintaining a presence in every segment, we will gain a competitive advantage by distinguishing our products with an excellent design, high awareness, and easy accessibility. We will develop an R&D competency that keeps our designs fresh and exciting. Our products will keep pace with the market, offering improved size and performance. We will price above average. We will expand capacity as we generate higher demand

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MARKETING PLAN- outline the basis, nature & magnitude of your decisions regarding your products' design, positioning, pricing, promotion & distribution--

KEY FACTS:

MARKETING GOALS:

MARKETING

MESSAGE STRATEGY

|[pic] |Low End Feat for electronic consumer Industry: |

| |" lower your cost without reducing quality" |

| | |

| |Traditional Fast for Computer and Automation Industry: |

| |" .. proven technology ". |

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| |High End Fist for Security Industry: |

| |“greater sensitivity means greater security” |

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| |Performance- Foam for Avionics, Missile and weaponry Industry: |

| |”Unsurpassed reliability –Unmatched accuracy” |

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| |Size Fume for Automotive Industry: |

| |" Miniaturized sensors on time, on target” |

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MARKETING

MEDIA STRATEGY

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Promotion Budget

| |Able |Acre |Adam |Aft |Agape |

|Print Media | | | | | |

|Direct Mail | | | | | |

|Web Media | | | | | |

|Email | | | | | |

|Trade Shows | | | | | |

|Budget ($000) | | | | | |

Sales Channel Effectiveness

| |Traditional |Low End |High End |Performance |Size |

|Inside Sales |Medium |Low |Medium |High |Medium |

|Outside Sales |Low |Medium |High |Medium |High |

|Distributors |High |High |Low |Low |Low |

According to the sales channel effectiveness and the diminishing returns, we determined our sales budget that is summarized in the following table:

Sales Budget

| |Resources |Trad |Low |High |Pfmn |Size |Budget |

|Outside Sales |12/segment |4 |8 |12 |8 |12 |5,500 |

|Inside Sales |30/segment |20 |10 |20 |30 |20 |5,000 |

|Distributors |15/segment |15 |15 |5 |5 |5 |4,500 |

|Intell. Report |$0 |$0 |$0 |$0 |$0 |$0 |$0 |

|Budget ($000) | |3,000 |3,000 |3,000 |3,000 |3,000 |15,000 |

Outside Sales - number of salespeople and manufacturers reps in our outside sales force for each segment. The outside sales force meets the customer in face-to-face sales calls. Each salesperson costs $125,000, which includes salary, commission, travel and support. Diminishing returns in a segment is reached at 12 salespeople.

Inside Sales - number of inside salespeople. Each inside salesperson costs $50,000. Diminishing returns in a segment is reached at 30 salespeople

Distributors - number of distributors carrying our product. Distributors offer customers an opportunity to see our product, compare it with other products, and take delivery. Each distributor costs $100,000 per year. Diminishing returns in a segment is reached at 15 distributors.

Research & Development Strategy

Re-Positioning magnitude & schedules, New Product development specs, MTBF Ratings

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Production Strategy (+HR & TQM)-- What  productivity improvements are you going to perform regarding efficiencies & effectiveness of your plant utilization, inventory management, automation and capacity changes as well as labor force- recruiting & training incentives are you going initiate? When and Why?

What type, timing and level of expenditure regarding PMI's & TQM  do you plan to implement in the competition -- and what tangible/ demonstrable benefits do you expect?

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w/ focus on low-end, traditional and high-end segments (as highlighted in blue)—with low-end and traditional sensor products allowing for largest profits.

Low-End Segment — In this segment we plan to achieve an automation level of

nine. In comparison with other segments, we assume these products will be

presented on the market for the longest time. Low-end customers are first

concerned with price when making a purchase decision. As with all of our products,

quality will not be sacrificed for price. This will also give the Baldwin Team a slight

competitive advantage over our LC-PLC competitors.

Traditional Segment — We will also increase current automation level for Baker,

as well as capacity of the assembly line. While high automation is also favorable for

the traditional segment if we are to compete with pricing, traditional customers

expect a certain level of quality in this product line—more so than low-end

customers.

High-End Segment — Potential buyers of the high-end products are our most

demanding customers. Therefore, our strategy calls for low to moderate (five or six)

automation and increased quality control. We will offer a high-quality product at

competitive prices. High-end products that move into the traditional segment will be

produced on our higher automation lines.

Size and Performance Segments — Because these two segments are out of our core business, we will only maintain these products with little capital investment.

However, we will monitor the market to determine if these products either drift into

another segment or our strategy shifts focus on size and performance segments.

Our decision to increase automation level or capacity is based on this assumption:

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-- we plan to keep only enough inventory to satisfy demand. …. Moreover, the Baldwin Team will implement TQM initiatives.

| |Years & $$ |reduces |Reduces |Reduce admin. |reduces |increases |

| | |labor |material costs |overhead |R&D time. |demand. |

| | |costs. | | | | |

|CPI (Continuous Process Improvements) |3,4 & 5 |X |X | | | |

|Systems |$2-2-1M | | | | | |

|Vendor/JIT | | |X |X | | |

|QIT-Quality Initiative Training | |X | | | | |

|Channel Support Systems | | | | | |X |

|Concurrent Engineering |3,4 & 5 | | | |X | |

| |$2-2-1M | | | | | |

|Benchmarking | | | |X | | |

|Quality Function Deployment |3,4 & 5 | | | |X |X |

| |$2-2-1M | | | | | |

|CCE (Concurrent Engineering)/6 Sigma | |X |X | | | |

|Training | | | | | | |

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Financial Strategy-

First & foremost you need to select (and allocate their relative weightings) what financial performance measures you want to want to use evaluate your success….

| | |

|Cumulative Profits |Performance Measures- Defined |

|Ending Market Share |Performance Measures-Dynamics |

|ROS | |

|Asset Turnovers | |

|ROA | |

|ROE | |

|Ending Stock Price | |

|Market Capitalization | |

- what are your objectives ( target scores) for your performance measures across future years---

Profits- Objectives

|Year 1 |  |$6 million |

|Year 2 |  |$8 million |

|Year 3 |  |$10 million |

|Year 4 |  |$12 million |

|Year 5 |  |$16 million |

|Year 6 |  |$21 million |

|Year 7 |  |$27 million |

|Year 8 |  |$35 million |

--- profit required to earn 100 points increases each yearFor example, if this is Year 1, and your Net Profit is $3 million, you earned $3M/$6M or 50 points. Of course, negative profits earn no points.

How are you financing your assets?= Leverage= assets/equity (1.8-2.8 optimal--- depends on Competitive strategy)

What will be your policy towards Current Debt? Current Debt is typically used to fund Inventory and Accounts Receivable. However, those accounts could also be backed by Retained Earnings. These policy decisions can be evaluated with the Current Ratio and Days of Working Capital

What is your Accounts Payable policy?

In the competition-- ---the market will continue to grow. Chances are you would need to make significant investments in new plant and equipment. How will you fund these?

Long Term Debt is used to fund Plant and Equipment. However, you could use equity (Common Stock plus Retained Earnings). If you eliminate Long Term Debt, its interest payment will disappear, and earnings will go up. However, the profits used to pay off the debt essentially went into the bondholder’s pocket. You could have paid dividends to shareholders instead. What will be your policy regarding long tem debt?

Maintain Leverage = 2.01

Maximum benefit is achieved when leverage falls between 1.18 – 2.80.

Margins- Objectives

Andrews’ goal is to maintain a contribution margin of 35% - for all products and 20% minimum for net margin and 6% ROS

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V

Tactical Decisions

FY2009

R & D

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1) Daze – improve positioning and reduce age. Hold reliability (MTBF) steady. Example: Increase Daze’s Performance by 0.8, and reduce Size by 1.0.

2) Dell – leave positioning alone, allowing the product to age further. Hold reliability (MTBF) steady. Example: no action required.

3) Dixie – improve positioning and reduce age. Hold reliability (MTBF) steady. Example: reduce Dixie’s Size by 1.0, and increase Performance by 1.2.

4) Dot – improve positioning and reduce age. Improve reliability to enhance demand. Example: Increase Dot’s Performance by 1.2, reduce Size by 0.5, and increase MTBF by 1000 hours.

5) Dune – improve positioning and reduce age. Hold reliability (MTBF) steady. Example: Reduce Dune’s Size by 1.2, and increase Performance by 0.5.

Make certain that the projects complete during this year before December 31st. Under the rules, a new project can only begin on January 1st. If these projects do not complete before the end of this year, we cannot begin follow-up projects next year.

MARKETING

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1) Daze – increase price, promotion budget, and sales budget. Forecast sales as a modest improvement from last year, because our product will not be revised until late this year. Example: price $29.00, promotion budget $2000, sales budget $2000, and sales forecast 1400.

2) Dell – increase price, promotion budget, and sales budget. Forecast flat unit sales growth. Example: $24.00, promotion budget $2000, sales $2000, and sales forecast 1500.

3) Dixie – increase price, promotion budget and sales budget. Forecast flat unit sales. Example: $39.50, promotion budget $1800, sales $1800, sales forecast 400.

4) Dot –increase price, promotion budget and sales budget. Forecast flat unit sales. Example: $34.50, promotion budget $1700, sales $1700, sales forecast 450.

5) Dune –increase price, promotion budget and sales budget. Forecast flat unit sales. Example: $34.50, promotion budget $1800, sales $1800, sales forecast 380.

NOTE: Sales forecasts are purposely conservative. They reflect a pessimistic point of view.

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PRODUCTION

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Production schedules should reflect a rule of thumb – plan for 6 weeks of inventory. That is, have enough inventory on hand to meet demand for 6 weeks beyond the sales forecast. This gives you a 12% inventory cushion. For example, suppose Marketing forecasts demand at 1000, and you have 100 units already on hand in the warehouse. You want 1000 x 112% = 1120 available for sale. Since you have 100 on hand, you would schedule 1020 for production.

1) For each product, schedule production using the formula:

(UnitSalesForecast X 112%) – InventoryOnHand.

2) Make no improvements to capacity or automation at this time.

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FINANCE

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Your fiscal policies should maintain adequate working capital reserves to avoid a liquidity crisis. Put another way, keep enough cash on hand to avoid Capstone’s™ loan shark, Big Al, if your competitors clobber you, resulting in large unexpected inventories in your warehouse. Inventories are paid for when you build the product. Too much unexpected inventory leads to zero cash with bills still outstanding. At that moment, Big Al arrives with a smile, pays your bills, and leaves you with a loan and a stiff interest payment. (In the United States, this event is also known as Chapter 11 bankruptcy.)

Here are some guidelines to help you avoid Big Al. Your proforma Balance Sheet predicts your financial condition at the end of this year. Make conservative marketing forecasts. Do not rely upon the computer’s forecast. Override it with a forecast of your own. If you are conservative, it is unlikely that your worst expectations will be exceeded. Next, build additional inventory beyond your pessimistic expectations. This forces your proforma Balance Sheet to predict a future where your conservative sales forecast comes true and you are left with inventory. (If you sell the inventory, that’s wonderful.) Now look at the proforma Balance Sheet’s Cash and Inventory accounts. Drive your Cash position until it roughly equals your Inventory position. That is, either issue stock or borrow bonds until Cash equals Inventory. This creates an additional reserve for those times when your worst expectations are exceeded and disaster strikes.

Working capital can be thought of as the money that you need to operate day-to-day. In Capstone™ it is equivalent to your Current Assets – Cash, Accounts Receivable, and Inventory. As you gain experience with managing your working capital, you will observe that the guidelines above make you somewhat “liquid”, and you may wish to tighten your policy by forecasting less cash and inventory. That is fine. The better your marketing forecasts, the less working capital you will require.

1) Pay a dividend between $0.50 and $1.00.

2) Do not issue Short Term Debt. If you are short of cash (unlikely) issue stock.

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Market

Penetration

Increase market share among existing customers.

Product

Development

Create new products

for present markets

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