The Decision-Making Process

Managers at all levels and in all areas of organizations make decisions. That is, they make
choices. For instance, Top-level managers make decisions about their organization’s goals,

where to locate manufacturing facilities, or what new markets to move into. Middle and

lower-level managers make decisions about production schedules, product quality problems,
pay raises, and Employee discipline. Making decisions isn’t something that just managers do;
all organizational members make decisions that affect their jobs and the organization they work
for.
The Decision-making process corporate decisions. Let’s use an example—a manager deciding what
laptop computers to purchase—to illustrate the steps in the process

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Decision making is an eight-step process that begins with identifying a problem and ends with
evaluating the outcome of the decision. After problem identification, managers must determine
the decision criteria that are relevant to solving the problem. For a manager looking for new
laptops, the decision criteria may include price, display quality, memory and storage capabilities,
battery life, and carrying weight. After the manager identifies the criteria, he must assign weights
to the criteria if they aren’t equally important.

Step 1: Identifying a Problem

Your team is dysfunctional, your customers are leaving, or your plans are no longer relevant.
Every decision starts with a problem, a discrepancy between an existing and a desired
condition. The sales manager whose reps need new laptops because their old ones are outdated
and inadequate for doing their job. To make it simple, assume it’s not economical to add
memory to the old computers and it’s the company’s policy to purchase, not lease.
Now we have a problem a disparity between the sales reps’ current computers (existing
condition) and their need to have more efficient ones (desired condition). So, the sales manager
has a decision to make.

How do managers identify problems? In the real world, most problems don’t come with neon
signs flashing “problem Managers also have to be cautious not to confuse problems with
symptoms of the problem. Is a 5 percent drop in sales a problem? Or are declining sales merely a
symptom of the real problem, such as poor-quality products, high prices, or bad advertising?
Also, keep in mind that problem identification is subjective. What one manager considers a
problem might not be considered a problem by another manager. In addition, a manager who
resolves the wrong problem Perfectly is likely to perform just as poorly as the manager who
doesn’t even recognize a problem and does nothing. As you can see, effectively identifying
problems is important, but not easy.

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Step 2: Identifying Decision Criteria
Once a manager has identified a problem, he or she must identify the decision criteria that are
important or relevant to resolving the problem. Every decision maker has criteria guiding his or
her decisions even if they’re not explicitly stated. In our example, the sales manager decides after
careful consideration that memory and storage capabilities, display quality, battery life,
warranty, and carrying weight are the relevant criteria in his decision.

Step 3: Allocating Weights to the Criteria

If the relevant criteria aren’t equally important, the decision maker must weight the items in
order to give them the correct priority in the decision. How? A simple way is to give the most
important criterion a weight of 10 and then assign weights to the rest using that standard. Of
course, you could use any number as the highest weight.

Important Decision Criteria

Memory and storage 10
Battery life 8
Carrying weight 6
Warranty 4
Display quality 3

Step 4: Developing Alternatives

The fourth step in the decision-making process requires the decision maker to list viable
alternatives that could resolve the problem. In this step, a decision maker needs to be creative.
And the alternatives are only listed, not evaluated just yet. Our sales manager, identifies eight
laptops as possible choices.

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Step 5: Analyzing Alternatives
Once alternatives have been identified, a decision maker must evaluate each one. How?
By using the criteria established in Step 2. Keep in mind that these data represent an assessment
of the eight alternatives using the decision criteria, but not the weighting. When you multiply
each alternative by the assigned weight, you get the weighted alternatives. The total score for
each alternative, then, is the sum of its weighted criteria.

Step 6: Selecting an Alternative

The sixth step in the decision-making process is choosing the best alternative or the one that
generated the highest total in Step 5. Dell Inspiron is now the choose, because it scored higher
than all other alternatives (249 total).

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Step 7: Implementing the Alternative
In step 7 in the decision-making process, you put the decision into action by conveying it to those
affected and getting their commitment to it. We know that if the people who must implement a
decision participate in the process, they’re more likely to support it than if you just tell them what
to do. Another thing managers may need to do during implementation is reassess the
environment for any changes, especially if it’s a long-term decision. Are the criteria, alternatives,
and choice still the best ones, or has the environment changed in such a way that we need to
reevaluate?

Step 8: Evaluating Decision Effectiveness

The last step in the decision-making process involves evaluating the outcome or result of the
decision to see whether the problem was resolved. If the evaluation shows that the problem still
exists, then the manager needs to assess what went wrong. Was the problem incorrectly defined?
Were errors made when evaluating alternatives? Was the right alternative selected but poorly
implemented? The answers might lead you to redo an earlier step or might even require starting
the whole process over.

Types of Decisions and Decision-Making Conditions

Types of Decisions:
1. Structured problems and programmed decisions: The Structured problems; problems
are straightforward. The decision maker’s goal is clear, the problem is familiar, and
information about the problem is easily defined and complete. The programmed
decisions; A repetitive decision that can be handled by a routine approach.
2. Unstructured problems and non-programmed decisions: The Unstructured problems;
are problems that are new or unusual and for which information is ambiguous or
incomplete. When problems are unstructured, managers must rely on non-programmed
decision making in order to develop unique solutions. Non-programmed decisions; are
unique and nonrecurring and involve custom-made solutions.

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Decision-Making Conditions
CERTAINTY. The ideal situation for making decisions is one of certainty, which is a
situation where a manager can make accurate decisions because the outcome of every
alternative is known.

RISK. A far more common situation is one of risk, conditions in which the decision maker
is able to estimate the likelihood of certain outcomes. Under risk, managers have historical data
from past personal experiences or secondary information that lets them assign probabilities to
different alternatives.

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The Strategic Management Process
What is a Strategy ?
“Strategy is a pattern or plan that integrates an organization’s major goals, policies and
action sequences into a whole.” (J Quinn, 1980)
“Strategy is how the ‘game plan’ can be achieved. It is the pattern in a stream of actions”
(Mintzberg & Waters 1985)

Visio n Sta tements: What do we want to become?

Vision is the organizational sixth sense that tells us why we make a difference in the world. It is
the real but unseen fabric of connections that nurture and sustain values. It is the pulse of the
organizational body that reaffirms relationships and directs behavior. A vision is the result of an
entrepreneur’s dream of something that does not exist yet and the ability to paint a compelling
picture of that dream for everyone to see.
Vision is based on an entrepreneur’s values.
A clearly defined vision helps a company in four ways:

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 1- Vision provides direction
2- Vision determines decisions.
3- Vision motivates people.
4- Vision allows a company to persevere in the face of adversity

Vision statement; many organizations today develop a vision statement that answers the
question “What do we want to become?”. Developing a vision statement is often considered
the first step in strategic planning, preceding even development of a mission statement. Many
vision statements are a single sentence. For example, the vision statement of Stokes Eye Clinic
in Florence, South Carolina, is “Our vision is to take care of your vision.” in contrast, is a future-
oriented declaration of the organization’s purpose and aspirations.
Vision statements are relatively brief, as in the case of Starbuck’s vision statement, which reads:
“Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining
our uncompromising principles as we grow.”
Vision statements typically take
the form of relatively brief,
future-oriented statements.

M issio n sta tements:

Why do we exist? are “enduring
statements of purpose that
distinguish one business from
other similar firms.
Three key issues entrepreneurs and their employees should address as they develop a mission
statement for their businesses include:

 The purpose of the company: What are we in business to accomplish?

 The business we are in: How are we going to accomplish that purpose?

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  The values of the company: What principles and beliefs form the foundation of the way
we do business?

A mission statement identifies the scope of a firm’s operations in product and market terms.”
It addresses the basic question that faces all strategists: “What is our business?”.
A clear mission statement describes the values and priorities of an organization. Developing a
mission statement compels strategists to think about the nature and scope of present operations
and to assess the potential attractiveness of
future markets and activities.
A mission statement not only broadly
charts the future direction of an
organization, but it also serves as a constant
reminder to its employees of why the
organization exists and what the founders
envisioned when they put their fame and
fortune (and names) at risk to breathe life
into their dreams.

Mission Statement Component:

• Customers • Products or services
Who are the firm’s customers? What are the firm’s major products or
services?
• Markets • Technology
Geographically, where does the firm compete? Is the firm technologically current?
• Concern for survival, growth, and • Self-concept
profitability What is the firm’s major competitive
Is the firm committed to growth and financial advantage?
soundness?
• Philosophy • Concern for public image
What are the basic beliefs, values, aspirations, and Is the firm responsive to social,
ethical priorities of the firm? community, and environmental concerns?
• Concern for employees
Are employees a valuable asset of the firm?

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Mission statement Criteria:
• Market-Oriented • Realistic
• Specific • Based on Competencies
• Appropriate for the environment • Motivating

Va lues :
Are the beliefs of an individual or group, and in this case the organization, in which they are
emotionally invested.

Organization values matter. Every successful organization has a set of organization values to
assist their employees in achieving their
goals as well as the organization’s. They are
the essence of the organization’s identity
and summarizes the purpose of their
existence. Organization values are a guide
on how the organization should run and they
are normally integrated in the organization’s
mission statement.

Every business is different, and so are their core values. Having said that, there are some
principles that are alike for all, even though they may be phrased differently. Here are four such
core values every organization should have:

1. Integrity and Ethics: Simply put, the two principles of integrity and ethics translate into
doing the right thing, in an honest, fair, and responsible way. Building your entire business on the
foundation of honesty and integrity goes a long way into building a strong, trusting relationship
with it’s employees, stakeholders, and customers. A truthful conduct on everyone’s part can
create a strong, credible reputation of the company in the market, which is beneficial for
everyone’s interests.

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2. Respect: Without dedicated employees, a company is nothing. Period. Committed employees
form the backbone of the entire corporation. They work together with the system in order to
achieve growth and profitability. A company has a responsibility towards its employees and, if
one of its core principles is showing utmost respect to its employees, it’s likely management will
have a low employee turnover.

Respecting all employees means respecting their individual human rights and privacy,
eliminating all kinds and forms of discrimination, whether based on religion, belief, race,
ethnicity, nationality, gender or physical disability. Moreover, ensuring a safe and healthy
workplace environment for all employees is an important part of giving respect to them.

Many organizations across the globe adopt an attitude whereby the entire company interacts
together like a close-knit family. Such an atmosphere helps boost the confidence of employees
and makes them feel like an important, even indispensable, part of the organization. This inspires
feelings of commitment and a drive to do even better.

3. Innovation (Not Imitation): Companies that focus on being ahead of their competitors and
introducing new ideas in the marketplace follow the principle of “innovation, not imitation.” This
is crucial if a company wants to be a trend setter and introduce new products that consumers
appreciate. Employees in such companies are encouraged to be dynamic and come up with
innovative ideas that can translate into successful products for the company. Constantly imitating
others won’t take the business far.

4. Driven for continuous improvement: The thirst to constantly improve can be achieved if one
is never satisfied. Organizations that have this principle as one of their core values try to provide
a dynamic platform to their employees, where they can explore their creativity and skills and
further enhance themselves. While celebrating successes is an important thing, just sitting back
and getting complacent over them is unacceptable for such companies.

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Goals and Objectives:

Go als : are the broad, long-range

attributes that a business seeks to
accomplish; they tend to be general
and sometimes even abstract. Goals
are not intended to be specific enough
for a manager to act on but simply
state the general level of
accomplishment sought.
 What level of sales would you like for your company to achieve in 5 years?
 Do you want to boost your market share?
 Does your cash balance need strengthening?
 Would you like to enter a new market or increase sales in a current one?
 Do you want your company to be the leader in its market segment?
 Do you want to improve your company’s customer retention level?
 What return on your investment do you seek?
Researchers Jim Collins and Jerry Porras studied a large group of businesses and determined that
one of the factors that set apart successful companies from unsuccessful ones was the
formulation of very ambitious, clear, and inspiring long-term goals.

Defining broad-based goals helps entrepreneurs to focus on developing specific, realistic

Objectives.
Objectives : are more specific targets of performance. They define the things that
entrepreneurs must accomplish if they are to achieve their goals and overall mission.
Common objectives address: Profitability, Productivity, Growth, Efficiency, Markets,
Financial Resources, Physical Facilities, Organizational Structure, Employee Well -
Being, And Social Responsibility .

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Objectives typically must
(1) be related directly to the goal;
(2) be clear, concise, and understandable;
(3) be stated in terms of results;
(4) begin with an action verb;
(5) specify a date for accomplishment; and
(6) be measurable.

The objectives a company sets determine the level of success it achieves. Establishing
profitability targets is not enough. Instead, entrepreneurs must set objectives and measure
performance in those critical areas that determine their companies’ ability to be profitable Well-
written objectives have SMART characteristics.
Drucker, P. (1954). The Practice of management. New York: HarperCollins. Drucker coined
the usage of the acronym for SMART objectives while discussing objective-based
management. Here is how to tell if your objectives, measures, and targets are SMART.
Specific:
A specific objective has a much greater chance of being accomplished than a general one. To
set a specific objective, you must answer the six “W” questions:
 Who: Who is involved?
 What: What do I want to accomplish?
 Where: Identify a location.
 When: Establish a time frame.
 Which: Identify requirements and constraints.
 Why: Specific reasons, purpose or benefits of accomplishing the objective.

EXAMPLE: A personal goal would be, “Get in shape.” But a specific objective would say, “Get into good
enough shape that 6 months from now I can hike to the summit of a 14,000-foot mountain and back in one
day. To do so, by next Monday I will join a health club within 5 miles of home and work out for at least 45
minutes 3 days a week for 3 months, then reassess my progress”.

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Measurable:
Establish concrete criteria for measuring progress toward the attainment of each objective you
set. When you measure your progress, you stay on track, reach your target dates, and
experience the exhilaration of achievement that spurs you on to continued effort required to
reach your objective. To determine whether your objective is measurable, ask questions such
as:
 How much?
 How many?
 How will I know when it is accomplished?
Notice that the specific version of the “get in shape” objective includes metrics of time and
distance.

Achievable:
When you identify objectives that are most important to you, you begin to figure out ways
you can make them come true. You develop the attitudes, abilities, skills, and financial
capacity to reach them. You begin seeing previously overlooked opportunities to bring
yourself closer to the achievement of your goals and objectives. You can attain most any
objective you set when you plan your steps wisely and establish a time frame that allows you
to carry out those steps. Goals that may have seemed far away and out of reach eventually
move closer and become achievable, not because your goals shrink but because you grow and
expand to match them through the achievement of nearer-term objectives. When you list your
objectives, you build your self-image. You see yourself as worthy of these goals and
objectives and develop the traits and personality that allow you to possess them.

Realistic:
To be realistic, an objective must represent an objective toward which you are both willing
and able to work. An objective can be both high and realistic; you are the only one who can
decide just how high your objective should be. But be sure that every objective represents

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substantial progress. A high objective is frequently easier to reach than a low one because a
low objective exerts low motivational force. Some of the hardest jobs you ever accomplished
actually seem easy simply because they were a labor of love. Your objective is probably
realistic if you truly believe that it can be accomplished. Additional ways to know whether
your objective is realistic is to determine whether you have accomplished anything similar in
the past or ask yourself what conditions would have to exist to accomplish this objective.
You might decide whether an objective to climb a 14,000-foot mountain is realistic by
considering whether people of your age and ability have been able to do it.

Timely:
An objective should be grounded within a time frame. With no time frame tied to it, there’s
no sense of urgency. If you want to lose 10 pounds, when do you want to lose it by?
“Someday” won’t work. But if you anchor it within a time frame, “by May 1st,” then you’ve
set your unconscious mind into motion to begin working on the objective.

External and Internal analysis

PEST ana lysis
PEST (political, economic, social/cultural, and technological factors):
It is a tool for understanding the political, economic, socio-cultural and technological
environment that an organization operates in. It can be used for evaluating market growth or
decline, and as such the position, potential and direction for a business.

The mechanism of application/implementation:

PEST factors can be classified as opportunities or threats in a SWOT analysis. It is often
useful to complete a PEST analysis before completing a SWOT analysis.

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The expected outcome of the model
- It is a significant model which comprehensively analyses the external situation
surrounding the company
- This analysis help managers understand the external environment by which they can
use this analysis in developing strategic planning
POLITICAL/LEGAL ECONOMIC FACTORS
 Political and legal structures  Business cycles
 Political alliances  Money supply
 Legislative structures  Inflation rates
 Monopoly restrictions  Investment levels
 Political and government stability  Unemployment
 Political orientations  Energy costs
 Taxation policies  GNP trends
 Employment legislation  Patterns of ownership
 Foreign trade regulations  The nature and bases of competition
 Environmental protection legislation domestically and internationally
 Pressure groups  Trading blocks
 Trades union power

SOCIO-CULTURAL TECHNOLOGICAL
 Demographics  Levels and focuses of government and
 Lifestyles  industrial R&D expenditure
 Social mobility  Speed of technology transfer
 Educational levels  Product life cycles
 Attitudes  Joint ventures
 Consumerism  Technological shifts
 Behavior and behavior patterns  The direction of technological transfer
 Zeitgeists  The (changing) costs of technology

SWOT a na lysis:
The objective behind knowing & applying this model:
To separate meaningful data from that which is merely interesting and to discover what
management must do to exploit its distinctive competencies within each of the market segments
both now and in the longer term.
Helps in understanding the Strengths, Weaknesses, Opportunities, and Threats involved in a
project or business activity.

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The mechanism of application/implementation
It starts by defining the objective of the project or business activity and identifies the internal and
external factors that are important to achieving that objective. strengths and weaknesses are
usually internal to the organization, while opportunities and threats are usually external. Often
these are plotted on a simple 2x2 matrix.
SWOT Identify the competitive advantage of the company and its competencies.
SWOT Help managers in strategic decision-making process by listing the opportunities and
threats, and its company capability through listing the strengths and weakness of the company.

TOWS ma trix
T O W S ma t r i x Maximize the competencies and overcome and eliminate weaknesses and
threats in order to get the best utilization of company competitiveness. TOWS, is the
Utilization of the company competitive advantage by utilizing the SWOT analysis. TOWS
Help managers in selecting the appropriate strategy.

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The mechanism of application/implementation:
TOWS is combining internal strengths with external opportunities and threats. internal
weaknesses with external opportunities and threats, to develop a strategy.
The WT Strategy (mini-mini). In general, the aim of the WT strategy is to minimize both
weaknesses and threats. A company faced with external threats and internal weaknesses may
indeed be in a precarious position. In fact, such a firm may have to fight for its survival or may
even have to choose liquidation. But there are, of course, other choices. Whatever strategy is
selected, the WT position is one that any firm will try to avoid.
The WO Strategy (mini--maxi). The second strategy attempts to minimize the weaknesses and
to maximize tile opportunities. A company may identify opportunities ill the external
environment but have organizational weaknesses which prevent the firm from taking advantage
of market demands.
The ST Strategy (maxi-mini). This strategy is based on the strengths of the organization that can
deal with threats in the environment. The aim is to maximize the former while minimizing the
latter.

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The SO Strategy (maxi-maxi). Any company would like to be in a position where it can
maximize both, strengths and opportunities. Such an enterprise can lead from strengths,
utilizing resources to take advantage of the market for its products and services.

Core competency
Core competencies are resources and capabilities that serve as a source of a firm’s competitive
advantage over rivals. Core competencies distinguish a company competitively and reflect its
personality. Core competencies emerge over time through an organizational process of
accumulating and learning how to deploy different resources and capabilities. As the capacity to
take action, core competencies are “crown jewels of a company,” the activities the company
performs especially well compared with competitors and through which the firm adds unique
value to its goods or services over a long period of time.

Core competencies are a unique set of skills, knowledge, or abilities that a company develops
in key areas, such as superior quality, customer service, innovation, engineering, team-
building, flexibility, speed, responsiveness, and others that allow it to perform vital processes
to world-class standards and to vault past competitors. They are the things that a company does
best and does far better than its competitors.

Intellectual Capital
Intellectual capital is the knowledge and information a company acquires and uses to create a
competitive edge in its market segment.
Increasingly, a company’s intellectual capital is likely to be the source of its competitive
advantage in the marketplace.

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Intellectual capital has three components:
1. Human capital: the talents, skills, and abilities of a company’s workforce.
2. Structural capital: the accumulated knowledge and experience in its industry and in
business in general that a company possesses. It can take many forms, including processes,
software, patents, copyrights, and, perhaps most important, the knowledge and experience of
the people in a company.
3. Customer capital: the established customer base, positive reputation, ongoing relationships,
and goodwill a company builds up over time with its customers.

Competitive advantages
The goal of developing a strategic plan is to create for the small company a competitive
advantage the aggregation of factors that differentiates a small business from its competitors
and gives it a unique and superior position in the market. From a strategic perspective, the
key to business success is to develop a unique competitive advantage, one that creates value
for customers, is sustainable, and is difficult for competitors to duplicate. No business can be
everything to everyone.

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In fact, one of the biggest pitfalls many entrepreneurs stumble into is failing to differentiate
their companies from the crowd of competitors. Entrepreneurs often face the challenge of
setting their companies apart from their larger, more powerful competitors (who can easily
outspend them) by using the creativity, speed, flexibility, and special abilities their businesses
offer customers.

Competitive Analysis Model

Porter five forces:
Porter five forces Identify the company
situation among its competitors and other
external barriers related to the industry
Porter five forces Analyzing the industry’s
barriers and tack in order to overcome it and gain
competitive advantage by taking the suitable action
or strategy.
Porter five forces Analyzing the external
environment helping in designing appropriate
strategic plan.

The mechanism of application/implementation:

 Reducing the Bargaining Power of Suppliers

 Reducing the Threat of New Entrants

 Reducing the Competitive Rivalry between Existing Players

 Reducing the Bargaining Power of Customers

 Reducing the Threat of Substitutes

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Reducing the Bargaining Power of Suppliers
 Partnering
 Supply chain management
 Supply chain training
 Increase dependency
 Build knowledge of supplier costs and methods
 Take over a supplier
Reducing the Threat of New Entrants
 Increase minimum efficient scales of operations
 Create a marketing / brand image (loyalty as a barrier)
 Patents, protection of intellectual property
 Alliances with linked products / services
 Tie up with suppliers
 Tie up with distributors
 Retaliation tactics
Reducing the Competitive Rivalry between Existing Players
 Avoid price competition
 Differentiate your product
 Buy out competition
 Reduce industry over-capacity
 Focus on different segments
 Communicate with competitors
Reducing the Bargaining Power of Customers
 Partnering
 Supply chain management
 Increase loyalty
 Increase incentives and value added
 Move purchase decision away from price
 Cut put powerful intermediaries (go directly to customer)
Reducing the Threat of Substitutes
 Legal actions
 Increase switching costs
 Alliances
 Customer surveys to learn about their preferences
 Enter substitute market and influence from within
 Accentuate differences (real or perceived)

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Business Ethics:

Business ethics involves the moral values and behavioral standards that businesspeople draw on
as they make decisions, solve problems, and interact with stakeholders It originates in a
commitment to do what is right.
Ethical behavior doing what is “right” as opposed to what is “wrong” starts at the top of an
organization with the entrepreneur. Entrepreneurs’ personal values and beliefs influence the way
they lead their companies and are apparent in every decision they make, every policy they write,
and every action they take. Entrepreneurs who succeed in the long term have a solid base of
personal values and beliefs that they articulate to their employees and put into practice in ways
that others can observe.
Building a reputation for ethical behavior typically takes a long time; unfortunately, destroying
that reputation requires practically no time at all, and the effects linger for some time.
One top manager compares a bad reputation to a hangover. “It takes a while to get rid of, and it
makes everything else hurt,” he says.

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Many businesses flounder or even fail after their owners or managers are caught acting
unethically.
There are three levels of ethical standards:
1. The law, which defines for society as a whole those actions that are permissible and those
that are not. The law merely establishes the minimum standard of behavior. Actions that are
legal, however, may not be ethical. Simply obeying the law is insufficient as a guide for
ethical behavior; ethical behavior requires more. Few ethical issues are so simple and one
dimensional that the law can serve as the acid test for making a decision.
2. Organizational policies and procedures, which serve as specific guidelines for people as
they make daily decisions. Many colleges and universities have created honor codes, and
companies rely on policies covering everything from sexual harassment and gift giving to
hiring and whistle-blowing.
3. The moral stance, that employees take when they encounter a situation that is not governed
by levels one and two. The values people learn early in life at home, in the church or
synagogue, in school, and at work are key ingredients at this level. Another determinant of
ethical behavior is training. As Aristotle said thousands of years ago, you get a good adult by
teaching a child to do the right thing. A company’s culture can serve either to support or
undermine its employees’ concept of what constitutes ethical behavior.

Writing a Code of Ethics

A code of ethics describes a business’s moral philosophy and gives concrete guidelines for
carrying it out.
Writing a code and distributing a copy to every employee is a wise move for several reasons.
Developing a useful code of ethics can be difficult. The challenge can be summed up in one
word: Balance. The code must balance contrasting qualities in an effective way. For example:
 The code must be general enough to apply to many situations, yet specific enough to offer
practical help.

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  The code should reflect your values but also respect the beliefs of those who will be
affected. The values can be idealistic, but the guidelines must be realistic.
 A code needs achievable language, such as “encourage” and “promote.” Reserve absolutes
and terms such as “always” and “never” for clear issues of right and wrong.
 A code of ethics should be continually evolving without drifting from its core beliefs.

Market y our business

Ma r ke t i n g mi x ( 4 Ps )
Marketing Mix is a combination of all of the factors at a marketing manger’s command to satisfy
the target market.

Marketing Mix is a strategic tool, that put

the right product or a combination of
products in the place and at the right price,
the challenge is to do this well, as you
need to know every aspect of your
business plan.
Marketing involves a number of activities.
To begin with, an organization may
decide on its target group of customers to
be served. Once the target group is
decided, the product is to be placed in the
market by providing the appropriate
product, price, distribution and promotional efforts. These are to be combined or mixed in an
appropriate proportion so as to achieve the marketing goal. Such mix of product, price,
distribution and promotional efforts is known as ‘Marketing Mix’.
So the marketing manager concentrates on seven major decision areas while planning the
Marketing activities, namely Ma r ke t i n g mi x ( 7 Ps ) :

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1) Products
2) Price
3) Place (distribution)
4) Promotion
5) People
6) Process
7) Physical Evidence
These 7‘P’s are called as elements of
marketing and together they constitute the
marketing mix. All these are inter-related
because a decision in one area affects
decisions in other areas. In this lesson you will

learn about the basic aspects relating to these ‘7 P’s, Product, Price, Place, Promotion, People,
Process and Physical Evidence.

26
G a p An a l y s i s
A gap analysis is an examination of your current performance for the purpose of identifying the
differences between your current state of business and where you’d like to be. It can be boiled
down into a few questions:

 Where are we now?

 Where we want to be?

 How are we going to close the gap?

Conducting a gap analysis can help you improve your

business efficiency, your product, and our
profitability by allowing you to pinpoint “gaps”
present in your company. Once it’s complete, you’ll
be able to better focus your resources and energy on
those identified areas in order to improve them.

4 Steps to Completion

1. Identify the current state.

2. Identify where you want to be.
3. Identify the gaps.
4. Formulate improvements to close the gaps.

27
 Ma r ke t S e g me n t a t i o n
The External Environmental segmentation
External Environmental Analysis
1) Scanning: Identifying early signals of environmental changes and trends.

2) Monitoring: Detecting meaning through ongoing observations of environmental changes and trends.

3) Forecasting: Developing projections of anticipated outcomes based on monitored changes and trends.

4 ) Assessing: Determining the timing and importance of environmental changes and trends for firms’
strategies and their management.

 The general environment is composed of dimensions in the broader society that influence an
industry and the firms within it. Firms
cannot directly control the general
environment’s segments and elements.
Accordingly, successful companies gather
the information required to understand each
segment and its implications for the
selection and implementation of the
appropriate strategies.

 The industry environment is the set of

factors that directly influences a firm and its competitive actions and competitive responses: the
threat of new entrants, the power of suppliers, the power of buyers, the threat of product
substitutes, and the intensity of rivalry among competitors.

 Analysis of the General Environment is focused on the future; analysis of the Industry
Environment is focused on the factors and conditions influencing a firm’s profitability
within its industry; and Analysis of Competitors is focused on predicting the dynamics of
competitors’ actions, responses, and intentions. In combination, the results of the three
analyses the firm uses to understand its external environment influence its vision, mission, and

28
strategic actions. Performance improves when the firm integrates the insights provided by
analyses of the general environment, the industry environment, and the competitor
environment.

29
Porter Generic Strategies

Type of Ways to achieve the Benefits Possible problems

strategies strategy
 Size and economies  The ability to:  Vulnerability to even
of scale  outperform rivals lower cost operators
 Globalization  erect barriers to entry  Possible price wars
 Relocating to low-  resist the five forces  The difficulty of
cost parts of the sustaining it in the long
world term
 Modification/simplif
Cost
ication of designs
Leadership  Greater labour
effectiveness
 Greater operating
effectiveness
 Strategic alliances
 New source of
supply
 Concentration upon  A more detailed  Limited opportunities
on or a small understanding of for sector growth
number of a strong particular segments  The possibility of
and specialist  The creation of barriers outgrowing the market
reputation to entry  The decline of the sector
Focus  A reputation for  A reputation for
specialization specialization which
 The ability to ultimately inhibits
concentrate efforts growth and development
into other sectors
 The creation of  A distancing from  The difficulties of
strong brand others in the market sustaining the bases for
identities  The creation of a major differentiation
 The consistent competitive advantage  Possibly higher costs
pursuit of pursuit of  Flexibility  The difficulty of
those factors which achieving true and
Differentiation customers perceive meaningful
to be important differentiation
 High performance in
one or more of a
spectrum of
activities

30
Business evaluation (Financial statements and ratios):
The financial statements are the “window” through which firms can be looked at, examined and
evaluated. Financial statements tell us what a firm’s position is at a specific point in time The
real value of financial statements is that they can be used to help predict the firm’s future value
as demonstrated in its earnings and dividends.
The purpose for analyzing Financial Statements:
1- Transform data into information.
2- Build trends from information.
3- Project forecasts from trends.
4- Use forecasts in planning.
5- Extract ratios for comparison and benchmarking.
6- Evaluate performance and identify weaknesses.
7- Plan corrective action.
8- Evaluate the firm’s stock and bonds.
9- Evaluate the firm’s financial position and assess its ability

Financial ratios

31
 Ratio How it calculated What is measures
Tests of Profitability:
Profitability is a primary measure of the overall success of a company
(measure management’s overall effectiveness as shown by the returns generated on sales and investment.)
This measure indicates how much income
was earned for every dollar invested by the
1- Return on Equity (ROE)
owners.

2- Return on Assets (ROA)or (ROI) This ratio is generally considered the best
overall measure of a company’s profitability
Financial leverage is the advantage or
disadvantage that occurs as the result of
3- Financial Leverage percentage earning a return on equity that is different
from the return on assets.

A ratio higher than 1 indicates high-quality

4- Quality of Income earnings.

This ratio tells us the percentage of each sales

5- Profit Margin dollar that is income.

Liquidity Ratios: Firm’s ability to meet its short-term obligations

the extent to which a firm can meet its short-

6- Quick Ratio (Acid Test) term obligations without relying on the sale of
its inventories

Leverage Ratios: measure the extent to which a firm has been financed by debt

The percentage of total funds that are

7- Debt-to-total-assets provided by creditors

the percentage of total funds provided

8- Debt-to-equity by creditors versus by owners

9- Long-term Debt-to-equity ratio the balance between debt and equity in

a firm’s long-term capital structure

the extent to which earnings can decline

10- times-interest-earned ratio without the firm becoming unable to meet
its annual interest costs

32
Location alternatives ,
Lay out, and Phy sical
Facilities
Few decisions that entrepreneurs make have
as lasting and as dramatic an impact on their
businesses as the choice of a location.
Entrepreneurs who choose their locations
wisely with their customers’ preferences and
their companies’ needs in mind—can
establish an important competitive
advantage over rivals who choose their
locations haphazardly.
The characteristics that make for an ideal
location often vary dramatically from one company to another due to the nature of their
business.
The key to finding a suitable location is identifying the characteristics that can give a company a
competitive edge and then searching out potential sites that meet those criteria.
A company’s location should match the market for its products or services, and assembling a
demographic profile tells an entrepreneur how well a particular site measures up to his or her
target market’s profile.

Location Criteria for Retail and Service Businesses

Criteria for selecting a City for your business

• Population trends: Successful small companies in a city tend to track a city’s population
growth.
• Population density: The number of people per square mile can be another important factor in
determining the optimal business location.
• Competition. For some retailers locating near competitors makes sense because similar

33
 businesses located near one another may serve to increase traffic flow to both. Overcrowding
of businesses of the same type in an area can create an undesirable impact on the profitability
of all competing firms. This location strategy works well for products for which customers are
most likely to comparison shop.
• Clustering: Some cities have characteristics that attract certain industries, and, as a result,
companies tend to cluster there.
• Compatibility with the community: One of the intangibles that can be determined only by a
visit to an area is the degree of compatibility a business has with the surrounding community.
In other words, a small company’s image must fit in with the character of a town and the needs
and wants of its residents.
• Local laws and regulations: Before selecting a particular site within a city, small business
owners must explore the local zoning laws to determine whether there are any ordinances that
would place restrictions on business activity or that would prohibit establishing a business
altogether.
• Transportation networks: Manufacturers and wholesalers in particular must investigate the
quality of local transportation systems.
• Cost of utilities and public services.
• Quality of life.
• Incentives: Some cities and counties offer financial and other incentives to encourage
businesses that will create jobs to locate within their borders.

Location Criteria for Retail and Service Businesses

• Trade Area Size • Retail compatibility

• Customer Traffic • Degree of competition.
• Adequate Parking • Transportation network.
• Visibility • Physical, cultural
• Expansion Potential • Political barriers and creations of law.
• The Index of Retail Saturation: (IRS) is a measure of the potential sales per
square foot of store space for a given product within a specific trading area.

34
Location Options for Retail and Service Businesses

• Central Business District • Inside Large Retail Stores.

• Neighborhood Locations • Outlying Areas (remote area)
• Shopping Centers and Malls • Home-Based Businesses
• Near Competitors

Layout and Design Considerations

• Size and Adaptability • Lighting, Scent, and Sound

• External Appearance • Environmentally Friendly Design
• Entrances • Business sign
• Interiors

35
36
Bus in e ss Mod el

A business model describes the rationale of how an organization creates, delivers,

and captures value.

This Business model concept has been applied and tested around the world and is already used in
organizations such as IBM, Ericsson, Deloitte, the Public Works, and Government Services of
Canada, and many more.
Business model can best be described through nine basic building blocks that show the logic of
how a company intends to make money. The nine blocks cover the four main areas of a business:
1. Customers: Source of short and long-term profits.
2. Offer: The value proposition offered to customers.
3. Infrastructure: Organization, partners, processes, systems.
4. Financial Viability: Ability to sustain profits, liquidity, stability, and efficiency.

37
The business model is like a blueprint for a strategy to be implemented through organizational
structures, processes, and systems.

38
Customer Segments

For whom are we creating value?

Who are our most important customers?

The Customer Segments Building Block defines the different groups of people organizations
an enterprise aims to reach and serve
Customers comprise the heart of any business model. Without (profitable) customers, no
company can survive for long. In order to better satisfy customers, a company may group them
into distinct segments with common needs, common behaviors, or other attributes.
A business model may define one or several large or small Customer Segments. An organization
must make a conscious decision about which segments to serve and which segments to ignore.
Once this decision is made, a business model can be carefully designed around a strong
understanding of specific customer needs.

39
Value Propositions

What value do we deliver to the customer?

Which one of our customer’s problems are we helping to solve?
Which customer needs are we satisfying?
What bundles of products and services are we offering to each Customer Segment?

The Value Propositions Building Block describes the bundle of products and services that
create value for a specific Customer Segment
The Value Proposition is the reason why customers turn to one company over another. It solves a
customer problem or satisfies a customer need. Each Value Proposition consists of a selected
bundle of products and/or services that caters to the requirements of a specific Customer
Segment. In this sense, the Value Proposition is an aggregation, or bundle, of benefits that a
company offers customers.
Some Value Propositions may be innovative and represent a new or disruptive offer. Others may
be similar to existing market offers, but with added features and attributes of a specific Customer
Segment. In this sense, the Value Proposition is an aggregation, or bundle, of benefits that a
company offers customers.
A Value Proposition creates value for a Customer Segment through a distinct mix of
elements catering to that segment’s needs. Values may be quantitative (e.g. price, speed of
service) or qualitative (e.g. design, customer experience). Elements from the following non-
exhaustive list can contribute to customer value creation.

Channels

Through which Channels do our Customer Segments want to be reached?

How are we reaching them now?
How are our Channels integrated? Which ones work best?
Which ones are most cost-efficient?
How are we integrating them with customer routines?

40
The Channels Building Block describes how a company communicates with and reaches its
Customer Segments to deliver a Value Proposition
Communication, distribution, and sales Channels comprise a company's interface with
customers. Channels are customer touch points that play an important role in the customer
experience.
Channels have five distinct phases. Each channel can cover some or all of these phases.
We can distinguish between direct Channels and indirect ones, as well as between owned
Channels and partner Channels.

Customer Relationships

What type of relationship does each of our Customer Segments expect us to

establish and maintain with them?
Which ones have we established? How costly are they?
How are they integrated with the rest of our business model?

The Customer Relationships Building Block describes the types of relationships a company
establishes with specific Customer Segments.
A company should clarify the type of relationship it wants to establish with each Customer
Segment. Relationships can range from personal to automated. Customer relationships may be

41
driven by the following motivations:
• Customer acquisition
• Customer retention
• Boosting sales (upselling)
In the early days, for example, mobile network operator Customer Relationships were driven by
aggressive acquisition strategies involving free mobile phones. When the market became
saturated, operators switched to focusing on customer retention and increasing average revenue
per customer. The Customer Relationships called for by a company’s business model deeply
influence the overall customer experience.

Revenue Streams

For what value are our customers really willing to pay?

For what do they currently pay? How are they currently paying?
How would they prefer to pay?
How much does each Revenue Stream contribute to overall revenues?

The Revenue Streams Building Block represents the cash a company generates from each
Customer Segment (costs must be subtracted from revenues to create earnings)
If customers comprise the heart of a business model, Revenue Streams are its arteries. A
company must ask itself, for what value is each Customer Segment truly willing to pay?
Successfully answering that question allows the firm to generate one or more Revenue Streams
from each Customer Segment. Each Revenue Stream may have different pricing mechanisms,
such as fixed list prices, bargaining, auctioning, market dependent, volume dependent, or yield
management.
A business model can involve two different types of Revenue Streams:
1. Transaction revenues resulting from one-time customer payments.

42
 2. Recurring revenues resulting from ongoing payments to either deliver a Value Proposition
to customers or provide post-purchase customer support.

Key Resources

What Key Resources do our Value Propositions require?

Our Distribution Channels? Customer Relationships?
Revenue Streams?
The Key Resources Building Block describes the most important assets required to make a
business model work.
Every business model requires Key Resources. These resources allow an enterprise to create and
offer a Value Proposition, reach markets, maintain relationships with Customer Segments, and
earn revenues. Different Key Resources are needed depending on the type of business model. A
microchip manufacturer requires capital-intensive production facilities, whereas a microchip
designer focuses more on human resources. Key resources can be physical, financial,
intellectual, or human.
Key resources can be owned or leased by the company or acquired from key partners.

Key Activities

What Key Activities do our Value Propositions require?

Our Distribution Channels? Customer Relationships?
Revenue streams?

The Key Activities Building Block describes the most important things a company must do to
make its business model work

43
Every business model calls for a number of Key Activities. These are the most important actions
a company must take to operate successfully. Like Key Resources, they are required to create
and offer a Value Proposition, reach markets, maintain Customer Relationships, and earn
revenues. And like Key Resources, Key Activities differ depending on business model type. For
software maker Microsoft, Key Activities include software development.

Key Partnerships

Who are our Key Partners? Who are our key suppliers?
Which Key Resources are we acquiring from partners?
Which Key Activities do partners perform?
The Key Partnerships Building Block describes the network of suppliers and partners that
make the business model work
Companies forge partnerships for many reasons, and partnerships are becoming a cornerstone of
many business models. Companies create alliances to optimize their business models, reduce
risk, or acquire resources. We can distinguish between four different types of partnerships:
1. Strategic alliances between non-competitors
2. Coopetition: strategic partnerships between competitors
3. Joint ventures to develop new businesses
4. Buyer-supplier relationships to assure reliable supplies

Cost Structure

What are the most important costs inherent in our business model?
Which Key Resources are most expensive?
Which Key Activities are most expensive?

The Cost Structure describes all costs incurred to operate a business model

44
This building block describes the most important costs incurred while operating under a
particular business model. Creating and delivering value, maintaining Customer Relationships,
and generating revenue all incur costs. Such costs can be calculated relatively easily after
defining Key Resources, Key Activities, and Key Partnerships. Some business models, though,
are more cost-driven than others. So-called “no frills” airlines, for instance, have built business
models entirely around low-Cost Structures.

Naturally enough, costs should be minimized in every business model. But low-Cost
Structures are more important to some business models than to others. Therefore, it can be
useful to distinguish between two broad classes of business model Cost Structures: cost-
driven and value-driven (many business models fall in between these two extremes)

Here we outline a general approach to producing innovative business model

options:

1. Team composition
Key question: Is our team sufficiently diverse to generate fresh business model ideas?
Assembling the right team is essential to generating effective new business model
ideas. Members should be diverse in terms of seniority, age, experience level, business
unit represented, customer knowledge, and professional expertise.

2. Immersion
Key question: Which elements must we study before generating business model ideas?
Ideally the team should go through an immersion phase. which could include general
research, studying customers or prospects, inspecting new technologies, or assessing
existing business models. Immersion could last several weeks or could be as short as a
couple of workshop exercises (e.g. the Empathy Map).

3. Expanding
Key question: What innovations can we imagine for each business model building
block? During this phase the team expands the range of possible solutions, aiming to
generate as many ideas as possible. Each of the nine business model building blocks
can serve as a starting point. The goal of this phase is quantity, not quality. Enforcing
brainstorming rules will keep people focused on generating ideas rather than on
critiquing too early in the process

45
 4. Criteria selection
Key question: What are the most important criteria for prioritizing our business model
ideas? After expanding the range of possible solutions, the team should define criteria
for reducing the number of ideas to a manageable few. The criteria will be specific to
the context of your business, but could include things such as estimated
implementation time, revenue potential, possible customer resistance, and impact on
competitive advantage.

5. Prototyping
Key question: What does the complete business model for each shortlisted idea look
like? With criteria defined, the team should be able to reduce the number of ideas to a
prioritized shortlist of three to five potential business model innovations. Use the
Business Model Canvas to sketch out and discuss each idea as a business model
prototype.

The business model design process has five phases:

Mobilize, Understand, Design, Implement, and Manage

46
Examples:

47
48
F e as ib ility S tud y

“Feasibility study is a report by an independent third-party that analyzes a business venture’s

prospects for success. It impartially lays out the features of the business plan & critiques them,
analyzing the strengths & weaknesses of the venture, & assessing its overall feasibility.”
(USDA, 2010)

 Technical Feasibility  Comprehensive Feasibility  Economic Feasibility

 Cultural Feasibility  Legal/Ethical Feasibility  Resource Feasibility
 Operational Feasibility  Marketing Feasibility  Real Estate Feasibility

49
  Schedule Feasibility
Th
ere are many different types of feasibility studies; here is a list of some of the most common:

And there is different way to perform a successful feasibility study where it depend on the type
of business and the purpose of it, while there is a recommended outline of considerations to be
included in the feasibility study. Particular emphasis should be given to market feasibility and
management feasibility issues.

 Economic feasibility: Given the financial resources of the company, is the project something that
can be completed? The economic feasibility study is more commonly called the cost/benefit
analysis.

 Marketing feasibility: Will anyone want the product once its done? What is the target
demographic? Should there be a test run? Is there enough buzz that can be created for the
product?

 Technical feasibility: Does the company have the technological resources to undertake the
project? Are the processes and procedures conducive to project success?

 Financial feasibility: how much cash is needed, where it will come from, and how it will be
spent.
 Operational Feasibility: This measures how well your company will be able to solve problems
and take advantage of opportunities that are presented during the course of the project.

 Comprehensive Feasibility: This takes a look at the various aspects involved in the project
marketing, real estate, cultural, economic, etc. When undertaking a new business venture, this is
the most common type of feasibility study performed.

50
Stages of Feasibility Studies
 Pre-feasibility study
 The detailed feasibility study

Pre-feasibility study (initial feasibility study)

Investment projects start with the identification of an investment idea and or investment
opportunity.

Sources of new business ideas Project ideas may arise from:

1- studies of the product-consumption pattern of the country,
2- market studies,
3- surveys of existing industrial firms,
4- import schedules; And more……………

All ideas for projects are valuable. However, each investment idea should be first studied. This
study is called a pre-feasibility study or preliminary feasibility study.
The purpose of this stage is to determine whether the project idea should be studied in more
details.
Pre-feasibility study will help in eliminating projects and investment proposals without going
into more detailed studies.
The purpose of the pre-feasibility study is to answer the following questions:
 Is it feasible to continue to study this investment project?
 Is it feasible to spend more resources (money, time) to extend this feasibility study?
 Are there any constraints (legal, technological, environmental, and ethical) over the
investment project?
The pre-feasibility study is prepared on the basis of available data in published form that can
be easily collected and worked out. If the pre-feasibility study indicates that the proposed
project appears to be a promising one, the decision may be taken to proceed further with the
complete or integrated feasibility study.

51
Final feasibility study or detailed feasibility study (feasibility study report)
it is a very detailed study in which all elements are presented in such a way that it helps the
decision maker to decide whether the project should be taken up, postponed or canceled.

The detailed feasibility study has 4 stages:

 Marketing feasibility study (Market Analysis)
 Technical feasibility study
 Financial feasibility study
 Economic feasibility study

Marketing feasibility study

The market feasibility study seeks to determine whether there is a market opportunity or not.
This can be done through 4 stages as follows:
1- Measuring/ forecasting demand
2- Measuring supply. Total supply includes fully imported goods, fully local produced goods,
and mix between imported and local suppliers.
3- Determining the market gap (demand – supply) that occurs only when the demand exceeds
supply. (does the gap represent a market opportunity? Why?)
4- Determining the market share

Market Position
Market Niche: small part of an existing market
Market Leader: maintain dominant position in the market?
Market Follower: Follow the lead of the market leader – pricing, product development, etc.
Market Challenger: Seek to adopt strategies to challenge market leader’s position

Technical feasibility study

52
Technical feasibility study seeks to determine whether the project can be technically
implemented. An investor should have the requisite number of technically capable people as well
as technology required to set up and run the plant.

Financial feasibility study

Financial feasibility study is to estimate the total Investment of the Project including the cost of
fixed assets and working capital, and how the total investment could be best financed.
- The ability to raise money to implement the project is of paramount importance.
- The promoter (investor) should be capable of raising funds either from his own sources or
from banks and institutions.

Economic Feasibility Study

The project must generate an acceptable rate of return, which adequately covers its cost of
capital. The expected rate of return depends on the risk profile of the project. In a rational
economic world, nobody implements a project to make losses. In other words, net present value
has to be positive.

53
Bus in e ss P lan

A business plan is a written summary of an entrepreneur’s proposed business venture, its

operational and financial details, its marketing opportunities and strategy, and its managers’
skills and abilities. There is no substitute for a well-prepared business plan, and there are no
shortcuts to creating one.
A business plan serves two essential functions:
 First, it guides the company’s operations by charting its future course and devising a
strategy for following it. The plan provides a battery of tools, a mission statement, goals,
objectives, budgets, financial forecasts, target markets, and strategies, to help the
entrepreneur lead the company successfully.
 The second function of the business plan is to attract lenders and investors. A business
plan must prove to potential lenders and investors that a venture will be able to repay
loans and produce an attractive rate of return.
Building a plan forces a potential entrepreneur to look at his or her business idea in the harsh
light of reality. To get external financing, an entrepreneur’s plan must pass three tests with
potential lenders and investors:
(1) the reality test, (2) the competitive test, and (3) the value test.
The first two tests have both an external and internal component:
REALITY TEST. The external component of the reality test revolves around proving that a
market for the product or service really does exist. It focuses on industry attractiveness, market
niches, potential customers, market size, degree of competition, and similar factors.
Entrepreneurs who pass this part of the reality test prove in the marketing portion of their
business plan that there is strong demand for their business idea.
The internal component of the reality test focuses on the product or service itself. Can the
company really build it for the cost estimates in the business plan? Is it truly different from what
competitors are already selling? Does it offer customers something of value?

54
COMPETITIVE TEST. The external part of the competitive test evaluates the company’s
relative position to its key competitors. How do the company’s strengths and weaknesses match
up with those of the competition? Do competitors’ reactions threaten the new company’s success
and survival?
The internal competitive test focuses on management’s ability to create a company that will gain
an edge over existing rivals. To pass this part of the competitive test, a plan must prove the
quality, skill, and experience of the venture’s management team. What other resources does the
company have that can give it a competitive edge in the market?

VALUE TEST. To convince lenders and investors to put their money into the venture, a
business plan must prove to them that it offers a high probability of repayment or an attractive
rate of return. Entrepreneurs usually see their businesses as good investments because they
consider the intangibles of owning a business gaining control over their own destinies, freedom
to do what they enjoy, and others; lenders and investors, however, look at a venture in colder
terms: dollar-for-dollar returns. A plan must convince lenders and investors that they will earn an
attractive return on their money.
Suggested Business Plan Elements
Although every company’s business plan will be unique, reflecting its individual circumstances, certain
elements are universal. The following outline summarizes these components.
I. Executive Summary (not to exceed two pages)
A. Company name, address, and phone number
B. Name(s), addresses, and phone number(s) of all key people
C. Brief description of the business, its products and services, the customer problems they
solve, and the company’s competitive advantage
D. Brief overview of the market for your products and services
E. Brief overview of the strategies that will make your company successful
F. Brief description of the managerial and technical experience of key people
G. Brief statement of the financial request and how the money will be used
H. Charts or tables showing highlights of financial forecasts

II. Vision and Mission Statement

A. Entrepreneur’s vision for the company
B. “What business are we in?”

55
C. Values and principles on which the business stands
D. What makes the business unique? What is the source of its competitive advantage?
III. Company History (for existing businesses only)
A. Company founding
B. Financial and operational highlights
C. Significant achievements
IV. Industry Profile and Overview
A. Industry analysis
1. Industry background and overview
2. Significant trends
3. Growth rate
4. Barriers to entry and exit
5. Key success factors in the industry
6. Outlook for the future
B. Stage of growth (start-up, growth, maturity)
V. Business Strategy
A. Desired image and position in market
B. Company goals and objectives
1. Operational
2. Financial
3. Other
C. SWOT analysis
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
D. Competitive strategy
1. Cost leadership
2. Differentiation
3. Focus
VI. Company Products and Services
A. Description
1. Product or service features
2. Customer benefits
3. Warranties and guarantees
4. Unique selling proposition (USP)
B. Patent or trademark protection
C. Description of production process (if applicable)
1. Raw materials
2. Costs
3. Key suppliers
4. Lead times

56
D. Future product or service offerings
VII. Marketing Strategy
A. Target market
1. Problem to be solved or benefit to be offered
2. Demographic profile
3. Other significant customer characteristics
B. Customers’ motivation to buy
C. Market size and trends
1. How large is the market?
2. Is it growing or shrinking? How fast?
D. Personal selling efforts
1. Sales force size, recruitment, and training
2. Sales force compensation
3. Number of calls per sale
4. Amount of average sale
E. Advertising and promotion
1. Media used—reader, viewer, listener profiles
2. Media costs
3. Frequency of usage
4. Plans for generating publicity
F. Pricing
1. Cost structure
a. Fixed
b. Variable
2. Desired image in market
3. Comparison against competitors’ prices
4. Discounts
5. Gross profit margin
G. Distribution strategy
1. Channels of distribution used
2. Sales techniques and incentives for intermediaries
H. Test market results
1. Surveys
2. Customer feedback on prototypes
3. Focus groups
VIII. Location and Layout
A. Location
1. Demographic analysis of location vs. target customer profile
2. Traffic count
3. Lease/Rental rates
4. Labor needs and supply
5. Wage rates
B. Layout

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1. Size requirements
2. Americans with Disabilities Act compliance
3. Ergonomic issues
4. Layout plan (suitable for an appendix)
IX. Competitor Analysis
A. Existing competitors
1. Who are they? Create a competitive profile matrix.
2. Strengths
3. Weaknesses
B. Potential competitors: Companies that might enter the market
1. Who are they?
2. Impact on your business if they enter
X. Description of Management Team
A. Key managers and employees
1. Their backgrounds
2. Experience, skills, and know-how they bring to the company
B. Résumés of key managers and employees (suitable for an appendix)
C. Future additions to management team
D. Board of directors or advisors
XI. Plan of Operation
A. Form of ownership chosen and reasoning
B. Company structure (organization chart)
C. Decision making authority
D. Compensation and benefits packages
XII. Financial Forecasts (suitable for an appendix)
A. Key assumptions
B. Financial statements (year 1 by month, years 2 and 3 by quarter)
1. Income statement
2. Balance sheet
3. Cash flow statement
C. Break-even analysis
D. Ratio analysis with comparison to industry standards (most applicable to existing
businesses)
XIII. Loan or Investment Proposal
A. Amount requested
B. Purpose and uses of funds
C. Repayment or “cash out” schedule (exit strategy)
D. Timetable for implementing plan and launching the business
XIV. Appendices (supporting documentation, including market research, financial statements, organization charts,
résumés, and other items)

58
References

References
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Baker, H. H. M., 2000. Doing Business in Egypt: Legal Aspects, Cairo: GAFI.

GAFI, 2019. Investorʹs Step‐by‐Step Guide provided by GAFIʹs One‐Stop‐Shop, Cairo: s.n.

Havinal, V., 2009. Management and Entrepreneurship, New Delhi: New Age International (P) Ltd., Publishers.

KURTZ, D. L. & BERSTON, S., 2015. Contemporary Business. 17th Edition ed. United States of America: wiley .

Mariotti, S. & Towle, T., 2010. Entrepreneurship:Owning Your Future. Eleventh Edition ed. New York: pearson -
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Richard M.S. Wilson, C. G., 2005. Strategic Marketing Management:Planning, implementation and control. Third
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Skripak, S. J., Parsons, R., Cortes, A. & Walz, A., 2016. Fundamentals of Business. Blacksburg, Virginia: Virginia Tech
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Thomas W. Zimmerer, o. M. & Wilson, D., 2011. Essentials of Entrepreneurship and Small Business Management.
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