The Business Plan

Chapter 7

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 Business Plan
A business plan is the description
of the future direction of the
business.

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 Benefits of a Business Plan
• Starting a business without a business plan
is like walking through the dark without a
flashlight.
• You can probably go a long way using just
your senses. But operating in such a
manner leaves you wide open to the risk
that something will get in your way (like a
competitor) and you probably won't see it
until it is too late.
• And just imagine all of the opportunities
that are just waiting to be grasped but
without a flashlight, a business plan, how
will you see and take advantage of them?
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 Benefits of a Business Plan
• The benefits of having a business plan
include:
• Helping you to clarify your vision and
deciding whether or not to forge ahead with
the idea.
• Determining if your product and/or service
has a sufficient market to support it and
whether or not it will be profitable.
• Providing an estimate of your start-up costs
and how much you'll need to invest.

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 Benefits of a Business Plan
• Convincing investors and lenders
to fund your business.
• Defining your target market (who
your customers are or will be)
and how to best reach them
through strategic marketing
actions or expanding market
coverage or reach.
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 Benefits of a Business Plan
• Establishing or reevaluating your
competitive position.
• Defining corporate objectives and
programs to achieve those objectives.
• Helping your business make money from
the start by developing effective
operational strategies.
• Understanding the risks involved and
anticipating potential problems.

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Components of a Business Plan
1. Executive Summary
• It should be concise; a maximum of two
pages, and should summarize all
relevant points of the business venture.
2. Company Vision and Mission
3. Company Ownership
Major Forms of Business Ownership
• Sole Proprietorship
• Partnership
• Corporation

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Components of a Business Plan
4. Company History
• This section should describe when and why
the company was formed and how it has
evolved over time.
5. Company Profile
• Stage of Growth
• Company Goals
• Keys to Success
• Company Structure (Organization Chart)
• Company Location

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Components of a Business Plan
6. Industry Analysis
• Industry Background and Overview
• Significant Trends
• Growth Rate
• Outlook for the Future

7. Company Products and Services

• Product or Service Description
• Future Products and Services

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Components of a Business Plan
8. Marketing Strategy
• Market Segmentation
• Target Market Strategy
• Positioning Strategy
• Pricing Strategy
• Promotion Strategy
• Distribution Strategy

9. Sales Strategy
• Sales Forecast

10. Competitor Analysis

• Existing Competitors
• Potential Competitors
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Components of a Business Plan
11. Management Team
• Key managers and employees
• Education, experience and skills
• Duties and responsibilities
12. Financial Forecasts
• Projected Income Statement
• Projected Cash Flow
• Projected Balance Sheet
• Break-Even Analysis
• Business Ratios
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 Marketing Strategy

Marketing
A total system of business activities
designed to plan, price, promote, and
distribute need-satisfying products to target
markets to achieve organizational
objectives.
Market
All actual and potential buyers of a product
or service.

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 The Four Ps

Marketing
Mix

Place
Product (Distribution)

Price
Promotion

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 Market Segmentation,
Targeting & Positioning
• Segmentation: Grouping consumers
by some criteria.
• Targeting: Choosing which group(s)
to sell to.
• Positioning: Creating a clear,
distinctive, and desirable position in
the target consumer’s mind, relative
to competing products.

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Steps in Market Segmentation,
Targeting, & Positioning
Market Segmentation
1. Identify bases for
segmenting the market
2. Develop segment profiles
Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments
Market Positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment

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Market Segmentation

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Geographic Segmentation

International

National

Regional/City

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Geographic Segmentation
Dividing the market into geographic
units:

• States
• Regions
• Cities
• Countries

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Demographic Segmentation
Dividing the market into groups based on
demographic variables:
• Age
• Gender
• Family size
• Income
• Occupation
• Education
• Religion
• Race
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Psychographic Segmentation
Dividing buyers into groups based on:
• Social class
• Lifestyle
• Personality

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Behavioral Segmentation
• Dividing the market into groups based on
variables such as:
• Occasions
• Benefits
• User status
• Usage rate
• Loyalty status
• Readiness stage
• Attitude toward product

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Requirements for Effective
Segmentation
• Size, purchasing power, profiles
Measurable
Measurable of segments can be measured.

• Segments can be effectively

Accessible
Accessible reached and served.

• Segments are large or

Substantial
Substantial profitable enough to serve.

• Effective programs can be

designed to attract and serve
Actionable
Actionable the segments.
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 Market Targeting
Target Marketing Strategy
Undifferentiated/Mass Marketing

Company
Company
Marketing
Marketing Market
Market
Mix
Mix

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 Undifferentiated/Mass Marketing
• A market-coverage strategy in which a firm
decides to ignore market segment differences
and goes after the whole market with one
offer.
• The focus is on what is common in the needs
of consumers rather than on what is different.
• The company designs a product and a
marketing program that appeals to largest
number of buyers.

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Undifferentiated/Mass Marketing
• Two of the most widely recognized
examples are Ford and Coca-Cola.
• Henry Ford applied the concept in the
automobile industry. His Model T was
marketed as a "universal" car—one that
would meet the needs of all buyers.
• Candler applied the concept in the soft
drink industry. Like Ford, he also
viewed his product as being the only
one that consumers needed.

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Ford Model T

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 Target Market Strategy
Differentiated/Segmented Marketing

Company
Company
Marketing
Marketing Mix
Mix 11 Segment
Segment 11
Company
Company
Marketing
Marketing Mix
Mix 22 Segment
Segment 22

Company
Company
Marketing
Marketing Mix
Mix 33 Segment
Segment 33

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Differentiated/Segmented Marketing

• A market - coverage strategy in

which a firm decides to target
several market segments and
designs separate offers for each.

• Example: Nike offers athletic shoes

for different sports such as running,
aeobics, cycling, baseball, tennis etc.

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Market – Coverage Strategy
Concentrated/Niche Marketing

Segment
Segment 11
Company
Company
Marketing
Marketing
Mix Segment
Segment 22
Mix

Segment
Segment 33

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Concentrated/Niche Marketing

• A market-coverage strategy in
which a firm goes after a large
share of one or a few smaller
segments or niches.
• Example:
• Rolls Royce focuses on luxury
automobile niche.

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 Positioning
Product’s Position - the way the
product is defined by consumers
on important attributes - the
place the product occupies in
consumers’ minds relative to
competing products.

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 Positioning Strategies
• Positioning by product attributes.
• Positioning by benefits.
• Positioning for user category.
• Positioning for usage occasion.
• Positioning against another competitor.
• Positioning against another product class.

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 Choosing & Implementing
a Positioning Strategy
Step 1. Identifying a set of possible
competitive advantages upon which to
build a position.
Step 2. Selecting the Right Competitive
Advantage: Unique Selling Proposition
(USP).
Step 3. Effectively communicating and
delivering the chosen position to a
carefully selected target market.
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 Pricing
Factors to Consider when Setting
Prices
Internal
Internal Factors
Factors

Pricing
Pricing Decisions
Decisions

External
External Factors
Factors

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Internal Factors Affecting
Pricing Decisions
Marketing
Objectives

Marketing-Mix
Strategy

Costs

Organizational
Considerations
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 External Factors Affecting
Pricing Decisions
Nature of the Market & Demand

Competition

Economy

Government

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 Promotion
Advertising

Sales Promotion Personal Selling

Public Relations

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 Advertising
Types of Advertising
• Informative Advertising: It is
used to inform consumers about a
new product or feature.
• Persuasive Advertising: It is used
as competition increases.
• Reminder Advertising: It is used
for mature products since it keeps
consumers thinking about the
product.
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 Advertising
Major Media Types
• Newspapers
• Television
• Direct mail
• Radio
• Magazines
• Newsletters
• Brochures
• Telephone
• Internet

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 Personal Selling
• Involves two-way,
personal communication
between salespeople and
individual customers
whether:
• Face to face
• By telephone
• Through video
conferencing

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 Public Relations
• Involves building good relations with the
company’s various publics by obtaining
favorable publicity and building up a good
corporate image.
Publics
• Financial
• Community
• Suppliers
• Customers
• Government
• Media

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 Sales Promotion
It consists of short-term
incentives to encourage
the sales of a product
such as:
• Samples
• Coupons
• Prices off
• Prizes
• Free trials
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 Distribution
Distribution Channels

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