"August 3, 2016 NEWS-Business plan part II"
In the previous article we outlined the main components of this document by analyzing the composition of the first two chapters, namely the executive summary and the corporate and financial profile. In this article we'll focus on the next two chapters: the market and the competitive environment.
The market
To assess the scenario of the market potential and size should be determined, as well as trends and forecasts in the short term. To transmit this information you will need to provide data on both the sector and the market, comparing growth and trends, even just from a graphical point of view. In this connection one of the instruments most commonly used is the CAGR (Compound Annual Growth Rate) which measures the average growth in a year and the subsequent taking into account the capitalization in a year. In other words, if we wanted to calculate the growth of a value that passes from 200 to 1000 in 5 years, couldn't we just calculate the difference between the two values and divide by five because this figure does not take account of the capitalization of growth itself. In addition to the CAGR, to compose the strategic analysis is useful to refer also to the SCP model (Structure, Conduct and Performance) aimed at understanding how the set of supply, demand and features of a particular area affect the conduct and performance of a business. The strength of this model is the synthesis, since all information must stay within a grid.
| Structure | Conduct | Performance |
| Describes the characteristics, the number of supply and demand, differentiation and entry barriers in a market. This category should be able to figure out who buys and who sells. | Examines the ways in which the business by describing the macro-strategies that player shall take or trends that become evident in competitive mode. | Results of the market. In the long run, a profitable market will tend always to lower margins, since, in the absence of significant barriers to entry, will attract the attention of other companies. |
Positioning and competition analysis shows how the company sets or is perceived in relation to other competitors. A company with production standards will have a big efficiency and will aim to hold a cost leadership. Otherwise, if the product is exclusive to selected customers, the price will be higher and it will be possible to reach a price leadership.
| Number of clients | Few | MARKET LEADERSHIP | |
| Many | COST LEADERSHIP | ||
| Standard | On order | ||
| Type of production | |||
It will also be interesting to see the level of verticalization of the company, or assess how many non-critical business processes are carried out by internal functions to the company itself, describing the choice c.d. "Make or Buy".
Competitive environment
The competitive edge, understood as the ability of a company to carry out one or more activities at levels that competitors are unable or unwilling to reach, may result from different resources as financial capacity, organization, technology and special skills. Competitive environment analysis can be dealt with using the "Porter's model" which interprets the strategic business through analysis of five forces that affect the profitability of the sector.
| Porter's model | ||||
| Entry of new competitors | Substitute goods | Bargaining power of suppliers | Bargaining power of customers | Competition between companies |
Another useful tool is the SWOT analysis, which highlights the strengths and weaknesses of a company on four areas: Strenght (strengths), Weaknesses (weaknesses), Opportunities (Opportunity) and Threats (threats).
| The SWOT analysis | |
| Short analysis – strengths
Examples: competitive advantages, cost structures, capacity to generate cash |
Weaknesses – weaknesses
Examples: commercial structure is not optimal, DSO |
| Opportunities-Opportunities
Examples: new technology, review of regulatory framework |
Threats – Threats
Examples: new competitors, saturation of demand |
by Meadow
