BUSINESS PLAN

KEY POINTS TO TAKE INTO ACCOUNT

BEGINNING

Internal environment
- People, organization, managers
- Hierarchy
- Product tools, products, or services
- Profits
- Investments, accounting

External environment
- Competition
- Law, commercial law
- Taxes
- Customers
- Suppliers
- Government, politics

Non-economic benefits of a company

- Work experience
- Credits from investors
- Patents
- Contacts, connections, social relationships
- Reputation
- Knowledge
- Competences

Mission
(qual’è la nostra missione, perché abbiamo deciso di creare questa
organizazione/azienda)
- What the company wants to achieve
- In which business are we working in
- What would be lost if the organization wouldn’t exist
- How do we make a difference?
- Who are our customers?
- Where is our market distribution globally?
- How do we use technology?
- Commitment to profitability and values
- Vision and beliefs of our organization
- Competitive advantages
- Social responsibility
- Loyalty towards people
 - Main products
 mission statement tells where the organization is going, in which direction

Vision
More specific, specific goals that the company wants to achieve
Goal for what your business will look like in the future, examples:
- Limitation of stadium capacity
- Television rights market decisions
- Restructuring the internal organization (people)
- Strengthening the brand image of real Madrid
- Asset recovery
- Development of new business lines: sport, social and marketing strategy
(example)

SPECIFIC ENVIRONMENT OF THE COMPANY

BUSINESS PLAN
MIDDLE PHASE
INTERNAL ANALYSIS OF THE COMPANY

1. Five forces Analysis

 environment made up of organisations producing the same product or service

- Supplier power
- Buyer power
- Competitive rivalry
- Threat of substitution
- Threat of new entry
 helps identify the attractiveness of an industry or sector in terms of
competitive forces

The threat of entry

Barriers to entry are factors that need to be overcome by new entrants if they want
to compete
 depends on the extent and height of barriers to entry

Typical barriers are as follows:

- Scale and experience
Once incumbents have reached large scale production, it will be very
expensive for new entrants to match them and until they reach a similar
volume, they will have higher unit costs. This scale effect is accentuated where
 there are high investment requirements for entry, like research and capital
equipment costs.
Barriers to entry ‘also come from experience curve effects: how to do things
more efficiently than an inexperienced new entrant could possibly do
- Access to supply or distribution channels
Often, manufacturers have had control over supply and distribution channels.
Sometimes through direct ownership (vertical integration), sometimes
through customer or supplier loyalty.
In some industries these barriers have been overcome, by selling directly to
consumers through ecommerce (AMAZON)
- Legislation or government actions
Legal restraints o new entry very from patent protections to regulation of
markets, through direct government action (tariffs)
- Differentiation
Providing a product or service with higher perceived value than the
competition

The threat of substitutes

Substitutes are products or services that offer a similar benefit to an industry’s
product or service, but have different nature, thus they come from outside the
industry.
Examples are:
 schools-online education
 cameras-online camera
 Face to face meetings-online conferences
 gas cars-electric cars

The simple risk of substitution puts a cap on the prices that can be charged in an
industry:
- The price/performance ratio
A substitute is still an effective threat even if more expensive, so long as it
offers performance advantages that customers value
- Extra-industry effects
The value of the substitution concept id to force managers to look outside
their own industry to consider more distant threats and constraints. The more
threats of substitution there are, the less attractive the industry is likely to be.

The power of buyers

Buyers  are the organisation’s immediate customers, not necessary the ultimate
customers

There is a high buyer power when some of the following conditions prevail:
- Concentrated buyers
 Increased power of buyer; when a few large customers account for most/ the
majority of sales.
 here buyers are powerful, so they can demand cheaper prices or product
development
An example is milk in the grocery sector in many European countries, where
just a few retailers dominate the market
- Low switching costs
Where buyers can easily switch between one supplier or another, at a low
cost
- Buyer competition threat
If the buyer has some facilities to supply itself or if it has the possibility of
acquiring such facilities, it tends to be powerful.
It can also raise the threat of doing the supplier’s job themselves. This is called
backward vertical integration; for example glass manufacturers have lost
power against their buyers as some large window manufacturers have
decided to produce some of their own glass.

The power of suppliers

Suppliers  those who supply the organisation with what it needs to produce the
product or service. Powerful suppliers can reduce organisation’s profits

The power of suppliers is high when:

- Concentrated suppliers
Where just a few producers dominate supply, suppliers have more power over
buyers
- High switching costs
If it is expensive to move from one supplier to another, then the buyer
becomes dependent and correspondingly weak.
For example, Microsoft is a powerful supplier because of the high switching
costs of moving from an operating system to another one. Buyers are
prepared to pay a premium product or service to avoid the trouble
- Supplier competition threat
Suppliers have increased power where they are able to cut out buyers who
are acting as intermediaries. For example, the rise of online booking has
allowed them to create a direct route to customers: forward vertical
integration (moving closer to the ultimate customer)

Competitive rivalry
 organisations with similar products and services aimed at the same customer
group, that is, not substitutes.
For example, Air France and British airways are rivals
Factors directly affecting the degree of competitive rivalry in an industry or sector are
the following:
- Competitor balance
 Where competitors are equal size there is the danger of intense competition
as one competitor attempts to gain dominance over others. On the other
hand, less rivalrous industries tend to have one or two dominant organisations
and try to focus on niches to avoid the attention of the dominant companies.
- Industry growth rate
In situations of strong growth, an organisation can grow with the market but
in situations of low growth or decline, any growth is likely to be at the expense
of a rival. Low-growth, markets are therefore often associated with price
competition and low profitability
- High fixed costs
Industries with high fixed costs require high investments in capital equipment
or initial research, that’s why they tend to be highly rivalrous. Companies will
try to reduce unit costs by increasing their volumes.
- High exit barriers
High barriers or closure/disinvestment tend to increase rivalry, especially in
declining industries because of fights to maintain market shares. Exit barriers
are high because of high costs, high investments in specific assets such as PPE
that others would not buy/are not willing to buy

Strategic customer
Is the person to whom the strategy is primarily addressed because they have the
most influence over purchased goods and services

The fundamental purpose of the five forces analysis/model

- Which industries to enter or leave?
 industries are attractive when the forces are weak
 invest in industries where the five forces work in their favour
- What influence can be exerted, taken out from the industry?
 organisations can build barriers to entry by increasing adv., to improve
customer loyalty
- How are competitors differently affected?
 if barriers are rising because of increased research and development (R and
D) or adv. spending, smaller players in the industry may not be able to keep up
with the larger/bigger players, and be squeezed out

Key issues using the five forces framework

- Defining the right industry and segment
Industries can be analysed at different levels. For example the airline industry
has several different segments; domestic, long haul, and different customer
groups. The competitive forces are likely to be different for each of these
segments
- Converging industries
Many industries are undergoing convergence.
 Technological change has brought convergence between the telephone and
photographic industries. For example, mobile phones increasingly include
camera and video functions.
- Complementary products
Complementors are players from whom customers buy complementary
products that are worth more together than separately. For example, Dell and
Microsoft are complementors as computers and software are complementary
products for buyers.
Complementors have opportunities for cooperation. Moreover there is the
potential for some complementors to demand a high share of the available
value for themselves; Microsoft has been much more profitable for dell than
the manufacturers of complementary computer products  higher margins

Steps in and industry analysis

1. Define the industry clearly
2. Identify the actors of each of the 5 forces
3. Determine the factors and strength of each force
4. Asses the overall industry structure and attractiveness
5. Asses recent and expected changes for each of the force
6. Determine how to position your business in relation to the five forces

2. SWOT Analysis
 internal analysis of the company
- Strength
- Weakness
- Threats
- Opportunities

S: Function that the organisation performs correctly, such as certain special

capacities for which it has a privileged position compared to the competition. What
do we do well? (Internal environment)
W: Factors that cause an unfavourable position against the competition. Resources
that are lacking, skills that are not possessed, activities that are not developed, etc.
but what can we do? (Internal environment)
O: Variables that are positive, favourable, exploitable and that must be discovered in
the environment in which the company operates, since they allow competitive
advantages to be obtained with respect to others. (External environment)
T: Situations that come from the environment and that can even threaten the
permanence of the organisation. It is essential to know them to minimise their ability
to affect us. (External environment)

3. VRIO
 Analysis which can be used for the main product of the company

The four key criteria by which capabilities can be assessed in terms of providing a
basis for achieving sustainable competitive advantage are:
- Value: Do resources and capabilities exist that are valued by customers and
enable the organisation to respond to environmental opportunities and
threats?
 take advantage of opportunities and neutralise threats
 provide value to customers
 are provided at a cost that still allows an organization to make an
acceptable return
- Rarity: Do resources and capabilities exist that no or just a few competitors
possess?
 patent products
 supremely talented people
 powerful brand
- Inimitability: Are resources and capabilities difficult and costly for competitors
to be obtained or imitated?
 key CEO
 IT system
 competences: the way resources are managed, developed and deployed,
the way competences are linked together and integrated
- Organizational support: Is the organization appropriately organised to exploit
the resources and capabilities?
 appropriate processes and systems

EXTERNAL ENVIRONMENT OF THE COMPANY

BUSINESS PLAN

4. PESTEL Analysis
  analysis of the macro-environment, extended to all kind of organisations
- Political
- Economical
- Social
- Technological
- Environmental
- Legal

PESTEL
 provides a list of potentially important issues influencing strategy
Possible success or failure of certain strategies
P: Political
- Government policies
 Labour market policy: regulating employment conditions, wages, labour
relations; minimum wages, working hours, provisions and benefits for
employees
- Role of the state
- Taxation changes
 Revise corporate tax rates to attract foreign investments, stimulate
business growth, incentivize business expansion, and job creation and
address fiscal challenges
- Foreign trade regulations
 The government announces the imposition of tariffs on imported steel
products; importers of steel products from affected countries would now
face higher costs due to the tariffs which may led to increased prices for
steel in the Italian market
- Political risk in foreign markets
- Corruption
 Because of corruption inside governments and politics, funds that could
have been invested in infrastructure, research, and development, were
instead diverted through inflated contracts, kickback, and bribes
- Changes in trade blocks: BREXIT
- Exposure to social and civil society organizations
- Systems for the promotion of business
 countries located in a country with political stability will have greater
economic stability

E: Economic
- Exchange rates
 during the financial crisis, the Euro faced downward pressure due to
concerns about the stability of European banks and economies,
 particularly in countries heavily affected by the crisis, such as Greece, Spain
and Italy
- business cycles
- differential economic growth rates around the world
- Interest rates
- Personal income disposal
- Unemployment rate
 During the great recession (mercato immobiliare, america, 2006), declining
demand, reduced consumer spending and financial stress, lead to
widespread layoffs and job losses
- Distribution of wealth
- GDP trends
- Size of companies
- Economic cycle
 macroeconomics issues

S: Social
- changing cultures and demographics, for example ageing populations in many
Western societies
- Wealth distribution
- Geography
- Social networks within an organisational field
- Beliefs, values, and cultures
 Cultural norms, values and preferences influence consumer behaviour,
impacting spending patterns, product choices and market demand
- Lifestyle and consumption habits
- Educational level
 Workforce productivity: higher levels of education are associated with
greater skills, knowledge, and productivity in the workforce. Employees
with advanced education levels tend to be more innovative, adaptable and
capable of contributing to economic growth and competitiveness
- Demographic: Population, life expectancy, birth rate, population growth
- Migration flows
 Migration flows from Mexico to the United States have historically been
driven by economic opportunities. In the US, migrant workers contribute
to the labour force, filling essential roles in industries, by supporting key
sectors of the economy

Sociograms: Maps of potentially social connections

 Network density: number of interconnections between members
 Central hub positions: organization interacting with other members
 Broker position: organization that connects other organizations or groups
together (third parties)
T: Technological
- innovation such as the internet, nanotechnology, or the rise of new composite
materials
- Subsidies/investments for the development and research
- Innovation of companies
- Technological changes
 The widespread adoption of the internet and digital technologies has
transformed communication, commerce and information sharing
- Knowledge protection
 research and development budgets
 New product announcements
 Media coverage

E: Ecological (“green” issues)

- Availability of natural resources
- Renewable energy
- Climate change
- Recycling and waste management
- General sustainability
In the classic macroeconomic vision, natural resources were considered infinite and
the limit of development came only from the people’s ability to take advantage of
the environment. However, since 1970s, increasing scarcity of certain resource have
highlighted the need to consider the environment as a central element.
 Direct pollution obligation: minimizing pollution, cleaning up and disposing of
waste
 Product stewardship: managing ecological issues
 sustainable development: whether the product can be produced indefinitely
into the future, taking the environment into account

L: legislative
- health and safety legislation
- restrictions on company mergers and acquisitions
- Commercial legislation: affects the financial function of a company
- Labour legislation: regulation of the labour market
- Environmental legislation: emissions, waste management regulations
- Tax legislations: tax level and tax design (tax rate)
- Different legislation levels: European, state and regional
- Markets regulatory system: goods and services
 labour, environmental, consumer regulation
 taxation and reporting requirements
 Competition regulation
 rules on ownership
Using the PESTEL analysis
1. Identify specific factors which impact on the industry
2. Consider factors that are important for the current situation and that will
become important and affect the future
3. Use data to support the points
4. Identify opportunities (governmental partnerships, diversification, new
technologies) and threats (Political hostility, digital detox, substitutes, energy
fears, online taxation and data constrain)

Example PESTEL Analysis of the “Riva Yacht” company

POLITICAL FACTORS
- Regulations and policies: Political stability and government regulations
regarding maritime transportation, environmental standards, safety
regulations and import/export laws can impact Riva’s operations and
international sales
- Taxes policies: Tax rates and policies in countries where Riva operates can
affect its profitability and pricing strategies

ECONOMIC FATCORS
- Economic conditions: The overall economic health of countries affects
consumer confidence and purchasing power for luxury items such as yachts.
Economic downturns could affect the demand for Riva products
- Exchange rates: As Riva operates globally, fluctuations in exchange rates can
impact its revenue and costs, especially for imported materials and
components

SOCIAL FACTORS
- Luxury lifestyle trends: Changing consumer preferences and trends toward
luxury activities can positively affect demand for Riva’s Yachts
- Demographic shifts: Changes in demographics, such as an increase in the
number of high-net-worth individuals and affluent retirees (retirees in EBRI’s
affluent category have more than 320.000 euros/dollars saved for retirement),
may expand the potential customer base for luxury yachts
- Environmental consciousness: Increasing awareness of environmental issues
may influence consumer preferences towards eco-friendly yachts or yacht
designs/models that minimize ecological impact

TECHNOLOGICAL FACTORS
- Innovation and technology: Advancement in yacht design, materials,
propulsion systems, and onboard amenities, play a crucial role in maintaining
Riva’s Yachts competing edge and meeting evolving customer expectations
 - Digitalization: Integration of digital technologies, such as navigation systems,
onboard entertainment systems and smart features, enhances the
functionality of Riva’s products

ENVIROMENTAL FACTORS
- Environmental regulations: Compliance with environmental regulations
regarding emissions, waste disposal and eco-friendly manufacturing processes
is essential for Riva to mitigate negative environmental impacts and
maintaining regulatory compliance
- Sustainability initiatives: Increasing focus on sustainability and environmental
conservation, may drive demand for yachts with eco-friendly features and
manufacturing processes

LEGAL FACTORS
- Maritime regulations: Compliance with international maritime laws and
regulations, including safety standards, licensing requirements, and maritime
insurance regulations, is essential for Riva to ensure the safety on its yachts
- Intellectual property protection: protecting intellectual property rights,
including yacht designs, technologies, and branding, is essential to safeguard
Riva’s innovation and maintaining its competitive advantage in the market

ONE OF THE MOST IMPORTANT ASPECTS OF A BUSINESS PLAN/ COMPANY ANALYSIS

Critical success factors

Factors that are valued by customers or which provide a significant advantaged in
terms of cost
 competitive advantage

RESOURCES AND CAPABILITIES

TALENT AND HUMAN CAPITAL
BRAND PARTNERSHIP
FINANCIAL RESOURCES
ECOSYSTEM AND SERVICES
SUPPLY CHAIN MANAGEMENT
DESIGN AND USER EXPERENCE
INNOVATIVE PRODUCT PORTFOLIO
BRAND EQUITY

Financial Analysis

- Balance sheet
- Income Statement
- Statement of cashflow
- Equity
- Investments
- Inventory
- Credits