Chapter 3Designing a Competitive Business

Model and Building a Solid Strategic Plan

Competitive Advantagethe combination of factors that sets a small business apart from its competitors and gives it a unique position in the market that is superior to its rivals.

It is the differentiating factor that makes customers want to buy from your business rather than from your competitors.

Building a Competitive AdvantageProducts they sell: what is unique about the products

the company sells?

Service they provide: what services does (or can) the

company provide to deliver added value and a superior experience for customers?

Pricing they offer: some small businesses differentiate

themselves using price

Way to sell: including extended hours, internet, home

pick-up/delivery

Values to which they are committed: creating good

for society and the environment

Strategic Management

Strategic Management involves developing a game plan to guide a company as it strives to accomplish its vision, mission, goals and objectives, and keeps it from straying off its desired course.

The Strategic Management ProcessStep 1 - Develop a clear vision and translate it

into a meaningful mission statement vision.

A mission statement is an enduring declaration of a company’s purpose that addresses the first question of any business venture: “What business am I in?”

Vision provides direction, determines decisions, inspires people, and allows for perseverance in the face of adversity.

The Strategic Management Process

Step 2 - Assess the Company’s Strengths and Weaknesses

Strengths are positive internal factors that a company can use to accomplish its mission, goals and objectives. (ex. special skills or knowledge, loyal customers, positive public image, )

Weaknesses are negative internal factors that inhibit a company’s ability to accomplish its mission, goals and objectives. (ex. lack of capital, shortage of skilled workers, inferior location)

The Strategic Management ProcessStep 3 - Scan the Environment for Significant

Opportunities and Threats Facing the Business

Opportunities are positive external options that a firm can exploit to accomplish its mission, goals and objectives.

Threats are negative external forces, such as new competitors, government mandates regulating business, economic recession, technology advances making a product obsolete, etc.

The Strategic Management ProcessStep 4 - Identify the Key Factors for Success in

the Business

Opportunities are positive external options that a firm can exploit to accomplish its mission, goals and objectives.

Threats are negative external forces, such as new competitors, government mandates regulating business, economic recession, technology advances making a product obsolete, etc.

The Strategic Management Process

Step 5 - Analyze the Competition

Direct Competitors - offer the same products and services

Significant Competitors - some of the same products and

services, and there is competition in several key areas

Indirect Competitors - the same or similar products or

services only in a small number of areas

A Competitive Profile Matrix is a tool that allows a business to evaluate their company against major major competitors using the key success factors (KSF - see step 4) for that market.

The Strategic Management Process

Step 6 - Create Company Goals and Objectives

Goals - the broad, long-range attributes a business seeks to

accomplish; they tend to be general and sometimes even abstract

Objectives - more specific targets of performance, commonly

addressing areas such as profitability, productivity, growth and other key aspects of a business.

Objectives are - specific, measurable, assignable, realistic yet

challenging, timely and written down.

The Strategic Management ProcessStep 7 - Formulate Strategic Options and Select

the Appropriate Strategies

Strategy - a road map of the actions an entrepreneur draws up to fulfill

a company’s mission, goals and objectives

Cost Leadership Strategy - a strategy in which a company

strives to be the low-cost producer in the industry

Differentiation Strategy - a strategy in which a company seeks

to build customer loyalty by positioning its goods or services in a unique or different fashion.

Focus Strategy - a strategy in which a company selects one or more

market segments; identifies customers’ special needs, wants and interests, and approaches them with a good or service designed to excel in meeting those needs, wants and interests.

The Strategic Management Process

Step 8 - Translate Strategic Plans into Action Plans

Implementing a strategy successfully requires both a process that fits a company’s culture and the right people committed to making that process work.

Divide the strategic plan into projects, defining each by its purpose, scope, contribution, resource requirements and timing.

The Strategic Management Process

Step 9 - Establish Accurate Controls

Balanced scorecards - are a set of multi-dimensional

measurements that give managers a quick yet comprehensive picture of the company’s overall performance.

Balanced scorecards looks at a business from five important perspectives:

Customer Perspective

Internal Business Perspective

Innovation and Learning Perspective

Financial Perspective

Corporate Citizenship