Section
Business Plan Components
Number of Pages
Executive Summary
1
Company
2-3
Management
1-2
Product
3-5
Market
4-7
Competition
2-3
Sales and Marketing
3 -5
Operations
2-5
Risk and Response
2-4
Financials (Narrative)
2-3
Market and Marketing Strategy
• Market definition
• Market share projection
• Positioning strategy
• Pricing strategy
• Distribution strategy
• Promotion plan
Market Section
• Fundamental intent
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Detailed, defensible description of the market being addressed by the
business’ product or service
• Market definition analysis: narrowing definitions from total
market to feasible market
The Narrowing Process
• Starts with brief description of total general market
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Size
Geography
Growth prospects
Type
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Niche
Perfectively competitive
Monopolistic
General type and level of competition
Narrowing Process (2)
• Transitions quickly to more narrow target market
• Narrows down total market through segmentation to
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total addressable market
Segmentation factors can be geography, customer
attributes, product orientation
Solar panels for pool heating: focus would be on number
of pool users in geographies with significant sun exposure
• Definition of target market critical for advertising
• Playskool advertises toys on Nickelodeon
• Target market characterized in terms of size,
structure, growth prospects and market potential
Narrowing Process (3)
• Next, further narrow by defining feasible market
within target market
• Example:
• Microbrewery case: plans to brew premium lager beer
• Total feasible market determined by number of drinkers
of premium pilsner beers in target market
• Feasible market the portion of market capturable
given perfect environmental conditions and little
competition
Market Share
• Market share projection a subjective estimate
• Basis is highly targeted and competitive distribution,
pricing, promotional strategies
• Microbrewery case: even with large number of drinkers of
premium pilsners forming total feasible market, distribution
network has to reach them at a market acceptable and
competitive price point
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Customers have to be made aware of availability and purchase
points
• Share projection required in plan though
• Make it defensible
Market Share (2)
• Factors underpinning market share
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Industry growth
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Increases number of customers
Conversion of users (from feasible market)
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Affected by new product adoption cycle
• Early pioneer users
• Early users
• Early majority users
• Late majority users
• Late users
• Again, key is make it defensible
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Granular detail helps
Who Are Competitors?
• Beware of the conclusion: We have no direct competitors; or
worse: We have no competitors
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Usually signifies a shallow-thinking entrepreneur
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It validates the market
It validates business models
It drives value creation for customers
• Competition is good
• No competition is not good
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Maybe there isn’t a market
Maybe the economics are such that it’s not really a good
opportunity
Maybe there isn’t an effective business model
Competition - Types
• Direct
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Easily identifiable
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Coke - Pepsi
Crispy Kreme – Dunkin Donuts
Honda Motorcycle – Harley Davidson
• Indirect
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Less easily identifiable
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Coke – Bottled Water
Crispy Kreme – Breakfast Burrito
Honda Motorcycle – Schwinn Bike
• Obtuse, but still a competitor
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Sometimes difficult to identify
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Coke – Fresh Fruit
Crispy Kreme - GHFC
Honda Motorcycle – RTS Bus
Competitive Analysis
• Purpose
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Determine strengths & weaknesses of market segment competitors
Scope out strategies that will provide distinct advantages
Determine developable barriers to prevent new competitor entries
Scope out exploitable weaknesses for product development cycle
Competitive Analysis (2)
• Process
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Identify current and potential competition
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Two approaches
• Customer driven approach – group competitors by degree to which they
contend for customers’ expenditures
• Strategy driven approach – group according to various competitive strategies
showcasing what motivates them
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Analyze strategies to identify vulnerability areas
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Examine competitors’ strengths & weaknesses
Positioning Business
• Positioning strategy defines how you want product
perceived by customers and competitors
• Kobe Bryant and OJ Simpson, for example, both lost
endorsement base in close proximity to court cases
• Driven by variables tied to:
• Motivations and requirements of target customers
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Customer need fulfilled by product
• Competitor factors
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Competitor positioning
Competitive advantages of product
Pricing
• Precepts of pricing strategy
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Prices must cover costs
Prices established to assure sales
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Resist pricing against competitive action
Price to sell
Prices must reflect product utility, longevity, maintenance, end
use
Pricing (2)
• Methods of establishing pricing
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Competitive
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Cost-based
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Used frequently upon entering market where product differentiation
difficult
Assures costs covered and gross margin attained
Value-based
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Establishes price reflective of value created for customer
Distribution
• Defines the process of moving product from factory to end
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user
Distribution strategy will reflect industry norms, size of
market, internal resources
Types
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Direct Sales
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Positives: focused, controlled sales
Negatives: fixed cost
OEM
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Your product a subsystem component of another’s, and their
distribution used
Positives: leverages sales capability
Negatives: high customer concentration
• Types (cont)
Distribution (2)
• Manufacturer’s reps
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Agency sales people that handle complementary products
Positives: pay for performance
Negatives: effectiveness; focus on high volume products
Video broadcast example
• Brokers
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Third party distributors who deal direct with retailers and end users
Positives: broad coverage and can deliver volume
Negatives: expensive
Distribution (3)
• Types (cont)
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Internet
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B-to-B; B-to-C
Positives: scale
Negatives: technical sell difficult; driving traffic difficult and expensive
Wholesale distributors
Retail distributors
Direct mail
Promotion Plan
• Follows structuring of distribution strategy
• Defines controlled distribution of communication targeted to
sell product or service
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Panera Bread targets restaurants as upscale, unique - artwork on walls,
classical music in background – all to create sense of tranquility (and
willingness of patrons to pay upscale prices for food offered
Promotional Plan (2)
• Elements of communication effort
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Advertising
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Packaging
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Which media
McDonald’s arches on fries
FedEx wrapping on packages
Public relations
Sales promotion
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Coupons, special offers
Think of the oil changes ads