Preparing the Business

Plan
Module 2 in Business Enterprise Simulation
In this module, you will be introduced to
a comprehensive but practical way to
prepare a business plan that covers the
following: a strategy plan for competitive
advantage, a marketing plan, an
operations plan, and a financial plan.
Keep in mind that preparing a business
plan is a serious responsibility.
  In making a business plan, you have to devise a
strategy plan for competitive advantage. A strategy
plan for competitive advantage deals with the
competitive environment where the entrepreneur will
participate in. The plan will show how competitive
Preparing a strategies based on the scan of the competitive
Strategy Plan environment can be devised.
for  This step is extremely important because the
entrepreneur will be able to easily specify how the
Competitive business will deal with the opportunities and threats in
Advantage the competitive environment, including the
competitors and how you, as the budding
entrepreneur, will use your innate strengths to your
advantage.
  A competitive environment is the dynamic
external system in which a business competes and
functions. Therefore, the entrepreneur will have to
adjust to the state of the competitive
environment where the business operates. In
order to scrutinize this competitive environment,
the entrepreneur has to conduct industry analysis
and competitive analysis.
The
Competitive
Environment
 An industry analysis is the examination of the industry
where the entrepreneur's business will participate in,
usually in the next three to five years. It encompasses the
opportunities and threats in the industry as well as the
major trends that could affect the growth or decline of the
industry. It is important to analyze the industry first before
going directly to the competitive analysis because the
industry analysis will help you evaluate if it is, indeed,
worth it to venture into the potential business you have
identified already. A competitive analysis, on the other
hand, is the examination of what the direct and indirect
competitors are doing and what they can possibly do in the
future. It also shows the driving forces and the rationale on
why the competitors are doing what they are doing.
Below is the format of a Strategy Plan for
Competitive Advantage (SPCA):
 A. Executive Summary
 B. The Competitive Environment
 1. Industry Analysis (Porter's Five Forces Model of
Competition)
 2. Competitive Analysis (Competitive Profile
Matrix)
 C. Competitive Strategies
 The most practical way to conduct an
industry analysis to test its attractiveness is
to follow Porter's Five Forces Model of
Industry Competition, a framework developed in
Analysis the 1980s by American academic Michael
E. Porter. This framework is illustrated in
the next slide.
To illustrate  Case 2:
Porter's Five  Mrs. Maritess Bonifacio had been a banker for five
Forces using a years. But she resigned from work after she got married
real-life and had her first child. She resigned so she could focus
on raising her son. One day, while her son was sleeping,
example, refer to Mrs. Bonifacio was channel surfing when she chanced
Case 2 from the upon a news feature. The news feature was about
previous virtual assistants or freelancers or home-based online
employees. While watching the program, Mrs. Bonifacio
module: discovered that virtual assistants work at home using a
computer connected to the Internet to serve the needs
of foreign employers.
 According to the program. foreign employers prefer
this setup because it is cheaper for them to operate
rather than to hire regular employees. Mrs. Bonifacio
also found out from the program that the Philippines
is currently one of the major sources of virtual
assistants in the world with over more than 1 000 000
Filipinos serving various foreign markets worldwide.
After watching the news feature, Mrs. Bonifacio did
more research and she found out that virtual
assistants in the Philippines earn an average of $5 per
hour and that most of the jobs were related to
accounting, finance, marketing, and sales. She also
discovered that this trend of hiring virtual assistants is
expected to continue for the next 5 to 10 years, thus
giving opportunities for Filipinos to work online
instead of going abroad or working in office-based
jobs.
  1. Threat of New Entrants/Potential Competitors
The following  Assessment: Medium Pressure
is a sample  According to The Philippine Star article “Further
industry Growth Seen in Philippine Online Freelance
analysis of Market,” more Filipino professionals are venturing
Case 2 using into freelance work. The article also mentions that
there are more than 500 000 businesses in 170
Porter's Five countries that hire online freelancers. Despite the
Forces Model threat of new entrants, the demand for this type
of of service business is relatively big enough such
that it will not be threatened yet.
Competition:
 2. Threat of Substitute Products
 Assessment: Low Pressure
 The threat of a substitute product is low
because online freelancing is still on the rise
based on the latest article from The Philippine
Star. In fact, online freelancing itself is a threat
to domestic businesses that hire regular
employees because more Filipino professionals
are venturing into online freelancing due to its
flexibility.
 3. The Bargaining Power of Buyers (Online Businesses)
 Assessment: Medium to High Pressure
 Despite the influx of online businesses, online employers
are still picky on who to hire because they require an
online employee who has a specific set of skills to
accomplish a particular job. For example, online English
tutors should have at least an English degree from a
reputable university or at least some experience in
teaching English classes.
 Online employers dictate the salary of their online
employee, and this salary is nonnegotiable most of the
time. In addition, online employers do not provide
benefits as compared to regular employment. Moreover,
they can easily replace an online employee if he or she
does not deliver on time or the desired output.
 4. The Bargaining Power of Suppliers (Online
Freelancers)
 Assessment: Low to Medium Pressure
 Online freelancers, being the suppliers, have
low to medium bargaining power since online
employers are meticulous in hiring online
freelancers. Despite the influx of online jobs,
the online freelancers must still be equipped
and qualified to do the job that they are
applying for. Some even undergo training or
get short courses before applying for certain
online job vacancies. Others use their work
experience as qualification.
 5. Rivalry among Existing Firms
 Assessment: Low Pressure
 Rivalry against other online freelancers is low because
the number of online Jobs is way higher than online
freelancers. The rivalry is actually between the online
freelancer and himself or herself (if he or she has the
skills needed to do the required). As mentioned several
times already, the online freelancer must be equipped
and skilled to perform the online job.
 The online freelancer must also continue with other
online jobs or projects after the contract with the
previous one ends so the skills can be enhanced u will
also boost the credibility of the online freelancer because
past projects are posted in his or her profile. Getting
positive ratings will give him be competitive in the online
freelancing world.
  One of the most practical tools to analyze competition is to
prepare a Competitive Profile Matrix (CPM). A CPM is an essential
strategic management tool that compares the entrepreneur's
business with the major players in the industry. It encompasses
both external and internal factors in evaluating the overall position
Competitive of the business. These factors are more clearly defined as critical
success factors (CSF) and are the bases for the CPM score. Critical
Analysis success factors encompass all important elements to achieve
business objectives, including how to ultimately provide value to
target customers. Each CSF is assigned a specific weight
depending on the compelling industry factors present at the time
of CPM preparation.
  4 - Major Strength
These CSFs are  3 - Minor Strength
scored  2 - Minor Weakness
according to  1 - Major Weakness
the following
 To better understand CPM and how it helps
scale: entrepreneurs analyze the competitive
environment, refer to Case 3 from the previous
module.
 Case 3:
 Mr. Marvin Miranda is a fresh graduate of
marketing management. He has observed that the
current administration has brought about a
number of drastic changes, including the
implementation in Baguio City of a curfew for
minors and a 1:00 am liquor ban. Marvin believes
that a number of bars in Baguio City might be
affected by these new policies. Additionally, he has
also noticed that most of the coffee and tea shops
in Baguio City are always full. An aspiring
entrepreneur ever since he was young, Marvin
wants to tap the market which he believes he
knows the most-the youth.
 After the FGD session where he gathered
insightful details, Marvin plans to make a
competition analysis for the top coffee and tea
shops in Baguio City through a CPM. He
believes a CPM will help him devise appropriate
competition strategies. Based on his scan,
there are three potential competitors: Nova
Coffee Shop, Bueno Coffee Shop, and Milla
Coffee Shop. He will name his coffee shop
Miranda Coffee Shop.
 The results show that Miranda Coffee Shop can
generally compete with the existing competitors which
garnered a score of 2.90 (2.50 is the median score
based on the CSF scale of 1 to 4). Miranda Coffee Shop
is strong in terms of strategic location, noncoffee/tea
products, and digital promos. However, it needs to be
competitive on basic coffee and tea products, brand
image since it is still new, and coffee/tea packaging.
Miranda Coffee Shop must be vigilant with its
competitors, especially Nova Coffee Shop which is
strong in overall service ambiance and service
personnel.
  After assessing and evaluating the competitive
strength and position of your business against
the competitors, you, as the entrepreneur,
have to come up with competitive strategies to
counter the challenges posed by the
competition. Aside from his Five Forces Model
Competitive of Competition, Michael E. Porter also devised
Strategies three generic competitive strategies —
collectively called Porter's Generic Competitive
Strategies—that can be applied in any business:
cost leadership strategy, differentiation
strategy, and focus strategy. Refer to the
following chart.
 According to
http://www.businessdictionary.com/definition/cost-
leadership.html, cost leadership is a strategy used
by businesses to create a low cost of operation
within their niche. The use of this strategy is
primarily to gain an advantage over competitors by
reducing cost of operations below that of the
industry. The cost leadership strategy is applied
when a business will produce goods or perform
services in bulk, achieving economies of scale in
aspects of production and even in marketing (i.e.,
undifferentiated or mass marketing). This means
that if a business applies the cost leadership
strategy, it automatically produces goods or
performs services in bulk; hence, it is more efficient
and effective in its operations. As a result, it
achieves economies of scale (producing more is
more cost-efficient than producing less).
 The same principle applies in marketing: when a
marketing strategy is implemented it has to target
a substantial number of customers rather than one
by one. This strategy, however, cannot be applied
by businesses that are relatively new and with
lesser financial capability. Cost leadership strategy
is a strategy that revolves around effective and
efficient pricing and is usually utilized by more
established businesses with established markets.
 The differentiation strategy is a strategy that
highlights the uniqueness or difference of a
product/service or an attribute of a product/service
that the competitors are weak at or have none at
all. This strategy makes a product/service stand out
from the rest.
 The focus strategy is a strategy applied when
the entrepreneur focuses on a certain or
specific target market segment in mind. The
previous two strategies are into the
undifferentiated market while the focus
strategy has a differentiated market. The
entrepreneur could apply either a cost focus or
differentiation focus strategy. The cost focus
strategy positions low cost as a competitive
advantage to the target segment while the
differentiation focus strategy positions a unique
product/service or a unique feature of a
product/service to the target segment.
 A business needs to have a sustainable competitive
advantage in order to thrive. Therefore, one clear
strategy must be adopted to increase the
likelihood of business success. A combination of
two strategies will confuse the market and might
lead to the failure of the business. An example of
such a situation is when a company applies both
cost leadership and differentiation strategies for a
rubber shoe business. The owner wants to operate
at a minimum cost possible but wants to position
its product as a premium brand to compete with
the major players, such a setup is quite
contradictory as it is nearly impossible to compete
with branded and well-known rubber shoe
companies while maintaining minimum costs.
 In the case of Mr. Miranda, it was clearly shown in the
CPM – based on Mr. Miranda's FGD - that more weight
was given to service personnel (20%) in a coffee and tea
shop business. This was the consolidated result of the
FGD session he conducted. Therefore, to be competitive
with Nova Coffee Shop, which got a rating of 4 points,
Miranda Coffee Shop must devise a differentiation focus
strategy with emphasis on excellent coffee and tea shop
service. The differentiation focus strategy is the most
appropriate because there is a target segment that wants
an excellent service experience from a coffee and tea
shop—the main reason why they take their coffee at a
coffee shop than at the comfort of their homes. The
specific tactics should then be covered by the marketing
plan, which will be tackled in the succeeding discussions.
What is important is to set one competitive strategy that
is based on actual research and on customer insight and
observation.
  A marketing plan is a business document outlining
your marketing strategy and tactics. It is often
focused on a specific period of time--for over the
next year, for instance and includes a variety of
marketing factors including costs, goals, and
action steps. It is basically a plan on how to woo
Preparing a the primary target market of a business. It must be
targeted, effective, and efficient and it would work
Marketing Plan only with effective execution and strict adherence
to the set plan.
 Marketing is all about providing what the customer
wants (market-driven) or the customers availing
what the entrepreneur can provide (product-driven).
 A. The Product or Service Offering
B. The Value Proposition and Unique Selling
Here is a Proposition
sample simple C. The 7Ps of Marketing (Marketing Mix)
format of a 1. Product
marketing 2. Place
and sales 3. Price
4. Promotion
plan. 5. Packaging
6. People
7. Process
D. Sales Forecast
  Strategic marketing efforts are made based on
the nature of the product or service that will be
offered. Product or service offering refers to
the value that the business will give to a
Product or customer. The marketing strategy also
influences the target customers' decision-
Service making process whether to patronize your
Offering product/service or those of the competitors. In
offering product or service, there are specific
questions that you need to answer in order to
be certain in terms of what you will offer and
what the customer will expect from you.
  Will you offer a product, a service, or a hybrid
(product and service)?
Examples:
Product: smartphones
These Service: smartphone repair service
questions are Hybrid: smartphone distribution and repair service
as follows:
 What is your product/service mix (i.e., business
that offers more than one good or service)?
Example: Smartphone distribution business selling
brand new smartphones and at the same time
offering smartphone repair service
 What is the depth of your offering (i.e., number
of products or services available in each
product line?)
Example: Smartphones for Class AB worth P30
000-P50 000; for Class C worth P15 000-P30 000;
and for Class DE worth P3 000 –P15 000

 What is the width of your offering (i.e., the

number of lines available in you offering?)
Examples: Smartphone products, air-
conditioning units, televisions, refrigerators
  Value Proposition (VP) refers to a definitive
statement which promotes the benefits or value
that a product or service can cater to the
customers. It is made to create a customer
The Value perception about the value that the
product/service will offer to the customer. The
Proposition and Unique Selling Proposition (USP), on the other
Unique Selling hand, refers to a statement that promotes the
Proposition most compelling attribute of a product or service
and what makes it different from the rest of its
competitors. It is made to differentiate an
attribute of a product or service. It is imperative
to craft a VP and USP as both will be the core
reasons why the business should exist and why
the business should continue.
 To better understand VP and USP, Case 4 will be used
as reference for the following example.
Proposed VP:
 Poem for you and your significant other in an instant!
Justification:
 The VP is specific and straight to the point. It describes
what the business is offering, opening with the product
right away. The value or benefit of the customers is that
they can receive a poem from a poet for their own
creative satisfaction or as a gift to their significant
others. The language used is easy to understand,
specifically geared toward attracting couples, couples-
to-be, and poem lovers. The compelling assurance from
this VP comes from the word instant which emphasizes
that the customers will receive the poem immediately.
Lastly, a poem given in an instant is a unique concept
that is not yet common in the marketplace.
 Proposed USP: Printed poem for you and your significant
other in an instant!
 Justification:
 The proposed USP is also specific, short, and simple. It
clearly specifies that the customers will get a printed
poem in an instant. The concept of making personalized
poems for couples is relatively new and is virtually unique
in all aspects.
 In crafting a VP and USP, keep in mind that even a catchy
and strategic VP and USP will not work if they are not
effectively communicated to the target customers. These
days, digital channels are the emerging platforms to
relay these marketing messages to the target customers.
Nevertheless, traditional ways such as signage, print
advertisements, flyers, and TV and radio advertisements
still remain useful and effective in many cases.
  You have learned in the previous level that the 4Ps
or marketing mix is a widely accepted strategic
marketing tool, But aside from the original 4Ps of
product, place, price, and promotion you should also
consider the new 3Ps of people, packaging, and
The 7Ps of process for service businesses in formulating
marketing strategies and tactics for a product or
Marketing service. These 7Ps are combined until the
entrepreneur finds the right combination that will
most effectively serve the customers' needs and
wants and at the same time help achieve the
profitability objective of the business.