Appunti Project Management and Business Planning

THE BUSINESS PLANNING

The strategic planning process is part of a larger system, commonly referred to

MANAGEMENT SYSTEM.

It may be schematized:

Reporting: evaluate the results achieved on a specific period, in order to identify

some results.

The sub-system of strategic planning takes the form of a document called in several

ways:

Strategic or multi-year plan Industrial plan Business plan

Business plan have different feature, depending on the company.

The logic behind the business plan are substantially the same in all companies.

However it is different:

its function

 the articulation of the corresponding process

 the placing in a broader processes



depending on:

I. Solid companies

II. Start-up

III. Companies in crisis

We have different purposes:

If is a solid company, the purpose of business plan is not required by the law

 (is not a mandatory document). But the main one is to drive managers,

employees, owners and external stakeholders, because they know the flow of

the company and they have a guide of the actions that must be carried out.

Business plan and budget are linked directly.

Drive managers: to drive and make responsible managers and employees

o for the achievement of specific goals. Voluntary reasons, not mandatory.

Finance projects: to finance the company as to show banks the financial

o situation. In this case the budget is not sufficient since it’s only for one

year, while the business plan has longer time, 3-5 years.

Economic evaluations: to support the choice of specific strategy.

o

Usually the strategy takes a period of time from 3 to 5 years.

If is a start-up, is necessary to achieve capitals, so to finance projects, because

 they are at the beginning of the business. Start-up companies are characterized

by a simple structure, so with few employees, and few organizational levels. Is

not necessary to create a document, but is necessary to finance sources.

Is the company is in crisis, is necessary to demonstrate the ability of the

 company to cover specific debts and to promote recovery.

Definition of Business Plan

The business plan to be effective should be prepared both at a corporate level but

also for business units, is quite complicated and expensive.

The strategic planning is useful for the strategy implementation.

The strategic plan is the document in which illustrates the strategic aims of

management relating to the company’s competitive strategies, the action which will

be carried out for the achievement of the strategic objectives, the evolution of the key

value drivers and the expected results. The plan performs an essential role with

regards to the management of the; to the members of the Board of Directors in order

to fully perform their role for guiding and overseeing the company; to the company in

order to attract resources, both human and financial, necessary for the

accomplishment of the Action Plan.

The drawing up of the strategic plan, as part of systematic strategic planning

initiatives.

The strategic plan can be defined as the document in which, starting off from the

presentation of the effective competitive strategies operative at company (corporate)

and Strategic Business Unit level (hereinafter SBU) and the possible renewal

requirement or opportunity, management’s strategic aims, the action which will be

carried out for the attainment of the strategic objectives, the evolution of the key

value drivers and the expected results are illustrated.

The main aim of a strategic plan is to permit management to define in what way the

company intends to increase the value created for the shareholders.

Business plan should be prepared both at corporate levels but also to the business

units.

Focus on the creation of values as part of a long-term outlook

The strategic plan, within the planning process, represents the occasion for the

managers to focus on the definition of deliberate strategies which make it possible to

maximize the creation of value. Often the short-term operating requirements do not

allow the managers to dedicate time to the analysis of the sector-based dynamics, the

conduct of the competitors and the identification of valid opportunities; the

introduction and the continual improvement of the strategic generation process

contribute, instead, towards creating occasions where it is possible to develop

innovative strategies which make it possible to create and maintain the competitive

advantage.

Creation of a guide for management of the corporate activities

The strategic plan, and more precisely the Action Plan - with the definition of the

action and the related timetable -, represents an instrument which guides the main

operating choices and in particular the entry into new markets, the introduction of new

products and services, the use of new distribution channels, the expansion of the

customer portfolio and the tracing of all the resources - financial, human,

organizational and technological - necessary for the implementation of the strategic

objectives.

The structure of the business plan

1. Executive summary

2. General description of the company: the focus has to be oriented to the

company, in order to allow the user to understand which is the goal

3. Focus on product/service

4. Description of the market and competitors

5. Strategic plan and business model

6. Organization and HR

7. Analysis of the financial balance:

8. Economic and financial plan

A. Technical annexes

B. References

C. Curricula

What are the essential element of the business plan?

1. The strategy with recent results

2. The strategic guidelines

3. The business strategic map is not easy to find it, because is a very sensitive



information. Is going to explain the impact for the achievement of the goals.

4. The strategic initiatives or action plans, with related projects

5. The expected results and the drivers to which they depend



The strategy realizes

1. it aims to highlight the strategic guidelines pursued

in the past, as well as the current ones, with the results achieved in a recent

period of time (3-5 yrs).

Strategic guidelines

2. they are necessary to:



a. Define the path to follow that can be the same of that of the previous

years or a new one

b. Give a global and synthetic vision of the strategic profile pursued about

decisions of “what to produce, to whom and how”.

The content of strategic guidelines or intentions can be expressed in 3 levels:

LESSON 3

The strategy map and the related

Balanced Scorecard required further consideration that will be done in the

following slides.

Business model means to have a look to internal aspects of the company,



while the business plan is the final document of the strategic planning process.

Business model is what is behind the business plan. (TATA case)

BP BM



Formal document of internal key features

the strategic planning of the company

Profit formula

 Value proposition for

 customers

Internal key processes



 Key resources

Key resources technological resources, HR, so critical success factors that



will increase employees satisfaction.

Values how to achieve customer’s satisfaction, with the quality, the price



or diversification of the products.

3. The business strategy – MAP and the CSF  The content of a strategy

derives from: Entrepreneurial ideas or strategic intentions. It is materializes in a

suitable business model, explained by a Strategy Map of the specific Business.

The strategy map reflect a logic model, such as the following:

INTANGIBLES They are able to strongly impact of the way of executing



processes, in terms of efficiency and effectiveness. It means to look at the

intangible resources of the company, the critical intangible resources.

Key intangible resources skills, knowledge, use of specific innovation etc.



PROCESS EXECUTION If the company is able to improve the process



execution, will increase efficiency to conduct profits, as in TATA, allows

managers to improve profit formulas. The management must focus on the key

processes of the company that are relevant for the strategy, not on all the

processes. Such ability improves customer satisfaction. Improving the efficiency

in processes allows to improve also profit formula.

cause and effect

Consequently it has a arrow that goes to shareholder

expectation and also one that goes to customer satisfaction.

CUSTOMER’S SATISFACTION if the company is able to satisfy them, it will



be able also to maintain the actual customers, or to achieve new ones. After

that, the company is able to improve another aspect, revenues, through the

Revenues

selling volume. This ability means increase through the selling

volume.

SHAREHOLDERS EXPECTATIONS In the shareholders expectation, the



company has to increase the profitability. If it increases, also dividends increase

and shareholders are satisfied and continue to invest.

SHAREHOLDER EXPECTATIONS

What is the best way to satisfy shareholders? Increasing profitability and , as a

consequence, dividends.

Are there any similarities between the strategic map and the business model? The

profit formula is present in the shareholder expectations, the customer value

proposition is explained in the customer expectation box, the key processes with

process excellence, and finally the key resources are in the intangibles box.

The strategy map is the business model but it adds something more, represented by

the cause and effect arrows.

In business is the perspective that concerns the basic objectives of management,

which are normally economic and financial goals.

The expectation for each profit company, are represented by profitability that can be

expressed through different indicators:

ROI and similar it will measure the ability to generate an adequate level of

 

profits.

Economic value-added (EVA) and similar



Expectations of shareholders are represented by profit expressed through the

stage of the business

indicators above. The choice of these indicators depends on the

life cycle.

ROI represented by different



items.

What is the ROI elements?

ROI= OPERATING INCOME/ CAPITAL INVESTED

O.I. = REVENUES- OPERATING COST

OPERATING COST = OPERATING VARIABLE COST + OPERATING FIXED COST

Variable cost is represented by monetary standards (m) and the quantity (f) m f

 x

To defend the position of the company, it’s important to understand if the companies

are able to control variable costs and to have enough surplus of revenues over costs.

CASH FLOW is the analysis of inflows and outflows of money, coming from different

activities.

The strategy map focuses on critical success factors (i.e. revenues growth rate),

something more conceptual measured with appropriate indicators. In