style="font-size:15px;"> ● The role of the corporate structure.
Exhibit 2.1 shows the structure of Alfa, a company controlling subsidiaries operating in the three following business sectors:
● IT and media solutions: high-tech services for the sharing and broadcasting of events
● Post-production and animation: digital content and graphical effects production for the cinema, television, and media advertising markets
● Events media technology: planning and realization services for arts and exposition events
Exhibit 2.1 Competitive strategy at corporate level
Exhibit 2.1 shows the strategies of Alfa Inc. management for the main businesses of the company.
Competitive Strategies at the Single Business Unit Level
The main competitive strategies that can translated in business plan objectives consist of decisions regarding:
● The geographical markets where to sell company's products.
● The geographical markets to establish directly owned operations versus creating partnerships with independent local players.
● The competitive positioning to follow in the chosen market(s). As such, it is necessary to identify with precision:
● Clients' needs to address
● Type of reference client
● Product/service to be offered
● Price policy
● The distribution channel(s) to use.
● The nature of the business activity the company operates into. In this respect, the management may deem it necessary to implement the following measures:
● Supply chain integration at the top/at the bottom of the chain. In other words, the company could decide to internalize and manage directly some activities or steps previously outsourced to suppliers, distributors, agents, and others.
● Outsource some activities previously internalized in the company processes.
● The places in which to physically operate. Management could take these measures:
● Start delocalization process, with the consequence that a portion of the activities is transferred to other production sites.
● Develop new manufacturing plants/production sites.
● Shut down some previously operating manufacturing plants/production sites.
Exhibits 2.2 and 2.3 show the competitive strategy studied by Alfa management with respect to, in particular, the “IT and media solutions” sector.
Exhibit 2.2 Competitive strategy at the single business activity level (the Alfa case, 1st part)
Exhibit 2.3 Competitive strategy at the single business activity level (the Alfa case, 2nd part)
2.2.3 Definition of the Actions Needed to Implement the Competitive Strategy
Once having defined the competitive strategies both at company and at single business activities level, it is then needed to focus on the actions needed in practice to implement them. For instance, let's hypothesize that the company management has opted to implement an internationalization strategy. In this case, the business plan will very likely envisage the opening of new branches, manufacturing plants, and so on in loco in those markets identified for the expansion. As a second example, let's assume the management has decided, in particular, to implement a cost-cutting program aimed at increasing the company profitability. In this example, the business plan could envisage, inter alia:
● Specific actions aimed at cutting labor costs (personnel cutting, delocalization of the production activity, etc.)
● Outsourcing of specific activities previously handled in-house
● Reengineering of the production process
Each of these actions should be coupled with, at least, the following prescriptions:
● Clear objectives that should be pursued
● Impacts on income statement, balance sheet, and cash flow statement
● Expected realization timing
● The project manager responsible
● The potential problems linked with the implementation
The credibility of a business plan largely depends on how clearly the mapping of the actions to implement is set out from the very outset. Indeed, absent precise indications around the actions needed to implement the decided competitive strategy, the latter is jeopardized.
Exhibit 2.4 has been extrapolated from the business plan of Beta a company operating in the production and commercialization of luxury goods, whose management has decided to undergo an internationalization process. The exhibit shows, in particular, the detailed plan underpinning the opening of the new stores (both direct points of sale and stores in franchise), as hypothesized by the management. The schedule provides for each new store:
Exhibit 2.4 Definition of the necessary actions to implement the strategy (the Beta case)
● The moment when raising of the financing needed for the setup of the new store activities is expected
● The moment when opening to public is expected
2.2.4 The Formulation of the Quantitative Assumptions
The output of the planning activity is represented by the income statement, balance sheet, and cash flow statement forecasts, which synthesize the outcome expected by the implementation of the competitive strategy set up by the company management. Having said this, it is also worth noting that the development of such forecasts is based on a series of quantitative assumptions. The breadth of this in turn depends on the complexity inherent to the company for which the business plan has been prepared. As such, if the company operates in several business activities, the following should be defined:
● Macroeconomic assumptions which have to be formulated by distinguishing the different geographical areas where the company operates, and which concern in particular:
● GDP real growth rates
● Inflation rates
● Exchange rates
● Interest rates
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