second variety of opportunities that could be exploited encompasses both vertical and horizontal integration. Vertical means going forward to the downstream market (e.g. from manufacturing to distribution to retailing) or going backward to the upstream supply chain (e.g. from processing, to semi-processing to raw materials production). Horizontal integration exploits opportunities in related and ancillary businesses such as after-sales services, financing of customers, complementary products (e.g. accessories to fashion wear) and piggy-back offerings (e.g. promotional toys in fastfood stores).
A third variety of opportunities seeks to improve the Quality, Delivery and Price (QDP) value proposition to customers. Different customers have different QDP expectations. This suggests that a “one-size-fits-all” strategy would not be able to delight all of the customers.
Quality improvements include measurable, palpable and experientiable attributes such as durability (lasts longer and does not break down), serviceability (easy to maintain and operate), taste (sweeter, spicier, saltier, more sour, more bitter, crunchier, softer, etc.), elegance (looks sleek and classy, opulent and indulgent, modernistic and aesthetic) and feels good (comfortable, soft, right fit, flattering).
Delivery improvements mean (a) consistently being more on-schedule at the precise time expectation, (b) being at the right place, (c) having acceptable terms and conditions, (d) being supported by accurate documentation, and, (e) using the most appropriate delivery mode, etc.
Price improvements can be one of three things: (a) reduced price offering at the same quality and delivery; (b) same price offering but with improved quality and/or delivery; and (c) higher price but with higher perception and actualization of quality and delivery value proposition. On one end, price improvements can come from greater cost efficiencies and economies of scale that allow the enterprise to lower its prices. On the other end, price improvements can come from product enhancements or logistical and market channel enlargements that enable the enterprise to charge a premium price vis-a-vis competitors.
QDP improvements may be obtained through better technologies, better product formulations, better work and operating systems, better supply services, better management and better market distribution. Any of these can be the subject of a Business Case decision.
A fourth variety of opportunities to be exploited is composed of entirely new venture opportunities. They are unrelated to the existing products and markets of the enterprise but are, nevertheless, very attractive to the owners and managers of the enterprise. While these opportunities are supposed to “spread the risk” by betting on several industries (not just one), they also present greater risks because management is less familiar with the opportunities. In fact, the opportunities may even be out of line with the company’s expertise. However, if these risks can be controlled and managed well, then the opportunities should enable the enterprise to widen its business horizons.
2. Solving problems
If problems are deviations from expectations, then solving them would just return the organization to its “normal” or expected state of being. There are four types of problems: (1) there are simple problems with singular causes, (2) there are complex problems with multiple causes, (3) there are problems that create other potential problems, and (4) there are problems that might potentially emerge if the decisions were made and carried out, meaning they are future threats.
For the first type, the single cause should be “discovered” or “uncovered”, and then corrected through an intervention mechanism. Examples of this type of problem includes: (1) machinery and equipment that suddenly do not work because of a faulty part; (2) increasing level of rejects because one portion of the work process is not being done correctly; (3) reduced output due to a particular bottleneck that has lessened the overall capacity; (4) delayed deliveries due to a greater number of outlets; (5) higher level of customer complaints due to bad handling of delivered packages.
In complex problems with multiple causes, all the significant causes must be identified and evaluated as to their impact on the desired or expected results. For example, the problem of frequent stockouts in an enterprise may have several causes such as poor forecasting of sales, poor ordering and re-ordering practices and lack of working capital to make timely and cheaper purchases of the merchandise to be sold. Another example is the declining sales of a product due to: (1) more competitive products in the market; (2) higher prices being charged by the enterprise due to its higher costs and inferior promotional campaigns, and; (3) poor selling practices compared to the competition.
Problems that lead to other potential problems are significant performance deviations, which, if not arrested, would precipitate a chain effect of unwanted consequences. For example, a series of bad operating losses by a bank would lead to: (1) reduced cash inflows from collections; (2) more regulatory intervention by the authorities; (3) a possible bank run, and; (4) a much reduced ability to lend money which may even bring it to bankruptcy. Another example is an automotive manufacturer that recently experienced product recalls due to faulty brakes. This problem would lead to higher costs (recalling and replacement costs), a tarnished image leading to lower sales, and the slowing down of future plant production with dire consequences on employee morale.
Potential problems or future threats arise from decisions that are being made. For example, if the business decision is to enter a new market with a new product, the potential problems can be legion. Competitors may respond with price reductions or launch their own counter-offensive products. Distribution channels may take some time to adjust their logistical capabilities, thus derailing the entire effort. If the new product were not thoroughly researched on intellectual property violations, then legal suits may hound the enterprise.
3. Strategizing and Operationalizing
The third generic form of Business Cases is concerned with generating alternatives or different options to achieve an objective, a desired outcome or an end result. Some end results are so significant and important that they require aggressive business strategies or major shifts in the way an enterprise does business. Other desired outcomes or end results are more confined to perpetuating existing strategies or ways of doing business. These other outcomes merely require alternative ways of operationalizing current strategies. Strategizing and Operationalizing, therefore, compose the third generic form of Business Cases.
In Strategizing, the desired outcomes or end results are usually Key Performance Indicators (KPIs) of the enterprise, such as Return on Equity, Return on Investment, Total Sales Volume, Market Share, Technological Leadership, Employee Productivity, Cost Competitiveness and other such major KPIs.
For example, a fastfood company may want to double or triple its sales over the next four years. It may aspire to capture a greater share of the market without impairing, or even improving, its desired return on equity. These ambitious outcomes necessitate major strategic moves. The Business Case in such strategic decision-making is to determine the best expansion alternative, among many strategic alternatives, that would achieve the desired outcomes or end results. These strategic alternatives may include:
1.Branching to other regions of the country
2.Franchising
3.Developing new product lines and services to cater to other segments of the market
4.Exporting to other countries
5.Acquiring or merging with competitors
Needless to say, there are pros and cons for each alternative. If one alternative does not even have one strong favorable outcome, then it should not
