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Overview of Strategic and
Business Planning
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1
Shareholder
Value
To develop an understanding of how a companycreates value for its shareholders
Strategy To understand the objectives of company strategy
and to define key strategic terms
Stakeholders To appreciate the influence of stakeholders and their
impact on company goals and performance
Planning
Process
To review the business planning process and gain an
overview of key tools and techniques
Learning Objectives
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2
Shareholder
Value
To develop an understanding of how a companycreates value for its shareholders
Strategy To understand the objectives of company strategy
and to define key strategic terms
Stakeholders To appreciate the influence of stakeholders and their
impact on company goals and performance
Planning
Process
To review the business planning process and gain an
overview of key tools and techniques
Learning Objectives
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Capital may be provided by shareholders or lenders
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Inject cash as shareholder
funds in return for an equitystake or share of the ownership
of the business
Borrow from the bank and
inject as a Long Term Liabilityor Bank Loan - banks do not
own the business
Capital Employed
Interest and
repayment of the
principal
Dividendpayments
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How do you create shareholder value?
An investor purchases a share or invests in a company with cash in the hope that
he receives back more cash in the future
Through selling the share at a higher price (capital appreciation)
and / or by receiving a stream of future dividends… the investors return
4
S h a r e
P r i c e
Time
MobileCo
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The return on investment (ROI) or return on capital employed
You have $100 in your pocket and you invest it in the bank which promises to
pay $10 per year.
The money invested or “employed” is often referred to as the “capital”.
The money that the investor gets back (dividends on shares) is referred to asthe “return”.
Your Return on Capital Employed or Investment:
– = 10 / 100 = 10%, this is your “ROI”
All things being equal, investors prefer higher returns.
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Returns are uncertain
When an investor makes an investment he will have an expectation of what he
thinks his return will be
The actual return he receives however, is uncertain, as returns vary and may beabove or below his expectations
This variability or volatility is the risk associated with the investment – all things
being equal, investors like low risk
S h a r e
P r i c e
Time 6© Copyright Coleago 2010
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Risk and reward (“return”) are inextricably linked
The Bank is expected to pay interest at 5%
MobileCo in Mobilistan is expected to pay a return of 5%
Which investment has the highest level of uncertainty or risk?
Given that both have the same expected level of return, which would you prefer?
What would you require to persuade you to invest in MobileCo?
What is the relationship between risk and return?
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Creating shareholder value
The Bank is expected to pay 5%
An investment in MobileCo is expected to pay a return of 15%
Would you invest?
S h a r e
P r i c e
Time
MobileCo
15% Expected Return
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Creating shareholder value
WirelessCo is expected to pay a return of 20%
Would you now invest in MobileCo?
What is the minimum expected return you would want from MobileCo?
S h a r e
P r i c e
Time
MobileCo
15% Expected Return
WirelessCo20% Expected Return
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Creating shareholder value
To create shareholder value you need to get back more cash than you
invested…
…and you need to get back more cash than you would have expected to receive
in your next best alternative investment of similar risk
S h a r e
P r i c e
Time
MobileCo
15% Expected Return
WirelessCo
20% Expected Return
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To create shareholder value your company has to beat the competition
Increase expectations of future cash flows by:
Investing in projects or acquiring resources that are expected to generate more
cash flow than could be expected to be earned in the next best alternative
investment of similar risk, i.e. you need to make better investment decision
than the competition.
Utilising its existing resources better than the competition, for example by
generating more profits from the assets already invested than the competition is
able to do.
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12
Shareholder
Value
To develop an understanding of how a companycreates value for its shareholders
Strategy To understand the objectives of company strategy
and to define key strategic terms
Stakeholders To appreciate the influence of stakeholders and their
impact on company goals and performance
Planning
Process
To review the business planning process and gain an
overview of key tools and techniques
Learning Objectives
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Exercise – Defining Strategy
Write down your definition of what is “Company Strategy”
What would you expect to find in a “Strategic Plan?”
What is the difference between “Strategy” and “Tactics?”
Work in groups
You have 10 minutes to perform this exercise
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Exercise – Definitions of Strategy
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The “traditional” objective of corporate strategy
The objective of strategy is to maximise shareholder value.
The assumption of profit or value maximisation underpins the neo-classical,micro-economic theory of the firm upon which economic theory and manystandard texts are based.
Taking account of the interests of parties other than shareholders is solely ameans to the end.
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So how do you maximise shareholder value in practice?
We know that to create or maximise shareholder value a company needsto earn a return greater than the next best alternative – often itscompetitors.
So to create value a company needs to “beat the competition”.
„Beating‟ the competition involves generating superior returns to your
competitors, ideally over a long period of time.
Economic theory tells us that you can only beat the competition if youhave “competitive advantage”.
Creating source(s) of competitive advantage, differentiation or a UniqueSelling Point (a “USP”) is the overriding objective of company strategy.
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Competitive Advantage
The ability to provide a product or service to customers which they valueand are prepared to pay for …
… but which the competition cannot easily replicate…
… at a price which is greater than the cost of producing that good or
service
This will allow the company to earn a return which is greater than the nextbest alternative and thus create shareholder value
The focus of company strategy and business planning is on how to
establish competitive advantage
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Strategic planning: a definition
The objective of strategic planning is to achieve, maintain and enhance thecompetitive advantage of a business, i.e. achieve a sustainable
competitive advantage.
Strategic planning is the process of developing such a strategy by achievingthe optimum fit between a business's resources and opportunities.
The strategic plan analyses and describes how a business should adapt tothrive in a dynamic competitive environment.
– It focuses on the medium to long term future of a business, i.e. generallya time horizon of three years or more.
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19
Vision
A broad statement which encompasses some aspects of the environment,
mostly of the market to be addressed and what business the organisationis in. It gives the broad direction in which the organisation is heading.
MissionOutlines how the vision is to be translated into reality, i.e. explains toinvestors, managers, staff and customers what the business is about to do.
Objectives
Specific quantified targets against which the success of the strategy andthe business plan can be measured. Objectives should be SMART:
S – Specific
M – Measurable
A – Achievable within the stated time frame R – Relevant in the context of the vision
T – Time bound
Vision, Mission and Objectives
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Examples of Vision statements
To inspire people to get the most out of their relationships & the world around them
To enrich our customers‟ lives through the unique
expanding power of mobile communication
To enable people to connect with whomever they want,whenever, however and wherever they want
We network society for a better future. With top quality, efficiency &innovation to the benefit of our customers in every respect
To be the essential wireless brand by enrichingpeople‟s lives, whatever they are doing, wherever
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Axiata’s vision and values
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Axiata is the emerging leader in Asian telecommunications with a vision of becoming aregional champion. Axiata is Advancing Asia by bringing affordable connectivity,innovative technology and world class talent to the entire region.
We are an organisation that pursues EXCELLENCE and INNOVATION across our entireoperation, bringing the most advanced world-class communication services to the region.
We are an organisation of global stature with sensitivity to the local markets that weoperate in. We take a COLLABORATIVE approach in all our partnerships, ensuring that
we address the specific needs of our stakeholders, while offering products, services andsolutions that are of LOCAL RELEVANCE.
We are PRINCIPLED and UNCOMPROMISING, holding ourselves to the higheststandards of conduct. We are a company with a purpose and we play a core role in nationdevelopment in the markets that we serve.
We are adaptive and OPTIMISTIC, an organisation with continued energy andconfidence, that is ready to meet global challenges.
Axiata is Advancing Asia towards a better, brighter future.
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Celcom Malaysia Vision Statement
1. To delight our customers.
2. To build a profitable enterprise that maximizes investor returns.
3. To empower, develop and reward our people, to become Malaysia‟s
preferred employer.
4. To build win-win relationships with all our business partners, based onmutual trust, respect and support.
5. To work to bridge the digital divide, to build our nation and to enhanceits standing abroad.
6. To maintain the highest levels of transparency, integrity and
professionalism.
7. Together with all our stakeholders, we will make Celcom Malaysia apremium brand: a brand that symbolizes the spirit of freedom, aspiration,confidence, dynamism, timelessness, universality and globalism.
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Dialog Sri Lanka Vision Statement
Our Vision
To be the undisputed leader in the provision of multi-sensory connectivity resulting always, in
the empowerment and enrichment of Sri Lankan lives and enterprises.
Our Mission
To lead in the provision of technology enabled connectivity touching multiple human sensorsand faculties, through committed adherence to customer-driven, responsive and flexiblebusiness processes, and through the delivery of quality service and leading edge technologyunparalleled by any other, spurred by an empowered set of dedicated individuals who are
driven by an irrepressible desire to work as one towards a common goal in the truest sense of the team spirit.
Corporate Values
Total commitment to our customers. Dynamic and human-centred leadership. Commitment to task & excellence.
Uncompromising integrity. Professionalism and accountability. Teamwork. Foremost respect for concern & care
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Are all opco’s aligned with Axiata’s vision?
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In some opco‟s Axiata does not have a
control, e.g. M1 in Singapore
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25
Shareholder
Value
To develop an understanding of how a companycreates value for its shareholders
Strategy To understand the objectives of company strategy
and to define key strategic terms
Stakeholders To appreciate the influence of stakeholders and their
impact on company goals and performance
Planning
Process
To review the business planning process and gain anoverview of key tools and techniques
Learning Objectives
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What companies actually do depends on a number of influences
Business Purpose
Corporate Values
Vision, Mission &
Objectives
Corporate Governance
Whom should thebusiness serve?
How should purposesbe determined?
Stakeholders
Whom does thebusiness serve?
Business Ethics
Which purposes shouldbe prioritised and why?
Cultural Context
Which purposes areprioritised and why?
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The influence and power of different stakeholder groups will have a
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InternalDepartments, geographical locations, different levels in thehierarchy
Market
Environment
Suppliers, competitors, customers, distributors – relationshipevolves from being a member of the value chain
Socio-politico
EnvironmentPolicy makers, regulators, government agencies, NGOs
Technology
environmentStandards agencies, owners of competitive technologies
The influence and power of different stakeholder groups will have a
significant impact on what the company actually does
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St k h ld d t t
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Stakeholders and company strategy
Managers (acting on behalf of the shareholders) may develop a valuemaximising strategy.
The successful implementation of that strategy and the creation of valuewill depend on the support of the various “stakeholders”.
In creating a business plan it is vital to consider whether the chosen
strategy can actually be successfully implemented.
An analysis of stakeholder power and influence is a crucial first stage inthe business planning process.
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Learning Objectives
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Shareholder
Value
To develop an understanding of how a companycreates value for its shareholders
Strategy To understand the objectives of company strategy
and to define key strategic terms
Stakeholders To appreciate the influence of stakeholders and their
impact on company goals and performance
Planning
Process
To review the business planning process and gain anoverview of key tools and techniques
Learning Objectives
© Copyright Coleago 2010
Overview of the strategic planning process
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Overview of the strategic planning process
External
Appraisal
Internal
Appraisal
Opportunities
and Threats
Strengths &
Weaknesses
Stakeholder Influences
Generation of
Strategic
Alternatives
Evaluation &
Strategic Choice
Implementation
of Strategy
The first two steps in business& strategic planning
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Overview of the tools & techniques used for the external analysis
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Overview of the tools & techniques used for the external analysis
Industry
Focus
Environment
Competitors
Customers
PESTEL*
Analysis
Scenario
Planning
Industry ValueChain
MarketStructure
Industry LifeCycle
Porter’s 5Forces
Key Success
FactorsWar Gaming
Porter’s 4
Corners
Market DemandMarket
Segmentation
Segmentation
Mapping
* Political, Economic, Social, Technological, Environmental, Legal
Tools and Techniques
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Overview of the tools & techniques used for the internal analysis
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Overview of the tools & techniques used for the internal analysis
ResourcesVRIO**
Analysis
Resource
Audit
Differentiators
and USPs*
Value Add
Analysis
Configuration
of Resources
Value Chain
Analysis
Products &
Services
Products Life
CycleBCG Box ***
Business
Position
Busin/ Industry
Attractiveness
Core
Competencies
* Unique Selling Point** Resources can be Valuable, Rare, Imitable Organisation exploits it*** Boston Consulting Group
Focus Tools and Techniques
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Following the external and internal analysis we can formulate several
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strategies – this is more art than science
Generic
Strategies
Ansoff Matrix
Directional
Policy Matrix
Basis for
Strategy
Direction
Method of
Implementation
Johnson &
Scholes Matrix
Focus Tools and Techniques
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The final step is to evaluation and valuation the different strategies and
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select the one that produces the highest increase in shareholder value
Pay Back
Qualitative
Quantitative
Discounted
Cash Flow
Internal Rate of
Return
Return on
Investment
Net Present
Value
CVFRA*
Analysis
Strategic Con-
trol Point Index
Sensitivity /
Risk Analysis
Benchmarking
Other Markets
Benchmarking
Other Industr.
* Consistency, Validity, Feasibility, Risk, Adaptability of strategy
Focus Tools and Techniques
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Limitations of analytical tools and techniques
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Limitations of analytical tools and techniques
All the techniques have their limitations and so should be used with care
Different techniques or combinations of techniques lend themselves todifferent strategic problems
A business planner will not rely on the results from any one piece of analysis in isolation
often the application of the technique is relatively easy
– provided the data is available
it is the interpretation and inference from the results which is key
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Business Plans
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Business plans can be developed at the company level or for projects to be
undertaken within a company.
Both have the objective of creating shareholder value
Plans should, therefore, focus on explaining how a company or a project isgoing to create Competitive Advantage.
The headings within a business plan should mirror the elements of thebusiness planning process.
The elements of company level or project level plans will be similar but thelevel of detail will vary depending on …
how much investment is required
whether resources are to be obtained internally or externally
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Key headings within a Business Plan
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y g
Executive Summary
Basic Business Information
Current Business Situation
Strategic Analysis
Strategic Plan
Marketing Plan
Operations / Production
Management and Organisation
Forecasts and Financial Data
Financing
Risk Analysis
Business Controls
Appendices
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Summary of the quantitative techniques in the financial part of a
business plan
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business plan
The four quantitative measures most commonly used
Net Present Value
Internal Rate of Return
Payback
Return on Capital Employed
Additional financial information
Forecast financial statements
Peak funding requirement
Sensitivity analysis
Break even
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Session Summary