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Management Consulting/MS-93-Management of New and Small Enterprises

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Question
1. Using the SWOT framework conduct an opportunity analysis for the following.
(a) a leather products outlet
(b) a handicrafts outlet
2. Explain the common errors committed in the formation of a Business Plan.
3. Discuss the management aspects of the following assets whose pitfalls are commonly observed in the daily operations of a small business.
(a) Land and Building
(b) Trade Debts

Answer
2. Using the SWOT framework conduct an opportunity analysis for the following.

(a) a leather products outlet
(b) a handicrafts outlet

useful forBusiness Owner/Entrepreneur/Manager

Definition  of  SWOT
SWOT analysis is a general technique which can be applied across diverse functions and activities, but it is particularly appropriate to the early stages of planning for CORPORATE  STRATEGY . Performing SWOT analysis involves generating and recording the strengths, weaknesses, opportunities, and threats relating to a given task. It is customary for the analysis to take account of internal resources and capabilities (strengths and weaknesses) and factors external to the organisation (opportunities and threats).
THE  NECESSITY   FOR  SWOT
Strengths
Strengths usually describe things that the company excels at doing. All strengths listed should support a competitive advantage that the corporation has over its rivals. These can be tangible (fast delivery of products to customers) or intangible (excellent customer service promotes very high customer satisfaction). As these are internal attributes they should all be within the company’s control. Ask questions such as:

• What does the company do well?
• What resources (physical and personnel) does the company possess?
• What advantages does the company have over its rivals?

Do not forget to include key strengths that the people in the organization possess which includes things such as their experience, knowledge, educational background, business connections, and job skills. Tangible assets such as plant capacity, state of the art equipment and facilities, strong supply chains, available capital (or access to credit), loyal customers, patents, copyrights and superior information systems.

Strengths
The Strengths can be considered as anything that is favourable towards the business for example:
Currently in a good financial position (few debts, etc)
Skilled workforce (little training required)
Company name recognized on a National/Regional/Local level
Latest machinery installed
Own premises (no additional costs for renting)
Excellent transport links (ease of access to/from the Company)
Little/non-threatening competition

THE  SWOT  ANALYSIS  --STRENGTHS
-helps   to  identify  the  core compentences  
-helps  how  to  maximize  the  strengths  to  gain
the  maximum  results --sales/profit/market  share/competitive  position.
========================================
Weaknesses
Weaknesses are factors that the company controls that impair its ability to compete with other firms. Weaknesses are any areas in which you need to improve to maintain a competitive edge in your market. Ask questions such as:

• Which departments need to be improved?
• What resources does the company lack?
• What skill sets do the employees lack that competing firm’s workforces have?
• What services does the company fail to offer?

Weaknesses
Recognizing the Weaknesses will require you being honest and realistic. Don’t leave anything out as this is an important part as to realize what needs to be done to minimize this list in the future. Here are a few examples:
Currently in a poor financial position (large debts, etc)
Un-Skilled workforce (training required)
Company name not recognized on a National/Regional/Local level
Machinery not up to date (Inefficient)
Rented premises (Adding to costs)
Poor location for business needs (Lack of transport links etc)
Stock problems (currently holding too much/too little)
Too much waste
THE SWOT   ANALYSIS --WEAKNESS
-helps  to  identify  the weak  points in  terms of  skills/manpower/
resources  etc
-how  to improve / overcome  these  weak  factors.
==================================================
Opportunities
Opportunities are the external factors that will allow your business to succeed against its rivals. Since these are external factors, they may not be under control of the company. Ask questions such as:

• What opportunities for new products or services exist in your market?
• Are new markets available that could provide opportunities for growth?
• Have new technologies been developed that will allow us to compete more effectively?
• Have consumer lifestyles, wants and desires shifted?
• Are the target customers economically healthy?
• Do previously resolved internal problems give the company a competitive edge?

Usually, opportunities reflect the areas where you can excel by changing the company’s marketing strategy. Should new products be launched? Should existing products be promoted to new customer groups? If possible, identify the time frame for each opportunity. Is it something the company must capitalize on by a certain date or will the opportunity last indefinitely?

Opportunities
Keeping in mind what you have listed as your Company Strengths, SWOT Analysis can now influence the Opportunities for the business. These can be seen as targets to achieve and exploit in the future for example:
Good financial position creating a good reputation for future bank loans and borrowings
Skilled workforce means that they can be moved and trained into other areas of the business
Competitor going bankrupt (Takeover opportunity?)
Broadband technology has been installed in the area (useful for Internet users)
Increased spending power in the Local/National economy
Moving a product into a new market sector
THE  SWOT  ANALYSIS -- OPPORTUNITIES
-helps  to  identify  gaps  in the  market  which  can  be  converted  into
opportunities.
-helps to  identify  the  gaps  in  performance , which  can be  exploited.
=======================================
Threats
Threats are factors beyond the control of the company that reduces its competitiveness in the marketplace, adversely affect marketing strategy, or in a worst case scenario, potentially lead to the total demise of the business (think buggy whip manufacturers when automobiles became popular). Although the company has no control over external factors, the key is to identify the threats and draw up contingency plans to negate the threat or soften the impact should an event arise. Ask questions such as:

• Are consumer preferences shifting away from company business lines?
• Is price competition from competitors affecting company profit margins?
• Are new technologies making the company’s products or processes obsolete or unaffordable?
• Are new competitors entering the market space?
• Are suppliers increasing prices?
• Are raw material costs going up due to scarcity or catastrophic events?
• Is the general economy on the downswing?

Classifying threats by the degree of impact and the likelihood of their occurrence is often useful to help identify which threats need to be planned for immediately.

Threats
The final part of the analysis will also be seen as the most feared- the Threats. It has to be done and therefore taking into account what you have listed as your weaknesses, the threats will now all seem too clear. Examples
Large and increasing competition
Rising cost of Wages (Basic wage, etc)
Possible relocation costs due to poor location currently held
Local authority refusing plans for future building expansion
Increasing interest rates (increases borrowing repayments, etc)
End of season approaching (if you depend on hot weather, etc)
Existing product becoming unfashionable or unpopular
THE SWOT  ANALYSIS --THREAT
-helps  to  identify  the  various  threats  like
competition/social /political/economic/technological etc
and  to take  preventive  action.
=========================================
THE  SWOT  ANALYSIS  --STRENGTHS
-helps   to  identify  the  core compentences  
-helps  how  to  maximize  the  strengths  to  gain
the  maximum  results --sales/profit/market  share/competitive  position.

THE SWOT   ANALYSIS --WEAKNESS
-helps  to  identify  the weak  points in  terms of  skills/manpower/
resources  etc
-how  to improve / overcome  these  weak  factors.

THE  SWOT  ANALYSIS -- OPPORTUNITIES
-helps  to  identify  gaps  in the  market  which  can  be  converted  into
opportunities.
-helps to  identify  the  gaps  in  performance , which  can be  exploited

THE SWOT  ANALYSIS --THREAT
-helps  to  identify  the  various  threats  like
competition/social /political/economic/technological etc
and  to take  preventive  action.



LEATHER  PRODUCT  OUTLET
strengths
•   Advantages of proposition?

•   Competitive advantages?
•   USP's (unique selling points)?
•   Resources, Assets, People?
•   Financial reserves, likely returns?

•   Innovative aspects?
•   Location and geographical?
•   Price, value, quality?

•   Processes, systems, IT, communications?
•   Cultural, attitudinal, behavioural?    weaknesses

•   Gaps in capabilities?
•   Financials?
•   Own known vulnerabilities?
•   Timescales, deadlines and pressures?
•   Cashflow, start-up cash-drain?
•   Continuity, supply chain robustness?
•   Effects on core activities, distraction?
•   Morale, commitment, leadership?
•   Accreditations, etc?
•   Processes and systems, etc? •   
opportunities
•   Market developments?
•   Competitors' vulnerabilities?
•   Industry or lifestyle trends?
•   Niche target markets?  
Market response to tactics, e.g., surprise?
•   Partnerships, agencies, distribution?
•   Market volume demand trends?
•   Seasonal, weather, fashion influences?    threats
•   Legislative effects?
•   IT developments?
•   Competitor intentions - various?
•   Market demand?
•   Insurmountable weaknesses?
•   Financial and credit pressures?




HANDICRAFTS  OUTLET
strengths
•   Advantages of proposition?
•   Capabilities?
•   Competitive advantages?
•   USP's (unique selling points)?
•   Resources, Assets, People?
•   Experience, knowledge, data?
•   Financial reserves, likely returns?

•   Innovative aspects?
•   Location and geographical?
•   Price, value, quality?
•   Cultural, attitudinal, behavioural? •      weaknesses

•   Lack of competitive strength?
•   Reputation, presence and reach?
•   Financials?
•   Own known vulnerabilities?
•   Cashflow, start-up cash-drain?
•    
•   Processes and systems, etc?
•   Management cover, succession?
opportunities
•   Market developments?
•   Competitors' vulnerabilities?
•   Industry or lifestyle trend
•   Niche target markets?
•   Market need for new USP's?
•   Information and research?

•   Market volume demand trends?
•   Seasonal, weather, fashion influences?    Threats

•   Legislative effects?
•   Environmental effects?
•   
•   Competitor intentions - various?
•   Market demand?
•   Obstacles faced?
•   Insurmountable weaknesses?

•   Financial and credit pressures?

•   Seasonality, weather effects?









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3. Explain the common errors committed in the formation of a Business Plan.

most common mistakes when writing a business plan? Here is my list of the ones to make sure you avoid. While including the necessary items in a business plan is important, you also want to make sure you don’t commit any of the following common business plan mistakes:
1. Putting It Off
Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.
Don’t wait to write your plan until you think you’ll have enough time. “I can’t plan. I’m too busy getting things done,” business people say. The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.
2. Cash Flow Casualness
Most people think in terms of profits instead of cash. When you imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don’t spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.
3. Idea Inflation
Don’t overestimate the importance of the idea. You don’t need a great idea to start a business; you need time, money, perseverance, and common sense. Few successful businesses are based entirely on new ideas. A new idea is harder to sell than an existing one, because people don’t understand a new idea and they are often unsure if it will work.
You don’t need a great idea to start a business; you need time, money, perseverance, and common sense.
Plans don’t sell new business ideas to investors. People do. Investors invest in people, not ideas. The plan, though necessary, is only a way to present information. So make sure you’re ready to wow your prospective investors with your knowledge and leadership skills, and don’t expect your business idea—or the business plan you explain it in—to do the work for you.
4. Fear and Dread
Doing a business plan isn’t as hard as you might think. You don’t have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as LivePlan, and others).
5. Spongy, Vague Goals
Leave out the vague and the meaningless babble of business phrases (such as “being the best”) because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.
6. One Size Fits All
Tailor your plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can also be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.
7. Diluted Priorities
Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.
8. “Hockey Stick Shaped” Growth Projections
Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as “something” happens. Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

• i gnoring the Competition: A business does not operate in a vacuum. There are direct and indirect competitors who will fight tooth and nail to retain their customer base and market share. All too often, the business team will state that their product and service is so great that there are no competitors. This inward attention on the business shows investors that the management is over-confident and may not foresee external factors that can impact the business.
•  Incredible Financial Projections: A growing company is what investors want to see and the growth patterns should be realistic and attainable. Financial data that is inconsistent with industry norms and overly aggressive can quickly have your plan shelved. It is far better too error on the conservative side here and work with your accountant on attractive and realistic numbers.
•  One Billion Consumers: Claiming your market size as huge and customers as everybody will quickly lose all the credibility of your plan and business. Maybe in the future you can attack different market segments but for now focus on one or two niches you can effectively serve. By showing you deeply understand the clients in a narrow market and can serve their needs, you'll win over the confidence of your banker or investors.
•  Procrastination: Many business owners under estimate the time and effort required to build a successful business plan. Don't delay. If you need capital in six months, now is the time to put together a plan and raise the money.
•  The Big Deal: A business may have signed a big contact with a major company and over-emphasis of this deal can be perceived as a weakness. If 80% of your revenues are based on a one-company contract, your company could tank if the deal goes sour. Highlight that your company is adept at forging strategic partnerships or winning big contracts and this skill will be utilized to diversify the client base.
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