Presentation - Session 01

7/27/2019 Presentation - Session 01

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Overview of Strategic and

Business Planning



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

© Copyright Coleago 2010



2

Shareholder

Value






Planning

Process



Learning Objectives




Capital may be provided by shareholders or lenders

3

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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http://images.google.co.uk/imgres?imgurl=http://www.eso.org/projects/alma/gallery/antennas/eie_alcat_vertex_rsi_mitsubishi-hr.jpg&imgrefurl=http://www.eso.org/projects/alma/gallery/antennas/&h=4625&w=4685&sz=3634&hl=en&start=1&tbnid=holrJajHZAUibM:&tbnh=148&tbnw=150&prev=/images?q=antennas&svnum=10&hl=en&lr=&rls=GGLJ,GGLJ:2006-31,GGLJ:en



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




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.

5© Copyright Coleago 2010



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



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?




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





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





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




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.




12

Shareholder

Value






Planning

Process



Learning Objectives




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




Exercise – Definitions of Strategy




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.




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.




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




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.




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




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




Axiata’s vision and values

21

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.




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.


http://www.celcom.com.my/index.html



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


http://www.dialog.lk/



Are all opco’s aligned with Axiata’s vision?

24

In some opco‟s Axiata does not have a

control, e.g. M1 in Singapore




25

Shareholder

Value






Planning

Process

To review the business planning process and gain anoverview of key tools and techniques

Learning Objectives




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?


The influence and power of different stakeholder groups will have a



27

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


St k h ld d t t



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.


Learning Objectives



29

Shareholder

Value






Planning

Process

To review the business planning process and gain anoverview of key tools and techniques

Learning Objectives


Overview of the strategic planning process



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


Overview of the tools & techniques used for the external analysis



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


Overview of the tools & techniques used for the internal analysis



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


Following the external and internal analysis we can formulate several



strategies – this is more art than science

Generic

Strategies

Ansoff Matrix

Directional

Policy Matrix

Basis for

Strategy

Direction

Method of

Implementation

Johnson &

Scholes Matrix



The final step is to evaluation and valuation the different strategies and



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



Limitations of analytical tools and techniques



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


Business Plans



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


Key headings within a Business Plan



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


Summary of the quantitative techniques in the financial part of a

business plan



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




Session Summary

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Presentation - Session 01

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