Abf Presentation by Kenny Ong Strategy and Budgeting p1 v2 1235006421145054 1

7/31/2019 Abf Presentation by Kenny Ong Strategy and Budgeting p1 v2 1235006421145054 1

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www.myCNI.com.my www.OOBEY.com

STRATEGIC PLANNING ANDBUDGETING Part 1:

Business Model and StrategyCase Study, Concepts and Debatable Ideas

Kenny Ong

CNI Holdings Berhad
http://www.mycni.com.my/http://www.oobey.com/http://www.oobey.com/http://www.mycni.com.my/


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Intro: CNI

1. 20 years old2. Core Business: MLM

3. Others: Contract Manufacturing,Export/Trading, eCommerce

4. Malaysia, Singapore, Brunei, Indonesia, India,China, Hong Kong, Philippines, Italy, Taiwan,Oman, United States, Vietnam

5. Staff force: 5006. Distributors: 200,000

7. Products: Consumer Goods and Services


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History of Strategic Planning and

Budgeting


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Planning in the old days

1. Budget top down no questions asked2. Only two budget goals revenue, expenses3. The only planning we needed to do was do better than

last year4. Planning was bottom up - compilation of plans within

set budget5. No one knew what the other was planning6. Accountings role was only to compile budget for

approval7. KPIs were not used

8. Sales was resource priority, everything else notimportant

9. Assumed no major changes in market10. R&D was bottom up


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Problems from the start


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Problems from the start (1/2)

1. No money2. Split Objectives: Sales? Share Price? Image?

3. Independent entities

4. Accounts controlling schedule5. S&M always running over budget

6. Compounding activities

7. BOD expectations too high without properexplanation nor justification

8. Lack of Market research

9. Expenses not spent gets punished


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Problems from the start (2/2)

10.Budgeting for known, consistent, andpredictable business conditions

11.Never learn from past mistakes, usually inunder-budgeting (e.g. staff and PCs)

12.Wrong Business Model blame Budgeting &Planning. Having a good planning processcannot correct a bad business model

13.Focusing on the Process (KPIs), instead ofBusiness

14.Planning & budgeting treated as separateprocesses by businesses/functions


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Todays Agenda


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Summary: Planning &Budgeting

Long-term PlansObjectives

Strategies

Enablers

Resources

Also known as L.O.S.E.R.


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Summary: Todayspresentation

1. Business Model

2. Strategy

3. Alignment

4. Resources


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Assumptions 1: Audience

1. Business2. Government

3. Non-profit


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1. Get the right Business Model first


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How to fail without trying

1. Wrong Business Model


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The Roadmap to Failure

Fred Wiersema andMike Treacy

Performan

ce

Time

Clear Sailing

Todaysperformance

Denial & Defense

DoomProjections

Overdue Failure

The Moment ofTruth

X

PerformanceFreefall

Tomorrows

actualperformance

Downpresure ofUnclear Strategy


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Denial and Defense

Its not really good value our competitor isoffering, because it doesnt include a lot of ourfeatures. - ABC vs Air Asia

Its good value but not in our preferred

customer market. - ABC vs Toyota Sure theyre hurting us, but with their unfair

advantage, what can we do? ABC vs MILO

The rules we are playing by have alwaysworked before AMEX vs VISA


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Performan

ce

Time

Clear Sailing

Todaysperformance

Denial & Defense

DoomProjections

Overdue Failure

The Moment ofTruth

X

PerformanceFreefall

Tomorrows

actualperformance



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Ad Hoc Tactics

Selectively hold discounts to hold business that hasstarted to go elsewhere

Introduce new promotions, terms, conditions, and offers toconfuse and cloud the market

Beef up customer service by adding people to fix mess-ups and quicken delayed shipments

Delay capital investments and adjust accounting methodsto portray quarterly financial results more favorably

Introduce new and improved products that are new inform, but not in substantive ways that are of consequenceto purchasers

Introduce Balanced Scorecards and PerformanceManagement Systems

Th R d F il


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Performan

ce

Time

Clear Sailing

Todaysperformance

Denial & Defense

DoomProjections

Overdue Failure

The Moment ofTruth

X

PerformanceFreefall

Tomorrows

actualperformance



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What is the moral ofthe story?


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What is the BusinessModel?

USP

MarketDisciplineProfit Model


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Intro: Market Discipline

Mamak stall


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"They are the most innovative""Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost andhassle

Lowest overall cost ofownership

"A no-hassles firm"

Convenience and speed

Reliable product and

service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service andflexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

ProductLeadership

OperationalExcellence

CustomerIntimacy
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Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Strategy: Value Disciplines

http://www.mycni.com.my/http://www.oobey.com/http://www.mycni.com.my/http://www.mycni.com.my/http://www.oobey.com/http://www.oobey.com/http://www.mycni.com.my/http://www.oobey.com/http://www.mycni.com.my/


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OperationalExcellence

Competitive price

Error free, reliable

Fast (on demand)

Simple

Responsive

Consistentinformation for all

Transactional

'Once and Done'

Customer Intimacy

Management byFact

Easy to dobusiness with

Have it your way(customization)

Market segmentsof one

Proactive, flexible Relationship and

consultativeselling

Cross selling

Product Leadership

New, state of theart products orservices

Risk takers

Meet volatilecustomer needs

Fast concept-to-counter

Never satisfied -obsolete own andcompetitors'products

Learningorganization


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The McPlaybook*

Make it easy to eat 50% drive-thru

Meals held in onehand

Make it easy to prepare High Turnover

Tasks simple to learn& repeat

Make it quick

Fast Food

Tests new productsfor Cooking Times

Make what customers want

Prowls market for new

products Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007



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* Treacy & Wiersema, The Discipline of Market Leaders, 1995

Product/Service Attributes Relationship Image


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Product/Service Attributes

Price

Quality

Time

Selection

SmartShopper

Relationship Image

Operational Excellence: Quality and selection inkey categories with unbeatable prices


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Brand

Time

Function

BestProduct

Relationship Image

Product Leadership: Unique products and servicesthat push the standards


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Service TrustedBrand

Relationship Image

Customer Intimacy: Personal service tailored toproduce results for customer and build long-termrelationships

Relations


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Strategy: Disciplines

Summary: Todays


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Summary: Todayspresentation

1. Business Model Done

2. Strategy

3. Alignment

4. Resources


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2. Set the Strategies

Hope is not a strategy


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What is Strategic Planning?

Strategic

Planning

Variables:

Research

Growth

Risks

Stakeholders

Constraints

SWOT

Misc.

Output:

Plans

Priorities

KPIs


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Before we start

Which comes first?1. Strategies -> KPI?

2. KPI -> Strategies?


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Step 1: Analysis

1. SWOT2. PESTEL

3. Scenario Analysis

SWOT: Opportunities &


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SWOT: Opportunities &Threats

Opportunities=

Taking advantage of TrendsThreats

=Strategic Risk Management


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Downturn Trends?


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Downturn Trends?


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Downturn Trends?


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Downturn Trends?

SWOT: General Strategic


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SWOT: General StrategicRisks

1. Industry

1. Margin Squeeze2. Rising R&D/CAPEX3. Overcapacity4. Commoditization5. Deregulation6. Increased power among

suppliers7. Extreme business-cycle

volatility

2. Technology1. Shift in technology2. Patent expiration

3. Process becomes obsolete3. Brand

1. Erosion2. Collapse

4. Competitor

1. Emerging global rivals2. Gradual market-share gainer3. One-of-a-kind competitor

5. Customer1. Customer priority shift2. Increasing customer power3. Over reliance on a few

customers

6. Project1. R&D failure2. IT failure3. Business development failure4. Merger or acquisition failure

7. Stagnation1. Flat or declining volume2. Volume up, price down3. Weak pipelineAdrian J. Slywotzky and John Drzik


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PESTEL and Scenarios

Scenario 1 Scenario 2 Scenario 3

Political

Economic

Social

Technology

Environment

Legal


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Business Situation vs. Focus

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

Change mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Innovation/R&D

Early wins

Slow Down HR Costs

Top Talent focus

Sales, Sales, Sales

Increase attrition


Business Situations vs


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Business Situations vs.Focus

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

Change mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Sales

Cash Flow

Talent Mgmt

Stack R&D

Early wins

Slow Down HR Costs

Top Talent focus

Stack Sales

Increase attrition

Many times, you need a differentCEO/Leader/Management Team

for each business situation



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Step 2: What is your Goal?

1. Cost Reduction2. Growth


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Strategies for Growth

1.Base Retention

2.Share Gain

3.Positioning4.Adjacent Market

5.New Business

GROWTH

Double-Digit Growth, Michael Treacy



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Growth

Expansion

1.Consolidate

2.Geographic

3.Distribution

4.Compensate

Transformative

1.Portfoliorefocus

2.Diversification

Easier Tougher



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Growth thru Expansion

Expansion

1.Consolidate

2.Geographic

3.Distribution

4.Compensate

1.Gain Scale to compete

2. Integrated Solutions

3.Financial Growth

4.Supply (security, mix)

5.Developing markets

6.High cost of Extra Capacity7.Private Equity

8.Expanding Sovereign Fundswww.myCNI.com.my www.OOBEY.com

G


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Growth thru Expansion

Expansion

1.Consolidate

2.Geographic

3.Distribution

4.Compensate

9.De-regularization

10.Demand outstrip supply

11.Revenue Mix Taxoptimization

12.Talent

13.New, Low-cost Entrants

14.Undervalued Big Players

15.Newer Assets


T f i G h


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Transformative Growth

Transformative

1.Portfoliorefocus

2.Diversification

1. New Business Lines2. Selling/Spin-off non-core

3. Increase product line

4. New customers

5. New technologies*

6. Complementary Business

7. Up-down Supply Chain

8. Patent

9. Convergence anticipation


C S T f i


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Cross Sector Transformation

Traditional

AlternativeIncremental


C S t T f ti


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Cross Sector Transformation

Traditional Utility

Alternative

Energy

Incremental

Technology

New Delivery, New Sources,Existing Resources

Oil, Gas,Electricity, Coal

Biomass, Nuclear,Ethanol, Wind, Solar


Example:Energy Sector

St 3 St t


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Step 3: Strategy

1.Base Retention

2.Share Gain

3.Positioning4.Adjacent Market

5.New Business

GROWTH

Double-Digit Growth, Michael Treacy


How Markets determine


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How Markets determineGrowth Strategies (1)

Growth Rate

GrowthRate

Strategy Why?

Fast 1. Market

Positioning2. Share Gain

3.BaseRetention

Maintain market share in strategic

segmentsPrepare for market decline

Competitors focus too much ongetting new customers

Flat 1.BaseRetention

2. Share Gain(Acquisitions)

Lose customers slower thancompetitors

Create scale economics, squeezecosts




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Churn RateChurnRate

Strategy Why?

Low 1. Share Gain

(Acquisitions)2. Adjacent

Markets

Buying customer base is

cheaper than own effortsNew products, old customersstrategy

High 1. Base

Retention

2. Share Gain

3. AdjacentMarket

Lose customers slower thancompetitors

Customers are always open tothe best value and offer

Desperate to gain revenue

How Markets determineGrowth Strategies (2)




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o a ets dete eGrowth Strategies (3)

Fast Growth,

Low Churn

1.Market Positioning

2.Share Gain (M&A)

3.Base Retention

4.Adjacent Markets (M&A)

Example: XYZ Sector


St t 2 Sh G i


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Create better Value proposition

Neutralize competitor advantages

Buy Market Share outright Price Premium

Operating Model Integration

Strategy 2: Share Gain


Buying Market Share:


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y gAcquisition strategy

IntegrationOperating

Model

PricePremium

BuyingMarketShare

Net Cost perCustomer stand alone



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Thank You.

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Abf Presentation by Kenny Ong Strategy and Budgeting p1 v2 1235006421145054 1

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