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STRATEGIC PLANNING ANDBUDGETING Part 1:
Business Model and StrategyCase Study, Concepts and Debatable Ideas
Kenny Ong
CNI Holdings Berhad
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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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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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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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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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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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Intro: Market Discipline
"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
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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
Strategy: Value Disciplines
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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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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
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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
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes Relationship Image
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes
Price
Quality
Time
Selection
SmartShopper
Relationship Image
Operational Excellence: Quality and selection inkey categories with unbeatable prices
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes
Brand
Time
Function
BestProduct
Relationship Image
Product Leadership: Unique products and servicesthat push the standards
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Intro: Market Discipline
* Treacy & Wiersema, The Discipline of Market Leaders, 1995
Product/Service Attributes
Service TrustedBrand
Relationship Image
Customer Intimacy: Personal service tailored toproduce results for customer and build long-termrelationships
Relations
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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: 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
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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
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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
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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
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C S T f i
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Cross Sector Transformation
Traditional
AlternativeIncremental
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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
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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
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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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How Markets determine
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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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How Markets determine
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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
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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
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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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