MBA Prequel

1
MBA Prequel Overview

• The Modeling Approach
• Deliverables Discussion

2
Objectives of this Presentation

• Understand Industry Analysis
• Understand Marketing Analysis
• Understand Marketing Plan
• Understand Cash Budget
• Understand Pro Forma Financials
• Master the concept of the environment
• Understand multiple models rationale
• Understand framing and chunking
• Understand true marketing complexity

3
Master the concept of the environment
Suggested in DeThomas textbook (Covered later)

• Industry Analysis (p. 45)
• Industry, market and competitive environment
• Economic environment
• Technological environment
• Social, legal, and political environment
• Demographic environment
• Market Analysis Sales Forecast (p. 65)
• Geographic boundaries
• Economic, competitive and social factors
• Firms market niche
• Target market specific characteristics for
  offering
• Sales potential
• Competitive firms offerings

4
Master the concept of the environment

• Specific
• Customer
• Competitors
• Channels (p. 109-110)
• Compliance Legal/Regulatory . . .
• Company/Firm . . . . . . . . . . . . . .
• General
• Technology . . . . . . Every digital/other
  advantage
• Economy . . . . . . . Up the sand dune, or
  down?
• Ethics . . . . . . . . . . What would Mama say?

External Rule Framework Internal
. . . . . . . .
5
Secondary/Own Financials replicate,
create, emulate
DUE DILIGENCE
Observed/Own Operations replicate,
create, emulate
Environment Technical, Economic, Regulatory,
Ethical, Users, Buyers, Try-ers, Sales Data,
Markets (Market Analysis), Segments/Niches, etc.
Your Industry (Industry Analysis)
Your Firm
Direct Competitors
Indirect Competitors
Substitute Industry
Observed/Own Strategy replicate, create,
emulate (intended behaviors)
6
Secondary/Own Financials replicate,
create, emulate
DUE DILIGENCE
Observed/Own Operations replicate,
create, emulate
Environment Technical, Economic, Regulatory,
Ethical, Users, Buyers, Try-ers, Sales Data,
Markets (Market Analysis), Segments/Niches, etc.
Your Industry (Industry Analysis)
Your Firm
Creative Destruction - Schumpeter
Direct Competitors
Indirect Competitors
Substitute Industry
Observed/Own Strategy replicate, create,
emulate (intended behaviors)
7
Forty-Second Boyd
John R. Boyd in the early 1950s was a young U.S.
Air Force fighter pilot at Nellis Air Force Base
NV a figher pilot cocky even by fighter-pilot
standards. He regularly issued a challenge to
all comers You get on my six and Ill be on
your tail (he didnt say tail) in forty seconds
or Ill give you 40! Using the F-86 (later the
F-100) he was always on their tail within 40
seconds. It is said that he never lost. His
ability to win any dogfight in 40 seconds got
him his early nickname Forty-Second Boyd.
Cites from this book and from Hammond. Details
available some editing done
8
Forty-Second Boyd
John R. Boyd in the early 1950s was a young U.S.
Air Force fighter pilot at Nellis Air Force Base
NV a figher pilot cocky even by fighter-pilot
standards. He regularly issued a challenge to
all comers You get on my six and Ill be on
your tail (he didnt say tail) in forty seconds
or Ill give you 40! Using the F-86 (later the
F-100) he was always on their tail within 40
seconds. It is said that he never lost. His
ability to win any dogfight in 40 seconds got
him his early nickname Forty-Second Boyd.
Thrust - Drag Most impressive
Velocity Ps or
Energy-Maneuverability Weight
9
Boyd applied his intuitive understanding of
energy maneuverability to the study of
aeronautics. In the 1970s, he helped design and
champion the F-16, an aluminum manifestation of
everything he knew about competition.
Then he focused his tenacious intellect
on something grander, an expression of agility
that, for him and others, became a consuming
passion OODA loop.
10
Observation orientation decision action - On
the face of it, Boyd's loop is a simple
reckoning of how human beings make tactical
decisions. But it's also an elegant framework
for creating competitive advantage. Operating
"inside" an adversary's OODA loop -- that is,
acting quickly to out-think and out-maneuver
rivals -- will, Boyd wrote, "make us appear
ambiguous, and thereby generate confusion and
disorder. The product of a singular,
half-century-long journey through the realms of
science,history, and moral philosophy, Boyd's
ideas both augment and challenge conventional
thinking about organizations and conflict. Boyd
himself, a cigar-smoking maverick, enjoyed
distinctive unpopularity in official Pentagon
circles. But even among critics, his OODA loop
was much harder to dismiss.
11
The concept is just as powerful when applied to
business. The convergence of rapidly globalizing
competition, real-time communication, and smarter
information technology has led to a reinvention
of the meaning and practice of strategy. What
do you do in the semiconductor industry and other
sectors where the time advantage of proprietary
technology is collapsing even as the cost of
developing it explodes? Companies in
manufacturing, telecommunications, retail in
nearly every business are discovering that
fashion, fad, and fickle customers require
constant vigilance and adjustment. We operate in
a video-game world where time is compressing,
information goes everywhere, and the Rules of
the Game change abruptly and continuously.
Creative Destruction
12
Destruction?

• Yes, even demolition and disassembly
• Disintermediation and reintermediation
• Child of the Internet
• Processes revolutionized
• Competing on time
• Flanking
• Cheng / Chi
• Demolition/destruction is not the exception
• Wrecking the market is every entrepreneurs goal
• Joseph Schumpeter
• and John Boyd

13
John Boyd Thought Experiment
We are having a terrible time traveling in snow
what is available as a vehicle to accomplish this
travel from ANY SOURCE? Lets mentally PILE all
the parts together after taking everything apart
?
Plus others?
14
The outcome of this analysis and synthesis was
very innovative Originally conceived by Karl
Eliason of Wisconsin in 1924 in a toboggan form .
. .
15
John Boyd Thought Experiment
Then the snowmobile was produced by Joseph-Armand
Bombardier of Quebec in 1958 after being
redesigned and re-patented into the form we all
know today.
16
V-22 Osprey Tilt Rotor in Hovering Flight
Helicopter, STOL, or Airplane.? Yes Hybrid Join
t effort Boeing and Bell Helicopter Textron,
Inc.
17
Satellite Imagery and Analysis
Knowledge of tractor position to the foot
What about Farming by the Foot? Mississippi
Delta MSU Test Site Ed Hood farm Geographic
Positioning System Geographic Information
System Satellite Imagery Modified Farm
Equipment Combinations of hybrid
technologies Much less cost with more production
and hugely friendly to River and Gulf
G P S
18
Toasted Sliced Bread
Innovation can be mundane, but still exciting.
Bread was not very standard for many years,
then it was baked to size. But it was sold by
the loaf because slicing the loaf ahead of time
caused it to dry out very quickly. The airtight
wrapping changed that and it could be sliced.
Soon Wonder Bread led the way. An inventor had
created the toaster but it was not selling
because inconsistent slicing by the preparer
caused a hassle. Standard bread and slices solved
the problem. Sliced bread met the toaster.
Voila!
19
Cell Phones and Sat Com
I am not going to insult your intelligence by
explaining sat com and the cell phone.
Technologies are rapidly evolving, a better word
may be revolving, honoring an
evolution-revolution contrast! BUTFYI it has
been interesting
Iridium has over 66 satellites in orbit and began
service in late 1998. However, due to poor
marketing, high charges, late delivery of
workable phones, gigantic debt load, spread of
terrestrial cell phone systems, etc., the company
attracted only 63 thousand subscribers instead of
the 100s of thousands expected by mid-1999. It
declared bankruptcy and even planned to begin
de-orbiting of the satellites. In November 2000,
however, an investor group purchased the Iridium
assets for 25 million. It received a 2 year
contract with the US Dept. of Defense to supply
communications services. Without a 4 billion
debt to pay off, the new company, called Iridium
Satellite, only had to attract another 30k of
subscribers to break even. The company reported
in June of 2005 that it was profitable and had
over 127,000 users. The company has said that it
intends to apply for a FCC license for a 96
satellite system to replace the current
constellation when it is expected to start
failing around 2010. They expect to fill the
capacity of the current system (guessing around 2
or 3 million users) before then.
Iridium Globalstar Thuraya
20
Secondary/Own Financials replicate,
create, emulate
DUE DILIGENCE
Observed/Own Operations replicate,
create, emulate
Environment Technical, Economic, Regulatory,
Ethical, Users, Buyers, Try-ers, Sales Data,
Markets (Market Analysis), Segments/Niches, etc.
Your Industry (Industry Analysis)
Your Firm
Creative Destruction - Schumpeter
Direct Competitors
Indirect Competitors
Substitute Industry
Observed/Own Strategy replicate, create,
emulate (intended behaviors)
21
Secondary/Own Financials replicate,
create, emulate
DUE DILIGENCE
Observed/Own Operations replicate,
create, emulate
Environment Technical, Economic, Regulatory,
Ethical, Users, Buyers, Try-ers, Sales Data,
Markets (Market Analysis), Segments/Niches, etc.
Your Industry (Industry Analysis)
Your Firm
Creative Destruction - Schumpeter
Direct Competitors
Indirect Competitors
Substitute Industry
Observed/Own Strategy replicate,
create, emulate (intended behaviors)
22
Discussion on Models

• Models extract key attributes of reality
• Model attributes are seldom wholly sufficient in
  representing reality
• Some model attributes may be erroneously
  included that meet iia criteria
• With proper variables included models behave
  properly
• Models create framing so we can think and
  reason
• Frames are mental structures permitting human
  understanding
• Marketing framing is an application of
  cognitive science
• Unconscious activation links to the sensible
  and excludes nonsense
• Frames define common sense what fits the frame
  makes sense
• Repetition embeds frames in the brain and they
  are then very persistent
• Frames facilitate effectiveness of spreading
  activation
• Models also are chunks and often contain
  chunks (composite parts)
• Chunks (e.g., Segment) are how brain storage
  and retrieval works
• Frames (e.g., Consumer Product Preference
  Space) organize the associated chunks into a
  consistent and coherent assemblage may be a
  chunk in a larger assemblage.
• Ref Goffman, E. Frame Analysis. New York
  Harper, 1974 Lakoff, G. Thinking Points. New
  York Farrar, Straus, and Giroux, 2006

23
What Models Speak for Marketing?

• Due Diligence Model
• Demand (Q ? (P, X1, X2, , Xn) or Y ?
  (ß1Pi ß2Xj e)
• Kartajaya Triune Model
• OODA Model
• Person-Situation Segmentation Model
• Fundamental Model
• CPPS Model
• Segmentation
• Positioning-Differentiation
• PLC Model
• Mental Attitude Model
• Value Model
• Diffusion of Innovation-Adaptation Model
• Taguchi Loss Function Model
• QFD Model
• Tactical-Strategic Matrix
• ??? (and ??????)

24
Example CPPS Frame, Segment Chunk
A high end segment willing to pay for quick
relief for intense pain

5.00/C
X 4.75/C
Viewed from here
I P
60 minutes
5 minutes
Desired speed of relief
X 12.3 min
I P
QFD required for formulation
.50/C
Cost per 100 tablets
Viewed from here
25
The Fundamental Model
VISION
Value culture
Value creation and destruction
STRATEGY
OPERATIONS
TACTICS
Build FOCUS and Mind Share
Build TRUST and Access Share
Build CAPABILITY and Market Share
IT/IM Research/DD Distribution/Logistics
Five Ps (Concept/Creativity)
Product/Promo/Price Place/People Selling
(Capture) B2B (Buyer-Seller/Promo) B2C
(Advertising) C2C (Buzz/Virus/Referral) Diffe
rentiation Content (What) Context
(How) Infrastructure (Enables)
Segmentation Macro/Micro
Methodology Targeting Size Dynamic
Leverage Positioning Reason for Being
Offering
VALUE
Build FRANCHISE and Heart Share
Process Service Branding Value Indicator
Loyalty/Love
Belief/Behavior
Custom/Habituation
26
The Fundamental Model
VISION
Value culture
Value creation and destruction
STRATEGY
OPERATIONS
TACTICS
Build FOCUS and Mind Share
Build TRUST and Access Share
Build CAPABILITY and Market Share
IT/IM Research/DD Distribution/Logistics
Five Ps (Concept/Creativity)
Product/Promo/Price Place/People Selling
(Capture) B2B (Buyer-Seller/Promo) B2C
(Advertising) C2C (Buzz/Virus/Referral) Diffe
rentiation Content (What) Context
(How) Infrastructure (Enables)
Segmentation Macro/Micro
Methodology Targeting Size Dynamic
Leverage Positioning Reason for Being
Offering
VALUE
Build FRANCHISE and Heart Share
Process Service Branding Value Indicator
Loyalty/Love
Belief/Behavior
Custom/Habituation
27
The Fundamental Model
VISION
Value culture
Value creation and destruction
STRATEGY
OPERATIONS
TACTICS
Build FOCUS and Mind Share
Build TRUST and Access Share
Build CAPABILITY and Market Share
IT/IM Research/DD Distribution/Logistics
Five Ps (Concept/Creativity)
Product/Promo/Price Place/People Selling
(Capture) B2B (Buyer-Seller/Promo) B2C
(Advertising) C2C (Buzz/Virus/Referral) Diffe
rentiation Content (What) Context
(How) Infrastructure (Enables)
Segmentation Macro/Micro
Methodology Targeting Size Dynamic
Leverage Positioning Reason for Being
Offering
VALUE
Build FRANCHISE and Heart Share
Process Service Branding Value Indicator
Loyalty/Love
Belief/Behavior
Custom/Habituation
28
The Fundamental Model
VISION
Value culture
Value creation and destruction
STRATEGY
OPERATIONS
TACTICS
Build FOCUS and Mind Share
Build TRUST and Access Share
Build CAPABILITY and Market Share
IT/IM Research/DD Distribution/Logistics
Five Ps (Concept/Creativity)
Product/Promo/Price Place/People Selling
(Capture) B2B (Buyer-Seller/Promo) B2C
(Advertising) C2C (Buzz/Virus/Referral) Diffe
rentiation Content (What) Context
(How) Infrastructure (Enables)
Segmentation Macro/Micro
Methodology Targeting Size Dynamic
Leverage Positioning Reason for Being
Offering
VALUE
Build FRANCHISE and Heart Share
Process Service Branding Value Indicator
Loyalty/Love
Belief/Behavior
Custom/Habituation
29
The Fundamental Model
VISION
Value culture
Value creation and destruction
STRATEGY
OPERATIONS
TACTICS
Build FOCUS and Mind Share
Build TRUST and Access Share
Build CAPABILITY and Market Share
IT/IM Research/DD Distribution/Logistics
Five Ps (Concept/Creativity)
Product/Promo/Price Place/People Selling
(Capture) B2B (Buyer-Seller/Promo) B2C
(Advertising) C2C (Buzz/Virus/Referral) Diffe
rentiation Content (What) Context
(How) Infrastructure (Enables)
Segmentation Macro/Micro
Methodology Targeting Size Dynamic
Leverage Positioning Reason for Being
Offering
VALUE
Build FRANCHISE and Heart Share
Process Service Branding Value Indicator
Loyalty/Love
Belief/Behavior
Custom/Habituation
30
Value can be expressed several ways. Three of the
clearest are Benefits (total
get) Value ---------- or more
specifically, Price (total give) Fb
Eb Value --------- where, P
Oe Fb Functional benefits (utility)
Eb Emotional benefits (psychology) P
Price (charged) for acquisition Oe Other
expenses/costs of acquisition and
finally Value You answered my
question! Solved my problem!
31
How YOU Add Value

• Exceptional due diligence in your work
• Write a clear, concise, complete plan
• Incorporate all component parts required
• Professional format and organization
• Establish a dialogue to avoid missteps
• Provide sources on everything not your own
• Work for a quality result not a grade (attitude)
• Be an exemplary group member
• Exhibit professional, quality behavior
• Demand professional, quality behavior

32
Deliverables

• Industry analysis (IA) (pp. 45-64)
• Market analysis (MA) (pp.65-82)
• Sales forecast (SF) (pp.82-96)
• Marketing plan (MP) (pp. 97-126)
• Cash budget (CB) (pp. 178-184)
• Pro-forma financials (PFF) (pp. 184-215)
• and other credible sources may be used for
  these purposes, but
• please discuss substantial deviations in
  content or format!

33
Deliverables

• Industry analysis
• Market analysis
• Marketing plan
• Sales forecast
• Cash budget
• Pro-forma financial statements

34
IA - Suggestions

• Characteristic attributes and processes of the
  industry
• Conceptual and geographic boundaries What
  business are we in?
• Customer attributes and characteristics
• Competitive intelligence
• Source availability, credibility, reliability,
  validity
• Offerings, offering categories, and detailed
  market share rationales
• Firm-affecting drivers in the industry (search
  for better schema)
• Economic, competitive, social, legal, and
  political
• Distributive, logistical, technological, ethical,
  regulatory
• Trends toward clusters, alliances, contractual
  relationships
• Revenues and Profitability
• History in industry overall and in the
  most-like-us firms
• Factors driving historical performance
• Environmental factor analysis of future trends
  and possibilities
• Intelligence-based (Duly Diligent) Strategic
  Intent
• Role of timing and location/place in market
  success
• Specific documented opportunities presenting
• Linkage between intended behaviors (long-term)
  and anticipated revenues

35
Deliverables

• Industry analysis
• Market analysis
• Marketing plan
• Sales forecast
• Cash budget
• Pro-forma financial statements

36
MA - Suggestions

• Characteristic attributes and processes of the
  market
• Conceptual and geographic boundaries and
  successful firm congruence
• Target market attributes and segments and niches
  of choice
• Competitive intelligence including their scope,
  behaviors, and outcomes
• Source availability, credibility, reliability,
  validity
• Offerings, offering categories, and detailed
  market share rationales
• Key influences on firms in the market (search for
  better schema)
• Economic, competitive, social, legal, and
  political
• Distributive, logistical, technological, ethical,
  regulatory, and cooperative
• Revenues and profitability specific to the
  targeted market
• History in market with the most-like-us firms
• Factors driving historical performance of like
  firms in market
• Environmental factor analysis of future market
  trends and possibilities
• Intelligence-based (Duly Diligent) Strategic
  Market Intent
• Role of timing and location/place in target
  market success
• Specific documented opportunities presenting in
  the targeted market
• Linkage between intended market behaviors and
  long-term revenues

37
Deliverables

• Industry analysis
• Market analysis
• Marketing plan
• Sales forecast
• Cash budget
• Pro-forma financial statements

38
MP - Suggestions

• Description of the targeted segments, niches, and
  offerings that FIT
• Formulate clear vision and mission
• Encompass targeted offering mix with goals and
  strategic initiatives
• Strategic commitment to definable, accessible
  customer base with means
• Document target market attributes of segments and
  niches of choice
• Create supported, persuasive, credible customer
  base positioning
• Competitive intelligence including their scope,
  behaviors, and outcomes
• Document all source availability, credibility,
  reliability, validity for revisit
• Key influences on firms in the target market
  (search for better schema)
• Situational Review incorporating all
  deliverables
• Economic, competitive, social, legal, and
  political
• Distributive, logistical, technological, ethical,
  regulatory, and cooperative

39
MP Suggestions(Continued)

• Specific targeted market opportunities
• History in target or similar markets of the
  most-like-us firms
• Factors driving historical performance of like
  firms serving customer base
• Estimated probability and outcomes of
  establishing a solid niche/segment
• Specific acquisition histories and purchase
  habits of customer base
• Intelligence-based (Duly Diligent) Strategic
  Positioning
• Role of timing and location/place in target
  market positioning
• Respond to documented opportunities identified in
  the targeted market
• Establish linkage from goals to tracking customer
  outcomes and revenues

Goals
Strategy
Tactics
Tracking
McCarthys Marketing Mix 4 Ps
40
Deliverables

• Industry analysis
• Market analysis
• Marketing plan
• Sales forecast
• Cash budget
• Pro-forma financial statements

41
SF - Suggestions

• Most fundamental data points determined
• Essential information for many other parts of the
  plan
• Every estimation should be supportable and linked
  to process
• Segment/niche analysis falling short of
  break-even is a red flag
• Realization of a profitable forecasted revenue
  flow is ucce
• Tracking defines the Product Life Cycle
• Sales Forecast Boundaries
• National economy
• Firms industry
• Targeted segments/niches
• Firms offering revenue forecasts
• Sales Forecasting Methods
• Extrapolation (smoothed curve, cyclicity,
  seasonality) if past has worked
• Market build-up by segment/niche by sales
  force/management
• Sales-correlated factors (variables)
• Customer survey
• Expert opinion, judgment

42
Deliverables

• Industry analysis
• Market analysis
• Marketing plan
• Sales forecast
• Cash budget
• Pro-forma financial statements

43
CB - Suggestions

• Realistic periodic cash inflow/outflow stream
  from operations
• Inflows cash receipts, accounts, asset sales,
  tax back
• Outflows purchases, wages/salaries, taxes,
  dividends, debt service
• Inflows Going concern differs from proposed
  business
• Cash sales and Receivables Collection Patterns
  can be extrapolated
• Specific methodologies apply
• Proposed business requires estimates
• Outflows Should be driven by plans and budgets
• Fixed salaries, leases, debt service, etc.
• Variable labor, advertising, purchasing, etc.

44
Deliverables

• Industry analysis
• Market analysis
• Marketing plan
• Sales forecast
• Cash budget
• Pro-forma financial statements

45
PFF - Suggestions

• Envision an historical income statement and
  balance sheet (but cash flows based in planned
  future events as if already over)
• Income Statement sales, expenses, profits
• Balance Sheet Assets, liabilities, owners
  equity (retained earnings)
• Total fund sources compared to total fund
  expenditures
• Reveals surpluses to be deployed if revenues
  exceed expenditures
• Treat forecasts, projections, budgets as
  diligently known (p. 184 ff.)
• Reveals financing required if expenditures exceed
  revenues THIS is the raison detre of the pro
  forma, the plug figure a shortfall you must
  meet
• Assumes relationships between revenues and all
  other items
• Useful in assessing and tracking risk
• Business risk sales and cash flow fluctuations
• Financial risk probability of penalties related
  to debt
• Financial and business risk must be viewed as
  inversely related
• Debt service is relatively constant, while
  projected revenues may be off
• Justifies every ounce of due diligence
  competitors, segments, positioning, etc.
• Internal (operations costs) and external factors
  (economy) will fluctuate

46
Marketing Complexity

• You have seen a few models extracts of
  reality
• Marketing is comprised of scores of models
• Many models are borrowed (stolen) from other
  areas
• Marketers have differing views of models
  (components)
• Marketing essence is diversely perceived
  (among others)
• Exchange processes
• Customer relationships
• Stakeholders
• Marketers very seldom agree on one viewpoint, or
  focus, or model
• McKenna said marketing was everything
• Levitt said marketing had become globally
  homogeneous
• A question to answer What business are we in,
  and why?
• Another question Who is our customerreally?
• It is, at the core, a grand adventure enjoy
• If you needed proof, we will finish with an
  interesting model, a matrix

47
The Strategic (Tactical) Matrix
Customer Competitor Channels
Compliance Company




Product Price Promotion Place
48
Now a slightly more traditional approach to
defining marketing