Strategic Portfolio Analysis: A New Market Opportunity for eAppeals LLC
©2005
Diplomarbeit
100 Seiten
Zusammenfassung
Inhaltsangabe:Zusammenfassung:
Die vorliegende Arbeit wurde zum grössten Teil in den USA erstellt. Der Autor hatte über einen Studentenaustausch und ein Praktikum in Miami/USA einen Kontakt zu einem Start-Up-Unternehmen aufgebaut, mit dem zusammen er schliesslich seine Diplomarbeit erarbeitete. Unterstützt wurde er dabei massgeblich von Frau Prof. Dr. Nickerson von der Barry University in Miami, einer Partneruniversität der GSO FH Nürnberg, zu der intensivste Beziehungen bestehen.
Das Ziel der Arbeit bestand darin, aufbauend auf das erfolgreiche Business Modell der Firma eAppeals LLC neue Geschäftsfelder in Europa zu identifizieren und zu bewerten. Dazu war es erforderlich, Erfolgsgrundlagen der Firma in den USA zu untersuchen, die Übertragbarkeit der spezifischen Lösungen auf anderen Anwendungen zu überprüfen und schliesslich neue Märkte zu finden und zu vergleichen. Der Verfasser benutzte zu letzterem eine spezifische Methode, nämlich die sog. Strategische Portfolio Analyse.
Die Struktur der Arbeit ist sehr gut: nach Einführung gibt der Autor einen Überblick über relevante Literaturansätze zum Thema Business Plan (Kap. 2). Anschliessend entwickelt er in Kap. 3 die zugrunde liegende Idee (Kap.3), beschreibt die Firma (Kap. 4) und entwirft dann die methodische Vorgehensweise (Kap. 5).
Die Haupteile der Arbeit sind sodann die Marktanalyse bzw. die Suche nach neuen strategischen Geschäftsfeldern (Kap. 6) und schliesslich die Strategische Portfolio Methode (Kap. 7).
Die Arbeit überzeugt insgesamt durch ihre kreative und auch gründliche Vorgehensweise. Der Verfasser hat sich insbesondere in den empirischen Teilen tief in die anspruchsvolle Materie hineingearbeitet. Juristische, technische und organisatorische Aspekte werden detailliert untersucht. Die Marktanalyse stützt sich auf eine sehr gute Datenbasis mit aktuellsten Zahlen.
Besonders gelungen ist der Teil der Strategischen Portfolioanalyse, in dem der Autor auf ein 8-köpfiges Experten-Team zurückgreift. Diese Experten mit verschiedensten beruflichen Hintergründen bilden eine starke Kompetenz-Gruppe, die durchaus das Know-how und die Erfahrung hat, die gefundenen Märkte zu bewerten.
Es ist zu hoffen, dass die gefundenen Ergebnisse zu einer Realisierung führen. Eine gute Grundlage für den Markteinstieg wurde jedenfalls mit dieser Diplomarbeit gelegt.
Abstract:
Establishing something new, working towards a vision and following a path of independence and uniqueness all describe the […]
Die vorliegende Arbeit wurde zum grössten Teil in den USA erstellt. Der Autor hatte über einen Studentenaustausch und ein Praktikum in Miami/USA einen Kontakt zu einem Start-Up-Unternehmen aufgebaut, mit dem zusammen er schliesslich seine Diplomarbeit erarbeitete. Unterstützt wurde er dabei massgeblich von Frau Prof. Dr. Nickerson von der Barry University in Miami, einer Partneruniversität der GSO FH Nürnberg, zu der intensivste Beziehungen bestehen.
Das Ziel der Arbeit bestand darin, aufbauend auf das erfolgreiche Business Modell der Firma eAppeals LLC neue Geschäftsfelder in Europa zu identifizieren und zu bewerten. Dazu war es erforderlich, Erfolgsgrundlagen der Firma in den USA zu untersuchen, die Übertragbarkeit der spezifischen Lösungen auf anderen Anwendungen zu überprüfen und schliesslich neue Märkte zu finden und zu vergleichen. Der Verfasser benutzte zu letzterem eine spezifische Methode, nämlich die sog. Strategische Portfolio Analyse.
Die Struktur der Arbeit ist sehr gut: nach Einführung gibt der Autor einen Überblick über relevante Literaturansätze zum Thema Business Plan (Kap. 2). Anschliessend entwickelt er in Kap. 3 die zugrunde liegende Idee (Kap.3), beschreibt die Firma (Kap. 4) und entwirft dann die methodische Vorgehensweise (Kap. 5).
Die Haupteile der Arbeit sind sodann die Marktanalyse bzw. die Suche nach neuen strategischen Geschäftsfeldern (Kap. 6) und schliesslich die Strategische Portfolio Methode (Kap. 7).
Die Arbeit überzeugt insgesamt durch ihre kreative und auch gründliche Vorgehensweise. Der Verfasser hat sich insbesondere in den empirischen Teilen tief in die anspruchsvolle Materie hineingearbeitet. Juristische, technische und organisatorische Aspekte werden detailliert untersucht. Die Marktanalyse stützt sich auf eine sehr gute Datenbasis mit aktuellsten Zahlen.
Besonders gelungen ist der Teil der Strategischen Portfolioanalyse, in dem der Autor auf ein 8-köpfiges Experten-Team zurückgreift. Diese Experten mit verschiedensten beruflichen Hintergründen bilden eine starke Kompetenz-Gruppe, die durchaus das Know-how und die Erfahrung hat, die gefundenen Märkte zu bewerten.
Es ist zu hoffen, dass die gefundenen Ergebnisse zu einer Realisierung führen. Eine gute Grundlage für den Markteinstieg wurde jedenfalls mit dieser Diplomarbeit gelegt.
Abstract:
Establishing something new, working towards a vision and following a path of independence and uniqueness all describe the […]
Leseprobe
Inhaltsverzeichnis
Alexander Tange
Strategic Portfolio Analysis: A New Market Opportunity for eAppeals LLC
ISBN: 978-3-8366-0440-6
Druck Diplomica® GmbH, Hamburg, 2007
Zugl. Georg-Simon-Ohm-Fachhochschule Nürnberg, Nürnberg, Deutschland,
Diplomarbeit, 2005
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© Diplomica GmbH
http://www.diplom.de, Hamburg 2007
Printed in Germany
Small opportunities are often the beginning of great enterprises.
Demosthenes
(Greek orator & politician in Athens, 384 322 BC)
Dedication
To my grandmother Christa Eva Peter
IV
Acknowledgements
I want to thank Dr. Inge Nickerson. Primarily it was her, who inspired me so much
during her class "Entrepreneurship" at Barry University in the winter semester
2003/04. She not only provided me with excellent theoretical knowledge but also
challenged my entrepreneurial thinking by inviting me to Start-Up Events in the
South Florida Region. Furthermore, I have to thank her for establishing the contact
with eAppeals LLC.
In Germany, Prof. Dr. Werner Fees provided active support, guidelines and room for
independent work for developing this thesis. Also, I appreciated the brainstorming
sessions, which eliminated critical barriers, which occurred during the work on this
thesis.
Dr. Bill Kirsh, president and co-founder of eAppeals, Andrea Kirsh and Joan
Freiwald from eAppeals LLC deserve my full gratitude for establishing such a
fascinating learning environment and challenging task, which ultimately led to this
thesis.
I appreciate all the efforts of Dr. Katja Bierau, Walther Doernte, Arno Fuchs and
Magnus Edwerts, who provided their expert knowledge and interesting insights in
their work experiences through several interesting interviews.
Naturally, I have to send special gratitude to my dear family, who always supported
me in whatever I was undertaking. The reason that I always know, that they are
available whenever necessary, provides me with the indispensable confidence to
accomplishing all my goals.
Sarcastically, I thank the woman who crashed at moderate speed in the back of my
car, opening my eyes for the existence of new market opportunities for eAppeals'
concept.
Last but not least, I want to thank all my International Business Colleagues, who
were a great class of 2005 and provided unforgettable memories. Particularly I am
thanking Thomas Greulich for helping me to grow up, Manuel Storrer, for
discovering together other parts of the world, Florian Gorzitzke, for many intellectual
moments and my girlfriend Natalie Raster for all the love.
V
Table of Contents
DEDICATION
IV
ACKNOWLEDGEMENTS
V
TABLE OF CONTENTS
VI
LIST OF TABLES
VIII
LIST OF FIGURES
VIII
ABBREVIATIONS
IX
1
INTRODUCTION 1
1.1
B
ACKGROUND AND
M
OTIVATION
1
1.2
R
ESEARCH
Q
UESTION AND
O
BJECTIVE
1
1.3
S
TRUCTURE OF THE THESIS
2
2
THE BUSINESS PLAN: LITERATURE REVIEW
4
2.1
O
VERVIEW
4
2.2
B
USINESS
P
LAN
T
HEORY
5
2.2.1
B
USINESS
P
LAN
C
ONTENT
T
HE
O
UTLINE
5
2.2.2
B
USINESS
P
LAN
C
ONTENT
T
HE
E
SSENTIALS
6
2.3
B
USINESS
P
LAN AND
G
ENERAL
M
ANAGEMENT
T
HEORY
9
2.3.1
D
ISCUSSION OF THE
B
USINESS
P
LAN
F
RAMEWORK
9
2.3.2
R
ECOMMENDATION
10
2.3.3
D
ISCUSSION OF THE
B
USINESS
P
LAN
E
SSENTIALS
10
2.4
R
ECOMMENDATION
13
3
THE IDEA
15
3.1
D
ESCRIPTION OF THE IDEA
15
3.2
SWOT
A
NALYSIS
16
3.3
F
OUNDATIONS OF HOW TO FIND A NEW MARKET FOR E
A
PPEALS
18
4
EAPPEALS LLC
21
4.1
T
HE COMPANY
21
4.1.1
T
HE PROBLEM IN THE
US
HEALTHCARE INDUSTRY
21
4.1.2
E
A
PPEALS
'
CONCEPT AND THE PRODUCT
23
4.2
E
A
PPEALS
'
C
ORE
C
OMPETENCE
25
5
RESEARCH METHODOLOGY
27
5.1
O
VERVIEW OF THE
R
ESEARCH
M
ETHOD
27
5.2
R
ESEARCH
M
ETHOD
27
5.2.1
S
TRATEGIC
P
ORTFOLIO
A
NALYSIS
I
NTRODUCTION
28
5.2.2
C
LASSIFICATION OF
A
TTRIBUTES
29
5.2.3
C
ALCULATION
M
ETHODOLOGY
31
VI
6
MARKET RESEARCH OF THREE POTENTIAL MARKETS
34
6.1
P
OTENTIAL
M
ARKET
O
PPORTUNITIES
34
6.2
T
HE
S
WISS
H
EALTHCARE CLAIM APPEALS
34
6.2.1
M
ARKET
A
TTRACTIVENESS
34
6.2.2
T
ECHNOLOGY
A
DAPTABILITY
37
6.3
G
ERMAN
H
EALTH
C
ARE
C
LAIM
A
PPEALS
38
6.3.1
M
ARKET
A
TTRACTIVENESS
39
6.3.2
T
ECHNOLOGY
A
DAPTABILITY
42
6.4
T
HE
C
AR
R
EPAIR
D
ISPUTED
C
LAIMS
43
6.4.1
M
ARKET ATTRACTIVENESS
43
6.4.2
T
ECHNOLOGY
A
DAPTABILITY
48
7
STRATEGIC PORTFOLIO ANALYSIS
51
7.1
S
TRATEGIC
P
ORTFOLIO
A
NALYSIS
-
O
VERVIEW
51
7.2
E
XPERT
T
EAM
51
7.2.1
E
XPERT
S
URVEY
52
7.2.2
S
URVEY
R
ESULTS
53
7.3
C
ONSOLIDATED
R
ESULTS
60
7.3.1
S
WISS
H
EALTHCARE
C
LAIM
A
PPEALS MARKET
(S
WISS
HC) 61
7.3.2
G
ERMAN
H
EALTHCARE
C
LAIM
A
PPEALS MARKET
(G
ERMAN
HC) 62
7.3.3
G
ERMAN
C
AR
R
EPAIR
C
LAIM
A
PPEALS MARKET
(G
ERMAN
CR) 63
7.4
S
TRATEGIC
P
ORTFOLIO
A
NALYSIS
(SPA) 64
8
CONCLUSION 65
8.1
R
ESULT OF THE
SPA 65
8.2
C
RITICAL
R
EFLECTIONS
65
8.3
R
ECOMMENDATION
66
8.4
S
UMMARY AND
O
UTLOOK
67
BIBLIOGRAPHY
I
APPENDIX
V
VII
List of Tables
T
ABLE
1
-
O
UTLINE
C
OMPARISON
... 9
T
ABLE
2
-
S
TRENGTHS AND
W
EAKNESSES
... 17
T
ABLE
3
-
O
PPORTUNITIES AND
T
HREATS
... 18
T
ABLE
4
-
A
NSOFF
'
S
P
RODUCT
/M
ARKET
M
ATRIX
... 19
T
ABLE
5
-
T
ECHNOLOGY
T
RANSFER
:
RED AND GREEN LIGHTS FOR ENTREPRENEURS
... 20
T
ABLE
6
-
S
CORING
M
ETHODOLOGY
... 32
T
ABLE
7
-
T
OP
T
EN OF THE MOST COMMON COMPLAINTS AT
G
ERMAN INSURANCES
... 47
T
ABLE
8-
E
XPERT
T
EAM MEMBERS
... 52
T
ABLE
9
P
ROFILE
E
XPERT
1
... 54
T
ABLE
10
-
E
XPERT
1
S
CORINGS
... 54
T
ABLE
11
-
P
ROFILE
E
XPERT
2
... 55
T
ABLE
12
-
E
XPERT
2
S
CORINGS
... 55
T
ABLE
13
-
P
ROFILE
E
XPERT
3
... 56
T
ABLE
14
-
E
XPERT
3
S
CORINGS
... 56
T
ABLE
15
-
P
ROFILE
E
XPERT
4
... 57
T
ABLE
16
-
E
XPERT
4
S
CORINGS
... 57
T
ABLE
17
-
P
ROFILE
E
XPERT
5
... 58
T
ABLE
18
-
E
XPERT
5
S
CORINGS
... 58
T
ABLE
19
-
P
ROFILE
E
XPERT
6
... 59
T
ABLE
20
-
E
XPERT
6
S
CORINGS
... 59
T
ABLE
21
-
C
ONSOLIDATED
S
CORINGS FOR THE
S
WISS
HC
... 61
T
ABLE
22
-
C
ONSOLIDATED
S
CORINGS FOR THE
G
ERMAN
HC
... 62
T
ABLE
23
-
C
ONSOLIDATED
S
CORINGS FOR THE
G
ERMAN
CR
... 63
T
ABLE
24
-
C
ONSOLIDATED
S
CORINGS OF ALL THREE MARKETS
... 64
List of Figures
F
IGURE
1-
S
TRUCTURE OF
T
HESIS
... 3
F
IGURE
2
-
T
HE
E
SSENTIALS OF A
B
USINESS
P
LAN
... 11
F
IGURE
3
-
T
HE
T
IMMONS
M
ODEL OF THE
E
NTREPRENEURIAL
P
ROCESS
... 13
F
IGURE
4
-
E
XAMPLE OF
SPA
... 33
F
IGURE
5
-
C
OMPARISON OF
GDP
PER CAPITA
... 36
F
IGURE
6-
L
OCATION OF
C
AR
R
EPAIRS IN
G
ERMANY
... 45
F
IGURE
7
-
R
OAD MOTOR VEHICLES
... 46
F
IGURE
8
-
SPA
S
WISS
HC
... 61
F
IGURE
9
-
SPA
G
ERMAN
HC
... 62
F
IGURE
10
-
SPA
G
ERMAN
CR
... 63
F
IGURE
11
-
F
INAL
SPA
OF THE THREE MARKETS
... 64
VIII
Abbreviations
BaFin
Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Financial
Supervisory Authority)
BVSK
Bundesverband der freiberuflichen und unabhängigen
Sachverständigen für das Kraftfahrzeugwesen e.V. (Advisory
organisation for independent consultancy of the motor vehicle
industry)
DKV
Deutsche Krankenversicherung (German private health insurance)
EU
European Union
FTP
File Transfer Protocol
German CR
German Car Repair Claim Appeals market
German HC
German Healthcare Claim Appeals market
GKV
Gesetzliche Krankenversicherung (Statutory health care insurance
program)
HAM
Hausarztnetzwerk
HIPAA
Health Insurance Portability and Accountability Act of 1996
HMO
Health Maintenance Organisation
LLC
Limited Liability Company
PPO
Preferred Provider Group
R & D
Research & Development
SBU
Small Business Unit
SPA
Strategic Portfolio Analysis
Swiss HC
Swiss Healthcare Claim Appeals market
SWOT
Strengths, Weaknesses, Opportunities, Threats
ZDK
Zentralverband des Deutschen Kraftfahrzeuggewerbes (German
Association of Motor Trade and Repairs)
IX
Background and Motivation
1
1
Introduction
1.1 Background and Motivation
Establishing something new, working towards a vision and following a path of
independence and uniqueness all describe the benefits of entrepreneurship. That
and other thoughts have driven the author to study International Business at the
Georg-Simon-Ohm University of Applied Sciences. That programme not only
allowed him to spend two semesters in the United States of America but also to
gather invaluable economic insight during two internship semesters. That was
exactly when the author was the first time exposed to an entrepreneurial
environment as he completed a five-month internship at an US start-up company
called eAppeals LLC. Working at a start-up company meant being exposed to a
young company culture, meeting real entrepreneurs and working in small teams. But
also, start-up experiences meant starting each business process from scratch,
working long hours and being exposed to uncertainty. This experience contributes to
continue following a career path which eventually will lead to a new venture creation.
Consequently, this thesis encounters a lot of entrepreneurial thinking and is trying to
identify a new business opportunity, the prerequisite for building a new business.
This thesis promotes entrepreneurial thinking by discussing business plan theory. It
furthermore invites creativity and welcomes any new thoughts, while aiming at the
identification of a business opportunity and examining its feasibility. The author is
inspired by the entrepreneurial action he has experienced at eAppeals and is
curious about establishing a new opportunity in order to create own new
entrepreneurial action. And that is at the same time the motivation behind this
thesis.
1.2 Research Question and Objective
Entrepreneurship knowingly subscribes a huge academic topic. However the
research within this thesis mainly is focusing on the business opportunity. Since a
business opportunity plays a central role within new venture creation, the results of
this thesis can serve as a baseline for a business plan. As the business opportunity
still represents a wide range of academic research possibilities, the underlying
research question to be answered in this thesis is:
Structure of the thesis
2
In what market could eAppeals' system be positioned besides the disputed
healthcare claims in the USA?
This main research question will be further underpinned with background
information throughout the next chapters. As this research question represents the
main research issue, it represents the whole of the parts, which are a number of
minor research questions to be answered throughout this thesis:
1. What business opportunity does eAppeals serve in its home market?
2. What are the characteristics a market has to have to be considered a
potential market of eAppeals?
3. What criteria determine the adaptability of the technology eAppeals
employs to new markets?
4. If more than one market appears to provide a business opportunity, how
can a decision about the best one be drawn?
All research preformed throughout this academic paper aims at answering the
research question or questions closely related to it like the 4 question listed above.
The central research objective is to identify a new market opportunity where
eAppeals' concept can be applied. Thus, the research objective is to name one and
only one potential new market, which provides a prospective environment to raise a
new business unit of eAppeals.
1.3 Structure of the thesis
The thesis is built in an incremental way, so that no special knowledge is necessary
to follow its logic. It consists of six main parts, namely the business plan theory, the
idea, eAppeals the company, the research methodology, a market research, the
research analysis and the result the selected market. All parts are linked in a
logical and incremental way. After the introduction the thesis starts off with the
literature review, providing theoretical concepts about the business plan, which is
the underlying theory of the research. Upon the business plan theory, the actual
idea and the company of eAppeals are presented. Both are encountered by the new
business opportunity, which is to be selected among numerous available market
Structure of the thesis
3
opportunities. Of those, three potential markets are selected and a thorough market
research is conducted. The research methodology describes the Strategic Portfolio
Analysis (SPA), which is used to select the market, which can be accessed at lowest
cost and offers the greatest demand potential. Figure 1 visualizes how each part of
the thesis is linked in the logical manner described above.
Figure 1- Structure of Thesis
Overview
4
2
The Business Plan: Literature Review
2.1 Overview
Within the last decades the term entrepreneurship has evolved to an important
concept of the global economy and will continue to pace its way. Entrepreneurship
provides plenty of benefits for the entire society. Thus, it drives the domestic and
global economy to provide a greater overall welfare. New businesses, which are
created by entrepreneurs present new job openings, they improve existing products
and services and they are the root for general innovations. However, in order to
build up a new venture, unique skills and knowledge are indispensable. That does
not necessarily mean that these entrepreneurial skills are part of one's personality or
are even innate. Rather, most of these skills may be developed in theory and
practice. Today, there are thousands of business schools worldwide offering
courses such as entrepreneurship or business plan crafting and every year one
start-up contest follows the other. All efforts are initiated to create personalities
equipped with entrepreneurial skills, to help them to put their ideas into practice and
to create new ventures. Thus, entrepreneurs should have many traits such as great
analytical thinking, advanced leadership skills, efficient time management, just to
name a few. Naturally entrepreneurs have the capabilities to recognize business
opportunities and effectively exploit those by allocating available resources and
applying supportive tools. One of these tools is the business plan. The business
plan plays a central role in every new venture. It not only describes the business and
serves the customers, suppliers or investors, it also supports the entrepreneur
himself to think about the entire opportunity as he is fixing his ideas on paper. That
way different scenarios are simulated and critical issues are displayed. By crafting
the business plan the entire business concept will generate more value and the
chance of a future failure is minimized. Moreover, life in the 21
st
Century has
tremendously changed compared to the past. This is because of the rapidly
advancing information technology and more sophisticated communication channels.
Thus, the world has become more complex and business opportunities cannot be
formulated on a piece of napkin anymore. Therefore, a business plan has become
vital. After all, a well developed business plan is like a road map and will keep the
entrepreneur on track. In the first place, it is a document for the entrepreneur to help
him steer the start-up company in the right direction and remain focused. Without
that, how would an entrepreneur know if he is still on track?
Business Plan Theory
5
2.2 Business Plan Theory
Before the detailed theory of a business plan is looked at, a clear definition of a
business plan is provided:
"The business plan is a written document prepared by the entrepreneur that
describes all the relevant external and internal elements involved in starting a
new venture. It is sometimes referred to as a game plan or road map that
answers the questions, Where am I now? Where am I going? and How will I get
there? Potential investors, suppliers, and even customers will request or require
a business plan."
1
With this definition of a business plan it is crucial to understand what a business
plan should cover, in terms of a thorough outline, as well as in terms of the essential
topics, that make the business plan an effective one.
2.2.1 Business Plan Content The Outline
The outline should structure the business plan in a logical and incremental way to
allow the audience to understand the opportunity and the concept. To make sure the
business plan answers all potential questions of the audience, the outline should be
complete in the first place. In the following, an outline is presented in progressive
order, suited for the professional investor, as proposed by
Ennis J. Walton
in his
article
"The Business Plan"
. As a matter of fact, the professional investors are the
most demanding interest group, and thus a plan based on this outline can be scaled
down to all other interest groups as they are less demanding, e.g. private individuals
or customers. After all a good business plan should not exceed 40 pages, be short
and remain focused.
The Executive Summary
covers the plan and primarily serves the reader as a
quick impression of the venture. It is the most critical section, with only a few pages
long, as any interest group will use it to make the decision whether they will continue
to read the plan. It is usually written at the end of the business planning process and
covers aspects such as the company's status, management, products or services,
the market, the main financial prospects and the amount of investment needed,
including the investment strategies.
The Company
is presented in the second section by providing information about its
origins, objectives and management. Also, the company's organization is crucial to
understanding the human resources and distributed responsibilities. The strategy is
displayed by painting a picture of where the company hopes to go and how it
foresees to get there.
1
Hisrich and Peters,1992, p. 126
Business Plan Theory
6
The Product or Service
is presented in detail, including its needs and all benefits.
Customer testimonials, competitor comparisons, manufacturing milestones or patent
rights are welcomed to enhance this product presentation.
The Market
has to be understood by the entrepreneur to ensure there is sufficient
evidence for demand. A helpful substructure is a) the size, rate of growth, and
purchasing characteristics of the target market b) the company's perspective on the
market and c) the reaction the company expects form the market.
The Competition
is another key success factor, which has to be understood by the
entrepreneur. Only if the competitive edges are known can the company become
more efficient in response. Therefore, a competitor's analysis is recommended,
including their products or services.
Sales and Marketing
explains the approach in which the product will be sold. How
is the product or services promoted to the target customers? Methods of advertising,
the utilization of what kind of distribution channel, and the initial market entrance are
described in this section.
Operations
deal with the manufacturing of the product. Here, the make of the
product is described, including the need for facilities, subcontractors, equipment,
etc.
Financials
should be projected for a 5-year time horizon and be based on
thoroughly documented assumptions. They include an income statement, balance
sheet, cash flow forecast, and breakeven analysis. Key figures of financial
performance such as sales or earnings can be highlighted separately. Crucial to
investors are also exit strategies such as public offering, sale of company or the
repurchase of shares.
Appendix
is the last section and provides the capacity for the resumes of the key
personnel. Comprehensive sample product literature, letters from customers or
suppliers, etc. can also be attached.
A business plan is a theoretical document, which is linked closely to the real world,
however, every argument used and every point made within the document has to be
scientifically based on evidence. No unjustified argument will be accepted by
interest groups with academic backgrounds.
2.2.2 Business Plan Content The Essentials
Having a good structure secures the logic and completeness of the business plan.
However, what are the key determinants that make a business plan a more effective
tool, and, thus, influence its potential to succeed?
William A. Sahlman
identified in
Business Plan Theory
7
his article
"How to Write a Great Business Plan"
four independent factors that are
critical for every new venture. Knowing these essential aspects, the entrepreneur
may be more focused in what makes the plan really work. These four factors are the
people, the opportunity, the context and the risk and reward. Each aspect is
illustrated in more detail in the following.
The people behind the new venture are the first critical factor to look at, because it is
the right team that will make the other parts work or not. Questions addressing their
education, experience, reputation and motivation will answer the people's
capabilities. The more they can convince on these questions the higher the chance
that they will make the opportunity a winning one. The business plan should answer
these questions and provide resources to prove them. Thus, it will be essential to
know what experience the people have that is directly relevant to the opportunity,
which is pursued. Have the team members worked together before? Are they known
by suppliers, customers and employees? Even though the enterprise is brand new,
experienced people could make a decisive difference. But what counts the most are
the execution skills. The best opportunity will fail, if carried out by weak people and
vice versa. As a matter of fact, skilled people are able to shift the venture in a new
direction if they suddenly find out to be wrong about their product or service. Others
might just fail. Exhaustively screening the people in a business plan and matching
their skills with the opportunity will provide evidence whether to carry out the venture
or not.
The opportunity is what makes the business. Thus, it has to allow the entrepreneur
to make some money. If this prerequisite will not be fulfilled the venture will fail. To
assure the attractiveness of an opportunity, the market for placing the product or
service should be large, rapidly growing or, ideally, both. Also, important is the
question whether the opportunity is now or could arise in the future. In fact, the
earlier high potential markets are identified, the bigger the payoffs. Once the
attractiveness of the opportunity is justified, the business plan clearly has to explain
the industry by addressing the markets, the product or service, the customers and
potential margins and costs. Talking about financials the focus should not only be on
direct revenues, costs for production and marketing, but also on the investments.
Above that, the cash flows are superior, since it is the cash that keeps the business
alive. The perfect opportunity naturally is when management can buy low, sell high,
collect early and pay late. The closer a business may approach that ideal, the lower
the risk of failure. Beyond that, the business plan has to discuss the potential for
growth. On the other hand entrepreneurs have to be aware of opportunity traps.
Besides structurally unattractive opportunities business planners might be blinded
Business Plan Theory
8
by inventions or arbitrage possibilities. Inventors often are more concerned with
their invention than with customer needs, while arbitrageurs often forget to add
value to build more enduring business models. By looking at opportunities, the
analysis of potential competitors should not be dismissed. And therein, the moves
of competitors within an opportunity have to be understood. As all opportunities
sound promising in the beginning, they truly all have vulnerabilities. An effective
entrepreneur uses the business plan to understand the dark side of the business as
well as the shining opportunity.
Every opportunity is exposed to a certain context. The context can be seen in
differing levels: One level is the macroeconomic environment, including the level of
economic activity, inflation, exchange rates, and interest rates. Another level
contains the wide range of government rules and regulations that govern the
opportunity and how resources are organized to exploit it. Again another level is
limits of what a business or its competition may accomplish, e.g. technology. In
extreme cases the context may change to a degree at which totally new
opportunities are created, for instance the deregulation of the airline industry in the
1970s. Overall, the context may support a business opportunity or even hinder it;
and, therefore, the entrepreneur should carefully assess the impact of the current
context in the relevant environment on the opportunity. Additionally, a simulation of
scenarios is helpful to see how a change in the context affects the business. The
business plan should reserve actions in case the context changes unfavorable. If
there are ways how the management may affect the context favorably, then it should
be said as well.
The last critical factor Sahlman mentions is the risk and reward. The best business
plans provide snapshots of the future as the people, the opportunity, and the context
are viewed from a wider perspective. This opens up possibilities of action and
reaction as the essential factors change over time. This is done to deal with the
unknown of the future. True entrepreneurs seek all the reward and leave the risks to
others. However, risk is unavoidable. In terms of risk, the people, the opportunity,
and the context, have to be scanned and management actions determined to be
ready in the worst case. Within the reward section, a wide range of exit options
should be provided to investors. If investors know the endgame upfront, it is easier
for them to deal with risks, according to the saying: a journey is a lot less risky when
you have directions.
Business Plan and General Management Theory
9
2.3 Business Plan and General Management Theory
2.3.1 Discussion of the Business Plan Framework
In this section the business plan framework from Walton, J. W. and Roberts, M. J.
presented in section 2.2.1 is compared with the proposed business plan framework
by Timmons, J. A., who has been one of the pioneers in the development of
entrepreneurial education and research in America since the late 1960.
Table 1 - Outline Comparison
Business Plan Framework by
Ennis J. Walton / Michael J.
Roberts
2
Business Plan Framework by
Jeffry A. Timmons / Stephen
Spinelli, Jr.
3
Executive Summary
Executive Summary
The Company
The Product or Service
The Industry and the Company
and its Product(s) or Service(s)
The Market
Competition
Market Research and Analysis
The Economics of the
Business
Sales and Marketing
Marketing Plan
Design
and
Development
Plans
Operations
Manufacturing and Operations
Plan
Management
Team
Overall
Schedule
Critical Risks, Problems, and
Assumptions
Financials
The Financial Plan
Proposed
Company
Offering
Appendix Appendices
In Table 1 I am comparing the two frameworks directly. In each column one can find
the major subheading of both authors' business plan framework. The author
mapped the contents of each subheading directly to the contents of the comparing
subheading. That way, it is possible to identify the identical parts and differences.
2
Walton, J.W. and Roberts, M.J, 1988, p. 2-5
3
Timmons, J.A. and Spinelli S., 2004, p. 403
Business Plan and General Management Theory
10
At a first glance at Table 1 it can be seen that Timmon's framework is much more
comprehensive and the information is more segmented. The core contents such as
the Executive Summary, Marketing Plan, Operations Plan, the Financial Plan and
the Appendices are identically. Differences occur in sections as the company, the
products or services, the market and the competition, which are segmented in
different ways. Information as to the economics of the business, the design and
development plans and an overall schedule are missing completely in
Walton/Robert's framework. Timmons uses the economics of the business to
explain in detail the gross and operating margins, the market trends, competitive
edges and the ongoing market evaluation. Furthermore, he reserves space in the
design and development plan for development tasks and status, difficulty and risks,
product improvement and new products. The most distinctive difference, however, is
that Timmons, devotes entire sections to the management team, the proposed
company offering and critical risks, problems and assumptions. This information is
not absent in the Walton/Roberts approach, but is mentioned within other contents.
2.3.2 Recommendation
Due to the more comprehensive and structurally much better accessible approach,
the business plan framework by Timmons and Spinelli is recommended. The reader
has a quicker access to the necessary information. The business plan writer at the
same time can more easily develop the business concept as the framework is built
in a more logical way. Finally, one of the most decisive contents in view of the later
success or failure of the concept, such as the management team, receives much
more attention by the Timmons/Spinelli framework.
2.3.3 Discussion of the Business Plan Essentials
The four independent factors for a new venture by William A. Sahlman:
In the section 2.2.2 "The Business Plan Content The Essentials" the author
presented the four independent factors critical to every new venture creation, which
are, according to William A. Sahlman, the keys to success within every business
plan framework. Within his business plan framework the venture's management
team is skillful and experienced in regard to the opportunity. Having worked together
in the past would perfectly match investors' requirements. The opportunity has a
popular and lasting business model, which has the potential to outperform its
competitors. A solid market position provides plenty of alternatives for future growth
and is unique to the venture and its people. Also, there are plenty of options to
Business Plan and General Management Theory
11
harvest or even to exit the business. The context is supportive in light of the
regulatory and macroeconomic environment. The management team knows the
risks as well as how to prevent difficult events. Thus, superior businesses have
excellent answers to questions regarding the management team, the opportunity,
the context and the risk and reward. In Figure 2, the author summarized the
relationship of the four independent factors of new ventures as presented by William
A. Sahlman.
Figure 2 - The Essentials of a Business Plan
Figure 2 illustrates that the four factors that represent the essentials of a business
plan after William A. Sahlman, individually and as a system, create an environment
in which new ventures are born and compete. Initially, this figure is reminiscent of
Porter's famous diamond in a different constellation. As Porter's diamond addresses
the question:
"Why does a nation achieve international success in a particular
industry?"
4
, here the appropriate questions is:
"Why does a new venture achieve
sustainable success in a particular industry?
" The word
"nation"
is replaced by
"new
venture"
as we are talking about entrepreneurship and the word
"international"
is
replaced by
"sustainable"
to express the new venture's goal more precisely. As it
can be seen the core questions only differ in a minimal way. Now the question
arises, whether Sahlman's theory represents Porter's Diamond in a different
context? If so, Sahlman's four independent factors should somehow match with the
four determinants of Porter's Diamond which are: factor conditions, demand
conditions, related and supporting industries and firm strategy, structure and rivalry.
By looking at the factor conditions, Porter counts skilled labor as one, and thus, it
easily can be matched with Sahlman's factor, the management team. However, it is
4
Porter, 1990, p. 71
Opportunity
Context
Management
Team
Risk/Reward
Opportunity
Opportunity
Context
Context
Management
Team
Management
Team
Risk/Reward
Risk/Reward
Business Plan and General Management Theory
12
questionable whether matching the management team only with the factor
conditions is sufficient, as there are other factor conditions such as capital or
infrastructure. A next match would have to be found for the
opportunity
within
Sahlman's theory. No one less than Porter himself already looked at this question as
he tried to integrate the role of chance in his model.
"Invention and entrepreneurship are the heart of national advantage. [...] a
visionary or inventor might be located in any nation, which means that the
birth of a world class industry can take place anywhere. [...] the determinants
become important in developing an industry but its initial formation is a
chance event."
5
Thus, Porter defines entrepreneurial activity as a chance event, which possibly
could be matched with Sahlman's factor the
opportunity
. Now, as Sahlman's
opportunity
and Porter's
chance event
are identical, how does Porter's diamond
reflect the
opportunity
respectively the
chance event
? Porter says that: "
Chance events play their role partly by altering the conditions in the
"diamond"
5
Thus,
chance
respectively
opportunity
cannot be matched with any determinants of
the diamond, but rather influence each of its determinants, and therefore it has to be
seen as an external determinant within the diamond. For example, a new invention
can make production more efficient (factor condition), and therefore lowers prices
(demand conditions), lowers margins of competitors (related and supporting
industries) and finally have impact on the firms strategy, structure and rivalry.
According to Porter, the nation with the most favorable "diamond" will be the one
that exploits the opportunity most effectively. It seems to be correct that the
opportunity can be turned into competitive advantage by a skilled management
team; however, that is not in line with Porter's diamond as we failed to match
Sahlmon's factors with Porter's determinants of the diamond. This is justified by
recalling that Sahlmon's theory makes business plans more effective, but not
businesses themselves. The question
"Why does a new venture achieve sustainable
success in a particular industry?"
obviously depends on different determinants than
the ones of Porter's diamond. In this context the already mentioned pioneer of
entrepreneurial education, Jeffry A. Timmons, provides an interesting theory, the
Timmons Model of the Entrepreneurial Process.
5
Porter, 1990, p. 125
Recommendation
13
Figure 3 - The Timmons Model of the Entrepreneurial Process
6
Within his model (see Figure 3) he identified the driving forces of the
entrepreneurial process. It always starts with the opportunity and everything else
follows, including the team, the resources, the capital, the business plan and so
forth.
"The role of the lead entrepreneur and the team is to juggle all of these key
elements in a dynamic, moving environment."
7
Thus, the factors of the success of a new venture are numerous, but can always be
scaled down to its driving forces. That is at the same time the answer to our
question:
"Why does a new venture achieve sustainable success in a particular
industry?"
Timmons model initially provides two determinants that match with two of
Sahlman's four independent factors, these are the
opportunity
and the
management
team
. The determinant
resources
can neither be matched with
context
nor with
risk
and reward
within the Sahlman's model. That is because both models provide
processes to different outcomes: one is the new venture itself and the other one is
the supporting business plan. Thus, Sahlman's theory and its four independent
factors address the success of the business plan, while the Timmons model
addresses the success of the new venture itself. And, therefore, it rather answers
the question:
"Why does a business plan achieve sustainable success in building a
new venture?"
And the business plan's success alters with the condition of the four
independent factors.
2.4 Recommendation
In this chapter the author has provided scientific evidence of the theory of the
business plan, including the business plan outline as well as the essentials that
make the business plan effective in the end. Within the discussion it became
6
Timmons, 1999, p. 38
7
Timmons, 1999, p. 37
Opportunity
Resources
Management
Team
Opportunity
Opportunity
Resources
Resources
Management
Team
Management
Team
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Jahr
- 2005
- ISBN (eBook)
- 9783956362606
- ISBN (Paperback)
- 9783836604406
- Dateigröße
- 1.2 MB
- Sprache
- Englisch
- Institution / Hochschule
- Georg-Simon-Ohm-Hochschule Nürnberg – Betriebswirtschaft, International Buisness
- Erscheinungsdatum
- 2007 (Juli)
- Note
- 1,0
- Schlagworte
- buisness plan marktanalyse gesundheitswesen suchfeldanalyse amerikanische geschäftsidee
