Entity Level Business Model - Example Part 1

In the next three Blogs I will construct a Generic Consumer Goods Organisation’s Entity Business Model.

• Part 1 - Include the Entity Business Model and Strategic Processes
• Part 2 - Includes the Core Business Processes
• Part 3 - Includes the Resource Processes

Consumer Goods - Entity Business Model

As discussed in the previous Blog the Entity Business Model is used to describe the inter-linking activities carried out within a business entity, the external business drivers and stakeholders that bear upon the entity, and the business relationships with persons outside the entity.

External Business Drivers and Stakeholders

External Business Drivers and Stakeholders are those outside factors, pressures etc that can prevent an entity from attaining its objectives. One of the ways to classify such external forces follows:

General environment: Political / legal Macroeconomics Technological Demographic Socio-cultural

Competitive environment: Competitors New entrants Substitute products Buyers Suppliers

Operating environment: Markets Customers Competitiveness Trade regulations Economics

Markets

Markets are the segments of an industry that are applicable to the entity.  When analysing Markets we may:

• Identify the entity’s significant market segments;
• Obtain an understanding of how the products and services are positioned within the market segments;
• Obtain an understanding of the relationship between an entity’s market segments and its business objectives and strategies.

Business Processes

A business process is a structured set of activities within an entity, designed to produce a specified output.  A business process emphasis how work is performed rather than what is done. It is also structuring of work activities across time and place to transform inputs, such as information, materials and resources, to outputs, such as the products or services for customers or other users. Processes are usually linked with the outputs of one process being the inputs of another process. Alliances / Relationships with Suppliers Alliances are the types of relationships with third parties that entities in the industry may establish to: attain business objectives, expand business opportunities reduce or transfer business risk. When analysing Relationships with Suppliers we may identify an entity’s significant suppliers; obtain an understanding of an entity’s relationship with its suppliers; obtain an understanding of relationship between an entity’s significant suppliers and its business objectives and strategies.

Products and Services

Products and Services are the significant products and services typically offered by entities within the industry.  When analysing Products and Services we may obtain:

• an understanding of the entity’s significant products and services;
• an understanding of the stage that significant products and services have reached in their life cycle;
• an understanding of the relationship between an entity’s significant products and services and its business objectives and strategies.

Customers

Customers are the significant types of consumers within the markets in the industry that entities may choose to focus on.  When analysing customers we may:

• identify an entity’s significant customers;
• obtain an understanding of the relationship between an entity’s significant customers and ts business objectives and strategies.

Strategic Management Processes

The strategic management process is the process that:

• Develops the entity’s mission,
• Defines the entity’s business objectives,
• Identifies the business risks that threaten attainment of the business objectives,
• Manages the business risks by establishing business processes, and monitors progress toward meeting the business objectives.

When we analyse the Strategic Management Process include how management (including the Board of directors, as appropriate):

• Sets the overall direction for the entity;
• Monitor the external environment and assess the strategic implications of potential opportunities and threats;
• Monitors the extent to which strategies have been implemented; understand the strategies and capabilities of the significant competitors; analyses the entity’s strengths and weaknesses;
• Allocates resources, including capital, people and facilities to the business processes;
• Aligns its strategic business objectives with the process objectives.

Consumer Goods - Strategic Management Processes

Process Objectives

1. Provide clear strategic direction to the business
2. Determine strategic objectives (e.g., profitability/market growth)
3. Identify and allocate resources necessary to execute business strategy
4. Measure business performance against strategic objectives
5. Promote culture of continuous change/improvement
6. Maximise market value of the business

Critical Success Factors (CSF’s)	KPI’s Linked to CSF’s
Creating and sustaining an appealing proposition to target customer/markets (1,2) Maximise stakeholder value (4,6) Successful  management change (3,4,5) Maximise return on capital (4,6) Adequate resource management processes (3)	Market share; customer surveys (A) Share price; employee surveys; analyst ratings (B) Percent completion  to schedule; improvement in affected process KPI’s (C) Return on equity; return on assets (D) Satisfaction surveys of internal customers (E)

Risks Which Threaten Objectives

Management Responses Linked to Risks

Poor communication of strategy and implementation (1,2,4) Poor operating capabilities/lack of appropriate resources (3,6) Inadequate coordination between resource management and core business processes (1,3) Missed opportunities/unforeseen threats (new competitors)/changing customer needs (5,6) Loss of focus or inability to foster change (4,5)

Formal board approval of strategy and establishment of targets and objectives through the organization to support its delivery (A) Competitive benchmarking, customer surveys and performance evaluation (B,D) Regular board review of performance against strategic plan using balanced scorecard approach (C,E) Monitoring and responding to external forces (D) Planned performance reviews; disciplined management change process (C,E)

Other Symptoms of Poor Performance

Unclear direction Lack of employee involvement

Undefined responsibilities Consistent failure to introduce new products/lines

Weak market position Poor financial results

Performance Improvement Observations

More rigorous planning and communication Visioning or needs assessment analyses

Introduce performance management systems Balanced scorecard

Merger and acquisition assistance More detailed market and competitor research to identify improvement opportunities