Saturday, April 21, 2012

Global Business Plan Analysis

     Business plans are organizational goals set forth in a formal written document that provides an organizational map about the direction of the firm. The document is meant to guide the decision-makers in an organization with all aspects of conducting business. Several components exist in the development of a business plan such as the executive summary, business description, marketing, management, and financial information. The five components of a business plan clarify the most important sections that a firm needs for investors, along with how these components affect a business entering a foreign country.

Executive Summary
     The opening section of a business plan is the executive summary. This section is the most important piece of the business plan because this draws the investor to decide whether to continue reading the rest of the plan. The summary should present the entire business plan in a concise, encapsulated format. The summary explains the business purpose and should include the reasons for the financial request and terms the loan(s) would be repaid. If entering a global market, the summary of the expansion information is part of this section such as listing the projected foreign market. 

Business Description
     Providing a description of the business, a company summary, history, and locations tells investors the goals and objectives of the business. A detailed description shows how the business appeals to customers and what sets it apart from other companies. The product or service description is part of this section and highlights of any differences the product has in comparison to competitive brands. In this section of the business plan, the details of locations is important and showing how the company is ready to expand into global markets. The current status of the company, growth opportunities, type of business (corporation, partnership, etc.), and prospects in the specific industry are part of a domestic and global business plan. 

     A critical component to a business plan is the marketing section. The market analysis will cover customers, competition, advertising, promotion, and pricing. A business plan will cover assessments of strengths and weaknesses of the competition and any competitive edge the company has in product quality, price, warranties, etc. The target market and market segmentation provides detailed analysis including sales information on how much customers buy each year. Advertising and promotion explains how the company plans to bring the product to the attention of their customers and costs associated with promotion. Pricing entails the cost for the product or service including comparisons to competitor pricing, and any discount allowances for payments and purchases. For global expansion, the marketing plan varies in localities. The marketing mix must look at the needs of the marketing environment and take into account whether a standardized mix will suffice or local variations instead. Customer needs could be dependent on local customs. Culture can affect the products and how advertising are complete in the local regions. Language can alter packaging, instructions, and labeling. Technology standards may differ in another country that would require variations on products. Legal factors may demand changes in how products packaging, advertising, or other requirements are finished in another country.

     The business plan outlines the compensation of each person in the management team including percentage of stock ownership and equity investment. The business plan also includes a description of other investors and any stock they own in the company, the price stock was sold, and acquisition date of the stock. Also explained in this section of the plan are any professional advisors, lawyers, or accountants that provide consultation or services for the company. The organizational structure of the company seldom changes when first entering the international market. However, eventually a company would want to change their design to implement multinational design and strategies. A global plan may want to include information on exporting, the overseas sales force, or any foreign subsidiaries. If manufacturing is taken overseas and the company plans to grow in operations, an international division is set up with extensive staff and management who have expertise in international functions.  

Financial Management
     The financial plan is an indicator to show the potential of the company and the financial success of the business venture. Include income statements and balance sheets for the current year and past three years and a financial statement not older than 90 days. Accounts receivables and payables listing are included as well as cash flow projections showing operation and income statement projections. The assumptions used to determine the projections include information on vendor payment terms, increase in operating expense, inventory changes, capital equipment, and other anticipated increases. In a global operation, the company will have to consider the political environment and other market factors that can affect fluctuating exchange rates. Changes in exchange rates can affect the operating costs in a particular country. The risks in cash flow management are different in international territory. Uncertainty in exchange rates, cash inflows and outflows, differences in tax systems, and transferring funds across national boundaries are more complex in the foreign market than a domestic one. The global business plan would need to reflect those adjustments.

The format of domestic and foreign business plans resemble each other. The main difference when entering a foreign market is the portion of the business plan outlining the global expansion will communicate the implications of financial risks and projections. The components in a global business plan change the organization design, global marketing mix, and other foreign political, economic, cultural, or environmental factors, which may differ from a domestic plan.

Campbell, D., Hamill, J., Purdie, T., & Stonehouse, G. (2004). Global operations and transnational business: Strategy and management (2nd ed.). West Sussex, England: Wiley.
Cullen, J. B., & Parboteeah, P. (2005). Multinational management: A strategic approach (3rd ed.). Mason, OH: Thompson.
Florida State University. (2010). Elements in a business plan. Jim Moran Institute for Global Entrepreneurship. Retrieved from

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