REVIEWING THE EXISTING OPERATION If there is an

REVIEWING THE EXISTING OPERATION If there is an existing business, you need to know how the state and capabilities of the present operation before beginning the marketing plan. A review of your current operation establishes a starting point from which lo develop your business plan logically. The purpose of the review is to: Market the small • determine what resources you have to start with for planning realistic growth business • identify operating strengths and weaknesses for finding out what needs to be improved. An operational review involves: The Marketing • reviewing the physical operation Plan • reviewing the financial performance of the operation. 26/12/2021 Cert IV Small Business Management WOB_1 1

Physical operation review Market A comprehensive review of the physical operation will consider all aspects the small of the business for example, marketing, production, purchasing and business personnel. For each operating function, you should: • identify the type and quality of resources (e. g. personnel, equipment) in current use The • identify your current business strategies Marketing • identify the current operating procedures in use Plan • determine the adequacy of existing record systems. 26/12/2021 Cert IV Small Business Management WOB_1 2

Financial performance review A review of financial performance requires you to obtain both past and Market the small current finan cial reports of the business. The three main financial reports business on the performance of the operation are: • the annual income statement (i. e. profit statement) • the annual statement of cash flows • the annual balance sheet (i. e. statement of financial position). The Marketing The information found in these financial reports should be compared over time and with industry averages to pinpoint strengths and weaknesses in Plan your operation. 26/12/2021 Cert IV Small Business Management WOB_1 3

Market the small business The Marketing Plan 26/12/2021 Cert IV Small Business Management WOB_1 4

Operating strengths Sales Market the small business Sales are growing by an average of 6% each year and are better than the industry average. These results indicate that, overall , marketing strategies are effective. Gross profit margin The gross profit margin in selling prices has increased in the current year and is better than the industry average. This suggests an improvement in The Marketing purchase supply terms and the maintenance of sound pricing policies for stock sales. Plan 26/12/2021 Cert IV Small Business Management WOB_1 5

Operating weaknesses Net profit The net profit of the business has been decreasing each year and has been below the industry average for the last two years. This indicates that profit Market performance in the small business is not being controlled properly. The main reason for the decline business in net profit to an unacceptable level is the lack of control of rising operating costs. Net cash flows The Marketing The net cash flows of the operation are declining each year and are Plan consistently worse than the industry average. This is reflected in the reducing cash position of the business at the end of each year, which is also worse than the industry average. These problems are due to poor cash flow control systems. Specific reasons could include untimely debtor collections, slow stock turnover, payment of increased operating expenses or increases in owner's drawings. 26/12/2021 Cert IV Small Business Management WOB_1 6

Debt ratio Market the small The level of debt used in the operation, as measured by the debt ratio, has business been increasing each year. The present level of debt is significantly above the industry average. The business should not undertake any more borrowings because the existing debt level is excessive. The Marketing Plan 26/12/2021 Cert IV Small Business Management WOB_1 7

SWOT ANALYSIS Businesses exist in a dynamic environment that is changing continually. Due to the dynamic nature of the operating environment, you need to understand that environ ment. Information on the operating environment must be collected analysed so that you can develop objectives and Market the small strategies for your operation. business From Figure 3. 1, we can see that the operating environment for a business comprises: • the general business environment (external) • the specific industry environment (external) The Marketing • the existing operation, if applicable (internal). Plan You should do an analysis of the total operating environment for any business marketing plan. This analysis is sometimes referred to as a SWOT analysis an analysis of business strengths, weaknesses, opportunities and threats. 26/12/2021 Cert IV Small Business Management WOB_1 8

FIGURE 3. 1 Operating environment Market the small business Existing operation The Marketing Plan 26/12/2021 Cert IV Small Business Management WOB_1 9

SWOT Analysis Tool 26/12/2021 Cert IV Small Business Management WOB_1 10

SWOT analysis In SWOT, strengths and weaknesses are internal factors. For example: S= a strength, it could be: • Your specialist marketing expertise. • A new, innovative product or service. • Location of your business. • Quality processes and procedures. • Any other aspect of your business that adds value to your product or service. 26/12/2021 Cert IV Small Business Management WOB_1 11

SWOT analysis SWOT cont’d. . . W= a weakness, it could be: • Lack of marketing expertise. • Undifferentiated products or services (i. e. in relation to your competitors). • Location of your business. • Poor quality goods or services. • Damaged reputation. 26/12/2021 Cert IV Small Business Management WOB_1 12

SWOT analysis SWOT cont’d. . Opportunities and threats are influenced by external factors O= opportunity this could be: • A developing market such as the Internet. • Mergers, joint ventures or strategic alliances. • Moving into new market segments that offer improved profits. • A new international market. • A market vacated by an ineffective competitor. 26/12/2021 Cert IV Small Business Management WOB_1 13

SWOT analysis SWOT cont’d. . T= a threat could be: • A new competitor in your home market. • Price wars with competitors. • A competitor has a new, innovative product or service. • Competitors have superior access to channels of distribution. • Taxation is introduced on your product e. g. GST Footwear 2000 26/12/2021 Cert IV Small Business Management WOB_1 14

Gathering Environmental Research Marketing research in practice: Consumer surveys showed that people wanted to see the actual product inside the pack Market the small business The Marketing Plan 26/12/2021 Cert IV Small Business Management WOB_1 15

Research techniques Market The small Business The marketing plan Syndicated services Where do organisations get information from? Marketing research studies 26/12/2021 Marketing information systems ( Mk. IS) Customer data bases Cert IV Small Business Management WOB_1 16

Gathering Marketing Information Primary Information versus Secondary PRIMARY: is collected firsthand for this project or study Will be current and relevant Degree of accuracy will be known Methods: surveys, observation, experiments, focus groups, in-depth interviews Qualitative versus quantitative methods SECONDARY: has been collected previously for another purpose. May not be relevant May be inaccurate Sources: government, industry bodies, internet, reports and previous studies Today some distinctions between primary and secondary are blurred 26/12/2021 Cert IV Small Business Management WOB_1 17

Gathering Marketing Information A Plan for a Marketing Research Study 1. Define the objective 2. Conduct a situational analysis Further study needed ? Yes No End project and report results 3. Plan and conduct a formal investigation 4. Analyse the data and present a report 5. Conduct a follow up 26/12/2021 Cert IV Small Business Management WOB_1 18

Primary Research Methods: Surveys Uses questionnaires Collects information from a large number of respondents Useful for what, when, where and how questions 26/12/2021 Cert IV Small Business Management WOB_1 19

Observation Research Market the small • business • • • The • Marketing • Plan 26/12/2021 Observations of current or previous actions Number of interviews Can be manual or mechanical Extensively used in web site analysis and social media tracking Gives descriptive measures (= what, when, who) Does not measure causal ( = why) Cert IV Small Business Management WOB_1 20

Secondary research Market the small business The ABS www. abs. gov. au is the main source of available published statistical infor mation. It is the official statistical reporting agency of the Commonwealth government The and collects statistics on business, the population (via periodic national Marketing census) and the economy Australia wide. Plan 26/12/2021 Cert IV Small Business Management WOB_1 21

Market the small business The types of statistical information relevant to a small business researcher that are able from the ABS include the following: • The • Marketing Plan 26/12/2021 population statistics for chosen areas showing: population numbers population projections population characteristics such as gender, ethnic background, income level, education level, age and occupational status Cert IV Small Business Management WOB_1 22

• industry statistics for selected industries in chosen areas showing: Market the small business competitor and supplier characteristics such as number of employees, sales turnover, expense ratios and profit ratios the number of competitors and suppliers • household expenditure statistics for chosen areas showing: The Marketing household characteristics by sex, family size, employment Plan status, income level, education level and occupancy status household expenditure patterns household expenditure components 26/12/2021 Cert IV Small Business Management WOB_1 23

• housing statistics for chosen areas showing: Market the small business • The Marketing Plan 26/12/2021 countries rate of housing construction housing types housing costs nature of occupancy foreign trade statistics showing: values of different commodities exported to selected countries values of different commodities imported from selected Cert IV Small Business Management WOB_1 24

• Economic performance indicators that measure the performance of the general economy, including: Market the small business The Marketing Plan 26/12/2021 average weekly earnings unemployment rates consumer price index (CPI an inflation measure) number of new car registrations National accounts such as gross national product, income and expenditure Cert IV Small Business Management WOB_1 25

Private research organisations; Market the small business The Marketing Plan 26/12/2021 Private research organisations also provide useful statistic information Roy Morgan research http: //www. roymorgan. com/ Cert IV Small Business Management WOB_1 26