Sample Business Plan

Sample Business Plan for
Fast Fenners
EUROPEAN FOARS COMPANY
Sample Business Plan
March 2001
Copyright 2001 McKinsey & Company. Confidential. Not for further

reproduction or distribution.
CONTENT EFC BUSINESS PLAN
1 Executive summary
2 Market/competitor analysis and EFC positioning
3 Product and customer value proposition
4 Business model, organization, and processes
5 Management team
6 Opportunities and risks
7 Financial planning and RONA analysis
8 Implementation road map
EXECUTIVE SUMMARY
The market for fenners has grown at a rapid rate since their introduction in 1985. Industry
revenues have grown from 500 million in 1985 to 7,000 million in 2000. Consumers have
shown almost insatiable demand for fenners and have consistently thrown away their old
fenners for new versions, as product features have been upgraded. This demand, combined
with other forces at work in the industry, make fenners a very attractive business opportunity.
Average industry profit margin has held firm at 15%
European Foars Company (EFC) is the nation's leading foar manufacturer. It has become the
industry benchmark for low-cost production processes and has established a strong brand
name, with EFC having become a household word. It has also established strong customer
relationships with the nations largest retail outlets
In recent years, market demand for fenners has flattened. In response, EFC began to
investigate the fenner market as a source of new profits to maintain its historical rate of return
to shareholders. After several years of R&D, EFC's engineers have developed and patented
the next generation of fenners known as 'fast fenners,' with features far surpassing existing
fenners. This business plan lays out EFC's strategy for entry into the fenner market with fast
fenners
EFC will begin selling fast fenners through the leading national retail outlets beginning in July
2001. Prior to this time, it will market the fast fenner aggressively to consumers, highlighting
its improved features and EFC's commitment to 24-hour customer service at the same price
as existing fenners. By offering consumers the fenner improvements and service that they
need at an economical price, EFC should be able to capture 62% of the market by the year
2005. EFC can realize up to 1,130 million in annual profit by 2005 from successful
implementation of the fast fenner business plan
Source: McKinsey
EXECUTIVE SUMMARY KEY ISSUES

1
The key issues in the business plan are:
Pricing: EFC is the low-cost producer of fenners. This business

plan assumes that EFC will be able to replicate this low-cost
production concept. Therefore, it proposes offering fast fenners
at the same cost as existing fenners. EFC expects even valueconscious consumers to buy the new fast fenners, thereby only
driving market growth but and gaining share
Competitive response: EFC has patented the fast fenner and

believes that it will be extremely difficult for competitors to
replicate. This business plan also assumes that competitors will
not attempt to maintain market share through price slashing or
that any attempts to do so will be unsuccessful
Distribution channel: This business plan recommends that EFC

leverage its strong relationships with the nations largest retail
outlets and sell fast fenners through them. The similarity of
fenners to foars suggests that consumers will be willing to
purchase fast fenners at retail outlets
Source: McKinsey
1 Executive summary
5 Management team
10
SIZE OF FENNER MARKET

2
millions
11,000
CAGR
1985-2005 = 16.7%
7,000
4,000
2,000
500
1985
* Compound average growth rate

Source: McKinsey
1990
1995
2000
2005(E)
11
AVERAGE INDUSTRY ROS OF FENNER MARKET

2
16
15
15
14
12
1985
Source: McKinsey
1990
1995
2000
2005(E)
12
FENNER DISTRIBUTION CHANNELS, MAT* 1999

2
%
Superstores
15
55
Catalogs
30
Retail outlets
Currently no fenners are sold online,

but experience from foars (15% online
sales and growing rapidly ) indicates
future online sales potential
* Moving annual total
Source: McKinsey
13
DEVELOPMENT OF MARKET SHARE OF IMPROVED FENNERS

2
1995
1990
Basic
fenner
100
Improved
fenner
Even
better
fenner
2000
20
80
10
90
Fast
fenner
Source: McKinsey
14
MARKET RESEARCH FINDINGS POTENTIAL CUSTOMER NEEDS

2
%
% of population currently
owning fenners
Dont own
15
% of population liking their

fenners
Indifferent
5
Don't like 20
Own
85
75
Like
Potential needs of fenner users*

'Wish my fenner could '
'Wish it had more '
'Need help getting my fenner to '
'Wish I could buy more fenners within my budget ...'
* Quotations from customer interviews

Source: McKinsey
15
MARKET RESEARCH FINDINGS IMPROVEMENT OPPORTUNITIES

2
Source: McKinsey
Potential customer needs
Improvement opportunities
'Wish my fenner could '
Improve fenners ability to do A, B, C
'Wish it had more '
Add options X, Y, Z
'Need help getting my

fenner to '
Better instructions
Toll-free number
24-hour service
'Wish I could buy more

fenners within my budget ...'
Scaled down, low-price fenner

Cut price on existing fenners
Volume discounts
16
WILLINGNESS TO SWITCH TO AN IMPROVED FENNER

2
% of respondents
Would you switch to a fenner with improved features ...
at a higher price?
at the same price?
at a lower price?
95
90
60
40
10
Yes
Source: McKinsey
No
Yes
No
Yes
No
17
KEY FACTORS DRIVING CUSTOMER BUYING DECISION
Rating
0 Unimportant
5 Important
Customer segment
Option lovers
Value seekers
Service seekers
Options
5
4
3
2
1
Price
...
5
2
3
4
5
Customer
service
Source: McKinsey
18
DEMOGRAPHICS OF TARGET CUSTOMER SEGMENTS

2
%
Demographics
Age
Option lovers
20 - 30
10
Buying
behavior
40
> 50
30
High
30
Medium
Catalogs
Superstore
40
25
30
10
10
20
40
50
20
40
30
40
30
10
50
30
Retail
Older customers with
medium education level
shop in superstores and
retail outlets
Source: McKinsey
20
30
40 - 50
Low
Service seekers
35
20
30 - 40
Education
level
Value seekers
30
60
20
Young customers with high

education level prefer
shopping through catalogs
and superstores
10
10
80
Mid-aged customers
with average education
level strongly prefer
shopping in retail outlets
19
FENNER INDUSTRY FORCES AT WORK

Industry structure and economics
Small number of competitors
R&D and manufacturing scale
effects create barriers to entry
Industry profitable
Market growing
2
Competitive conduct
Competitors crowded out as others
upgrade product
No price competition
Innovation difficult and costly
Fenner market is an
attractive business
opportunity
Consumer demand
Consumer willing to trade up
Demand consistently growing
No substitutes for fenners
Source: McKinsey
External factors
Strong overall economic growth
fuels consumer spending
Expected legislation changes in
2003 could additional fuel
consumer demand
20
MARKET SHARE OF FENNER COMPANIES, MAT* 1999

2
Kings Fenner Co.

5
Wonaby
Fenners
Significant barriers for

Trinity Fenners
25
40
entry into fenner market:

high research and
development costs and
scale requirements
Fenner companies with
30
old product (e.g., Kings

Fenner Company) were
quickly crowded out of
market
John's Fenner Co.
* Moving annual total

Source: McKinsey
21
ANALYSIS OF COMPETITORS
2
Years since
last fenner
innovation
Innovation
expected
40%
Possible
30%
No
25%
5%
10
Current
market share
Company
Trinity Fenners
Johns Fenner Co.
Wonaby Fenners
Kings Fenner Co.
Capability
to innovate
No
EFC's competitors generally are not expected to

innovate in the near future
Trinity Fenners has the highest capability to innovate

in the medium future, all other competitors have only
low to medium ability to improve their products in
response to EFC's fast fenner
Source: McKinsey
22
COMPETITIVE POSITION EFC vs. COMPETITORS

2
Skills
EFC
Ability for low-cost
production
Extensive experience
with foar production
Trinity
Fenners
Cost leader in current
Johns
Fenner Co.
Very good
Wonaby
Fenners
fenner production
management
resources as part
of the Johns
conglomerate
CEO left six months

ago to Kings Fenner
Co.
Strategic assets
Fast fenner patent

Well-established
brand name for foars
Patent for enhanced
Special relationship
High
Low
Existing relationship
with some large
national retailers
Fenner retail chain
fenners
Strong brand name

Patent for enhanced
fenners
Partnership with
Fenner research lab
Preferred supplier of
medium-sized
supermarkets
Experimenting with
selling fenners online
License to produce
enhanced fenners
Kings
Fenner Co.
Source: McKinsey
New CEO
Beginning turnaround
Old production
facilities (cannot be
upgraded)
De-listed from
Wesko supermarket
two months ago
23
SWOT ANALYSIS FOR EFC FENNERS FUTURE BUSINESS
Weaknesses
Currently no experience with
online selling
No own retail activities
No relationship with medium-sized
supermarkets
Strengths
Low-cost production capability
Patent for faster fenner
Well-established brand name for
foars
Opportunities
Fast-growing market: CAGR
2000-2005: 9.5%
Profitable market: industry-wide
ROS 2005: 15%
Customers' openness to
innovation of fenners in the
past: market share of evenbetter fenners in 2000: 90%
Customers' willingness to switch
to fast fenners in the future:
90%
Source: McKinsey
EFC Fenner
Business
Threats
Competitive reaction to market
entry of EFC, including possibility
of price war
Competitors leveraging relationship to existing distribution channel
to block EFC's market entry
Fenner competitors attacking EFC
on its home territory with entry into
the foar market
Product innovation through Trinity
Fenners
24
1 Executive summary
5 Management team
25
FAST FENNERS VALUE PROPOSITION
Product
characteristics
Customer need
More options
Better performance
Lots of service
Value for money
Emotional styling
Fast fenners with
Many new options
Enhanced
performance
EFC value added
24-hour customer
service for fast fenner
customers
Leveraging experience
as low-cost producer of
foars to offer fast
fenners at today's
market price
Value proposition
A better product with more options and
an innovative styling at the same price
as regular fenners, plus 24-hour
customer service
Source: McKinsey
26
VALUE PROPOSITION TARGETED TO CUSTOMER SEGMENTS
Source: McKinsey
Segment
Key value proposition
Option lovers
Fast fenners have lots of new

capabilities you want
Value seekers
Fast fenners cost the same as

traditional fenners, plus you get
more bang for your buck with its
enhanced capabilities
Service seekers
Fast fenners offer 24-hour

customer service, so help will be
there when you need it
27
ESTIMATED CUSTOMER SEGMENT DEVELOPMENT, 2001-2005
'000
CAGR*, 2001-05
%
11,000
12
3.500
15
5.000
9,830
8,780
7,840
7,000
3.040
2.640
2.300
Option lovers
Value seekers
Service seekers
2.000
4.000
4.240
4.436
1.000
1.300
1.650
2001
2002
2003
* Compound average growth rate

Source: McKinsey
4.760
2.030
2.500
2004
2005
28
EFC REVENUE AND MARKET SHARE DEVELOPMENT, 2001-2005

'000
6,785
CAGR***, 2001-05
%
320
1.836
Option lovers
320
2.622
Value seekers
320
2.327
Service seekers
320
3,887
1.042
18
25
22
Market share
%
*
**
***
Source:
154
195
65 164
513
1,847
487
694
666
1.490
1.355
2001
2002
2003
2004
2005
6.9
6.3
21.0
39,5
61,7
Target price of 2 per fenner

Target price of 1.9 per fenner through increase in price promotions
Compound average growth rate
McKinsey
29
1 Executive summary
5 Management team
30
DISTRIBUTION CHANNEL FOR EFC's FENNERS
Initially fast fenners will be
Lainbury
sold through the national

retail outlets of Wesko,
Almi, Spam, and Lainbury
only
10
Spam
40 Wesko
20
Fenner online offering to

be decided one to two
years after product
introduction
Since fenners have

30
Almi
Source: McKinsey
product characteristics
similar to foars, consumers
should be willing to buy
fast fenners from those
national retail outlets
31
MARKETING CONCEPT
Price
Product
Pricing at level of even-better
Innovative product (fast fenners
fenners
Price transparency (e.g.,
recommended fast fenner
selling price)
One price concept for all
channels (in particular for
expansion into online offer)
with many new options and

enhanced performance)
Additional 24-hour customer
service for all fast fenner
customers
Placement
National retail outlets of big
supermarket chains only
Shelf placement in conjunction
with foars
Development of leading edge
www platform with complete
offering of virtual buying
process and built-in flexibility*
Promotion
Leverage of EFCs foar brand
name for faster fenners
Full leverage of foar advertising/
promotion carry-over effect for
fenners
Tailored promotion/
communication concept for
market entry phase
* Potential online sales commencing in one to two years

Source: McKinsey
32
CRM LEVERS AND SOURCES OF CUSTOMER DATA
4
Initial
focus
Acquisition
Potential
CRM levers
Loyalty
Conquest
Potential
sources of
customer
data
Source: McKinsey
Foar sales
data
Shared
customer
database
with Wesko
for foar &
fenner sales
Customer
call center
Store exit
polls
Others
(e.g., from
external
affinity
players)
33
ORGANIZATIONAL STRUCTURE OF EUROPEAN FENNER COMPANY
Proposed new
business unit
CEO
CFO
Fast fenner
SBU*
* Strategic business unit

Source: McKinsey
Head of
corp. center
COO
Great foar
SBU
34
ORGANIZATIONAL STRUCTURE OF FAST FENNER BUSINESS UNIT
Fast fenner
SBU
Manufacturing
Source: McKinsey
Sales and
marketing
Customer
service
Systems
support/
back office
35
CORE PROCESSES MANUFACTURING
Develop product
Produce
product
Purchase raw
Package
product
Ship product
Key
activities
Research and
Develop package Store bulk
develop product
materials
innovations
Operate plant
Understand
Control quality
customer needs
of output
Test/pilot new
Improve
product
production flow
innovations
product
design
Package product Load transport
Develop
vehicles
Track orders and
innovative
promotion format shipments
Control quality of
output
Skills
Strong R&D, tied Purchasing

to marketing
Cost control
TQM*
Efficient plant
Cost control
Quality control
operations
Staffing
FTEs
* Total quality management

Source: McKinsey
34
10
Efficient
packaging/
loading
Transport
deployment
10
36
CORE PROCESSES SALES AND MARKETING

Understand
customer
needs
Key
activities
Skills
Staffing
No. of FTEs
Perform
Develop
marketing
strategy
Gain in-depth Prioritize
consumer
market
understanding
research
Define product
Surveys
positioning
Question Develop
naires
ad/promotions
Sales rep
strategy and
feedback
implementation
concept
Quantitative/ Advertising
analytic
expertise
analysis of Marketing
data
expertise
Communication
2
5
* Including 35 field sales managers

Source: McKinsey
Develop
sales
strategy
4
Sell to
customers
Negotiate
potential
outlets
Develop
account
plans
sales with
retailers
Conduct
pricing
analysis
Close
contracts
Sales
Negotiation
Pricing
expertise
Customer
relations
Communication
5
Bill
customers
Send bills
Process
payments
Accounting
skills
analysis
Sales
experience
37*
37
CORE PROCESSES CUSTOMER SERVICE
Maintain account
relationships
Key
activities
Select accounts to
Skills
Account planning
Customer relationship
Operate phone center
Respond to
customer concerns
Schedule 24-hour shifts Advise over phone

focus on
Train operators
Send service reps to
customer
Develop account plans Monitor calls
Schedule account visits
Operate in-house
service center
Visit/call on accounts
management
Communication
Technical knowledge
Operations efficiency
Communication
Technical knowledge
Repair and maintenance
know-how
Staffing
No. of FTEs
Source: McKinsey
90
38
CORE PROCESSES SYSTEMS SUPPORT/BACK OFFICE
Design systems
Key
activities
Skills
Staffing
No. of FTEs
Understand
Operate
systems
Run day-to-day
Service
systems
Service
4
Provide backoffice support
Provide
needs of
secretarial
computer
malfunctioning
manufacturing,
support to
systems
systems
sales, and
Run help desk
Repair equipment manufacturing,
customer service Advise with
sales, and
areas
customer service
technical support
Design support
Provide legal
systems to meet
advice
their needs
Provide
accounting
services*
Systems
Technical skills Equipment
Secretarial skills
expertise
repair
Communication
Legal
Software design
Accounting
Programming
skills
5
5
4
10
* Partly outsourced
Source: McKinsey
39
FAST FENNER BUSINESS UNIT STAFF POSITIONS
4
( ) FTE
Head of fast fenner

SBU (1)
SVP of
manufacturing
(1)
R&D
specialists (2)
SVP of sales
and marketing
(1)
Sales reps
(35)
SVP of
customer
services (1)
Major account
reps (5)
SVP of systems/
back office (1)
Information
technology (14)
Plant
personnel (50)
Advertising and
marketing
specialists (12)
Service
mechanics (90)
Human
resources (6)
Quality control
engineers (4)
Market
researchers (2)
Phone reps (8)
Legal (2)
Billing
coordinators (4)
Source: McKinsey
Finance (2)
40
PERSONNEL PLANNING IN FIRST FIVE YEARS
FTE
Driver of FTE growth
241*
57
184*
156*
95*
50
15
20
13
2001
112*
56
54
22
22
15
2002
Manufacturing
Customer
service
54
52
52
Sales and
marketing
Starting with sales representatives in region 1 only

Including other regions 2003
Developing in line with

Starting with full systems
53
38
18
22
25
2003
2004
2005
* Including head of fast fenner SBU

Source: McKinsey
facturing plant in 2001
customer growth
104
45
Building of full manu-
Systems/
back office
engineering support
Developing customer support
in line with customer growth
41
1 Executive summary
5 Management team
42
MANAGEMENT TEAM OF FAST FENNER SBU
Head of fast
fenner SBU
SVP of
manufacturing
SVP of sales
and marketing
Name
Short CV
Mark Tscherner
Has led Great Foar SBU for four years, overlooking the rapid
Stefan Fischer
Five years production manager at Trinity Fenner, successfully
Jacqueline Hoch
growth of the business unit

Eight years of marketing with Nova with responsibility for $80
million revenues. Consultant with McLinsey, focusing on
consumer goods and venture capital investments
launching the improved fenner version
Assistant product manager with responsibility for 30 employees
10 years of marketing executive experience in leading consumer
goods company
Worked for Gutte as brand manager for three years
SVP of
customer
services
Mike Murphy
VP at call center operations at Rouge*

Director of infrastructure development of Rouge*
SVP of
systems/
back-office
Jan Patterson
Three years of hands-on experience in back-office building for
* Mobile telephones
Source: McKinsey
e-price.com
Developing of C++ and Assembler software for ADS.com
Independent C++ programmer and PhD degree in computing
from University of Sunderland
43
COMPENSATION SCHEMES FOR INTEGRATED BUSINESS UNIT

5
LAUNCHES
Range of base salary*
Recent management
searches
Mutual fund company

CEO/Head
of SBU
350,000 base salary

50%-60% annual bonus
Executive stock option plan
(< 0.5% of stores)
Consumer products company

SVP of
manufacturing
EURO 190,000 base salary

15%-25% bonus
Small number of shares
Retail clothing chain

SVP of sales
and marketing
SVP of customer
services/systems
and back office
* From recent sampling (1999/2000)

Source: McKinsey
EURO 225,000 base salary

20%-30% bonus
Foar company
170,000 base salary
10%-20% bonus
(average)
180,000 450,000
(342,000)
130,000 290,000
(124,000)
140,000 280,000
(231,000)
125,000 245,000
(187,000)
44
VISION, MISSION, AND IMPERATIVES FOR FAST FENNER SBU

Vision
'What is fast fenner?'
An innovative company driving for

high customer satisfaction
We aim to be the world's No. 1 fenner

Mission
'Where are we
going?'
producer. In getting there we will

attain a commanding market share
and facilitate a sustainable, long-term
profit growth
Develop a focused, segmented, dif-
Strategic
imperatives
Source: McKinsey
'How will we get

there?'
ferentiated product portfolio by market

Establish excellent trade, marketing,
and distribution capabilities in end mkt.
Develop and manufacture innovative
products while minimizing supply chain
costs
Establish leading position in all key
markets
Ensure that managers in key roles are
first class
45
1 Executive summary
5 Management team
46
OPTIONS FOR MARKET ENTRY CONSIDERED BUT REJECTED

6
Pricing
Options
Reason for rejections
Set a higher retail price
Consumers may not trade up,

reducing market penetration
Set a lower retail price
Cannot make profit at cost

level below today's market
Competitive
response
Don't patent fast fenner in order

to get to market quicker
Cut price to preempt

competitive entry
Distribution
channels
Use catalogs
Use superstores
Use retail outlets, catalogs, and
superstores
Source: McKinsey
Patent lasts 15 years and

innovations are difficult to copy
Fenner competitors historically

do not have capability to
successfully innovate
Adding catalog service

increases annual cost by 50
million
Superstores reduce profit
margins by 5%
Using all three distribution

channels increases annual cost
by 60 million and reduces profit
margins by 4%
47
1 Executive summary
5 Management team
48
DEVELOPMENT OF KEY FINANCIALS, 2001-2005

BASE CASE
Revenue
millions
EBIT
6,785
1,162
millions
1,847
65
2001
2003
2005
ROS
%
Source: McKinsey
-144
-51
2001
2003
RONA
%
-222
-3
17
2001
2003
2005
2005
67
-178
-17
2001
2003
2005
49
FIVE-YEAR PROJECTION OF PROFIT AND LOSS STATEMENT

BASE CASE
millions
2001
2002
2003
2004
2005
65
513
1,847
3,887
6,785
209
322
81
125
55
85
30
46
43
66
626
122
348
68
152
30
58
11
68
14
1,898
103
1,182
64
362
20
165
9
189
10
3,510
90
2,295
59
617
16
305
8
293
8
5,623
83
3,891
57
963
14
480
7
424
6
EBIT
% of revenues
Interest
Taxes
-144
-222
3
0
-113
-22
8
0
-51
-3
12
0
378
10
12
5
1,162
17
12
340
Net income
% of revenues
-147
-226
-121
-24
-63
-3
361
9
793
12
Revenue
Expenses
% of revenues
Cost of goods sold
% of revenues
Marketing and sales
% of revenues
Administration
% of revenues
R&D
% of revenues
Source: McKinsey
50
FIVE-YEAR PROJECTION OF CASH FLOW STATEMENT
BASE CASE
millions
Cash year in
Sources of cash
Net income:
+ Depreciation (amortization)
Increase/decrease in
+ Trade and other payables
+ Employee benefit liabilities
+ Deferred tax liabilities
+ Long-term debt and loans
Total sources of cash
Use of cash
Increase/decrease in:
Trade and other receivables
+ Inventories
+ Fixed assets
+ Interest
Total use of cash
Increase/decrease in cash
+ Financing (increase of equity)
Cash years out
Source: McKinsey
2001
2002
2003
2004
2005
33
31
236
-147
8
-121
12
-63
19
361
85
793
103
8
5
0
50
16
3
0
80
23
6
0
50
36
8
1
0
49
9
84
0
-76
-10
+35
491
1,038
14
38
3
15
54
12
8
3
62
24
12
16
156
83
12
35
227
155
12
48
70
-146
150
77
-87
120
114
-79
110
286
205
0
442
596
0
33
31
236
832
51
FIVE-YEAR PROJECTION OF BALANCE SHEET ASSETS

BASE CASE
millions
2001
2002
2003
2004
2005
33
31
236
832
+Trade and other receivables

+ Inventories
14
68
130
286
513
15
18
34
69
117
Total current assets
33
119
195
591
1,462
54
101
152
279
509
20
39
124
227
Total fixed assets
46
81
113
155
282
Total assets
81
183
299
751
1,744
Current assets
Liquid assets
Fixed assets
Gross value
Accumulated depreciation
Source: McKinsey
52
FIVE-YEAR PROJECTION BALANCE SHEET LIABILITIES

BASE CASE
AND EQUITY
millions
2001
2002
2003
2004
2005
Trade and other payables
24
47
83
132
+ Employee benefit liabilities

+ Deferred tax liabilities
14
22
31
85
13
32
61
106
248
Long-term debt and loans
50
130
180
180
180
Total long-term liabilities
50
130
180
180
180
Total liabilities
63
162
241
286
428
150
270
380
380
380
-132
-249
-271
85
936
Total equity
18
21
109
465
1,316
Total liabilities and equity
81
183
299
751
1,744
Current liabilities
Total current liabilities

Long-term liabilities
Equity
Share capital
+ Retained earnings
Source: McKinsey
53
PROJECTION OF EBIT, ROS, AND RONA, 2001-2005

BASE CASE
1,162
EBIT
millions
378
-144
-113
ROS
%
-51
-3
10
17
50
67
-22
RONA
%
-222
-62
-17
-178
Source: McKinsey
54
BUSINESS EVALUATION THROUGH DCF* METHOD

millions
8,938
1,162
BASE CASE
NPV of
free cash
flows is
4,653
million
378
Discounting
rate
%
-51
-144
-113
2001
2002
2003
2004
2005
30
27
24
21
18
* Discounted cash-flow analysis

** Last years cash flow with yearly growth rate of 2.5% discounted by 15.5%
Source: McKinsey
Residual
value**
15.5
55
DESCRIPTION OF CASES
Competitors (Trinity Fenner, Wonaby Fenner)

Worst case
developing fast fenner in two to three years

Market growth limited (3%)
Price war driving down market price by 10%-15%
Development as expected
Base case
Best case
Market exit 2002 of Kings Fenner company

Market growth exceeding expectations
(15%-20%) mainly driven by introduction of fast
fenners
Price discrimination for option levers by 10%
Source: McKinsey
56
COMPARISON OF EBIT, ROS, AND RONA BETWEEN CASES, 2005
Worst case
Base case
Best case
2,014
EBIT
millions
1,162
512
24
17
ROS
%
5
85
RONA
%
Source: McKinsey
67
32
57
BUSINESS EVALUATION THROUGH WEIGHTING CASES

DCF
millions
Base case
Worst case
Best case
Source: McKinsey
Probability
%
4,653
-138
60
20
6,221
Value of
EFC's fast
fenner SBU
4,008
million
20
58
1 Executive summary
5 Management team
59
IMPLEMENTATION ACTION PLAN AND TIMELINE, 2001
Month
Activity
Finish final product

development
Set up business unit

Hire new staff
Train new staff
Begin fenner production
Develop marketing
strategy/ads campaign
Begin ads campaign/

sales rep visits
Roll out fast fenners

Start up customer
service phone center
Send out account reps

Follow up surveys with
early customers
Fine-tune product
Source: McKinsey
60

Sample Business Plan

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CONTENT EFC BUSINESS PLAN

EXECUTIVE SUMMARY KEY ISSUES

Pricing: EFC is the low-cost producer of fenners. This business

Competitive response: EFC has patented the fast fenner and

Distribution channel: This business plan recommends that EFC

CONTENT EFC BUSINESS PLAN

SIZE OF FENNER MARKET

* Compound average growth rate

AVERAGE INDUSTRY ROS OF FENNER MARKET

FENNER DISTRIBUTION CHANNELS, MAT* 1999

Currently no fenners are sold online,

DEVELOPMENT OF MARKET SHARE OF IMPROVED FENNERS

MARKET RESEARCH FINDINGS POTENTIAL CUSTOMER NEEDS

% of population liking their

Potential needs of fenner users*

* Quotations from customer interviews

MARKET RESEARCH FINDINGS IMPROVEMENT OPPORTUNITIES

Potential customer needs

'Wish my fenner could '

Improve fenners ability to do A, B, C

'Wish it had more '

'Need help getting my

'Wish I could buy more

Scaled down, low-price fenner

WILLINGNESS TO SWITCH TO AN IMPROVED FENNER

at the same price?

KEY FACTORS DRIVING CUSTOMER BUYING DECISION

DEMOGRAPHICS OF TARGET CUSTOMER SEGMENTS

Young customers with high

FENNER INDUSTRY FORCES AT WORK

MARKET SHARE OF FENNER COMPANIES, MAT* 1999

Kings Fenner Co.

Significant barriers for

entry into fenner market:

Fenner companies with

old product (e.g., Kings

John's Fenner Co.

* Moving annual total

EFC's competitors generally are not expected to

Trinity Fenners has the highest capability to innovate

COMPETITIVE POSITION EFC vs. COMPETITORS

Ability for low-cost

Cost leader in current

CEO left six months

Fast fenner patent

Patent for enhanced

Fenner retail chain

Strong brand name

SWOT ANALYSIS FOR EFC FENNERS FUTURE BUSINESS

CONTENT EFC BUSINESS PLAN

FAST FENNERS VALUE PROPOSITION

EFC value added

VALUE PROPOSITION TARGETED TO CUSTOMER SEGMENTS

Key value proposition

Fast fenners have lots of new

Fast fenners cost the same as

Fast fenners offer 24-hour

ESTIMATED CUSTOMER SEGMENT DEVELOPMENT, 2001-2005

* Compound average growth rate

EFC REVENUE AND MARKET SHARE DEVELOPMENT, 2001-2005

Target price of 2 per fenner

CONTENT EFC BUSINESS PLAN