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K-Mart is an interesting example. This company arguably created and owned discount / general merchandise category for many years and dominated their early competition to point of causing extinction (WT Grant and to a lesser extent Woolworth). Why would K-Mart ever want to consider a changing their strategy. The answer in one word - Wal-Mart.
Unlike K-Mart, Wal-Mart's strategy was to go after smaller markets with stand-alone stores using brand merchandise - three distinct strategies that were diametrically opposed to direction that K-Mart had committed to (large markets, attached stores, private brand merchandise). When Sam Walton opened his first small store in Little Rock, Arkansas in 1972, K-Mart had over 1,600 hundred store locations. Today, Wal-Mart isn't just largest discounter with over 5000 stores, they are now largest retailer in world and represent an incredible success story. And K-Mart? Well, K-Mart is still K-Mart.
The lesson to be learned here is that it is almost never a good idea to have a new strategy forced on you. IBM's decision to lessen their reliance on their mainframe computer business, for example, wasn't entirely voluntary nor was decision on part of Borders or Barnes & Noble to enter into e-commerce business. In each case, it was defensive measure and a matter of self-preservation.
One of reasons a business plan can and should be such a valuable asset is because it offers us that rare opportunity to look into future and predict with some degree of certainty what is going to happen. The accuracy of course depends on planner but as a general rule major surprises are rare, or at least they should be. Wal-Mart wasn't exactly a stealth operation. Changes in IBM's mainframe business didn't happen overnight and who didn't foresee impact that Amazon.com was going to have on brick and mortar bookstores.
Your business plan should provide ample warning that there is something on horizon but it doesn't necessarily guarantee that changes are going to be made. In some cases it could be that threat is downplayed or timing is misjudged. But most common problem is that business plans are very often is relegated to a middle management function with inadequate visibility. When this happens, plan invariably lacks perspective, vision, scope and most importantly visible support and cooperation of senior management.
It is also critically important that planner is able to function as an antagonist, to ask tough questions, to probe and work freely and unencumbered by company politics or organizational issues. Here's how process might have worked at K-Mart circa 1975.
K-Mart Business Planner - "According to our demographic analysis, number of smaller markets outnumber larger markets by a ratio of 50 to 1."
Executive - "That may be true, but smaller markets also mean a much smaller number of potential consumers, or didn't you think of that," a smug look on his face.
K-Mart Business Planner - "But smaller markets also mean fewer competitors. Wal-Mart's in-store traffic is 20% higher than ours and their average individual purchase is almost 30% higher than ours."
Executive - "Wal-Mart, who's Wal-Mart. And are you suggesting that we abandon our strategic direction and shift gears midstream."
K-Mart Business Planner - "What I am suggesting is that we more closely examine this market and consider our options. One possible strategy would be to bracket Wal-Mart by introducing a line of stores aimed at smaller markets. With our economies of scale, merchandising acumen and marketing clout, we should be able to own this segment and minimize impact of future competition at same time."
Using your business plan to discuss, analyze and review options is no guarantee that you'll always make right decision. What it does assure, however, is that you're making an informed decision based on best available information.
Daniel McGilvery is President of The Business Planning Institute ("BPI"). BPI provides professional business plan writing, editing and review services. Contact BPI at info@bpiplans.com or visit their Web site at www.bpiplans.com