Strategic Planning Concepts & Principles (cont...)

BUSINESS INTELLIGENCE (also see "Data Warehouse")
The gathering, management, analysis, and distribution of information about a company's customers and competitors in order to sustain competitive advantage. Through business intelligence, companies are able to better understand their customers and prospects, develop and expand customer relationships, bolster customer service, improve the profitability of products and services, and create valuable new offerings.

It also monitors competitors in order to stay one step ahead of them, or to enable quick reaction to their innovations. (It obviously does not include industrial espionage!).

Business intelligence, therefore, facilitates "correct" and speedy strategic decisions.

BUSINESS SEGMENT
A defensible competitive arena within which market leadership is valuable. A business segment is an area within which a company can specialise and gain COMPETITIVE ADVANTAGE. An example of a business segment would be high performance sports cars, which is a defensible market against mass-market cars. Thus Ferrari does not have to worry about its share of the overall car market, if it can be the leader in its own segment.

CHANNEL MIX
The different methods whereby companies distribute their products and services, and conduct transactions with customers (distribution channels).

Conducting transactions (and provision of information) are currently experiencing a major move from manual to electronic.

CORE COMPETENCES (British), COMPETENCIES (American)
Those distinctive skills, qualities and capabilities that are key/critical to the success of the business, and that distinguish an organisation from its competitors and establish value in the minds of its customers.

To be successful an organisation must be at least as good as its competition in certain core competencies. For example, in retailing one of the most important skills is Buying and Merchandising, that is procuring goods that consumers will want to buy and displaying them attractively.

Assessing and improving competencies (relative to competition) has rightly become the top priority for many organisations.

COMPETITIVE ADVANTAGE (also see "Differentiation")
A company has competitive advantage when it has identified a market or market niche where it is possible to have a price advantage, or a cost advantage, or both, over competitors.

Price advantage means that the product or service is thought sufficiently superior by its buyers to make a price premium possible. Brand leaders usually command a price premium over secondary brands or own label products, sometimes as much as 20-40 percent, which far exceeds the additional cost of advertising and superior product formulation.

Cost advantage can come from superior scale (and therefore economies of scale: greater spreading of fixed costs), from having lower factor costs (for example, by using cheap labour), from superior technology, or simply having workers who perform their tasks more intelligently or quickly.

Competitive advantage needs to be sustained in order to stay ahead of the competition - meaning continuous innovation and improvement.

CONTINUOUS IMPROVEMENT
A Japanese concept holding that COMPETITIVE ADVANTAGE of a company accrues from the persistent search for improvement and a series of tiny steps made continuously, rather than from great leaps forward.

CONTRACTING-OUT / OUTSOURCING
Using outside suppliers of services to provide non-core functions, rather than having an internal department to do this.

There is a strong and increasing trend towards contracting-out in both business and government, largely to cut costs, but partly also motivated by the belief that organisations should concentrate on their core competencies and leave other specialists to fulfill other roles.

External providers are/should be specialists in their fields and should, therefore, be able to add more value than an internal department would normally be able to. The cost saving lies in them being used when you need them, eliminating permanent overhead costs.

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