xxii INTRODUCTION TO THE THIRD EDITION
Introduction to the Third
Edition
Everything is changing except the way you
plan for change
Managers, executives and directors had to contend with exceptionally turbulent business
conditions while the second edition of this book was in print. Yet, amid constant chal-
lenges and change, one fact remained clear: the fundamental principles of planning have
not altered. And, while you must have a plan, it is increasingly obvious that strategies and
plans must be kept under constant review; that external operating conditions and markets
must be continually monitored; and that businesses must remain responsive and flexible.
During the life of the second edition (2002 to 2011), the world economy doubled in
size. The world’s most populous countries, China and India, surged ahead – helped in part
by US and European outsourcing (‘offshoring’) of back office functions in the search to cut
costs. Within a decade or so China will be the major economic superpower (larger than
the US economy) and by about 2030 India will be number three. Spending by the new
middle classes, new consumers, in these countries will rocket. Think how all this could
change your business model.
We are witnessing a transfer of economic power. While Asia and other emerging
markets are powering upwards, the West is floundering. Two major bubbles in the US,
reflecting mainly erroneous policies, caused the worst recessions in the developed world
in decades. After the 2000 dotcom bubble (see the Introduction to the Second Edition)
low interest rates intended to stimulate activity, combined with injudicious bank lend-
ing, created a huge housing bubble. Worse, housing loans were repackaged and sold on
to banks and investment funds worldwide. So when the interest rates started to rise and
borrowers defaulted on loans in the US, the world banking system all but collapsed and
recession bit hard. Obviously, this created a tough environment for businesses and most
business plans had to be revised.
The world motor industry and its suppliers probably suffered most, because while the
housing bubble was still expanding an energy crisis had been developing. Economic
growth in emerging markets, tension in the Middle East, depleting oil reserves, and con-
cern about the approach of peak oil (the year when oil production will reach its zenith
and start to decline) pushed oil prices from $25 to nearly $150 a barrel between 2003 and
INTRODUCTION TO THE THIRD EDITION xxiii
2008. The transport industry and car makers obviously suffer when fuel prices rise, but
while the onset of recession brought at least a temporary end to the petroleum price run
up, it just piled on the pressure for transport and automotive businesses.
Oil prices affect the costs of transport, fertiliser, and industrial agricultural – and
thereby contributed to a spike in world food prices in 2007–08 (which in turn stimulated
social unrest in some developing countries). Other factors affecting food prices were
droughts, and expanding demand in China and the emerging economies. Clearly, oil and
food prices have to be watched as world population, and spending power in emerging
economies, continue to grow. Unrest in the Middle East when this edition went to press
was again helping to push up oil and food prices. Moreover, worries about petroleum
reserves, climate change, carbon emissions, etc. have boosted demand for greener tech-
nology and environmentally friendly business.
Changes and shocks in our globally interconnected world will continue. In 2011, the
World Economic Forum identified the major risks in the next ten years as climate change,
fiscal crises, economic disparity, geopolitical conflict, energy price volatility, water secu-
rity, storms, cyclones and flooding, and failures in global governance (i.e. international
negotiations on climate change, trade, development goals, etc.). Clearly, no matter how
well you plan, there will always be surprises.
Remember that business plans should never be set in concrete. You need to keep the
world around you under review and be ready to adapt your plans to changing conditions.
Finally, to end on a brighter note, Web 2 (greater interaction and collaboration on the
Internet) has changed the way we share information. There are new opportunities for
building relationships with employees, suppliers, partners, and customers, for watching
your competitors, and for enhancing your collaboration and workflow. Moreover, the web
provides a venue for us to keep in touch after this book is printed. I’ll meet you online –
see below. May your business plans succeed and your business prosper.
Richard Stutely
July 2011
Supporting material for this book is available from
www.definitivebusinessplan.com
You can also follow and interact with Richard on the following networks:
Twitter www.twitter.com/RichardStutely
Google+ www.gplus.to/RichardStutely
Facebook www.facebook.com/RichardStutely
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