Mississippi State University - PowerPoint Presentation

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Mississippi State University

“The people’s university”

-- Dr. Mark Keenum

MGT 3323Entrepreneurship

Daniel T. HoltAssistant Professor of Management

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Administrative IssuesFinancial Feasibility

Analyses—DUE TODAYIndustry, Competitor, & Customer AnalysisOpportunity to revise & resubmit work—Due 2 Apr (beginning of class)Submit the revision along with the original that was graded—note: you must make changes for these to be evaluated (i.e., you won’t get any penalty corrected by submitting unrevised work)

Grade weighting 80% of the highest & 20% of the lowest

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Feasibility Analysis

Includes…First phase (due 5 Mar—resubmissions due 2 Apr, not required)Analysis of the IndustryAnalysis of competitors & how you’re differentAnalysis of the target market (requires first hand data from customers—we’ll talk about this today)Second phase

(submitted 26 Mar)Financial feasibilityFinal phase (due 9 Apr)Revisions & improvements to first two phasesAnd…

SuppliersDistribution channelsLocation analysisTechnology and service analysis

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Social Lending

Zopa.comProsper.comVirginmoney.comLendingclub.com

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Planning Process

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IKEA Operations Video

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Operations Plan

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General Guidance

Primary requirements

StrategyDevise & maintain a clearly stated focus, goal, or objectiveUnderstand what you are capable of doing exceptionally

Operational excellenceDevelop & maintain processes that are flawlessCultureFoster an added-value environment (reward performance & ethics)Organize simply

Employ a structure that facilitates communication, cooperation, & action (i.e., minimize bureaucracy)Secondary requirements (2 of 4)TalentRecruit, select, develop, & retain exceptional people

InnovateExplore & incorporate new ideas & technologies that transform operations

Leadership

Recruit, select, & retain those that build relationships, motivate, & recognize opportunities

Mergers & Partnerships

Work with those that compliment & supplement organizational goals

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General Guidance

Primary requirements

StrategyDevise & maintain a clearly stated focus, goal, or objectiveUnderstand what you are capable of doing exceptionally

Operational excellenceDevelop & maintain processes that are flawlessCultureFoster an added-value environment (reward performance & ethics)Organize simply

Employ a structure that facilitates communication, cooperation, & action (i.e., minimize bureaucracy)

OPERATIONAL EXCELLENCEDevelop and maintain flawlessoperational execution

Winners consistently meet the

expectations of their customers

by delivering value

Bad quality will hurt

Companies in the bottom half of the perceived quality rankings failed, but were safe as long as they remained in the top third

Winners consistently slashed

operational costs while

increasing productivity by 6 to 7

percent yearly

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Details

Operations plans provide details as to how the business will be run and how the product will be produced.

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Value Chain

Applied Research

Product

Design

1

2

3

4

Logistics

Product Development Plan and a Prototype

Process

Design

Manufacturing

Marketing & Sales

5

6

7

8

Sales & Service

Happy Customer

Distribution

Not all firms provide all of the functions across the value chain. In fact, if you can eliminate certain aspects through your business this is incredibly desirable to investors.

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Attractive OpportunitiesEliminating some traditional part of a business’ value chain (which

typically is a line on your income statement or balance sheet)Amazon eliminated inventory and accounts receivableParametric eliminated excess engineering costs (did it at 3% when other firms were doing this at 19%)Hotmail and Skype eliminated marketing costsHotmail marketed simply by putting a message at the close of each e-mail that said…

“Get your free e-mail at Hotmail” (originally suggest the message read, “P.S. I love you. Get your free e-mail at Hotmail.”)

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Dell’s Model

According to one estimate, PCs lose 2% of their value each day they sit in the finished goods storeroomDell computers eliminated finished goods storage by…Directly selling computers to knowledgeable computer users that don’t need hand holdingBuilding a custom computer after it is orderedThis also allowed Dell to…Eliminate 30- to 60-day accounts receivable that is typically financed with working capital or loans

Pay their suppliers within 30 days of an order (a marked improvement over the past)

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HotmailHotmail grew a subscriber base more rapidly than any company in the history of the world ...

Faster than any new online, Internet, or print publication everHotmail is the largest email provider in the world. In its first 18 months, Hotmail signed up over 12 million subscribers. Traditional print publications hope to reach a total of 100,000 subscribers within a few years of launchHotmail signs up more than 150,000 subscribers every day, seven days a week.

From company launch to 12 million users, Hotmail spent less than $500K on marketing, advertising and promotionThis compares to over $20 million spent on advertising and brand promotion by Juno, Hotmail's closest competitor with a fraction of the users

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Wal-Mart’s Logistics

Less reliant on its less resilient partnersPositive relationships with the state’s railroads running through the city established an alternate transfer point for goods

Before the storm, a crisis control team were organizing delivery of a variety of emergency supplies to designated staging areas

Protocol were in place to guide action as soon as the storm hit

Solid resources and network

Stellar responsiveness

Despite 126 stores lying in Katrina’s direct path, within days, all but 15 had been re-opened for business with strong sales

Wal-Mart’s speed of response was days quicker than federal emergency crews in getting trucks filled with emergency supplies to relief workers and citizens

Crisis execution

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Suppliers

What materials are used to produce the product/service and who are the suppliers? Is there more than one source of supply? Are these suppliers reputable and reliable? Do they supply the best quality at the most competitive prices?

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Geographic LocaitonProximity to labor force

Closeness to suppliersAccess to transportationAccess to international shipping alternativesProximity to customersAccess to favorable state and local tax ratesAccess to economic incentivesProximity to high-quality community

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Facilities

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Distribution & Sales

Distribution encompasses all the activities that move a firm’s product from its place of origin to the consumerYou need to understand where people in your target market shopSalesWho must sell your product or service (not always obvious)Explain how you will “sell”

An internal sales forceManufacturer's representativesTelephone solicitorsHow you will support your sales effortInternal staffService operations

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Sales Approach

Advantages

Disadvantages

Firm sales people

Know your product well

High fixed cost

Relatively easy to manage

Low geographical dispersion

Provide feedback from customers

Time &

costs associated with selection & training

Paid salary

plus commission

Travel costs

Independent

representatives

Paid on commission

Sell for several firms,

making it difficult to get their attention

Lower hiring & training costs

Difficult to manage

Geographical dispersion

Low feedback from customers

Have established

customer relationships

May

have limited understanding of a complex product

Low fixed costs

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Ownership Structure

Ownership structureCompensationOptions Pool—An inventory of company stock which is set aside for future employees

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Ownership Options

Sole proprietorshipBusiness owned by one individual (complete control)

For tax and liability purposes, business and individual are one in the samePartnershipBusiness owned by two or more individualsFor tax and liability purposes, it is treated as a proprietorshipEarnings are distributed based on the partnership agreement

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Ownership Options

Limited partnershipHybrid form of organization with general and limited partners (no voice in management & legally liable for capital contributions)

General partners…Assume management responsibilityHave unlimited liabilityHave at least a 1 % interest in profits and lossesC Corporation (think of the of the common corporation)The firm is treated as an individual (i.e., it can be fined, taxed, or sued)

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Ownership Options

S CorporationMust be a domestic firm deriving at least 20% of its revenues from US sourcesTax status is the same as a partnership

Partners, however, have liability protections granted to corporate shareholdersLimited liability corporationCan have one or more owners, known as membersSeparate legal entity from its ownersMembers have limited personal liabilityUnlimited life unless dissolved

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Advantages & Disadvantages

Advantages

Disadvantages

Sole proprietorship

Simple to organize

Full Liability of the owner

One

level of taxation

Cannot

raise outside equity capital, thus limiting potential size of the business

Partnership

Can bring additional talent and personal capital

Full liability of partners

One

level of taxation

Capital

limited to the pockets of the partners

Geographical dispersion

Unles

s addressed through the partnership agreement, dissolves with the death or withdrawal of any partner

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Advantages & Disadvantages

Advantages

Disadvantages

C

corporationTheoretically capable of attracting equity capital through share ownership

Complex to set up and operate

Preferred

form of venture capitalists

Income subject to double

taxation

Shareholders enjoy limited liability

Able to deduct many benefit payments to employees

S

Corporation

Like

a proprietorship and partnership, subject to only one level of taxation

Complex to set up and operate

Share

holders enjoy limited liability

Limited

number of shareholders

Geographical dispersion

Venture capitalists

cannot be share holders

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Questions, Comments, or Criticisms?