Transcript CONOPS Elements - Mississippi State University

Mississippi State University
MGT 3323
Entrepreneurship
Daniel T. Holt
Assistant Professor of
Management
“The people’s university”
-- Dr. Mark Keenum
Administrative Issues
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Financial Feasibility Analyses—DUE TODAY
Industry, Competitor, & Customer Analysis
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Opportunity to revise & resubmit work—Due 2 Apr (beginning of class)
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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
Feasibility Analysis
• Includes…
• First phase (due 5 Mar—resubmissions due 2 Apr, not required)
• Analysis of the Industry
• Analysis of competitors & how you’re different
• Analysis of the target market (requires first hand data from customers—we’ll talk
about this today)
• Second phase (submitted 26 Mar)
• Financial feasibility
• Final phase (due 9 Apr)
• Revisions & improvements to first two phases
• And…
Suppliers
Distribution channels
Location analysis
Technology and service analysis
Social Lending
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Zopa.com
Prosper.com
Virginmoney.com
Lendingclub.com
Planning Process
IKEA Operations Video
Operations Plan
General Guidance
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Primary requirements
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Strategy
• Devise & maintain a clearly stated focus, goal, or
objective
• Understand what you are capable of doing
exceptionally
Operational excellence
• Develop & maintain processes that are flawless
Culture
• Foster 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)
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Talent
• Recruit, select, develop, & retain exceptional
people
Innovate
• Explore & 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
General Guidance
OPERATIONAL EXCELLENCE
• Develop and maintain flawless
operational execution
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Primary requirements
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Strategy
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Devise & maintain a clearly stated
focus, goal, or objective
•
Understand what you are capable
of doing exceptionally
Operational excellence
•
Develop & maintain processes
that are flawless
Culture
•
Foster an added-value
environment (reward performance
& ethics)
Organize simply
•
Employ a structure that facilitates
communication, cooperation, &
action (i.e., minimize bureaucracy)
• 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
Details
Operations plans provide
details as to how the
business will be run and
how the product will be
produced.
Value Chain
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Applied Research
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Product
Design
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Manufacturing
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Process
Design
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Marketing &
Sales
Logistics
Product
Development
Plan and a
Prototype
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Distribution
Sales &
Service
Happy
Customer
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.
Attractive Opportunities
• Eliminating 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 receivable
• Parametric eliminated excess engineering costs (did it at
3% when other firms were doing this at 19%)
• Hotmail and Skype eliminated marketing costs
• Hotmail 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.”)
Dell’s Model
• According to one estimate, PCs lose 2% of their
value each day they sit in the finished goods
storeroom
• Dell computers eliminated finished goods storage
by…
• Directly selling computers to knowledgeable computer
users that don’t need hand holding
• Building a custom computer after it is ordered
• This 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)
Hotmail
• Hotmail grew a subscriber base more rapidly than any
company in the history of the world ...
• Faster than any new online, Internet, or print publication ever
• Hotmail 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 launch
Hotmail 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 promotion
• This compares to over $20 million spent on advertising and brand
promotion by Juno, Hotmail's closest competitor with a fraction of the
users
Wal-Mart’s Logistics
Stellar responsiveness
Solid resources and
network
Crisis execution
• Less reliant on its
• Before the storm, a
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less resilient
partners
Positive
relationships with
the state’s railroads
running through the
city established an
alternate transfer
point for goods
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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
• Despite 126 stores lying in
Katrina’s direct path, within
days, all but 15 had been reopened 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
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?
Geographic Locaiton
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Proximity to labor force
Closeness to suppliers
Access to transportation
Access to international shipping alternatives
Proximity to customers
Access to favorable state and local tax rates
Access to economic incentives
Proximity to high-quality community
Facilities
Distribution & Sales
• Distribution encompasses all the activities that move
a firm’s product from its place of origin to the
consumer
• You need to understand where people in your target
market shop
• Sales
• Who must sell your product or service (not always obvious)
• Explain how you will “sell”
• An internal sales force
• Manufacturer's representatives
• Telephone solicitors
• How you will support your sales effort
• Internal staff
• Service operations
Sales Approach
Advantages
Firm sales people
Independent
representatives
Disadvantages
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
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
Ownership Structure
• Ownership structure
• Compensation
• Options Pool—An inventory of
company stock which is set aside
for future employees
Ownership Options
• Sole proprietorship
• Business owned by one individual
(complete control)
• For tax and liability purposes, business
and individual are one in the same
• Partnership
• Business owned by two or more
individuals
• For tax and liability purposes, it is treated
as a proprietorship
• Earnings are distributed based on the
partnership agreement
Ownership Options
• Limited partnership
• Hybrid form of organization with general
and limited partners (no voice in
management & legally liable for capital
contributions)
• General partners…
• Assume management responsibility
• Have unlimited liability
• Have at least a 1 % interest in profits and
losses
• C Corporation (think of the of the
common corporation)
• The firm is treated as an individual (i.e.,
it can be fined, taxed, or sued)
Ownership Options
• S Corporation
• Must be a domestic firm deriving at least 20% of its
revenues from US sources
• Tax status is the same as a partnership
• Partners, however, have liability protections granted to
corporate shareholders
• Limited liability corporation
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Can have one or more owners, known as members
Separate legal entity from its owners
Members have limited personal liability
Unlimited life unless dissolved
Advantages & Disadvantages
Advantages
Sole
proprietorship
Partnership
Disadvantages
Simple to organize
Full Liability of the owner
One level of taxation
Cannot raise outside equity
capital, thus limiting potential
size of the business
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
Unless addressed through the
partnership agreement,
dissolves with the death or
withdrawal of any partner
Advantages & Disadvantages
C corporation
Advantages
Disadvantages
Theoretically 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
Shareholders enjoy limited liability
Limited number of
shareholders
Geographical dispersion
Venture capitalists cannot be
share holders
Questions, Comments, or
Criticisms?
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