Mississippi State University

1. Mississippi State University MGT 3323 Entrepreneurship Daniel T. Holt Assistant Professor of Management “The people’s university” -- Dr. Mark Keenum

2. Administrative Issues • Financial Feasibility Analyses—DUE TODAY • Industry, Competitor, & Customer Analysis • Opportunity 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

3. 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

4. Social Lending Zopa.com Prosper.com Virginmoney.com Lendingclub.com

5. Planning Process

6. IKEA Operations Video

7. Operations Plan

8. General Guidance • Primary requirements • 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) • 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

9. General Guidance • OPERATIONAL EXCELLENCE • Develop and maintain flawless • operational 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 • Primary requirements • 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)

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

11. Value Chain 1 2 3 4 Product Development Plan and a Prototype Product Design Process Design Logistics Applied Research 5 6 7 8 Marketing & Sales Happy Customer Sales & Service Manufacturing 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.

12. 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.”)

13. 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)

14. 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

16. Wal-Mart’s Logistics • 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 Solid resources and network Crisis execution • Less reliant on its less resilient partners • Positive 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

17. 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?

18. Geographic Locaiton 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

19. Facilities

20. 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

21. Sales Approach

22. Ownership Structure • Ownership structure • Compensation • Options Pool—An inventory of company stock which is set aside for future employees

23. 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

24. 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)

25. 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 • Can have one or more owners, known as members • Separate legal entity from its owners • Members have limited personal liability • Unlimited life unless dissolved

26. Advantages & Disadvantages

27. Advantages & Disadvantages

28. Questions, Comments, or Criticisms?