chapter 13 management and operations strategy. copyright houghton mifflin company13-2 overview...

Chapter 13

Managementand Operations

Strategy

Copyright © Houghton Mifflin Company 13-2

Overview

• Organization: the way the business works

• Location: finding the appropriate business site

• People: organizing the start-up team


Identify Your Business Processes

• Who does the work?

• Where do they work?

• What do they need to do the work?

• What information is being generated?

• Where does that information go?

A Simple Business Flowchart


Organizing Virtually

• A business without walls

• Outsource business processes

• Form a network of strategic alliances

• Use technology to link all the pieces


Traditional Bricks-and-Mortar Enterprise

• Differentiated from virtual by flexibility and cost

• B&M businesses not as flexible because of physical location and physical assets

• Must achieve more sales to be profitable• Cost more to launch• Solution: hybrid model where core

activities in-house; rest is outsourced


Location Decisions

• Region, state, and community– Type of business– Your personal lifestyle goals

• Economic base—major source of income

• Financial incentives to new businesses

• Demographics—population base


The Retail Site

• Consider the trade area– Map it

• Competition and character– Drive it

• Accessibility– Observe it


The Service/Wholesale Site

• If customers don’t come to the site, can choose less expensive location

• Service businesses that receive clients should choose based on client expectations


The Manufacturing Site

• Look for appropriate zoning

• Consider an industrial park– Electrical power and sewage

plants for manufacturing

• Enterprise zones– Tax incentives to bring jobs to inner cities

and rural areas

• Access to suppliers and transportation

• Cost of labor and utilities

The Lease/Build/Buy Decision


Alternatives to Conventional Facilities

• Incubators– Shared space, support, and training– Does it provide a network of contacts, access to

expertise and capital, and access to customers?

• Shared Space– Co-location within the facility of a larger company

• Mobile locations: pushcarts and kiosks• Temporary tenant agreements

– Good for demos, samples, and personalized merchandise


Organizing People


Organizing Entrepreneurially


Hiring the Right Team

• Determine which functions to fill and describe the behaviors and experience necessary for success

• Seek among current employees first• Conduct interviews that get at the

character of the person• Do background checks and call references• Consider leasing employees


Ownership and Compensation

• Founder’s stock (144 stock)– Usually the lowest level the stock will ever be– Restricted and not registered with SEC

• Equity partners do not have to be equal partners• Don’t bring someone on as an equity partner if

you can hire that person• Use cash bonuses in lieu of stock options

where possible• Have employees work for the company at least

two years before they are vested


Alternatives to Equity Incentives

• Deferred compensation plans linked to profits and performance

• Bonus plans• Capital appreciation rights to participate in

the company’s profit at a specified percentage

• Profit-sharing plans, which are subject to rules for retirement programs


Take-Aways

• List what students took away from the discussion in real time

chapter 13 management and operations strategy. copyright houghton mifflin company13-2 overview...

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