1. Chapter 13 Management and Operations Strategy

2. Copyright © Houghton Mifflin Company13-2 Overview Organization: the way the business works Location: finding the appropriate business site People: organizing the start-up team

3. Copyright © Houghton Mifflin Company13-3 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?

4. A Simple Business Flowchart

5. Copyright © Houghton Mifflin Company13-5 Organizing Virtually A business without walls Outsource business processes Form a network of strategic alliances Use technology to link all the pieces

6. Copyright © Houghton Mifflin Company13-6 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

7. Copyright © Houghton Mifflin Company13-7 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

8. Copyright © Houghton Mifflin Company13-8 The Retail Site Consider the trade area –Map it Competition and character –Drive it Accessibility –Observe it

9. Copyright © Houghton Mifflin Company13-9 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

10. Copyright © Houghton Mifflin Company13-10 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

11. The Lease/Build/Buy Decision

12. Copyright © Houghton Mifflin Company13-12 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

13. Copyright © Houghton Mifflin Company13-13 Organizing People

14. Copyright © Houghton Mifflin Company13-14 Organizing Entrepreneurially

15. Copyright © Houghton Mifflin Company13-15 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

16. Copyright © Houghton Mifflin Company13-16 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

17. Copyright © Houghton Mifflin Company13-17 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

18. Copyright © Houghton Mifflin Company13-18 Take-Aways List what students took away from the discussion in real time