Executive Summary and classmate repsonse

Learning Material:

The first way to fund a new idea is to do so yourself with savings or other investments. Many entrepreneurs just starting out are not wealthy and find it possible to only fund a limited amount of their new business. Often, savings, a home equity loan, and credit cards provide the entrepreneur with capital to get the product off the ground. This is risky for sure, but a new venture does not succeed without a champion that believes strongly in the venture.

Bootstrapping is what some entrepreneurs do to get off the ground. Bootstrapping is putting in funds as you can, selling some product and putting that money back into the company, and doing this over and over until it grows large enough to fund itself. The advantage to bootstrapping is that the entrepreneur retains 100% ownership of the venture, complete control, and the ability to retain complete profits (or loss).

The disadvantage to bootstrapping a business is that it takes much longer to grow a company this way. If considering a large-scale business or research-intense technology, it may not be possible to bootstrap it to market. If serious research is needed, the entrepreneur will not have a product to sell to provide some income to keep going. In this case, options other than bootstrapping will need to be considered.

Before others will invest, the entrepreneur will need to show he or she has created something of value. The more value already created, the more likely the entrepreneur is to receive investment, and the more ownership she will be able to retain. So, once all one's own resources are exhausted, the entrepreneur will look to friends, family, and other contacts for additional money. An attorney can help set up an interest loan or stock ownership for this type of investment in the new enterprise.

The next phase of funding to seek is from angel investors. These are wealthy individuals looking for a large return who often pool funds to invest in early stage companies. They are often genuinely interested in your idea and believe in what you are doing. They assume a higher degree of risk in investing in your company in hopes for a higher return.

After angel funding, comes venture capital. Make no mistake, venture capitalists are in business to make money and are looking for high returns. They bring value to the table in the ability to invest large amounts of capital in the entrepreneur's operation, often multiple times. But, the entrepreneur may be called upon to pay for this by giving the venture capitalist half his company or more just for the first round of funding. A typical startup will need to come back for 3–4 rounds of funding before the company can support itself. Each time, the venture capitalist takes a larger ownership in the business. When the venture capitalist has over 50%, he or she will be able to put in his or her own business leadership team. This can be a blessing or a curse, depending on the situation. If the entrepreneur is not a business person, but rather the engineer or scientist who came up with a great new technology, he or she may not care to run the business end of things, preferring to pursue the science. If experienced start-up people run the company, it should raise the likelihood of success. On the flip side, if you do not bring enough value to the table and watch what you sign, you may find your company becoming successful and very little of the ownership still in your hands, sometimes less than 1%. The most important people to consult and keep at your side through this process is an attorney who is well-known and respected (especially in the venture capitalist community) for start-up activities and a good CPA who works with start-up activities.

Question 1: What is a comprehensive strategic-management model?

Answer 1: Three major phases to the strategic-management model are strategy formulation, implementation, and evaluation. The strategy formulation phase involves developing vision and mission statements; performing external and internal audits; establishing long-term objectives; and generating, evaluating, and selecting strategies. The strategy implementation stage involves the implementation of the strategy management, marketing, finance, accounting, R&D, and MIS issues. The strategy evaluation stage involves the measurement and evaluation of strategy performance.

Question 2: What is strategy evaluation?

Answer 2: It is important that when a strategy is implemented its effectiveness is closely evaluated. It is important to see how well the plan met its goals and objectives. Any assessment of strategies should address the following key questions and determine the actions to take as a result of the answers. The three major questions that should be considered when evaluating a strategy implementation are as follows (David, 2003):

· “Have major changes occurred in the firm’s internal strategic position?” (“Yes” or “No”)

· “Have major changes occurred in the firm’s external strategic position?” (“Yes” or “No”)

· “Has the firm progressed satisfactorily toward achieving its stated objectives?” (“Yes” or “No”)

Question 3: What are the characteristics of an effective evaluation system?

Answer 3: The effective evaluation system must be simple, economical, meaningful, timely, accurate, realistic, foster understanding, and not dominate any decisions. Furthermore, managers need not receive all reports, only the ones appropriate to their needs. Also, questions and answers should be handled effectively, so as not to foster any ill-gotten feelings. Not only are the results important, but also the recipients of the results. Timely dissemination of the information is as important as the results themselves. An organization is comprised of a culture, and it is important to gauge the effect the information may have on it so as not to have negative affects, but foster growth and productivity.

Question 4: How important are ethics in strategy evaluation?

Answer 4: Ethical considerations may become a factor while evaluating the effectiveness of a strategy. There sometimes can be a tendency to look the other way when improprieties are exposed when it is evident that a strategy exceeded goals or expectations, the rationale being that the goals or objectives were successfully met, and the improprieties may be only temporary or short-lived. Consequently, ethical considerations are sometimes placed on the back burner, and only considered again during the initial stages of strategy planning. This is very dangerous, because the more they are overlooked, the more easily they are ignored when strategies are implemented. Establishing an organizational-wide ethics statement is crucial, and remembering that it exists is also most crucial when successful strategy implementations are evaluated.

Question 5: What are contingency plans?

Answer 5: Contingency plans can be defined as alternate plans that can take effect in case key events that may interfere with the implementation of the strategy do or do not occur. Regardless of how carefully strategies are formulated, implemented, or evaluated, unforeseen events may occur that can make a strategy plan obsolete. Management should have contingency plans to deal with them. Some commonly established contingency plans are as follows (David, 2003):

· “If a major competitor withdraws from particular markets as intelligence exports indicate, what actions should our firm take?”

· “If our sales objectives are not reached, what actions should our firm take to avoid losses?”

· “If demand for our new product exceeds plans, what actions should our firm take to meet the higher demand?”

· “If certain disasters occur – such as loss of computer capabilities; a hostile takeover attempt; loss of patent protection; or destruction of manufacturing facilities because of earthquakes, tornados, or hurricanes – what actions should our firm take?”

· “If a new technological advancement makes our product obsolete sooner than expected, what actions should our firm take?"

Question 6: What is an executive summary?

Answer 6: The executive summary--sometime known as a synopsis--is a comprehensive, brief account of the report. It is usually three or fewer pages, and contains a brief account of all the sections in the report. It is crucial that it is well written, because at times this is the only part of the report that some management may read. Informational and analytical reports should always contain an overall summary of the findings. A summary of the discussion of the findings should be included at the end of each section when the analysis is lengthy and complex. In an informative report written inductively, the summary marks the conclusion of the report. In an analytical report, the summary may be in a separate section, or may be included in the section with the conclusions and recommendations.

Question 7: How should the recommendations and implementations of a research project be presented?

Answer 7: The final section of the report is the conclusions; these are drawn from the findings and usually include a list of recommendations for implementation. Any assumptions, margins of error, or problems encountered will be included here as well. Depending upon the type of report and the writer, the recommendations and conclusions may also appear at the beginning of a report. The recommendations and conclusions are at the end of the report when analytical reports are inductive. The recommendations and conclusions may appear at the beginning of the report when the analytical are deductive in nature.

Question 8: How should conclusions be presented?

Answer 8: Conclusions must be logical inferences of the findings supported by the data analysis. All information that support the conclusions should be included in the data analysis section and not here. New data that support the conclusions should never be included here for a dramatic ending. The conclusions should indicate a completion of the analysis. In some circumstances, however, supplemental material may be included for additional support to the conclusions and recommendations.

Reference

David, F. D. (2003). Strategic management, concepts and cases. Upper Saddle River, NJ: Prentice Hall.

A Small Business is one that is independently owned, operated, and financed, has fewer than 100 employees, doesn't engage in any new marketing or innovative practices, and has relatively little impact on its industry.

An Entrepreneurial Venture is characterized by innovative strategic practices, has profitability and growth as its main goals, is more innovative and seeks out new opportunities, and is willing to take risks.

Small businesses and entrepreneurial ventures are important to every industry sector in the U.S. and global economy. They tend to respond more quickly to changing conditions than larger, less-flexible, organizations. They also create the most new jobs in today's economy.

Developing and exploiting a sustainable competitive advantage is an important task for strategic managers in small businesses and entrepreneurial ventures, just as it is for larger organizations. What's different or unique about the way that strategic managers in small businesses and entrepreneurial ventures do this? Let's look more closely at the process.

Strategy research on the value of general planning in these types of organizations and on the value of pre-start-up planning in particular has shown mixed results. Several studies have shown positive linkages between planning and business performance. Others have not uncovered any such relationship between planning and performance or have shown that the relationship depends on the industry.

The strategic planning process in small organizations should be far less formal than in large organizations to encourage flexibility. The value of strategic planning lies more in the "doing" than the outcome. Most of the value comes from its emphasis on analyzing and evaluating the external and internal environments.

A not-for-profit organization, or NFP, is an organization whose purpose is to provide some service or good with no intention or goal of earning a profit. The many different types of NFPs include Charitable, Religious, Social service, Public Sector, Professional membership associations, Health service, Cultural and recreational, Cause-related, Foundations, and Educational.

A public-sector organization is an NFP created, funded, and regulated by the public sector or government. It provides those public services that a society needs to be able to exist and operate.

Types of public-sector organizations include governmental units, police protection, paved roads and other transportation needs, recreation facilities, care and help for needy and disabled citizens, and laws and regulations to protect and enhance life.

NFPs are competing for resources and customers, which makes strategic management a necessity. The strategic management process for these types of organizations involves external and internal environmental analysis, strategy choices, and strategy evaluation and control.

NFPs are facing increasingly dynamic environments just as business organizations are. An External analysis provides an assessment of the positive and negative environmental trends and changes that might impact the NFP's strategic decisions and actions, just as it does for the for-profit organizations. An Internal analysis provides an assessment of the NFP's resources and capabilities and its strengths and weaknesses in specific areas. Knowing the resources and capabilities and which ones are inadequate or absent, lets strategic managers see what distinctive capabilities, core competencies, and competitive advantage(s) the NFP might have or might need to develop.

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An NFP's strategic managers must make some decisions about strategies to fulfill its vision and mission. The strategic options that an NFP or a public sector organization has are similar in many respects to those available to businesses.

Remember that functional strategies allow the company to do what it's set up to do. Competitive strategies allow NFPs to compete for resources and customers to ensure their existence. And, corporate strategies allow companies to decide whether or not to grow, stabilize, or renew.

Like for-profit organizations, NFPs need to evaluate whether or not the implemented strategy has had the intended effect. This is probably the most difficult part of the strategic management process for NFP and public sector organizations because clearly stated performance standards are not easy to develop for these types of organizations. Without clearly stated goals, strategy evaluation and control become more difficult.

In these types of organizations there's not one simple measure of performance like the profit standard used for business organizations. Instead, strategic managers may have to look at several different measures of strategic performance.

Often it's easier for strategic managers of not-for-profit organizations to measure the resources coming into the organization than the services or goods being provided or how these resources are being used.

Some specific strategic issues facing NFPs include the misperception about the Usefulness of Strategic Management, Multiple Stakeholders, and some Unique Strategies used by NFPs in response to the variable and unpredictable revenue sources.

Because NFPs often rely on variable and unpredictable revenue sources, many have developed some unique strategies to cope with the changing environmental conditions-both external and internal. Three of these unique strategies include:

· Cause-related marketing, a strategic practice in which for-profit businesses link up with a social cause that fits in well with the company's product or service.

· Not-for-profit marketing alliances, which are strategic partnerships between a not-for-profit organization and one or more corporate partners in which the corporate partners agrees to undertake a series of marketing actions that will benefit all parties.

· And Strategic piggybacking, which is the development of a new activity that would generate revenue for the NFP organization

Let’s examine some important characteristics of the business environment. What forces are driving it? What are the implications? And what will it take to be successful?

Three major drivers of the new business environment include:

· The information revolution

· Technological advances and breakthroughs

· And globalization

Information is now readily available to practically anyone from anywhere on the globe at any hour of the day and pretty much in any format. The almost instant availability of information has radically changed the nature of the business environment.

Information is now seen as the essential resource of production. Organizations can no longer simply rely on the traditional factors of production to provide a sustainable competitive advantage. They must now look to how information and knowledge can be exploited.

Technology is the use of equipment, materials, knowledge, and experience to perform tasks. Four major technological trends include:

1. The increasing rate of change and diffusion. Not only are technological advances happening more frequently, they’re also being more rapidly adopted by organizations.

2. Increasing commercialization of innovations. Innovation is the process of taking a creative idea and turning it into a product or process that can be used or sold.

3. Increasing knowledge intensity. As the use of technology increases, so does the need for knowledge. And

4. The Advent of increasing returns.

The third driving force of the new business environment is globalization. Globalization is the international linkage of economies and cultures that foster a business and competitive situation in which organizations have no national boundaries.

Global factors impact:

1. The global marketplace, which provides significant opportunities for organizations to market their goods and services. Creating sustainable competitive advantage may require looking globally for customers. The global marketplace shouldn't just be viewed as an outlet for products, but also a critical source of resources. And,

2. Global competitors, which can come from anywhere. They, too, will be looking for a sustainable competitive advantage. Global competitors don't always have to be a negative threat to each other. They might find they can achieve a sustainable competitive advantage is by partnering in some type of an arrangement to make or market products. There are four major implications of these driving forces:

· Continual Turbulence and Change. All organizations must deal with change on an increasingly frequent basis.

· Reduced Need for Physical Assets. Traditionally, accumulating physical assets led to power. However, in the new economy, value can be found in intangible factors such as information, people, ideas, and knowledge.

· Vanishing Distance. Geography and political boundaries no longer determine customers and competitors.

· And Compressed Time. Electronic mail and interactive Web sites give us instantaneous delivery of information.

There are three critical success factors for succeeding in the new business environment:

1. The Ability to Embrace Change. Being successful in a turbulent environment means seeking out change and embracing it.

2. Creativity and Innovation Capabilities. Create and innovate, or lose! Creativity is the ability to combine ideas in a unique way or to make unusual associations between ideas. An innovative organization is characterized by its ability to channel creativity into useful outcomes. And,

3. Being a World-Class Organization. A world-class organization is an organization that continually acquires and utilizes knowledge in its strategic decisions and actions in order to be the best in the world at what it does.

Organizational vision is a broad comprehensive picture of what a leader wants an organization to become. It's a statement of what the organization stands for, what it believes in, and why it exists. Four components have been identified as important to organizational vision:

1. The vision should be built on a foundation of the organization's core values and beliefs.

2. The vision should elaborate a purpose for the organization.

3. It should include a brief summary of what the organization does. And,

4. It should specify broad goals.

A mission is a statement of what the various organizational units do and what they hope to accomplish. A mission statement should be in alignment with the organizational vision.

Corporate social responsibility, or CSR, is the obligation of organizational decision makers to make decisions and act in ways that recognize the interrelatedness of business and society. CSR recognizes the existence of various stakeholders and how organizations deal with them.

Ethics involves the rules and principles that define right and wrong decisions and behavior. As we live our lives, there are decisions and behaviors that are ethically "right" and there are decisions and behaviors that are ethically "wrong." But these interpretations of right and wrong can vary.

Organizational learning is the intentional and ongoing actions of an organization to continuously transform itself by acquiring information and knowledge and incorporating these into organizational decisions and actions. A learning organization can either create or acquire new ideas and information and then use these to make decisions and take action.

An organization learns by:

· competence acquisition: cultivating new capabilities in teams or individuals

· experimentation: continuously trying new ideas and approaches

· continuous improvement: mastering each step in a process before moving on

· and boundary spanning: continuously scanning what others are doing.

Definition of Strategy

Although strategy is commonly associated with the business world, it is actually a term borrowed from the military. Originating back to the 18th century, strategy is derived from the Greek strategiareferring to the art of arranging military troops when going to battle (Matloff, 1996). While military strategy thus pertains to the planning and coordination of troops to deceive the enemy and fulfill the intended policy, a firm's strategy similarly entails planning and coordination of its business activities in lieu of competition to reach its end goal of higher performance.

The definition of strategy has evolved over the years. In his well-renowned book Strategy and Structure (1962), Alfred Chandler defines strategy as “the determination of the long-run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.” Michael Porter (1996) stresses the fact that strategy is distinctly different from operational effectiveness and rests upon being different or unique.

Levels of Strategy

There are two basic levels of strategy that together help define the way in which a firm will achieve its goals. A business strategy is essentially how the firm competes while the corporate strategy defines where the firm competes. Also referred to as competitive strategy, a firm's business strategy details how it will develop a competitive advantage over its rivals. The firm’s corporate strategy is somewhat broader and determines what industries and markets to enter, and more specifically, through what methods to do so, such as the choice of acquisitions, diversification, new ventures, and so forth.

External Environment

Strategy is critical because it links the firm with its environment and therefore, determines the ultimate survival and success of the firm. When planning which strategic direction a firm should go, it is first necessary to obtain an in-depth understanding of its external environment. This requires researching and analyzing not only the competition, but other factors within its industry relating to the interaction of buyers, suppliers, substitutes, and barriers to entry. The external environment is very dynamic and constantly changing as new firms enter into the industry while others exit. Other macrolevel factors also impact the nature of the industry and must be understood. The external environment is important because it is the context in which a firm will implement its strategy.

Internal Strengths and Weaknesses

Second, in addition to its external environment, a firm must attain a good understanding of its internal strengths and weaknesses. To do so, the firm must assess its resources and capabilities including its best strategic tools for leveraging itself against the competition. These key resources and capabilities may include size and buying power, reputation, network relationships, and innovation capabilities. It is the unique combination or set of firm resources and capabilities that matters most.

Third, a firm must determine its goals and where it wants to be. Many times, this involves setting specific financial performance goals to compensate its owners and be able to continue in business; however, in addition to its owners, a firm has many different stakeholders, including its employees, lenders, suppliers, community, and the government. A firm can also simultaneously set other goals to meet its stakeholder needs. For instance, a firm might set environmental goals to satisfy its community or quality goals to ensure that government requirements are easily met.

In summary, strategy is important because it links the firm to its environment. Detailed analyses of both the external environment along with the internal resources and capabilities of the firm allow development of a strategy that is a good fit and thus has a greater likelihood of success. Any strategy will also need performance diagnostic tools set up to monitor how effective the strategy truly is and if the goals are being met.

References

Chandler, A. (1962). Strategy and structure. Cambridge, MA: MIT.

Matloff, M. (1996). American military history: 1775–1902, volume 1. Boston, MA: Da Capo.

Porter, M. E. (1996). On competition. Boston, MA: Harvard Business School.