MBAX 6100 Entrepreneurship & Small Business Management Marshalling Resources

Marshalling Resources

MBAX 6100MBAX 6100Entrepreneurship & Entrepreneurship &

Small Business ManagementSmall Business ManagementMarshalling ResourcesMarshalling Resources

Frank MoyesFrank MoyesLeeds College of Business Leeds College of Business University of ColoradoUniversity of ColoradoBoulder, ColoradoBoulder, Colorado


Today’s AgendaToday’s Agenda

Live case study: Live case study: Confident LivingConfident Living Terry Tierney, CEO of Confident LivingTerry Tierney, CEO of Confident Living

Strategic alliancesStrategic alliances Marshalling resourcesMarshalling resources Bootstrapping Bootstrapping


Next WeekNext Week

Legal IssuesLegal Issues Intellectual propertyIntellectual property Employee agreementsEmployee agreements Stock optionsStock options

Read BZ-9 & 10Read BZ-9 & 10 Case: Mason and SheppardCase: Mason and Sheppard Jim Linfield, Cooley GodwardJim Linfield, Cooley Godward


Strategic AlliancesStrategic Alliances


Strategic AlliancesStrategic Alliances

Over 75% of technology businesses are active in Over 75% of technology businesses are active in strategic alliances. 63% said critical or very important. strategic alliances. 63% said critical or very important. (PricewaterhouseCoopers, (PricewaterhouseCoopers, Trendsetter BarometerTrendsetter Barometer 2001). 2001).

Most are informalMost are informal Joint venture – jointly owned entityJoint venture – jointly owned entity

Speed to marketSpeed to market Access to markets, technology or knowledgeAccess to markets, technology or knowledge Access to capitalAccess to capital Spin-ins & spin-outsSpin-ins & spin-outs


Strategic Alliances FormsStrategic Alliances Forms

Marketing – access to distribution e.g. Nestle in EuropeMarketing – access to distribution e.g. Nestle in Europe Technological – joint research, e.g. Celebrex for PfizerTechnological – joint research, e.g. Celebrex for Pfizer Manufacturing – subcontract operations, e.g. Manufacturing – subcontract operations, e.g.

JurismonitorJurismonitor Investment – Intel had 220 active investments in 2004Investment – Intel had 220 active investments in 2004


Advantages to Strategic AlliancesAdvantages to Strategic Alliances

Gain access to a resource, e.g. production, skills, capitalGain access to a resource, e.g. production, skills, capital Economies of scaleEconomies of scale Risk & cost sharingRisk & cost sharing Gain access to international marketGain access to international market LearningLearning Speed to marketSpeed to market Neutralizing or blocking competitorsNeutralizing or blocking competitors

Barringer & Ireland, Entrepreneurship


Disadvantages of Strategic AlliancesDisadvantages of Strategic Alliances

Loss of proprietary informationLoss of proprietary information Management complexitiesManagement complexities High risk of failureHigh risk of failure Become dependent on partnerBecome dependent on partner

Risk of opportunismRisk of opportunism Non performanceNon performance

Loss of decision autonomyLoss of decision autonomy Clash of culturesClash of cultures Precludes partnership with another firm or exitPrecludes partnership with another firm or exit

Barringer & Ireland, Entrepreneurship


Marshalling ResourcesMarshalling Resources


What Resources Do What Resources Do New Ventures Have?New Ventures Have?


People Resources?People Resources?


Physical Assets?Physical Assets?


Financial Resources?Financial Resources?


Social Resources?Social Resources?


Own or Control Resources?Own or Control Resources?

Ask yourself where is the value added of my venture?Ask yourself where is the value added of my venture? R & D? Sales & Marketing? Manufacturing? Customer Service?R & D? Sales & Marketing? Manufacturing? Customer Service?

““Key is not to own resources, but to have Key is not to own resources, but to have use of & be able to control or influence use of & be able to control or influence deployment”, Timmonsdeployment”, Timmons


What is Bootstrapping?What is Bootstrapping?

““Launching ventures with modest personal funds”, BhideLaunching ventures with modest personal funds”, BhideUsing Other People’s Resources (OPR), TimmonsUsing Other People’s Resources (OPR), TimmonsScrooge modeScrooge mode


Bootstrapping ExamplesBootstrapping Examples

Make vs. buyMake vs. buy Volume purchasingVolume purchasing Hiring employees vs. temps or subcontractHiring employees vs. temps or subcontract Employee benefitsEmployee benefits Office and locationOffice and location Used equipmentUsed equipment PR vs. advertising & promotionPR vs. advertising & promotion Strategic alliances - JurismonitorStrategic alliances - Jurismonitor GrantsGrants


Benefits of Bootstrapping - Benefits of Bootstrapping - Enhances FundingEnhances Funding

Need less capitalNeed less capital Reduces financial exposureReduces financial exposure Reduces amount of money need to raise - less dilutionReduces amount of money need to raise - less dilution

Reduces riskReduces risk ObsolescenceObsolescence Lower sunk costsLower sunk costs

Investor's love itInvestor's love it Proves concept and management teamProves concept and management team Reduces riskReduces risk


Benefits of Bootstrapping - Benefits of Bootstrapping - Provides FlexibilityProvides Flexibility

Fluctuating conditions and uncertaintyFluctuating conditions and uncertainty Difficulty in predicting what resources are neededDifficulty in predicting what resources are needed Make changes quicklyMake changes quickly Permits strategic experimentsPermits strategic experiments Cost of making a mistake is minimizedCost of making a mistake is minimized

Mistakes less likely to be fatalMistakes less likely to be fatal Inexperienced entrepreneurs can screw-upInexperienced entrepreneurs can screw-up Don’t have the pressure of high growthDon’t have the pressure of high growth


Benefits of Bootstrapping - Benefits of Bootstrapping - Improves Problem SolvingImproves Problem Solving

Like zero inventory in JITLike zero inventory in JIT Reveals hidden problemsReveals hidden problems Forces management to solve themForces management to solve them

Focus is on profitsFocus is on profits Forces management to solve problemsForces management to solve problems Price for profitabilityPrice for profitability Reduces costsReduces costs

Lower fixed costsLower fixed costs Higher variable costs, but high Gross Profit Margin solvesHigher variable costs, but high Gross Profit Margin solves Lower break-even pointLower break-even point


Benefits of Bootstrapping - Benefits of Bootstrapping - Sets the Right CultureSets the Right Culture

Employees Employees SuppliersSuppliers


Bootstrapping SummaryBootstrapping Summary Requires less capital Requires less capital Lowers riskLowers risk Improves decision makingImproves decision making Enhances flexibility Enhances flexibility Focus on profitabilityFocus on profitability Investors love itInvestors love it Establishes cultureEstablishes culture

A Bhide, Bootstrap Finance, HBR


What Is the Greatest Source of Cash?What Is the Greatest Source of Cash?


Marshaling Resources ConclusionMarshaling Resources Conclusion

Control rather than own - Control rather than own - OPROPR Money is not the solution. May be the problem.Money is not the solution. May be the problem. Bootstrapping is an attitudeBootstrapping is an attitude What is a downside of focusing on resources?What is a downside of focusing on resources?

Documents

MBAX 6100 Entrepreneurship & Small Business Management Marshalling Resources