In this part of the lesson I want to show you how each of the five parts of our MBA conceptual framework fit into the actual management of a business. And I wanna do this by literally taking you from the ground up to the catbird seat of one of the top corporations in the world hypothetically of course. Suppose then you are a young Bill Gates with a hot piece of software. Or, better yet, a young Steve Jobs with an even hotter piece of software. By using this software or hardware, you and your schoolmates have come up with what you believe is the next killer application in the world of high technology. And this killer app, which you have already patented is so astonishing that you, well you fill in the blank here because I've got no idea. >> At any rate, if you are going to develop this product properly, the first step you will want to take is to create a business plan. As we learn from Professor Archy, such a plan will precisely define your business and identify goals and include such financial accounting tools such as a pro-forma balance sheet, income statement, and cash flow analysis. This plan will also describe what service or product your business will reach and what needs in the marketplace it will fill, as well as who your potential customers are, how you will reach them and why they will purchase it from you. Armed with such a business plan, you and your partners can go about the business of trying to raise enough venture capital to get the project up and running. Now if your company is successful, you will constantly be raising additional funds to build new facilities, modernize old ones and maybe even acquire some of your rivals to consolidate your position in the industry. All of this will take money and it will be your corporate finance team that will help you determine whether you will finance growth by issuing stock or bonds or drawing on retained earnings. Or, most realistically, using some optimal combination of all three of these forms of so called capital financing. Assuming all goes well with this fundraising phase of the business, and that you have enough capital to get your venture off the ground, here are just some of the questions you will be asking your other teams of MBA equipped experts that you necessarily will assemble to help your company. For starters, even if your product seems like a sure winner, you may still want your management strategy team to examine questions such as these. Should you even enter the market? And, is there room for another competitor? Perhaps not. Are there rivals out there who could bury you with deep financial pockets, reputational capital, and established marketing and distribution chains? Perhaps so. If you get the green light from your strategy team and enter the market you will also want to know which part of the market you want to attack. For example, the high end, high quality high margin end versus the low end, lower quality, tight margin end. In consultation with your operations management team, managerial economists, and your marketing team, your strategy team will also want to consider whether the company should actually produce the product or outsource production and simply distribute. And if your company is going to produce the product, just where should the facilities be located? Should you produce it locally or perhaps in a state like Tennessee or Texas with a more business friendly climate? Or should you seek an international location like India, Indonesia or Malaysia where wages are cheap but political upheaval is more of a risk. Let's next suppose that, after reviewing all of the information, you do in fact decide that you will produce your own product locally at this point, you'll want to discuss with your operations management team how to design a production process that is most efficient. This, of course, will entail a detailed examination of your so called supply chain. The chain of various inputs such as energy and raw materials in your production process. Now, once you have produced your product, the next step will be to sell it. This will be the responsibility of your marketing team. It will be the role of this team to figure out the most appropriate distribution channels. Should you sell wholesale to big chains like Walmart or Costco, or open your own line of retail stores or just sell the product Amazon style over the Internet? Your marketing and sales team must also figure out an advertising strategy, and the most appropriate message around which to build this strategy. Of course with considerable input from your firm's managerial economists the marketing and sales team will also determine a pricing structure. Now I am personally convinced that your product will be wildly successful and the money will start pouring in. As it does so, it will be the job of the financial and managerial accounting teams to carefully track both cost and revenue flows. Essentially, this team will be your scorekeepers. It will be able to tell you whether you are making it or whether your firm will soon go belly up. This team will account for the various cost and revenue streams, calculate your profits, earnings to shareholders, and pay your taxes. And importantly, internally use such information to improve decision making. And how is organization behavior and leadership critical to our story? Well in the early stages of the company, you and your entrepreneurial partners will likely know all or most of the employees. And you together will make most of the decisions. And like a lot of entrepreneurs you may manage your company mostly from your gut rather than in a manner taught in the management textbooks. Note, however, that as your company grows and prospers, you will likely notice that not only does it become increasingly difficult to keep track of everyone, but also that any flaws in your personal management style will be amplified. Accordingly, once your fledgling company reaches a certain critical mass It will become absolutely essential that you pay more and more attention to how your company is actually organized. And what incentive structures you have in place to make sure it operates efficiently and to its full potential. At such a point, you will come to rely more and more on your organizational behavior. And your human resources management teams to appropriately staff the corporation. Have procedures in place to ensure best management practices. And perhaps most importantly of all create a management culture where morale is always high, productivity is maximized and efficiency rules. At this stage in your corporation's development, it will become equally important that you become more and more aware of the political and regulatory environment within which a firm operates. This is where your business and government teams with strut their stuff. Want to locate a new plant in a particular state? You may have to lobby the local city council or state legislature for the appropriate permits. Make your money primarily from the Internet? Some states, and even the federal government, may be trying to impose new taxes on the Internet that your industry may want to fight. Want a bigger capital investment tax credit that will allow you to build a new plant locally, and there by help keep jobs in the country? That might be a nice argument that your corporate lobbying team can pitch to a congressman or key committee. Of course, throughout this whole process in which your company grows from a small seed in your consciousness to a large cap stock on the New York Stock Exchange, you and all your employees will want to conduct yourselves in a manner consistent with both the law and certain ethical cannons. However, during this ongoing process of wooing consumers on the one hand and fighting competitors on the other. You will soon learn that, at least in some cases, the law will allow you to do things that may not In fact, be up to your own ethical standards. Or you may even be tempted to cross an ethical or legal line to ensure your firm's success. In such cases, will you serve your shareholders? Or your own moral conscious? And how, buffeted by these ethical crosswinds, will you determine the right thing to do? Hopefully with the help of both your lawyers and other advisors you will figure that out. And a solid grounding in the concepts and lessons of corporate ethics will surely help. At any rate, you can see from this example how all the various pieces of the MBA core curriculum fit together to make a profitable enterprise. Well you may never be that entrepreneur who starts the whole project to begin with, this overview will at least give you an idea of how things work. From a career standpoint, one of the worst things you can do in this world is be content to be a cog in the machine, and never know how the machine actually works. But here's my last key tip. When you're on the job market, if you have a better understanding of how enterprises work, no matter what part of that enterprise you may wind up in you are likely to do much better in your job interview, if you present yourself as someone with a big picture perspective of the enterprise. All right, that's it for part two, when you're ready, move on to part three and our closing remarks. [MUSIC]
