BTMW 4012:

ENTREPRENEURSHIP TECHNOLOGY

Lecture 7:
ORGANIZATIONAL MANAGEMENT
FOR START-UP

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INTRODUCTION

NEW CRITERIA OF

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CHARACTERISTICS OF SMEs

1. OWNERSHIP
2. MANAGEMENT
3. RESOURCES
4. ORGANIZATIONAL
STRUCTURE
5. FLEXIBILITY OF
CHANGE

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 Introduction
• An organization’s objectives are worked out based on the
organization’s mission, vision and strategies developed to
take advantage of the external opportunities available and to
suit the resources that can be mobilized by the organization.
• Organization management involves the process of organizing,
planning, leading and controlling resources and activities of an
organization to achieve the set objectives.
 Organization Mission and Vision

• The organization mission is an attempt to provide

meaning or answer to “why you do, what you are doing
and where you are headed”.
• In October 2015, Mark Zuckerberg, the Facebook CEO,
talked about the importance of having a “strong sense of
mission” to effect meaningful change in the world.
 Organization Mission and Vision (cont.)
• The themes of believing in your mission, caring more
deeply than anyone else and always looking ahead is
relevant to anything you might build.
• Collins and Porras (1994) list the following as mission
statements or “whys”. These “whys” are big “whys” that
motivate entrepreneurs and those who work for them and
with them.
(a) To preserve and improve human life (Merck)
(b) To make people happy (Walt Disney)
(c) To make technical contributions for the advancement
and welfare of humanity (HP)
Organization Mission and Vision (cont.)
• The next questions that an entrepreneur must ask are:
(a) “What to do?”
(b) “How to do?”
(c) “When to do?”
(d) “Where to do?”
The answer to these questions will explain the
basic strategies of a particular company.
 “What” of Strategy
• This refers to the vision or change agenda that the
entrepreneur wants to achieve within a time frame.
• Organizations normally express their vision statement in
a crisp and precise form and it acts as a shared
aspiration that provides long-term directions and targets
of the organization.
• Vision statements always refer to the aspired
performance or quality goal in providing products or
services within a targeted geographical area of operation
and may include the long-term company’s aspirations.
 “What” of Strategy (cont.)
• Visions must clearly indicate the gap—preferably a quantifiable
value gap—between what the firm is today and where it expects
to be, say in three years from now.
• Based on the example earlier, Facebook started with a vision of
having 100 million users. Upon achieving this, the challenge was
raised to 1 billion users. The “how” of strategy will be the
integrated choices translated into programmes and projects that
the organization implements to close the value gap.
 “What” of Strategy (cont.)
• The company’s business strategies refer to the methods by
which the organization choose to achieve its stated objectives.
This may include the choice of business sector, products,
customers, capabilities, operational areas, technologies,
methods of execution or working, investments, borrowings, etc.
• For small businesses, this will include the choice of business an
entrepreneur would like for a new venture.
“What” of Strategy (cont.)
“What” of Strategy (cont.)
“What” of Strategy (cont.)
An entrepreneur may have to do a basic strengths,
weaknesses, opportunities, threats (SWOT) analysis to
analyze his strengths and weaknesses (internal), and
opportunities and threats, (external) to identify suitable
business opportunities and strategies. Figure 4.3
illustrates SWOT analysis.
“What” of Strategy (cont.)
“What” of Strategy (cont.)

Matching internal strengths with external opportunities

Organization Objectives
• The organization objectives refer to the short-term goals
of the organization (for example, one to three years),
which will normally include sales targets, profit targets,
geographical area of operation, etc.
• Ideally, objectives should have the following
characteristics (SMART):
(a) Specific (b) Measurable
(c) Achievable (d) Realistic
(e) Time frame (schedule implementation)
 Organization Structure
• The organization will have to undertake certain specific
tasks and these tasks can be divided into smaller tasks
which can be assigned to specific personnel. This
division of labour can be represented in the form of an
organization structure.

• Tasks on the organization chart can be divided based

on functionality, such as marketing, administration,
operations and finance; or geographically, such as
zone A, zone B and zone C; or on products sales
responsibility, such as product A, product B and
product C.
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ORGANISATIONAL PRINCIPLES AND STRUCTURE

• What is Organisation?
• A social unit which comprises people performing different tasks in a
coordinated manner to achieve organisational goals
• Organisational Principles (OP)
 Division of work
 Authority and responsibility
 Unity of Command
 Span of control
 Delegation of authority and responsibility.
• Organisational Structure (OS)
 Based on shift
 Based on number of workers
 Based on functions products
 Based on regions
 Based on shift clients
 Organization Structure (cont.)

When students organize groups to undertake group

entrepreneurial projects, they will have to identify key
tasks that must be done and divide the tasks among
group members. Figure 4.5 is an example of an
organization chart.
 Planning
• An entrepreneur will have to make a long-term
strategic plan, especially in choosing which business
sector is suitable and offers the best opportunity for
him. It is recommended for him to use the Business
Model Canvas to work out his business strategies.

• For a business start-up, an entrepreneur may need

to do a simple project planning for main activities in
the form of a Gantt chart. The Gantt chart will outline
for each activity the start-up date, duration and its
completion date.
 Controlling
• Controlling refers to the act of controlling and guiding
the enterprise’s work, executing and monitoring work
progress involving work schedules, resources,
manpower, machines and space, etc. and where
required activities may have to be speeded up,
corrected or even stopped.

• Controlling can be improved if an enterprise develops

controlling documentations including outlining its
mission, vision, objectives, strategies, work schedules,
methodologies, manual and operating procedures,
quality procedures, auditing procedures, etc.
 Managing Entrepreneurial
Growth

Entrepreneurship
Technology
 Organizational changes
during growth
 Entrepreneur must give up some decision making
authority
 Corporate culture changes from small to larger
business
 Such changes are often difficult for the
entrepreneur and other founding members to adapt
to

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 New skills for the entrepreneur
 Record keeping and financial control
 Inventory control
 Human resources
 Marketing skills
 Strategic planning skills
 Time management skills
 Negotiation skills

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Growth Strategies

Product
Existing Penetration Development

Market
Market
New Development Diversification

Existing New
Product
EXAMPLE

26
 Strategies
 Penetration- Growth By Selling More of Existing Product to
Existing Customers

 Market Development
 New Geographic Market
 New Demographic Market
 New Product Use

 Product Development- Sell New Products To Existing Customers

 Diversification- Sell New Product To New Market

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 Pressures On Firm Growth
1. Existing Financial Resources

2. Human Resources

3. Management Of Employees

4. Entrepreneur’s Time

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 Overcoming
Financial Resources Pressure

 Manage Cash Flow- Budget vs. Actual

 Manage Inventory
 Manage Fixed Assets
 Manage Costs/Profits- Compare Actual vs.
Standard Percentages
 Taxes
 Record Keeping

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Generic Strategies
Cost Leadership
 In conjunction with differentiation
 Economies or diseconomies of scale
 diseconomies of scale occur when the average costs
of a firm increase due to increased output
  Diseconomies of Scale Arises due to managerial
problems
 An example of a diseconomies of scale is where the
firm has to hire more staff to increase sales, increase
the office overheads such as communication costs in
order to enhance efficient communication among the
staff and hire new product managers to manage
increased sales regions

 Capacity utilization achieved

 Linkages w/ suppliers & distributors
Generic Strategies

Low Cost Producer Advantage

 Many price-sensitive buyers

 Few ways of achieving differentiation
 Buyers not sensitive to brand
differences
 Large no of buyers w/bargaining
power
Generic Strategies
Differentiation

 Greater product flexibility

 Greater compatibility
 Lower costs
 Improved service
 Greater convenience
 More features
Generic Strategies

Focus

 Industry segment of sufficient size

 Good growth potential
 Not crucial to success of major competitors
 Three strategies for managing fast
growth
 Scaling
 Duplication
 Granulation

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 Scaling – doing more of what you are
good at
 Focus on concrete product, technology, or
customer segment
 Invest aggressively
 Expand product development around core
technologies, expand product lines, increase marketing
using existing channels to reach new groups
 Specialize and standardize
 Hire the right mix
 Adapt the structures
 Learn from customers

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 Duplication: Repeat the business
model in new regions
 Balance standardization and adaptation
 Hire flexible, independent managers
 Duplicate key parts of the infrastructure
 Duplication entrepreneurial knowledge
 Be aware of the limitations

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 Granulation: Growing select business
cells
 Focus on specific areas of business
 Balance the old and the new
 Balance formal and informal
 Evaluate and monitor
 Learn from customers, partners, and competition

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 Understand competitors
 There 3 types of competitor
 Direct competitors
 Compete against on a day-to day basis
 Close competitors
 Those that similar, but not identical products/services
 Indirect competitors
 More varied

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 What we can learn from competitors?

 Products and services

 Product line
 Promotional activities
 Distribution

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 Thank you

Champions believe in themselves even if no one else

does. In order to succeed, we must first believe that
we can. They can because they think they can.

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