Professional Documents
Culture Documents
Schmidt
By submitting this paper, I affirm that this work is my own except for where the words or
ideas of others are specifically acknowledged. I also affirm that this work did not exist
before the beginning of the course I am submitting this for.
Target Audience
This paper was written for the review of my Rushmore MBA course advisor and
view by other MBA students as information to help them with their MBA program.
Executive Summary
Reading Silbiger's book gave me a good overall synopsis of the areas studied in
an MBA program. This study confirmed my interest in organizational behavior,
quantitative analysis, operations, finance, and strategy. While writing my profile, I
reviewed the available courses and listed those that struck my interest at that
time. I still feel strongly about pursuing course 2001-Crosby on Leadership, 2002-
Hargrave on Strategic Planning, and 2053-Siegel on Finance. I plan to use what I
have learned from this paper to continue developing my curriculum with my
advisor.
Introduction
The company I work for provides technical services, which includes design and
engineering of automotive component parts, automated equipment, paint
systems, facilities design and construction, and supplier quality. These services
have been provided, primarily to the automotive industry, for over fifty years.
The demand for lower cost and higher quality by automotive customers has
made it very difficult to maintain a profit. Building and growing a company,
through establishing solid working relationships and partnerships with its
customers, has slowly become a thing of the past in the automotive arena.
Today, price is the foremost deciding factor for awarding business to suppliers.
Small operating margins, that most automotive suppliers are forced to live
under, mean little budget is available for marketing and training. As an
operations manager, I have been focused on ensuring that technical projects
have the right resources, are completed on time, meet the cost targets, and
that the customer is satisfied. What is missing in my toolkit, to be more effective
in contributing to the overall operations, is knowledge of marketing, strategy,
and finance that are presented in Silbiger's book, The Ten Day MBA. I hope to
gain insight from the nine disciplines of an MBA presented in this book to
develop my MBA curriculum.
Marketing
Silbiger states in his book, The Ten Day MBA, that his concentration will be on
product marketing, rather than services marketing, but the same frameworks
and vocabulary are applicable to both.1 This statement caught my attention
because of my lack of experience and knowledge of marketing, and because I
have worked in the services industry for the past 17 years. It is difficult to
appreciate something that one does not understand. Observing marketing
from a distance would give one the impression that it does not require any real
quantitative analysis, or need for accuracy. I realize this is a wrong assumption
after having read Silbiger's explanation of the seven-part marketing strategy
process2, which is:
1. Consumer Analysis
2. Market Analysis
3. Review of the Competition and Self
4. Review of the Distribution Channels
5. Development of a "Preliminary" Marketing Mix
6. Evaluation of the Economics
7. Revision and Extension of Steps 1-6 until a consistent plan emerges
Marketing mix refers to the marketing efforts that are chosen. These efforts are
referred to as the Four P's of marketing, which are product, place, promotion,
and price.4 The promotional decisions include all of the advertising and sales
efforts of the plan. A technical services company directs most of its budget and
resources towards the sales effort, rather than advertising. Getting in front of the
decision-maker of a potential customer is the primary goal in selling services.
Selling services is still a problem solving and consultant type of sales, much like
the Fuller Brush and Kirby vacuum cleaner door-to-door sales of the past. The
salesman of services understands the technical aspects of the services his
company can provide, and how these services can be applied in solving the
customer's problems. This type of sales requires the salesman to give
Submitted June 1, 2002 Page 3 of 16
BUS1001, Achieving Success Through Self-Directed Learning, Michael D. Schmidt
Ethics
Integrity, honesty, trust and commitment are words that I associate with ethics.
In business, as in personal matters, these virtues are what contribute to the
success and long-term growth of a company. Ethics directly relates to
profitability. These principals apply not only to a company's customers, but also
to their employees and suppliers. Treating them with respect, keeping promises,
negotiating in good faith, and truthful communication are all ingredients for
success. Top management sets the example of the operating principals for a
company; and we have seen evidence in the news recently of poor ethical
practices by top management and how it has affected companies, such as
Enron.
The practices by the CFO of one of the companies, for whom I worked, are an
example of what can happen when ethical principals are not followed. As the
company accumulated debt, and revenues started declining from the
downturn in the economy, financial reporting to the investors and bank was
distorted. Projected business conditions and revenue forecasts were overstated.
Over time, the company could not meet their covenants with the bank, which
resulted in a total lack of confidence in the company on the bank's part.
It was common, in years past, that purchasing people in the automotive industry
would accept gratuities of various types from their suppliers. Some automotive
contracts meant millions in revenue to suppliers, which put purchasing in a
position of power − a power that sometimes was abused. Many examples could
be cited where this practice of accepting gifts, by a few people in purchasing,
went beyond the accepted and into the unethical.
Silbiger explains that, although there are no set formulas for solving ethical
dilemmas, Stakeholder Analysis is a framework with which to organize ones
thoughts, weigh various elements, and reach a decision. This method involves
identifying the affected parties, the harms and benefits of certain actions on
those affected parties, and the responsibilities and rights of all stakeholders.5
The organized approach of this method allows the MBA to take a global look at
an issue, which is helpful but the decision may not be clear and concise just
from this analysis. Some decisions have elements that might involve each of the
social, political and environmental ethical areas, where additional consideration
and analysis is required before making a judgment. Short and long-term
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BUS1001, Achieving Success Through Self-Directed Learning, Michael D. Schmidt
Accounting
When the business of my company began a downturn, and the CFO and upper
management began to distort the financial reporting to the investors and bank,
the bank ordered a third party workout team to come in and run the company.
Their focus was on the cash flow of the company, and all of the accounting
details that were involved. Many companies and individuals will tell you that the
bottom line in business is profitability. It was valuable for me to gain the
understanding, through daily involvement with the workout team, that a
company can be profitable yet be in trouble at the same time. The cash flow
statement was the accounting tool that had not been consistently used by my
company. The cash flow statement should always be used along with the
balance sheet and income statement − they work together to tell the entire
story about the health of a company.
Accounts Receivable (AR) is a key factor in cash flow that relates to how quickly
payment is received for services rendered. The revenue that the company
accrues as labor hours are worked, which is "Unbilled Accounts Receivables,"
may not be billed to the customer until the end of a project or at incremental
milestone dates. Likewise, after services are billed, which turns "Unbilled
Accounts Receivable" into “Accounts Receivable," or “AR," the payment terms
may be net 30 or 60 days after date of invoice. Employees are paid each
week, or every two weeks, which requires cash that the company may not have
on a weekly basis because of the timing of receivables. The bank will loan the
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BUS1001, Achieving Success Through Self-Directed Learning, Michael D. Schmidt
Organizational Behavior
Organizational Behavior (OB) classes attempt to teach MBA's how to deal with
the human challenges in the workplace.6 Hundreds of books are available for
managers that give insight and instruction for motivating people, and dealing
with difficult employee situations. However, managers have to experience
these things before they can really appreciate the complexity of managing
people. Most people can describe the managers for whom they have worked −
some they consider to be good, while others they consider to be bad. They can
tell you how the good manager treated the employees, dealt with issues, and
their motivational techniques.
Good managers are good leaders. Leaders have vision, shape the future, and
have the ability to meet the challenges of business and people. Managers are
reactive, not pro-active, and their focus is on solving problems. Leaders set
goals, and reach people on an emotional level. Leaders have three
characteristics in their profile; vision, commitment, and management skills.
These qualities vary in proportion depending on individual and job situation.7
Job situation can refer to many scenarios, including cultural, when considering
that business is conducted globally today. In 1959, Friedman and Roseman
identified the Type A behavior type, which is the person who is driven by
achievement, fast-paced, aggressive, and exhibits impatience and a self-
centered attitude. This demanding, dictatorial approach was effective in the
1960’s and 1970’s, but does not work in today’s business world. Type B
personalities are the opposite of the Type A’s, less aggressive, and more people-
oriented. Most people fall somewhere between these two types.
Organizations are made up of various types of people, and people are what
make an organization. There are six basic elements that define an organization;
systems, climate, culture, strategy, structure, and policies and procedures.
Organization structure is one element with which business people are most
familiar − an organizational chart shows the company’s reporting and
accountability structure. These charts can be presented in several different
styles, which is dependent upon how a company is organized. Styles can
include functional, product, customer, geographic, and divisional. Everyone
expects changes in the organization when a new manager takes charge, when
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BUS1001, Achieving Success Through Self-Directed Learning, Michael D. Schmidt
Quantitative Analysis
Quantitative Analysis (QA) provides the most important tools to the MBA. Just as
it is important for the MBA to be able to read and understand the three financial
statements, the methods used in analyzing data are important in the decision-
making process. Decision theory teaches how to break complex problems into
manageable parts. A decision tree diagram can organize the problem's
alternatives, risks, and uncertainty,8 which are the basic elements involved in
creating a tree diagram. At each alternative an activity fork, symbolized by a
square, or an event fork, which is symbolized as a circle, is drawn. The event fork
is used when an alternative is uncertain as to the outcome; i.e., the test of a
product either passes or fails.
Test
.40
Fail
No Test
Cash flow analysis, net present value, probability theory, and regression analysis
and forecasting are other useful problems-solving tools used by the MBA.
Cash flow analysis not only involves accounting information that looks at short-
term measurements but also considers timing over the entire life a project or
entire operation. Cash flow involves tracking only the cash coming into a
company through receivables or sales, and the cash paid out through COGS,
SG&A, and taxes. What is our "Cash In?" and "Cash Out?" were questions asked
and tracked daily by the workout group that came into our company. The
bank established a new borrowing base each week that set a limit on the
amount that could be borrowed. Monies needed over the borrowing limit
came from cash flow, which had to be positive in order to sustain operations.
Net present value (NPV) takes the cash flow analysis picture over time and
paints it in today's dollar value. A dollar today is worth more than a dollar
received in the future. NPV analysis takes future cash flows and discounts them
to their value today. Using NPV enables all projects to be compared and
considered on an equal financial basis, regardless of timing.9
and, approximately 98% fall within three SDs. Normal distribution tables are
available to determine the probability for any specific point on the curve. This
provides the probability for any outcome in the decision-making process.
Finance
The investments area and financial management are the two career paths for
the MBA in finance. The investments area is outward, “market” focused, where
financial management is inward, “company” focused. The two areas are
interconnected because the performance of a business, for which the finance
department is to a large extent responsible, affects its investors’ share of the
firm’s profits.11
Companies, and the government, issue bonds to raise cash, and they have a
fixed rate of interest (coupon). Bonds have a maturity date, at which time the
original principal amount, face or par value, is paid. Higher coupon rates are
given to bonds with longer maturity dates because investors have their money
tied up for a longer period of time. There are other types of bonds that include
zero coupon bonds, consuls, convertible bonds, callable bonds and junk bonds.
A zero coupon bond pays no interest, but pays a lump sum at maturity. A
consul bond is one that never pays back the principal amount, but continues to
pay interest forever. Convertible bonds are those that can be converted to
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BUS1001, Achieving Success Through Self-Directed Learning, Michael D. Schmidt
Operations
Operations vary, as vastly as the number of different products and services that
exist, but every operation has some basic business similarities. A successful
operation is dependent on many people that have different roles and
responsibilities in contributing to the process flow from start to finish. To make
everything work together requires that everyone understands their job and is
given the tools to do that job. Much time and resources are spent on
determining the most efficient and cost effective approach for every step of the
total process. This is true of services, too, not only manufacturing operations.
How to produce a product for the least cost and with the highest quality are the
basic ingredients for profit.
• Capacity
• Scheduling
• Inventory
• Standards
• Control
Scheduling all of the tasks of the production process requires tools such as Gantt
Charts or Critical Path Method (CPM). Each task or activity is listed in order of
their sequence, and includes the estimated time for completion. The critical
activities, which can hold up a project or process, can be identified from this
charting of activities.
Economics
Strategy
One of the turning points in the company I work for occurred when several
strategic decisions cost the company a major piece of business with its largest
customer. The risk involved was not analyzed thoroughly because of our past
strong position and key support with our customer. A no-compromising
approach was taken when presented alternative plans by the decision-making
committee of the customer. The loss of this business came just before the
downturn in the economy, which continued the downward economic spiral of
the company. This is an example of what Silbiger explains about strategy in his
book: Strategic thinking involves a comprehensive analysis of a business in
relation to its industry, its competitors, and the business environment in both the
short- and the long-term.19
Strategy should always look at the company as a whole, and with implementing
change as the ultimate goal. In the late 1970’s, Thomas J. Peters, of In Search of
Excellence fame, Robert H. Waterman, and Julien R. Phillips created the Seven S
model. Peters and Waterman were part of the McKinsey and Company at that
time, and Waterman is still a director there. The Seven S model was the result of
their study of forty-three successful American companies, including Johnson &
Johnson, Proctor & Gamble, IBM, Delta Airlines and McDonalds.
• Structure
• Systems
• Skills
• Style
• Staff
• Strategy
• Superordinate Goals or Shared Values
Picture a wheel with superordinate goals as the hub, and the other six elements
at the end of the spokes of the wheel. Each element interconnects with the
other elements, which speaks of them all working together for achieving
effective change. Addressing each of these elements in strategic planning
organizes the entire process for tackling complicated company organizational
problems and reaching its goals.
Systems are the processes, procedures, and tools with which the company
operates and gathers information. Customer, competition, operations and
manpower information is needed when challenges requiring decisions for
change come about.
Skills are the specific abilities and expertise of the staff of a company. For
example, the company I work for has a business unit that is known for its
specialized expertise in automotive interior design and engineering. For them to
develop a strategy for obtaining automotive brake system business, questions
about how to obtain the manpower with the skills and experience need to be
answered.
Staff is not just warm bodies, but relates to the things that are important to them,
such as working environment, compensation, training, and appraisals. This also
involves motivation, which is something that is often overlooked by
Strategy is the plan of action leading to change and achieving company goals.
Strategy is one of the topics I would like to learn more about in my MBA studies.
Many companies invest time and money each year for strategic planning
meetings. I have participated in these types of meetings, and have been
disappointed in the lack of follow-up and implementation. I would like to
change this, when given the opportunity, as I become more knowledgeable
about strategy.
MBA Mini-Courses
Research has changed dramatically with the advent of the Internet, which gives
us access to a world of information at our fingertips. I must admit that I enjoy
research because I like information and data, and have spent time on research
while writing this paper. Various search engines are available via the Internet
but not all search engines give the same results, so you must visit multiple sites to
obtain a good search. Other resources used in research include books,
periodicals, computer service databases (for a fee), interviews, trade shows,
and magazines.
Working three years in Mexico taught me many of the things that Silbiger outlines
for conducting international business. Having a good understanding of the
culture and customs of the host country is essential. I realized that I was a guest
in Mexico, and adapted to their way of doing business. I treated the nationals
with respect, and gained their confidence, which resulted in a successful
operation.
BIBLIOGRAPHY
Silbiger, Stephen. The Ten Day MBA. Revised Edition. New York: William Morrow, 1999.
Turabian, Kate L. A Manual for Writers of Term Papers, Theses, and Dissertations. Sixth
Edition. Chicago: The University of Chicago Press, 1996.
Steven Silbiger, The Ten Day MBA, rev. ed. (New York, N.Y.: William Morrow, 1999), 3-4.
1
2 Ibid.
3 Ibid., 11.
4 Ibid., 28.
5 Ibid., 59.
6 Ibid., 107.
7 Ibid., 116.
8 Ibid., 145.
9 Ibid., 157-58.
10 Ibid., 165-66.
11 Ibid., 186.
12 Ibid., 193-98.
13 Ibid., 233.
14 Ibid., 238.
15 Ibid., 253.
16 Ibid., 270-71.
17 Ibid., 274.
18 Ibid., 275-76.
19 Ibid., 297.
20 Ibid., 302.