4 M’s of Operation in Relation to the Business Opportunity

The operations plan is an important part of the business plan because it simply states the details in
operating the business. Operations management controls the implementation of the business plan.
The 4 operational aspects of operations: the 4Ms of operations
1. methods- or the processes to be followed in effectively manufacturing or delivering a product or service.
2. manpower- or the right human resources who will handle certain business operations
3. machines- or the technology used in efficiently operating the business
4. materials to be used in creating a product or performing a service, which includes supply chain
management.

Methods
Represents the day-to-day operations of a business
 Manufacturing is the process of translating raw materials into finished goods that are acceptable to
the customer’s standards. 3 elements: inputs- the materials or ingredients to be used in creating
the product; process- the transformation phase where inputs are processed by manpower and
machines to come up with the final product; output-the final product of the process stage, which is
intended to be sold to target customers.
• Example methods used in the production of rice: planting, transplanting, drying, harvesting
Manufacturing sites: home-based, commercial space for rent, commercial space purchase
  Service delivery process- prepare a detailed flowchart of the service business, which also called a
service blueprint. Bottleneck is a part of the process where there is an apparent inefficiency and
where the customer waits longer.
 Distribution method: distribution is the process of bringing the products or service to the
customers.
The supply chain or distribution channel: manufacturer- handles the invention, development, and
production of the product or service; distributors are entrepreneurs who often buy products or service to
the manufacturers and sell them at mark-up price to either wholesaler or retailers; agents they negotiate
with buyers as to how much or how many are to be sold, they are the commission for every product sold.
 Payment process-either cash or by flexible and customer friendly payment terms such as credit
cards, instalment plans or a simple account payable. Or uses point of sale (POS) machines in their
shops to accommodate those who will pay through their credit or debit cards.

Manpower
Is one of the highest costs of operating a business but also the most instrumental to its success, having the
right people encompasses a myriad of advantages.
Job description

 Enumerates the duties and responsibilities of the potential employee, including the scope,
limitations and terms and conditions of employment.
 The heading of job description is the job title-summary of what the employee will do;
 compensation and benefit range- details the potential salary and benefits that the employee will
get;
 duties- clearly describe the job that the employee will assume with allowance for flexibility;
responsibilities and accountabilities which must be communicated well to the employee so that he
or she knows what to expect with the job;
 Work schedule, including work hours- to align the work schedule with his or personal schedule and
highly driven by business requirement.
Employee qualifications criteria: educational background, work experience, specific skill or knowledge
and work attitude.
Preparatory Selection of Job Applicants:
 1. Headhunters- usually charge a finder’s fee once the entrepreneur has decided to accept a n
applicant.
2. Manpower agencies- recruit temporary employees under short contract, usually on a six-month
period.
3. Recommendations and referrals- from friends, relatives or business partners with an untainted
reputation. Digital media- one of the revolutionary ways of selecting potential employee.
Selection of Job Applicants:
- preliminary screening can easily be done because the entrepreneur will just need to refer to the
required qualifications and eliminate those who did not qualify; ask relevant questions to the
interviewee.
Job Offer
- job contract generally summarizes the terms and conditions of the candidate’s employment with the
business. It includes:
1. Rant or position of the candidate,
2. A list of responsibilities or deliverables and its scope and limitations,
3. The salary and benefits including vacation and sick leave,
4. Work schedule,
5. Probationary period if any and qualifications to become a regular employee,
6. The duration of the contract, and
7. Resignation procedure
Employee development: Employee orientation- is usually a one to two-day session that summarizes the
history of the business. KPIs (key performance indicators) and KRAs (key result areas) are the bases of the
entrepreneur for rating the performance of the employee- if the employee is exceeding expectations,
meeting expectations, or seldom meeting expectations.
Training tools:
1. buddy system- is a training program wherein an expert team member is assigned to assist a new
employee in his or her function;
2. mentor-mentee program- is a training program for supervisors, wherein they will be mentored by a
senior executive or senior officer of the business;
3. online learning programs or Webinars-seminar on Web- is a practical way of learning because the
entrepreneur or the employee does not need to go abroad or out of town just to get the necessary
training;
4. internal training programs- led by competent subject matter experts to discuss the intricacies of
each department to the newly hired employees.
Strategies for talent management: provide very competitive salary package; nonmonetary benefits;
additional benefits such as annual trips and scholarships.
Machines
Can be describe as the “best friend” of manpower in producing goods and offering services and can even
replace employees.
Equipment another facility. The size and shapes of the facilities and equipment affect the entire
operations process, so the site must adapt to how big or small the pieces of equipment are, the site must
also be conducive, well-ventilated, and well lit, so that the employees can manage the machines efficiently.
There should be fire exits and safety reminders on how to use the facilities to ensure safety of the
employees to prevent accidents.
Telecommunications and information technology: landline phones, mobile phones, laptop and desktop
computers, POS machines, accounting and inventory software and website.
Materials
The supplier must have a consistent and sufficient amount of raw materials and supplies that can
accommodate the demand of the entrepreneur. Options include in materials requisitioning:
1. Manufacturing own products or offer services; 2. Outsourcing of manufacturing or service activities to
third party; and
3. Purchasing own product or service from present suppliers.
Outsourcing is the process of appointing a third party manufacture to do the manufacturing operations of
the business. Protecting product through: Patent is the right to protect the entrepreneur regarding the
product or service; Trademark is a sign or symbol that helps distinguish the product from others; NDA-
nondisclosure agreement states that the third party will be given full access to any confidential
information provided that it should not be disclosed to anyone else.
Logistics: warehousing- is storing the finished goods manufactured in a facility until they are distribute to
end users; transportation- is the process of efficiently transferring the products to retailers or consumers;
distribution hub- is where the entrepreneur/manufacturer combines the goods before delivery to retailers
or end consumers; inventory- should be tracked religiously by the entrepreneur/manufacturer.
PRODUCT DEVELOPMENT
The process of developing, testing, and commercializing a product or service with the ultimate objective
of solving the problem of the primary target market. It is composed of four sequential steps:
1. Developing a product or service description;
2. Creating a prototype;
3. Testing the prototype; and
4. Validating the market.
Product or Service Description
The product or service description simply describes how a product or service works and how it benefits
the customers. A clear product or service
description is important because this will serve
as the blueprint of all business operations.
Therefore, the entrepreneur has to take note
of the following:
1. It should directly address the primary
target market in a personal manner
using everyday language. The
entrepreneur should put himself or
herself in the customer’s shoes, where
the product description will be addressed to.
2. It should highlight the features that will cater to the customer’s needs or address the customer’s
problems.
 3. Realistic superlatives should be used for the product description. Mother hood statements such as
“world-class service or product excellence” may not matter to the customers at all.
Creating a Prototype of the Product or Service
A Prototype is preliminary model or sample of a new product or service that is created to test a product
concept or service process. Creating a prototype lessens implementation/commercialization risks and
provides the entrepreneur a bunch of advantages as follows:
1. Creating a prototype enables the entrepreneur to engage in trial-and-error, provides room for
improvements, and refines the functionality of the product design or service process.
2. Creating a prototype provides the entrepreneur window to test the performance and specifications
of various materials and service processes.
3. A prototype helps the entrepreneur effectively describe the product or service to the product team.
4. Creating a prototype elicits respect from key stakeholders and customers. At the same time, a
prototype gives credibility to the entrepreneur.
Testing the Product Prototype
Testing the prototype is a vital process before an actual product or service is launched to the market, it will
uncover the final loopholes that need to be fixed before commercialization. The following testing
methods are applied by the entrepreneur:
1. Focus group discussion-the participants will provide relevant insights about the new product or
service.
2. Legality and ethical test-prior to launching, the entrepreneur must ensure that the product or
service complies with all relevant laws and regulations and has necessary license or permit to
operate a particular business.
3. Safety test- the entrepreneur must ensure that the product is safe to use, safe to be consumed
(food and beverages), and safe to applied (cosmetic products).
4. Product costing test-the entrepreneur must examine every stage of the manufacturing process or
every process of the service blueprint to evaluate and finalize the costs involved.
5. Component test- each component of the product or service must be tested independently to
identify component failures for goods, or service failures for services.
6. Competitors product/service test-the entrepreneur must test a similar lines of products or the
competitors’ product or service itself to compare and get the best practices to be applied to the
new product or service.

The Business Model

• Business model describes the factors of how an organization creates, delivers, and captures value
in economic, social, cultural or other contexts. The development of business model construction
and variation is also called business model innovation and forms part of a business plan.
• According to Don Deebelak in his article “Developing a Great Business Model” on the Entrepreneur
Web site, the entrepreneur must adapt the dynamics of traffic lights in developing the business
model.
• These are the three “green lights” or the positive signals that can help entrepreneurs develop ideal
business models and eventually succeed. On the other end, there are three “red lights” or negative
signals that entrepreneurs should be wary of.
 FORECASTING REVENUE AND COST
I. The Financial Plan
Capital is the money that will be allocated by the entrepreneur to establish a business.
Collateral refers to a high value asset that is submitted by the business to the bank when applying for a
loan and will be subject for repossession if the business defaults.
Factors Affecting Estimation of Revenue
Revenue is the output of a sale wherein the sales price exceeds the cost to produce the product or render
the service
Earned revenue when the product is already sold or service has been rendered regardless if the business is
paid in cash or credit
Deferred revenue when the product or service has not yet been delivered or sold but the customer already
paid in advance
• The economy and the external primary target market
• The external competitors
Competitive profile matrix- a chart that details the relevant data of both direct and indirect competitors
and how these factors affect profitability.
Direct competitors are those that offer exactly the same product/product lines or services as the
entrepreneur.
Indirect competitors are those do not offer exactly the same products or services but influence or affect
the entrepreneur’s market share
• The internal business
Forecasting the Revenues of the Business
Revenue is a result when sales exceed the cost to produce goods or render the services. Revenue is
recognized when earned, whether paid in cash or charged to the account of the customer.
Sales is used especially when the nature of business is merchandising or retailing, while Service Income is
used to record revenues earned by rendering services.
Mark up refers to the amount added to the cost to come up with the selling price. The formula for getting
the mark up price is as follows:
- Mark Up Price = ( Cost x Desired Mark Up Percentage)
In calculating for the Selling Price, the formula is as follows:
- Selling Price = Cost + Mark Up
 Forecasting the Cost to Be Incurred
Cost of Goods Sold / Cost of Sales refer to the amount of merchandise or goods sold by the business for a
given period of time. This is computed by adding the beginning inventory to the Net Amount of Purchases
to arrive with Cost of Goods available for sale from which the Merchandise Inventory, end is subtracted.
Merchandise Inventory, beginning refers to goods and merchandise at the beginning of operation of
business or accounting period.
Purchases refer to the merchandise or goods purchased. Example: Cost to buy each pair of Jeans or t-shirt
from a supplier.
Merchandise Inventory, end refers to goods and merchandise left at the end of operation or accounting
period.
Freight-in refers to amount paid to transport goods or merchandise purchased from the supplier to the
buyer. In this case, it is the buyer who shoulders these cost. In a merchandising business such as Fit Mo’to
Ready to Wear Online Selling Business, the formula to compute for costs of goods sold is as follows: