Company profiles and case studies

One of the tasks I regularly set for my Molecules to Market courses is for students at all levels to perform a short analysis of a company that has either failed or succeeded. This helps them gain an understanding of the forces that are at play in the commercial world. Some choices are predictable: Starbucks, Marks and Spencers, Amazon, Virgin etc. Some are more parochial, Pete's Pet Foods and Geoff's Surf Supplies. There is value in the analysis of all companies. I often think of a discussion I had with a group of PhD students about one of the lowest entry barrier startups: hand car washing. with a few pound coins to invest in a sponge, a bucket and some detergent, an afternoon of door-stepping (in the right area of town!), generally sees a return on investment and a move to profitability by the end of the first day.

It was during a discussion with (mainly) Masters Level Molecular Scientists recently, that we discussed the business model underlying Higher Education. Notwithstanding regulatory issues (accreditation and the investment in infrastructure etc.), the current funding model in the UK, where students can borrow £9 000 pa for course fees, together with a small annual maintenance loan, all repayable at an "affordable" rate post graduation. As a business model, the not-for-profit Universities must "earn" sufficient income from research, teaching and related activities to pay staff salaries, maintain buildings and provide appropriate levels of support (ICT etc). The net profits (minus a small allowable surplus) are re-invested in staff, buildings etc as approved by a board of governors or council. 

So far, an interesting subject, fairly simple revenue streams: undergraduate and postgraduate teaching etc., research council iand charitable income (less salaries and costs for supplies, services and instrumentation) and then less restricted income streams for consultancy work, services and professional training and conferences (not forgetting hospitality and accommodation for students on site). I then asked how many students enrolled into HE courses last year (2013): we agreed that the figure is around 500 000, across just over 100 institutions. Now think about the income from undergraduate teaching provision alone £(500, 000 x 10, 000)! I cant wait to see if anyone chooses to analyse the successes an failures! When they do, I'll report back!

Can co-ops still survive in the current socio-political climate?

One headline from the BBC today reads: 

"Co-op Group members approve sweeping reforms to board"

What is the background to this change to an organisation that has its foundations in working class, Victorian Rochdale over 130 years ago? And why is it important? The principle of shared ownership didn't feature highly outside of the retail sector in the UK, as Britain emerged from the challenges of World War II. However some organisations (John Lewis for example in the UK and New England Biolabs) have employee ownership or shared bonus schemes hard wired into their operations. In addition, many venture capital funded businesses use stock options as an incentive to senior employees and early stage recruits. The concept is very simple: if you own a stake in the company that employs you, you are more likely to contribute to its success. You should take a look at examples of companies and how they manage their employee remuneration and rewards. You might be interested in the history of Unilever (originally Lever Brothers) in this respect.

The Rochdale Pioneers

The Co-operative movement in the UK (and similar overseas organisations exist) is run through a large number of members (8 million in the UK alone), who take decisions ranging from the distribution of local funds to good causes, to management of the funeral service fleet for example. It is this structure that is perceived to have led to the current financial crisis at the Co-op. I wonder whether this model, which in my view combines elements of socialism, philanthropy and fair trade ideologies, is viable in today's world? Is it something that could work best in developing countries? Or is it a threat to those global corporates that operate on stretch sales targets for maximising economic growth, often at the expense of employee satisfaction. Read about the many ways that businesses can operate and decide what mode of governance you feel most comfortable with and how you feel it might impact on financial viability in the short and long term of your virtual business.