Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues

1. Chapter 8Implementing Strategies:Marketing, Finance/Accounting, R&D, and MIS Issues Strategic Management: Concepts and Cases. 9th edition Fred R. David PowerPoint Slides by Anthony F. Chelte Western New England College Fred R. David Prentice Hall

2. Chapter Outline • The Nature of Strategy Implementation • Marketing Issues • Research and Development (R&D) Issues Fred R. David Prentice Hall

3. Chapter Outline • Finance/Accounting Issues • Management Information Systems Issues Fred R. David Prentice Hall

4. Implementing Strategies There is no “perfect” strategic decision. One always has to pay a price. One always has to balance conflicting objectives, conflicting opinions, and conflicting priorities. The best strategic decision is only an approximation—and a risk -- Peter Drucker Fred R. David Prentice Hall

5. Implementing Strategies Strategy implementation means change Fred R. David Prentice Hall

6. Implementing Strategies: Less than 10% of strategies formulated are successfully implemented! Fred R. David Prentice Hall

7. Implementing Strategies: Low strategy implementation success: • Failing to segment markets appropriately • Paying too much for a new acquisition • Falling behind competition in R&D • Not recognizing benefit of computers in managing information Fred R. David Prentice Hall

8. Implementing Strategies: For Successful Strategy Implementation -- • Firms must market goods and services well • Firms must raise needed working capital • Firms produce technologically-sound goods • Firms must have sound information systems Fred R. David Prentice Hall

9. Marketing Issues Marketing variables affect success or failure of strategy implementation • Market Segmentation • Production Positioning Fred R. David Prentice Hall

10. Implementing Strategies: Marketing Issues Strategy Analysis & Choice Marketing Decisions requiring polices – • Use exclusive dealerships or multiple channels of distribution • Use heavy, light, or no TV advertising • Limit (or not) the share of business done with a single customer Fred R. David Prentice Hall

11. Implementing Strategies: Marketing Issues Strategy Analysis & Choice Marketing Decisions requiring polices – • Be a price leader or price follower • Offer a complete or limited warranty • Reward salespeople based on straight commission or combination salary/commission Fred R. David Prentice Hall

12. Market Segmentation • Subdividing of a market into distinct subsets of customers according to needs and buying habits Fred R. David Prentice Hall

13. Market Segmentation • Widely used in implementing strategies • Small and specialized firms Fred R. David Prentice Hall

14. Market Segmentation Market Segmentation Important Variable: • Market and product development, market penetration, and diversification require increased sales through new markets or products Fred R. David Prentice Hall

15. Market Segmentation Market Segmentation Important Variable: • Firm can operate with limited resources. Enables a small firm by maximizing per-unit profits and per-segment sales. Fred R. David Prentice Hall

16. Market Segmentation Market Segmentation Important Variable: • Segmentation decisions directly affect marketing mix variables: • Product, place, promotion, and price Fred R. David Prentice Hall

17. Product Place Promotion Price Quality Distribution channels Advertising Level Features Distribution coverage Personal selling Discounts & allowances Style Outlet location Sales promotion Payment terms Brand name Sales territories Publicity Packaging Inventory levels/locations Product line Transportation carriers Warranty Service level Marketing Mix – Component Factors Fred R. David Prentice Hall

18. Market Segmentation Bases for Segmenting Markets -- • Geographic • Demographic • Psychographic • Behavioral Fred R. David Prentice Hall

19. Market Segmentation Geographic Basis: • Region • County Size • City or SMSA size • Density • Climate Fred R. David Prentice Hall

20. Market Segmentation Demographic Basis: • Age • Family Size • Family Life Cycle • Income Occupation • Education • Religion • Race Nationality Fred R. David Prentice Hall

21. Market Segmentation Psychographic Basis: • Social Class • Lifestyle • Personality Fred R. David Prentice Hall

22. Market Segmentation Behavioral Basis: • Use occasion • Benefits sought • User status • Usage rate • Loyalty status • Readiness Stage • Attitude toward product Fred R. David Prentice Hall

23. Product Positioning Developing schematic representations that reflect how products or services compare to competitors’ on dimensions most important to success in the industry Fred R. David Prentice Hall

24. Product Positioning Product Positioning based on: • Customers wants • Customers needs Fred R. David Prentice Hall

25. Product Positioning Steps 1. Select Key Criteria 2. Diagram Map Product Positioning Steps • Plot competitors’ products 4. Look for niches 5. Develop Marketing Plan Fred R. David Prentice Hall

26. Product Positioning Map High Convenience Rental Car Market Firm 1 • • Firm 2 High Customer Loyalty Low Customer Loyalty • Firm 3 Low Convenience Fred R. David Prentice Hall

27. Product Positioning Product Positioning Map as Strategy-Implementation Tool— • Look for vacant niche • Avoid suboptimization • Don’t serve 2 segments with same strategy • Don’t position in the middle of the map Fred R. David Prentice Hall

28. Finance/Accounting Issues Central to Strategy Implementation – • Acquiring needed capital • Developing pro forma financial statements • Preparing financial budgets • Evaluating worth of a business Fred R. David Prentice Hall

29. Decisions Requiring Finance/Accounting Policies Raise capital w/ short-term, long-term preferred or common stock Lease or buy fixed assets Determine an appropriate dividend payout ratio Use LIFO, FIFO, or market-value accounting approach Fred R. David Prentice Hall

30. Decisions Requiring Finance/Accounting Policies Extend time of accounts receivable Establish percentage discount on accounts for terms Determine the amount of cash kept on hand Fred R. David Prentice Hall

31. Finance/Accounting Issues Acquiring Capital to Implement Strategies – • Basic sources of capital: • Debt • Equity Fred R. David Prentice Hall

32. Finance/Accounting Issues Debt vs. Equity Decisions – • EPS/EBIT analysis • Earnings per share/Earnings before interest and taxes Fred R. David Prentice Hall

33. Finance/Accounting Issues Pro Forma Financial Statements - • Allows an organization to examine the expected results of various actions and approaches Fred R. David Prentice Hall

34. Finance/Accounting Issues 6 Steps in Pro Forma Financial Analysis • Prepare income statement before balance sheet (forecast sales) • Use percentage-of-sales method to project CGS and expenses • Calculate projected net income • Subtract dividends to be paid from Net Income and add remaining to Retained Earnings • Project balance sheet times beginning with retained earnings • List comments (remarks) on projected statements Fred R. David Prentice Hall

35. Finance/Accounting Issues Financial Budget – Document that details how funds will be obtained and spent for a specified period of time. Fred R. David Prentice Hall

36. Finance/Accounting Issues Types of Budgets – • Cash budgets • Operating budgets • Sales budgets • Profit budgets • Factory budgets • Capital budgets • Expense budgets • Divisional budgets • Variable budgets • Flexible budgets • Fixed budgets Fred R. David Prentice Hall

37. Evaluating Worth of a Business Central to strategy implementation as integrative, intensive and diversification strategies are often implement through acquisitions of other firms. Fred R. David Prentice Hall

38. Evaluating Worth of a Business 3 Basic approaches: • What a firm owns • What a firm earns • What a firm will bring in the market Fred R. David Prentice Hall

39. Research & Development Issues New products and improvement of existing products that allow for effective strategy implementation Fred R. David Prentice Hall

40. Research & Development Issues • Level of support is constrained by resource availability • Technological improvements shorten product life cycles Fred R. David Prentice Hall

41. Research & Development Issues 3 Major R&D approaches to implementing strategies – • First firm to market new technological products • Be an innovative imitator of successful products • Low-cost producer of similar but less expensive products Fred R. David Prentice Hall

42. Key Terms • Cash Budget • E-mail • EPS/EBIT Analysis • Financial Budget • Information Systems • Market Segmentation • Marketing-mix Variables Fred R. David Prentice Hall

43. Key Terms • Multidimensional Scaling • Outstanding Shares Method • Price-earnings Ratio Method • Pro Forma Financial Statement Analysis • Product Positioning Fred R. David Prentice Hall

44. Key Terms • Research and Development • Retained Earnings • Vacant Niche • World Wide Web Fred R. David Prentice Hall