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

Strategic Management: Concepts & Cases 13th Edition Fred David

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Ch 8 -1

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Ch 8 -2

Implementing Strategies

The greatest strategy is doomed if its implemented badly. Bernard Reimann

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Ch 8 -3

The Nature of Strategy Implementation

Less than 10% of strategies formulated are successfully implemented!

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Ch 8 -4

Marketing Issues
Marketing decisions requiring policies

Exclusive dealerships or multiple channels of distribution Heavy, light, or no TV advertising To limit or not the share of business with a single customer Price leader or price follower Offer complete or limited warranty Reward salespeople with commission or salary Advertise online or not
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Ch 8 -6

Current Marketing Issues

Advertising media Purpose-based marketing

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Ch 8 -7

Marketing Issues

Market segmentation Product positioning

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Ch 8 -8

Marketing Issues
Market Segmentation

Subdividing of a market into distinct subsets of customers according to needs and buying habits
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Market Segmentation
Geographic
Demographic

Market Segment Basis

Psychographic

Behavioral

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Ch 8 -10

Market Segmentation

Market-development, productdevelopment, market-penetration, and diversification strategies require market segmentation Market segmentation allows operating with limited resources; enables small firms to compete successfully Market segmentation decisions affect marketing mix variables
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Marketing Mix Variables

Product Place Promotion Price

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Marketing Issues
Product Positioning
Schematic representations that reflect how products/services compare to competitors on dimensions most important to success in the industry

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Ch 8 -13

Product Positioning Steps

1.
2. 3. 4. 5.

Select key criteria Diagram map Plot competitors products Look for niches Develop marketing plan
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Product-Positioning Map for Banks

Personal Bank B Bank A Aggressive Bank D

Bank C
Conservative

Bank E

Impersonal
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Product-Positioning Map for Personal Computers High Capability

Firm 1
Firm 2 Good Customer Service Bad Customer Service

Firm 4

Firm 3

Low Capability
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Product-Positioning Map for Menswear Retail Stores

Very latest, fashionable menswear Average specialty chain High Price Average department store

Low Price Average mass merchandiser or discounter

Conservative, everyday menswear

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Product-Positioning Map for the Rental Car Market

High Convenience

Firm 1
Firm 2 High Customer Loyalty Low Customer Loyalty

Firm 3

Low Convenience
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Product Positioning
Look

for a vacant niche Dont serve two segments with the same strategy Dont position yourself in the middle of the map

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Ch 8 -19

Finance/Accounting Issues
Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating the worth of a business

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Ch 8 -20

Finance/Accounting Issues

Raise capital short-term debt, long-term debt, preferred, or common stock Lease or buy fixed assets Determine appropriate dividend payout ratio LIFO, FIFO, or market-value accounting Timeframe of accounts receivable Discounts on accounts Amount of cash to be kept on hand
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Finance/Accounting Issues
Debt vs. Equity Decisions

EPS/EBIT analysis

Earnings per share/earnings before interest and taxes

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Ch 8 -22

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Ch 8 -23

Finance/Accounting Issues
Projected Financial Statement Analysis

Allows an organization to examine the expected results of various actions and approaches

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Ch 8 -24

Finance/Accounting Issues
Steps in Preparing Projected Financial Statements
1.

Prepare income statement before balance sheet (forecast sales) Use percentage of sales method to project CGS & expenses Calculate projected net income
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2.

3.

Finance/Accounting Issues
Steps in Preparing Projected Financial Statements (contd)
4.

Subtract dividends to be paid from net income and add remaining to retained earnings Project balance sheet items beginning with retained earnings

5.

6.

List comments (remarks) on projected statements

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Projected Income Statement

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Ch 8 -27

Projected Balance Sheet

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Ch 8 -28

Finance/Accounting Issues
Financial Budget
Details how funds will be obtained and spent for a specified period of time

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Ch 8 -29

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

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Ch 8 -30

Finance/Accounting Issues
Evaluating Worth of a Business

Central to strategy implementation integrative, intensive, and diversification strategies often implemented through acquisitions of other firms

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Ch 8 -31

Evaluating Worth of a Business

Three Basic Approaches
1.

What a firm owns What a firm earns

2.

3.

What a firm will bring in the market

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Evaluating Worth of a Business

Net worth or stockholders equity Net profit conservative value would be five times the firms current annual profits Price-earnings ratio method Outstanding shares method

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Ch 8 -34

Research & Development Issues

New products and improvement of existing products that allow for effective strategy implementation

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Ch 8 -35

Research & Development Issues

Constraints

Level of support constrained by resource availability Technological improvements shorten product life cycles
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Ch 8 -36

Research & Development Issues

Three Major R&D Approaches to Implementing Strategies
1.

First firm to market new technological products Innovative imitator of successful products Low-cost producer of similar but less expensive products
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2.

3.

Management Information Systems (MIS) Issues

Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms.

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Ch 8 -38

MIS Issues
Functions of MIS

Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allows firm to reduce costs
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Ch 8 -40