Bus 411 Day 12 Copyright 2005 Prentice Hall1

Ch 1 -2 Agenda Question? Assignment 3 Corrected  3 A’s, 2 B’s, 2 C’s, 1 D and 1 non-submit Assignment 4 posted  Due March 12:30 PM  SWOT, Space, BCG and QSPM matrixes for McDonald’s Assignment 5 (last one) will be posted next week  Evaluation and control Mid-term exam March 22 th  Chapters 1 – 9 and 10, 11? Finish Discussion on Implementing Strategies: Management and Operations Issues Begin Discussion on Implementing Strategies: Marketing, Finance/Accounting R&D and MIS Issues

Schedule Change March 5 Chap 7 & 8 March 8 Chap 8 & 9 March 12 Chap 10 March 15 Chap 11 March 19. How to prepare and present a case study, Group Assignment, Case assignments March 22, Mid-term Back on Schedule after Spring break First Student Case Presentation on Apr 5 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -3

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -4 Chapter 7 Implementing Strategies: Management & Operations Issues Strategic Management: Concepts & Cases 13 th Edition Fred David

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -5 Restructuring, Reengineering, and E-engineering Restructuring is called  Downsizing  Rightsizing  Delayering

Unemployment rates EU-27, EA-17, US and Japan, seasonally adjusted, January January 2012 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -6 Source:

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 7 -7 Restructuring, Reengineering, and E-engineering Cornerstones of Reengineering  Decentralization  Reciprocal interdependence  Information sharing

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -8

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -9

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Tests for Performance-Pay Plans Does the plan capture attention? Do employees understand the plan? Is the plan improving communication? Does the plan pay out when it should? Is the company or unit performing better?

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -11

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -12

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Managing Resistance to Change

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Creating a Strategy-Supportive Culture 1. Formal statements of organizational philosophy 2. Design of physical spaces 3. Deliberate role modeling, teaching, and coaching 4. Explicit reward and status system 5. Stories, legends, myths, and parables

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Creating a Strategy-Supportive Culture 6. What leaders pay attention to 7. Leader reactions to critical incidents and crises 8. Organizational design and structure 9. Organizational systems and procedures 10. Criteria for recruitment, selection, promotion, leveling off, retirement, and “excommunication” of people

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Production/Operations Concerns Production processes typically constitute more than 70% of a firm’s total assets

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Production/Operations Decision Examples Plant size Inventory / Inventory control Quality control Cost control Technological innovation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -18

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -19

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Human Resource Concerns Assessing staffing needs/costs Furloughs Developing performance incentives ESOPs Work–life balance issues Matching managers with strategy

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Corporate Wellness Programs Wellness of employees has become a strategic issue for many firms  Reduction of health care costs

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Strategic Management: Concepts & Cases 13 th Edition Fred David

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -23

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch “The greatest strategy is doomed if it’s implemented badly.” – Bernard Reimann Implementing Strategies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Less than 10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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 Marketing Issues Marketing decisions requiring policies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -27

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Current Marketing Issues Advertising media Purpose-based marketing

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Market segmentation Product positioning Marketing Issues

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Subdividing of a market into distinct subsets of customers according to needs and buying habits Marketing Issues Market Segmentation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Market Segmentation Market Segment Basis Psychographic Behavioral Geographic Demographic

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Market-development, product- development, 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 Market Segmentation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Product Place Promotion Price Marketing Mix Variables

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Marketing Issues Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry Product Positioning

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Product Positioning Steps 1. Select key criteria 2. Diagram map 3. Plot competitors’ products 4. Look for niches 5. Develop marketing plan

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Product-Positioning Map for Banks Personal Impersonal AggressiveConservative Bank A Bank B Bank C Bank D Bank E

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Product-Positioning Map for Personal Computers High Capability Low Capability Good Customer Service Bad Customer Service Firm 1 Firm 2 Firm 3 Firm 4

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Product-Positioning Map for Menswear Retail Stores Very latest, fashionable menswear Conservative, everyday menswear Low PriceHigh Price Average department store Average specialty chain Average mass merchandiser or discounter

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Product-Positioning Map for the Rental Car Market High Convenience Low Convenience High Customer Loyalty Low Customer Loyalty Firm 1 Firm 2 Firm 3

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Look for a vacant niche Don’t serve two segments with the same strategy Don’t position yourself in the middle of the map Product Positioning

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Finance/Accounting Issues Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating the worth of a business

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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 Finance/Accounting Issues

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch EPS/EBIT analysis  Earnings per share/earnings before interest and taxes Finance/Accounting Issues Debt vs. Equity Decisions

Ch 8-44 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Ch 8-45 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Copyright 2007 Prentice Hall Ch $Amount Needed: $500 Stock Price $40 (avg for month of Dec 2001) EBIT Range $1000 to $2000 Tax Rate 175/673 =.26 = 26% Interest Rate 5% (based on prime rate) # Shares Outstanding 350 (million) Prime Rate History  All data is from Dec 2001, all dollar amount are in millions EPS-EBIT Analysis (in $millions) Heinz Company – Year End 2001

Copyright 2007 Prentice Hall Ch EPS-EBIT Analysis (in $millions) – Heinz Company Stock FinancingFinancing Combination 60/40 HighLowHighLowHighLow EBIT ($982.4 in 2001)$2000$1000$2000$1000$2000$1000 Interest (5%) EBT Taxes 26% EAT # Shares outstanding EPS

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Allows an organization to examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statement Analysis

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Prepare income statement before balance sheet (forecast sales) 2. Use percentage of sales method to project CGS & expenses 3. Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Subtract dividends to be paid from net income and add remaining to retained earnings 5. Project balance sheet items beginning with retained earnings 6. List comments (remarks) on projected statements Finance/Accounting Issues Steps in Preparing Projected Financial Statements (cont’d)

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Projected Income Statement

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Projected Balance Sheet

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Details how funds will be obtained and spent for a specified period of time Finance/Accounting Issues Financial Budget

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Central to strategy implementation – integrative, intensive, and diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating Worth of a Business

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch What a firm owns 2. What a firm earns 3. What a firm will bring in the market Evaluating Worth of a Business Three Basic Approaches

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Evaluating Worth of a Business Net worth or stockholder’s equity Net profit – conservative value would be five times the firm’s current annual profits Price-earnings ratio method Outstanding shares method

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -58

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Research & Development Issues New products and improvement of existing products that allow for effective strategy implementation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Level of support constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch First firm to market new technological products 2. Innovative imitator of successful products 3. Low-cost producer of similar but less expensive products Research & Development Issues Three Major R&D Approaches to Implementing Strategies

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Management Information Systems (MIS) Issues Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allows firm to reduce costs MIS Issues Functions of MIS

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.