Copyright 2005 Prentice Hall1 Bus 411 Day 14

Copyright 2007 Prentice Hall Ch 7-2 Agenda Assignment 4 Corrected  2 A’s, 4 B’s, 2 C’s & 2 D’s Assignment 5 Due Mid-term exam  March  Take home (non-group work)  Short essays  Intense-- ~10 hours Discussion on Implementing Strategies: Management & Operations, Marketing, Finance/Accounting, R&D, & MIS Issues

Copyright 2007 Prentice Hall Ch 7-3 Assignment 2 PURPOSE:  In performing business policy case analysis, you can find information about the respective company’s strategies. Comparing what is planned versus what you would have recommended is an important part of case analysis. Do not recommend what the firm actually plans, unless in-depth analysis of the situation reveals those strategies to be best among all feasible alternatives. This exercise gives you experience conducting library and Internet research to determine what Google should do in INSTRUCTIONS:  Look up Google and Yahoo! on the Internet. Find some recent articles about firms in this industry. Scan Moody’s, Dun & Bradstreet, and Standard & Poor’s publications for information. Check and  Summarize your findings in a three-page report titled “Strategies for Google in 2007.” Grading rubric  Quality of research (20 points) 3-5 quality sources (not web sites)  Quality of writing (20 points) Spelling, grammar, appropriate vocabulary and tone Directed wring not creative writing  In-Depth Analysis of existing and Planned Google Strategies (30 Points What worked, what didn’t, what will and what won’t  Recommendations for NEW Google strategies (30 points) Should have been tied to strategies discussed in the chapter

Copyright 2007 Prentice Hall Ch 7-4 teams Team 1  J. Harbison  N. Lozier  M. Martin Team 2  C. Brusig  C. Pennine  T. Nhundu  J. Jalbert Team 3  K. Beaulieu  M. Doucette  D. Lemon

Copyright 2007 Prentice Hall Ch 7-5 Timeline March 9  Finish Chapter 7 & begin  Chapter 8  Assignment 5 due March 13  Finish Chapter 8  Chapter 9  Mid-term assigned March 16  How to present a case study  Mid-term due March 20  Tony Case study One Apple Computer March 23  Team 1 Case Study Two Dell Computer March Spring Break April 3  Team 2 Case Study Three PepsiCo April 6  Team 3 Case Study Four Molson Coors Brewing Company April 10  Team 1 Case Study Five Hershey Foods Corporation

Copyright 2007 Prentice Hall Ch 7-6 Steps in Preparing Case Studies Identify Existing Mission, Vision, Objectives, Strategies Develop New Vision and Mission  Most are poor Identify external opportunities and threats  CPM  EFE Identify internal strengths and weaknesses  IFE  Financial ratios Analyze  SWOT Matrix  SPACE  BCG  IE matrix  Grand Strategy Matrix  QSPM Give advantage and disadvantages of alternative strategies Recommend  Strategies and long range objectives  Show cost Specify how strategies are to be implemented and what results to expect Recommend specific annual objectives (goal) and polices Recommend procedures for evaluation Be Original – Take chances  Remember business rewards risk taking

Copyright 2007 Prentice Hall Ch 7-7 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-8 Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation

Copyright 2007 Prentice Hall Ch 7-9 Management Issues Resistance to Change -- Raises anxiety; fear concerning  Economic loss  Inconvenience  Uncertainty  Break in status-quo

Copyright 2007 Prentice Hall Ch 7-10 Management Issues Change Strategies  Force Change Strategy  Just do it  Educative Change Strategy  This is why we are changing  Rational or Self-Interest Change Strategy  This is why change is good for you

Copyright 2007 Prentice Hall Ch 7-11 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-12 Management Issues Natural Environment -- Wide appreciation for firms that “mend” rather than “harm” the environment

Copyright 2007 Prentice Hall Ch 7-13 Management Issues Natural Environment – Environmental Strategies  Develop/acquire “green” businesses  Divesting environmental-damaging business  Low-cost producer through waste minimization & energy conservation

Copyright 2007 Prentice Hall Ch 7-14 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-15 Management Issues Strategy-Supportive Culture -- Preserve, emphasize, & build upon aspects of existing culture that support new strategies

Copyright 2007 Prentice Hall Ch 7-16 Formal statements of philosophy, charters, etc. used for recruitment and selection, socialization Designing of physical spaces, facades, buildings Deliberate role modeling, teaching and coaching Explicit reward and status system, promotion criteria Stories, legends, myths about key people and events Management Issues Elements linking culture to strategy:

Copyright 2007 Prentice Hall Ch 7-17 What leaders pay attention to, measure and control Leader reactions to critical incidents and crises How the organization is designed and structured Organizational systems and procedures Criteria used for recruitment, selection, promotion, retirement Management Issues Elements linking culture to strategy:

Copyright 2007 Prentice Hall Ch 7-18 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-19 Management Issues Production/Operations Concerns -- Production processes typically constitute more than 70% of firm’s total assets

Copyright 2007 Prentice Hall Ch 7-20 Management Issues Production/Operations Decisions  Plant size  Inventory/Inventory control  Quality control  Cost control  Technological innovation

Copyright 2007 Prentice Hall Ch 7-21 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

Copyright 2007 Prentice Hall Ch 7-22 Management Issues Human Resource Concerns -- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc.

Copyright 2007 Prentice Hall Ch 7-23 Management Issues Human Resource Strategic Responsibilities  Assessing staffing needs/costs  Developing performance incentives  ESOP’s  Child-care policies  Work-life balance issues

Copyright 2007 Prentice Hall Ch 7-24 Diversity Issues CEOCompanyAge Meg WhitmaneBay49 Andrea JungAvon Products47 Anne MulcahyXerox52 Marjorie MagnerCitigroup56 Betsy HoldenKraft Foods49 Ann MooreAOL Time Warner57 Women CEO’s in U.S (examples)

Copyright 2007 Prentice Hall Ch 7-25 Benefits of a Diverse Workforce Improves corporate culture Improves employee morale Leads to a higher retention of employees Leads to easier recruitment of employees Decreases complaints and litigation Increases creativity Decreases interpersonal conflict

Copyright 2007 Prentice Hall Ch 7-26 Benefits of a Diverse Workforce Enables the organization to move into emerging markets Improves client relations Increases productivity Improves the bottom line Maximizes brand identity Reduces training costs CostsBenefExSumEN.pdf

Copyright 2007 Prentice Hall Ch 7-27 Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, & MIS Issues Strategic Management: Concepts & Cases 11 th Edition Fred David

Copyright 2007 Prentice Hall Ch 7-28 The greatest strategy is doomed if it’s implemented badly. -- Bernard Reimann Implementing Strategies

Copyright 2007 Prentice Hall Ch Strategy implementation means change The Nature of Strategy Implementation

Copyright 2007 Prentice Hall Ch Less than 10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation

Copyright 2007 Prentice Hall Ch 7-31 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 The Nature of Strategy Implementation Low Success Rate – Strategy Implementation

Copyright 2007 Prentice Hall Ch 7-32 Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems The Nature of Strategy Implementation Successful Strategy Implementation

Copyright 2007 Prentice Hall Ch 7-33 Marketing Issues -- Marketing variables affect success/failure of strategy implementation

Copyright 2007 Prentice Hall Ch 7-34 Exclusive dealerships – multiple channels of distribution Heavy, light, or no TV advertising Price leader or price follower Advertise online or not Offer complete or limited warranty Marketing Issues Marketing decisions requiring policies

Copyright 2007 Prentice Hall Ch Market segmentation 2. Product positioning Marketing Issues Centrally important to Implementation

Copyright 2007 Prentice Hall Ch 7-36 Subdividing of a market into distinct subsets of customers according to needs and buying habits Marketing Issues Market Segmentation

Copyright 2007 Prentice Hall Ch 7-37 Key to matching supply & demand Market development, product-development, market penetration & diversification strategies Allows operating with limited resources Enables small firms to compete successfully Marketing Issues Market Segmentation

Copyright 2007 Prentice Hall Ch 7-38 Directly affect marketing mix variables:  Product  Place  Promotion  Price Marketing Issues Market Segmentation

Copyright 2007 Prentice Hall Ch 7-39 Marketing Mix – Component Factors Service level Warranty Transportation carriers Product line Inventory levels/locations Packaging PublicitySales territoriesBrand name Payment termsSales promotionOutlet locationStyle Discounts & allowances Personal selling Distribution coverage Features LevelAdvertising Distribution channels Quality PricePromotionPlaceProduct

Copyright 2007 Prentice Hall Ch 7-40 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

Copyright 2007 Prentice Hall Ch 7-41 Region County size City or SMSA size Density Climate Marketing Issues Geographic

Copyright 2007 Prentice Hall Ch 7-42 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

Copyright 2007 Prentice Hall Ch 7-43 Age Family Size Family Life Cycle Income/Occupation Education Religion Race/Nationality Marketing Issues Demographic

Copyright 2007 Prentice Hall Ch 7-44 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

Copyright 2007 Prentice Hall Ch 7-45 Social Class Lifestyle Personality Marketing Issues Psychographic

Copyright 2007 Prentice Hall Ch 7-46 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

Copyright 2007 Prentice Hall Ch 7-47 Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product Marketing Issues Behavioral

Copyright 2007 Prentice Hall Ch 7-48 Marketing Issues -- Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry Product Positioning

Copyright 2007 Prentice Hall Ch 7-49 Marketing Issues Product Positioning Customer Wants Customer Needs

Copyright 2007 Prentice Hall Ch 7-50 Product Positioning Steps Product Positioning Steps 2. Diagram Map 1. Select Key Criteria 3.Plot competitors’ products 4. Look for niches 5. Develop Marketing Plan

Copyright 2007 Prentice Hall Ch 7-51 Product Positioning Map Low Convenience High Customer Loyalty Low Customer Loyalty High Convenience Firm 1 Firm 2 Firm 3 Rental Car Market Low Customer Loyalty High Convenience Firm 1 Firm 2 Firm 3 Rental Car Market

Copyright 2007 Prentice Hall Ch 7-52 Look for vacant niche Avoid sub optimization Don’t serve 2 segments w/ same strategy Don’t position in the middle of the map Marketing Issues Product Positioning as Strategy Implementation Tool

Copyright 2007 Prentice Hall Ch 7-53 Finance/Accounting Issues -- Central to strategy implementation

Copyright 2007 Prentice Hall Ch 7-54 Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business Finance/Accounting Issues Essential for implementation

Copyright 2007 Prentice Hall Ch 7-55 Raise capital – short-term debt, long-term debt, preferred, or common stock Lease or buy fixed assets  Expense or depreciate Determine appropriate dividend payout ratio Finance/Accounting Issues Decisions based on Finance/Accounting

Copyright 2007 Prentice Hall Ch 7-56 LIFO, FIFO, or market-value accounting approach Extend time of AR  Factor AR? Establish % discount on accounts for terms Determine the amount of cash kept on hand  Cash flow analysis has become more important in recent past due to rising Prime rate Finance/Accounting Issues Decisions based on Finance/Accounting

Copyright 2007 Prentice Hall Ch 7-57 Debt Equity Finance/Accounting Issues Capital acquisition to implement strategies

Copyright 2007 Prentice Hall Ch 7-58 EPS/EBIT analysis  Earnings per share/Earnings before interest and taxes Finance/Accounting Issues Debt vs. Equity Decisions

Copyright 2007 Prentice Hall Ch 7-59

Copyright 2007 Prentice Hall Ch 7-60

Copyright 2007 Prentice Hall Ch 7-61 Allow an organization to examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statements

Copyright 2007 Prentice Hall Ch Prepare income statement before balance sheet (forecast sales) 2. Use percentage of sales method to project CoGS & expenses 3. Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements

Copyright 2007 Prentice Hall Ch Subtract dividends to be paid from Net Income and add remaining to Retained Earnings 5. Project balance sheet times beginning with retained earnings 6. List comments (remarks) on projected statements Finance/Accounting Issues Steps in Preparing Projected Financial Statements (cont’d)

Copyright 2007 Prentice Hall Ch 7-64 Projected Income Statement for Litten Company (in millions) Prior Year 2005 Projected Year 2006Remarks Projected Income Statement Sales % increase Cost of Goods Sold % of sales Gross Margin Selling Expense % of sales Administrative Expense57.505% of sales EBIT Interest33.00 EBT Taxes % rate Net Income69.75 Dividends25.00 Retained Earnings44.75

Copyright 2007 Prentice Hall Ch Details how funds will be obtained and spent for a specified period of time. Finance/Accounting Issues Financial Budget

Copyright 2007 Prentice Hall Ch 7-66 Cash budgets Operating budgets Sales budgets Profit budgets Factory Budgets Expense Budgets Finance/Accounting Issues Types of Budgets

Copyright 2007 Prentice Hall Ch 7-67 Divisional budgets Variable budgets Flexible budgets Fixed budgets Finance/Accounting Issues Types of Budgets

Copyright 2007 Prentice Hall Ch 7-68 Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating Worth of a Business

Copyright 2007 Prentice Hall Ch What a firm owns 1. Total assets – liabilities (discount overvalued assets) 2. Stockholders equity 2. What a firm earns 1. 5 X times annual earnings (tax consequences) 3. What a firm will bring in the market 1. Outstanding shares Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches

Copyright 2007 Prentice Hall Ch 7-70 Worth of a Business Analysis (see 8-8) Southwest Airlines Stockholders’ Equity:$ 5,524 Net Income: 313 Stock Price: EPS:.45 Shares Outstanding 784 Company Worth Analysis Stockholders Equity $ 5,524 Net Income x 5 1,565 Share Price/EPS x NI 10,920 # Shares x Share Price 12,309

Copyright 2007 Prentice Hall Ch 7-71 Research & Development Issues -- New products and improvement of existing products that allow for effective strategy implementation

Copyright 2007 Prentice Hall Ch 7-72 Level of support constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints

Copyright 2007 Prentice Hall Ch st 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 3 Major R&D approaches to implementing strategies

Copyright 2007 Prentice Hall Ch 7-74 Management Information Systems (MIS) Issues -- Information is the basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms

Copyright 2007 Prentice Hall Ch 7-75 Information collection, retrieval, & storage Keeping managers informed Coordination of activities among divisions Allow firm to reduce costs MIS Issues Functions of MIS