1. Copyright 2005 Prentice Hall1 Bus 411 DAY 12

2. Copyright 2005 Prentice Hall Ch 7-2 Agenda Assignment #4 was mailed to in WebCT  Due Feb 28 Templates available in WebCT 7 days till Spring Break and Bike Week! Mid-term after Spring Break  Handed out Mar. 14 Due Mar 17  Chapters 1-9  Intense Discussion on Implementing Strategies

3. Copyright 2005 Prentice Hall Ch 7-3 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

4. Copyright 2005 Prentice Hall Ch 7-4 Management Issues Strategy-Supportive Culture -- Preserve, emphasize, & build upon aspects of existing culture that support new strategies

5. Ch 7-5 1.Formal statements of philosophy, charters, etc. used for recruitment and selection, and socialization 2.Designing of physical spaces, facades, buildings 3.Deliberate role modeling, teaching and coaching 4.Explicit reward and status system, promotion criteria 5.Stories, legends, myths about key people and events Management Issues Elements linking culture to strategy:

6. Ch 7-6 6.What leaders pay attention to, measure and control 7.Leader reactions to critical incidents and crises 8.How the organization is designed and structured 9.Organizational systems and procedures 10.Criteria used for recruitment, selection, promotion, retirement Management Issues Elements linking culture to strategy:

7. Copyright 2005 Prentice Hall Ch 7-7 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

8. Copyright 2005 Prentice Hall Ch 7-8 Management Issues Production/Operations Concerns -- Production processes typically constitute more than 70% of firm’s total assets

9. Copyright 2005 Prentice Hall Ch 7-9 Management Issues Production/Operations Decisions  Plant size  Inventory/Inventory control  Quality control  Cost control  Technological innovation

10. Copyright 2005 Prentice Hall Ch 7-10 Management Issues (cont’d) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

11. Copyright 2005 Prentice Hall Ch 7-11 Management Issues Human Resource Concerns -- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc.

12. Copyright 2005 Prentice Hall Ch 7-12 Management Issues Human Resource Strategic Responsibilities  Assessing staffing needs/costs  Developing performance incentives  ESOP’s  http://groups.msn.com/DynKorea/dyncorphistory.msnw http://groups.msn.com/DynKorea/dyncorphistory.msnw  http://www.corpwatch.org/article.php?list=type&type=18 http://www.corpwatch.org/article.php?list=type&type=18  Child-care policies  Work-life balance issues

13. Copyright 2005 Prentice Hall Ch 7-13 Diversity Issues Carly FiorinaHewlett-Packard49 yrs old Meg WhitmaneBay47 yrs old Andrea JungAvon Products45 yrs old Anne MulcahyXerox50 yrs old Marjorie MagnerCitigroup54 yrs old Betsy HoldenKraft Foods47 yrs old Mary SammonsRite Aid57 yrs old Women CEO’s in U.S. 2004 (examples)

14. Copyright 2005 Prentice Hall Ch 7-14 Agenda Templates available in WebCT Mid-term will be after Spring Break  Chapters 1-9  Take home  Intense Discussion on Implementing Strategies  Marketing  Finance/accounting  R&D  MIS

15. Copyright 2005 Prentice Hall Ch 7-15 Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, & MIS Issues Strategic Management: Concepts & Cases 10 th Edition Fred David PowerPoint Slides by Anthony F. Chelte Western New England College

16. Copyright 2005 Prentice Hall Ch 7-16 Chapter Outline The Nature of Strategy Implementation Marketing Issues Finance/Accounting Issues

17. Copyright 2005 Prentice Hall Ch 7-17 Chapter Outline ( cont’d ) Research & Development (R&D) Issues Management Information Systems (MIS) Issues

18. Copyright 2005 Prentice Hall Ch 7-18 The greatest strategy is doomed if it’s implemented badly. -- Bernard Reimann Implementing Strategies

19. Copyright 2005 Prentice Hall Ch 7-19 -- Strategy implementation means change. The Nature of Strategy Implementation

20. Copyright 2005 Prentice Hall Ch 7-20 -- Less than 10% of strategies formulated are successfully implemented! Why??? The Nature of Strategy Implementation

21. Copyright 2005 Prentice Hall Ch 7-21 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 Nature of Strategy Implementation Low Success Rate – Strategy Implementation

22. Copyright 2005 Prentice Hall Ch 7-22 Market goods & services well Raise needed working capital Produce technologically sound goods Correct use of information systems Nature of Strategy Implementation Successful Strategy Implementation

23. Copyright 2005 Prentice Hall Ch 7-23 Marketing Issues -- Marketing variables affect success/failure of strategy implementation Marketing creates Demand which leads to sales that create revenue

24. Copyright 2005 Prentice Hall Ch 7-24 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 warrantee Marketing Issues Marketing Decisions requiring policies

25. Copyright 2005 Prentice Hall Ch 7-25 1. Market segmentation 2. Product positioning Marketing Issues Centrally important to Implementation

26. Copyright 2005 Prentice Hall Ch 7-26 Subdividing of a market into distinct subsets of customers according to needs and buying habits. Marketing Issues Market Segmentation

27. Copyright 2005 Prentice Hall Ch 7-27 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

28. Copyright 2005 Prentice Hall Ch 7-28 Directly affect marketing mix variables:  Product  Place  Promotion  Price Marketing Issues Market Segmentation

29. Ch 7-29 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

30. Copyright 2005 Prentice Hall Ch 7-30 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

31. Copyright 2005 Prentice Hall Ch 7-31 Region County size City or SMSA (Standard Metropolitan Statistical Area ) size Density Climate Marketing Issues Geographic

32. Copyright 2005 Prentice Hall Ch 7-32 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

33. Copyright 2005 Prentice Hall Ch 7-33 Age Family Size Family Life Cycle Income/Occupation Education Religion Race/Nationality Marketing Issues Demographic

34. Copyright 2005 Prentice Hall Ch 7-34 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

35. Copyright 2005 Prentice Hall Ch 7-35 Social Class Lifestyle Personality Marketing Issues Psychographic

36. Copyright 2005 Prentice Hall Ch 7-36 Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

37. Copyright 2005 Prentice Hall Ch 7-37 Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product Marketing Issues Behavioral

38. Copyright 2005 Prentice Hall Ch 7-38 Marketing Issues -- Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry Product Positioning

39. Copyright 2005 Prentice Hall Ch 7-39 Marketing Issues Product Positioning Customer Wants Customer Needs

40. Copyright 2005 Prentice Hall Ch 7-40 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

41. Copyright 2005 Prentice Hall Ch 7-41 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

42. Copyright 2005 Prentice Hall Ch 7-42 Look for vacant niche Don’t Squat Between Segments 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

43. Copyright 2005 Prentice Hall Ch 7-43 Finance/Accounting Issues -- Central to strategy implementation.

44. Copyright 2005 Prentice Hall Ch 7-44 Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business Finance/Accounting Issues Essential for implementation

45. Copyright 2005 Prentice Hall Ch 7-45 Raise capital – short-term debt, long-term debt, preferred stock, or common stock Lease or by fixed assets Determine appropriate dividend payout ratio Finance/Accounting Issues Decisions based on Finance/Accounting

46. Copyright 2005 Prentice Hall Ch 7-46 LIFO, FIFO, or market-value accounting approach Extend time of Accounts Receivable Establish % discount on accounts for terms of payment (factoring receivables) Determine the amount of cash kept on hand Finance/Accounting Issues Decisions based on Finance/Accounting

47. Copyright 2005 Prentice Hall Ch 7-47 Debt (take a loan) Equity (get more partners, sell treasury stock, issue new stock) Finance/Accounting Issues Capital acquisition to implement strategies

48. Copyright 2005 Prentice Hall Ch 7-48 EPS/EBIT analysis  Earnings per share/Earnings before interest and taxes Finance/Accounting Issues Debt vs. Equity Decisions

49. Copyright 2005 Prentice Hall Ch 7-49 $Amount Needed: $500 Stock Price $40 EBIT Range $1000 to $2000 Tax Rate 175/673 =.26 = 26% Interest Rate 5% # Shares Outstanding 350 (million) EPS-EBIT Analysis (in $millions) Heinz Company – Year End 2001

50. Copyright 2005 Prentice Hall Ch 7-50 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%)0025 10 EBT2000100019759751990990 Taxes 26%520260514254517257 EAT148074014617211473733 # Shares outstanding362.5 350 357.5 EPS4.082.044.172.064.122.05

51. Copyright 2005 Prentice Hall Ch 7-51 Conclusion:  Heinz should use debt to raise the $500 million Finance/Accounting Issues EPS-EBIT Analysis Heinz

52. Copyright 2005 Prentice Hall Ch 7-52 Allow an organization to examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statements

53. Copyright 2005 Prentice Hall Ch 7-53 1. Prepare income statement before balance sheet (forecast sales) 2. Use percentage of sales method to project Cost of Good Sold & expenses 3. Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements

54. Copyright 2005 Prentice Hall Ch 7-54 4. 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)

55. Copyright 2005 Prentice Hall Ch 7-55 Projected Income Statement for Litten Company (in millions) Prior Year 2004 Projected Year 2005Remarks Projected Income Statement Sales100150.0050% increase Cost of Goods Sold70105.0070% of sales Gross Margin3045.00 Selling Expense1015.0010% of sales Administrative Expense57.505% of sales EBIT1522.50 Interest33.00 EBT1219.50 Taxes69.7550% rate Net Income69.75 Dividends25.00 Retained Earnings44.75

56. Copyright 2005 Prentice Hall Ch 7-56 -- Details how funds will be obtained and spent for a specified period of time. Finance/Accounting Issues Financial Budget

57. Copyright 2005 Prentice Hall Ch 7-57 Cash budgets Operating budgets Sales budgets Profit budgets Factory Budgets Expense Budgets Finance/Accounting Issues Types of Budgets

58. Copyright 2005 Prentice Hall Ch 7-58 Divisional budgets Variable budgets Flexible budgets Fixed budgets Finance/Accounting Issues Types of Budgets

59. Copyright 2005 Prentice Hall Ch 7-59 Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating Worth of a Business

60. Copyright 2005 Prentice Hall Ch 7-60 1. What a firm owns 2. What a firm earns 3. What a firm will bring in the market Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches

61. Copyright 2005 Prentice Hall Ch 7-61 Research & Development Issues -- New products and improvement of existing products that allow for effective strategy implementation

62. Copyright 2005 Prentice Hall Ch 7-62 Level of support constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints

63. Copyright 2005 Prentice Hall Ch 7-63 1. 1 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

64. Copyright 2005 Prentice Hall Ch 7-64 Management Information Systems (MIS) Issues -- Information is basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms

65. Copyright 2005 Prentice Hall Ch 7-65 Information collection, retrieval, & storage Keeping managers informed Coordination of activities among divisions Allow firm to reduce costs MIS Issues Functions of MIS