1. Strategic Management: Concepts & Cases
Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues
Strategic Management: Concepts & Cases
12th Edition
Fred David
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2. Chapter Outline The Nature of Strategy Implementation Marketing Issues
Finance/Accounting Issues
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3. Chapter Outline (cont’d)
Research & Development (R&D) Issues
Management Information Systems (MIS) Issues
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4. Implementing Strategies
“The greatest strategy is doomed if it’s implemented badly.”
– Bernard Reimann
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6. The Nature of Strategy Implementation
– Strategy implementation means change
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7. The Nature of Strategy Implementation
– Less than 10% of strategies formulated are successfully implemented!
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8. The Nature of Strategy Implementation
Low Success Rate – Strategy Implementation
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
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9. The Nature of Strategy Implementation
Successful Strategy Implementation
Market goods & services well
Raise needed working capital
Produce technologically sound goods
Sound information systems
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10. Marketing Issues
– Marketing variables affect success/failure of strategy implementation
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11. Marketing Issues Marketing decisions requiring policies
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
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12. A marketing issue
A marketing issue of increasing concern to consumers today is the extent to which companies can track individuals’ movements on the Internet and are even be able to identify the individual by name and address.
Recently completed research reveals that web advertising dollars spent by businesses will increase to 27 percent of total advertising expenditures by 2002, up from 17 percent in 1999.
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13. Marketing Issues Centrally important to Implementation
Market segmentation
Product positioning
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14. Marketing Issues Market Segmentation
Subdividing of a market into distinct subsets of customers according to needs and buying habits
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15. Importance of Market Segmentation
strategies such as market development, product development, market penetration, and diversification require increased sales through new markets and products.
market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and mass advertising are not required.
Enable small businesses to operate better.
market-segmentation decisions directly affect marketing mix variables: product, place, promotion, and price
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17. Marketing Issues Market Segment Basis Geographic Demographic
Psychographic
Behavioral
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18. Marketing Issues Geographic Region County size City or SMSA size
Density
Climate
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19. Marketing Issues Market Segment Basis Geographic Demographic
Psychographic
Behavioral
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20. Marketing Issues Demographic Age Family size Family life cycle
Income/occupation
Education
Religion
Race/nationality
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21. Marketing Issues Market Segment Basis Geographic Demographic
Psychographic
Behavioral
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22. Marketing Issues Psychographic Social class Lifestyle Personality
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23. Marketing Issues Market Segment Basis Geographic Demographic
Psychographic
Behavioral
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24. Marketing Issues Behavioral Use occasion Benefits sought User status
Usage rate
Loyalty status
Readiness stage
Attitude toward product
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25. Product Positioning
1. After segmenting markets, the next step is to find out what customers want and expect. This takes analysis and research.
2. Identifying target customers on whom to focus marketing efforts sets the stage for deciding how to meet the needs and wants of particular consumer groups.
Positioning entails developing schematic representations that reflect how your products or services compare to competitors on dimensions most important to success in the industry.
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26. Steps in product positioning:
Select key criteria that effectively differentiate products or services in the industry.
Diagram a two-dimensional product-positioning map with specified criteria on each axis.
Plot major competitors’ products in the resultant four-quadrant matrix.
Identify areas in the positioning map where the company’s products or services could be most competitive in the given target market. Look for vacant areas (niches).
Develop a marketing plan to position the company’s products appropriately.
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28. Marketing Issues Product Positioning Customer Wants Customer Needs
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29. Product Positioning Steps
1. Select Key Criteria
2. Diagram Map
Product-Positioning
Steps
Plot Competitors’
Products
4. Look for Niches
5. Develop Marketing Plan
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34. Marketing Issues
Rules of using Product Positioning 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
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35. Criteria of effective product positioning strategy
(1) it uniquely distinguishes a company from the competition.
(2) it leads customers to expect slightly less service than a company can deliver.
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36. Finance/Accounting Issues
– Central to strategy implementation
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37. Finance/Accounting Issues
Essential for Implementation
Acquiring needed capital
Developing projected financial statements
Preparing financial budgets
Evaluating worth of a business
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38. Some examples of decisions that may require finance/accounting policies:
To raise capital with short-term debt, long-term debt, preferred stock, or common stock.
To lease or buy fixed assets.
To determine an appropriate dividend payout ratio.
To use a market-value accounting approach.
To establish a certain percentage discount on accounts within a specified period of time.
To determine the amount of cash that should be kept on hand.
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39. Finance/Accounting Issues
Capital Acquisition to Implement Strategies
Debt
Equity
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40. Finance/Accounting Issues
Debt vs. Equity Decisions
EPS/EBIT analysis
Earnings per share/earnings before interest and taxes
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43. Finance/Accounting Issues
Projected Financial Statements
Allow an organization to examine the expected results of various actions and approaches
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44. Finance/Accounting Issues
Steps in Preparing Projected Financial Statements
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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45. Finance/Accounting Issues
Steps in Preparing Projected Financial Statements (cont’d)
Subtract dividends to be paid from net income and add remaining to retained earnings.
Project balance sheet items beginning with retained earnings.
List comments (remarks) on projected statements.
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47. Finance/Accounting Issues
Financial Budget
– Details how funds will be obtained and spent for a specified period of time
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48. Finance/Accounting Issues
Types of Budgets
Cash budgets
Operating budgets
Sales budgets
Profit budgets
Factory budgets
Expense budgets
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49. Finance/Accounting Issues
Types of Budgets
Divisional budgets
Variable budgets
Flexible budgets
Fixed budgets
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50. 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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51. Finance/Accounting Issues
Evaluating Worth of a Business:
Three Basic Approaches
What a firm owns
What a firm earns
What a firm will bring in the market
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53. Research & Development Issues
– New products and improvement of existing products that allow for effective strategy implementation
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54. R&D policies can enhance strategy-implementation efforts to:
Emphasize product or process improvements.
Stress basic or applied research.
Be leaders or followers in R&D.
Develop robotics or manual-type processes.
Spend a high, average, or low amount of money on R&D.
Perform R&D within the firm or contract R&D to outside firms.
Use university researchers or private sector researchers.
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55. R&D Approaches for Implementing Strategy
a. The first strategy is to be the first firm to market new technological products.
b. The second R&D approach is to be an innovative imitator of successful products, thus minimizing the risks and costs of start-up.
c. A third R&D strategy is to be a low-cost producer by mass-producing products similar to, but less expensive than products recently introduced.
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56. Research & Development Issues
Constraints
Level of support constrained by resource availability
Technological improvements shorten product life cycles
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57. Management Information Systems (MIS) Issues
– Information is the basis for understanding the firm. It’s one of the most important factors differentiating successful from unsuccessful firms.
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58. MIS Issues Functions of MIS
Information collection, retrieval, and storage
Keeping managers informed
Coordination of activities among divisions
Allow firm to reduce costs
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59. For Review (Chapter 8) Key Terms & Concepts Cash Budget
Marketing Mix Variables
EPS/EBIT Analysis
Outstanding Shares Method
Management Information Systems (MIS)
Price-Earnings Ratio Method
Market Segmentation
Product Positioning
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60. Projected Financial Statement Analysis Research & Development (R&D)
For Review (Chapter 8)
Key Terms & Concepts
Projected Financial Statement Analysis
Research & Development (R&D)
Vacant Niche
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61. Review Discuss the limitations of EPS/EBIT analysis.
An EPS/EBIT analysis is the most widely used technique for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies.
Several considerations should be made whenever using this technique.
Profit levels may be higher for stock or debt alternatives when EPS levels are lower.
Control is also a concern. When additional stock is issued to finance strategy implementation, ownership and control of the enterprise are diluted. When using EPS/SBIT analysis, timing in relation to movements of stock prices, interest rates, and bond prices becomes important.
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62. Review
Explain how marketing, finance/accounting, R&D, and computer information systems managers’ involvement in strategy formulation can enhance strategy implementation.
Answer: Marketing, finance/accounting, R&D, and computer information systems managers play a vital role in implementing strategies, so their active involvement in formulating strategies is needed to gain support and commitment for actions to come. Perhaps, more importantly, their expertise should weigh heavily in prioritizing internal strengths/weaknesses, external opportunities/threats, and in generating and selecting from among alternative strategies.
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63. Review
What effect is e-commerce having on firms’ efforts to segment markets?
E-commerce is making it possible for firms to further segment their markets at low cost due to the inherent cost advantages of selling via the Internet. In addition, the Internet makes market segmentation easier today because consumers naturally form “communities” on the Web as explained in the feature in the chapter titled “Does the Internet Make Market Segmentation Easier?”
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64. Review
Under what conditions would Retained Earnings on the Balance Sheet decrease from one year the next?
The only way for RE to decrease from one year to the next on the balance sheet is 1) if the firm incurred an earnings loss that year or 2) the firm has positive net income for the year but paid out dividends more than the net income.
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65. Review
Why should you be careful not to use historical percentages blindly in developing projected financial statements?
One must be aware of what the firm did to achieve past sales increases which may not be appropriate for the future unless the firm takes similar or analogous actions. Similarly, for manufacturing firms, if the firm is already operating at 100% capacity in all shifts then new manufacturing facilities would be necessary to increase sales further.
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66. Review
Why is it both important and necessary to segment markets and target groups of customers, rather than marketing to all possible consumers?
Answer: Segmentation is the subdividing of a market into distinct subsets of customers according to needs and buying habits. If all consumers are marketed to in the same way, it will be difficult to please all the different needs and buying preferences in the marketplace. To tailor offerings to distinct subsets in an efficient and effective manner, segmentation is necessary.
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