Ch 8-1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and.

Ch 8-1Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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

Strategic Management: Concepts & Cases

12th Edition

Fred David


Chapter Outline

The Nature of Strategy Implementation

Marketing Issues

Finance/Accounting Issues


Chapter Outline (cont’d)

Research & Development (R&D) Issues

Management Information Systems (MIS)Issues


“The greatest strategy is doomed if it’s implemented badly.”

– Bernard Reimann

Implementing Strategies



– Strategy implementation means change



– Less than 10% of strategies formulated are successfully implemented!



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


Low Success Rate – Strategy Implementation


Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems


Successful Strategy Implementation


Marketing Issues

– Marketing variables affect success/failure of strategy implementation


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


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 e-mail 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.


1. Market segmentation

2. Product positioning

Marketing Issues

Centrally important to Implementation


Subdividing of a market into distinct subsets of customers according to needs and buying habits

Marketing Issues

Market Segmentation


Importance of Market Segmentation1. strategies such as market development, product

development, market penetration, and diversification require increased sales through new markets and products.

2. market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and mass advertising are not required.

3. Enable small businesses to operate better.4. market-segmentation decisions directly affect

marketing mix variables: product, place, promotion, and price



Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic


Region County size City or SMSA size Density Climate

Marketing Issues

Geographic


Marketing Issues






Age Family size Family life cycle Income/occupation Education Religion Race/nationality

Marketing Issues

Demographic


Marketing Issues






Social class Lifestyle Personality

Marketing Issues

Psychographic


Marketing Issues






Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product

Marketing Issues

Behavioral


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.


Steps in product positioning:1. Select key criteria that effectively differentiate

products or services in the industry.2. Diagram a two-dimensional product-positioning

map with specified criteria on each axis.3. Plot major competitors’ products in the resultant

four-quadrant matrix.4. 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).

5. Develop a marketing plan to position the company’s products appropriately.



Marketing Issues

ProductPositioning

Customer WantsCustomer Wants

Customer NeedsCustomer Needs


Product Positioning Steps

Product-Positioning Steps

2. Diagram Map

1. Select Key Criteria

3. Plot Competitors’Products

4. Look for Niches

5. Develop MarketingPlan






Look for vacant niche Avoid suboptimization Don’t serve 2 segments with same strategy Don’t position in the middle of the map

Marketing Issues

Rules of using Product Positioning as Strategy Implementation Tool


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.



– Central to strategy implementation


Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business


Essential for Implementation


Some examples of decisions that may require finance/accounting policies:1. To raise capital with short-term debt, long-

term debt, preferred stock, or common stock.

2. To lease or buy fixed assets.

3. To determine an appropriate dividend payout ratio.

4. To use a market-value accounting approach.

5. To establish a certain percentage discount on accounts within a specified period of time.

6. To determine the amount of cash that should be kept on hand.


Debt

Equity


Capital Acquisition to Implement Strategies


EPS/EBIT analysis Earnings per share/earnings before interest and

taxes


Debt vs. Equity Decisions




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


Projected Financial Statements


1. Prepare income statement before balance sheet (forecast sales).

2. Use percentage of sales method to project CGS & expenses.

3. Calculate projected net income.


Steps in Preparing Projected Financial Statements


4. 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.


Steps in Preparing Projected Financial Statements (cont’d)



– Details how funds will be obtained and spent for a specified period of time


Financial Budget


Cash budgets Operating budgets Sales budgets Profit budgets Factory budgets Expense budgets


Types of Budgets


Divisional budgets Variable budgets Flexible budgets Fixed budgets


Types of Budgets


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


Evaluating Worth of a Business


1. What a firm owns2. What a firm earns3. What a firm will bring in the market


Evaluating Worth of a Business:

Three Basic Approaches



Research & Development Issues

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


R&D policies can enhance strategy-implementation efforts to:1. Emphasize product or process improvements.2. Stress basic or applied research.3. Be leaders or followers in R&D.4. Develop robotics or manual-type processes.5. Spend a high, average, or low amount of money on

R&D.6. Perform R&D within the firm or contract R&D to

outside firms.7. Use university researchers or private sector

researchers.


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.


Level of support constrained by resource availability

Technological improvements shorten product life cycles

Research & Development Issues

Constraints


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.


Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allow firm to reduce costs

MIS Issues

Functions of MIS


Key Terms & Concepts

For Review (Chapter 8)

Cash Budget Marketing Mix Variables

EPS/EBIT AnalysisOutstanding Shares

Method

Management InformationSystems (MIS)

Price-Earnings RatioMethod

Market Segmentation Product Positioning


Key Terms & Concepts

For Review (Chapter 8)

Projected Financial Statement Analysis

Research & Development(R&D)

Vacant Niche


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.


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.


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?”


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.


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.


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.

Ch 8-1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and.

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