Fred R. David

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Chapter 8Implementing StrategiesMarketing,
Finance/Accounting, RD, and MIS Issues

• Strategic Management
• Concepts and Cases. 9th edition
• Fred R. David
• PowerPoint Slides by
• Anthony F. Chelte
• Western New England College

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Chapter Outline

• The Nature of Strategy Implementation
• Marketing Issues
• Research and Development (RD) Issues

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Chapter Outline

• Finance/Accounting Issues
• Management Information Systems Issues

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Implementing Strategies

• There is no perfect strategic decision. One
  always has to pay a price. One always has to
  balance conflicting objectives, conflicting
  opinions, and conflicting priorities. The best
  strategic decision is only an approximationand a
  risk
• -- Peter Drucker

Less than 10 of strategies formulated are
successfully implemented!
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Implementing Strategies

• Strategy implementation means change

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Implementing Strategies

• Less than 10 of strategies formulated
• are successfully implemented!

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Implementing Strategies

• Low strategy implementation success
• Failing to segment markets appropriately
• Paying too much for a new acquisition
• Falling behind competition in RD
• Not recognizing benefit of computers in managing
  information
• For Successful Strategy Implementation
• Firms must market goods and services well
• Firms must raise needed working capital
• Firms produce technologically-sound goods
• Firms must have sound information systems

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Implementing Strategies

• For Successful Strategy Implementation --
• Firms must market goods and services well
• Firms must raise needed working capital
• Firms produce technologically-sound goods
• Firms must have sound information systems

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Marketing Issues

• Marketing variables affect success or failure of
  strategy implementation
• Market Segmentation
• Production Positioning

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Strategy Analysis Choice
Implementing Strategies Marketing Issues

• Marketing Decisions requiring polices
• Use exclusive dealerships or multiple channels of
  distribution
• Use heavy, light, or no TV advertising
• Limit (or not) the share of business done with a
  single customer

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Strategy Analysis Choice
Implementing Strategies Marketing Issues

• Marketing Decisions requiring polices
• Be a price leader or price follower
• Offer a complete or limited warranty
• Reward salespeople based on straight commission
  or combination salary/commission

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Market Segmentation

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

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Market Segmentation

• Widely used in implementing strategies
• Small and specialized firms

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Market Segmentation

• Market Segmentation Important Variable
• Market and product development, market
  penetration, and diversification require
  increased sales through new markets or products

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Market Segmentation

• Market Segmentation Important Variable
• Firm can operate with limited resources. Enables
  a small firm by maximizing per-unit profits and
  per-segment sales.

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Market Segmentation

• Market Segmentation Important Variable
• Segmentation decisions directly affect marketing
  mix variables
• Product, place, promotion, and price

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Marketing Mix Component Factors
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Market Segmentation

• Geographic Basis
• Region
• County Size
• City or SMSA size
• Density
• Climate

• Bases for Segmenting Markets --
• Geographic
• Demographic
• Psychographic
• Behavioral

• Demographic Basis
• Age
• Family Size
• Family Life Cycle
• Income Occupation
• Education
• Religion
• Race Nationality

• Behavioral Basis
• Use occasion
• Benefits sought
• User status
• Usage rate
• Loyalty status
• Readiness Stage
• Attitude toward product

• Psychographic Basis
• Social Class
• Lifestyle
• Personality

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Market Segmentation

• Geographic Basis
• Region
• County Size
• City or SMSA size
• Density
• Climate

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Market Segmentation

• Demographic Basis
• Age
• Family Size
• Family Life Cycle
• Income Occupation
• Education
• Religion
• Race Nationality

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Market Segmentation

• Psychographic Basis
• Social Class
• Lifestyle
• Personality

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Market Segmentation

• Behavioral Basis
• Use occasion
• Benefits sought
• User status
• Usage rate
• Loyalty status
• Readiness Stage
• Attitude toward product

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Product Positioning

• Developing schematic representations that reflect
  how products or services compare to competitors
  on dimensions most important to success in the
  industry

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Product Positioning

• Product Positioning based on
• Customers wants
• Customers needs

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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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Product Positioning Map
High Convenience
Rental Car Market
Firm 1
Firm 2
High Customer Loyalty
Low Customer Loyalty

• Product Positioning based on
• Customers wants
• Customers needs

• Strategy-Implementation Tool
• Look for vacant niche
• Avoid suboptimization
• Dont serve 2 segments with same strategy
• Dont position in the middle of the map

Firm 3
Low Convenience
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PP Map for Business Degrees
High Leadership Training

• Schools SMC, CSUM, CSUEB, SJSU

Little Individual Attention
A lot of Individual Attention
Low Leadership Training
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Product Positioning

• Product Positioning Map as Strategy-Implementation
  Tool
• Look for vacant niche
• Avoid suboptimization
• Dont serve 2 segments with same strategy
• Dont position in the middle of the map

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Evaluating Worth of a Business

• Central to strategy implementation as
  integrative, intensive and diversification
  strategies are often implement through
  acquisitions of other firms.

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Evaluating Worth of a Business

• 3 Basic approaches
• What a firm owns
• What a firm earns
• What a firm will bring in the market

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WGO      
Equity method BS Equity Goodwill Valuation
2004 201,875 0 201,875
2003 210,626 0 210,626
2002 179,815 0 179,815
Net Income method Net Inc 5 Valuation
2004 70,641   353,205
2003 49,884   249,420
2002 54,671   273,355
PENet Income Share Price EPS Valuation
2004 37.59 2.03 1,308,076
2003 33.88 1.33 1,270,729
2002 19.21 1.34 783,754
Market Value Shares out Share Price Valuation
2004 34,214 37.59 1,286,104
2003 36,974 33.88 1,252,679
2002 39,898 19.21 766,441
  32.92    
Value Average      
2004     787,315
2003     745,864
2002     500,841

• Valuation
• What a firm owns
• What a firm earns
• What a firm will bring in the market
• http//finance.yahoo.com/

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Research Development Issues

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

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Research Development Issues

• Level of support is constrained by resource
  availability
• Technological improvements shorten product life
  cycles

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Research Development Issues

• 3 Major RD approaches to implementing strategies
  
• First firm to market new technological products
• Be an innovative imitator of successful products
• Low-cost producer of similar but less expensive
  products

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Key Terms

• Cash Budget
• E-mail
• EPS/EBIT Analysis
• Financial Budget
• Information Systems
• Market Segmentation
• Marketing-mix Variables

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Key Terms

• Multidimensional Scaling
• Outstanding Shares Method
• Price-earnings Ratio Method
• Pro Forma Financial Statement Analysis
• Product Positioning

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Key Terms

• Research and Development
• Retained Earnings
• Vacant Niche
• World Wide Web

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Finance/Accounting Issues

• Central to Strategy Implementation
• Acquiring needed capital
• Developing pro forma financial statements
• Preparing financial budgets
• Evaluating worth of a business

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Decisions Requiring Finance/Accounting Policies
Raise capital w/ short-term, long-term preferred
or common stock
Lease or buy fixed assets
Determine an appropriate dividend payout ratio
Use LIFO, FIFO, or market-value accounting
approach
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Decisions Requiring Finance/Accounting Policies
Extend time of accounts receivable
Establish percentage discount on accounts for
terms
Determine the amount of cash kept on hand
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Finance/Accounting Issues

• Acquiring Capital to Implement Strategies
• Basic sources of capital
• Debt
• Equity

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Finance/Accounting Issues

• Debt vs. Equity Decisions
• EPS/EBIT analysis
• Earnings per share/Earnings before interest and
  taxes

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Finance/Accounting Issues

• Pro Forma Financial Statements -
• Allows an organization to examine the expected
  results of various actions and approaches

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Pro-Forma

• 6 Steps in Pro Forma Financial Analysis
• Prepare income statement before balance sheet
  (forecast sales)
• Use percentage-of-sales method to project CGS and
  expenses
• Calculate projected net income
• Subtract dividends to be paid from Net Income and
  add remaining to Retained Earnings
• Project balance sheet times beginning with
  retained earnings
• List comments (remarks) on projected statements

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Finance/Accounting Issues

• Financial Budget
• Document that details how funds will be obtained
  and spent for a specified period of time.

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Finance/Accounting Issues

• 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