Chapter 8 Implementing Strategies Marketing FinanceAccounting RD and
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Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Strategic Management: Concepts & Cases 13 th Edition Fred David Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 2
Implementing Strategies “The greatest strategy is doomed if it’s implemented badly. ” – Bernard Reimann Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 3
The Nature of Strategy Implementation Less than 10% of strategies formulated are successfully implemented! Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 4
The Nature of Strategy Implementation There are many reasons for the low success rate of Strategy Implementation. These include: n Failing to segment markets appropriately n Paying too much for a new acquisition n Falling behind competitors in R&D n Not recognizing benefit of computers in managing information Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5
Marketing Issues Countless marketing variables affect the success or failure of Strategy Implementation (SI). Two variables are of central importance to SI: § Market segmentation § Product positioning Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 6
Marketing Issues Market Segmentation n Subdividing of a market into distinct subsets of customers according to needs and buying habits Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 7
Market Segmentation Geographic Demographic Market Segment Basis Psychographic Behavioral Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 8
Market Segmentation n Market Segmentation is an important variable in strategy implementation for three major reasons: It is required to successfully implement market development, product development, market penetration, and diversification strategies. It allows a firm to operate with limited resources because mass production, distribution, and advertising are not required. It enables small firms to compete successfully with large firms by maximizing per-unit profits and per-segment sales. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 9
Marketing Mix Variables Market Segmentation decisions directly affect marketing mix variables, as indicated in Table 8 -3: n Product n Place n Promotion n Price Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 10
Table 8 -3 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 11
Product Positioning After markets have been segmented, the next step is to find out what customers in each segment need and want. Product Positioning is widely used for this purpose. § Product Positioning entails developing schematic representations that reflect how a firm’s products or services compare to competitors’ on dimensions most important to success in the industry. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 12
Product Positioning Steps 1. 2. 3. 4. 5. Select key criteria Diagram map Plot competitors’ products Look for niches Develop marketing plan Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 13
Product-Positioning Map for Menswear Retail Stores Very latest, fashionable menswear Low Price Average mass merchandiser or discounter Average specialty chain High Price Average department store Conservative, everyday menswear Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 14
Finance/Accounting Issues There are several finance/accounting concepts that are central to strategy implementation. Some of the concepts essential for Strategy Implementation are: n n Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating the worth of a business Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 15
Finance/Accounting Issues Acquiring Needed Capital: Equity – common stock n Debt - bonds n Debt - borrow from lenders n Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 16
Finance/Accounting Issues n Debt vs. Equity Decisions EPS/EBIT analysis q q An Earnings Per Share/Earnings Before Interest and Taxes analysis is the most widely used method for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies. This method involves an examination of the impact that debt versus stock financing has on earnings per share under various assumptions as to EBIT. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 17
Finance/Accounting Issues Projected Financial Statement Analysis n Allows an organization to examine the expected results of various actions and approaches Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 18
Finance/Accounting Issues Steps in Preparing 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 19
Finance/Accounting Issues Steps in Preparing Projected Financial Statements (cont’d) 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 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 20
Projected Income Statement Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 21
Projected Balance Sheet Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 22
Finance/Accounting Issues Financial Budget Details how funds will be obtained and spent for a specified period of time Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 23
Types of Budgets n n n Cash budgets Operating budgets Sales budgets Profit budgets Factory budgets Capital budgets n n n Expense budgets Divisional budgets Variable budgets Flexible budgets Fixed budgets Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 24
Finance/Accounting Issues Evaluating the Worth of a Business n Central to strategy implementation – integrative, intensive, and diversification strategies often implemented through acquisitions of other firms Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 25
Evaluating the Worth of a Business There are three basic approaches 1. What a firm owns 2. What a firm earns 3. What a firm will bring in the market Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 26
Research & Development Issues New products and improvement of existing products that allow for effective strategy implementation Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 27
Research & Development Issues Constraints n Level of support constrained by resource availability n Technological improvements shorten product life cycles Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 28
Research & Development Issues There are three major R&D approaches to implementing strategies: 1. 2. 3. Be the first firm to market new technological products. Be an innovative imitator of successful products. Be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 29
Management Information Systems (MIS) Issues Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 30
MIS Issues Functions of MIS n n Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allows firm to reduce costs Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 31
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