report (business policy)
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8/4/2019 Report (Business Policy)
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Annual Objectives
And DevelopingFunctional Strategies
(Strategy Implementation)
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Decentralized activity
Involves all managers in the firm
Annual Objectives
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1. Basis for allocating resources
2. Primary mechanism forevaluating managers
3. Major instrument for monitoring
progress toward long-termobjectives
4. Establish organizational,
divisional, and departmental
Annual Objectives
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Horizontal consistency of objectives
Vertical consistency of objectives
Annual Objectives
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1. measurable
2. consistent
3. reasonable4. challenging
5. time bounded
6. communicated throughout theorganization
Annual Objectives should be:
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Objectives should state –
Quantity
Quality
Cost
Time
Annual Objectives
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…It should be compatible withemployees’ and managers values
and should be supported by clearlystated policies.
Annual Objectives
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Production/OperationsConcerns
Production processes typicallyconstitute more than 70% of
firm’s total assets Decisions on:
Plant size
Inventory/inventory control
Quality control
Cost control
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Just in Time production Approach
a production strategy that strives toimprove a business return oninvestment by reducing in-processinventory and associated carryingcosts.
Thus, it Significantly reduces the costof implementing strategy.
Production/OperationsConcerns Cont.
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Human Resource Concerns
Assessing staffing needs and costs
Develop performance incentives ESOPs
Work-life balance
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Employee Stock Ownership Plan (ESOPs)
= an employee-benefit plan where byemployees purchase stock of the companythrough borrowed money or cash contribution.
= a firm sets up a trust fund and purchasesshares of stocks which would be allocated tothe employees.
= can benefit the firm through substantial taxsavings.
Human Resource Concerns
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Top ten BestCompanies for
WorkingWomen
Bristol-MyersSquibb
Procter
AndGamble
FannieMae IBM
MarriotInternatio
nal
Prudential
Morgan
Stanley
Price
Waterhouse
Texas
Instruments
Citigroup
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1. Improves Corporate Structure
2. Improves Employee Morale
3. Leads to Higher Retention
4. Leads to easier recruitment
5. Decrease complaints and litigation
6. Increase Creativity
7. Decrease Interpersonal Conflict betweenEmployees
8. Improves client relations
9. Increases productivity
Benefits of A DiverseWorkforce
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4/14/12Fred R. David 14Ch 8-14
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 asingle customer
Implementing Strategies:
Marketing Issues
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Marketing Decisions requiring polices –
Be a price leader or price follower
Offer a complete or limited warranty
Reward salespeople based on straightcommission or combination salary/commission
Implementing Strategies:
Marketing Issues
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Marketing variables affect successor failure of strategyimplementation
Market SegmentationProduction Positioning
Marketing Issues
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Subdividing of a market into
distinct subsets of customersaccording to needs and buyinghabits
Market Segmentation
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Widely used in implementing
strategies
Small and specialized firms
Market Segmentation
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Market Segmentation Important Variable:
1. Market and product development, marketpenetration, and diversification requireincreased sales through new markets orproducts
Market Segmentation
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Market Segmentation Important Variable:
2. Firm can operate with limited resources.Enables a small firm by maximizing per-unit profits and per-segment sales.
Market Segmentation
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Market Segmentation Important Variable:
3. Segmentation decisions directly affectmarketing mix variables:
- Product, place, promotion, and price
Market Segmentation
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Marketing Mix – Component Factors
Service level
Warranty
Transportation carriersProduct line
Inventorylevels/locations
Packaging
PublicitySales territoriesBrand name
Payment termsSales promotionOutlet locationStyle
Discounts &allowances
Personal sellingDistribution coverageFeatures
LevelAdvertisingDistribution channelsQuality
PricePromotionPlaceProduct
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Bases for Segmenting Markets --
Geographic
Demographic
Psychographic Behavioral
Geographic Basis:
Region
County Size
City or SMSA size
Density
Climate
Market Segmentation
Demographic Basis:• Age• Family Size• Family Life Cycle• Income
Occupation• Education• Religion• Race Nationality
Psychographic Basis: – Social Class – Lifestyle – Personality
Behavioral Basis:
– Use occasion – Benefits sought – User status – Usage rate – Loyalty status – Readiness Stage – Attitude toward
product
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Developing schematic
representations that reflecthow products or servicescompare to competitors’ on
dimensions most important tosuccess in the industry
Product Positioning
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Product Positioning based on:
Customers wants
Customers needs
Product Positioning
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Product Positioning Steps
ProductPositioning
Steps
2. Diagram Map
1. Select Key Criteria
3. Plot competitors’products
4. Look for niches
5. Develop MarketingPlan
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Product Positioning Map 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
Product Positioning
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Effective Strategy
1. Uniquely distinguishes a companyfrom the competition
2. It leads the customer to expectslightly less service than a companycan deliver.
Product Positioning
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Evaluating Worth of aBusiness
3 Basic approaches:
1. What a firm owns
2. What a firm earns
3. What a firm will bring in the market
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Fred R. DavidPrentice Hall
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 Incomemethod Net Inc 5Valuation
2004 $70,641 $353,205
2003 $49,884 $249,420
2002 $54,671 $273,355
PE*Net 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 firmearns
What a firm willbring in the
market
http://finance.yahoo.com/
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Research & DevelopmentIssues
New products and improvement of existingproducts that allow for effective strategyimplementation
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Research & DevelopmentIssues
Level of support is constrained by resourceavailability
Technological improvements shortenproduct life cycles
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Research & DevelopmentIssues
3 Major R&D approaches to implementingstrategies –
1. First firm to market new technologicalproducts
2. Be an innovative imitator of successful
products3. Low-cost producer of similar but less
expensive products
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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 orcommon 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 analysisEarnings per share/Earnings before interest and
taxes
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Finance/Accounting Issues
Pro Forma Financial Statements -
Allows an organization to examine theexpected results of various actions andapproaches
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Pro-Forma
6 Steps in Pro Forma Financial Analysis
1. Prepare income statement before balancesheet (forecast sales)
2. Use percentage-of-sales method to project CGSand expenses
3. Calculate projected net income
4. Subtract dividends to be paid from Net Incomeand add remaining to Retained Earnings
5. Project balance sheet times beginning withretained earnings
6. List comments (remarks) on projected
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Finance/Accounting Issues
Financial Budget –
Document that details how funds will beobtained and spent for a specified periodof 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
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