strategic management concepts & cases 11th edition fred david

Copyright 2007 Prentice Hall Ch 8-1

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

Strategic Management:

Concepts & Cases11th EditionFred David

Strategic Management: Concepts & Cases 11th Edition Fred David

PowerPoint Slides byAnthony F. Chelte

Western New England CollegeRevised by

Azhar Kazmi

KFUPM Dhahran


Strategy implementation means change; strategy implementation could also be termed as change management

The Nature of Strategy Implementation

Less than 10% of strategies formulated are successfully implemented!


Here are some examples:

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

The Nature of Strategy ImplementationWhy is there low success rate in strategy implementation?


Marketing goods & services well

Raising needed working capital

Producing technologically sound goods

Creating sound information systems

The Nature of Strategy ImplementationSome examples of 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

Examples of marketing decisions requiring policies


1. Market segmentation

2. Product positioning

Marketing Issues

Two marketing variables centrally important to strategy implementation are:


Market segmentation is the subdividing of a market into distinct subsets of customers according to needs and buying habits

Marketing Issues: market segmentation

Key to matching supply & demand

Market development, product-development, market penetration & diversification strategies require increased sales through new products/markets

Allows operating with limited resources

Enables small firms to compete successfully

Why market segmentation could be a strategic issue?


Directly affect marketing mix variables:

Product

Place

Promotion

Price


Market Segmentation


Marketing Mix – Component Factors

Service level

Warranty

Transportation carriersProduct line

Inventory levels/locationsPackaging

PublicitySales territoriesBrand name

Payment termsSales promotionOutlet locationStyle

Discounts & allowancesPersonal sellingDistribution

coverageFeatures

LevelAdvertisingDistribution channelsQuality

PricePromotionPlaceProduct



Four bases for market segmentation Psychographic

Behavioral

Demographic

Geographic


Geographic:

Region

Province size

City size

Density

Climate

Marketing Issues: bases for segmentationDemographic:

Age

Family Size

Family Life Cycle

Income/Occupation

Education

Religion

Race/Nationality

Psychographic:

Social Class

Lifestyle

Personality

Behavioral:

Use occasion

Benefits sought

User status

Usage rate

Loyalty status

Readiness stage

Attitude toward product


Marketing Issues: product positioning

Product positioning is the schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry

Customer Wants Customer Needs

Product Positioning


Product Positioning Steps

2. Diagram Map with two-dimensional product positioning map

1. Select Key Criteria for differentiating products/ services in industry

3. Plot competitors’ products in the four-quadrant matrix

4. Look for niches in the positioning map

5. Develop Marketing Plan to position company’s product/services


Example of Product Positioning Map

Conservative, Everyday menswear

Low price

Very latest, fashionable menswear

Menswear retail store

High price

Average massmerchandizeror discounter

Average Department store

Average Specialtychain


Look for vacant niche as the best opportunity may be unserved segment

Avoid sub optimization by squatting between two segments

Don’t serve two segments with the same strategy

Don’t position in the middle of the map

Marketing Issues

Product Positioning as Strategy Implementation Tool


Finance/Accounting Issues

Financial/Accounting issues are central to strategy implementation

Acquiring needed capital

Developing projected financial statements

Preparing financial budgets

Evaluating worth of a business

Examples of financial/accounting issues essential for implementation


Raise capital – short-term, long-term, preferred, or common stock

Lease or buy fixed assets

Determine appropriate dividend payout ratio

LIFO, FIFO, or market-value accounting approach

Extend time of AR

Establish % discount on accounts for terms

Determine the amount of cash kept on hand


Decisions based on Finance/Accounting


Sources of capital to implement strategies (besides net profit from operations and sales of assets) are:

Debt

Equity

Determining the appropriate mix of debt and equity in a firm’s capital structure can be vital to successful strategy implementation


Successful strategy implementation often requires additional capital.


EPS/EBIT analysis involves an examination of the impact of debt versus equity financing on earnings per share

Earnings per share/Earnings before interest and taxes

Finance/Accounting Issues: debt/equity

Debt vs. Equity DecisionsChoosing between debt and equity requires analysis based on EPS/EBIT for determining whether debt, equity, or their combination is the best alternative to raise capital for strategy implementation


Projected financial statements analysis enables an organization to examine the expected results of various actions and approaches in strategy implementation.


Projected Financial Statements


Projected Income Statement for Litten Company (in millions)

Prior Year 2005Projected Year

2006 Remarks

Projected Income Statement

Sales 100 150.00 50% increase

Cost of Goods Sold 70 105.00 70% of sales

Gross Margin 30 45.00

Selling Expense 10 15.00 10% of sales

Administrative Expense 5 7.50 5% of sales

EBIT 15 22.50

Interest 3 3.00

EBT 12 19.50

Taxes 6 9.75 50% rate

Net Income 6 9.75

Dividends 2 5.00

Retained Earnings 4 4.75


-- Financial budget details how funds will be obtained and spent for a specified period of time.

Finance/Accounting Issues: financial budget

Various types of budgets

Cash budgets

Operating budgets

Sales budgets

Profit budgets

Factory Budgets

Expense Budgets

Divisional budgets

Variable budgets

Flexible budgets

Fixed budgets


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


Evaluating Worth of a Business

Three basic approaches to evaluating a business:

What a firm owns: net worth or stockholder’s equity

What a firm earns: future benefits through net profits

What a firm will bring in the market when sold


Research & Development Issues

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

Examples of strategy implementation actions in R & D: Transferring complex technology Adjusting processes to local raw materials Adapting processes to local markets

Altering products to specific customer preferences

and tastes


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 on R&D

Perform R&D within the firm or to contract it outside

Use university researchers or private-sector researchers



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


Three R&D approaches for strategy implementation:


Management Information Systems (MIS) Issues

Firms that gather, assimilate, and evaluate external and internal information more effectively gain competitive advantage over other firms

Information is the basis for understanding the firm. It is one of the most important factors differentiating successful from unsuccessful firms

Strategic management process is greatly facilitated greatly in firms having an effective information system


Information collection, retrieval, & storage can be used to create competitive advantage. Examples of such actions are:

Cross-selling to customers

Monitoring suppliers

Keeping managers and employees informed

Coordination of activities among divisions

Allow firm to reduce costs

MIS Issues

Functions of MIS

strategic management concepts & cases 11th edition fred david

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