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

Strategic Management: Concepts & Cases

12th Edition

Fred David

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Chapter Outline

The Nature of Strategy Implementation

Marketing Issues

Finance/Accounting Issues

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Chapter Outline (cont’d)

Research & Development (R&D) Issues

Management Information Systems (MIS)Issues

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

– Bernard Reimann

Implementing Strategies

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– Strategy implementation means change

The Nature of Strategy Implementation

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

The Nature of Strategy Implementation

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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 Implementation

Low Success Rate – Strategy Implementation

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

The Nature of Strategy Implementation

Successful Strategy Implementation

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Marketing Issues

– Marketing variables affect success/failure of strategy implementation

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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

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1. Market segmentation

2. Product positioning

Marketing Issues

Centrally important to Implementation

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

Marketing Issues

Market Segmentation

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Key to matching supply & demand Market-development, product-development,

market-penetration, and diversification strategies

Allows operating with limited resources Enables small firms to compete successfully

Marketing Issues

Market Segmentation

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Directly affect marketing mix variables: Product Place Promotion Price

Marketing Issues

Market Segmentation

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Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic

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Region County size City or SMSA size Density Climate

Marketing Issues

Geographic

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Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic

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

Marketing Issues

Demographic

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Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic

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Social class Lifestyle Personality

Marketing Issues

Psychographic

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Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic

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

Marketing Issues

Behavioral

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Marketing Issues

– Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry

Product Positioning

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Marketing Issues

ProductPositioning

Customer WantsCustomer Wants

Customer NeedsCustomer Needs

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Product Positioning Steps

Product-Positioning Steps

2. Diagram Map

1. Select Key Criteria

3. Plot Competitors’Products

4. Look for Niches

5. Develop MarketingPlan

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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

Product Positioning as Strategy Implementation Tool

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Finance/Accounting Issues

– Central to strategy implementation

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

Finance/Accounting Issues

Essential for Implementation

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

Lease or buy fixed assets Determine appropriate dividend payout ratio

Finance/Accounting Issues

Decisions Based on Finance/Accounting

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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

Finance/Accounting Issues

Decisions Based on Finance/Accounting

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Debt

Equity

Finance/Accounting Issues

Capital Acquisition to Implement Strategies

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

taxes

Finance/Accounting Issues

Debt vs. Equity Decisions

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

Finance/Accounting Issues

Projected Financial Statements

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

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

3. Calculate projected net income.

Finance/Accounting Issues

Steps in Preparing Projected Financial Statements

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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.

Finance/Accounting Issues

Steps in Preparing Projected Financial Statements (cont’d)

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

Finance/Accounting Issues

Financial Budget

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

Finance/Accounting Issues

Types of Budgets

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Divisional budgets Variable budgets Flexible budgets Fixed budgets

Finance/Accounting Issues

Types of Budgets

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

Finance/Accounting Issues

Evaluating Worth of a Business

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

Finance/Accounting Issues

Evaluating Worth of a Business:

Three Basic Approaches

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Research & Development Issues

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

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Level of support constrained by resource availability

Technological improvements shorten product life cycles

Research & Development Issues

Constraints

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1. 1st firm to market new technological products2. Innovative imitator of successful products3. Low-cost producer of similar but less

expensive products

Research & Development Issues

Three Major R&D Approaches to Implementing Strategies

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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.

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

MIS Issues

Functions of MIS

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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

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Key Terms & Concepts

For Review (Chapter 8)

Projected Financial Statement Analysis

Research & Development(R&D)

Vacant Niche

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