Lecture 8  Implementing strategies: functional level issues
Objectives <ul><li>Explain the role of functional strategies and activities in support of the overall corporate strategic ...
<ul><li>Failing to segment markets appropriately </li></ul><ul><li>Paying too much for a new acquisition </li></ul><ul><li...
<ul><li>Market goods & services well (Marketing) </li></ul><ul><li>Raise needed working capital (Finance) </li></ul><ul><l...
Levels of Strategies Corporate level Functional  level Business level Corporate strategy Business 1 strategy Business 2 st...
Nature of Strategy Implementation <ul><li>Decision making at functional level is the implementation of corporate plans. </...
Nature of Strategy Implementation <ul><li>Departments (divisions) in the functional level also have  objectives , which sh...
Nature of Strategy Implementation <ul><li>For example, regarding marketing issue: </li></ul><ul><li>If the general objecti...
Main functional issues/strategies <ul><li>Marketing strategies </li></ul><ul><li>Financial /accounting strategies </li></u...
<ul><li>Marketing variables affect success/failure of strategy implementation </li></ul><ul><li>Marketing strategy refers ...
<ul><li>Market segmentation </li></ul><ul><li>Product positioning </li></ul><ul><li>These two strategies can support busin...
<ul><li>Subdividing of a market into distinct subsets of customers according to needs and buying habits. </li></ul>Marketi...
<ul><li>Key to matching supply & demand </li></ul><ul><li>Support market development, product-development, market penetrat...
<ul><li>Directly affect marketing mix variables: </li></ul><ul><ul><li>Product </li></ul></ul><ul><ul><li>Place </li></ul>...
Marketing Mix – Component Factors Service level Warranty Transportation carriers Product line Inventory levels/locations P...
Example <ul><li>Market segmentation of the maritime industry? </li></ul><ul><li>Ex: bulk cargo segmentation: in terms of v...
Dry bulk market segmentation by vessel size Minor bulks: steel products, cement, sugar, gypsum, non ferrous metal ores, sa...
<ul><li>-- Schematic representations that reflect how products/services compare to competitors’ on dimensions most importa...
Marketing Issues Product Positioning Customer Wants Customer Needs
Positioning strategies <ul><li>Attribute positioning </li></ul><ul><li>Benefit positioning (based on providing certain ben...
<ul><li>-- Central to strategy implementation.  </li></ul>Finance/Accounting Issues
<ul><li>Acquiring needed capital (source) </li></ul><ul><li>Developing projected financial statements </li></ul><ul><li>Pr...
<ul><li>Raise capital – short-term, long-term, preferred, or common stock </li></ul><ul><li>Lease or by fixed assets </li>...
<ul><li>Debt </li></ul><ul><li>Equity </li></ul>Finance/Accounting Issues Capital acquisition to implement strategies
<ul><li>EPS/EBIT analysis </li></ul><ul><ul><li>Earnings per share/Earnings before interest and taxes </li></ul></ul>Finan...
<ul><li>$Amount Needed:  $500 </li></ul><ul><li>Stock Price $40 </li></ul><ul><li>EBIT Range $1000 to $2000 </li></ul><ul>...
EPS-EBIT Analysis (in $millions) – Heinz Company 100% Stock Financing 100% Debt Financing Financing (60%stock, 40% debt) H...
<ul><li>Conclusion: </li></ul><ul><ul><li>Heinz should use debt to raise the $500 million </li></ul></ul>Finance/Accountin...
<ul><li>Allow an organization to examine the expected results of various actions and approaches </li></ul>Finance/Accounti...
<ul><li>Prepare income statement before balance sheet (forecast sales) </li></ul><ul><li>Use percentage of sales method to...
<ul><li>Subtract dividends to be paid from Net Income and add remaining to Retained Earnings </li></ul><ul><li>Project bal...
Projected Income Statement for Litten Company (in millions)   Prior Year 2004 Projected Year 2005 Remarks Projected Income...
<ul><li>-- Details how funds will be obtained and spent for a specified period of time. </li></ul>Finance/Accounting Issue...
<ul><li>Central to strategy implementation – integrative, intensive, & diversification strategies often implemented throug...
<ul><li>What a firm owns </li></ul><ul><li>What a firm earns </li></ul><ul><li>What a firm will bring in the market </li><...
<ul><li>-- New products and improvement of existing products that allow for effective strategy implementation </li></ul>Re...
<ul><li>Level of support constrained by resource availability </li></ul><ul><li>Technological improvements shorten product...
<ul><li>1 st  firm to market new technological products  </li></ul><ul><li>Innovative imitator of successful products  </l...
Research & Development Issues <ul><li>R&D Timing  </li></ul><ul><li>First mover </li></ul><ul><li>follower </li></ul>
Research & Development Issues   <ul><li>Who? </li></ul><ul><li>R&D department </li></ul><ul><li>Cross-functional team </li...
Research & Development Issues <ul><li>Current R&D strategies </li></ul><ul><li>Employee suggestion systems </li></ul><ul><...
<ul><li>Information is basis for understanding the firm.  One of the most important factors differentiating successful fro...
<ul><li>Functions of MIS </li></ul><ul><li>Information collection, retrieval, & storage </li></ul><ul><li>Keeping managers...
Activities <ul><li>Case: Toyota Motor (Coulter 2005, pp.137-138)  </li></ul><ul><li>1. What do you think are the keys to T...
Upcoming SlideShare
Loading in...5
×

Lecture 8 Implementing strategies: functional level issues

5,838

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
5,838
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
208
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Lecture 8 Implementing strategies: functional level issues

  1. 1. Lecture 8 Implementing strategies: functional level issues
  2. 2. Objectives <ul><li>Explain the role of functional strategies and activities in support of the overall corporate strategic plan </li></ul>
  3. 3. <ul><li>Failing to segment markets appropriately </li></ul><ul><li>Paying too much for a new acquisition </li></ul><ul><li>Falling behind competition in R&D </li></ul><ul><li>Not recognizing benefit of computers in managing information </li></ul>Nature of Strategy Implementation Low Success Rate – Strategy Implementation -- Less than 10% of strategies formulated are successfully implemented! Source: David 2005.
  4. 4. <ul><li>Market goods & services well (Marketing) </li></ul><ul><li>Raise needed working capital (Finance) </li></ul><ul><li>Produce technologically sound goods (R&D, Innovation) </li></ul><ul><li>Sound information systems </li></ul><ul><li>Operations </li></ul>Nature of Strategy Implementation Successful Strategy Implementation
  5. 5. Levels of Strategies Corporate level Functional level Business level Corporate strategy Business 1 strategy Business 2 strategy Business 3 strategy Operations Management strategy R&D strategy Financial/ Accounting strategy Marketing Strategy HRM strategy
  6. 6. Nature of Strategy Implementation <ul><li>Decision making at functional level is the implementation of corporate plans. </li></ul><ul><li>Therefore, the operational plan for implementing corporate or business level strategies needs to select appropriate functional strategies. </li></ul>
  7. 7. Nature of Strategy Implementation <ul><li>Departments (divisions) in the functional level also have objectives , which should be subordinated to corporate objectives. </li></ul><ul><li>Functional strategies are implemented to meet the objectives of individual division and corporation. </li></ul>
  8. 8. Nature of Strategy Implementation <ul><li>For example, regarding marketing issue: </li></ul><ul><li>If the general objective of a port is to minimise the cost of cargo passing through the port then the marketing objective may be attracting and obtaining more traffic to ensure full utilisation of the port facilities at a high level of productivity. </li></ul><ul><li>Marketing strategies: for example, leasing of berths or terminals to operating companies or shipping line. </li></ul>
  9. 9. Main functional issues/strategies <ul><li>Marketing strategies </li></ul><ul><li>Financial /accounting strategies </li></ul><ul><li>R&D strategies </li></ul><ul><li>MIS </li></ul><ul><li>Operation </li></ul>
  10. 10. <ul><li>Marketing variables affect success/failure of strategy implementation </li></ul><ul><li>Marketing strategy refers to the position that a company takes with regard to pricing, promotion, advertising, product design, and distribution. </li></ul>Functional strategies: Marketing Issues
  11. 11. <ul><li>Market segmentation </li></ul><ul><li>Product positioning </li></ul><ul><li>These two strategies can support business strategies such as differentiation strategy </li></ul>Marketing Issues Centrally important to Implementation
  12. 12. <ul><li>Subdividing of a market into distinct subsets of customers according to needs and buying habits. </li></ul>Marketing Issues Market Segmentation
  13. 13. <ul><li>Key to matching supply & demand </li></ul><ul><li>Support market development, product-development, market penetration & diversification strategies </li></ul><ul><li>Allows operating with limited resources </li></ul><ul><li>Enables small firms to compete successfully </li></ul>Marketing Issues Market Segmentation
  14. 14. <ul><li>Directly affect marketing mix variables: </li></ul><ul><ul><li>Product </li></ul></ul><ul><ul><li>Place </li></ul></ul><ul><ul><li>Promotion </li></ul></ul><ul><ul><li>Price </li></ul></ul>Marketing Issues Market Segmentation
  15. 15. Marketing Mix – Component Factors Service level Warranty Transportation carriers Product line Inventory levels/locations Packaging Publicity Sales territories Brand name Payment terms Sales promotion Outlet location Style Discounts & allowances Personal selling Distribution coverage Features Level Advertising Distribution channels Quality Price Promotion Place Product
  16. 16. Example <ul><li>Market segmentation of the maritime industry? </li></ul><ul><li>Ex: bulk cargo segmentation: in terms of vessel type or market </li></ul><ul><li>Port? </li></ul>
  17. 17. Dry bulk market segmentation by vessel size Minor bulks: steel products, cement, sugar, gypsum, non ferrous metal ores, salt, Sulphur, forest products, wood chips and chemicals. Source: Kavussanos, M. G. 2002, Handbook or Maritime transport, p665. Vessel type/market Vessel size Cargo type Capesize 80,000+dwt Iron ore, Coal Panamax 50,000-79,999dwt Coal, grain, bauxite and larger minor bulk parcels Handymax 30,000-49,999dwt Minor bulks and smaller parcels of major bulks such as grain, coal and bauxite Handy 10,000-29,999dwt Minor bulks and smaller parcels of major bulks such as grain, coal and bauxite
  18. 18. <ul><li>-- Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry </li></ul>Marketing Issues Product Positioning
  19. 19. Marketing Issues Product Positioning Customer Wants Customer Needs
  20. 20. Positioning strategies <ul><li>Attribute positioning </li></ul><ul><li>Benefit positioning (based on providing certain benefits) </li></ul><ul><li>Use-application positioning (based on limit use or application) </li></ul><ul><li>User positioning (on the basis of some customers characteristics) </li></ul><ul><li>Competitor positioning (positioning against one or more competitors) </li></ul><ul><li>Product category positioning (on the basis of some product category) </li></ul><ul><li>Quality-price positioning </li></ul><ul><li>Ex: rental car market (position in terms of high (low) convenience and high (low) customer loyalty) </li></ul>Source: Coulter, M. 2005, Strategic management in Action, 3 rd edn, Pearson, New Jersey, pp.147-148.
  21. 21. <ul><li>-- Central to strategy implementation. </li></ul>Finance/Accounting Issues
  22. 22. <ul><li>Acquiring needed capital (source) </li></ul><ul><li>Developing projected financial statements </li></ul><ul><li>Preparing financial budgets </li></ul><ul><li>Evaluating worth of a business </li></ul>Finance/Accounting Issues Essential for implementation
  23. 23. <ul><li>Raise capital – short-term, long-term, preferred, or common stock </li></ul><ul><li>Lease or by fixed assets </li></ul><ul><li>Determine appropriate dividend payout ratio </li></ul>Finance/Accounting Issues Decisions based on Finance/Accounting
  24. 24. <ul><li>Debt </li></ul><ul><li>Equity </li></ul>Finance/Accounting Issues Capital acquisition to implement strategies
  25. 25. <ul><li>EPS/EBIT analysis </li></ul><ul><ul><li>Earnings per share/Earnings before interest and taxes </li></ul></ul>Finance/Accounting Issues Debt vs. Equity Decisions
  26. 26. <ul><li>$Amount Needed: $500 </li></ul><ul><li>Stock Price $40 </li></ul><ul><li>EBIT Range $1000 to $2000 </li></ul><ul><li>Tax Rate 26% </li></ul><ul><li>Interest Rate 5% </li></ul><ul><li># Shares Outstanding 350 </li></ul>EPS-EBIT Analysis (in $millions) Heinz Company – Year End 2001
  27. 27. EPS-EBIT Analysis (in $millions) – Heinz Company 100% Stock Financing 100% Debt Financing Financing (60%stock, 40% debt) High Low High Low High Low EBIT ($982.4 in 2001) $2000 $1000 $2000 $1000 $2000 $1000 Interest (5%) 0 0 25 25 10 10 EBT 2000 1000 1975 975 1990 990 Taxes 26% 520 260 514 254 517 257 EAT 1480 740 1461 721 1473 733 # Shares outstanding 362.5 362.5 350 350 357.5 357.5 EPS 4.08 2.04 4.17 2.06 4.12 2.05
  28. 28. <ul><li>Conclusion: </li></ul><ul><ul><li>Heinz should use debt to raise the $500 million </li></ul></ul>Finance/Accounting Issues EPS-EBIT Analysis Heinz
  29. 29. <ul><li>Allow an organization to examine the expected results of various actions and approaches </li></ul>Finance/Accounting Issues Projected Financial Statements
  30. 30. <ul><li>Prepare income statement before balance sheet (forecast sales) </li></ul><ul><li>Use percentage of sales method to project CoGS & expenses </li></ul><ul><li>Calculate projected net income </li></ul>Finance/Accounting Issues Steps in Preparing Projected Financial Statements
  31. 31. <ul><li>Subtract dividends to be paid from Net Income and add remaining to Retained Earnings </li></ul><ul><li>Project balance sheet times beginning with retained earnings </li></ul><ul><li>List comments (remarks) on projected statements </li></ul>Finance/Accounting Issues Steps in Preparing Projected Financial Statements (cont’d)
  32. 32. Projected Income Statement for Litten Company (in millions)   Prior Year 2004 Projected Year 2005 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  
  33. 33. <ul><li>-- Details how funds will be obtained and spent for a specified period of time. </li></ul>Finance/Accounting Issues Financial Budget
  34. 34. <ul><li>Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms </li></ul>Finance/Accounting Issues Evaluating Worth of a Business
  35. 35. <ul><li>What a firm owns </li></ul><ul><li>What a firm earns </li></ul><ul><li>What a firm will bring in the market </li></ul>Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches
  36. 36. <ul><li>-- New products and improvement of existing products that allow for effective strategy implementation </li></ul>Research & Development Issues
  37. 37. <ul><li>Level of support constrained by resource availability </li></ul><ul><li>Technological improvements shorten product life cycles </li></ul>Research & Development Issues Constraints
  38. 38. <ul><li>1 st firm to market new technological products </li></ul><ul><li>Innovative imitator of successful products </li></ul><ul><li>Low-cost producer of similar but less expensive products </li></ul>Research & Development Issues 3 Major R&D approaches to implementing strategies
  39. 39. Research & Development Issues <ul><li>R&D Timing </li></ul><ul><li>First mover </li></ul><ul><li>follower </li></ul>
  40. 40. Research & Development Issues <ul><li>Who? </li></ul><ul><li>R&D department </li></ul><ul><li>Cross-functional team </li></ul><ul><li>Some combination </li></ul><ul><li>How? </li></ul><ul><li>Formal or informal process </li></ul><ul><li>Use prototypes, product tests, design reviews or test markets </li></ul><ul><li>How to implement new design </li></ul><ul><li>How to evaluate success of new design </li></ul>Source: Coulter, M. 2005, Strategic management in Action, 3 rd edn, Pearson, New Jersey, p.158.
  41. 41. Research & Development Issues <ul><li>Current R&D strategies </li></ul><ul><li>Employee suggestion systems </li></ul><ul><li>Innovative culture </li></ul>
  42. 42. <ul><li>Information is basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms. </li></ul><ul><li>How an organisation collects, uses, and disseminates information ultimately will affect its ability to develop a sustainable competitive advantage. Ex: information technology such as EDI (Electronic Data Interchange) and RFID (radio frequency identification) </li></ul><ul><li>Ex: Walt- Mart required its top 100 suppliers to use RFID by 2005. </li></ul>Importance of information system
  43. 43. <ul><li>Functions of MIS </li></ul><ul><li>Information collection, retrieval, & storage </li></ul><ul><li>Keeping managers informed </li></ul><ul><li>Coordination of activities among divisions </li></ul><ul><li>Allow firm to reduce costs </li></ul>Management Information Systems (MIS) Issues MIS is one type of information systems
  44. 44. Activities <ul><li>Case: Toyota Motor (Coulter 2005, pp.137-138) </li></ul><ul><li>1. What do you think are the keys to Toyota’s success? </li></ul><ul><li>2. Do you think production or marketing would be most important to Toyota? Support your choice. </li></ul><ul><li>3. Is strategy coordination important to Toyota? </li></ul>
  1. Gostou de algum slide específico?

    Recortar slides é uma maneira fácil de colecionar informações para acessar mais tarde.

×