Chapter 08 implimenting strategies r&d, finance, accountin, marketing issues

1. Chapter 8
Implementing Strategies: Marketing,
Finance/Accounting, R&D, & MIS Issues
Strategic Management:
Concepts & Cases
10th Edition
Fred David
PowerPoint Slides by
Ishfaque Rahujo
School of Business Administration
Shaheed Benazir Bhutto University
Shaheed Benazirabad
Ch 8-1
BY:MADDY.KALEEM

2. Chapter Outline
Ch
8-2
The Nature of Strategy Implementation
Marketing Issues
Finance/Accounting Issues
BY:MADDY.KALEEM

3. Chapter Outline (cont’d)
Ch
8-3
Research & Development (R&D) Issues
Management Information Systems (MIS)
Issues
BY:MADDY.KALEEM

4. The greatest strategy is doomed if it’s
implemented badly. --
Bernard Reimann
Ch
8-4
Implementing Strategies
BY:MADDY.KALEEM

5. -- Strategy implementation means change.
Ch
8-5
The Nature of Strategy
Implementation
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6. -- Less than 10% of strategies formulated are
successfully implemented!
Ch
8-6
The Nature of Strategy
Implementation
BY:MADDY.KALEEM

7.  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
Ch 8-7
Nature of Strategy
Implementation
Low Success Rate – Strategy Implementation
BY:MADDY.KALEEM

8.  Market goods & services well
 Raise needed working capital
 Produce technologically sound goods
 Sound information systems
Ch 8-8
Nature of Strategy
Implementation
Successful Strategy Implementation
BY:MADDY.KALEEM

9. -- Marketing variables affect
success/failure of strategy implementation
Ch 8-9
Marketing Issues
BY:MADDY.KALEEM

10.  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 warrantee
Ch 8-10
Marketing Issues
Marketing Decisions requiring policies
BY:MADDY.KALEEM

11. 1. Market segmentation
2. Product positioning
Ch 8-11
Marketing Issues
Centrally important to Implementation
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12.  Subdividing of a market into distinct subsets
of customers according to needs and buying
habits.
Ch 8-12
Marketing Issues
Market Segmentation
BY:MADDY.KALEEM

13.  Key to matching supply & demand
 Market development, product-development,
market penetration & diversification strategies
 Allows operating with limited resources
 Enables small firms to compete successfully
Ch 8-13
Marketing Issues
Market Segmentation
BY:MADDY.KALEEM

14.  Directly affect marketing mix variables:
◦ Product
◦ Place
◦ Promotion
◦ Price
Ch 8-14
Marketing Issues
Market Segmentation
BY:MADDY.KALEEM

15. Marketing Mix – Component Factors
Ch
8-
15
Service level
Warranty
Transportation
carriers
Product line
Inventory
levels/locations
Packaging
PublicitySales territoriesBrand name
Payment termsSales promotionOutlet locationStyle
Discounts &
allowances
Personal selling
Distribution
coverage
Features
LevelAdvertising
Distribution
channels
Quality
PricePromotionPlaceProduct
BY:MADDY.KALEEM

16. Marketing Issues
Ch
8-
16
Market Segment
Basis Psychographic
Behavioral
Geographic
Demographic
BY:MADDY.KALEEM

17.  Region
 County size
 City or SMSA size
 Density
 Climate
Marketing Issues
Geographic
BY:MADDY.KALEEM

18. Marketing Issues
Ch
8-
18
Market Segment
Basis Psychographic
Behavioral
Geographic
Demographic
BY:MADDY.KALEEM

19.  Age
 Family Size
 Family Life Cycle
 Income/Occupation
 Education
 Religion
 Race/Nationality
Ch 8-19
Marketing Issues
Demographic
BY:MADDY.KALEEM

20. Marketing Issues
Ch
8-
20
Market Segment
Basis Psychographic
Behavioral
Geographic
Demographic
BY:MADDY.KALEEM

21.  Social Class
 Lifestyle
 Personality
Ch 8-21
Marketing Issues
Psychographic
BY:MADDY.KALEEM

22. Marketing Issues
Ch
8-
22
Market Segment
Basis Psychographic
Behavioral
Geographic
Demographic
BY:MADDY.KALEEM

23.  Use occasion
 Benefits sought
 User status
 Usage rate
 Loyalty status
 Readiness stage
 Attitude toward product
Ch 8-23
Marketing Issues
Behavioral
BY:MADDY.KALEEM

24. -- Schematic representations that reflect how
products/services compare to competitors’
on dimensions most important to success in
the industry
Ch 8-24
Marketing Issues
Product Positioning
BY:MADDY.KALEEM

25. Marketing Issues
Ch
8-
25
Product
Positioning
Customer Wants
Customer Needs
BY:MADDY.KALEEM

26. Product Positioning Steps
Ch
8-
26
Product
Positioning
Steps
2. Diagram Map
1. Select Key Criteria
3. Plot competitors’
products
4. Look for niches
5. Develop Marketing
Plan
BY:MADDY.KALEEM

27. Product Positioning Map
Ch
8-
27
Low
Convenience
High
Customer
Loyalty
Low
Customer
Loyalty
High
Convenience
Firm 1
•
•
Firm 2
•
Firm 3
Rental Car Market
Low
Customer
Loyalty
High
Convenience
Firm 1
•
•
Firm 2
•
Firm 3
Rental Car Market
BY:MADDY.KALEEM

28.  Look for vacant niche
 Avoid sub optimization
 Don’s serve 2 segments w/ same strategy
 Don’t position in the middle of the map
Ch 8-28
Marketing Issues
Product Positioning as Strategy Implementation
Tool
BY:MADDY.KALEEM

29. -- Central to strategy implementation.
Ch 8-29
Finance/Accounting Issues
BY:MADDY.KALEEM

30.  Acquiring needed capital
 Developing projected financial statements
 Preparing financial budgets
 Evaluating worth of a business
Ch 8-30
Finance/Accounting Issues
Essential for implementation
BY:MADDY.KALEEM

31.  Raise capital – short-term, long-term, preferred,
or common stock
 Lease or by fixed assets
 Determine appropriate dividend payout ratio
Ch 8-31
Finance/Accounting Issues
Decisions based on Finance/Accounting
BY:MADDY.KALEEM

32.  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
Ch 8-32
Finance/Accounting Issues
Decisions based on Finance/Accounting
BY:MADDY.KALEEM

33.  Debt
 Equity
Ch 8-33
Finance/Accounting Issues
Capital acquisition to implement strategies
BY:MADDY.KALEEM

34.  EPS/EBIT analysis
◦ Earnings per share/Earnings before interest and
taxes
Ch 8-34
Finance/Accounting Issues
Debt vs. Equity Decisions
BY:MADDY.KALEEM

35.  $Amount Needed: $500
 Stock Price $40
 EBIT Range $1000 to $2000
 Tax Rate 175/673 = .26 = 26%
 Interest Rate 5%
 # Shares Outstanding 350
Ch 8-35
EPS-EBIT Analysis
(in $millions)
Heinz Company – Year End 2001
BY:MADDY.KALEEM

36. EPS-EBIT Analysis (in $millions) – Heinz Company
Stock Financing Financing Financing
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
Ch 8-36
BY:MADDY.KALEEM

37.  Conclusion:
◦ Heinz should use debt to raise the $500 million
Ch 8-37
Finance/Accounting Issues
EPS-EBIT Analysis Heinz
BY:MADDY.KALEEM

38.  Allow an organization to examine the expected
results of various actions and approaches
Ch 8-38
Finance/Accounting Issues
Projected Financial Statements
BY:MADDY.KALEEM

39. 1. Prepare income statement before balance
sheet (forecast sales)
2. Use percentage of sales method to project
CoGS & expenses
3. Calculate projected net income
Ch 8-39
Finance/Accounting Issues
Steps in Preparing Projected Financial
Statements
BY:MADDY.KALEEM

40. 4. Subtract dividends to be paid from Net Income
and add remaining to Retained Earnings
5. Project balance sheet times beginning with
retained earnings
6. List comments (remarks) on projected
statements
Ch 8-40
Finance/Accounting Issues
Steps in Preparing Projected Financial
Statements (cont’d)
BY:MADDY.KALEEM

41. 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
Ch 8-41
BY:MADDY.KALEEM

42. -- Details how funds will be obtained and spent for
a specified period of time.
Ch 8-42
Finance/Accounting Issues
Financial Budget
BY:MADDY.KALEEM

43.  Cash budgets
 Operating budgets
 Sales budgets
 Profit budgets
 Factory Budgets
 Expense Budgets
Ch 8-43
Finance/Accounting Issues
Types of Budgets
BY:MADDY.KALEEM

44.  Divisional budgets
 Variable budgets
 Flexible budgets
 Fixed budgets
Ch 8-44
Finance/Accounting Issues
Types of Budgets
BY:MADDY.KALEEM

45.  Central to strategy implementation – integrative,
intensive, & diversification strategies often
implemented through acquisitions of other firms
Ch 8-45
Finance/Accounting Issues
Evaluating Worth of a Business
BY:MADDY.KALEEM

46. 1. What a firm owns
2. What a firm earns
3. What a firm will bring in the market
Ch 8-46
Finance/Accounting Issues
Evaluating Worth of a Business:
3 Basic Approaches
BY:MADDY.KALEEM

47. -- New products and improvement of
existing products that allow for effective
strategy implementation
Ch 8-47
Research & Development
Issues
BY:MADDY.KALEEM

48.  Level of support constrained by resource
availability
 Technological improvements shorten product
life cycles
Ch 8-48
Research & Development
Issues
Constraints
BY:MADDY.KALEEM

49. 1. 1st firm to market new technological products
2. Innovative imitator of successful products
3. Low-cost producer of similar but less
expensive products
Ch 8-49
Research & Development
Issues
3 Major R&D approaches to implementing
strategies
BY:MADDY.KALEEM

50. -- Information is basis for understanding
the firm. One of the most important
factors differentiating successful from
unsuccessful firms
Ch 8-50
Management Information
Systems (MIS) Issues
BY:MADDY.KALEEM

51.  Information collection, retrieval, & storage
 Keeping managers informed
 Coordination of activities among divisions
 Allow firm to reduce costs
Ch 8-51
MIS Issues
Functions of MIS
BY:MADDY.KALEEM

52. Key Terms & Concepts
Ch
8-
52
For Review (Chapter 8)
Cash Budget Marketing Mix Variables
EPS/EBIT Analysis
Outstanding Shares
Method
Management Information
Systems (MIS)
Price-Earnings Ratio
Method
Market Segmentation Product Positioning
BY:MADDY.KALEEM

53. Key Terms & Concepts
Ch
8-
53
For Review (Chapter 8)
Projected Financial
Statement Analysis
Research & Development
(R&D)
Vacant Niche
BY:MADDY.KALEEM