Transcript Chapter 8: Implementing Strategies

Chapter 8
Implementing Strategies: Marketing,
Finance/Accounting, R&D, and MIS Issues
Strategic Management:
Concepts & Cases
13th Edition
Fred David
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Ch 8 -1
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Ch 8 -2
Implementing Strategies
“The greatest strategy is doomed
if it’s implemented badly.”
– Bernard Reimann
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Ch 8 -3
The Nature of Strategy
Implementation
Less than 10% of strategies formulated
are successfully implemented!
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Ch 8 -4
The Nature of Strategy
Implementation
There are many reasons for the low success rate
of Strategy Implementation. These include:
 Failing to segment markets appropriately
 Paying too much for a new acquisition
 Falling behind competitors in R&D
 Not recognizing benefit of computers in
managing information
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Ch 8 -5
Marketing Issues
Countless marketing variables affect
the success or failure of Strategy
Implementation (SI). Two variables
are of central importance to SI:

Market segmentation

Product positioning
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Ch 8 -6
Marketing Issues
Market Segmentation

Subdividing of a market into
distinct subsets of customers
according to needs and buying
habits
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Ch 8 -7
Market Segmentation
Geographic
Demographic
Market Segment
Basis
Psychographic
Behavioral
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Ch 8 -8
Market Segmentation

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Market Segmentation is an important variable
in strategy implementation for three major
reasons:
It is required to successfully implement market
development, product development, market
penetration, and diversification strategies.
It allows a firm to operate with limited
resources because mass production,
distribution, and advertising are not required.
It enables small firms to compete successfully
with large firms by maximizing per-unit profits
and per-segment sales.
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Ch 8 -9
Marketing Mix Variables
Market Segmentation decisions directly
affect marketing mix variables, as
indicated in Table 8-3:
 Product
 Place
 Promotion
 Price
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Ch 8 -10
Table 8-3
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Ch 8 -11
Product Positioning
After markets have been segmented, the next step
is to find out what customers in each segment
need and want. Product Positioning is widely
used for this purpose.
 Product Positioning entails developing
schematic representations that reflect how a
firm’s products or services compare to
competitors’ on dimensions most important to
success in the industry.
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Ch 8 -12
Product Positioning Steps
1.
2.
3.
4.
5.
Select key criteria
Diagram map
Plot competitors’ products
Look for niches
Develop marketing plan
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Ch 8 -13
Product-Positioning Map for
Menswear Retail Stores
Very latest, fashionable
menswear
Low Price
Average mass
merchandiser or
discounter
Average specialty
chain
High Price
Average
department store
Conservative, everyday
menswear
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Ch 8 -14
Finance/Accounting Issues
There are several finance/accounting
concepts that are central to strategy
implementation. Some of the concepts
essential for Strategy Implementation are:



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Acquiring needed capital
Developing projected financial statements
Preparing financial budgets
Evaluating the worth of a business
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Ch 8 -15
Finance/Accounting Issues
Acquiring Needed Capital:
Equity – common stock
 Debt - bonds
 Debt - borrow from lenders

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Ch 8 -16
Finance/Accounting Issues

Debt vs. Equity Decisions
EPS/EBIT analysis


An Earnings Per Share/Earnings Before Interest and
Taxes analysis is the most widely used method for
determining whether debt, stock, or a combination of
debt and stock is the best alternative for raising capital
to implement strategies.
This method involves an examination of the impact
that debt versus stock financing has on earnings per
share under various assumptions as to EBIT.
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Ch 8 -17
Finance/Accounting Issues
Projected Financial Statement Analysis

Allows an organization to examine the
expected results of various actions and
approaches
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Ch 8 -18
Finance/Accounting Issues
Steps in Preparing Projected Financial
Statements
1.
Prepare income statement before
balance sheet (forecast sales)
2.
Use percentage of sales method to
project CGS & expenses
3.
Calculate projected net income
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Ch 8 -19
Finance/Accounting Issues
Steps in Preparing Projected Financial
Statements (cont’d)
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
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Ch 8 -20
Projected Income Statement
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Ch 8 -21
Projected Balance Sheet
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Ch 8 -22
Finance/Accounting Issues
Financial Budget
Details how funds will be obtained
and spent for a specified period of
time
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Ch 8 -23
Types of Budgets
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Cash budgets
Operating budgets
Sales budgets
Profit budgets
Factory budgets
Capital budgets
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Expense budgets
Divisional budgets
Variable budgets
Flexible budgets
Fixed budgets
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Ch 8 -24
Finance/Accounting Issues
Evaluating the Worth of a Business

Central to strategy implementation –
integrative, intensive, and
diversification strategies often
implemented through acquisitions of
other firms
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Ch 8 -25
Evaluating the Worth of a Business
There are three 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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Ch 8 -26
Research & Development Issues
New products and improvement of
existing products that allow for effective
strategy implementation
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Ch 8 -27
Research & Development Issues
Constraints

Level of support constrained by resource
availability

Technological improvements shorten
product life cycles
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Ch 8 -28
Research & Development Issues
There are three major R&D approaches
to implementing strategies:
1.
2.
3.
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.
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Ch 8 -29
Management Information
Systems (MIS) Issues
Having an effective management
information system (MIS) may be the
most important factor in differentiating
successful from unsuccessful firms.
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Ch 8 -30
MIS Issues
Functions of MIS

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Information collection, retrieval, and
storage
Keeping managers informed
Coordination of activities among divisions
Allows firm to reduce costs
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Ch 8 -31