Transcript Lec 18.ppt
Lecture 18 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Lecture Outline • The Nature of Strategy Implementation • Marketing Issues • Research and Development (R&D) Issues Lecture Outline • Finance/Accounting Issues • Management Information Systems Issues Implementing Strategies There is no “perfect” strategic decision. One always has to pay a price. One always has to balance conflicting objectives, conflicting opinions, and conflicting priorities. The best strategic decision is only an approximation—and a risk -- Peter Drucker Implementing Strategies Strategy implementation means change Implementing Strategies: Less than 10% of strategies formulated are successfully implemented! Implementing Strategies: Low strategy implementation success: • • • • 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 Implementing Strategies: For Successful Strategy Implementation -– Firms must market goods and services well – Firms must raise needed working capital – Firms produce technologically-sound goods – Firms must have sound information systems Marketing Issues Marketing variables affect success or failure of strategy implementation • Market Segmentation • Production Positioning Implementing Strategies: Marketing Issues Marketing Decisions requiring polices – – Use exclusive dealerships or multiple channels of distribution – Use heavy, light, or no TV advertising – Limit (or not) the share of business done with a single customer Implementing Strategies: Marketing Issues Marketing Decisions requiring polices – – Be a price leader or price follower – Offer a complete or limited warranty – Reward salespeople based on straight commission or combination salary/commission Market Segmentation • Subdividing of a market into distinct subsets of customers according to needs and buying habits Market Segmentation • Widely used in implementing strategies • Small and specialized firms Market Segmentation Market Segmentation Important Variable: 1. Market and product development, market penetration, and diversification require increased sales through new markets or products Market Segmentation Market Segmentation Important Variable: 2. Firm can operate with limited resources. Enables a small firm by maximizing per-unit profits and per-segment sales. Market Segmentation Market Segmentation Important Variable: 3. Segmentation decisions directly affect marketing mix variables: Product, place, promotion, and price Marketing Mix – Component Factors Product Place Promotion Price Quality Distribution channels Advertising Level Features Distribution coverage Personal selling Discounts & allowances Style Outlet location Sales promotion Payment terms Brand name Sales territories Publicity Packaging Inventory levels/locations Product line Transportation carriers Warranty Service level Market Segmentation Bases for Segmenting Markets -– – – – Geographic Demographic Psychographic Behavioral Market Segmentation Geographic Basis: – – – – – Region County Size City or SMSA size Density Climate Market Segmentation Demographic Basis: – – – – – – – Age Family Size Family Life Cycle Income Occupation Education Religion Race Nationality Market Segmentation Psychographic Basis: – – – Social Class Lifestyle Personality Market Segmentation Behavioral Basis: – – – – – – – Use occasion Benefits sought User status Usage rate Loyalty status Readiness Stage Attitude toward product Product Positioning Developing schematic representations that reflect how products or services compare to competitors’ on dimensions most important to success in the industry Product Positioning Product Positioning based on: – – Customers wants Customers needs Product Positioning Steps 1. Select Key Criteria 2. Diagram Map Product Positioning Steps 3. Plot competitors’ products 4. Look for niches 5. Develop Marketing Plan Product Positioning Map High Convenience Rental Car Market • Firm 2 Firm 1 • High Customer Loyalty Low Customer Loyalty • Firm 3 Low Convenience Product Positioning Product Positioning Map as StrategyImplementation Tool— – – – – Look for vacant niche Avoid suboptimization Don’t serve 2 segments with same strategy Don’t position in the middle of the map Thank You Lecture 19 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Finance/Accounting Issues Central to Strategy Implementation – – Acquiring needed capital – Developing pro forma financial statements – Preparing financial budgets – Evaluating worth of a business Decisions Requiring Finance/Accounting Policies Raise capital w/ short-term, long-term preferred or common stock Lease or buy fixed assets Determine an appropriate dividend payout ratio Use LIFO, FIFO, or market-value accounting approach Decisions Requiring Finance/Accounting Policies Extend time of accounts receivable Establish percentage discount on accounts for terms Determine the amount of cash kept on hand Finance/Accounting Issues Acquiring Capital to Implement Strategies – • Basic sources of capital: – Debt – Equity Finance/Accounting Issues Debt vs. Equity Decisions – • EPS/EBIT analysis – Earnings per share/Earnings before interest and taxes Finance/Accounting Issues Pro Forma Financial Statements • Allows an organization to examine the expected results of various actions and approaches Finance/Accounting Issues 6 Steps in Pro Forma Financial Analysis 1. 2. 3. 4. 5. 6. Prepare income statement before balance sheet (forecast sales) Use percentage-of-sales method to project CGS and expenses Calculate projected net income Subtract dividends to be paid from Net Income and add remaining to Retained Earnings Project balance sheet times beginning with retained earnings List comments (remarks) on projected statements Finance/Accounting Issues Financial Budget – Document that details how funds will be obtained and spent for a specified period of time. Finance/Accounting Issues Types of Budgets – – – – – – – – – – – – Cash budgets Operating budgets Sales budgets Profit budgets Factory budgets Capital budgets Expense budgets Divisional budgets Variable budgets Flexible budgets Fixed budgets Evaluating Worth of a Business Central to strategy implementation as integrative, intensive and diversification strategies are often implement through acquisitions of other firms. Evaluating Worth of a Business 3 Basic approaches: 1. What a firm owns 2. What a firm earns 3. What a firm will bring in the market Research & Development Issues New products and improvement of existing products that allow for effective strategy implementation Research & Development Issues • • Level of support is constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues 3 Major R&D approaches to implementing strategies – 1. First firm to market new technological products 2. Be an innovative imitator of successful products 3. Low-cost producer of similar but less expensive products Key Terms • • • • • • • Cash Budget E-mail EPS/EBIT Analysis Financial Budget Information Systems Market Segmentation Marketing-mix Variables Key Terms • • • • • Multidimensional Scaling Outstanding Shares Method Price-earnings Ratio Method Pro Forma Financial Statement Analysis Product Positioning Key Terms • • • • Research and Development Retained Earnings Vacant Niche World Wide Web Thank You