Implementing Strategies ( Part 2 )

Implementing Strategies ( Part 2 )

• 1.
  Chapter 8 ImplementingStrategies: Marketing, Finance/Accounting, R&D, & MIS Issues Strategic Management: Concepts & Cases 10 th Edition Fred David PowerPoint Slides by Anthony F. Chelte Western New England College
• 2.
  Chapter Outline TheNature of Strategy Implementation Marketing Issues Finance/Accounting Issues
• 3.
  Chapter Outline (cont’d ) Research & Development (R&D) Issues Management Information Systems (MIS) Issues
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  The greatest strategyis doomed if it’s implemented badly. -- Bernard Reimann Implementing Strategies
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  -- Strategy implementationmeans change. The Nature of Strategy Implementation
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  -- Less than10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation
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  Failing to segmentmarkets appropriately Paying too much for a new acquisition Falling behind competition in R&D Not recognizing benefit of computers in managing information Nature of Strategy Implementation Low Success Rate – Strategy Implementation
• 8.
  Market goods &services well Raise needed working capital Produce technologically sound goods Sound information systems Nature of Strategy Implementation Successful Strategy Implementation
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  -- Marketing variablesaffect success/failure of strategy implementation Marketing Issues
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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 warrantee Marketing Issues Marketing Decisions requiring policies
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  Market segmentation Productpositioning Marketing Issues Centrally important to Implementation
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  Subdividing of amarket into distinct subsets of customers according to needs and buying habits. Marketing Issues Market Segmentation
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  Key to matchingsupply & demand Market development, product-development, market penetration & diversification strategies Allows operating with limited resources Enables small firms to compete successfully Marketing Issues Market Segmentation
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  Directly affect marketingmix variables: Product Place Promotion Price Marketing Issues Market Segmentation
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  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
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  Marketing Issues MarketSegment Basis Psychographic Behavioral Geographic Demographic
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  Region County sizeCity or SMSA size Density Climate Marketing Issues Geographic
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  Marketing Issues MarketSegment Basis Psychographic Behavioral Geographic Demographic
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  Age Family SizeFamily Life Cycle Income/Occupation Education Religion Race/Nationality Marketing Issues Demographic
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  Marketing Issues MarketSegment Basis Psychographic Behavioral Geographic Demographic
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  Social Class LifestylePersonality Marketing Issues Psychographic
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  Marketing Issues MarketSegment Basis Psychographic Behavioral Geographic Demographic
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  Use occasion Benefitssought User status Usage rate Loyalty status Readiness stage Attitude toward product Marketing Issues Behavioral
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  -- Schematic representationsthat reflect how products/services compare to competitors’ on dimensions most important to success in the industry Marketing Issues Product Positioning
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  Marketing Issues ProductPositioning Customer Wants Customer Needs
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  Product Positioning StepsProduct Positioning Steps 2. Diagram Map 1. Select Key Criteria Plot competitors’ products 4. Look for niches 5. Develop Marketing Plan
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  Product Positioning MapLow 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
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  Look for vacantniche Avoid sub optimization Don’s serve 2 segments w/ same strategy Don’t position in the middle of the map Marketing Issues Product Positioning as Strategy Implementation Tool
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  -- Central tostrategy implementation. Finance/Accounting Issues
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  Acquiring needed capitalDeveloping 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 by fixed assets Determine appropriate dividend payout ratio Finance/Accounting Issues Decisions based on Finance/Accounting
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  LIFO, FIFO, ormarket-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/AccountingIssues Capital acquisition to implement strategies
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  EPS/EBIT analysis Earningsper share/Earnings before interest and taxes Finance/Accounting Issues Debt vs. Equity Decisions
• 35.
  $Amount Needed: $500 Stock Price $40 EBIT Range $1000 to $2000 Tax Rate 175/673 = .26 = 26% Interest Rate 5% # Shares Outstanding 350 EPS-EBIT Analysis (in $millions) Heinz Company – Year End 2001
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  EPS-EBIT Analysis (in$millions) – Heinz Company 2.05 4.12 2.06 4.17 2.04 4.08 EPS 357.5 357.5 350 350 362.5 362.5 # Shares outstanding 733 1473 721 1461 740 1480 EAT 257 517 254 514 260 520 Taxes 26% 990 1990 975 1975 1000 2000 EBT 10 10 25 25 0 0 Interest (5%) $1000 $2000 $1000 $2000 $1000 $2000 EBIT ($982.4 in 2001) Low High Low High Low High Financing Financing Stock Financing
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  Conclusion: Heinz shoulduse debt to raise the $500 million Finance/Accounting Issues EPS-EBIT Analysis Heinz
• 38.
  Allow an organizationto examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statements
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  Prepare income statementbefore balance sheet (forecast sales) Use percentage of sales method to project CoGS & expenses Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements
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  Subtract dividends tobe 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 Steps in Preparing Projected Financial Statements (cont’d)
• 41.
  Projected Income Statementfor Litten Company (in millions)   4.75 4 Retained Earnings   5.00 2 Dividends   9.75 6 Net Income 50% rate 9.75 6 Taxes   19.50 12 EBT   3.00 3 Interest   22.50 15 EBIT 5% of sales 7.50 5 Administrative Expense 10% of sales 15.00 10 Selling Expense   45.00 30 Gross Margin 70% of sales 105.00 70 Cost of Goods Sold 50% increase 150.00 100 Sales   Projected Income Statement Remarks Projected Year 2005 Prior Year 2004  
• 42.
  -- Details howfunds will be obtained and spent for a specified period of time. Finance/Accounting Issues Financial Budget
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  Cash budgets Operatingbudgets Sales budgets Profit budgets Factory Budgets Expense Budgets Finance/Accounting Issues Types of Budgets
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  Divisional budgets Variablebudgets Flexible budgets Fixed budgets Finance/Accounting Issues Types of Budgets
• 45.
  Central to strategyimplementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating Worth of a Business
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  What a firmowns What a firm earns What a firm will bring in the market Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches
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  -- New productsand improvement of existing products that allow for effective strategy implementation Research & Development Issues
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  Level of supportconstrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints
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  1 st firm to market new technological products Innovative imitator of successful products Low-cost producer of similar but less expensive products Research & Development Issues 3 Major R&D approaches to implementing strategies
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  -- Information isbasis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms Management Information Systems (MIS) Issues
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  Information collection, retrieval,& 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 Analysis Outstanding Shares Method Management Information Systems (MIS) Price-Earnings Ratio Method Market Segmentation Product Positioning
• 53.
  Key Terms &Concepts For Review (Chapter 8) Projected Financial Statement Analysis Research & Development (R&D) Vacant Niche