Chapter 8 Implementing Strategies Marketing Finance Accounting R D and

Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Strategic Management: Concepts and Cases. 9 th edition Fred R. David Power. Point Slides by Anthony F. Chelte Western New England College Prentice Hall, 2001 1

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 Less than 10% of strategies formulated are successfully implemented! 4

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 – 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 7

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 17

Market Segmentation Bases for Segmenting Markets -Geographic Demographic Psychographic Behavioral – – Behavioral Basis: – – – – Use occasion Benefits sought User status Usage rate Loyalty status Readiness Stage Attitude toward product Geographic Basis: – – – Region County Size City or SMSA size Density Climate Demographic Basis: • Age • Family Size • Family Life Cycle • Income Occupation • Education • Religion • Race Nationality Psychographic Basis: – Social Class – Lifestyle – Personality 18

Product Positioning Steps 1. Select Key Criteria 2. Diagram Map Product Positioning Steps 3. Plot competitors’ 4. products 4. Look for niches 5. Develop Marketing Plan Fred R. David Prentice Hall 25

Product Positioning Map High Convenience Rental Car Market • Firm 2 Firm 1 • High Customer Loyalty Strategy-Implementation Tool— • • Look for vacant niche Avoid suboptimization Don’t serve 2 segments with same strategy Don’t position in the middle of the map Low Customer Loyalty Product Positioning based on: • Firm 3 – – Customers’ wants Customers’ needs Low Convenience Fred R. David Prentice Hall 26

PP Map for Business Degrees Ø Schools: SMC, CSUM, CSUEB, SJSU High Leadership Training Little Individual Attention A lot of Individual Attention Low Leadership Training Fred R. David Prentice Hall 27

Evaluating Worth of a Business Central to strategy implementation as integrative, intensive and diversification strategies are often implement through acquisitions of other firms. 29

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 30

WGO Equity method BS Equity Goodwill Valuation 2004 $201, 875 $0 $201, 875 2003 $210, 626 $0 $210, 626 2002 $179, 815 $0 $179, 815 Net Income method Net Inc 5 Valuation 2004 $70, 641 $353, 205 2003 $49, 884 $249, 420 2002 $54, 671 $273, 355 PE*Net Income Share Price EPS Valuation 2004 $37. 59 $2. 03 $1, 308, 076 2003 $33. 88 $1. 33 $1, 270, 729 2002 $19. 21 $1. 34 $783, 754 Market Value Shares out Share Price • • Valuation: What a firm owns What a firm earns What a firm will bring in the market • http: //finance. yahoo. com/ Valuation 2004 34, 214 $37. 59 $1, 286, 104 2003 36, 974 $33. 88 $1, 252, 679 2002 39, 898 $19. 21 $766, 441 $32. 92 2004 $787, 315 2003 $745, 864 2002 $500, 841 Value Average Fred R. David Prentice Hall 31

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 34

Finance/Accounting Issues Debt vs. Equity Decisions – • EPS/EBIT analysis – Earnings per share/Earnings before interest and taxes 42

Pro-Forma 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 44