Chapter 8

Implementing Strategies: Marketing,

Finance/Accounting, R&D, & MIS Issues

Successful strategy implementation depends on

cooperation among all functional & divisional
managers in an Organization

Marketing dept are commonly charged with

implementing strategies that require significant
increases in sales rev in new areas and with new or
improved products
Finance / accounting managers devise effective SI
approaches at low cost & minimum risk to that firm
R&D transfer complex technologies or develop new tech
to successfully implement Strategies
Ch 8-1
MIS provide leadership and training for all individuals

This chapter examines marketing,

finance/accounting, R&D, and management
information systems(MIS)
Less than 10% of strategies formulated are
successfully implemented!

Paying too much for a new acquisition

Falling behind competitors in R&D

Ch 8-2

Comprehensive strategic management model

Perform
External
Audit

Chapter 3

Develop
Vision
&
Mission

Chapter 2

Establish
Long-Term
Objectives

Generate,
Evaluate,
Select
Strategies

Implement
Strategies:
Mgmt Issues

Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS

Measure &
Evaluate
Performance

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Perform
Internal
Audit

Chapter 4

Marketing Issues

1.

Centrally important to
Implementation
Market segmentation
A.

B.

C.

Sub dividing of a market into

distinct subsets of customers
according to needs & buying
habits

Strategies such as Market development, product

development, market penetration & diversification
require increased sales through new markets &
products
MS allows a firm to operate with limited
resources because mass production, mass
distribution and mass advertising are not required
SM decisions affect Marketing mix

Does the internet Make Market Segmentation

Easier ?
Placing banners on related
websites

Marketing Issues
Geographic

Demographic

Market Segment
Basis

Psychographic

Behavioral

Ch 8-5

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
Ch 8-6

Marketing Issues

1.

Centrally important to
Implementation
Product Positioning

After markets have been

segmented , next step is to
find out what customers want
and expect

A severe mistake is to assume the firm knows what

customers want and expect

ANALYSIS & RESEARCH

Steps required in Product planning

Book

Effective product-positioning meets two criteria

2.
1.

2.

It uniquely distinguishes a company from the

competition
It leads customers to expect slightly less service than
a company can deliever
Under promise and then overdeliver is
the Key!

Marketing Issues
Customer Wants

Product
Positioning
Customer Needs

Ch 8-8

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
Ch 8-9

Product Positioning Map

High
Convenience

Rental Car Market

Firm 2

Firm 1

High
Customer
Loyalty

Low
Customer
Loyalty

Firm 3
Low
Convenience
Ch 8-10

Finance /Accounting Issues

Acquiring needed capital

Developing projected financial statements
Preparing financial budgets

To lease or buy fixed assets

To extend the time of accounts receivable
To determine the amount of cash that should be
kept on hand

Ch 8-11

EPS-EBIT Analysis
(in $millions)
Heinz Company Year End 2001

$Amount Needed: $500

Stock Price $40
EBIT Range $1000 to $2000
Tax Rate 175/673 = .26 = 26%
Interest Rate 5%
# Shares Outstanding 350

Ch 8-12

EPS-EBIT Analysis (in $millions) Heinz

Company
Stock Financing

Debt Financing

Combination
Financing

High

Low

High

Low

High

Low

$2000

$1000

$2000

$1000

$2000

$1000

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

EBIT ($982.4 in 2001)

Interest (5%)

Ch 8-13

Finance/Accounting Issues
EPS-EBIT Analysis Heinz

Conclusion:

Heinz should use debt to raise the $500 million

Ch 8-14

Finance/Accounting Issues
Projected Financial Statements

Allow an organization to examine the expected

results of various actions and approaches

This type of analysis can be used to forecast the

impact of various implementation decisions ( for
example, to increase promotional expenditures by 50%
to support a market development strategy & to
increase salaries by 25% to support a market
penetration strategy, to increase R&D expenditures by
70% to support product development, or to tell sell $1
Million of common stock to raise capital for
diversification

Projected Income Statement for Litten Company (in millions)

Prior Year 2004

Projected Year
2005

Remarks

Projected Income Statement

Sales

100

150.00

50% increase

70

105.00

70% of sales

30

45.00

10

15.00

10% of sales

7.50

5% of sales

15

22.50

3.00

12

19.50

Taxes

9.75

Net Income

9.75

5.00

4.75

Cost of Goods Sold

Gross Margin
Selling Expense
Administrative Expense
EBIT
Interest
EBT

Dividends
Retained Earnings

50% rate

Ch 8-16

Finance/Accounting Issues
Financial Budget

-- Details how funds will be obtained and spent for

a specified period of time.

Ch 8-17

Research & Development

Issues
Developing new products & improving
old products in a way that will allow
effective strategy implementation

3 Major R&D approaches to implementing

strategies
Product development, Market Penetration &
related diversification require new products to
be successfully developed and that old
products be significantly improved

1.

But the level of management support for R&D is

often constrained by resources availability
Well formulated R&D policies match market
opportunities with internal capablilities

Ch 8-18

MIS Issues

Functions of MIS

Firms that implement strategies using

the best information will reap competitive
advantages in the 21st Century

Information collection, retrieval, & storage

Keeping managers informed
Coordination of activities among divisions
Allow firm to reduce costs

Ch 8-19