Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues

Strategic Management: Concepts and Cases. 9th edition Fred R. David

PowerPoint Slides by Anthony F. Chelte Western New England College
Fred R. David Prentice Hall Ch 8-1

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 approximationand a risk -- Peter Drucker

Less than 10% of strategies formulated are successfully implemented!

Fred R. David Prentice Hall

Ch 8-4

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 Firms must market goods and services well Firms must raise needed working capital Firms produce technologically-sound goods Firms must have sound information systems

For Successful Strategy Implementation:

Fred R. David Prentice Hall

Ch 8-7

Marketing Mix Component Factors

Product Place Promotion Price

Quality Features Style Brand name Packaging Product line Warranty

Distribution channels Advertising Distribution coverage Outlet location Sales territories Inventory levels/locations Transportation carriers Personal selling Sales promotion Publicity

Level Discounts & allowances Payment terms

Service level
Fred R. David Prentice Hall Ch 8-17

Market Segmentation
Bases for Segmenting Markets -
Geographic Basis:

Geographic Demographic Psychographic Behavioral

Region County Size City or SMSA size Density Climate

Behavioral Basis:

Demographic Basis: Age Family Size Family Life Cycle Income Occupation Education Religion Race Nationality
Psychographic Basis: Social Class Lifestyle Personality

Use occasion Benefits sought User status Usage rate Loyalty status Readiness Stage Attitude toward product

Fred R. David Prentice Hall

Ch 8-18

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

Fred R. David Prentice Hall

Ch 8-25

Product Positioning Map

High Convenience

Rental Car Market

Firm 2
Low Customer Loyalty Product Positioning based on:

Firm 1
High Customer Loyalty
Strategy-Implementation Tool

Look for vacant niche Avoid suboptimization Dont serve 2 segments with same strategy Dont position in the middle of the map

Firm 3
Low Convenience
Fred R. David Prentice Hall

Customers wants Customers needs

Ch 8-26

PP Map for Business Degrees

Schools: SMC, CSUM, CSUEB, SJSU

High Leadership Training

Little Individual Attention

A lot of Individual Attention

Low Leadership Training

Fred R. David Prentice Hall Ch 8-27

Evaluating Worth of a Business

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

Fred R. David Prentice Hall

Ch 8-29

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

Fred R. David Prentice Hall

Ch 8-30

WGO

Equity method
2004 2003 2002 Net Income method 2004 2003 2002 PE*Net Income 2004 2003 2002 Market Value 2004

BS Equity
$201,875 $210,626 $179,815 Net Inc $70,641 $49,884 $54,671 Share Price $37.59 $33.88 $19.21 Shares out 34,214

Goodwill
$0 $0 $0 5

Valuation
$201,875 $210,626 $179,815 Valuation $353,205 $249,420 $273,355

EPS $2.03 $1.33 $1.34 Share Price $37.59

Valuation $1,308,076 $1,270,729 $783,754 Valuation $1,286,104

Valuation: What a firm owns What a firm earns What a firm will bring in the market
http://finance.yahoo.com/

2003
2002

36,974
39,898 $32.92

$33.88
$19.21

$1,252,679
$766,441

Value Average 2004 2003 2002 $787,315 $745,864 $500,841

Fred R. David Prentice Hall

Ch 8-31

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
Ch 8-34

Fred R. David Prentice Hall

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

Fred R. David Prentice Hall

Ch 8-42

Pro-Forma
6 Steps in Pro Forma Financial Analysis 1. 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
Fred R. David Prentice Hall Ch 8-44

2.
3. 4. 5. 6.