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

Strategic Management: Concepts & Cases 13th Edition Fred David

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Ch 8 -1

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Ch 8 -2

Implementing Strategies

The greatest strategy is doomed if its implemented badly. Bernard Reimann

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Ch 8 -3

The Nature of Strategy Implementation

Less than 10% of strategies formulated are successfully implemented!

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Ch 8 -4

The Nature of Strategy Implementation

There are many reasons for the low success rate of Strategy Implementation. These include: Failing to segment markets appropriately Paying too much for a new acquisition Falling behind competitors in R&D Not recognizing benefit of computers in managing information

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Ch 8 -5

Marketing Issues
Countless marketing variables affect the success or failure of Strategy Implementation (SI). Two variables are of central importance to SI:

Market segmentation Product positioning

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Marketing Issues
Market Segmentation

Subdividing of a market into distinct subsets of customers according to needs and buying habits
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Market Segmentation
Geographic Demographic

Market Segment Basis

Psychographic

Behavioral

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Ch 8 -8

Market Segmentation
Market Segmentation is an important variable in strategy implementation for three major reasons: It is required to successfully implement market development, product development, market penetration, and diversification strategies. It allows a firm to operate with limited resources because mass production, distribution, and advertising are not required. It enables small firms to compete successfully with large firms by maximizing per-unit profits and per-segment sales.
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Marketing Mix Variables

Market Segmentation decisions directly affect marketing mix variables, as indicated in Table 8-3: Product Place Promotion Price
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Table 8-3

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Ch 8 -11

Product Positioning
After markets have been segmented, the next step is to find out what customers in each segment need and want. Product Positioning is widely used for this purpose. Product Positioning entails developing schematic representations that reflect how a firms products or services compare to competitors on dimensions most important to success in the industry.
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Product Positioning Steps

1. 2. 3. 4. 5.

Select key criteria Diagram map Plot competitors products Look for niches Develop marketing plan
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Product-Positioning Map for Menswear Retail Stores

Very latest, fashionable menswear Average specialty chain Low Price Average mass merchandiser or discounter High Price Average department store

Conservative, everyday menswear

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Finance/Accounting Issues
There are several finance/accounting concepts that are central to strategy implementation. Some of the concepts
essential for Strategy Implementation are:

Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating the worth of a business
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Finance/Accounting Issues
Acquiring Needed Capital: Equity common stock Debt - bonds Debt - borrow from lenders

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Ch 8 -16

Finance/Accounting Issues

Debt vs. Equity Decisions

EPS/EBIT analysis

An Earnings Per Share/Earnings Before Interest and Taxes analysis is the most widely used method for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies. This method involves an examination of the impact that debt versus stock financing has on earnings per share under various assumptions as to EBIT.

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Ch 8 -17

Finance/Accounting Issues
Projected Financial Statement Analysis

Allows an organization to examine the expected results of various actions and approaches

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Ch 8 -18

Finance/Accounting Issues
Steps in Preparing Projected Financial Statements
1.

Prepare income statement before balance sheet (forecast sales) Use percentage of sales method to project CGS & expenses Calculate projected net income
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2.

3.

Finance/Accounting Issues
Steps in Preparing Projected Financial Statements (contd)
4.

Subtract dividends to be paid from net income and add remaining to retained earnings Project balance sheet items beginning with retained earnings List comments (remarks) on projected statements
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5.

6.

Projected Income Statement

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Ch 8 -21

Projected Balance Sheet

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Ch 8 -22

Finance/Accounting Issues Financial Budget

Details how funds will be obtained and spent for a specified period of time

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Ch 8 -23

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

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Ch 8 -24

Finance/Accounting Issues
Evaluating the Worth of a Business

Central to strategy implementation integrative, intensive, and diversification strategies often implemented through acquisitions of other firms

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Ch 8 -25

Evaluating the Worth of a Business

There are three basic approaches
1.

What a firm owns What a firm earns What a firm will bring in the market
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2.

3.

Research & Development Issues

New products and improvement of existing products that allow for effective strategy implementation

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Ch 8 -27

Research & Development Issues

Constraints

Level of support constrained by resource availability Technological improvements shorten product life cycles
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Research & Development Issues

There are three major R&D approaches to implementing strategies:
1.

2.

3.

Be the first firm to market new technological products. Be an innovative imitator of successful products. Be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced.
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Management Information Systems (MIS) Issues

Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms.

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Ch 8 -30

MIS Issues
Functions of MIS

Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allows firm to reduce costs
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