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Copyright 2005 Prentice Hall1 Bus 411 Day 12. Copyright 2007 Prentice Hall Ch 6 -2 Agenda Assignment 4 Due Assignment 5 Posted (Last One!) Due March 20.

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Presentation on theme: "Copyright 2005 Prentice Hall1 Bus 411 Day 12. Copyright 2007 Prentice Hall Ch 6 -2 Agenda Assignment 4 Due Assignment 5 Posted (Last One!) Due March 20."— Presentation transcript:

1 Copyright 2005 Prentice Hall1 Bus 411 Day 12

2 Copyright 2007 Prentice Hall Ch 6 -2 Agenda Assignment 4 Due Assignment 5 Posted (Last One!) Due March 20 SWOT, SPACE, BCG and QSPM Matrices for Google Mid term Exam Posted Due March Short essays Continue Discussion on Implementing Strategies

3 Copyright 2007 Prentice Hall Ch 6 -3 Timeline (tentative) Today Chapter 8 Assignment 4 due Mid-term assigned Pick teams & assign cases March Spring Break March 17 Chapter 9 How to present a case study March 20 Assignment 5 Due Tony Case study One Apple Computer Team work March 24 Midterm due Team work March 27 Team Work March 31 Team 1 Case 19 Jet Blue April 3 Team 2 Case 20 AirTran April 7 Tony Case 27 Kroger April 10 Team 1 Case 26 Best Buy April 14 Team 2 Case 28 Home Depot April 17 Tony Case 23 Harrahs April 21 Team 1 Case 24 Royal Caribbean Cruises April 24 Team 2 Case 25 Web Reservations International April 28 Team 1 Case 21 USA truck May 1 Team 2 Case 22 Yellow Roadway Corp. Take home final assigned May 10AM In-class final May 9 by 3 PM Take home final

4 Copyright 2007 Prentice Hall Ch 6 -4 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

5 Copyright 2007 Prentice Hall Ch 6 -5 Management Issues Restructuring -- Reducing the size of the firm – # of employees, divisions and/or units, # of hierarchical levels

6 Copyright 2007 Prentice Hall Ch 6 -6 Management Issues Restructuring Downsizing Rightsizing Delayering

7 Copyright 2007 Prentice Hall Ch 6 -7 Management Issues Reengineering -- Reconfiguring or redesigning work, jobs, & processes to improve cost, quality, service, & speed

8 Copyright 2007 Prentice Hall Ch 6 -8 Management Issues Reengineering Process management Process innovation Process redesign

9 Copyright 2007 Prentice Hall Ch 6 -9 Management Issues Management Issues Resources Organizational structure Restructuring Rewards/Incentives Annual Objectives Policies

10 Copyright 2007 Prentice Hall Ch Management Issues Linking Pay/Performance to Strategies -- Pay for performance systems

11 Copyright 2007 Prentice Hall Ch Management Issues Linking Pay/Performance to Strategies Dual bonus systems Based on annual and long-term objectives Profit sharing systems Company makes money.. Employees make money Gain sharing systems Exceeding agreed to objectives

12 Copyright 2007 Prentice Hall Ch Tests for Performance-Pay Plans Does the plan capture attention? Do employees understand the plan? Is the plan improving communication? Does the plan pay out when it should? Is the company or unit performing better?

13 Copyright 2007 Prentice Hall Ch

14 Copyright 2007 Prentice Hall Ch Management Issues (contd) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

15 Copyright 2007 Prentice Hall Ch Management Issues Resistance to Change -- Single greatest threat to successful strategy implementation

16 Copyright 2007 Prentice Hall Ch Management Issues Resistance to Change -- Raises anxiety; fear concerning Economic loss Inconvenience Uncertainty Break in status-quo

17 Copyright 2007 Prentice Hall Ch Management Issues Change Strategies Force Change Strategy Just do it Educative Change Strategy This is why we are changing Rational or Self-Interest Change Strategy This is why change is good for you

18 Copyright 2007 Prentice Hall Ch Management Issues (contd) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

19 Copyright 2007 Prentice Hall Ch Management Issues Natural Environment -- Wide appreciation for firms that mend rather than harm the environment

20 Copyright 2007 Prentice Hall Ch Management Issues Natural Environment – Environmental Strategies Develop/acquire green businesses Divesting environmental-damaging business Low-cost producer through waste minimization & energy conservation

21 Copyright 2007 Prentice Hall Ch Management Issues (contd) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

22 Copyright 2007 Prentice Hall Ch Management Issues Strategy-Supportive Culture -- Preserve, emphasize, & build upon aspects of existing culture that support new strategies

23 Copyright 2007 Prentice Hall Ch Formal statements of philosophy, charters, etc. used for recruitment and selection, socialization Designing of physical spaces, facades, buildings Deliberate role modeling, teaching and coaching Explicit reward and status system, promotion criteria Stories, legends, myths about key people and events Management Issues Elements linking culture to strategy:

24 Copyright 2007 Prentice Hall Ch What leaders pay attention to, measure and control Leader reactions to critical incidents and crises How the organization is designed and structured Organizational systems and procedures Criteria used for recruitment, selection, promotion, retirement Management Issues Elements linking culture to strategy:

25 Copyright 2007 Prentice Hall Ch Management Issues (contd) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

26 Copyright 2007 Prentice Hall Ch Management Issues Production/Operations Concerns -- Production processes typically constitute more than 70% of firms total assets

27 Copyright 2007 Prentice Hall Ch Management Issues Production/Operations Decisions Plant size Inventory/Inventory control Quality control Cost control Technological innovation

28 Copyright 2007 Prentice Hall Ch Management Issues (contd) Management Issues Supportive Culture Production/Operations Human Resources Resistance to Change Natural Environment

29 Copyright 2007 Prentice Hall Ch Management Issues Human Resource Concerns -- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc.

30 Copyright 2007 Prentice Hall Ch February 29, 2008 March 1, 2008

31 Copyright 2007 Prentice Hall Ch Management Issues Human Resource Strategic Responsibilities Assessing staffing needs/costs Developing performance incentives ESOPs Child-care policies Work-life balance issues

32 Copyright 2007 Prentice Hall Ch Diversity Issues CEOCompanyAge Meg WhitmaneBay49 Andrea JungAvon Products47 Anne MulcahyXerox52 Marjorie MagnerCitigroup56 Betsy HoldenKraft Foods49 Ann MooreAOL Time Warner57 Women CEOs in U.S (examples)

33 Copyright 2007 Prentice Hall Ch Benefits of a Diverse Workforce Improves corporate culture Improves employee morale Leads to a higher retention of employees Leads to easier recruitment of employees Decreases complaints and litigation Increases creativity Decreases interpersonal conflict

34 Copyright 2007 Prentice Hall Ch Benefits of a Diverse Workforce Enables the organization to move into emerging markets Improves client relations Increases productivity Improves the bottom line Maximizes brand identity Reduces training costs CostsBenefExSumEN.pdf

35 Copyright 2007 Prentice Hall Ch Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, & MIS Issues Strategic Management: Concepts & Cases 11 th Edition Fred David

36 Copyright 2007 Prentice Hall Ch The greatest strategy is doomed if its implemented badly. -- Bernard Reimann Implementing Strategies

37 Copyright 2007 Prentice Hall Ch Strategy implementation means change The Nature of Strategy Implementation

38 Copyright 2007 Prentice Hall Ch Less than 10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation

39 Copyright 2007 Prentice Hall Ch 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 The Nature of Strategy Implementation Low Success Rate – Strategy Implementation

40 Copyright 2007 Prentice Hall Ch Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems The Nature of Strategy Implementation Successful Strategy Implementation

41 Copyright 2007 Prentice Hall Ch Marketing Issues -- Marketing variables affect success/failure of strategy implementation

42 Copyright 2007 Prentice Hall Ch 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 warranty Marketing Issues Marketing decisions requiring policies

43 Copyright 2007 Prentice Hall Ch Market segmentation 2. Product positioning Marketing Issues Centrally important to Implementation

44 Copyright 2007 Prentice Hall Ch Subdividing of a market into distinct subsets of customers according to needs and buying habits Marketing Issues Market Segmentation

45 Copyright 2007 Prentice Hall Ch Key to matching supply & demand Market development, product-development, market penetration & diversification strategies Allows operating with limited resources Enables small firms to compete successfully Marketing Issues Market Segmentation

46 Copyright 2007 Prentice Hall Ch Directly affect marketing mix variables: Product Place Promotion Price Marketing Issues Market Segmentation

47 Copyright 2007 Prentice Hall Ch Marketing Mix – Component Factors Service level Warranty Transportation carriers Product line Inventory levels/locations Packaging PublicitySales territoriesBrand name Payment termsSales promotionOutlet locationStyle Discounts & allowances Personal selling Distribution coverage Features LevelAdvertising Distribution channels Quality PricePromotionPlaceProduct

48 Copyright 2007 Prentice Hall Ch Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

49 Copyright 2007 Prentice Hall Ch Region County size City or SMSA size Density Climate Marketing Issues Geographic

50 Copyright 2007 Prentice Hall Ch Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

51 Copyright 2007 Prentice Hall Ch Age Family Size Family Life Cycle Income/Occupation Education Religion Race/Nationality Marketing Issues Demographic

52 Copyright 2007 Prentice Hall Ch Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

53 Copyright 2007 Prentice Hall Ch Social Class Lifestyle Personality Marketing Issues Psychographic

54 Copyright 2007 Prentice Hall Ch Marketing Issues Market Segment Basis Psychographic Behavioral Geographic Demographic

55 Copyright 2007 Prentice Hall Ch Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product Marketing Issues Behavioral

56 Copyright 2007 Prentice Hall Ch Marketing Issues -- Schematic representations that reflect how products/services compare to competitors on dimensions most important to success in the industry Product Positioning

57 Copyright 2007 Prentice Hall Ch Marketing Issues Product Positioning Customer Wants Customer Needs

58 Copyright 2007 Prentice Hall Ch Product Positioning Steps Product Positioning Steps 2. Diagram Map 1. Select Key Criteria 3.Plot competitors products 4. Look for niches 5. Develop Marketing Plan

59 Copyright 2007 Prentice Hall Ch Product Positioning Map Low 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

60 Copyright 2007 Prentice Hall Ch Look for vacant niche Avoid sub optimization Dont serve 2 segments w/ same strategy Dont position in the middle of the map Marketing Issues Product Positioning as Strategy Implementation Tool

61 Copyright 2007 Prentice Hall Ch Finance/Accounting Issues -- Central to strategy implementation

62 Copyright 2007 Prentice Hall Ch Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business Finance/Accounting Issues Essential for implementation

63 Copyright 2007 Prentice Hall Ch Raise capital – short-term debt, long-term debt, preferred, or common stock Lease or buy fixed assets Expense or depreciate Determine appropriate dividend payout ratio Finance/Accounting Issues Decisions based on Finance/Accounting

64 Copyright 2007 Prentice Hall Ch LIFO, FIFO, or market-value accounting approach Extend time of AR Factor AR? Establish % discount on accounts for terms Determine the amount of cash kept on hand Finance/Accounting Issues Decisions based on Finance/Accounting

65 Copyright 2007 Prentice Hall Ch Debt Equity Finance/Accounting Issues Capital acquisition to implement strategies

66 Copyright 2007 Prentice Hall Ch EPS/EBIT analysis Earnings per share/Earnings before interest and taxes Finance/Accounting Issues Debt vs. Equity Decisions

67 Copyright 2007 Prentice Hall Ch $Amount Needed: $500 Stock Price $40 EBIT Range $1000 to $2000 Tax Rate 175/673 =.26 = 26% Interest Rate 5% (based on prime rate) # Shares Outstanding 350 (million) Prime Rate History EPS-EBIT Analysis (in $millions) Heinz Company – Year End 2001

68 Copyright 2007 Prentice Hall Ch EPS-EBIT Analysis (in $millions) – Heinz Company Stock FinancingFinancing Combination 60/40 HighLowHighLowHighLow EBIT ($982.4 in 2001)$2000$1000$2000$1000$2000$1000 Interest (5%) EBT Taxes 26% EAT # Shares outstanding EPS

69 Copyright 2007 Prentice Hall Ch Conclusion: Heinz should use debt to raise the $500 million Finance/Accounting Issues EPS-EBIT Analysis Heinz

70 Copyright 2007 Prentice Hall Ch 6 -70

71 Copyright 2007 Prentice Hall Ch 6 -71

72 Copyright 2007 Prentice Hall Ch Allow an organization to examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statements

73 Copyright 2007 Prentice Hall Ch Prepare income statement before balance sheet (forecast sales) 2. Use percentage of sales method to project CoGS & expenses 3. Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements

74 Copyright 2007 Prentice Hall Ch Subtract dividends to be paid from Net Income and add remaining to Retained Earnings 5. Project balance sheet items beginning with retained earnings 6. List comments (remarks) on projected statements Finance/Accounting Issues Steps in Preparing Projected Financial Statements (contd)

75 Copyright 2007 Prentice Hall Ch Projected Income Statement for Litten Company (in millions) Prior Year 2005 Projected Year 2006Remarks Projected Income Statement Sales % increase Cost of Goods Sold % of sales Gross Margin Selling Expense % of sales Administrative Expense57.505% of sales EBIT Interest33.00 EBT Taxes % rate Net Income69.75 Dividends25.00 Retained Earnings44.75

76 Copyright 2007 Prentice Hall Ch Details how funds will be obtained and spent for a specified period of time. Finance/Accounting Issues Financial Budget

77 Copyright 2007 Prentice Hall Ch Cash budgets Operating budgets Sales budgets Profit budgets Factory Budgets Expense Budgets Finance/Accounting Issues Types of Budgets

78 Copyright 2007 Prentice Hall Ch Divisional budgets Variable budgets Flexible budgets Fixed budgets Finance/Accounting Issues Types of Budgets

79 Copyright 2007 Prentice Hall Ch Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating Worth of a Business

80 Copyright 2007 Prentice Hall Ch What a firm owns 1. Total assets – liabilities (discount overvalued assets) 2. Stockholders equity 2. What a firm earns 1. 5 X times annual earnings (tax consequences) 3. What a firm will bring in the market 1. Outstanding shares Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches

81 Copyright 2007 Prentice Hall Ch Worth of a Business Analysis (see 8-8) Southwest Airlines Stockholders Equity:$ 5,524 Net Income: 313 Stock Price: EPS:.45 Shares Outstanding 784 Company Worth Analysis Stockholders Equity $ 5,524 Net Income x 5 1,565 Share Price/EPS x NI 10,920 # Shares x Share Price 12,309

82 Copyright 2007 Prentice Hall Ch Research & Development Issues -- New products and improvement of existing products that allow for effective strategy implementation

83 Copyright 2007 Prentice Hall Ch Level of support constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints

84 Copyright 2007 Prentice Hall Ch st firm to market new technological products 2. Innovative imitator of successful products 3. Low-cost producer of similar but less expensive products Research & Development Issues 3 Major R&D approaches to implementing strategies

85 Copyright 2007 Prentice Hall Ch Management Information Systems (MIS) Issues -- Information is the basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms

86 Copyright 2007 Prentice Hall Ch 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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