1. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -1 Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Strategic Management: Concepts & Cases 13 th Edition Fred David

2. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -2

3. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -3 “The greatest strategy is doomed if it’s implemented badly.” – Bernard Reimann Implementing Strategies

4. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -4 Less than 10% of strategies formulated are successfully implemented! The Nature of Strategy Implementation

5. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -5 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

6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -6 Countless marketing variables affect the success or failure of Strategy Implementation (SI). Two variables are of central importance to SI:  Market segmentation  Product positioning Marketing Issues

7. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -7 Subdividing of a market into distinct subsets of customers according to needs and buying habits Marketing Issues Market Segmentation

8. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -8 Market Segmentation Market Segment Basis Psychographic Behavioral Geographic Demographic

9. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -9 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. Market Segmentation

10. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -10 Market Segmentation decisions directly affect marketing mix variables, as indicated in Table 8-3: Product Place Promotion Price Marketing Mix Variables

11. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -11 Table 8-3

12. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -12 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 firm’s products or services compare to competitors’ on dimensions most important to success in the industry.

13. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -13 Product Positioning Steps 1. Select key criteria 2. Diagram map 3. Plot competitors’ products 4. Look for niches 5. Develop marketing plan

14. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -14 Product-Positioning Map for Menswear Retail Stores Very latest, fashionable menswear Conservative, everyday menswear Low PriceHigh Price Average department store Average specialty chain Average mass merchandiser or discounter

15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -15 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

16. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -16 Acquiring Needed Capital: Equity – common stock Debt - bonds Debt - borrow from lenders Finance/Accounting Issues

17. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -17 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.

18. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -18 Allows an organization to examine the expected results of various actions and approaches Finance/Accounting Issues Projected Financial Statement Analysis

19. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -19 1. Prepare income statement before balance sheet (forecast sales) 2. Use percentage of sales method to project CGS & expenses 3. Calculate projected net income Finance/Accounting Issues Steps in Preparing Projected Financial Statements

20. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -20 4. 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 (cont’d)

21. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -21 Projected Income Statement

22. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -22 Projected Balance Sheet

23. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -23 Details how funds will be obtained and spent for a specified period of time Finance/Accounting Issues Financial Budget

24. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -24 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

25. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -25 Central to strategy implementation – integrative, intensive, and diversification strategies often implemented through acquisitions of other firms Finance/Accounting Issues Evaluating the Worth of a Business

26. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -26 1. What a firm owns 2. What a firm earns 3. What a firm will bring in the market Evaluating the Worth of a Business There are three basic approaches

27. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -27 Research & Development Issues New products and improvement of existing products that allow for effective strategy implementation

28. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -28 Level of support constrained by resource availability Technological improvements shorten product life cycles Research & Development Issues Constraints

29. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -29 1. Be the first firm to market new technological products. 2. Be an innovative imitator of successful products. 3. Be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced. Research & Development Issues There are three major R&D approaches to implementing strategies:

30. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -30 Management Information Systems (MIS) Issues Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms.

31. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 8 -31 Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allows firm to reduce costs MIS Issues Functions of MIS