1. Lecture 19 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues

2. Finance/Accounting Issues
Central to Strategy Implementation –
Acquiring needed capital
Developing pro forma financial statements
Preparing financial budgets
Evaluating worth of a business

3. Decisions Requiring Finance/Accounting Policies
Raise capital w/ short-term, long-term preferred or common stock
Lease or buy fixed assets
Determine an appropriate dividend payout ratio
Use LIFO, FIFO, or market-value accounting approach

4. Decisions Requiring Finance/Accounting Policies
Extend time of accounts receivable
Establish percentage discount on accounts for terms
Determine the amount of cash kept on hand

5. Finance/Accounting Issues
Acquiring Capital to Implement Strategies –
Basic sources of capital:
Debt
Equity

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

7. Finance/Accounting Issues
Pro Forma Financial Statements -
Allows an organization to examine the expected results of various actions and approaches

8. Finance/Accounting Issues
6 Steps in Pro Forma Financial Analysis
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

9. Finance/Accounting Issues
Financial Budget – Document that details how funds will be obtained and spent for a specified period of time.

10. Finance/Accounting Issues
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

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

12. Evaluating Worth of a Business
3 Basic approaches:
What a firm owns
What a firm earns
What a firm will bring in the market

13. Research & Development Issues
New products and improvement of existing products that allow for effective strategy implementation

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

15. Research & Development Issues
3 Major R&D approaches to implementing strategies –
First firm to market new technological products
Be an innovative imitator of successful products
Low-cost producer of similar but less expensive products

16. Key Terms Cash Budget E-mail EPS/EBIT Analysis Financial Budget
Information Systems
Market Segmentation
Marketing-mix Variables

17. Key Terms Multidimensional Scaling Outstanding Shares Method
Price-earnings Ratio Method
Pro Forma Financial Statement Analysis
Product Positioning

18. Key Terms Research and Development Retained Earnings Vacant Niche
World Wide Web

19. Strategy Review, Evaluation and Control

20. Topic Outline The Nature of Strategy Evaluation
A Strategy-Evaluation Framework
Published Sources of Strategy-Evaluation Information

21. Topic Outline Characteristics of an Effective Evaluation System
Contingency Planning
Auditing

22. Topic Outline Using Computers to Evaluate Strategy
Guidelines for Effective Strategic Management

23. Implementing Strategies
Organizations are most vulnerable when they are at the peak of their success. -- R.T. Lenz

24. Strategy Review, Evaluation & Control
Systematic Review, Evaluation & Control –
Strategies become obsolete
Internal environments are dynamic
External environments are dynamic

25. Strategy Evaluation
Strategy evaluation is vital to the organization’s well-being
Alert management to potential or actual problems in a timely fashion
Erroneous strategic decisions can have severe negative impact on organizations

26. Strategy Evaluation 3 Basic Activities –
Examining the underlying bases of a firms’ strategy
Comparing expected to actual results
Corrective actions to ensure performance conforms to plans

27. Strategy Evaluation Strategy evaluation –
Complex and sensitive undertaking
Overemphasis can be costly and counterproductive

28. Strategy Evaluation
In many organizations, evaluation is an appraisal of performance –
Have assets increased?
Increase in profitability?
Increase in sales?
Increase in productivity?
Profit margins, ROI and EPS ratios increased?

29. Strategy Evaluation Four Criteria (Richard Rummelt): Consistency
Consonance
Feasibility
Advantage

30. Rummelt’s Criteria Consistency
Strategy should not present inconsistent goals and policies.
Conflict and interdepartmental bickering symptomatic of managerial disorder and strategic inconsistency

31. Rummelt’s Criteria Consonance
aNeed for strategies to examine sets of trends
Adaptive response to external environment
Trends are results of interactions among other trends

32. Rummelt’s Criteria Feasibility
Neither overtax resources or create unsolvable subproblems
Organizations must demonstrate the abilities, competencies, skills and talents to carry out a given strategy

33. Rummelt’s Criteria Advantage
Creation or maintenance of competitive advantage
Superiority in resources, skills, or position

34. Strategy Evaluation Difficulty in strategy evaluation –
Increase in environment’s complexity
Difficulty predicting future with accuracy
Increasing number of variables

35. Strategy Evaluation Difficulty in strategy evaluation –
Rate of obsolescence of plans
Domestic and global events
Decreasing time span for planning certainty

36. Process of Strategy Evaluation
Strategy evaluation should –
Initiative managerial questioning
Trigger review of objectives and values
Stimulate creativity in generating alternatives

37. Reviewing Bases of Strategy
Review of underlying bases of strategy –
Develop revised EFE Matrix
Develop revised IFE Matrix

38. Reviewing Bases of Strategy
Review effectiveness of strategy –
Competitors’ reaction to strategy
Competitors’ change in strategy
Competitors’ changes in strengths and weaknesses
4. Reasons for competitors’ strategic change

39. Reviewing Bases of Strategy
Review effectiveness of strategy –
Reasons for competitors’ successful strategies
Competitors’ present market positions and profitability
Potential for competitor retaliation
Potential for cooperation with competitors

40. Reviewing Bases of Strategy
Monitor Threats and Opportunities and Weaknesses and Strengths
Are our internal strengths still strengths?
Have we added additional strengths?
Are our weaknesses still weaknesses?
Have we other internal weaknesses?

41. Reviewing Bases of Strategy
Monitor Threats and Opportunities and Weaknesses and Strengths
Are opportunities still opportunities?
Other external opportunities?
Are threats still threats?
Are there other threats?
Are we vulnerable to a hostile takeover?

42. II. Measure Firm Performance
I. Review Underlying Bases
Evaluation Framework
III.
Take
Corrective
Actions
Yes
Differences? NO
II. Measure Firm Performance
Yes
Differences? NO
Continue present course

43. Measuring Organizational Performance
Comparing expected to actual results
Investigating deviations from plan
Evaluating individual performance
Progress toward stated objectives

44. Measuring Organizational Performance
Quantitative criteria for strategy evaluation –
Financial Ratios:
Compare performance over different periods
Compare performance to competitors
Compare performance to industry averages

45. Measuring Organizational Performance
Key Financial Ratios –
Return on investment
Return on equity
Profit margin
Market share

46. Measuring Organizational Performance
Key Financial Ratios –
Debt to equity
Earnings per share
Sales growth
Asset growth

47. Measuring Organizational Performance
Qualitative evaluation of strategy -
Internal consistency of strategy
Consistency of strategy with environment
Strategy appropriate in view of resources
Acceptable degree of risk
Appropriate time frame
Workability of the strategy

48. Characteristics of Evaluation
Basic requirements for effective strategy evaluation –
Economical
Meaningful
Generate useful information
Timely information
Provide a true picture of what is happening

49. Strategy-Evaluation Assessment Matrix
Continue course
Yes No
Corrective actions
Result
Has the firm progressed satisfactorily toward achieving its stated objectives?
Have major changes occurred in the firm’s external strategic position?
Have major changes occurred in the firm’s internal strategic position?

50. Contingency Planning Premise of sound strategic management –
Planning to deal with unfavorable and favorable events before they occur.

51. Contingency Planning Contingency Planning –
Alternative plans that can be put into effect if certain key events do not occur as expected

52. Auditing
Financial audits to determine correspondence between assertions based on strategic plans and established criteria
Environmental audits to insure sound and safe practices

53. Key Terms Advantage Auditing Consistency Consonance Contingency Plans
Corporate Agility
Feasibility

54. Key Terms Future Shock Management by Wandering Around
Measuring Organizational Performance
Planning Process Audit (PPA)
Reviewing the Underlying Bases of an Organization’s Strategy

55. Key Terms Revised EFE Matrix Revised IFE Matrix
Taking Corrective Actions

56. Thank You