1. BUS 411
DAY 13

2. Agenda Questions? Assignment 4 DUE Assignment 5 posted
Due March 19
Assignment 5 Walt Disney.pdf
Midterm will Take Home, due March 29
Finish Discussion On Marketing, Finance/Accounting, R&D, and MIS issues.
Begin Discussion on Strategy Review Evaluation and Control

3. Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues
Chapter Eight

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Chapter Objectives
Discuss procedures for determining the worth of a business.
Explain why projected financial statement analysis is a central strategy implementation tool.
Discuss the nature and role of research and development in strategy implementation.
Explain how management information systems can determine the success of strategy-implementation efforts.
Explain business analytics and data mining.
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5. Comprehensive Strategic-Management Model
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6. Project Financials Example
McDonalds 2010
1) Build 300 new company-owned and operated McDonald’s in Africa at a cost of $1 million dollars each.
2) Forecast a 10% rise in company-owned restaurant sales in year 2010
3) Borrow $150 million payable in five yearly 4% simple interest
4) On January 10, 2010 issue enough common stock to raise another $150 million
5) On Dec 20, 2010 declare a $3 per share dividend
Assignment%205%20MCD%20INCOME.xls
Assignment%205%20MCD%20balance%20sheet.xls
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Financial Budgets
Financial budget
a document that details how funds will be obtained and spent for a specified period of time
include cash budgets, operating budgets, sales budgets, profit budgets, factory budgets, capital budgets, expense budgets, divisional budgets, variable budgets, flexible budgets, and fixed budgets
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8. Limitations of Financial Budgets
Budgetary programs can become so detailed that they are cumbersome and overly expensive
Financial budgets can become a substitute for objectives
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9. Limitations of Financial Budgets
Budgets can hide inefficiencies if based solely on precedent rather than on periodic evaluation of circumstances and standards
Budgets are sometimes used as instruments of tyranny that result in frustration, resentment, absenteeism, and high turnover
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10. Evaluating the Worth of a Business
Three main approaches:
What a firm owns (assets based)
What a firm earns (ROI)
What a firm will bring in the market (market based)
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11. Evaluating the Worth of a Business
The first approach is determining a firm’s net worth or stockholders’ equity
(True) Assets – liabilities
The second approach is based on the future benefits a firm’s owners may derive through net profits
Future returns, treats possible purchase as an investment
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12. Evaluating the Worth of a Business
The third approach is to divide the market price of the firm’s common stock by the annual earnings per share and multiply this number by the firm’s average net income for the past five years
Also called the price-earnings ratio method
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13. Evaluating the Worth of a Business
The fourth method is to simply multiply the number of shares outstanding by the market price per share
Also called the outstanding shares method
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14. - (Goodwill +Intangibles )
1, , ,371
3, , ,573

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16. Research and Development (R&D) Issues
Emphasize product or process improvements
Stress basic or applied research
Be leaders or followers in R&D
Develop robotics or manual-type processes
Spend a high, average, or low amount of money on R&D
Perform R&D within the firm or contract R&D to outside firms
Use university researchers or private-sector researchers
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17. R&D Approaches for Implementing Strategies
Be the first firm to market new technological products
Be an innovative imitator of successful products, thus minimizing the risks and costs of start-up
Be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced
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Research and Development Involvement in Selected Strategy-Implementation Situations
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19. Management Information Systems (MIS) Issues
Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms
The process of strategic management is facilitated immensely in firms that have an effective information system
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Business Analytics
Business analytics
a management information system technique that involves using software to mine huge volumes of data to help executives make decisions
also called predictive analytics, machine learning, or data mining
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Business Analytics
A key distinguishing feature of business analytics is that it is predictive rather than retrospective, in that it enables a firm to learn from experience and make current and future decisions based on prior information
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22. Strategy Review, Evaluation, and Control
Chapter Nine

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Chapter Objectives
Describe a practical framework for evaluating strategies.
Explain why strategy evaluation is complex, sensitive, and yet essential for organizational success.
Discuss the importance of contingency planning in strategy evaluation.
Discuss the role of auditing in strategy evaluation.
Discuss the Balanced Scorecard.
Discuss three twenty-first-century challenges in strategic management.
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24. A Comprehensive Strategic-Management Model
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25. The Nature of Strategy Evaluation
Strategy evaluation includes three basic activities:
examining the underlying bases of a firm’s strategy
comparing expected results with actual results
taking corrective actions to ensure that performance conforms to plans
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26. A Few Big Company Household Names That Disappeared Over Past Years
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27. Rumelt’s Criteria for Evaluating Strategies
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28. Rumelt’s Criteria for Evaluating Strategies
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29. The Nature of Strategy Evaluation
Consonance and advantage are mostly based on a firm’s external assessment
Consistency and feasibility are largely based on an internal assessment
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30. Why Strategy Evaluation is More Difficult Today
A dramatic increase in the environment’s complexity
The increasing difficulty of predicting the future with accuracy
The increasing number of variables
The rapid rate of obsolescence of even the best plans
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31. Why Strategy Evaluation is More Difficult Today
The increase in the number of both domestic and world events affecting organizations
The decreasing time span for which planning can be done with any degree of certainty
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32. The Process of Evaluating Strategies
Strategy evaluation should initiate managerial questioning of expectations and assumptions, should trigger a review of objectives and values, and should stimulate creativity in generating alternatives and formulating criteria of evaluation
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33. The Process of Evaluating Strategies
Evaluating strategies on a continuous rather than on a periodic basis allows benchmarks of progress to be established and more effectively monitored
Successful strategies combine patience with a willingness to promptly take corrective actions when necessary
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34. Reviewing Bases of Strategy
How have competitors reacted to our strategies?
How have competitors’ strategies changed?
Have major competitors’ strengths and weaknesses changed?
Why are competitors making certain strategic changes?
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35. Reviewing Bases of Strategy
Why are some competitors’ strategies more successful than others?
How satisfied are our competitors with their present market positions and profitability?
How far can our major competitors be pushed before retaliating?
How could we more effectively cooperate with our competitors?
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36. Key Questions to Address in Evaluating Strategies
Are our internal strengths still strengths?
Have we added other internal strengths? If so, what are they?
Are our internal weaknesses still weaknesses?
Do we now have other internal weaknesses? If so, what are they?
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37. Key Questions to Address in Evaluating Strategies
Are our external opportunities still opportunities?
Are there now other external opportunities? If so, what are they?
Are our external threats still threats?
Are there now other external threats? If so, what are they?
Are we vulnerable to a hostile takeover?
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38. A Strategy-Evaluation Framework

39. Measuring Organizational Performance
Strategists use common quantitative criteria to make three critical comparisons:
Comparing the firm’s performance over different time periods
Comparing the firm’s performance to competitors’
Comparing the firm’s performance to industry averages
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40. Problems with Quantitative Criteria
Most quantitative criteria are geared to annual objectives rather than long-term objectives
Different accounting methods can provide different results on many quantitative criteria
Intuitive judgments are almost always involved in deriving quantitative criteria
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41. Additional Key Questions
How good is the firm’s balance of investments between high-risk and low-risk projects?
How good is the firm’s balance of investments between long-term and short-term projects?
How good is the firm’s balance of investments between slow-growing markets and fast-growing markets?
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42. Additional Key Questions
How good is the firm’s balance of investments among different divisions?
To what extent are the firm’s alternative strategies socially responsible?
What are the relationships among the firm’s key internal and external strategic factors?
How are major competitors likely to respond to particular strategies?
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Corrective Actions
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44. The Balanced Scorecard
How well is the firm continually improving and creating value along measures such as innovation, technological leadership, product quality, operational process efficiencies, and so on?
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45. The Balanced Scorecard
How well is the firm sustaining and even improving upon its core competencies and competitive advantages?
How satisfied are the firm’s customers?
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46. The Balanced Scorecard
The Balanced Scorecard approach to strategy evaluation aims to balance long-term with short-term concerns, to balance financial with nonfinancial concerns, and to balance internal with external concerns.
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47. An Example Balanced Scorecard
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48. Balanced Score Card
Source:

49. Characteristics of an Effective Evaluation System
Strategy evaluation activities must be economical
too much information can be just as bad as too little information
too many controls can do more harm than good
Activities should be meaningful
should specifically relate to a firm’s objectives
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50. Characteristics of an Effective Evaluation System
Activities should provide timely information
Activities should be designed to provide a true picture of what is happening
Activities should not dominate decisions
should foster mutual understanding, trust, and common sense
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Contingency Planning
If a major competitor withdraws from particular markets as intelligence reports indicate, what actions should our firm take?
If our sales objectives are not reached, what actions should our firm take to avoid profit losses?
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Contingency Planning
If demand for our new product exceeds plans, what actions should our firm take to meet the higher demand?
If certain disasters occur, what actions should our firm take?
If a new technological advancement makes our new product obsolete sooner than expected, what actions should our firm take?
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53. Effective Contingency Planning
Identify both beneficial and unfavorable events that could possibly derail the strategy or strategies.
Specify trigger points.
Assess the impact of each contingent event.
Develop contingency plans.
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54. Effective Contingency Planning
Assess the counter-impact of each contingency plan.
Determine early warning signals for key contingent events.
For contingent events with reliable early warning signals, develop advance action plans to take advantage of the available lead time.
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Auditing
Auditing
“a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users”
GAAP, GAAS, IFRS, FASB, GASB
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56. Twenty-First-Century Challenges in Strategic Management
Deciding whether the process should be more an art or a science
Deciding whether strategies should be visible or hidden from stakeholders
Deciding whether the process should be more top-down or bottom-up in their firm
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