Copyright 2005 Prentice Hall1 Bus 411 Day 14. Copyright 2007 Prentice Hall Ch 7-2 Agenda Assignment 4 Corrected 2 A’s, 4 B’s, 2 C’s & 2 D’s Assignment

Copyright 2005 Prentice Hall 1

Bus 411

Day 14

Copyright 2007 Prentice Hall Ch 7-2

Agenda

Assignment 4 Corrected 2 A’s, 4 B’s, 2 C’s & 2 D’s

Assignment 5 Due Mid-term exam

March 13-16 Take home (non-group work) 20-25 Short essays Intense-- ~10 hours

Discussion on Implementing Strategies: Management & Operations, Marketing, Finance/Accounting, R&D, & MIS Issues


Assignment 2

PURPOSE: In performing business policy case analysis, you can find information about the respective company’s

strategies. Comparing what is planned versus what you would have recommended is an important part of case analysis. Do not recommend what the firm actually plans, unless in-depth analysis of the situation reveals those strategies to be best among all feasible alternatives. This exercise gives you experience conducting library and Internet research to determine what Google should do in 2007.

INSTRUCTIONS: Look up Google and Yahoo! on the Internet. Find some recent articles about firms in this industry.

Scan Moody’s, Dun & Bradstreet, and Standard & Poor’s publications for information. Check http://finance.yahoo.com and www.strategyclub.com.

Summarize your findings in a three-page report titled “Strategies for Google in 2007.” Grading rubric

Quality of research (20 points) 3-5 quality sources (not web sites)

Quality of writing (20 points) Spelling, grammar, appropriate vocabulary and tone Directed wring not creative writing

In-Depth Analysis of existing and Planned Google Strategies (30 Points What worked, what didn’t, what will and what won’t

Recommendations for NEW Google strategies (30 points) Should have been tied to strategies discussed in the chapter


teams Team 1

J. Harbison N. Lozier M. Martin

Team 2 C. Brusig C. Pennine T. Nhundu J. Jalbert

Team 3 K. Beaulieu M. Doucette D. Lemon


Timeline March 9

Finish Chapter 7 & begin Chapter 8 Assignment 5 due

March 13 Finish Chapter 8 Chapter 9 Mid-term assigned

March 16 How to present a case study Mid-term due

March 20 Tony Case study One Apple Computer

March 23 Team 1 Case Study Two Dell Computer

March 26-30 Spring Break April 3

Team 2 Case Study Three PepsiCo April 6

Team 3 Case Study Four Molson Coors Brewing Company April 10

Team 1 Case Study Five Hershey Foods Corporation


Steps in Preparing Case Studies Identify Existing Mission, Vision,

Objectives, Strategies Develop New Vision and Mission

Most are poor Identify external opportunities and

threats CPM EFE

Identify internal strengths and weaknesses IFE Financial ratios

Analyze SWOT Matrix SPACE BCG IE matrix Grand Strategy Matrix QSPM

Give advantage and disadvantages of alternative strategies

Recommend Strategies and long range

objectives Show cost

Specify how strategies are to be implemented and what results to expect

Recommend specific annual objectives (goal) and polices

Recommend procedures for evaluation

Be Original – Take chances Remember business rewards risk taking


Management Issues (cont’d)

ManagementIssues

Supportive CultureSupportive Culture

Production/OperationsProduction/Operations

Human ResourcesHuman Resources

Resistance to ChangeResistance to Change

Natural EnvironmentNatural Environment


Management Issues

Resistance to Change

-- Single greatest threat to successful strategy implementation


Management Issues

Resistance to Change

-- Raises anxiety; fear concerning

Economic loss

Inconvenience

Uncertainty

Break in status-quo


Management Issues

Change StrategiesForce Change Strategy

Just do it

Educative Change StrategyThis is why we are changing

Rational or Self-Interest Change Strategy

This is why change is good for you



ManagementIssues







Management Issues

Natural Environment

-- Wide appreciation for firms that “mend” rather than “harm” the environment


Management Issues

Natural Environment – Environmental Strategies

Develop/acquire “green” businesses

Divesting environmental-damaging business

Low-cost producer through waste minimization & energy conservation



ManagementIssues







Management Issues

Strategy-Supportive Culture

-- Preserve, emphasize, & build upon aspects of existing culture that support new strategies


• 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:


• 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:



ManagementIssues







Management Issues

Production/Operations Concerns

-- Production processes typically constitute more than 70% of firm’s total assets


Management Issues

Production/Operations Decisions

Plant size

Inventory/Inventory control

Quality control

Cost control

Technological innovation



ManagementIssues







Management Issues

Human Resource Concerns

-- HR manager position has strategic responsibility & has changed dramatically as companies continue to reorganize, outsource, etc.


Management Issues

Human Resource Strategic Responsibilities

Assessing staffing needs/costs

Developing performance incentives

ESOP’shttp://groups.msn.com/DynKorea/dyncorphistory.msnw http://www.corpwatch.org/article.php?list=type&type=18

Child-care policies

Work-life balance issues


Diversity Issues

CEO Company Age

Meg Whitman eBay 49

Andrea Jung Avon Products 47

Anne Mulcahy Xerox 52

Marjorie Magner Citigroup 56

Betsy Holden Kraft Foods 49

Ann Moore AOL Time Warner 57

Women CEO’s in U.S. 2005 (examples)

http://money.cnn.com/magazines/fortune/fortune500/womenceos/


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


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


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

Strategic Management:

Concepts & Cases

11th Edition

Fred David


The greatest strategy is doomed if it’s implemented badly. --

Bernard Reimann

Implementing Strategies


-- Strategy implementation means change

The Nature of Strategy Implementation


-- Less than 10% of strategies formulated are successfully implemented!



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


Low Success Rate – Strategy Implementation


Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems


Successful Strategy Implementation


Marketing Issues

-- Marketing variables affect success/failure of strategy implementation


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


1. Market segmentation

2. Product positioning

Marketing Issues

Centrally important to Implementation


Subdividing of a market into distinct subsets of customers according to needs and buying habits

Marketing Issues

Market Segmentation


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


Directly affect marketing mix variables: Product Place Promotion Price

Marketing Issues

Market Segmentation


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 sellingDistribution coverage

Features

LevelAdvertisingDistribution channels

Quality

PricePromotionPlaceProduct


Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic


Region County size City or SMSA size Density Climate

Marketing Issues

Geographic


Marketing Issues






Age Family Size Family Life Cycle Income/Occupation Education Religion Race/Nationality

Marketing Issues

Demographic


Marketing Issues






Social Class Lifestyle Personality

Marketing Issues

Psychographic


Marketing Issues






Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product

Marketing Issues

Behavioral


Marketing Issues

-- Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry

Product Positioning


Marketing Issues

ProductPositioning

Customer WantsCustomer Wants

Customer NeedsCustomer Needs


Product Positioning Steps

ProductPositioning

Steps

2. Diagram Map

1. Select Key Criteria

3. Plot competitors’products

4. Look for niches

5. Develop Marketing Plan


Product Positioning Map

LowConvenience

HighCustomerLoyalty

LowCustomerLoyalty

HighConvenience

Firm 1•

•Firm 2

• Firm 3

Rental Car Market

LowCustomerLoyalty

HighConvenience

Firm 1•

•Firm 2

• Firm 3

Rental Car Market


Look for vacant niche Avoid sub optimization Don’t serve 2 segments w/ same strategy Don’t position in the middle of the map

Marketing Issues

Product Positioning as Strategy Implementation Tool


Finance/Accounting Issues

-- Central to strategy implementation


Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business


Essential for implementation


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


Decisions based on Finance/Accounting


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

Cash flow analysis has become more important in recent past due to rising Prime rate


Decisions based on Finance/Accounting


Debt

Equity


Capital acquisition to implement strategies


EPS/EBIT analysis Earnings per share/Earnings before interest and

taxes


Debt vs. Equity Decisions




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


Projected Financial Statements


1. Prepare income statement before balance sheet (forecast sales)

2. Use percentage of sales method to project CoGS & expenses

3. Calculate projected net income


Steps in Preparing Projected Financial Statements


4. Subtract dividends to be paid from Net Income and add remaining to Retained Earnings

5. Project balance sheet times beginning with retained earnings

6. List comments (remarks) on projected statements


Steps in Preparing Projected Financial Statements (cont’d)


Projected Income Statement for Litten Company (in millions)

Prior Year 2005Projected Year

2006 Remarks

Projected Income Statement

Sales 100 150.00 50% increase

Cost of Goods Sold 70 105.00 70% of sales

Gross Margin 30 45.00

Selling Expense 10 15.00 10% of sales

Administrative Expense 5 7.50 5% of sales

EBIT 15 22.50

Interest 3 3.00

EBT 12 19.50

Taxes 6 9.75 50% rate

Net Income 6 9.75

Dividends 2 5.00

Retained Earnings 4 4.75


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


Financial Budget


Cash budgets Operating budgets Sales budgets Profit budgets Factory Budgets Expense Budgets


Types of Budgets


Divisional budgets Variable budgets Flexible budgets Fixed budgets


Types of Budgets


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


Evaluating Worth of a Business


1. What a firm owns1. Total assets – liabilities (discount overvalued assets)

2. Stockholders equity

2. What a firm earns1. 5 X times annual earnings (tax consequences)

3. What a firm will bring in the market1. Outstanding shares


Evaluating Worth of a Business:

3 Basic Approaches


Worth of a Business Analysis (see 8-8)

Southwest AirlinesStockholders’ Equity: $ 5,524Net Income: 313Stock Price: 15.70EPS: .45Shares Outstanding 784

Company Worth AnalysisStockholders Equity $ 5,524Net Income x 5 1,565Share Price/EPS x NI 10,920# Shares x Share Price 12,309


Research & Development Issues

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


Level of support constrained by resource availability

Technological improvements shorten product life cycles


Constraints


1. 1st firm to market new technological products2. Innovative imitator of successful products3. Low-cost producer of similar but less

expensive products


3 Major R&D approaches to implementing strategies


Management Information Systems (MIS) Issues

-- Information is the basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms


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

MIS Issues

Functions of MIS

Documents

Copyright 2005 Prentice Hall1 Bus 411 Day 14. Copyright 2007 Prentice Hall Ch 7-2 Agenda Assignment 4 Corrected 2 A’s, 4 B’s, 2 C’s & 2 D’s Assignment