Chapter08 1

Fred R. DavidPrentice Hall

Ch 8-1

Chapter 8Chapter 8Implementing Strategies:Implementing Strategies:

Marketing, Finance/Accounting, Marketing, Finance/Accounting, R&D, and MIS IssuesR&D, and MIS Issues

Strategic Management:

Concepts and Cases. 9th edition

Fred R. David

PowerPoint Slides by

Anthony F. Chelte

Western New England College


Ch 8-4

Implementing StrategiesImplementing Strategies

There is no “perfect” strategic decision. One always has to pay a price. One always has to balance conflicting objectives, conflicting opinions, and conflicting priorities. The best strategic decision is only an approximation—and a risk

-- Peter Drucker

Less than 10% of strategies formulated

are successfully implemented!


Ch 8-7

Low strategy implementation success:– 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

For Successful Strategy Implementation:For Successful Strategy Implementation:– Firms must market goods and services well– Firms must raise needed working capital– Firms produce technologically-sound goods – Firms must have sound information systems

Implementing Strategies:Implementing Strategies:


Ch 8-17

Marketing Mix – Component FactorsMarketing 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 channelsQuality

PricePromotionPlaceProduct


Ch 8-18

Bases for Segmenting Markets --

– Geographic – Demographic– Psychographic– Behavioral

Geographic Basis:– Region– County Size– City or SMSA size– Density– Climate

Market SegmentationMarket Segmentation

Demographic Basis:• Age• Family Size• Family Life Cycle• Income Occupation• Education• Religion• Race Nationality

Psychographic Basis:– Social Class– Lifestyle– Personality

Behavioral Basis:

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


Ch 8-25

Product Positioning StepsProduct Positioning Steps

ProductPositioning

Steps

2. Diagram Map

1. Select Key Criteria

3. Plot competitors’products

4. Look for niches

5. Develop Marketing Plan


Ch 8-26

Product Positioning MapProduct Positioning Map

LowConvenience

HighCustomerLoyalty

LowCustomerLoyalty

HighConvenience

Firm 1•

•Firm 2

• Firm 3

Rental Car Market

Product Positioning based on:– Customers’ wants– Customers’ needs

Strategy-Implementation Tool—

• Look for vacant niche• Avoid suboptimization• Don’t serve 2

segments with same strategy

• Don’t position in the middle of the map


Ch 8-27

LowLeadership

Training

Little Individual Attention

A lot of Individual Attention

HighLeadership

Training

PP Map for Business DegreesPP Map for Business Degrees

Schools: SMC, CSUM, CSUEB, SJSU


Ch 8-29

Evaluating Worth of a BusinessEvaluating Worth of a Business

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


Ch 8-30

Evaluating Worth of a BusinessEvaluating Worth of a Business

3 Basic approaches:3 Basic approaches:

1.1. What a firm ownsWhat a firm owns2.2. What a firm earnsWhat a firm earns3.3. What a firm will bring in the marketWhat a firm will bring in the market


Ch 8-31

WGO

Equity method BS Equity Goodwill Valuation

2004 $201,875 $0 $201,875

2003 $210,626 $0 $210,626

2002 $179,815 $0 $179,815

Net Income method Net Inc 5 Valuation

2004 $70,641 $353,205

2003 $49,884 $249,420

2002 $54,671 $273,355

PE*Net Income Share Price EPS Valuation

2004 $37.59 $2.03 $1,308,076

2003 $33.88 $1.33 $1,270,729

2002 $19.21 $1.34 $783,754

Market Value Shares outShare

Price Valuation

2004 34,214 $37.59 $1,286,104

2003 36,974 $33.88 $1,252,679

2002 39,898 $19.21 $766,441

$32.92

Value Average

2004 $787,315

2003 $745,864

2002 $500,841

• Valuation:Valuation:• What a firm ownsWhat a firm owns• What a firm earnsWhat a firm earns• What a firm will What a firm will

bring in the marketbring in the market

• http://finance.yahoo.com/

http://finance.yahoo.com/




Ch 8-34

Research & Development IssuesResearch & Development Issues

3 Major R&D approaches to implementing 3 Major R&D approaches to implementing strategies –strategies –

1.1. First firm to market new technological First firm to market new technological productsproducts

2.2. Be an innovative imitator of successful Be an innovative imitator of successful productsproducts

3.3. Low-cost producer of similar but less Low-cost producer of similar but less expensive productsexpensive products


Ch 8-42

Finance/Accounting IssuesFinance/Accounting Issues

Debt vs. Equity Decisions –Debt vs. Equity Decisions –

• EPS/EBIT analysisEPS/EBIT analysis– Earnings per share/Earnings before interest Earnings per share/Earnings before interest

and taxesand taxes


Ch 8-44

Pro-FormaPro-Forma

6 Steps in Pro Forma Financial Analysis6 Steps in Pro Forma Financial Analysis

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

2.2. Use percentage-of-sales method to project CGS and Use percentage-of-sales method to project CGS and expensesexpenses

3.3. Calculate projected net incomeCalculate projected net income4.4. Subtract dividends to be paid from Net Income and Subtract dividends to be paid from Net Income and

add remaining to Retained Earningsadd remaining to Retained Earnings5.5. Project balance sheet times beginning with retained Project balance sheet times beginning with retained

earningsearnings6.6. List comments (remarks) on projected statementsList comments (remarks) on projected statements