Implementing Strategies: Marketing, Finance/Accounting, R&D, and CIS Issues

Strategic Management
Concepts & Cases

8th edition
Fred R. David
Chapter 8:
Implementing Strategies:
Marketing,
Finance/Accounting, R&D,
and CIS Issues
PowerPoint Slides By:
Anthony F. Chelte
Western New England College
Ch. 8-1
Comprehensive Strategic Management Model
External
Audit
Chapter 3
Vision
&
Mission
Statements
Strategies
In
Action
Chapter 2
Chapter 5
Strategy
Analysis
&
Choice
Chapter 6
Implement
Strategies:
Management
Issues
Chapter 7
Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS
Chapter 8
Measure &
Evaluate
Performance
Chapter 9
Internal
Audit
Chapter 4
Ch. 8-2
Implementing
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 approximationand a
risk.
Peter Drucker
Ch. 8-3
Implementing
Strategies
As market windows open and close
more quickly, it is important that
R&D be tied more closely to
corporate strategy.
William Spenser
Ch. 8-4
Implementing
Strategies
Most of the time, strategists should
not be formulating strategy at all;
they should be getting on with
implementing strategies they already
have.
Henry Mintzberg
Ch. 8-5
Implementing
Strategies
Less than 10% of strategies

formulated
are successfully implemented!
Ch. 8-6
Implementing
Strategies
Some reasons for low success rate
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
Ch. 8-7
Marketing Issues
Two Variables of Central
Importance to Strategy
Implementation:
Market Segmentation
Product Positioning
Ch. 8-8
Marketing Issues
Decisions that may require policies:
Use
exclusive dealers or multiple

channels of distribution
Use heavy, light, or no TV
advertising
Be a price leader or price follower
Offer a complete or limited warranty
Salespersons reward structure
Ch. 8-9
Marketing Issues
Current Issues:
Tracking individual movements

on the Internet
Consumer profiling
Ch. 8-10
Marketing Mix: Component Factors
Product
Place
Promotion Price
Quality
Distribution
channels
Advertising
Level
Features
Distribution
coverage
Personal selling
Discounts &
allowances
Style
Outlet location
Sales promotion
Brand name
Sales
Publicity
territories
Inventory
levels/locations
Payment
terms
Packaging
Product line
Transportation
carriers
Warranty
Service level
Ch. 8-11
Marketing Issues
Market Segmentation
Used in strategy implementation
Particularly
useful in small and

specialized firms
Ch. 8-12
Marketing Issues
Market Segmentation
Important because:
Market and product
development, market
penetration, and diversification
require increased sales through
new markets or products
Ch. 8-13
Marketing Issues
Market Segmentation
Important because:
Firm can operate with limited
resources. Enables a small
firm by maximizing per-unit
profits and per-segment sales.
Ch. 8-14
Marketing Issues
Market Segmentation
Important because:
Segmentation decisions
directly affect marketing mix
variables:
Product,
place promotion, and
price
Ch. 8-15
Marketing Issues
Market Segmentation
Strategists evaluate potential:
Characteristics & needs of
consumers
Consumer similarities and
differences
Consumer group profiles
Ch. 8-16
Marketing Issues
Market Segmentation
Based on:
Geographic variables
Demographic variables
Psychographic variables
Behavioral variables
Ch. 8-17
Marketing Issues
Product Positioning
After segmenting the market,

determine what customers
want and expect
Analysis
& research
Ch. 8-18
Marketing Issues
Product Positioning
Develop schematic
representations of products
Compare
to competitors on
industry
success dimensions
Ch. 8-19
Marketing Issues
Action Steps in Product Positioning
Select key criteria that are differentiators in the

industry.
Diagram a two-dimensional product positioning
map.
Plot major competitors products or services in
the matrix.
Identify areas in the positioning map where firms
products could be most competitive. Look for
niches.
Develop a marketing plan to position firms
products appropriately.
Ch. 8-20
Marketing Issues
Product Positioning as a Strategy
Implementation Tool
Look for the vacant niche.

Avoid suboptimization
Dont serve two segments with
same strategy.
Dont position firm in the middle of
the map.
Ch. 8-21
Product Positioning
Map High
Convenience
Rental Car Market
Firm 2
Firm 1
High
Customer
Loyalty
Low
Customer
Loyalty
Firm 3
Low
Convenience
Ch. 8-22
Finance/Accounting
Central to Strategy Implementation
Capital acquisition
Development of pro forma
financial statements
Financial budget preparation
Business valuation
Ch. 8-23
Finance/Accounting
Raise capital with short-term debt,
long-term debt, preferred stock, or
common stock
Lease or buy fixed assets
Determine dividend payout ration
LIFO, FIFO, or market-value
accounting approach
Ch. 8-24
Finance/Accounting
Extend the time of accounts receivable
Establish a certain percentage discount
on accounts w/I specified period of time
Determine the amount of cash on hand
Ch. 8-25
Finance/Accounting
Capital Acquisition
Sources of capital:
Net
profit from pperations

Sale of assets
Debt
Equity
Ch. 8-26
Finance/Accounting
Capital Acquisition
Earnings Per Share/Earnings
Before Interest and Taxes
(EPS/EBIT) Analysis
Determination of debt, stock, or

combination of debt & stock is
best alternative for raising capital
to implement strategies
Ch. 8-27
Finance/Accounting
Pro Forma Financial Statements
Allows the firm to examine

the expected results of
various actions and
approaches
Ch. 8-28
Finance/Accounting
Pro Forma Financial Statements
Forecast impact of various

implementation decisions
Compute projected financial ratios

under various strategyimplementation scenarios
Ch. 8-29
Finance/Accounting
Steps in Pro Forma Financial Analysis
Prepare pro forma income statement. Forecast

sales as accurately as possible.
Use percentage-of-sales method to project cost of
goods sold (CGS) and the expense items in the
income statement.
Calculate the projected net income.
Subtract from net income any dividends to be

paid. Add remaining net income to Retained
Earnings. Retained earnings total on both income
statement and balance sheet as this is the key
link for the projected statements.
Ch. 8-30
Finance/Accounting
Steps in Pro Forma Financial Analysis
Project balance sheet items. Begin with Retained

Earnings. Forecast in the following order:
stockholders equity, long-term liabilities, current
liabilities, total liabilities, total assets, fixed
assets, and current assets. Use cash account as
the plug figure. Make appropriate adjustments.
List comments (remarks) on the projected

statements. Significant changes from prior years
to projected year necessitate a remark. Remarks
are necessary for meaningful pro formas.
Ch. 8-31
Finance/Accounting
Financial Budgets
Document that details how funds will

be obtained and spent for a specified
period of time.
Annual
budgets most common

Not a tool for limiting expenditures
Method for obtaining the most
productive and profitable use of firms
resources
Ch. 8-32
Finance/Accounting
Financial Budgets
Types of Budgets:
Cash budgets
Operating budgets
Sales budgets
Profit budgets
Factory budgets
Ch. 8-33
Finance/Accounting
Financial Budgets
Types of Budgets:
Capital budgets
Expense budgets
Divisional budgets
Variable budgets
Flexible budgets
Fixed budgets
Ch. 8-34
Finance/Accounting
Financial Budgets
Limitations:
Can become too detailed; cumbersome
and expensive
Can become a substitute for objectives
Can hide inefficiencies
Can be used as instruments of tyranny
Ch. 8-35
Finance/Accounting
Business Valuation
Main approaches:
What
a firm owns
What a firm earns
What a firm will bring in the
market
Ch. 8-36
Finance/Accounting
Business Valuation
Determine net worth or

stockholders equity
Sum
of common stock, additional paid

in capital and retained earnings.
Goodwill and under- or overvalued
assets.
Provides estimate of firms monetary value
Ch. 8-37
Finance/Accounting
Business Valuation
Future benefits derived

through net profits
5
X the firms current annual profit

or
Five-year average profit level
Ch. 8-38
Finance/Accounting
Business Valuation
Market determination
Selling
price of similar company

Price-earnings ratio method
Outstanding shares method
Ch. 8-39
R&D Issues
Research and Development (R&D)
Development of new products and

improvement of existing products
Strategies of product development,
market penetration, and concentric
diversification require R&D
Ch. 8-40
R&D Issues
Research and Development
(R&D)
R&D policies match market

opportunities with internal
capabilities
Ch. 8-41
R&D Issues
Policies enhance strategyimplementation efforts:

Product
or process improvements
Stress basic or applied research
Leaders or followers in R&D
Ch. 8-42
R&D Issues
Policies enhance strategyimplementation efforts:

Develop
robotics or manual processes

Spend high, average, or low on R&D
Perform R&D internal or outsource
Use university resources or private
Ch. 8-43
R&D Issues
Three Major Approaches
First mover in new technological

products
Innovative imitator of successful
products
Low-cost producer through mass
production similar to recently
introduced products
Ch. 8-44
Key Terms & Concepts
Cash budget
Computer
Information
systems
EPS/EBIT analysis
Financial budget
Market
segmentation
Marketing mix
variables
Outstanding shares
method
Price-earnings ratio
Pro forma financial
statement analysis
product positioning
Research and
development
Vacant niche
Ch. 8-45

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Strategic Management

Concepts & Cases

Comprehensive Strategic Management Model

Less than 10% of strategies

Failing to segment markets

exclusive dealers or multiple

Tracking individual movements

Marketing Mix: Component Factors

useful in small and

place promotion, and

After segmenting the market,

Select key criteria that are differentiators in the

Look for the vacant niche.

Rental Car Market

profit from pperations

Determination of debt, stock, or

Allows the firm to examine

Forecast impact of various

Compute projected financial ratios

Prepare pro forma income statement. Forecast

Calculate the projected net income.

Subtract from net income any dividends to be

Project balance sheet items. Begin with Retained

List comments (remarks) on the projected

Document that details how funds will

budgets most common

Determine net worth or

of common stock, additional paid

Provides estimate of firms monetary value

Future benefits derived

X the firms current annual profit

price of similar company

Development of new products and

R&D policies match market

Policies enhance strategyimplementation efforts:

Policies enhance strategyimplementation efforts:

robotics or manual processes

First mover in new technological

Key Terms & Concepts

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