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

Successful strategy implementation depends on cooperation among all functional & divisional managers in an Organization Marketing dept are commonly charged with implementing

strategies that require significant increases in sales rev in new areas and with new or improved products

Finance / accounting managers devise effective SI approaches at low cost & minimum risk to that firm

R&D transfer complex technologies or develop new tech to successfully implement Strategies

MIS provide leadership and training for all individualsCh 8-1

This chapter examines marketing, finance/accounting, R&D, and management information systems(MIS)

Less than 10% of strategies formulated are successfully implemented! Paying too much for a new acquisition Falling behind competitors in R&D

Ch 8-2

PerformExternal

Audit

Chapter 3

PerformInternal

Audit

Chapter 4

EstablishLong-TermObjectives

Chapter 5

Generate,Evaluate,

SelectStrategies

Chapter 6

ImplementStrategies:

Mgmt Issues

Chapter 7

ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8

Measure &Evaluate

Performance

Chapter 9

DevelopVision

& Mission

Chapter 2

Comprehensive strategic management model

1. Market segmentationA. Strategies such as Market development, product

development, market penetration & diversification require increased sales through new markets & products

B. MS allows a firm to operate with limited resources because mass production, mass distribution and mass advertising are not required

C. SM decisions affect Marketing mix

Does the internet Make Market Segmentation Easier ?

Marketing Issues

Centrally important to Implementation

•Sub dividing of a market into distinct subsets of customers according to needs & buying habits

Placing banners on related websites

Ch 8-5

Marketing Issues

Market SegmentBasis PsychographicPsychographic

BehavioralBehavioral

GeographicGeographic

DemographicDemographic

Ch 8-6

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

1. Product Positioning A severe mistake is to assume the firm knows what

customers want and expect

Steps required in Product planning

2. Effective product-positioning meets two criteria1. It uniquely distinguishes a company from the competition2. It leads customers to expect slightly less service than a

company can deliever

Marketing Issues

Centrally important to Implementation

•After markets have been segmented , next step is to find out what customers want and expect

Under promise and then overdeliver is the Key!

•ANALYSIS & RESEARCH

•Book

Ch 8-8

Marketing Issues

ProductPositioning

Customer WantsCustomer Wants

Customer NeedsCustomer Needs

Ch 8-9

Product Positioning Steps

ProductPositioning

Steps

2. Diagram Map

1. Select Key Criteria

3. Plot competitors’products

4. Look for niches

5. Develop Marketing Plan

Ch 8-10

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

Finance /Accounting Issues

Acquiring needed capital Developing projected financial statements Preparing financial budgets

To lease or buy fixed assets To extend the time of accounts receivable To determine the amount of cash that should be

kept on hand

Ch 8-11

Ch 8-12

$Amount Needed: $500 Stock Price $40 EBIT Range $1000 to $2000 Tax Rate 175/673 = .26 = 26% Interest Rate 5% # Shares Outstanding 350

EPS-EBIT Analysis(in $millions)

Heinz Company – Year End 2001

Ch 8-13

EPS-EBIT Analysis (in $millions) – Heinz Company

Stock Financing Debt FinancingCombination

Financing

High Low High Low High Low

EBIT ($982.4 in 2001) $2000 $1000 $2000 $1000 $2000 $1000

Interest (5%) 0 0 25 25 10 10

EBT 2000 1000 1975 975 1990 990

Taxes 26% 520 260 514 254 517 257

EAT 1480 740 1461 721 1473 733

# Shares outstanding 362.5 362.5 350 350 357.5 357.5

EPS 4.08 2.04 4.17 2.06 4.12 2.05

Ch 8-14

Conclusion:

Heinz should use debt to raise the $500 million

Finance/Accounting Issues

EPS-EBIT Analysis Heinz

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

Finance/Accounting Issues

Projected Financial Statements

This type of analysis can be used to forecast the impact of various implementation decisions ( for

example, to increase promotional expenditures by 50% to support a market development strategy & to increase

salaries by 25% to support a market penetration strategy, to increase R&D expenditures by 70% to

support product development, or to tell sell $1 Million of common stock to raise capital for diversification

Ch 8-16

Projected Income Statement for Litten Company (in millions)

  Prior Year 2004Projected Year

2005 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  

Ch 8-17

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

Finance/Accounting Issues

Financial Budget

Ch 8-18

1. Product development, Market Penetration & related diversification require new products to be successfully developed and that old products be significantly improved

But the level of management support for R&D is often constrained by resources availability

Well formulated R&D policies match market opportunities with internal capablilities

Research & Development Issues

3 Major R&D approaches to implementing strategies

Developing new products & improving old products in a way that will allow effective strategy implementation

Ch 8-19

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

MIS Issues

Functions of MIS

Firms that implement strategies using the best information will reap competitive

advantages in the 21st Century