Lecture 18 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues.

Lecture 18Implementing Strategies:

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

Lecture Outline

• The Nature of Strategy Implementation

• Marketing Issues

• Research and Development (R&D) Issues

Lecture Outline

• Finance/Accounting Issues

• Management Information Systems Issues

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 approximation—and a risk

-- Peter Drucker

Strategy implementation means change

Implementing Strategies

Less than 10% of strategies formulated are successfully implemented!

Implementing Strategies:Implementing Strategies:

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

Implementing Strategies:

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:

Marketing variables affect success or failure of strategy implementation

• Market Segmentation• Production Positioning

Marketing IssuesMarketing Issues

Marketing Decisions requiring polices –

– Use exclusive dealerships or multiple channels of distribution

– Use heavy, light, or no TV advertising

– Limit (or not) the share of business done with a single customer

Implementing Strategies: Marketing Issues

Marketing Decisions requiring polices –

– Be a price leader or price follower

– Offer a complete or limited warranty

– Reward salespeople based on straight commission or combination salary/commission

Implementing Strategies: Marketing Issues

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

Market Segmentation

• Widely used in implementing strategies

• Small and specialized firms

Market Segmentation

Market Segmentation Important Variable:

1. Market and product development, market penetration, and diversification require increased sales through new markets or products

Market SegmentationMarket Segmentation


2. Firm can operate with limited resources. Enables a small firm by maximizing per-unit profits and per-segment sales.



3. Segmentation decisions directly affect marketing mix variables:

- Product, place, promotion, and price


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 channelsQuality

PricePromotionPlaceProduct

Bases for Segmenting Markets --

– Geographic – Demographic– Psychographic– Behavioral


Geographic Basis:

– Region– County Size– City or SMSA size– Density– Climate


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


Developing schematic representations that reflect how products or services compare to competitors’ on dimensions most important to success in the industry

Product PositioningProduct Positioning

Product Positioning based on:

– Customers wants– Customers 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

Product Positioning Map as 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


Thank You

Lecture 19Implementing Strategies:

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

Finance/Accounting Issues

Central to Strategy Implementation –

– Acquiring needed capital– Developing pro forma financial statements– Preparing financial budgets– Evaluating worth of a business

Decisions Requiring Finance/Accounting PoliciesDecisions Requiring Finance/Accounting Policies

Raise capital w/ short-term, long-term preferred or common stock

Lease or buy fixed assets

Determine an appropriate dividend payout ratio

Use LIFO, FIFO, or market-value accounting approach

Decisions Requiring Finance/Accounting PoliciesDecisions Requiring Finance/Accounting Policies

Extend time of accounts receivable

Establish percentage discount on accounts for terms

Determine the amount of cash kept on hand


Acquiring Capital to Implement Strategies –

• Basic sources of capital:– Debt– Equity


Debt vs. Equity Decisions –

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

taxes


Pro Forma Financial Statements -

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


6 Steps in Pro Forma Financial Analysis

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

2. Use percentage-of-sales method to project CGS and expenses

3. Calculate projected net income4. Subtract dividends to be paid from Net Income and add

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

earnings6. List comments (remarks) on projected statements


Financial Budget –

Document that details how funds will be obtained and spent for a specified period of time.


Types of Budgets –

– Cash budgets– Operating budgets– Sales budgets– Profit budgets– Factory budgets– Capital budgets– Expense budgets– Divisional budgets– Variable budgets– Flexible budgets– Fixed budgets

Evaluating Worth of a Business

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

Evaluating Worth of a Business

3 Basic approaches:

1. What a firm owns2. What a firm earns3. What a firm will bring in the market

Research & Development Issues

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


• Level of support is constrained by resource availability

• Technological improvements shorten product life cycles


3 Major R&D approaches to implementing strategies –

1. First firm to market new technological products2. Be an innovative imitator of successful products3. Low-cost producer of similar but less expensive

products

Key Terms

• Cash Budget• E-mail• EPS/EBIT Analysis• Financial Budget• Information Systems• Market Segmentation• Marketing-mix Variables

Key Terms

• Multidimensional Scaling• Outstanding Shares Method• Price-earnings Ratio Method• Pro Forma Financial Statement Analysis• Product Positioning

Key Terms

• Research and Development• Retained Earnings• Vacant Niche• World Wide Web

Thank You

Lecture 18 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues.

Documents

Transcript of Lecture 18 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues.