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
Market Segmentation Important Variable:
2. Firm can operate with limited resources. Enables a small firm by maximizing per-unit profits and per-segment sales.
Market SegmentationMarket Segmentation
Market Segmentation Important Variable:
3. Segmentation decisions directly affect marketing mix variables:
- Product, place, promotion, and price
Market SegmentationMarket 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 channelsQuality
PricePromotionPlaceProduct
Bases for Segmenting Markets --
– Geographic – Demographic– Psychographic– Behavioral
Market SegmentationMarket Segmentation
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
Market SegmentationMarket Segmentation
Psychographic Basis:
– Social Class– Lifestyle– Personality
Market SegmentationMarket Segmentation
Behavioral Basis:
– Use occasion– Benefits sought– User status– Usage rate– Loyalty status– Readiness Stage– Attitude toward product
Market SegmentationMarket Segmentation
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 PositioningProduct Positioning
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
Product PositioningProduct Positioning
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
Finance/Accounting Issues
Acquiring Capital to Implement Strategies –
• Basic sources of capital:– Debt– Equity
Finance/Accounting Issues
Debt vs. Equity Decisions –
• EPS/EBIT analysis– Earnings per share/Earnings before interest and
taxes
Finance/Accounting Issues
Pro Forma Financial Statements -
• Allows an organization to examine the expected results of various actions and approaches
Finance/Accounting Issues
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
Finance/Accounting Issues
Financial Budget –
Document that details how funds will be obtained and spent for a specified period of time.
Finance/Accounting Issues
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
Research & Development Issues
• Level of support is constrained by resource availability
• Technological improvements shorten product life cycles
Research & Development Issues
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
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