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Chapter 8

Implementing Strategies: Marketing,


Chapter Outline
Finance/Accounting, R&D, & MIS Issues
The Nature of Strategy Implementation
Strategic Management:
Concepts & Cases
10th Edition Marketing Issues
Fred David

PowerPoint Slides by
Anthony F. Chelte Finance/Accounting Issues
Western New England College

Ch 8-1 Ch 8-2
Copyright 2005 Prentice Hall Copyright 2005 Prentice Hall

Chapter Outline (contd) Implementing Strategies

Research & Development (R&D) Issues The greatest strategy is doomed if its
implemented badly. --
Bernard Reimann
Management Information Systems (MIS)
Issues

Ch 8-3 Ch 8-4
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The Nature of Strategy The Nature of Strategy
Implementation Implementation

-- Strategy implementation means change. -- Less than 10% of strategies formulated are
successfully implemented!

Ch 8-5 Ch 8-6
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Nature of Strategy Nature of Strategy


Implementation Implementation
Low Success Rate Strategy Implementation Successful Strategy Implementation

Failing to segment markets appropriately Market goods & services well


Paying too much for a new acquisition Raise needed working capital
Falling behind competition in R&D Produce technologically sound goods
Sound information systems

Ch 8-7 Ch 8-8
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Marketing Issues Marketing Issues

Marketing Decisions requiring policies

Exclusive dealerships multiple channels of


-- Marketing variables affect distribution
success/failure of strategy implementation Heavy, light, or no TV advertising
Price leader or price follower
Advertise online or not
Offer complete or limited warrantee

Ch 8-9 Ch 8-10
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Marketing Issues Marketing Issues

Centrally important to Implementation Market Segmentation

1. Market segmentation Subdividing of a market into distinct subsets


of customers according to needs and buying
2. Product positioning habits.

Ch 8-11 Ch 8-12
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Marketing Issues Marketing Issues

Market Segmentation Market Segmentation

Key to matching supply & demand Directly affect marketing mix variables:
Market development, product-development, Product
market penetration & diversification strategies Place
Allows operating with limited resources Promotion
Enables small firms to compete successfully Price

Ch 8-13 Ch 8-14
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Marketing Mix Component Factors


Product Place Promotion Price Marketing Issues
Distribution
Quality Advertising Level
channels
Distribution Discounts & Geographic
Features Personal selling
coverage allowances

Style Outlet location Sales promotion Payment terms


Demographic
Brand name Sales territories Publicity

Inventory
Market Segment
Packaging Basis Psychographic
levels/locations
Transportation
Product line
carriers
Behavioral
Warranty

Service level

Ch 8-15 Ch 8-16
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Marketing Issues Marketing Issues

Geographic Geographic

Region Demographic

County size
Market Segment
City or SMSA size Basis Psychographic
Density
Climate
Behavioral

Ch 8-17 Ch 8-18
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Marketing Issues Marketing Issues

Demographic Geographic

Age
Demographic
Family Size
Family Life Cycle Market Segment
Income/Occupation Basis Psychographic
Education
Religion
Behavioral
Race/Nationality

Ch 8-19 Ch 8-20
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Marketing Issues Marketing Issues

Psychographic Geographic

Social Class Demographic


Lifestyle
Personality Market Segment
Basis Psychographic

Behavioral

Ch 8-21 Ch 8-22
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Marketing Issues Marketing Issues

Behavioral
Product Positioning
Use occasion
Benefits sought
User status -- Schematic representations that reflect how
Usage rate products/services compare to competitors on
Loyalty status dimensions most important to success in the
Readiness stage industry
Attitude toward product

Ch 8-23 Ch 8-24
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Product Positioning Steps
Marketing Issues

1. Select Key Criteria


Customer Wants

2. Diagram Map

Product 3. Plot competitors


Product
Positioning products
Positioning
Steps
4. Look for niches
Customer Needs

5. Develop Marketing
Plan
Ch 8-25 Ch 8-26
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Product Positioning Map Marketing Issues


High
Convenience
Rental Car Market Product Positioning as Strategy Implementation
Tool

Firm 1
Firm 2

Look for vacant niche
High Low Avoid sub optimization
Customer Customer
Loyalty Loyalty Dons serve 2 segments w/ same strategy
Dont position in the middle of the map

Firm 3
Low
Convenience
Ch 8-27 Ch 8-28
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Finance/Accounting Issues Finance/Accounting Issues

Essential for implementation

Acquiring needed capital


-- Central to strategy implementation. Developing projected financial statements
Preparing financial budgets
Evaluating worth of a business

Ch 8-29 Ch 8-30
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Finance/Accounting Issues Finance/Accounting Issues

Decisions based on Finance/Accounting Decisions based on Finance/Accounting

LIFO, FIFO, or market-value accounting


Raise capital short-term, long-term, preferred, approach
or common stock
Extend time of Accounts Receivable
Lease or buy fixed assets
Establish % discount on accounts for terms
Determine appropriate dividend payout ratio
Determine the amount of cash kept on hand

Ch 8-31 Ch 8-32
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Finance/Accounting Issues Finance/Accounting Issues

Capital acquisition to implement strategies Debt vs. Equity Decisions

Debt EPS/EBIT analysis


Earnings per share/Earnings before interest and
taxes
Equity
This technique involves an examination of the impact that debt
versus stock financing has on earnings per share under various
assumptions as to EBIT.

Ch 8-33 Ch 8-34
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Finance/Accounting Issues Finance/Accounting Issues

Projected Financial Statements Steps in Preparing Projected Financial


Statements
1. Prepare income statement before balance
Allow an organization to examine the expected sheet (forecast sales)
results of various actions and approaches
2. Use percentage of sales method to project
CoGS & expenses

3. Calculate projected net income

Ch 8-35 Ch 8-36
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Projected Income Statement for Litten Company (in millions)
Finance/Accounting Issues
Projected Year

Steps in Preparing Projected Financial Prior Year 2004 2005 Remarks

Statements (contd) Projected Income Statement


Sales 100 150.00 50% increase

4. Subtract dividends to be paid from Net Income Cost of Goods Sold


Gross Margin
70
30
105.00
45.00
70% of sales

and add remaining to Retained Earnings Selling Expense 10 15.00 10% of sales
Administrative Expense 5 7.50 5% of sales

5. Project balance sheet times beginning with EBIT 15 22.50

retained earnings EBT


Interest 3
12
3.00
19.50
Taxes 6 9.75 50% rate

6. List comments (remarks) on projected Net Income 6 9.75

statements Dividends
Retained Earnings
2
4
5.00
4.75

Ch 8-37 Ch 8-38
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Finance/Accounting Issues Finance/Accounting Issues

Financial Budget Types of Budgets

Cash budgets
Operating budgets
-- Details how funds will be obtained and spent for
a specified period of time. Sales budgets
Profit budgets
Factory Budgets
Expense Budgets

Ch 8-39 Ch 8-40
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Finance/Accounting Issues Finance/Accounting Issues

Types of Budgets Evaluating Worth of a Business

Divisional budgets
Central to strategy implementation integrative,
Variable budgets intensive, & diversification strategies often
Flexible budgets implemented through acquisitions of other firms
Fixed budgets

Ch 8-41 Ch 8-42
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Finance/Accounting Issues Research & Development


Issues
Evaluating Worth of a Business:
3 Basic Approaches

-- New products and improvement of


1. What a firm owns
existing products that allow for effective
2. What a firm earns strategy implementation
3. What a firm will bring in the market

Ch 8-43 Ch 8-44
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Research & Development Research & Development
Issues Issues

Constraints 3 Major R&D approaches to implementing


strategies

Level of support constrained by resource 1. 1st firm to market new technological products
availability 2. Innovative imitator of successful products
Technological improvements shorten product 3. Low-cost producer of similar but less
life cycles expensive products

Ch 8-45 Ch 8-46
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Management Information MIS Issues


Systems (MIS) Issues

Functions of MIS

-- Information is basis for understanding


Information collection, retrieval, & storage
the firm. One of the most important
factors differentiating successful from Keeping managers informed
unsuccessful firms Coordination of activities among divisions
Allow firm to reduce costs

Ch 8-47 Ch 8-48
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For Review (Chapter 8) For Review (Chapter 8)

Key Terms & Concepts Key Terms & Concepts

Projected Financial
Cash Budget Marketing Mix Variables
Statement Analysis

Outstanding Shares Research & Development


EPS/EBIT Analysis
Method (R&D)

Management Information Price-Earnings Ratio


Vacant Niche
Systems (MIS) Method

Market Segmentation Product Positioning

Ch 8-49 Ch 8-50
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