strategic management chapter 8

1. Chapter 8
Implementing Strategies:
Marketing, Finance/Accounting,
R&D, and MIS Issues
Strategic Management:
Concepts and Cases. 9th edition
Fred R. David
PowerPoint Slides by
Anthony F. Chelte
Western New England College
Ch 8-1
Fred R. David

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 approximation—and a risk
-- Peter Drucker
Less than 10% of strategies formulated
are successfully implemented!
Ch 8-4
Fred R. David

3. 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
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
Ch 8-7
Fred R. David

4. Marketing Mix – Component Factors
Product Place Promotion Price
Quality Distribution channels Advertising Level
Distribution Discounts &
Features Personal selling
coverage allowances
Style Outlet location Sales promotion Payment terms
Brand name Sales territories Publicity
Inventory
Packaging
levels/locations
Transportation
Product line
carriers
Warranty
Service level
Ch 8-17
Fred R. David

5. Market Segmentation
Geographic Basis:
Bases for Segmenting – Region
Markets -- –
–
County Size
City or SMSA size
– Geographic – Density
– Climate
– Demographic
Demographic Basis:
– Psychographic •
•
Age
Family Size
– Behavioral •
•
Family Life Cycle
Income Occupation
• Education
• Religion
• Race Nationality
Behavioral Basis:
– Use occasion
Psychographic Basis:
– Benefits sought
– User status – Social Class
– Usage rate – Lifestyle
– Loyalty status – Personality
– Readiness Stage
– Attitude toward product
Ch 8-18
Fred R. David

6. Product Positioning Steps
1. Select Key Criteria
2. Diagram Map
Product 3. Plot competitors’
Positioning products
Steps
4. Look for niches
5. Develop Marketing Plan
Ch 8-25
Fred R. David

7. Product Positioning Map
High
Convenience Rental Car Market
•
Firm 1
Firm 2
•
High Low
Customer Customer
Loyalty Loyalty
Strategy-Implementation Product Positioning based on:
•
Tool—
Look for vacant niche
• – Customers’ wants
• Avoid suboptimization Firm 3 – Customers’ needs
• Don’t serve 2
segments with same
strategy Low
• Don’t position in the
middle of the map Convenience
Ch 8-26
Fred R. David

8. PP Map for Business Degrees
High
 Schools: Leadership
SMC, CSUM, Training
CSUEB,
SJSU
Little A lot of
Individual Individual
Attention Attention
Low
Leadership
Training
Ch 8-27
Fred R. David

9. Evaluating Worth of a Business
Central to strategy implementation as
integrative, intensive and diversification
strategies are often implement through
acquisitions of other firms.
Ch 8-29
Fred R. David

10. Evaluating Worth of a Business
3 Basic approaches:
1. What a firm owns
2. What a firm earns
3. What a firm will bring in the market
Ch 8-30
Fred R. David

11. WGO
Equity method BS Equity Goodwill Valuation
2004 $201,875 $0 $201,875
2003 $210,626 $0 $210,626
2002 $179,815 $0 $179,815
Net Income
method Net Inc 5 Valuation
2004 $70,641 $353,205
• Valuation:
2003 $49,884 $249,420
2002 $54,671 $273,355 • What a firm owns
PE*Net Income
2004
Share Price
$37.59
EPS
$2.03
Valuation
$1,308,076
• What a firm earns
2003 $33.88 $1.33 $1,270,729 • What a firm will
2002 $19.21 $1.34 $783,754 bring in the market
Share
Market Value Shares out Price Valuation
2004 34,214 $37.59 $1,286,104 • http://finance.yahoo.com/
2003 36,974 $33.88 $1,252,679
2002 39,898 $19.21 $766,441
$32.92
Value Average
2004 $787,315
2003 $745,864
2002 $500,841 Ch 8-31
Fred R. David

12. Research & Development Issues
3 Major R&D approaches to implementing
strategies –
1. First firm to market new technological
products
2. Be an innovative imitator of successful
products
3. Low-cost producer of similar but less
expensive products
Ch 8-34
Fred R. David

13. Finance/Accounting Issues
Debt vs. Equity Decisions –
• EPS/EBIT analysis
– Earnings per share/Earnings before interest
and taxes
Ch 8-42
Fred R. David

14. Pro-Forma
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 income
4. Subtract dividends to be paid from Net Income and
add remaining to Retained Earnings
5. Project balance sheet times beginning with retained
earnings
6. List comments (remarks) on projected statements
Ch 8-44
Fred R. David