Chapter 8 Implementing - Strategies - Marketing - Finance

Strategic Management
Concepts & Cases

8th edition
Fred R. David
Chapter 8:
Implementing Strategies:
Marketing,
Finance/Accounting, R&D,
and CIS Issues
PowerPoint Slides By:
Anthony F. Chelte
Western New England College
Ch. 8-1
© 2001 Prentice Hall
Comprehensive Strategic Management Model
External
Audit
Chapter 3
Implement
Vision
Strategies Strategy Implement
Strategies:
& Analysis Strategies:
Mission In Management
Marketing,
Measure &
Action & Fin/Acct,
Statements Issues Evaluate
Choice R&D, CIS
Performance
Chapter 5 Chapter 6 Chapter 7
Chapter 2
Chapter 8 Chapter 9
Internal
Audit
Chapter 4
Ch. 8-2
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—
Ch. 8-3
“As market windows open and close more

quickly, it is important that R&D be tied
more closely to corporate strategy.”
—William Spenser—
Ch. 8-4
“Most of the time, strategists should not

be formulating strategy at all; they
should be getting on with implementing
strategies they already have.”
—Henry Mintzberg—
Ch. 8-5
Less than 10% of strategies formulated

are successfully implemented!
Ch. 8-6
Some reasons for low success rate
• 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
Ch. 8-7
Marketing Issues
Two Variables of Central Importance
to Strategy Implementation:
• Market Segmentation
• Product Positioning
Ch. 8-8
Marketing Issues
Decisions that may require policies:
• Use exclusive dealers or multiple
channels of distribution
• Use heavy, light, or no TV advertising
• Be a price leader or price follower
• Offer a complete or limited warranty
• Salespersons reward structure
Ch. 8-9
Marketing Issues
Current Issues:
• Tracking individual movements on

the Internet
• Consumer “profiling”
Ch. 8-10
Marketing Mix: Component Factors
Product Place Promotion Price

Distribution
Quality Advertising Level
channels
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. 8-11
Marketing Issues
Market Segmentation
Used in strategy implementation

• Particularly useful in small and
specialized firms
Ch. 8-12
Marketing Issues
Market Segmentation
Important because:
• Market and product development,
market penetration, and
diversification require increased
sales through new markets or
products
Ch. 8-13
Marketing Issues
Market Segmentation
Important because:
• Firm can operate with limited
resources. Enables a small firm by
maximizing per-unit profits and
per-segment sales.
Ch. 8-14
Marketing Issues
Market Segmentation
Important because:
• Segmentation decisions directly
affect marketing mix variables:
Product, place promotion, and price
Ch. 8-15
Marketing Issues
Market Segmentation
Strategists evaluate potential:
• Characteristics & needs of
consumers
• Consumer similarities and
differences
• Consumer group profiles
Ch. 8-16
Marketing Issues
Market Segmentation
Based on:
• Geographic variables
• Demographic variables
• Psychographic variables
• Behavioral variables
Ch. 8-17
Marketing Issues
Product Positioning
• After segmenting the market,

determine what customers want
and expect
 Analysis & research
Ch. 8-18
Marketing Issues
Product Positioning
• Develop schematic representations

of products
 Compare to competitors on industry
success dimensions
Ch. 8-19
Marketing Issues
Action Steps in Product Positioning
• Select key criteria that are differentiators in the industry.
• Diagram a two-dimensional product positioning map.

• Plot major competitors’ products or services in the
matrix.
• Identify areas in the positioning map where firm’s
products could be most competitive. Look for niches.
• Develop a marketing plan to position firm’s products
appropriately.
Ch. 8-20
Marketing Issues
Product Positioning as a Strategy
Implementation Tool
• Look for the “vacant niche.”

• Avoid suboptimization
• Don’t serve two segments with same
strategy.
• Don’t position firm in the middle of the
map.
Ch. 8-21
Product Positioning Map
High
Convenience Rental Car Market
•
Firm 1
Firm 2
•
High Low
Customer Customer
Loyalty Loyalty
•
Firm 3
Low
Convenience
Ch. 8-22
Finance/Accounting
Central to Strategy Implementation
• Capital acquisition
• Development of pro forma financial
statements
• Financial budget preparation
• Business valuation
Ch. 8-23
Finance/Accounting
• Raise capital with short-term debt, long-

term debt, preferred stock, or common
stock
• Lease or buy fixed assets
• Determine dividend payout ration
• LIFO, FIFO, or market-value accounting
approach
Ch. 8-24
Finance/Accounting
• Extend the time of accounts receivable

• Establish a certain percentage discount on
accounts w/I specified period of time
• Determine the amount of cash on hand
Ch. 8-25
Finance/Accounting
Capital Acquisition
Sources of capital:
• Net profit from operations
• Sale of assets
• Debt
• Equity
Ch. 8-26
Finance/Accounting
Capital Acquisition
Earnings Per Share/Earnings Before

Interest and Taxes (EPS/EBIT)
Analysis
• Determination of debt, stock, or
combination of debt & stock is best
alternative for raising capital to
implement strategies
Ch. 8-27
Finance/Accounting
Pro Forma Financial Statements
• Allows the firm to examine the

expected results of various
actions and approaches
Ch. 8-28
Finance/Accounting
Pro Forma Financial Statements
• Forecast impact of various

implementation decisions
• Compute projected financial ratios under
various strategy-implementation
scenarios
Ch. 8-29
Finance/Accounting
Steps in Pro Forma Financial Analysis
• Prepare pro forma income statement. Forecast sales as
accurately as possible.
• Use percentage-of-sales method to project cost of goods
sold (CGS) and the expense items in the income
statement.
• Calculate the projected net income.
• Subtract from net income any dividends to be paid. Add
remaining net income to Retained Earnings. Retained
earnings total on both income statement and balance
sheet as this is the key link for the projected
statements.
Ch. 8-30
Finance/Accounting
Steps in Pro Forma Financial Analysis
• Project balance sheet items. Begin with Retained
Earnings. Forecast in the following order: stockholders’
equity, long-term liabilities, current liabilities, total
liabilities, total assets, fixed assets, and current assets.
Use cash account as the plug figure. Make appropriate
adjustments.
• List comments (remarks) on the projected statements.
Significant changes from prior years to projected year
necessitate a remark. Remarks are necessary for
meaningful pro formas.
Ch. 8-31
Finance/Accounting
Financial Budgets
• Document that details how funds will

be obtained and spent for a specified
period of time.
 Annual budgets most common
 Not a tool for limiting expenditures
 Method for obtaining the most productive
and profitable use of firm’s resources
Ch. 8-32
Finance/Accounting
Financial Budgets
Types of Budgets:
• Cash budgets
• Operating budgets
• Sales budgets
• Profit budgets
• Factory budgets
Ch. 8-33
Finance/Accounting
Financial Budgets
Types of Budgets:
• Capital budgets
• Expense budgets
• Divisional budgets
• Variable budgets
• Flexible budgets
• Fixed budgets
Ch. 8-34
Finance/Accounting
Financial Budgets
Limitations:
• Can become too detailed; cumbersome
and expensive
• Can become a substitute for objectives
• Can hide inefficiencies
• Can be used as instruments of tyranny
Ch. 8-35
Finance/Accounting
Business Valuation
Main approaches:
• What a firm owns
• What a firm earns
• What a firm will bring in the market
Ch. 8-36
Finance/Accounting
Business Valuation
• Determine net worth or

stockholders’ equity
 Sum of common stock, additional paid in
capital and retained earnings. Goodwill
and under- or overvalued assets.
 Provides estimate of firm’s monetary value
Ch. 8-37
Finance/Accounting
Business Valuation
• Future benefits derived through net

profits
5 X the firm’s current annual profit or
 Five-year average profit level
Ch. 8-38
Finance/Accounting
Business Valuation
• Market determination
 Sellingprice of similar company
 Price-earnings ratio method
 Outstanding shares method
Ch. 8-39
R&D Issues
Research and Development (R&D)
• Development of new products and

improvement of existing products
• Strategies of product development,
market penetration, and concentric
diversification require R&D
Ch. 8-40
R&D Issues
• R&D policies match market

opportunities with internal
capabilities
Ch. 8-41
R&D Issues
• Policies enhance strategy-

implementation efforts:
 Product or process improvements
 Stress basic or applied research
 Leaders or followers in R&D
Ch. 8-42
R&D Issues
• Policies enhance strategy-

implementation efforts:
 Develop robotics or manual processes
 Spend high, average, or low on R&D
 Perform R&D internal or outsource
 Use university resources or private
Ch. 8-43
R&D Issues
Three Major Approaches

• First mover in new technological
products
• Innovative imitator of successful
products
• Low-cost producer through mass
production similar to recently
introduced products
Ch. 8-44
Key Terms & Concepts
• Cash budget • Outstanding shares
• Computer method
Information systems • Price-earnings ratio
• EPS/EBIT analysis • Pro forma financial
• Financial budget statement analysis
• Market • product positioning
segmentation • Research and
• Marketing mix development
variables • Vacant niche
Ch. 8-45

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Strategic Management

Concepts & Cases

“As market windows open and close more

“Most of the time, strategists should not

Less than 10% of strategies formulated

• Tracking individual movements on

Product Place Promotion Price

Brand name Sales territories Publicity

Used in strategy implementation

• After segmenting the market,

• Develop schematic representations

• Select key criteria that are differentiators in the industry.

• Diagram a two-dimensional product positioning map.

• Look for the “vacant niche.”

Central to Strategy Implementation

Decisions that may require policies:

• Raise capital with short-term debt, long-

Decisions that may require policies:

• Extend the time of accounts receivable

Earnings Per Share/Earnings Before

Pro Forma Financial Statements

• Allows the firm to examine the

Pro Forma Financial Statements

• Forecast impact of various

• Document that details how funds will

• Determine net worth or

• Future benefits derived through net

Research and Development (R&D)

• Development of new products and

Research and Development (R&D)

• R&D policies match market

Research and Development (R&D)

• Policies enhance strategy-

Research and Development (R&D)

• Policies enhance strategy-

Three Major Approaches

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