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

Chapter 8
Implementing Strategies: Marketing,

Finance/Accounting, R&D, and MIS Issues
Strategic Management:
Concepts & Cases
12th Edition
Fred David
Copyright © 2009 Pearson Education, Inc. Ch 8-1

Publishing as Prentice Hall
Chapter Outline
The Nature of Strategy Implementation
Marketing Issues
Finance/Accounting Issues

Chapter Outline (cont’d)
Research & Development (R&D) Issues
Management Information Systems (MIS)

Issues

Implementing Strategies
“The greatest strategy is doomed if it’s

implemented badly.”
– Bernard Reimann

The Nature of Strategy
Implementation
– Strategy implementation means change

Implementation
– Less than 10% of strategies formulated are

successfully implemented!

Implementation
Low Success Rate – Strategy Implementation
 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

Implementation
Successful Strategy Implementation
 Market goods & services well

 Raise needed working capital
 Produce technologically sound goods
 Sound information systems

Marketing Issues
– Marketing variables affect success/failure

of strategy implementation

Marketing Issues
Marketing decisions requiring policies
 Exclusive dealerships – multiple channels of

distribution
 Heavy, light, or no TV advertising
 Price leader or price follower
 Advertise online or not
 Offer complete or limited warranty

A marketing issue
 A marketing issue of increasing concern to
consumers today is the extent to which companies
can track individuals’ movements on the Internet
and are even be able to identify the individual by
name and e-mail address.
 Recently completed research reveals that web
advertising dollars spent by businesses will
increase to 27 percent of total advertising
expenditures by 2002, up from 17 percent in 1999.

Marketing Issues
Centrally important to Implementation
1. Market segmentation
2. Product positioning

Marketing Issues
Market Segmentation
 Subdividing of a market into distinct subsets

of customers according to needs and buying
habits

Importance of Market Segmentation
1. strategies such as market development, product

development, market penetration, and
diversification require increased sales through new
markets and products.
2. market segmentation allows a firm to operate with
limited resources because mass production, mass
distribution, and mass advertising are not required.
3. Enable small businesses to operate better.
4. market-segmentation decisions directly affect
marketing mix variables: product, place, promotion,
and price
Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral

Marketing Issues
Geographic
 Region
 County size
 City or SMSA size
 Density
 Climate

Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral

Marketing Issues
Demographic
 Age
 Family size
 Family life cycle
 Income/occupation
 Education
 Religion
 Race/nationality

Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral

Marketing Issues
Psychographic
 Social class
 Lifestyle
 Personality

Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral

Marketing Issues
Behavioral
 Use occasion
 Benefits sought
 User status
 Usage rate
 Loyalty status
 Readiness stage
 Attitude toward product

Product Positioning
 1. After segmenting markets, the next step is to
find out what customers want and expect. This takes
analysis and research.
 2. Identifying target customers on whom to focus
marketing efforts sets the stage for deciding how to
meet the needs and wants of particular consumer
groups.
 Positioning entails developing schematic
representations that reflect how your products or
services compare to competitors on dimensions
most important to success in the industry.

Steps in product positioning:
1. Select key criteria that effectively differentiate
products or services in the industry.
2. Diagram a two-dimensional product-positioning
map with specified criteria on each axis.
3. Plot major competitors’ products in the resultant
four-quadrant matrix.
4. Identify areas in the positioning map where the
company’s products or services could be most
competitive in the given target market. Look for
vacant areas (niches).
5. Develop a marketing plan to position the
company’s products appropriately.
Marketing Issues
Customer Wants
Product
Positioning
Customer Needs

Product Positioning Steps
1. Select Key Criteria
2. Diagram Map
3. Plot Competitors’
Product-Positioning Products
Steps
4. Look for Niches
5. Develop Marketing
Plan
Marketing Issues
Rules of using Product Positioning 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

Criteria of effective product positioning
strategy
 (1) it uniquely distinguishes a company from
the competition.
 (2) it leads customers to expect slightly less
service than a company can deliver.

– Central to strategy implementation

Essential for Implementation
 Acquiring needed capital

 Developing projected financial statements
 Preparing financial budgets
 Evaluating worth of a business

Some examples of decisions that may
require finance/accounting policies:
1. To raise capital with short-term debt, long-term
debt, preferred stock, or common stock.
2. To lease or buy fixed assets.
3. To determine an appropriate dividend payout
ratio.
4. To use a market-value accounting approach.
5. To establish a certain percentage discount on
accounts within a specified period of time.
6. To determine the amount of cash that should be
kept on hand.
Capital Acquisition to Implement Strategies
 Debt
 Equity

Debt vs. Equity Decisions
 EPS/EBIT analysis
 Earnings per share/earnings before interest and
taxes

Projected Financial Statements
 Allow an organization to examine the expected

results of various actions and approaches

Steps in Preparing Projected Financial

Statements
1. Prepare income statement before balance
sheet (forecast sales).
2. Use percentage of sales method to project

CGS & expenses.
3. Calculate projected net income.

Steps in Preparing Projected Financial
Statements (cont’d)
4. Subtract dividends to be paid from net income

and add remaining to retained earnings.
5. Project balance sheet items beginning with

retained earnings.
6. List comments (remarks) on projected

statements.

Financial Budget
– 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
 Expense budgets

Types of Budgets
 Divisional budgets
 Variable budgets
 Flexible budgets
 Fixed budgets

Evaluating Worth of a Business
 Central to strategy implementation – integrative,

intensive, and diversification strategies often
implemented through acquisitions of other firms

Evaluating Worth of a Business:

Three Basic Approaches
1. What a firm owns

2. What a firm earns
3. What a firm will bring in the market

Research & Development
Issues
– New products and improvement of existing

products that allow for effective strategy
implementation

R&D policies can enhance strategy-
implementation efforts to:
1. Emphasize product or process improvements.
2. Stress basic or applied research.
3. Be leaders or followers in R&D.
4. Develop robotics or manual-type processes.
5. Spend a high, average, or low amount of money on
R&D.
6. Perform R&D within the firm or contract R&D to
outside firms.
7. Use university researchers or private sector
researchers.

R&D Approaches for Implementing
Strategy
 a. The first strategy is to be the first firm to
market new technological products.
 b. The second R&D approach is to be an
innovative imitator of successful products,
thus minimizing the risks and costs of start-
up.
 c. A third R&D strategy is to be a low-cost
producer by mass-producing products similar
to, but less expensive than products recently
introduced.
Issues
Constraints
 Level of support constrained by resource

availability
 Technological improvements shorten product
life cycles

Management Information
Systems (MIS) Issues
– Information is the basis for understanding

the firm. It’s one of the most important
factors differentiating successful from
unsuccessful firms.

MIS Issues
Functions of MIS
 Information collection, retrieval, and storage

 Keeping managers informed
 Coordination of activities among divisions
 Allow firm to reduce costs

For Review (Chapter 8)
Key Terms & Concepts
Cash Budget Marketing Mix Variables
Outstanding Shares
EPS/EBIT Analysis
Method
Management Information Price-Earnings Ratio

Systems (MIS) Method
Market Segmentation Product Positioning

For Review (Chapter 8)
Key Terms & Concepts
Projected Financial
Statement Analysis

(R&D)
Vacant Niche

Review
 Discuss the limitations of EPS/EBIT analysis.
 An EPS/EBIT analysis is the most widely used technique for
determining whether debt, stock, or a combination of debt and
stock is the best alternative for raising capital to implement
strategies.
 Several considerations should be made whenever using this
technique.
 Profit levels may be higher for stock or debt alternatives when
EPS levels are lower.
 Control is also a concern. When additional stock is issued to
finance strategy implementation, ownership and control of the
enterprise are diluted. When using EPS/SBIT analysis, timing
in relation to movements of stock prices, interest rates, and
bond prices becomes important.
Review
 Explain how marketing, finance/accounting, R&D, and
computer information systems managers’ involvement in
strategy formulation can enhance strategy
implementation.
 Answer: Marketing, finance/accounting, R&D, and computer
information systems managers play a vital role in implementing
strategies, so their active involvement in formulating strategies
is needed to gain support and commitment for actions to come.
Perhaps, more importantly, their expertise should weigh
heavily in prioritizing internal strengths/weaknesses, external
opportunities/threats, and in generating and selecting from
among alternative strategies.

Review
 What effect is e-commerce having on firms’
efforts to segment markets?
 E-commerce is making it possible for firms to
further segment their markets at low cost due to
the inherent cost advantages of selling via the
Internet. In addition, the Internet makes market
segmentation easier today because consumers
naturally form “communities” on the Web as
explained in the feature in the chapter titled “Does
the Internet Make Market Segmentation Easier?”

Review
 Under what conditions would Retained

Earnings on the Balance Sheet decrease
from one year the next?
 The only way for RE to decrease from one
year to the next on the balance sheet is 1) if
the firm incurred an earnings loss that year
or 2) the firm has positive net income for the
year but paid out dividends more than the
net income.
Review
 Why should you be careful not to use historical
percentages blindly in developing projected
financial statements?
 One must be aware of what the firm did to achieve
past sales increases which may not be appropriate
for the future unless the firm takes similar or
analogous actions. Similarly, for manufacturing
firms, if the firm is already operating at 100%
capacity in all shifts then new manufacturing
facilities would be necessary to increase sales
further.

Review
 Why is it both important and necessary to
segment markets and target groups of
customers, rather than marketing to all
possible consumers?
 Answer: Segmentation is the subdividing of a
market into distinct subsets of customers
according to needs and buying habits. If all
consumers are marketed to in the same way, it will
be difficult to please all the different needs and
buying preferences in the marketplace. To tailor
offerings to distinct subsets in an efficient and
effective manner, segmentation is necessary.

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Chapter 8

Implementing Strategies: Marketing,

Copyright © 2009 Pearson Education, Inc. Ch 8-1

The Nature of Strategy Implementation

Copyright © 2009 Pearson Education, Inc. Ch 8-2

Research & Development (R&D) Issues

Management Information Systems (MIS)

Copyright © 2009 Pearson Education, Inc. Ch 8-3

“The greatest strategy is doomed if it’s

Copyright © 2009 Pearson Education, Inc. Ch 8-4

– Strategy implementation means change

Copyright © 2009 Pearson Education, Inc. Ch 8-6

– Less than 10% of strategies formulated are

Copyright © 2009 Pearson Education, Inc. Ch 8-7

 Failing to segment markets appropriately

Copyright © 2009 Pearson Education, Inc. Ch 8-8

 Market goods & services well

Copyright © 2009 Pearson Education, Inc. Ch 8-9

– Marketing variables affect success/failure

Copyright © 2009 Pearson Education, Inc. Ch 8-10

Marketing decisions requiring policies

 Exclusive dealerships – multiple channels of

Copyright © 2009 Pearson Education, Inc. Ch 8-11

Copyright © 2009 Pearson Education, Inc. Ch 8-12

Centrally important to Implementation

Copyright © 2009 Pearson Education, Inc. Ch 8-13

 Subdividing of a market into distinct subsets

Copyright © 2009 Pearson Education, Inc. Ch 8-14

1. strategies such as market development, product

Copyright © 2009 Pearson Education, Inc. Ch 8-17

Copyright © 2009 Pearson Education, Inc. Ch 8-18

Copyright © 2009 Pearson Education, Inc. Ch 8-19

Copyright © 2009 Pearson Education, Inc. Ch 8-20

Copyright © 2009 Pearson Education, Inc. Ch 8-21

Copyright © 2009 Pearson Education, Inc. Ch 8-22

Copyright © 2009 Pearson Education, Inc. Ch 8-23

Copyright © 2009 Pearson Education, Inc. Ch 8-24

Copyright © 2009 Pearson Education, Inc. Ch 8-25

Copyright © 2009 Pearson Education, Inc. Ch 8-28

1. Select Key Criteria

4. Look for Niches

 Look for vacant niche

Copyright © 2009 Pearson Education, Inc. Ch 8-34

Copyright © 2009 Pearson Education, Inc. Ch 8-35

– Central to strategy implementation

Copyright © 2009 Pearson Education, Inc. Ch 8-36

Essential for Implementation

 Acquiring needed capital

Copyright © 2009 Pearson Education, Inc. Ch 8-37

Capital Acquisition to Implement Strategies

Copyright © 2009 Pearson Education, Inc. Ch 8-39

Debt vs. Equity Decisions

Copyright © 2009 Pearson Education, Inc. Ch 8-40

Projected Financial Statements

 Allow an organization to examine the expected

Copyright © 2009 Pearson Education, Inc. Ch 8-43

Steps in Preparing Projected Financial

2. Use percentage of sales method to project

3. Calculate projected net income.

Copyright © 2009 Pearson Education, Inc. Ch 8-44

4. Subtract dividends to be paid from net income

5. Project balance sheet items beginning with

6. List comments (remarks) on projected