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
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 Chapter Outline

• The Nature of Strategy Implementation

• Marketing Issues

• Research and Development (R&D)

Issues
Ch 8-2
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 Chapter Outline

• Finance/Accounting Issues

• Management Information Systems

Issues

Ch 8-3
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 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 8-4
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 Implementing Strategies

Strategy implementation means change

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 Implementing Strategies:

Less than 10% of strategies formulated

are successfully implemented!

Ch 8-6
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 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

Ch 8-7
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 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

Ch 8-8
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 Marketing Issues

Marketing variables affect success or

failure of strategy implementation

• Market Segmentation
• Production Positioning

Ch 8-9
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 Implementing Strategies:
Strategy Analysis & Choice
Marketing 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

Ch 8-10
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 Implementing Strategies:
Strategy Analysis & Choice
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

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 Market Segmentation

• Subdividing of a market into distinct

subsets of customers according to
needs and buying habits

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 Market Segmentation

• Widely used in implementing

strategies

• Small and specialized firms

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 Market Segmentation

Market Segmentation Important Variable:

1. Market and product development,

market penetration, and diversification
require increased sales through new
markets or products

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 Market 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.

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 Market Segmentation

Market Segmentation Important Variable:

3. Segmentation decisions directly affect

marketing mix variables:
- Product, place, promotion, and price

Ch 8-16
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 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
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 Market Segmentation

Bases for Segmenting Markets --

– Geographic
– Demographic
– Psychographic
– Behavioral

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 Market Segmentation

Geographic Basis:

– Region
– County Size
– City or SMSA size
– Density
– Climate

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 Market Segmentation
Demographic Basis:

– Age
– Family Size
– Family Life Cycle
– Income Occupation
– Education
– Religion
– Race Nationality

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 Market Segmentation

Psychographic Basis:

– Social Class
– Lifestyle
– Personality

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 Market Segmentation

Behavioral Basis:

– Use occasion
– Benefits sought
– User status
– Usage rate
– Loyalty status
– Readiness Stage
– Attitude toward product

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 Product Positioning

Developing schematic representations

that reflect how products or
services compare to competitors’
on dimensions most important to
success in the industry

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 Product Positioning

Product Positioning based on:

– Customers wants
– Customers needs

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 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

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 Product Positioning Map
High
Convenience Rental Car Market
•
Firm 1
Firm 2
•
High Low
Customer Customer
Loyalty Loyalty

•
Firm 3
Low
Convenience
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 Product Positioning

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

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 Finance/Accounting Issues

Central to Strategy Implementation –

– Acquiring needed capital

– Developing pro forma financial statements
– Preparing financial budgets
– Evaluating worth of a business

Ch 8-28
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Decisions 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

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Decisions Requiring Finance/Accounting Policies

Extend time of accounts receivable

Establish percentage discount on accounts for terms

Determine the amount of cash kept on hand

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 Finance/Accounting Issues

Acquiring Capital to Implement Strategies –

• Basic sources of capital:

– Debt
– Equity

Ch 8-31
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 Finance/Accounting Issues

Debt vs. Equity Decisions –

• EPS/EBIT analysis
– Earnings per share/Earnings before interest
and taxes

Ch 8-32
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 Finance/Accounting Issues

Pro Forma Financial Statements -

• Allows an organization to examine the

expected results of various actions and
approaches

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 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 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
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 Finance/Accounting Issues

Financial Budget –

Document that details how funds will be

obtained and spent for a specified
period of time.

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 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

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 Evaluating Worth of a Business

Central to strategy implementation as

integrative, intensive and diversification
strategies are often implement through
acquisitions of other firms.

Ch 8-37
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 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

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Research & Development Issues

New products and improvement of existing

products that allow for effective strategy
implementation

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Research & Development Issues

• Level of support is constrained by

resource availability
• Technological improvements shorten
product life cycles

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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

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 Key Terms

• Cash Budget
• E-mail
• EPS/EBIT Analysis
• Financial Budget
• Information Systems
• Market Segmentation
• Marketing-mix Variables
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 Key Terms

• Multidimensional Scaling
• Outstanding Shares Method
• Price-earnings Ratio Method
• Pro Forma Financial Statement Analysis
• Product Positioning

Ch 8-43
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 Key Terms

• Research and Development

• Retained Earnings
• Vacant Niche
• World Wide Web

Ch 8-44
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