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Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Chapter 8

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John Dickey

on 19 February 2015

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Transcript of Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues Chapter 8

Thank you!
ImplementingStrategies: Marketing,Finance/Accounting,R&D, and MIS Issues
CHAPTER 8

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Research and Development Involvement in Selected Strategy-Implementation Situations

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

The third approach is to divide the market price of the firm’s common stock by the annual earnings per share and multiply this number by the firm’s average net income for the past five years
Also called the price-earnings ratio method


Evaluating the Worth of a Business

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The first approach is determining a firm’s net worth or stockholders’ equity
The second approach is based on the future benefits a firm’s owners may derive through net profits




Evaluating the Worth of a Business

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Three main approaches:
What a firm owns
What a firm earns
What a firm will bring in the market

Evaluating the Worth of a Business

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Budgets are sometimes used as instruments of tyranny that result in frustration, resentment, absenteeism, and high turnover


Budgets can hide inefficiencies if based solely on precedent rather than on periodic evaluation of circumstances and standards


Limitations of Financial Budgets

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Financial budgets can become a substitute for objectives



Budgetary programs can become so detailed that they are cumbersome and overly expensive


Limitations of Financial Budgets

An EPS/EBIT Chart for
the XYZ Company

EPS/EBIT Analysis for the
XYZ Company

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To extend the time of accounts receivable
To establish a certain percentage discount on accounts within a specified period of time
To determine the amount of cash that should be kept on hand


Finance/Accounting Issues

Examples of
Product-Positioning Maps

Alternative Bases for Market Segmentation

Alternative Bases for Market Segmentation

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The Marketing Mix Component Variables

Market segmentation decisions directly affect marketing mix variables: product, place, promotion, and price


Market Segmentation

The New Principles of Marketing

Comprehensive Strategic-Management Model

Chapter Eight

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

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Be the first firm to market new technological products
Be an innovative imitator of successful products, thus minimizing the risks and costs of start-up
Be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced


R&D Approaches for Implementing Strategies

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Emphasize product or process improvements
Stress basic or applied research
Be leaders or followers in R&D
Develop robotics or manual-type processes
Spend a high, average, or low amount of money on R&D
Perform R&D within the firm or contract R&D to outside firms
Use university researchers or private-sector researchers

Research and Development (R&D) Issues

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The fourth method is to simply multiply the number of shares outstanding by the market price per share
Also called the outstanding shares method


Evaluating the Worth of a Business

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Financial budget
a document that details how funds will be obtained and spent for a specified period of time
include cash budgets, operating budgets, sales budgets, profit budgets, factory budgets, capital budgets, expense budgets, divisional budgets, variable budgets, flexible budgets, and fixed budgets


Financial Budgets

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Project the balance sheet items, beginning with retained earnings and then forecasting stockholders’ equity, long-term liabilities, current liabilities, total liabilities, total assets, fixed assets, and current assets (in that order)
List comments (remarks) on the projected statements


Performing Projected
Financial Analysis

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Prepare the projected income statement before the balance sheet
Use the 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 the net income any dividends to be paid for that year


Performing Projected
Financial Analysis

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Projected Financial Statements
allows an organization to examine the expected results of various actions and approaches
allows an organization to compute projected financial ratios under various strategy-implementation scenarios


Projected Financial Statements

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When using EPS/EBIT analysis, timing in relation to movements of stock prices, interest rates, and bond prices becomes important
In times of depressed stock prices, debt may prove to be the most suitable alternative
However, when cost of capital (interest rates) is high, stock issuances become more attractive


Acquiring Capital to
Implement Strategies

EPS = Earnings Per Share, which is Net Income divided by # of Shares Outstanding.
Another term for Shares Outstanding is Shares Issued
EBIT = Earnings Before Interest and Taxes (also called operating income)
EBT = Earnings Before Tax
EAT = Earnings After Tax


Acquiring Capital to
Implement Strategies

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Successful strategy implementation often requires additional capital
Besides net profit from operations and the sale of assets, two basic sources of capital for an organization are debt and equity


Acquiring Capital to
Implement Strategies

To raise capital with short-term debt, long-term debt, preferred stock, or common stock
To lease or buy fixed assets
To determine an appropriate dividend payout ratio
To use LIFO (Last-in, First-out), FIFO (First-in, First-out), or a market-value accounting approach


Finance/Accounting Issues

An effective product positioning strategy meets two criteria:
it uniquely distinguishes a company from the competition
it leads customers to expect slightly less service than a company can deliver


Product Positioning

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Look for the hole or vacant niche.
Don’t serve two segments with the same strategy.
Don’t position yourself in the middle of the map.

Rules for Using Product Positioning as a Strategy-Implementation Tool

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).
Develop a marketing plan to position the company’s products or services appropriately.


Product Positioning Steps

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Select key criteria that effectively differentiate products or services in the industry.
Diagram a two-dimensional product-positioning map with specified criteria on each axis.
Plot major competitors’ products or services in the resultant four-quadrant matrix.

Product Positioning Steps

Product positioning
entails developing schematic representations that reflect how your products or services compare to competitors’ on dimensions most important to success in the industry


Product Positioning

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Tag #1: Is this customer at high risk of canceling the company’s service?
Tag #2: Is this customer worth retaining?
Tag #3: What retention tactics should be used to retain this customer?


Retention-Based Segmentation

Market Segmentation
subdividing of a market into distinct subsets of customers according to needs and buying habits widely used in implementing strategies


Market Segmentation

Purpose-Based Marketing
best way to sell in a weak economy is to “show customers how they can improve their lives” with your product or service
need to build trust and an emotional connection to the customer in order to differentiate your product or service


Purpose-Based Marketing

Internet advertising is growing so rapidly that marketers are more and more allowed to create bigger, more intrusive ads that take up more space on the web page
Websites are allowing lengthier ads to run before short video clips play
Blogs are creating more content that doubles also as an ad


Advertising Media

Firms should provide incentives to consumers to share their thoughts, opinions, and experiences on the company website
The company website must not be all about the company—it must be all about the customer too


Current Marketing Issues

To limit (or not) the share of business done with a single customer
To be a price leader or a price follower
To offer a complete or limited warranty
To reward salespeople based on straight salary, straight commission, or a combination salary/commission


Current Marketing Issues

How to make advertisements more interactive to be more effective
How to best take advantage of Facebook and Twitter conservations about the company and industry
To use exclusive dealerships or multiple channels of distribution
To use heavy, light, or no TV advertising versus online advertising


Current Marketing Issues

Discuss the nature and role of research and development in strategy implementation.
Explain how management information systems can determine the success of strategy-implementation efforts.
Explain business analytics and data mining.


Chapter Objectives (cont.)

Explain market segmentation and product positioning as strategy implementation tools.
Discuss procedures for determining the worth of a business.
Explain why projected financial statement analysis is a central strategy implementation tool.
Explain how to evaluate the attractiveness of debt versus stock as a source of capital to implement strategies.


Chapter Objectives

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A key distinguishing feature of business analytics is that it is predictive rather than retrospective, in that it enables a firm to learn from experience and make current and future decisions based on prior information


Business Analytics

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Business analytics
a management information system technique that involves using software to mine huge volumes of data to help executives make decisions also called predictive analytics, machine learning, or data mining


Business Analytics

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Having an effective management information system (MIS) may be the most important factor in differentiating successful from unsuccessful firms
The process of strategic management is facilitated immensely in firms that have an effective information system


Management Information Systems (MIS) Issues

The segments of people whom marketers want to reach online are much more precisely defined than the segments of people reached through traditional forms of media, such as television, radio, and magazines
People in essence segment themselves by nature of the websites that comprise their “favorite places,” and many of these websites sell information regarding their “visitors”



Does the Internet Make Market Segmentation Easier?

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Market segmentation allows a firm to operate with limited resources because mass production, mass distribution, and mass advertising are not required


Strategies such as market development, product development, market penetration, and diversification require increased sales through new markets and products


Market Segmentation

Questions???
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