Bus 411
Day 14
Copyright 2005 Prentice Hall
1
Agenda
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Assignment 4 Corrected
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2 A’s, 4 B’s, 2 C’s & 2 D’s
Assignment 5 Due
Mid-term exam
 March 13-16
 Take home (non-group work)
 20-25 Short essays
 Intense-- ~10 hours
Discussion on Implementing Strategies: Management &
Operations, Marketing, Finance/Accounting, R&D, & MIS
Issues
Copyright 2007 Prentice Hall
Ch 7-2
Assignment 2
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PURPOSE:
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INSTRUCTIONS:
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In performing business policy case analysis, you can find information about the respective
company’s strategies. Comparing what is planned versus what you would have recommended is an
important part of case analysis. Do not recommend what the firm actually plans, unless in-depth
analysis of the situation reveals those strategies to be best among all feasible alternatives. This
exercise gives you experience conducting library and Internet research to determine what Google
should do in 2007.
Look up Google and Yahoo! on the Internet. Find some recent articles about firms in this industry.
Scan Moody’s, Dun & Bradstreet, and Standard & Poor’s publications for information. Check
http://finance.yahoo.com and www.strategyclub.com.
Summarize your findings in a three-page report titled “Strategies for Google in 2007.”
Grading rubric
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Quality of research (20 points)
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Spelling, grammar, appropriate vocabulary and tone
Directed wring not creative writing
In-Depth Analysis of existing and Planned Google Strategies (30 Points
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3-5 quality sources (not web sites)
Quality of writing (20 points)
What worked, what didn’t, what will and what won’t
Recommendations for NEW Google strategies (30 points)
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Should have been tied to strategies discussed in the chapter
Copyright 2007 Prentice Hall
Ch 7-3
teams
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Team 1
 J. Harbison
 N. Lozier
 M. Martin
Team 2
 C. Brusig
 C. Pennine
 T. Nhundu
 J. Jalbert
Team 3
 K. Beaulieu
 M. Doucette
 D. Lemon
Copyright 2007 Prentice Hall
Ch 7-4
Timeline
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March 9
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March 13
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Finish Chapter 8
Chapter 9
Mid-term assigned
March 16
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Finish Chapter 7 & begin
Chapter 8
Assignment 5 due
How to present a case study
Mid-term due
March 20
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Tony Case study One Apple Computer
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March 23
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March 26-30 Spring Break
April 3
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April 6
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Team 1 Case Study Two Dell Computer
Team 2 Case Study Three PepsiCo
Team 3 Case Study Four Molson Coors Brewing Company
April 10
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Team 1 Case Study Five Hershey Foods Corporation
Copyright 2007 Prentice Hall
Ch 7-5
Steps in Preparing Case Studies
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Identify Existing Mission, Vision,
Objectives, Strategies
Develop New Vision and Mission
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Most are poor
CPM
EFE
Identify internal strengths and
weaknesses
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IFE
Financial ratios
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Analyze
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SWOT Matrix
SPACE
BCG
IE matrix
Grand Strategy Matrix
QSPM
Copyright 2007 Prentice Hall
Give advantage and disadvantages
of alternative strategies
Recommend
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Identify external opportunities and
threats
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Strategies and long range
objectives
Show cost
Specify how strategies are to be
implemented and what results to
expect
Recommend specific annual
objectives (goal) and polices
Recommend procedures for
evaluation
Be Original – Take chances
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Remember business rewards risk taking
Ch 7-6
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Copyright 2007 Prentice Hall
Ch 7-7
Management Issues
Resistance to Change
-- Single greatest threat to successful
strategy implementation
Copyright 2007 Prentice Hall
Ch 7-8
Management Issues
Resistance to Change
-- Raises anxiety; fear concerning
Economic loss
Inconvenience
Uncertainty
Break in status-quo
Copyright 2007 Prentice Hall
Ch 7-9
Management Issues
Change Strategies
Force Change Strategy
Just do it
Educative Change Strategy
This is why we are changing
Rational or Self-Interest Change
Strategy
This is why change is good for you
Copyright 2007 Prentice Hall
Ch 7-10
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Copyright 2007 Prentice Hall
Ch 7-11
Management Issues
Natural Environment
-- Wide appreciation for firms that
“mend” rather than “harm” the
environment
Copyright 2007 Prentice Hall
Ch 7-12
Management Issues
Natural Environment – Environmental
Strategies
Develop/acquire “green” businesses
Divesting environmental-damaging
business
Low-cost producer through waste
minimization & energy conservation
Copyright 2007 Prentice Hall
Ch 7-13
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Copyright 2007 Prentice Hall
Ch 7-14
Management Issues
Strategy-Supportive Culture
-- Preserve, emphasize, & build upon
aspects of existing culture that support
new strategies
Copyright 2007 Prentice Hall
Ch 7-15
Management Issues
Elements linking culture to strategy:
•
•
•
•
•
Formal statements of philosophy, charters, etc. used
for recruitment and selection, socialization
Designing of physical spaces, facades, buildings
Deliberate role modeling, teaching and coaching
Explicit reward and status system, promotion criteria
Stories, legends, myths about key people and events
Copyright 2007 Prentice Hall
Ch 7-16
Management Issues
Elements linking culture to strategy:
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What leaders pay attention to, measure and control
Leader reactions to critical incidents and crises
How the organization is designed and structured
Organizational systems and procedures
Criteria used for recruitment, selection, promotion,
retirement
Copyright 2007 Prentice Hall
Ch 7-17
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Copyright 2007 Prentice Hall
Ch 7-18
Management Issues
Production/Operations Concerns
-- Production processes typically
constitute more than 70% of firm’s total
assets
Copyright 2007 Prentice Hall
Ch 7-19
Management Issues
Production/Operations Decisions
Plant size
Inventory/Inventory control
Quality control
Cost control
Technological innovation
Copyright 2007 Prentice Hall
Ch 7-20
Management Issues (cont’d)
Resistance to Change
Natural Environment
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Copyright 2007 Prentice Hall
Ch 7-21
Management Issues
Human Resource Concerns
-- HR manager position has strategic
responsibility & has changed
dramatically as companies continue to
reorganize, outsource, etc.
Copyright 2007 Prentice Hall
Ch 7-22
Management Issues
Human Resource Strategic Responsibilities
Assessing staffing needs/costs
Developing performance incentives
ESOP’s
http://groups.msn.com/DynKorea/dyncorphistory.msnw
http://www.corpwatch.org/article.php?list=type&type=18
Child-care policies
Work-life balance issues
Copyright 2007 Prentice Hall
Ch 7-23
Diversity Issues
Women CEO’s in U.S. 2005 (examples)
CEO
Company
Age
Meg Whitman
eBay
49
Andrea Jung
Avon Products
47
Anne Mulcahy
Xerox
52
Marjorie Magner
Citigroup
56
Betsy Holden
Kraft Foods
49
Ann Moore
AOL Time Warner
57
http://money.cnn.com/magazines/fortune/fortune500/womenceos/
Copyright 2007 Prentice Hall
Ch 7-24
Benefits of a Diverse Workforce
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Improves corporate culture
Improves employee morale
Leads to a higher retention of employees
Leads to easier recruitment of employees
Decreases complaints and litigation
Increases creativity
Decreases interpersonal conflict
Copyright 2007 Prentice Hall
Ch 7-25
Benefits of a Diverse Workforce
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Enables the organization to move into
emerging markets
Improves client relations
Increases productivity
Improves the bottom line
Maximizes brand identity
Reduces training costs
CostsBenefExSumEN.pdf
Copyright 2007 Prentice Hall
Ch 7-26
Chapter 8
Implementing Strategies: Marketing,
Finance/Accounting, R&D, & MIS Issues
Strategic
Management:
Concepts & Cases
11th Edition
Fred David
Copyright 2007 Prentice Hall
Ch 7-27
Implementing Strategies
The greatest strategy is doomed if it’s
implemented badly. -Bernard Reimann
Copyright 2007 Prentice Hall
Ch 7-28
The Nature of Strategy
Implementation
-- Strategy implementation means change
Copyright 2007 Prentice Hall
Ch 7-29
The Nature of Strategy
Implementation
-- Less than 10% of strategies formulated are
successfully implemented!
Copyright 2007 Prentice Hall
Ch 7-30
The Nature of Strategy
Implementation
Low Success Rate – Strategy Implementation
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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
Copyright 2007 Prentice Hall
Ch 7-31
The Nature of Strategy
Implementation
Successful Strategy Implementation
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Market goods & services well
Raise needed working capital
Produce technologically sound goods
Sound information systems
Copyright 2007 Prentice Hall
Ch 7-32
Marketing Issues
-- Marketing variables affect
success/failure of strategy implementation
Copyright 2007 Prentice Hall
Ch 7-33
Marketing Issues
Marketing decisions requiring policies
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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
Copyright 2007 Prentice Hall
Ch 7-34
Marketing Issues
Centrally important to Implementation
1.
Market segmentation
2.
Product positioning
Copyright 2007 Prentice Hall
Ch 7-35
Marketing Issues
Market Segmentation
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Subdividing of a market into distinct subsets
of customers according to needs and buying
habits
Copyright 2007 Prentice Hall
Ch 7-36
Marketing Issues
Market Segmentation
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Key to matching supply & demand
Market development, product-development,
market penetration & diversification strategies
Allows operating with limited resources
Enables small firms to compete successfully
Copyright 2007 Prentice Hall
Ch 7-37
Marketing Issues
Market Segmentation
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Directly affect marketing mix variables:
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Product
Place
Promotion
Price
Copyright 2007 Prentice Hall
Ch 7-38
Marketing Mix – Component Factors
Product
Place
Promotion
Price
Quality
Distribution
channels
Advertising
Level
Features
Distribution
coverage
Personal selling
Discounts &
allowances
Style
Outlet location
Sales promotion
Payment terms
Brand name
Sales territories
Publicity
Packaging
Inventory
levels/locations
Product line
Transportation
carriers
Warranty
Service level
Copyright 2007 Prentice Hall
Ch 7-39
Marketing Issues
Geographic
Demographic
Market Segment
Basis
Psychographic
Behavioral
Copyright 2007 Prentice Hall
Ch 7-40
Marketing Issues
Geographic
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Region
County size
City or SMSA size
Density
Climate
Copyright 2007 Prentice Hall
Ch 7-41
Marketing Issues
Geographic
Demographic
Market Segment
Basis
Psychographic
Behavioral
Copyright 2007 Prentice Hall
Ch 7-42
Marketing Issues
Demographic
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Age
Family Size
Family Life Cycle
Income/Occupation
Education
Religion
Race/Nationality
Copyright 2007 Prentice Hall
Ch 7-43
Marketing Issues
Geographic
Demographic
Market Segment
Basis
Psychographic
Behavioral
Copyright 2007 Prentice Hall
Ch 7-44
Marketing Issues
Psychographic
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Social Class
Lifestyle
Personality
Copyright 2007 Prentice Hall
Ch 7-45
Marketing Issues
Geographic
Demographic
Market Segment
Basis
Psychographic
Behavioral
Copyright 2007 Prentice Hall
Ch 7-46
Marketing Issues
Behavioral
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Use occasion
Benefits sought
User status
Usage rate
Loyalty status
Readiness stage
Attitude toward product
Copyright 2007 Prentice Hall
Ch 7-47
Marketing Issues
Product Positioning
-- Schematic representations that reflect how
products/services compare to competitors’ on
dimensions most important to success in the
industry
Copyright 2007 Prentice Hall
Ch 7-48
Marketing Issues
Customer Wants
Product
Positioning
Customer Needs
Copyright 2007 Prentice Hall
Ch 7-49
Product Positioning Steps
1. Select Key Criteria
2. Diagram Map
Product
Positioning
Steps
3. Plot competitors’
products
4. Look for niches
5. Develop Marketing
Plan
Copyright 2007 Prentice Hall
Ch 7-50
Product Positioning Map
High
Convenience
Rental Car Market
•
Firm 2
Firm 1
•
High
Customer
Loyalty
Low
Customer
Loyalty
•
Firm 3
Low
Convenience
Copyright 2007 Prentice Hall
Ch 7-51
Marketing Issues
Product Positioning as Strategy Implementation
Tool
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Look for vacant niche
Avoid sub optimization
Don’t serve 2 segments w/ same strategy
Don’t position in the middle of the map
Copyright 2007 Prentice Hall
Ch 7-52
Finance/Accounting Issues
-- Central to strategy implementation
Copyright 2007 Prentice Hall
Ch 7-53
Finance/Accounting Issues
Essential for implementation
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Acquiring needed capital
Developing projected financial statements
Preparing financial budgets
Evaluating worth of a business
Copyright 2007 Prentice Hall
Ch 7-54
Finance/Accounting Issues
Decisions based on Finance/Accounting
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Raise capital – short-term debt, long-term debt,
preferred, or common stock
Lease or buy fixed assets
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Expense or depreciate
Determine appropriate dividend payout ratio
Copyright 2007 Prentice Hall
Ch 7-55
Finance/Accounting Issues
Decisions based on Finance/Accounting
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LIFO, FIFO, or market-value accounting
approach
Extend time of AR
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Factor AR?
Establish % discount on accounts for terms
Determine the amount of cash kept on hand
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Cash flow analysis has become more important in
recent past due to rising Prime rate
Copyright 2007 Prentice Hall
Ch 7-56
Finance/Accounting Issues
Capital acquisition to implement strategies
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Debt
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Equity
Copyright 2007 Prentice Hall
Ch 7-57
Finance/Accounting Issues
Debt vs. Equity Decisions
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EPS/EBIT analysis
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Earnings per share/Earnings before interest and
taxes
Copyright 2007 Prentice Hall
Ch 7-58
Copyright 2007 Prentice Hall
Ch 7-59
Copyright 2007 Prentice Hall
Ch 7-60
Finance/Accounting Issues
Projected Financial Statements
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Allow an organization to examine the expected
results of various actions and approaches
Copyright 2007 Prentice Hall
Ch 7-61
Finance/Accounting Issues
Steps in Preparing Projected Financial
Statements
1.
Prepare income statement before balance
sheet (forecast sales)
2.
Use percentage of sales method to project
CoGS & expenses
3.
Calculate projected net income
Copyright 2007 Prentice Hall
Ch 7-62
Finance/Accounting Issues
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 times beginning with
retained earnings
6.
List comments (remarks) on projected
statements
Copyright 2007 Prentice Hall
Ch 7-63
Projected Income Statement for Litten Company (in millions)
Prior Year 2005
Projected Year
2006
Remarks
Projected Income Statement
Sales
100
150.00
50% increase
70
105.00
70% of sales
30
45.00
10
15.00
10% of sales
5
7.50
5% of sales
15
22.50
3
3.00
12
19.50
Taxes
6
9.75
Net Income
6
9.75
2
5.00
4
4.75
Cost of Goods Sold
Gross Margin
Selling Expense
Administrative Expense
EBIT
Interest
EBT
Dividends
Retained Earnings
Copyright 2007 Prentice Hall
50% rate
Ch 7-64
Finance/Accounting Issues
Financial Budget
-- Details how funds will be obtained and spent for
a specified period of time.
Copyright 2007 Prentice Hall
Ch 7-65
Finance/Accounting Issues
Types of Budgets
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Cash budgets
Operating budgets
Sales budgets
Profit budgets
Factory Budgets
Expense Budgets
Copyright 2007 Prentice Hall
Ch 7-66
Finance/Accounting Issues
Types of Budgets
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Divisional budgets
Variable budgets
Flexible budgets
Fixed budgets
Copyright 2007 Prentice Hall
Ch 7-67
Finance/Accounting Issues
Evaluating Worth of a Business
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Central to strategy implementation – integrative,
intensive, & diversification strategies often
implemented through acquisitions of other firms
Copyright 2007 Prentice Hall
Ch 7-68
Finance/Accounting Issues
Evaluating Worth of a Business:
3 Basic Approaches
1.
What a firm owns
1.
2.
2.
What a firm earns
1.
3.
Total assets – liabilities (discount overvalued assets)
Stockholders equity
5 X times annual earnings (tax consequences)
What a firm will bring in the market
1.
Outstanding shares
Copyright 2007 Prentice Hall
Ch 7-69
Worth of a Business Analysis (see 8-8)
Southwest Airlines
Stockholders’ Equity:
Net Income:
Stock Price:
EPS:
Shares Outstanding
Company Worth Analysis
Stockholders Equity
Net Income x 5
Share Price/EPS x NI
# Shares x Share Price
Copyright 2007 Prentice Hall
$ 5,524
313
15.70
.45
784
$ 5,524
1,565
10,920
12,309
Ch 7-70
Research & Development
Issues
-- New products and improvement of
existing products that allow for effective
strategy implementation
Copyright 2007 Prentice Hall
Ch 7-71
Research & Development
Issues
Constraints
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Level of support constrained by resource
availability
Technological improvements shorten product
life cycles
Copyright 2007 Prentice Hall
Ch 7-72
Research & Development
Issues
3 Major R&D approaches to implementing
strategies
1.
2.
3.
1st firm to market new technological products
Innovative imitator of successful products
Low-cost producer of similar but less
expensive products
Copyright 2007 Prentice Hall
Ch 7-73
Management Information
Systems (MIS) Issues
-- Information is the basis for
understanding the firm. One of the most
important factors differentiating successful
from unsuccessful firms
Copyright 2007 Prentice Hall
Ch 7-74
MIS Issues
Functions of MIS
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Information collection, retrieval, & storage
Keeping managers informed
Coordination of activities among divisions
Allow firm to reduce costs
Copyright 2007 Prentice Hall
Ch 7-75