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
Copyright © 2009 Pearson Education, Inc. Ch 8-2
Publishing as Prentice Hall
Chapter Outline (cont’d)
Research & Development (R&D) Issues
Management Information Systems (MIS)
Issues
Copyright © 2009 Pearson Education, Inc. Ch 8-3
Publishing as Prentice Hall
Implementing Strategies
“The greatest strategy is doomed if it’s
implemented badly.”
– Bernard Reimann
Copyright © 2009 Pearson Education, Inc. Ch 8-4
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-5
Publishing as Prentice Hall
The Nature of Strategy
Implementation
– Strategy implementation means change
Copyright © 2009 Pearson Education, Inc. Ch 8-6
Publishing as Prentice Hall
The Nature of Strategy
Implementation
– Less than 10% of strategies formulated are
successfully implemented!
Copyright © 2009 Pearson Education, Inc. Ch 8-7
Publishing as Prentice Hall
The Nature of Strategy
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
Copyright © 2009 Pearson Education, Inc. Ch 8-8
Publishing as Prentice Hall
The Nature of Strategy
Implementation
Successful Strategy Implementation
Market goods & services well
Raise needed working capital
Produce technologically sound goods
Sound information systems
Copyright © 2009 Pearson Education, Inc. Ch 8-9
Publishing as Prentice Hall
Marketing Issues
– Marketing variables affect success/failure
of strategy implementation
Copyright © 2009 Pearson Education, Inc. Ch 8-10
Publishing as Prentice Hall
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
Copyright © 2009 Pearson Education, Inc. Ch 8-11
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-12
Publishing as Prentice Hall
Marketing Issues
Centrally important to Implementation
1. Market segmentation
2. Product positioning
Copyright © 2009 Pearson Education, Inc. Ch 8-13
Publishing as Prentice Hall
Marketing Issues
Market Segmentation
Subdividing of a market into distinct subsets
of customers according to needs and buying
habits
Copyright © 2009 Pearson Education, Inc. Ch 8-14
Publishing as Prentice Hall
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
Copyright © 2009 Pearson Education, Inc. Ch 8-15
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-16
Publishing as Prentice Hall
Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral
Copyright © 2009 Pearson Education, Inc. Ch 8-17
Publishing as Prentice Hall
Marketing Issues
Geographic
Region
County size
City or SMSA size
Density
Climate
Copyright © 2009 Pearson Education, Inc. Ch 8-18
Publishing as Prentice Hall
Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral
Copyright © 2009 Pearson Education, Inc. Ch 8-19
Publishing as Prentice Hall
Marketing Issues
Demographic
Age
Family size
Family life cycle
Income/occupation
Education
Religion
Race/nationality
Copyright © 2009 Pearson Education, Inc. Ch 8-20
Publishing as Prentice Hall
Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral
Copyright © 2009 Pearson Education, Inc. Ch 8-21
Publishing as Prentice Hall
Marketing Issues
Psychographic
Social class
Lifestyle
Personality
Copyright © 2009 Pearson Education, Inc. Ch 8-22
Publishing as Prentice Hall
Marketing Issues
Geographic
Demographic
Market Segment
Basis Psychographic
Behavioral
Copyright © 2009 Pearson Education, Inc. Ch 8-23
Publishing as Prentice Hall
Marketing Issues
Behavioral
Use occasion
Benefits sought
User status
Usage rate
Loyalty status
Readiness stage
Attitude toward product
Copyright © 2009 Pearson Education, Inc. Ch 8-24
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-25
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-26
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-27
Publishing as Prentice Hall
Marketing Issues
Customer Wants
Product
Positioning
Customer Needs
Copyright © 2009 Pearson Education, Inc. Ch 8-28
Publishing as Prentice Hall
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
Copyright © 2009 Pearson Education, Inc. Ch 8-29
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-30
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-31
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-32
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-33
Publishing as Prentice Hall
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
Copyright © 2009 Pearson Education, Inc. Ch 8-34
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-35
Publishing as Prentice Hall
Finance/Accounting Issues
– Central to strategy implementation
Copyright © 2009 Pearson Education, Inc. Ch 8-36
Publishing as Prentice Hall
Finance/Accounting Issues
Essential for Implementation
Acquiring needed capital
Developing projected financial statements
Preparing financial budgets
Evaluating worth of a business
Copyright © 2009 Pearson Education, Inc. Ch 8-37
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-38
Publishing as Prentice Hall
Finance/Accounting Issues
Capital Acquisition to Implement Strategies
Debt
Equity
Copyright © 2009 Pearson Education, Inc. Ch 8-39
Publishing as Prentice Hall
Finance/Accounting Issues
Debt vs. Equity Decisions
EPS/EBIT analysis
Earnings per share/earnings before interest and
taxes
Copyright © 2009 Pearson Education, Inc. Ch 8-40
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-41
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-42
Publishing as Prentice Hall
Finance/Accounting Issues
Projected Financial Statements
Allow an organization to examine the expected
results of various actions and approaches
Copyright © 2009 Pearson Education, Inc. Ch 8-43
Publishing as Prentice Hall
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
CGS & expenses.
3. Calculate projected net income.
Copyright © 2009 Pearson Education, Inc. Ch 8-44
Publishing as Prentice Hall
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 items beginning with
retained earnings.
6. List comments (remarks) on projected
statements.
Copyright © 2009 Pearson Education, Inc. Ch 8-45
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-46
Publishing as Prentice Hall
Finance/Accounting Issues
Financial Budget
– Details how funds will be obtained and spent for
a specified period of time
Copyright © 2009 Pearson Education, Inc. Ch 8-47
Publishing as Prentice Hall
Finance/Accounting Issues
Types of Budgets
Cash budgets
Operating budgets
Sales budgets
Profit budgets
Factory budgets
Expense budgets
Copyright © 2009 Pearson Education, Inc. Ch 8-48
Publishing as Prentice Hall
Finance/Accounting Issues
Types of Budgets
Divisional budgets
Variable budgets
Flexible budgets
Fixed budgets
Copyright © 2009 Pearson Education, Inc. Ch 8-49
Publishing as Prentice Hall
Finance/Accounting Issues
Evaluating Worth of a Business
Central to strategy implementation – integrative,
intensive, and diversification strategies often
implemented through acquisitions of other firms
Copyright © 2009 Pearson Education, Inc. Ch 8-50
Publishing as Prentice Hall
Finance/Accounting Issues
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
Copyright © 2009 Pearson Education, Inc. Ch 8-51
Publishing as Prentice Hall
Copyright © 2009 Pearson Education, Inc. Ch 8-52
Publishing as Prentice Hall
Research & Development
Issues
– New products and improvement of existing
products that allow for effective strategy
implementation
Copyright © 2009 Pearson Education, Inc. Ch 8-53
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-54
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-55
Publishing as Prentice Hall
Research & Development
Issues
Constraints
Level of support constrained by resource
availability
Technological improvements shorten product
life cycles
Copyright © 2009 Pearson Education, Inc. Ch 8-56
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-57
Publishing as Prentice Hall
MIS Issues
Functions of MIS
Information collection, retrieval, and storage
Keeping managers informed
Coordination of activities among divisions
Allow firm to reduce costs
Copyright © 2009 Pearson Education, Inc. Ch 8-58
Publishing as Prentice Hall
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
Copyright © 2009 Pearson Education, Inc. Ch 8-59
Publishing as Prentice Hall
For Review (Chapter 8)
Key Terms & Concepts
Projected Financial
Statement Analysis
Research & Development
(R&D)
Vacant Niche
Copyright © 2009 Pearson Education, Inc. Ch 8-60
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-61
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-62
Publishing as Prentice Hall
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?”
Copyright © 2009 Pearson Education, Inc. Ch 8-63
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-64
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-65
Publishing as Prentice Hall
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.
Copyright © 2009 Pearson Education, Inc. Ch 8-66
Publishing as Prentice Hall
