Annual Objectives And Developing Functional Strategies

(Strategy Implementation)
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Annual Objectives

Decentralized activity Involves all managers in the firm

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Annual Objectives
1. Basis for allocating resources 2. Primary mechanism for

evaluating managers 3. Major instrument for monitoring progress toward long-term objectives 4. Establish organizational, 4/14/12 divisional, and departmental

Annual Objectives

Horizontal consistency of

objectives
Vertical consistency of

objectives
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Annual Objectives should be:

1. measurable 2. consistent 3. reasonable 4. challenging 5. time bounded 6. communicated throughout the

organization
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Annual Objectives
Objectives should state
Quantity Quality Cost Time
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Annual Objectives

It should be compatible with employees and managers values and should be supported by clearly stated policies.

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Production/Operations Concerns
Production processes typically

constitute more than 70% of firms total assets Decisions on: Plant size Inventory/inventory control Quality control Cost control 4/14/12

Production/Operations Concerns Cont.

Just in Time production Approach
a production strategy that strives to

improve a business return on investment by reducing in-process inventory and associated carrying costs.
Thus, it Significantly reduces the cost

of implementing strategy.
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Human Resource Concerns

Assessing staffing needs and costs Develop performance incentives ESOPs Work-life balance

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Human Resource Concerns

Employee Stock Ownership Plan (ESOPs) = an employee-benefit plan where by employees purchase stock of the company through borrowed money or cash contribution. = a firm sets up a trust fund and purchases shares of stocks which would be allocated to the employees. = can benefit the firm through substantial tax savings.
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BristolMyers Squibb Marriot Internatio nal Morgan Stanley

Citigroup

Fannie Mae

IBM

Top ten Best Companies for Working Women Price Waterhous e Procter And Gamble

Prudential

Texas Instrument s

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Benefits of A Diverse Workforce

1. Improves Corporate Structure 2. Improves Employee Morale 3. Leads to Higher Retention 4. Leads to easier recruitment 5. Decrease complaints and litigation 6. Increase Creativity 7. Decrease Interpersonal Conflict between

Employees

8. Improves client relations 9. Increases productivity

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Implementing Strategies: 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

Fred R. David

4/14/12 14Ch 8-14

Implementing Strategies: Marketing Issues

Marketing Decisions requiring polices
Be a price leader or price follower

Offer a complete or limited warranty

Reward salespeople based on straight

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commission or combination salary/commission

Marketing Issues
Marketing variables affect success or failure of strategy implementation
Market Segmentation Production Positioning
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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 perunit 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

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Marketing Mix Component Factors

Product Quality Features Style Brand name Packaging Product line Warranty Service level Place Distribution channels Distribution coverage Outlet location Sales territories Inventory levels/locations Transportation carriers Promotion Advertising Personal selling Sales promotion Publicity Price Level Discounts & allowances Payment terms

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Market Segmentation
Bases for Segmenting Markets -

Geographic Demographic Psychographic Behavioral

Geographic Basis:

Region County Size City or SMSA size Density Climate Demographic Basis: Age Family Size Family Life Cycle Income Occupation Education Religion Race Nationality

Behavioral Basis:

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

Psychographic Basis: Social Class Lifestyle Personality

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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 Positioning Steps

3. Plot competitors products

4. Look for niches

5. Develop Marketing Plan

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Product Positioning
Product Positioning Map as StrategyImplementation Tool

Look for vacant niche Avoid suboptimization Dont serve 2 segments with same strategy Dont position in the middle of the map

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Product Positioning
Effective Strategy
1. Uniquely distinguishes a company

from the competition

2. It leads the customer to expect

slightly less service than a company can deliver.

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Evaluating Worth of a Business

3 Basic approaches: What a firm owns 2. What a firm earns 3. What a firm will bring in the market
1.

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WGO Equitymethod

BSEquity 2004 2003 2002

Goodwill $201,875 $210,626 $179,815

Valuation $0 $0 $0 5Valuation $201,875 $210,626 $179,815

NetIncome method

NetInc 2004 2003 2002 $70,641 $49,884 $54,671 EPS

$353,205 $249,420 $273,355 Valuation $2.03 $1.33 $1.34 Valuation $1,286,104 $1,252,679 $766,441 $37.59 $33.88 $19.21 $787,315 $745,864 $500,841 $1,308,076 $1,270,729 $783,754

Valuation: What a firm owns What a firm

PE*NetIncome

SharePrice

2004 2003 2002 MarketValue 2004 2003 2002 ValueAverage 2004 2003 2002

$37.59 $33.88 $19.21 34,214 36,974 39,898 $32.92

earns

Sharesout

SharePrice

What a firm will

bring in the market

http://finance.yahoo.com/

Fred R. David Prentice Hall

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 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
1.
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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

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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

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Finance/Accounting Issues
Debt vs. Equity Decisions
EPS/EBIT analysis
Earnings per share/Earnings before interest and

taxes

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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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Pro-Forma
6 Steps in Pro Forma Financial Analysis
1. 2. 3. 4. 5. 6.

Prepare income statement before balance sheet (forecast sales) Use percentage-of-sales method to project CGS and expenses Calculate projected net income Subtract dividends to be paid from Net Income and add remaining to Retained Earnings Project balance sheet times beginning with retained earnings List comments (remarks) on projected
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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
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