Discussion Forum Week 9 Discussion Forum Week 9Go to the end of Chapter 8 and do Exercise 8C 'Determine the Cash Value of Coca-Cola Company' Steps 1 thru 3.? Submit your calculations for the

14 Oct Discussion Forum Week 9 Discussion Forum Week 9Go to the end of Chapter 8 and do Exercise 8C ‘Determine the Cash Value of Coca-Cola Company’ Steps 1 thru 3.? Submit your calculations for the

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Discussion Forum Week 9

Discussion Forum Week 9Go to the end of Chapter 8 and do Exercise 8C "Determine the Cash Value of Coca-Cola Company" Steps 1 thru 3. Submit your calculations for the Net Worth Method and the Net Income Method, Price-Earnings Ratio, and the outstanding shares method along with your determination of Coca-Cola cash value for the fiscal year, in the discussion forum. After submitting the assignment, work with your peers and come to an agreement about Coca-Cola cash value.

Chapter8-ImplementingStrategiesMarketingFinanceAccountingRDandMISIssues.pptx

Strategic Management Concepts: A Competitive Advantage Approach

Sixteenth Edition

Chapter 8

Implementing Strategies: Marketing, Finance/Accounting, R and D, and M I S Issues

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Learning Objectives (1 of 3)

8.1 Identify and describe strategic marketing issues vital for strategy implementation.

8.2 Explain why social media marketing is an important strategy-implementation tool.

8.3 Explain why market segmentation is an important strategy-implementation tool.

8.4 Explain how to use product positioning (perceptual mapping) as a strategy-implementation tool.

8.5 Identify and describe strategic finance/accounting issues vital for strategy implementation.

After studying this chapter, you should be able to do the following:

8-1. Identify and describe strategic marketing issues vital for strategy implementation.

8-2. Explain why social media marketing is an important strategy-implementation tool.

8-3. Explain why market segmentation is an important strategy-implementation tool.

8-4. Explain how to use product positioning (perceptual mapping) as a strategy-implementation

tool.

8-5. Identify and describe strategic finance/accounting issues vital for strategy

implementation.

8-6. Perform EPS/EBIT analysis to evaluate the attractiveness of debt versus stock as a

source of capital to implement strategies.

8-7. Develop projected financial statements to reveal the impact of strategy

recommendations.

8-8. Determine the cash value of any business using four corporate evaluation methods.

8-9. Discuss IPOs, keeping cash offshore, and issuing corporate bonds as strategic

decisions

that face many firms.

8-10. Discuss the nature and role of research and development (R&D) in strategy

implementation.

8-11. Explain how management information systems (MISs) impact strategy-implementation

efforts.

Learning Objectives (2 of 3)

8.6 Perform E P S/E B I T analysis to evaluate the attractiveness of debt versus stock as a source of capital to implement strategies.

8.7 Develop projected financial statements to reveal the impact of strategy recommendations.

8.8 Determine the cash value of any business using four corporate evaluation methods.

8.9 Discuss I P Os, keeping cash offshore, and issuing corporate bonds as strategic decisions that face many firms.

After studying this chapter, you should be able to do the following:

8-1. Identify and describe strategic marketing issues vital for strategy implementation.

8-2. Explain why social media marketing is an important strategy-implementation tool.

8-3. Explain why market segmentation is an important strategy-implementation tool.

8-4. Explain how to use product positioning (perceptual mapping) as a strategy-implementation

tool.

8-5. Identify and describe strategic finance/accounting issues vital for strategy

implementation.

8-6. Perform EPS/EBIT analysis to evaluate the attractiveness of debt versus stock as a

source of capital to implement strategies.

8-7. Develop projected financial statements to reveal the impact of strategy

recommendations.

8-8. Determine the cash value of any business using four corporate evaluation methods.

8-9. Discuss IPOs, keeping cash offshore, and issuing corporate bonds as strategic

decisions

that face many firms.

8-10. Discuss the nature and role of research and development (R&D) in strategy

implementation.

8-11. Explain how management information systems (MISs) impact strategy-implementation

efforts.

Learning Objectives (3 of 3)

8.10 Discuss the nature and role of research and development (R&D) in strategy implementation.

8.11 Explain how management information systems (M I Ss) impact strategy-implementation efforts.

Figure 8-1 Comprehensive Strategic-Management Model

Source: Fred R. David, “How Companies Define Their Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo, and Putu ArtamaWiguna, “Balance Scorecard of David’s Strategic Modeling at Industrial Business for National Construction Contractor of Indonesia,” Journal of Mathematics and Technology, no. 4 (October 2010): 20.

This chapter is highlighted in the strategic management model.

Strategic Marketing Issues (1 of 2)

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 T V advertising versus online advertising

Countless marketing variables affect the success or failure of strategy implementation efforts. Some strategic marketing issues or decisions are on the next two slides.

Strategic Marketing Issues (2 of 2)

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

Social Media Marketing

Marketers must get customers involved in the company website and solicit suggestions in terms of product development, customer service, and ideas.

The company should enable customers to interact with the firm on the following social media networks:

Facebook

Google Plus

Twitter

Instagram

Foursquare

Social media marketing has become an important strategic issue. Marketing has evolved to be more about building a two-way relationship with consumers than just informing consumers about a product or service.

Table 8-1 The New Principles of Marketing

1. Do not just talk at consumers-work with them throughout the marketing process.

2. Give consumers a reason to participate.

3. Listen to-and join-the conversation outside your company’s website.

4. Resist the temptation to sell, sell, sell. Instead attract, attract, attract.

5. Do not control online conversations; let it flow freely.

6. Find a “marketing technologist,” a person who has three excellent skill sets (marketing, technology, and social interaction).

7. Embrace instant messaging and chatting.

Source: Based on Salvatore Parise, Patricia Guinan, and Bruce Weinberg, “The Secrets of Marketing in a Web 2.0 World,” Wall Street Journal, December 15, 2008, R1

Customers must not feel like they are a captive audience for advertising at a firm’s website. Table 8-1 provides new principles of marketing according to Parise, Guinan, and Weinberg.

Market Segmentation (1 of 3)

Market Segmentation

subdividing of a market into distinct subsets of customers according to needs and buying habits

widely used in implementing strategies

Market segmentation enables a small firm to compete successfully with a large firm by maximizing per-unit profits and per-segment sales.

Market Segmentation (2 of 3)

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

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

To implement these strategies successfully, new or improved market-segmentation approaches are required.

Market Segmentation (3 of 3)

Market segmentation decisions directly affect the marketing mix variables:

Product

Place

Promotion

Price

Geographic and demographic bases for segmenting markets are the most commonly employed.

Table 8-2 The Marketing Mix Component Variables

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

Source: Based on E. Jerome McCarthy, Basic Marketing: A Managerial Approach, 9th ed. (Homewood, I L: Richard D. Irwin, Inc., 1987), 37-44. Used with permission.

Evaluating potential market segments requires strategists to determine the characteristics and needs of consumers, to analyze consumer similarities and differences, and to develop consumer group profiles.

Retention-Based Segmentation

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?

Tag #1: Is this customer at high risk of canceling the company's service? One of the most common indicators of high-risk customers is a drop off in usage of the company's service. For example, in the credit card industry this could be signaled through a customer's decline in spending on his or her card.

Tag #2: Is this customer worth retaining? This determination boils down to whether the post-retention profit generated from the customer is predicted to be greater than the cost incurred to retain the customer. Customers need to be managed as investments.

Tag #3: What retention tactics should be used to retain this customer? For customers who are deemed “save-worthy,” it's essential for the company to know which save tactics are most likely to be successful. Tactics commonly used range from providing “special” customer discounts to sending customers communications that reinforce the value proposition of the given service.

Alternative Bases for Market Segmentation

Geographic

Region, country size, city size, density, climate

Demographic

Age, gender, family size, family life cycle, income, occupation, education, religion, race, nationality

Psychographic

Social class, personality

Behavioral

Use occasion, benefits sought, user status, usage rate, loyalty status, readiness stage, attitude toward product

Market segmentation on these characteristics is possible with the use of business analytics or data mining.

Product Positioning (1 of 2)

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

Also called perceptual mapping

Product positioning is widely used for deciding how to meet the needs and wants of particular consumer groups.

Product Positioning Steps (1 of 2)

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 can be summarized in five steps.

Product Positioning Steps (2 of 2)

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.

Rules for Using Product Positioning as a Strategy-Implementation Tool

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.

Some rules for using product positioning as a strategy-implementation tool are on this slide.

Product Positioning (2 of 2)

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

Firms need to inform customers about what to expect and then exceed the promise. Underpromise and overdeliver! That is a key for excellent strategy implementation.

Figure 8-2 Example of a Product- Positioning Map

A Perceptual Map for the Automobile Industry

Source: Based on info at Perceptual_mapping.

This is an example of a product positioning map for the auto industry.

Finance/Accounting Issues (1 of 3)

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 L I F O (Last-in, First-out), F I F O (First-in, First-out), or a market-value accounting approach

Several finance and accounting concepts central to strategy implementation are acquiring needed capital, developing projected financial statements, preparing financial budgets, and evaluating the worth of a business. Some examples of decisions that may require finance and accounting policies are included on the next two slides.

Finance/Accounting Issues (2 of 3)

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 (3 of 3)

Acquire needed capital to implement strategies.

Develop projected financial statements to show expected impact of strategies implemented.

Determine the firm’s value (corporate valuation) in the event an offer is received.

Decide whether to go public with an Initial Public Offering (I P O).

Decide whether to keep cash offshore that was earned offshore.

Five especially important finance and accounting activities central to strategy implementation are listed on this slide and explained on later slides.

Acquiring Capital to Implement Strategies (1 of 2)

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.

When a firm needs additional capital, the choice is often made between debt or equity financing.

Acquiring Capital to Implement Strategies (2 of 2)

E P S = Earnings Per Share, which is Net Income divided by # of Shares Outstanding

Another term for Shares Outstanding is Shares Issued

E B I T = Earnings Before Interest and Taxes (also called operating income)

E B T = Earnings Before Tax

E A T = Earnings After Tax

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.

Table 8-4 E P S/E B I T Analysis for the X Y Z Company (1 of 2)

Input Data	The Number	How Determined
$ Amount of Capital Needed	$100 million	Estimated $ cost of recommendations
E B I T Range	$20 to $40 million	Estimate based on prior year E B I T and recommendations for the coming year(s)
Interest Rate	5 percent	Estimate based on cost of capital
Tax Rate	30 percent	Use prior year %: taxes divided by income before taxes, as given on income statement
Stock Price	$50	Use most recent stock price
# Shares Outstanding	500 million	For the debt columns, enter the existing # shares outstanding. For stock columns, use the existing # shares outstanding + the # new shares that must be issued to raise the needed capital (i.e., based on stock price). So divide the stock price into the $ amount of capital needed.

Table 8-4 E P S/E B I T Analysis for the X Y Z Company (2 of 2)

Conclusion: The best financing alternative is 100% stock because the E P S values are largest; the worst financing alternative is 100% debt because the E P S values are lowest.

The best way to explain EPS/EBIT analysis is by working through an example for the XYZ Company, as provided in Table 8-4. Note that 100 percent stock is the best financing alternative as indicated by the EPS values of 0.0279 and 0.056.

Figure 8-6 An EPS/EBIT Chart for the XYZ Company

As noted in Figure 8-6, the top row (EBIT) on the x-axis is graphed with the bottom row (EPS) on the y-axis, and the highest plotted line reveals the best method. Sometimes the plotted lines will interact, so a graph is especially helpful in making the capital acquisition decision, rather than solely relying on a table of numbers.

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 decisions

Most financial institutions require at least three years of projected financial statements whenever a business seeks capital.

Performing Projected Financial Analysis (1 of 2)

Prepare the projected income statement before the balance sheet.

Use the percentage-of-sales method to project cost of goods sold (C G S) 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.

Projected financial analysis can be explained in seven steps.

Performing Projected Financial Analysis (2 of 2)

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).

Use the cash account as the plug figure.

List commentary (remarks) on the projected statements.

Corporate Valuation

Methods:

The Net Worth Method

Total Shareholders’ Equity (S E) minus (Goodwill + Intangibles)

The Net Income Method

Net Income × Five

Price-Earnings Ratio Method

Outstanding Shares Method

# of Shares Outstanding × Stock Price

Four methods are often used to determine the monetary value of a company.

I P Os, Cash Management, and Corporate Bonds

Go public with an I P O?

Keep cash offshore if earned offshore?

Issue corporate bonds for what purpose?

This slide lists important financial decisions that companies must make.

Research and Development (R and D) Issues

Emphasize product or process

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14 Oct Discussion Forum Week 9 Discussion Forum Week 9Go to the end of Chapter 8 and do Exercise 8C ‘Determine the Cash Value of Coca-Cola Company’ Steps 1 thru 3.? Submit your calculations for the

Discussion Forum Week 9

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