Report (Business Policy)

8/4/2019 Report (Business Policy)

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Annual Objectives

And DevelopingFunctional Strategies

(Strategy Implementation)



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Decentralized activity

Involves all managers in the firm

Annual Objectives



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1. Basis for allocating resources

2. Primary mechanism forevaluating managers

3. Major instrument for monitoring

progress toward long-termobjectives

4. Establish organizational,

divisional, and departmental

Annual Objectives



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Horizontal consistency of objectives

Vertical consistency of objectives

Annual Objectives



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1. measurable

2. consistent

3. reasonable4. challenging

5. time bounded

6. communicated throughout theorganization

Annual Objectives should be:



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Objectives should state –

Quantity

Quality

Cost

Time

Annual Objectives



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…It should be compatible withemployees’ and managers values

and should be supported by clearlystated policies.

Annual Objectives



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Production/OperationsConcerns

Production processes typicallyconstitute more than 70% of

firm’s total assets Decisions on:

Plant size

Inventory/inventory control

Quality control

Cost control



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Just in Time production Approach

a production strategy that strives toimprove a business return oninvestment by reducing in-processinventory and associated carryingcosts.

Thus, it Significantly reduces the costof implementing strategy.

Production/OperationsConcerns Cont.



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Human Resource Concerns

Assessing staffing needs and costs

Develop performance incentives ESOPs

Work-life balance



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Employee Stock Ownership Plan (ESOPs)

= an employee-benefit plan where byemployees purchase stock of the companythrough borrowed money or cash contribution.

= a firm sets up a trust fund and purchasesshares of stocks which would be allocated tothe employees.

= can benefit the firm through substantial taxsavings.

Human Resource Concerns



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Top ten BestCompanies for

WorkingWomen

Bristol-MyersSquibb

Procter

AndGamble

FannieMae IBM

MarriotInternatio

nal

Prudential

Morgan

Stanley

Price

Waterhouse

Texas

Instruments

Citigroup



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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 betweenEmployees

8. Improves client relations

9. Increases productivity

Benefits of A DiverseWorkforce



4/14/12Fred R. David 14Ch 8-14

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 asingle customer

Implementing Strategies:

Marketing Issues



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Marketing Decisions requiring polices –

Be a price leader or price follower

Offer a complete or limited warranty

Reward salespeople based on straightcommission or combination salary/commission

Implementing Strategies:

Marketing Issues



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Marketing variables affect successor failure of strategyimplementation

Market SegmentationProduction Positioning

Marketing Issues



4/14/12 17Ch 8-17

Subdividing of a market into

distinct subsets of customersaccording to needs and buyinghabits

Market Segmentation



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Widely used in implementing

strategies

Small and specialized firms

Market Segmentation



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Market Segmentation Important Variable:

1. Market and product development, marketpenetration, and diversification requireincreased sales through new markets orproducts

Market Segmentation



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2. Firm can operate with limited resources.Enables a small firm by maximizing per-unit profits and per-segment sales.

Market Segmentation



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3. Segmentation decisions directly affectmarketing mix variables:

- Product, place, promotion, and price

Market Segmentation



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Marketing Mix – Component Factors

Service level

Warranty

Transportation carriersProduct line

Inventorylevels/locations

Packaging

PublicitySales territoriesBrand name

Payment termsSales promotionOutlet locationStyle

Discounts &allowances

Personal sellingDistribution coverageFeatures

LevelAdvertisingDistribution channelsQuality

PricePromotionPlaceProduct



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Bases for Segmenting Markets --

Geographic

Demographic

Psychographic Behavioral

Geographic Basis:

Region

County Size

City or SMSA size

Density

Climate

Market Segmentation

Demographic Basis:• Age• Family Size• Family Life Cycle• Income

Occupation• Education• Religion• Race Nationality

Psychographic Basis: – Social Class – Lifestyle – Personality

Behavioral Basis:

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

product



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Developing schematic

representations that reflecthow products or servicescompare to competitors’ on

dimensions most important tosuccess in the industry

Product Positioning



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Product Positioning based on:

Customers wants

Customers needs

Product Positioning



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Product Positioning Steps

ProductPositioning

Steps

2. Diagram Map

1. Select Key Criteria

3. Plot competitors’products

4. Look for niches

5. Develop MarketingPlan



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Product Positioning Map 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

Product Positioning



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Effective Strategy

1. Uniquely distinguishes a companyfrom the competition

2. It leads the customer to expectslightly less service than a companycan deliver.

Product Positioning



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Evaluating Worth of aBusiness

3 Basic approaches:

1. What a firm owns

2. What a firm earns

3. What a firm will bring in the market



Fred R. DavidPrentice Hall

WGO

Equity method BS Equity Goodwill Valuation

2004 $201,875 $0 $201,875

2003 $210,626 $0 $210,626

2002 $179,815 $0 $179,815

Net Incomemethod Net Inc 5Valuation

2004 $70,641 $353,205

2003 $49,884 $249,420

2002 $54,671 $273,355

PE*Net Income Share Price EPS Valuation

2004 $37.59 $2.03 $1,308,076

2003 $33.88 $1.33 $1,270,729

2002 $19.21 $1.34 $783,754

Market Value Shares out Share Price Valuation

2004 34,214 $37.59 $1,286,104

2003 36,974 $33.88 $1,252,679

2002 39,898 $19.21 $766,441

$32.92

Value Average

2004 $787,315

2003 $745,864

2002 $500,841

Valuation:

What a firm owns

What a firmearns

What a firm willbring in the

market

http://finance.yahoo.com/





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Research & DevelopmentIssues

New products and improvement of existingproducts that allow for effective strategyimplementation









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Level of support is constrained by resourceavailability

Technological improvements shortenproduct life cycles











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3 Major R&D approaches to implementingstrategies –

1. First firm to market new technologicalproducts

2. Be an innovative imitator of successful

products3. Low-cost producer of similar but less

expensive products

















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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 orcommon 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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Acquiring Capital to Implement Strategies –

Basic sources of capital:

Debt

Equity












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Debt vs. Equity Decisions –

EPS/EBIT analysisEarnings per share/Earnings before interest and

taxes











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Pro Forma Financial Statements -

Allows an organization to examine theexpected results of various actions andapproaches










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Pro-Forma

6 Steps in Pro Forma Financial Analysis

1. Prepare income statement before balancesheet (forecast sales)

2. Use percentage-of-sales method to project CGSand expenses

3. Calculate projected net income

4. Subtract dividends to be paid from Net Incomeand add remaining to Retained Earnings

5. Project balance sheet times beginning withretained earnings

6. List comments (remarks) on projected






















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Financial Budget –

Document that details how funds will beobtained and spent for a specified periodof time.










Types of Budgets –

Cash budgets

Operating budgets

Sales budgets

Profit budgets

Factory budgets

Capital budgets

Expense budgets

Divisional budgets



















Documents

Report (Business Policy)