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Bus 411

Bus 411. Day 14. Agenda. Assignment 4 Corrected 1 A, 4 B’s, 2 MIA’s, and 1 late Assignment 5 Posted (Last One!) Due March 20 (next class) SWOT, SPACE, BCG and QSPM Matrices for Google Mid term Exam Posted Due March 24 20 Short essays Finish Discussion on Implementing Strategies

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Bus 411

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  1. Bus 411 Day 14 Copyright 2005 Prentice Hall

  2. Agenda • Assignment 4 Corrected • 1 A, 4 B’s, 2 MIA’s, and 1 late • Assignment 5 Posted (Last One!) • Due March 20 (next class) • SWOT, SPACE, BCG and QSPM Matrices for Google • Mid term Exam Posted • Due March 24 • 20 Short essays • Finish Discussion on Implementing Strategies • Discussion on Strategic Review, Evaluation and Control Copyright 2007 Prentice Hall

  3. Team 1 Karen Geneice Lee James Team 2 Takefumi Matt Darius Danielle Case Study Teams Copyright 2007 Prentice Hall

  4. Today Finish Chapter 8 Chapter 9 March 20 Assignment 5 Due How to present a case study Tony Case Study One Apple Computer Team work if time allows March 24 Midterm due Team work (no class) March 27 Team Work (no class) March 31 Team 1 Case 19 Jet Blue April 3 Team 2 Case 20 AirTran April 7 Tony Case 27 Kroger April 10 Team 1 Case 26 Best Buy April 14 Team 2 Case 28 Home Depot April 17 Tony Case 23 Harrah’s April 21 Team 1 Case 24 Royal Caribbean Cruises April 24 Team 2 Case 25 Web Reservations International April 28 Team 1 Case 21 USA truck May 1 Team 2 Case 22 Yellow Roadway Corp. Take home final assigned May 6 @ 10AM In-class final May 9 by 3 PM Take home final Timeline (tentative) Copyright 2007 Prentice Hall

  5. Copyright 2007 Prentice Hall

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  7. Finance/Accounting Issues Projected Financial Statements • Allow an organization to examine the expected results of various actions and approaches Copyright 2007 Prentice Hall

  8. Finance/Accounting Issues Steps in Preparing Projected Financial Statements • Prepare income statement before balance sheet (forecast sales) • Use percentage of sales method to project CoGS & expenses • Calculate projected net income Copyright 2007 Prentice Hall

  9. Finance/Accounting Issues Steps in Preparing Projected Financial Statements (cont’d) • Subtract dividends to be paid from Net Income and add remaining to Retained Earnings • Project balance sheet items beginning with retained earnings • List comments (remarks) on projected statements Copyright 2007 Prentice Hall

  10. Projected Income Statement for Litten Company (in millions) Copyright 2007 Prentice Hall

  11. Finance/Accounting Issues Financial Budget -- Details how funds will be obtained and spent for a specified period of time. Copyright 2007 Prentice Hall

  12. Cash budgets Operating budgets Sales budgets Profit budgets Factory Budgets Expense Budgets Divisional budgets Variable budgets Flexible budgets Fixed budgets Finance/Accounting Issues Types of Budgets Copyright 2007 Prentice Hall

  13. Finance/Accounting Issues Evaluating Worth of a Business • Central to strategy implementation – integrative, intensive, & diversification strategies often implemented through acquisitions of other firms Copyright 2007 Prentice Hall

  14. Finance/Accounting Issues Evaluating Worth of a Business: 3 Basic Approaches • What a firm owns • Total assets – liabilities (discount overvalued assets) • Stockholders equity • What a firm earns • 5 X times annual earnings (tax consequences) • What a firm will bring in the market • Outstanding shares Copyright 2007 Prentice Hall

  15. Worth of a Business Analysis (see 8-8) Southwest Airlines Stockholders’ Equity: $ 5,524 Net Income: 313 Stock Price: 15.70 EPS: .45 Shares Outstanding 784 Company Worth Analysis Stockholders Equity $ 5,524 Net Income x 5 1,565 Share Price/EPS x NI 10,920 # Shares x Share Price 12,309 Copyright 2007 Prentice Hall

  16. Research & Development Issues -- New products and improvement of existing products that allow for effective strategy implementation Copyright 2007 Prentice Hall

  17. Research & Development Issues • Level of support constrained by resource availability • Technological improvements shorten product life cycles Constraints Copyright 2007 Prentice Hall

  18. Research & Development Issues • 1st firm to market new technological products • Innovative imitator of successful products • Low-cost producer of similar but less expensive products 3 Major R&D approaches to implementing strategies Copyright 2007 Prentice Hall

  19. 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

  20. MIS Issues • Information collection, retrieval, & storage • Keeping managers informed • Coordination of activities among divisions • Allow firm to reduce costs Functions of MIS Copyright 2007 Prentice Hall

  21. Chapter 9Strategy Review, Evaluation, & Control Strategic Management: Concepts & Cases 11th Edition Fred David Copyright 2007 Prentice Hall

  22. Strategic Management Process Model Copyright 2007 Prentice Hall

  23. Strategy Evaluation Organizations are most vulnerable when they are at the peak of their success -- R.T. Lenz Copyright 2007 Prentice Hall

  24. Strategy Review, Evaluation, & Control -- Strategies become obsolete -- Internal environments are dynamic -- External environments are dynamic Copyright 2007 Prentice Hall

  25. Strategy Review, Evaluation, & Control • Vital to the organization’s well-being • Alert management to potential/actual problems in a timely fashion • Erroneous strategic decisions can have severe negative impact on organizations Strategy Evaluation Copyright 2007 Prentice Hall

  26. Strategy Review, Evaluation, & Control • Examine the underlying bases of a firm’s strategy • Did we do a careful analysis? • Did things change? • Compare expected to actual results • Identify corrective actions to ensure that performance conforms to plans 3 Basic Activities Copyright 2007 Prentice Hall

  27. Strategy Review, Evaluation, & Control • Complex & sensitive undertaking • Overemphasis can be costly & counterproductive • Too much time spentmeasuringrather than doing Strategy Evaluation Copyright 2007 Prentice Hall

  28. Strategy Review, Evaluation, & Control • Have assets increased • Increase in profitability • Increase in sales • Increase in productivity • Profit margins, ROI, & EPS ratios increased Appraisal of Strategic Performance Copyright 2007 Prentice Hall

  29. Strategy Evaluation, Review & Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage Copyright 2007 Prentice Hall

  30. Strategy Evaluation, Review & Control • Strategy should not present inconsistent goals & policies • Issue and not “people” problems • Success for one department means failure for another • Policy problems rise to the top Consistency Copyright 2007 Prentice Hall

  31. Strategy Evaluation, Review & Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage Copyright 2007 Prentice Hall

  32. Strategy Evaluation, Review & Control • Need for strategies to examine sets of trends • Need a Holistic view (internal and external) Consonance Copyright 2007 Prentice Hall

  33. Strategy Evaluation, Review & Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage Copyright 2007 Prentice Hall

  34. Strategy Evaluation, Review & Control • Neither overtax resources or create unsolvable sub-problems • Can it be done with the given or available resources? Feasibility Copyright 2007 Prentice Hall

  35. Strategy Evaluation, Review & Control Consistency Rumelt’s4 Criteria Consonance Feasibility Advantage Copyright 2007 Prentice Hall

  36. Strategy Evaluation, Review & Control • Creation or maintenance of competitive advantage • If it doesn't create a competitive advantage then what’s the point? Advantage Copyright 2007 Prentice Hall

  37. Process of strategic evaluation • Management should be continually aware of progress • Management by wandering around • Don't wait for information get to you, go out and get the information • Things Change Copyright 2007 Prentice Hall

  38. Strategy Review, Evaluation, & Control • Increase in environment’s complexity • Difficulty predicting future with accuracy • Increasing number of variables Difficulties in Strategy Evaluation Copyright 2007 Prentice Hall

  39. Strategy Review, Evaluation, & Control • Rate of obsolescence of plans • Domestic and global events • Decreasing time span for planning certainty Difficulties in Strategy Evaluation Copyright 2007 Prentice Hall

  40. Strategy Review, Evaluation, & Control • Initiate managerial questioning • Trigger review of objectives & values • Stimulate creativity in generating alternatives Strategy Evaluation Should -- Copyright 2007 Prentice Hall

  41. Strategy Review, Evaluation, & Control • Develop revised EFE Matrix • Develop revised IFE Matrix Review of Underlying Bases of Strategy -- Copyright 2007 Prentice Hall

  42. Strategy Review, Evaluation, & Control • Competitors’ reaction to strategy • Competitors’ change in strategy • Competitors’ changes in strengths & weaknesses • Reasons for competitors’ strategic change Review Effectiveness of Strategy -- Copyright 2007 Prentice Hall

  43. Strategy Review, Evaluation, & Control • Reasons for competitors’ successful strategies • Competitors’ present market positions & profitability • Potential for competitor retaliation • Potential for cooperation with competitors Review Effectiveness of Strategy -- Copyright 2007 Prentice Hall

  44. Strategy Review, Evaluation, & Control • Are strengths still strengths? • Have we added additional strengths? • Are weaknesses still weaknesses? • Have we developed other weaknesses? Monitor Strengths & Weaknesses; Opportunities & Threats Copyright 2007 Prentice Hall

  45. Strategy Review, Evaluation, & Control • Are opportunities still opportunities? • Other opportunities develop? • Are threats still threats • Other threats emerged? • Are we vulnerable to hostile takeover? Monitor Strengths & Weaknesses; Opportunities & Threats Copyright 2007 Prentice Hall

  46. Copyright 2007 Prentice Hall

  47. Review Underlying Bases New IFE & EFE Take Corrective Actions Measure Firm Performance Evaluation Framework Yes Differences? NO Yes Differences? NO Continue present course Copyright 2007 Prentice Hall

  48. Strategy Review, Evaluation, & Control • Compare expected to actual results • Investigate deviations from plan • Evaluate individual performance • Progress toward stated objectives Measuring Organizational Performance Copyright 2007 Prentice Hall

  49. Strategy Review, Evaluation, & Control • Financial Ratios • Compare performance over different periods • Compare performance to competitors • Compare performance to industry averages Quantitative Criteria for Strategy Evaluation Copyright 2007 Prentice Hall

  50. Strategy Review, Evaluation, & Control • Return on investment (ROI) • Return on equity (ROE) • Profit margin • Market Share Key Financial Ratios Copyright 2007 Prentice Hall

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