Ch.8

Deciding Whether or not to Go Public

As firms grow, they often move from being a private company (privately owned) to a public company (owned by various shareholders). Doing so: dilutes owners' control of the firm. creates costs and obligations associated with reporting and management. allows firms to raise extra capital. Initial Public Offering (IPO) - when a private firm goes public by selling its shares of stock to the public in order to raise capital.

Finance and Accounting Issues

Aspects of finance/accounting of importance to strategy implementation: Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating the worth of a business

Research and Development (R&D)

R&D policies can enhance strategy implementation efforts to: Emphasize product or process improvements. Develop robotics or manual-type processes. Spend a high, medium, or low amount of money on R&D. Perform R&D within the firm or contract R&D to outside firms. Use university researchers or private-sector researchers.

Guidelines for creating a Perceptual Map

Select key criteria that effectively differentiate products or services in the industry. Diagram a two-dimensional perceptual map with specified criteria on each axis. Plot major competitors in the resulting matrix. Identify areas in the perceptual map where products or services could be most competitive. In other words, look for vacant areas Incorporate findings into the firm's marketing plan.

Acquiring Capital

Two basic sources of capital for firms: Debt Too little debt can be bad for a company, particularly if the cost of capital (interest rates) are low. Firms may be missing out on opportunities. Too much debt can endanger both shareholders' returns and company survival. Stock Concerns with stock issuance include dilution of ownership and effect on stock price. Which of the two should be used? An earnings per share/earnings before interest and taxes (EPS/EBIT) analysis is a technique for determining whether debt, stock, or a combination of both is the best option for raising capital to implement strategies.

Marketing Issues

1. market segmentation - marketing technique of subdividing consumers into distinct subsets according to needs and buying habits Market segmentation decisions directly affect the marketing mix variables: Product Place Promotion Price 2. product positioning - a marketing tool designed to position a firm versus its rival firms in a diagram which helps to determine effective marketing strategies also called perceptual mapping

Social Media Marketing

It is increasingly important that company websites enable customers to interact with the firm through social media networks. Many larger companies hire social media managers. These managers are responsible for: Responding to problems and comments Tracking negative or misleading statements Managing online discussions about the firm Gathering information about opinions and desires Important social networks for firms: Facebook Google Plus Twitter LinkedIn Wikis: websites that allow employee users to add, delete, and edit content across a firm's value chain

Multi-Segment Perceptual Map

On a multi-segment perceptual map: Circles represent different segments. If a product is outside of the solid circle, customers start to lose interest (sales go down). If a product is outside of the dashed circle, no customers will have no interest (sales will be zero). Circles are often in constant motion as customer preferences change over time. On this map, different colors indicate rival firms.

Guidelines for Creating Projected Financial Statements

Prepare the projected income statement before the balance sheet. Start by forecasting sales as accurately as possible Use the percentage-of-sales method to project cost of goods sold (COGS). For example, if COGS is 75% of sales in the previous year, use 75% to forecast. Calculate the projected net income. Subtract any dividends to be paid from net income. This provides retained earnings. Retained Earnings is the key link between the income statement and the balance sheet. Prepare the projected balance sheet, starting with retained earnings. Use the cash account as a plug figure. Plug figure - the amount of money placed into (or taken from) the cash account of a balance sheet in order to make total assets equal total liabilities and stockholders' equity. List comments (remarks) about significant changes due to recommended strategies.

Projected Financial Statements

Projected Financial Statement Analysis - a technique that enables a firm to forecast the expected financial results of various strategies Involves developing income statements and balance sheets for future periods of time.