Most Important Variables in Strategy Implementation (SMUnit V-2of 4)

Although there are many marketing variables that impact the success or failure of strategy-implementation efforts, two variables are central to the process. What are these variables? Discuss why they are so important. Your response should be at least 200 words in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

Learning Objectives

Upon completion of this unit, students should be able to:

1.    Assess the strategic management process.

2.    Analyze the steps used to implement strategies in the functional management systems of a firm.

Written Lecture

The Sales and Marketing Response

When the strategy of the firm is determined and the strategic mission is cascaded throughout the company, each function in the company responds accordingly. Since the marketing organization engages with the customer and the overall market in general, often it is the first operation within the company to engage in strategic implementation. There are many decisions of strategic import that will need to be made involving the product line, how exactly the product will be sold, to whom it will be sold, and how it actually gets to the customer.

The Product Line

Strategy is usually more concerned with the product line offered by the firm rather than the individual product itself. Why? First, the product line is developed from the core technology platform designed by the R&D function of the firm. Such development requires a long term investment that is justified by the three- to five-year strategic vision. Once the core technological investments are in place, a complete line of products may be offered that addresses a range of different markets. As an example, consider an automobile manufacturer that develops a drive train that is used in a number of different models. Although the drive train is the same, the interior and the trim may differ significantly and, as a result, command different pricing and margins. In a product line some products will have higher profit margins than others so that the mix of products sold and the average price are monitored against the strategic plan on an ongoing basis. What R&D delivers for the long term is the underlying technologies, components, and the platforms that play together to produce a line of products over time. This long-term effort is what allows companies to bring products to market quickly. Without an underlying platform, a product could take years instead of months to deliver, and this could cripple a company's strategic prospects.

Executives may well ask, "What exactly is our product?" This is a good question to ask because too narrow a product definition may lead to a failure to appreciate opportunities for additional revenues, or conversely, the failure to appreciate additional costs. For example, does your product include services such as installation, maintenance, or repair? Are such ancillary services offered as an additional sale? Also, should a product warranty be offered? If so, warranty is a cost to the organization that must be covered by reserves supported by the price of the product. Unlike a warranty offered as a sales incentive, an extended warranty is an opportunity to earn higher margins from each sale. The key to making this service-product contribute to the bottom line is building quality into the product so that purchased extended warranties are rarely used—but are paid for by the customer.

Financing is another type of product or product enhancer. Some products are rarely sold without financing, and because of this, companies dealing in products, such as automobiles and capital equipment, make financing a strategic element of the overall product portfolio. In some cases, the financial arm of a capital manufacturing company becomes so large that it rivals the actual manufacturing. The financing arm of General Motors (GMAC) prior to the financial rescue fit this profile in such a way that it was almost as if the purpose of the company was financing, and the automobile manufacturing division was simply a means to maintain the flow of financial offerings.

Sales and Strategy

Should one or more products, or product lines have special emphasis? Should the company apply special focus on market share growth, or sustained profitability? These questions relate to the role of sales and marketing in the implementation of strategy. Companies take different approaches to sales depending on the mission of the company. For instance, if sales growth and market share are critical success factors for strategic success, then the company may foster this by compensating salespeople with an uncapped commission-only plan. On the other hand, in a mature established market with high demands for customer support, a more complex sales compensation plan that incentivizes account management may be implemented. The key point is that sales is a subset of the overall implementation of strategy, and that strategic sales goals are attained and continuously fine-tuned by adjustment of incentives.

Finance and Strategy

Companies with a high level of debt are said to be highly "leveraged." This term reflects the fact that debt financing requires only relatively small ongoing debt service payments, even when profits and return on investment is very high. In other words, debt financing with small payments may lead to large sales, profits, and returns. Equity financing, or the selling of shares of the company to investors, must result in returns commensurate with the level of investment. In other words, investors who commit a high investment under high risk expect high returns. There are advantages and disadvantages to each method of financing, and each must be considered in the strategic implementation of the company. The benefit of debt leverage is a negative, and this is the constraint of ongoing debt service. Debt financing is paid back according to a strict schedule. Therefore, if the company needs significant cash to fund R&D and sales and marketing, debt service may deplete cash reserves. Equity financing has no debt service requirement, however, equity partners have an ownership stake in the company. Cash will not be depleted in this case, but equity partners are likely to be represented on the board of directors and will want a say in the strategic direction.

MIS and Cost of Operations

Management information systems are considered the "nervous system" of companies today. They are present in all companies, regardless of scale. You will find such technology used in communications, business systems, and even shop floor operations. The flow of information made possible by MIS precludes the need for additional management layers so, in strategic terms, MIS makes possible constant monitoring and controlling of the strategic plan, instant communication to the field sales and marketing personnel as well as customers, and finally, streamlined reduced-cost operations