Jul 25, 2017

does your product include services such as installation, maintenance, or repair?

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Business and Marketing (SMUnit V-4of 4)


Describe the considerations of EPS/EBIT analysis in the context of strategic implementation. 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
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
Chapter 8:
Implementing Strategies:
Marketing, Finance/
Accounting, R&D, and
MIS Issues
Click here to access a
PDF of the Chapter 8
Key Terms
1. Cash budget
2. EPS/EBIT analysis
3. Financial budgets
4. Management
information system
5. Market segmentation
6. Marketing mix
7. Multidimensional
8. Outstanding shares
9. Price earnings ratio
10. Product positioning
11. Projected financial
statement analysis
12. Purpose-based
13. Research and
development (R&D)
BBA 4951, Business Policy and Strategy  2
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
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.

Business and MarketingNameInstitutionDateDescribe the considerations of EPS/EBIT analysis in the context of strategic implementationThe acronym EPS refers to Earnings per Share while EBIT refers to Earnings before Interest and Tax. The EPS is the company`s total profit divided by the earnings per sh...

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