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MGT603 - Strategic Management - Lecture Handout 39

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Learning objectives

The main objective of this chapter to enable to students about research and development issue relating to strategy implementation.
Going public means selling off a specific percentage of the business to others in order to raise capital; consequently, it shifts the owners' control of the firm. Going public is not recommended for companies that initial costs can be too high for the firm to generate sufficient amount of cash inflows to make going public worthwhile. The firm must have sufficient amount of capital to bear out lawyer, underwriter and other documentation cost in order to form the business. In addition to initial costs involved with a stock offering, there are costs and obligations associated with reporting and management in a publicly held firm. For firms with more than $10 million in sales, going public can provide major advantages:

  1. It can allow the firm to raise capital to develop new products,
  2. To build plants,
  3. Expand, grow, and market products and services more effectively.

Before going public, a firm must have quality management with a proven track record for achieving quality earnings and positive cash flow. The company also should enjoy growing demand for its products. Sales growth of about 5 or 6 percent a year is good for a private firm, but shareholders expect public companies to grow around 10 to 15 percent per year.

Research and Development (R&D) Issues

Research and development (R&D) management can plays part in strategy implementation.
“New products and improvement of existing products that allow for effective strategy implementation”

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MGT603 - Strategic Management - Lecture Handout 26

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These dimensions are explained below:

Internal Strategic Position

External Strategic Position
Financial Strength (FS)
Environmental Stability (ES)
Risk involved in business
Impact of technology Price elasticity of demand
Debt to equity ratio
Working capital condition
Political situation
Demand variability
Ease of exit from market
Price range of competing products
Cash flow statement
Rate of inflation
Return on investment
Competitive pressure
Competitive Advantage (CA)
Industry Strength (IS)
Access to the market
Market share
Demand and supply factors Resource utilization Growth potential
Quality of product and services
Profit potential
Product life cycle
Financial stability
Customer loyalty
Technological know-how
Capacity, location and layout
Productivity, capacity utilization
Technological know-how
Capital intensity
Backward and forward integration
Ease of entry into market

After the selection of variables the rating is assigned to each. After the addition of these variables taking the average. For example financial strength is explain below

Read more: MGT603 - Strategic Management - Lecture Handout 26