Strategy Evaluation

Essay by AmBeddUniversity, Bachelor's March 2005

download word file, 7 pages 2.7

Suppose your company has just acquired a firm that produces battery-operated lawn mowers, and strategists want to implement a market-penetration strategy. How would you segment the market for this product? Justify your answer.

Explain how you would estimate the total worth of a business.

In order to estimate the total worth of a business, I would determine its net worth or stockholders equity. After calculating net worth, I would add or subtract an appropriate amount for goodwill and overvalued or undervalued assets. I would establish the businesses to worth at five times its current annual profit. I may chose to use a five-year average profit level. I would also consider using the price-earnings ratio method or possibly the outstanding shares method.

Explain why EPS/EBIT analysis is a central strategy-implementation technique.

"An Earnings Per Share/Earnings Before Interest and Taxes (EPS/EBIT) analysis is the most widely used technique for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies.

EPS/EBIT analysis is a valuable tool for making capital financing decisions needed to implement strategies, but several considerations should be made whenever using this technique."

(http://faculty.jwu.edu/rwahl/HM4060/HM4060%20Chapter%208.htm)

How would the R&D role in strategy implementation differ in small versus large organizations?

Resource availability largely determines the research and development of a company. Because small companies have less capital to attain those resources, their emphasis would probably not be on research and development. Because of the rising costs of R&D, consortiums have developed among companies to all have access each other's R&D. The larger companies can take more risks in this area which is highly risky financially.

Discuss the limitations of EPS/EBIT analysis.

"First, profit levels may be higher for stock or debt alternatives when EPS levels are lower. Another consideration when using EPS/EBIT...