Case Analysis

Case method is basis of BUS 400 course methodology

Environmental scanning

Strategy Formulation

StrategyImplementation

Evaluation&

Control

Strategic Management Process

Why Cases? • Can’t be manager without practice; in biz

school, practice is cases

• Understand what managers should/shouldn’t do

• Build assessment skills of strengths & weaknesses of different organizations

• Practice in identifying strategic issues, evaluating alternatives, & forming plans

• Enhance business judgment, not what text says

• Gain exposure to different industries & types of organizations

How Cases are Organized

Opening Paragraph

Firm Background – structure, products, industry, competitors, history,

financial situationArea of Interest – finance, hr, etc.

Problem or decision

Alternatives (optional)

Conclusion

– task, deadline

What is Answer!1. No right answer!

2. Don’t try to guess what instructor wants

3. Looking for sound argument for selected course of action

4. Not seeking precise answers to set of managerial problems

5. Goal - become skilled in process of evaluating environment, assessing options, & forming appropriate strategy

Short Cycle ApproachTake 15 minutes maximum to do:1. Read 1st paragraph (or 2-3) & last paragraph

2. Answer (in summary form) questions:• Who is decision maker & who am I?

• What is my issue & its significance to firm?

• Why has my issue arisen & why involved now?

• When do I have to decide or act?

3. Look at exhibits to get initial impression

4. Review headings of case to understand where info is

5. Skim text quickly – could read 1st & last sentences of each paragraph

6. Read assignment questions & reflect on case

Short Cycle PreparationCase Title: ____________________________

Name Position

Who: ________________________________

Issue(s)

What: _______________________________

Why: _______________________________

When:_______________________________

Long Cycle Approach After perspective from short-cycle:

1. Knowing how case is organized, read case thoroughly

2. Analyze casea. Define issueb. Analyze case datac. Select decision criteriad. Analyze/evaluate alternativese. Select preferred alternativef. Develop action/implementation plan

Long Cycle Preparation (1)a. Issue(s): Immediate Basic

(one to be resolved in case) (larger, more generic) 1. ___________ 1. ___________

2. ___________ 2. ___________

IMPORTANCE (is issue of strategic importance?) Low High

I II

III IV

Low

URGENCY Highb. Case Data Analysis

(Apply course frameworks & analytical tools – e.g., PEST, lifecycle, etc.)

Long Cycle Preparation (2)c. Alternative Generation 1. ______ 2. ______ 3. _______ 4. ________, etc.

d. Decision Criteria (e.g., ROI, net margin, etc.)

e. Alternative Assessment (using Decision criteria, pro’s & con’s)

f. Preferred Alternative (predicted outcome)

g. Action & Implementation Plan Timing/Milestone

WhoWhatWhenWhereHow

Missing Info:Assumptions

Intro & Problem Identification• Introduce succinctly firm & problem(s)

facing Usually > 1

• May be difficult to isolate problems into distinct categories to address separately

• Indicate approach using to get solution

• Indicate frameworks & tools to be used

• Outline parts of report

Analysis of (Macro) Environment• Examine trends in PEST & assess their

influence on organization:

• Political

• Economic

• Social, cultural and demographic;

• Technological

• Global (International)

Task & Compet. Environment• Analyze competition

• Rivalry among companies offering same product or service

• Ease & possibility to set up new companies

• Presence of substitutes to products or services offered

• Threats from suppliers• Threats from clients

• Analyze threats from other external stakeholders

• Describe life cycle of industry: emergence,

growth, maturity, decline

Summary of Ext. Environment• Summarize threats &

opportunities from two previous steps

• Assess industry attractiveness

• Identify 3-5 key factors of success

Analysis of Int. Environment• Carry out functional analysis:

• Marketing/Finance/R&D/Operations/HR/MIS

• Analyze value chain & identify core competences. If necessary, examine other aspects

• Summarize strengths & weaknesses of company

SWOT & Critical Strategic Issues• Matrix contrasting threats &

opportunities with strengths & weaknesses

• Identify critical issues for company according to situation described in matrix

Governance & Strat. Posture

• Examine critically:• Mission Statement & Vision

• Objectives

• Corporate strategies

• Competitive/business strategies

• Functional strategies appropriateness

• Examine composition & competency of:• Board of Directors

• Top Managers

Alternatives & Recommendations• To address gaps in current situation,

what are feasible alternative strategies & actions?• Identify pros & cons for each action

• Among alternatives, which one recommending?• At corporate, business, & functional levels?

• Why are these strategies most appropriate?

• What will be impact of strategies on firm?

Implementation of Strategies• What programs required for

recommended strategies?

• What human & material resources necessary?

• Are programs financially feasible?

• What are priorities & timetables for their achievements?

• Will structure of firm be modified?

Evaluation & Control• What standards & measures to

evaluate strategies during implementation phase & at end?

• Who will evaluate them?

• What will be source of data?

• When will evaluation take place?

Writing & Presenting Case Report• Don’t repeat large pieces of factual

info

• Use appropriate framework for consistency of your analysis

• Make your discussion flow logically & smoothly

• Avoid grammatical & spelling errors

• If possible, do Internet & library search

Presentation Slides• Use PowerPoint

• Use BIG FONT, sans serif (e.g., Tahoma)

• Use visuals if possible

• Avoid too many slides; 6-7 max. for presentation of 15 minutes

• Consider time for questions

Discussion• Not looking for “answer for case”• Group discussion of case & sound arguments for

position are important• Participation & discussion is key; invite class to

provide other alternatives• Instructor’s role: not to give answers or to get

you to say what I want• Opportunity to take risks but don’t go off-track

with trivia• Don’t get offended by questions• Adopt attitude of managers – get into role

Key Financial Ratios #1Profitability Ratios

1. Gross margin Cover expenses (Sales-COGS)/Sales & yield profit

2. Operating profit margin Shows profitability

NI Before Tx & Int/Sales

3. Return on Sales Look for sub-par

Profit After Tx/Sales profits

4. Return on Total Assets Return on investment

Profit After Tx/Total Assets

5. Return on Net Worth SH Rate of return Profit A Tx/Total SH equity

Key Financial Ratios #2Liquidity Ratios

1. Current ratio Short-term debt

C. Assets/C. Liabilities covered by liquid assets

2. Acid-test ratio Pay off s-t obligations

(C.A.-inventory)/C.L. without inventory sales

Key Financial Ratios #3Leverage Ratios

1.Debt-to-asset Measure use of debt

Ttl Debt/Total Assets

2.L-t debt-to-equity Measure of debt/equity

L-t debt/ttl SH Equity

3. Fixed charge coverage Ability to meet interest

Profit BTx+Int+Lease charges Ttl int. + lease oblig.

Key Financial Ratios #4Activity Ratios

1.Inventory Turnover Level of industry

Sales/Inv. of Fin. Goods

2.Fixed Asset Turnover Sales productivity Sales/Fixed Assets

3. Acc’ts Rec. Turnover avg. time to collect credit Ann.Credit Sales/ A-R 4. Avg. Collection Period Waiting time for payment A-R/(Ttl Sales/365)

Key Financial Ratios #5Other Ratios

1.Price earnings risky firms have low P/E

Mkt share price/ATx earnings

2.Dividend yield Return on dividends Div. per share/Price per share

3. Break-even analysis Sales to make profit Fix. Costs Sales-Var. Cost/unit

Key Ratios Summary

• Pick & choose appropriate ratios

• Gives backup to your position (e.g., in financial trouble)

• Some industries have published ratios to compare company against average

Internal SWOT AnalysisStrengths:• Adequate resources?• Perception by customers?• Market leader?• Strong functional areas?• Economies of scale?• Insulated from competitive pressures?• Proprietary technology or innovativeness?• Cost advantages?• Proven management?

Internal SWOT AnalysisWeaknesses:• Not clear direction?• Obsolete facilities?• Lack of management depth/talent?• Poor track record on strategy?• Internal operating problems?• Falling behind on R & D?• Too narrow product line?• Weak market image/poor marketing skills?• Unable to finance changes in strategy?

External SWOT AnalysisOpportunities:• Service new customers?• Enter new markets?• Expand product line to meet more

needs?• Diversify into related products?• Add complementary products?• Vertical integration?• Faster market growth?

External SWOT AnalysisThreats:• Likely entry of new competitors?• Rising sales of substitute products?• Slower market growth?• Adverse regulations and policies?• Growing competitive pressures?• Vulnerability to cycles?• Growing bargaining power of customers?• Changing buyer needs?• Adverse demographic changes?

Case Hints

• Chronology helpful in looking at case

• Look at competitors – look for contrast

• Don’t take things at face value

• “Do nothing” always an option

• Think outside of case – what would another company you know do in situation?