ANALYZING STRATEGIC MANAGEMENT CASES

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

STRATEGIC MANAGEMENT

Analyzing Strategic Management

Cases

Strategic Management: creating competitive advantages

Gregory G. DessG. T. Lumpkin

Marilyn L. Taylor

14-2Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Why Analyze Strategic Management Cases?

• The process of analyzing, decision making, and implementing strategic actions raises many good questions• Why do some firms succeed and others fail?

• Why are some companies higher performers than others?

• What information is needed in the strategic planning process?

• How do competing values and beliefs affect strategic decision making?

• What skills and capabilities are needed to implement a strategy effectively?



• Case analysis

• Simulates the real-world experience

• Forces you to choose among different options

• Set forth a plan of action based on your choices



• Strategic management cases

• Detailed description of a challenging situation faced by an organization

• Usually includes a chronology of events and extensive support materials

• Financial statements

• Product lists

• Transcripts of interviews with employees


Skills Developed from Case Analyses

• Evaluate many different elements of a situation at once

• Differentiating between the factors that are influencing the situation

• Understanding that problems are often complex and multilayered• Dig deep

• Being too quick to accept an easy solution will probably fail to get to the heart of the problem

Differentiate



• Envision explanation that might not readily be apparent

• Imagine different scenarios

• Contemplate the outcome of a decision

• Deal with uncertainty and incomplete knowledge• Missing data

• Information may be contradictory

• Speculate about details and consequences that are unknown

Speculate

Differentiate



• Look at the big picture

• Have an organizationwide perspective

• Integrate the information into one set of recommendations affecting the whole company• Changes made in one part will

affect the others

• Integrate the impact of various decisions and environmental influences on all parts of the organization

Integrate

Speculate

Differentiate


How to Conduct a Case Analysis

• Prepare for a case discussion• Do your homework

• Investigate

• Analyze

• Research potential solutions

• Gather the advice of others

• Become immersed in facts, options, and implications


How to Conduct a Case Analysis

• Put yourself “inside” the case

• Think like an actual participant Strategic decision maker Board of directors Outside consultant

• Try different perspectives One of the most challenging is as a business

founder or owner Hiring an outside consultant may not be an option


Five Steps for Conducting a Strategic Management Case Analysis

Become familiar with the material• Read quickly through the case

one time

• Use initial read-through to assess possible links to strategic concepts

• Read the case again, making notes

• Evaluate application of strategic concepts

• After forming first recommendation, thumb through the case again to assess consequences of actions you propose

Step One


Step OneStep Two


Identify problems

• Some cases have more than one problem

• Avoid getting hung up on symptoms

• Articulate the problem Writing down a problem statement gives you a

reference point when you proceed through the case analysis

• Some problems are not apparent until after you do the analysis


Step Two


Conduct strategic analyses

• Determine which strategic issues are involved

• Use strategic tools to conduct the analysis Five-forces analysis Value chain analysis Contingency frameworks Financial analysis

• Test your own assumptions about the case

Step Three


Financial Ratio Analysis Techniques

Short-term solvency, or liquidity, ratios:

Adapted from Exhibit 14.1 Summary of Financial Ratio Analysis Techniques

Current ratio Ability to use assets to pay off liabilities.Quick ratio Ability to use liquid assets to pay off liabilities quickly.Cash ratio Ability to pay off liabilities with cash on hand.

Ratio What It Measures



Long-term solvency, or financial leverage, ratios:

Total debt ratio How much of a company’s total assets are financed by debt.

Debt-equity ratio Compares how much a company is financed by debt with how much is it finance by equity.

Equity multiplier How much debt is being used to finance assets.Times interest How well a company has its interest obligations covered.ratioCash coverage A company’s ability to generate cash from operations.ratio





Asset utilization, or turnover, ratios:Inventory turnover How many times each year a company sells its entire

inventory.Day’s sales in How many days on average inventory is on hand before itinventory is sold.Receivables How frequently each year a company collects on its creditturnover sales.Days’ sales in How many days on average it takes to collect on credit receivables sales (average collection period).Total asset How much of sales is generated for every dollar in assets.turnoverCapital intensity The dollar investment in assets needed to generate $1 in

sales.






Profitability ratios:

Profit margin How much profit is generated by every dollar of sales.Return on assets How effectively assets are being used to generate a (ROA) return.Return on equity How effectively amounts invested in the business by its (ROE) owners are being used to generate a return.


Market value ratios:

Price-earnings How much investors are willing to pay per dollar of current ratio earnings.Market-to-book Compares market value of the company's investments to ratio the cost of those investments


Step ThreeStep Four


Propose alternative solutions• Develop a list of options first without

judging them Do nothing is often a reasonable alternative

• Evaluate alternatives Can the company afford it? Is the solution likely to evoke a competitive

response? Will employees accept the change? How will it affect other stakeholders? How does it fit with the vision, mission, objectives? Will the culture or values of the company change?


Step Four


Make recommendations• Make a set of recommendations

that your analysis supports

• Describe exactly what needs to be done

• Explain why this course of action will solve the problem

• Include suggestions for how best to implement the proposed solution

• The solution you propose must solve the problem you identified

Step Five


Preparing an Oral Case Presentation

Organize your thoughts

Adapted from Exhibit 14.2 Preparing an Oral Case Presentation

Begin by becoming familiar with the material. Compare notes about key points of the case and share insights among team members. Make an outline.

Rule Description

Emphasize strategic analysis

Purpose of case analysis is to diagnose problems and find solutions. You may need to unravel the case material as presented and reconfigure it in a way that can be more effectively analyzed. Three major categories

• Background/Problem Statement 10-20%• Strategic Analysis/Options 60-75 %• Recommendations/Action Plan 10-20%

Emphasis should be on analysis. You may need to reorganize the material so that the tools of strategic analysis can be applied.


Preparing an Oral Case Presentation

Be logical and consistent

Adapted from Exhibit 14.2 Preparing an Oral Case Presentation

Rambling presentations are hard to follow, may confuse the listener, and fail to evoke a good discussion. Present arguments and explanations in logical sequence. Support with facts and appropriate financial analyses. Be sure solutions address the problems you identified.

Rule Description

Defend your position

Anticipate what others might disagree with and be prepared to defend your views in class discussion. Be aware of the choices you made and implications of your recommendations. Be clear about your assumptions. Be able to expand on your analysis.

Share presentation responsibilities

Strategic management case analyses are often conducted by teams. Each member should have a clear role in the oral presentation, preferably a speaking role. Coordinate the different parts into a logical, smooth-flowing whole.


How to Get the Most from Case Analysis

• Keep an open mind

• Take a stand for what you believe

• Draw on your own personal experience

• Participate and persuade

• Be concise and to the point

• Think out of the box

• Learn from the insights of others

• Apply insights from other case analyses

• Critically analyze your own performance

• Conduct outside research


Preparing an Written Case Analysis

Be thorough

Adapted from Exhibit 14.3 Preparing a Written Case Analysis

Many ideas about oral presentations also apply to written case analysis. However, a written analysis typically has to be more complete. Write out the problem statement and articulate assumptions. Support your arguments and reference case materials and other facts more specifically.

Rule Description

Coordinate team efforts

Written cases are often prepared by small groups. Within a group you may disagree about the diagnosis or recommended plan of action. Healthy disagreement may lead to a richer understanding of the case, but, before committing your ideas to writing make sure you coordinate your responses. Don’t prepare a written analysis that appears contradictory or looks like a patchwork of disconnected thoughts.


Preparing an Written Case Analysis

Avoid restating the obvious

Adapted from Exhibit 14.3 Preparing a Written Case Analysis

There is no reason to restate the case content. This uses up valuable space and accomplishes little. Stay focused on key points. Only restate information that is most central to your analysis.

Rule Description

Present information graphically

Tables, graphs, and other exhibits are usually one of the best ways to present supporting factual material. Financial calculations such as break-even analysis, sensitivity analysis, or return on investment are best presented graphically. Even qualitative information such as product lists or rosters of employees can be summarized and viewed quickly by using a table or graph.

Exercise quality control

Use good grammar, avoid misspelling words, and eliminate typos and other visual distractions. Make your written presentation appear as professional as possible. Don’t let a poor appearance of your written case keep the reader from recognizing the importance and quality of your analysis.


Using Conflict-Inducing Decision-Making Techniques in Case Analysis

Groupthink

Devil’s Advocacy

Dialectical Inquiry

Use conflict-inducing decision-making techniques to help prevent groupthink and lead to better decisions.


Symptoms of Groupthink and How to Prevent It

• Symptoms

• Illusion of invulnerability

• Belief in the inherent morality of the group

• Stereotyped views of members of opposing groups

• Application of pressure to members who express doubts about the group’s shared allusions or question the validity of arguments proposed

• Practice of self-censorship

• Appointment of mindguards

Groupthink


Symptoms of Groupthink and How to Prevent It

• Preventing groupthink• Leaders must encourage group members

to address concerns and objectives

• Leaders should adopt impartial stance

• Leader should encourage members to discuss deliberations with trusted associates and report perspectives back to group

• Invite outside experts, challenge group’s viewpoints and positions

• Divide into subgroups, meet at different times, reconvene to resolve differences

• Hold a “second chance” meeting

Groupthink


Using Conflict to Improve Decision Making

• Devil’s advocacy

• One of the groups (or members) acts as a critic to the plan

• Devil’s advocate comes up with problems of the proposed alternative and suggests reasons for not adopting it

• Forces the group to take a hard look at its proposed solution

• Can be demoralizing

• May not lead to better suggestions

Devil’s Advocacy


Using Conflict to Improve Decision Making

• Dialectical inquiry

• Identify proposal and information used to derive it

• State underlying assumptions

• Identify counter plan (antithesis)

• Engage in debate

• Identify a synthesis (best components of each alternative)

• Can be very time consuming

• May result in undesirable compromises (original solution was better)

Devil’s Advocacy

Dialectical Inquiry


Two Conflict-Inducing Decision-Making Processes

Adapted from Exhibit 14.4 Two Conflict-Inducing Decision-Making Processes

Business

ANALYZING STRATEGIC MANAGEMENT CASES