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Dess, G.G, Lumpkin, G.T., & Eisner, A.B.,
Strategic Management: Creating
Competitive Advantages (4th ed.) © 2008
McGraw-Hill. ISBN 978-0-07-338121-3
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Copyright Warning
This presentation is the intellectual property of the textbook publisher McGraw-Hill 2008. Students are hereby advised that they may not copy or distribute this work to any third party
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Learning Objectives
After reading this chapter, you should have a good understanding of:
How strategic case analysis is used to simulate real-world experiences.
How analyzing strategic management cases can help develop the ability to differentiate, speculate, and integrate when evaluating complex business problems.
The steps involved in conducting a strategic management case analysis.
How conflict-inducing discussion techniques can lead to better decisions.
How to get the most out of case analysis.
How to use the strategic insights and material from each of the 12 previous chapters in the text to analyze issues posed by strategic management cases.
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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?
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Why Analyze Strategic
Management Cases?
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
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Skills Developed from Case
Analyses
Differentiate
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
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Skills Developed from Case
Analyses
Speculate
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
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Skills Developed from Case
Analyses
Integrate
Look at the big picture
Have an organization-wide 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
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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
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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
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Five Steps for Conducting a
Strategic Management Case
Analysis
Step 1: 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
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Five Steps for Conducting a
Strategic Management Case
Analysis
Step 2: 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 case analysis
Some problems are not apparent until after you do the analysis
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Five Steps for Conducting a
Strategic Management Case
Analysis
Step 3: 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
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Financial Ratio Analysis
Techniques
Ratio
Short-term solvency, or liquidity, ratios:
Current ratio
Quick ratio
Cash ratio
What It Measures
Ability to use assets to pay off liabilities.
Ability to use liquid assets to pay off liabilities quickly.
Ability to pay off liabilities with cash on hand.
Adapted from Exhibit 13.1 Summary of Financial Ratio Analysis Techniques
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Financial Ratio Analysis
Techniques
Ratio
Long-term solvency, or financial leverage, ratios:
Total debt ratio
Debt-equity ratio
What It Measures
Equity multiplier
Times interest ratio
Cash coverage ratio
How much of a company’s total assets are financed by debt.
Compares how much a company is financed by debt with how much is it finance by equity.
How much debt is being used to finance assets.
How well a company has its interest obligations covered.
A company’s ability to generate cash from operations.
Adapted from Exhibit 13.1 Summary of Financial Ratio Analysis Techniques
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Financial Ratio Analysis
Techniques
Ratio What It Measures
Asset utilization, or turnover, ratios:
Inventory turnover How many times each year a company sells its entire inventory.
Day’s sales in inventory
How many days on average inventory is on hand before it is sold.
Receivables turnover
Days’ sales in receivables
How frequently each year a company collects on its credit sales.
How many days on average it takes to collect on credit sales (average collection period).
How much of sales is generated for every dollar in assets.
Total asset turnover
Capital intensity The dollar investment in assets needed to generate $1 in sales.
Adapted from Exhibit 13.1 Summary of Financial Ratio Analysis Techniques
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Financial Ratio Analysis
Techniques
Ratio What It Measures
Profitability ratios:
Profit margin How much profit is generated by every dollar of sales.
Return on assets
(ROA)
How effectively assets are being used to generate a 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 ratio
Market-to-book ratio
How much investors are willing to pay per dollar of current earnings.
Compares market value of the company's investments to the cost of those investments
Adapted from Exhibit 13.1 Summary of Financial Ratio Analysis Techniques
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Example
Google Inc. – Selected key financial ratios
Financial Ratio
Current ratio
Quick ratio
Debt-equity ratio
Return on assets
(ROA)
Return on equity
(ROE)
Asset turnover
Source: http://moneycentral.msn.com
Receivable turnover
Company
11.2
11.2
0.00
22.3
24.4
0.8
10.4
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Industry
8.9
8.9
0.02
18.3
20.7
0.7
10.9

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Five Steps for Conducting a
Strategic Management Case
Analysis
Step 4: 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?
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Five Steps for Conducting a
Strategic Management Case
Analysis
Step 5: 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
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Preparing an Oral Case
Presentation
Rule
Organize your thoughts
Emphasize strategic analysis
Description
Begin by becoming familiar with the material. Compare notes about key points of the case and share insights among team members. Make an outline.
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
•
Strategic Analysis/Options
• Recommendations/Action Plan
10-20%
60-75 %
10-20%
Emphasis should be on analysis. You may need to reorganize the material so that the tools of strategic analysis can be applied.
Adapted from Exhibit 13.2 Preparing an Oral Case Presentation
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Preparing an Oral Case
Presentation
Rule
Be logical and consistent
Defend your position
Share presentation responsibilities
Description
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.
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.
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.
Adapted from Exhibit 13.2 Preparing an Oral Case Presentation
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Example
Here are five tips to “wow” your audience like Steve
Jobs, co-founder of Apple:
Sell the benefit
Practice, Practice, and Practice Some More
Keep It Visual
Exude Passion, Energy, and Enthusiasm
At the end of your presentation add more suspense by stating “and one more thing..."
Source: Gallo, Carmine. “How to Wow 'Em Like Steve Jobs,” Business Week . April 6, 2006
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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
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Preparing a Written Case
Analysis
Rule Description
Be thorough 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.
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.
Adapted from Exhibit 13.3 Preparing a Written Case Analysis
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Preparing a Written Case
Analysis
Rule
Avoid restating the obvious
Present information graphically
Description
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.
Tables, graphs, and other exhibits are usually one of the best ways to present supporting factual material. Financial calculations such as breakeven 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.
Adapted from Exhibit 13.3 Preparing a Written Case Analysis
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Using Conflict-Inducing
Decision-Making Techniques in
Case Analysis
Devil’s
Advocacy
Dialectical
Inquiry
Group Think
Use conflict-inducing decision-making techniques to help prevent groupthink and lead to better decisions.
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Question
What are the symptoms of groupthink identified by
Irving Janis? Have experienced any of these in a group situation? Explain.
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Analysis-Decision-Action Cycle in Case Analysis
1.
Analyzing organizational goals and objectives
Has the company developed short-term objectives that are inconsistent with its long-term mission?
Has the company considered all of its stakeholders equally in making critical decisions?
Is the company faced with an issue that conflicts with one of its longstanding policies?
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Analysis-Decision-Action Cycle in Case Analysis
2.
Analyzing the external environment
Does the company follow trends and events in external environment?
Is the company effectively scanning and monitoring the competitive environment?
Has the company analyzed the impact of competitive forces in its industry on profitability?
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Analysis-Decision-Action Cycle in Case Analysis
3.
Analyzing the internal environment
Does the company know how the various components of its value chain are adding value to the firm?
Has the company accurately analyzed the source and vitality of its resources?
Is the company’s financial performance as good as or better than that of its close competitors?
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Analysis-Decision-Action Cycle in Case Analysis
4.
Assessing a firm’s intellectual assets
Does the company have underutilized human capital?
Is the company missing opportunities to forge strategic alliances?
Has the company developed knowledge-management systems that capture what it learns?
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Analysis-Decision-Action Cycle in Case Analysis
5.
Formulating business-level strategies
Has the company chosen the correct competitive strategy, given its industry environment and competitive situation?
Does the company use combination strategies effectively?
Is the company using a strategy that is appropriate for the industry life cycle in which it is competing?
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Analysis-Decision-Action Cycle in Case Analysis
6.
Formulating corporate-level strategies
Is the company competing in the right businesses, given the opportunities and threats that are present in the environment?
Is the corporation managing its portfolio of businesses in a way that creates synergies among the businesses?
Are the motives of the top corporate executives who are pushing diversification strategies appropriate?
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Question
Corporate strategies address methods for achieving
______ among businesses within a large firm’s portfolio.
A) synergies
B) competitiveness
C) devil’s advocacy
D) teamwork
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Analysis-Decision-Action Cycle in Case Analysis
7.
Formulating international-level strategies
Is the company’s entry into an international marketplace threatened by the actions of local competitors?
Has the company made the appropriate choices between cost reduction and local adaptation to foreign markets?
Can the company improve its effectiveness by embracing one international strategy over another?
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Analysis-Decision-Action Cycle in Case Analysis
8.
Formulating Internet strategies
Is the company engaged in an ongoing process of opportunity recognition? If not, how can it enhance its ability to recognize opportunities?
Do the entrepreneurs who are launching new ventures have vision, dedication and drive, and a commitment to excellence? If so, how have these affected the performance and dedication of other employees involved in the venture?
Have strategic principles been used in the process of developing strategies to pursue the entrepreneurial opportunity? If not, how can the venture apply tools such as five-force analysis and value-chain analysis to improve its competitive position and performance?
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Analysis-Decision-Action Cycle in Case Analysis
9.
Achieving effective strategic control
Is the company employing the appropriate informational control systems?
Does the company have a strong and effective culture?
Has the company implemented control systems that match its strategies?
10.
Creating effective organizational designs
Has the company implemented organizational structures that are suited to the type of business it is in?
Is the company employing boundaryless organizational designs where appropriate?
Does the company use outsourcing to achieve the best possible results?
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Analysis-Decision-Action Cycle in Case Analysis
11.
Creating a learning organization and an ethical organization
Do company leaders promote excellence as part of the overall culture?
Is the company committed to being a learning organization?
Have company leaders exhibited an ethical attitude in their own behavior?
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Analysis-Decision-Action Cycle in Case Analysis
12.
Fostering corporate entrepreneurship
Has the company resolved the dilemmas associated with managing innovation?
Has the company developed autonomous work units that have the freedom to bring forth new product ideas?
Does the company have an entrepreneurial orientation?
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