Introduction to
Corporate Research
&
Research Methodologies
Chapter 5 & 6
Research is a structured enquiry that relies on
scientific methodology to answer questions and
create NEW knowledge.
Remember “research” is comprised of two syllables
– “re” and “search”
This means the careful “re”thinking and systematic
search for facts related to some area of curiosity.
Research is divided into two broad categories:
(1) Basic
(2) Applied
Basic Research is the pursuit of NEW
Knowledge for the sake of Knowing
Applied Research is the pursuit of NEW
Knowledge for a specific Purpose.

 Basic Research attempts to improve
the "knowledge of humanity.“

 Applied Research attempts to improve
the "condition of humanity."
Corporate research is a branch of applied research.
It involves two initial steps:
(1) Formulating a research question or questions.
(2) Pursuing answers by exploring (mining) multiple data sources.
Sources include:
 Independent technical reports by performance analysts
 Media reports about the firm's achievements and behaviors
 The 10-K, 10-Q, 8-K, Annual Report, Proxy Statements, etc.
 Direct observations of the firm – specifically on site visitations
and inspections
Research
Applied
Basic
Corporate
Research
Context
Performance
YOUR PROJECT DEMONSTRATING EXCELLENCE
The Corporate Research question contains three
dimensions:
1) Did the company appropriately fulfill its social
responsibilities?
2) Did the company adequately fulfill its financial
objectives?
3) Did the company position itself for future growth
and prosperity?
Were decisions and actions:
Ethical
 Appropriately People-sensitive
 Environmentally sensitive
 Balanced for all stakeholders


Was firm performance in each of the four crucial
financial measurement areas satisfactory?
The four areas are known as the Financial Four:
 1. Profit, Equity, & Share Value Management
 2. Debt Management
 3. Cash Management
 4. Asset Management









Does the firm have clear vision and mission statements?
Does the mission statement seem grounded in logic?
Do these statements suggest a company committed to
forward thinking?
Has the TMT suggested the need to balance between longterm and short-term priorities?
Has the company achieved a sustainable competitive
advantage?
Can the firm cope with rapid changes in the general and
competitive environments?
Does the TMT appear to be capable of innovative thinking?
Has the TMT entertained expansion plans?
Does the firm have a history of making plans without
successful implementation?
The Corporate Analysis Template (CAT) guides
three crucial activities:
1. Research Activities (gathering & organizing)
2. Evaluation Activities (assessing)
3. Reporting Activities (reporting)
CAT
Research
Evaluate
Report
CAT
Corporate Analysis Template
Research Activities
Evaluation Activities
Reporting Activity
(Contextual and Performance Data)
(Target and Benchmark)
(Findings and Conclusions)
1. General Environment
2. Competitive Environment
3. Internal Environment
4. Qualitative Performance
5. Financial Performance
1. Profit, Equity, & Share Value
2. Debt (financial leverage)
3. Cash
4. Asset (utilization)
5. Organizational Citizenship
6. Strategic Positioning
1. Grade assigned to each
performance category
2. Overall performance
assessment
3. Rationale for conclusions
I. Two categories of “data mining” in the CAT system:

(1) Context
(The firm’s external environment – general & competitive)

(2) Performance
(The firm’s behavior and achievements).
II. Data mined involves both:
primary and secondary information.
 “Primary” refers to observable data directly related to performance
 “Secondary” refers to opinions of other analysts about performance
Data
Mining
Context
Data
General
Environment
Competitive
Environment
Research Activities
Performance
Data
Benchmark
Company
Target
Company
Qualitative
Qualitative
Financial
Financial
The External Environment = General + Competitive
Context data relate to the external environment
Context data are crucial to the understanding of the
conditions and challenges confronting TMTs
Context data help identify strengths and weaknesses
as well as its opportunities and threats.
Context Data are crucial to the accurate and fair
assessment a firm’s Performance Data.
Context Data
General
Environment
Competitive
Environment
General Environment
Sociocultural
Economic
Target
Company
Demographics
Technological
Political/Legal
Competitive Environment
Substitutes
Suppliers
Unions
Customers
Target
Company
Associations
Creditors
New
Entrants
Competitors
Other
Interest
Groups
Demographic
General Environment
Sociocultural
Competitive Environment
Customers
Suppliers
Target
Company
Creditors
Unions
Competitors
Leadership
Resources
Associations
Substitutes
New
Entrants
Interest Groups
Political/Legal
Economic
Technological
Includes a firm’s decisions, actions, & results – Examples:
 Reputation
 Relationships
 Behaviors
 Competitive advantages
 Strategies
 Financial achievements
There are multiple sources for performance data:
1. The firm’s annual report and/or 10K
2. The Internet
3. Newspapers and periodicals including The Wall Street
Journal, Barron’s, Fortune, Newsweek, etc.
These can reveal additional data related to the firm’s financial health, credit
rating, rumors, scandal, litigation, or bankruptcy potential.
Performance
Data
Qualitative
Financial
Employees
Vendors
Customers
Persona
Competitors
Organizational
Communication
Citizenship
Stockholders
Directors
Government
Community
Environment
Vision
Mission
Plan
&
Competitive
Strategic
Progress
Advantage
Positioning
Innovation
Environment
Adaptability

Balance Sheets




Income Statements



Assets
Liabilities
Equity
Revenues
Expenses
Statement of Cash Flows



Operating Activities
Investing Activities
Financing Activities
Financial
Performance
Profit, Equity, &
Share Value
Debt
Cash
Asset
The CAT system guides the collection of crucial data that is
then entered into the computerized PSC analysis program for a
coalesced summary of corporate performance.
Profit, Equity, &
Share Value
Debt
Management
Cash
Management
Performance
Scorecard
PSC
Asset
Utilization
Organizational
Citizenship
Strategic
Positioning
Evaluation Activities
Performance
Evaluation
Financial
Data
Qualitative
Data
Organizational
Citizenship
Strategic
Positioning
Profit, Equity, &
Share Value
Management
Debt
Management
Cash
Management
Asset
Management
Corporate Research Methodologies –
Data Mining Methods
Chapter 6
Corporate Research Methodologies –
Data Mining Methods
PSC
CAT
Data
Mining
Corporate research is a process of mining (extracting)
valuable informational gems from existing databases.
Search, Investigate, Collect
(1) Profit, Equity, & Share Value
(2) Debt Management
(3) Cash Management
(4) Asset Management
(5) Organizational Citizenship (Social Responsibility)
(6) Strategic Positioning (Sustainable growth)
Data Mining Corporate Performance
1. Establish Context
(Gather information about the external environment [General and
Competitive] to develop a clear understanding of the context in which the target
firm competes)
2. Assemble Internal Data
(Gather information about the firm's internal environment [Resources
and Leadership] to understand the infrastructure the TMT has created)
General & Competitive environments = sources of Opportunities and Threats
Resources & Leadership = sources of Strengths and Weaknesses
Data mining involves researching &
collecting two types of data:
(1) Context Data
(2) Performance Data
Step 1: Select a target company
Step 2: Select a benchmark company
Step 3: Determine the primary industry in which your target competes
Step 4: Research information about the competitive environment
Step 5: Research information about the general environment
Step 6: Search for published information about the target’s internal
environment and its qualitative and financial performance.
Step 7: Research how the company views itself – (Its self-perception). Find this
information on the company website and in the letters to shareholders in
the annual report.
Step 8: Repeat steps 6 & 7 for your benchmark.
Step 9: Organize your data into a 5-folder system.
Folder 1: All data pertaining to the target’s external environment
(general & competitive)
Folder 2: All data pertaining to the target’s internal environment and qualitative
performance
Folder 3: All data pertaining to the target’s financial performance
Folder 4: All data that identifies the internal environment and qualitative
performance of the benchmark
Folder 5: All data that pertains to the benchmark’s financial performance
Drawing an OVERVIEW of…
Industries, Data Mining, and Annual Reports
An industry is an environment in
which a number of companies are
providing services or producing
products that are closely related.
Remember:
The condition of an industry is a window into the
challenges and opportunities that your target
company is facing.
These are government codes to identify industries.
They are helpful in identifying and collecting data about the
target’s competitive environment.
SIC = Standard Industrial Classification
NAICS = North American Industrial Classification System
For more information on SIC & NAICS see Chapter Two in your text.
Categories of Industries
The annual report is “The Mother Lode” of
company-specific performance data.
It includes information about both –
► Financial Performance
► Qualitative Performance
The letters to the stockholders contain numerous
clues about the internal environment of the
company and how management is coping with
the competitive and general environments.
An annual report is a written document
detailing certain aspects of performance as
well as the company’s philosophy and plans.
Many annual reports also include
information about the firm’s perception of its
VISION and MISSION.
General segments of the Annual Report
Report of Management
Board Chair accepts responsibility for annual report and asserts
that it complies with SEC requirements. Also indicates control systems and
internal auditing procedures are in place.
Auditor’s Report
Public accounting firm summarizes its independent audit of the
company and indicates whether or not the company appears to be fairly
representing its financial condition. It also states an opinion about the
adherence to generally accepted accounting principles.
Management Discussion
This is management’s interpretation of its own performance. It
includes a gamut of items both quantitative and qualitative. It will discuss
results of operations and funding items.
Mandated general segments of the Annual Report (cont)
Financial Statements
Statement of Earnings (Income Statement),
Statement of Financial Position (Balance Sheet), and
Statement of Cash Flows are basic requirements by the SEC.
Other items can be included.
Selected Financial Data
This provides information helpful for making comparisons over
longer periods of time.
Statement of Earnings (Income Statement) –
The Income Statement summarizes the revenues and expenses for a complete
accounting period.
Generally three years of data are included in the Income Statements
Statement of Financial Position (Balance Sheet) –
The Balance Sheet reveals the year-end values of assets, debts, and equity.
Generally two years of data are included in the Balance Sheets.
Statement of Stockholders’ Equity –
The NET value in the stockholder’s account is simply…
Assets less Debts.
A comprehensive detail of changes in stockholders’ equity is usually provided.
Statement of Cash Flows –
Consists of a three-category summary of how cash has been flowing
through the company.
The broad categories are:
Operating Activities
Investing Activities
Financing Activities
Proxy statements are available from all publicly traded companies.
It contains information such as:
Invitation to the annual meeting
Legal rights and administrative details available to the
shareholders
Biographies of all directors (most with pictures)
Board committees & board compensation
Executive compensation
Shareholder
proposals
SEC
Form DEF 14A
is a filing with the Securities and Exchange Commission (SEC)
used in combination with an annual proxy. It includes:
1. Adequate information to allow shareholders to make informed
decision when voting their shares.
2. Date, time and place of shareholder meetings,
3. Dissenter’s right of appraisal, modification or change of
securities, voting procedures, and other relevant issues and
data.
Corporate Analysis
Template
[CAT]
Research
Financial
Qualitative
Evaluation
Report
Synthesize
Defend
Recommendation
Financial
Recommend
Action
Qualitative
Profit, Equity,
Share Value
Organizational
Citizenship
Strategic
Positioning
Holistic
Judgment
Debt
Employees
Investors
Customers
Vision and Mission
Holistic
Data Review
Cash
Directors
Governments
Competitive Advantage
Asset
Competitors
Environmental
Community
Innovation
Cultural sensitivity
Creditors
Other Stakeholders
Growth Plans
Read Chapter 7:
Research: Qualitative Domain
Also: 1st Term Secretary Report due
Important
PSC Lab