Chapter 9
Analyzing
Strategic Management
Cases
What are Strategic
Management Cases?
Case – a detailed description of a
challenging situation faced by an
organization, usually including a chronology
of events and extensive support materials
Case Analysis – a method of learning
complex strategic management concepts by
placing students in the middle of an actual
situation and challenging them to figure out
what to do
9-2
Why do case analysis?
 Simulates real-world experience
 Complements other learning methods
 Trains one to analyze, make decisions
 Improves skills
Differentiate
Speculate
integrate
9-3
Why Analyze Strategic
Management Cases?
 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?
9-4
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
9-5
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
9-6
Skills Developed from
Case Analyses
 Integrate
Look at the big picture
Have an organization-wide perspective
Integrate 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
9-7
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
9-8
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
9-9
Five Steps for Conducting a Strategic
Management Case Analysis
1.
2.
3.
4.
5.
Become familiar with the material
Identify problems
Conduct strategic analysis
Propose alternative solutions
Make recommendations
9-10
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
9-11
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
9-12
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
9-13
Financial Ratio
Analysis Techniques
 Short-term solvency
(liquidity) ratios
Current ratio
Quick ratio
Cash ratio
 Long-term solvency
(leverage) ratios
Total debt ratio
debt-equity ratio
Equity multiplier
Times interest ratio
Cash coverage ratio
9-14
Financial Ratio
Analysis Techniques
 Asset utilization
(turnover) ratios
Inventory turnover
Days’ sales in
inventory
Receivables turnover
Days’ sales in
receivables
Total asset turnover
Capital intensity
 Profitability ratios
Profit margin
Return on assets (ROA)
Return on Equity (ROE)
 Market value ratios
Price-earnings ratio
Market-to-book ratio
9-15
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” may be 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?
9-16
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
9-17
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
9-18
How to Get the Most
from Case Analysis
 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
9-19
Preparing an
Oral Case Presentation
Organize your thoughts
Emphasize strategic analysis
Be logical and consistent
Defend your position
Share presentation responsibilities
9-20
Preparing a
Written Case Analysis
Be thorough
Coordinate team efforts
Avoid restating the obvious
Present information graphically
Exercise quality control
9-21
Case Analysis
Case 1
Enron: On the Side of Angels
“We’re on the side of angels. We’re taking on the
entrenched monopolies. In every business we’ve
been in, we’re the good guys.”
-- Jeffrey Skilling,
President and CEO,
Enron Corporation
Background








Began as natural gas distribution co.
Evolved into financial services firm
Aggressive culture
Excessive spending
Claimed revenues of $111B in 2000
Named “America’s Most Innovative Company” for
6 consecutive years (1996-2001) by Fortune
Named to Fortune’s “100 Best Companies to
Work for in America” list
Share price > $90
Key Problems

Organizational culture/leadership/ethics
◦ Quotes from executives
◦ Personnel practices
◦ Reward systems

Unethical financial arrangements
◦ Special Purpose Entities (SPEs)
◦ Mark-to-Market accounting

Corporate governance
◦ Oversight of management
Analysis: PEST

Political

◦ Lobbied for
deregulation
◦ $7M in contributions
◦ Clinton/Bush era

Societal
Economic
◦ Bull market
◦ Deregulation of
markets
◦ “Making markets”

Technological
◦ Excess
◦ Dot-com bubble
◦ 9/11/2001
◦ EnronOnline
Analysis: Five Forces

Barriers to Entry
◦ High – oil/gas
◦ Low – tech/financial services

Substitute Products
◦ Commodities markets



Suppliers
Buyers
Competitors
◦ Plenty of financial services firms available
Analysis: Value Chain

Marketing
◦ Great reputation


Service
◦ Culture
◦ Opportunistic
◦ Low ethics/improper
controls/fraud
◦ Branching out to offer
more services

Procurement
◦ Purchase suppliers

Technology
development
◦ EnronOnline
General administration

Human resource
management
◦ Peer Review Committee
(PRC)
◦ Compensation levels
◦ Benefits
Analysis:VIRO

Valuable
◦ Oil/gas

Difficult to Imitate
◦ Very diverse

Rare
◦ Many other gas and financial services firms

Well-Organized
◦ Successful, but opaque
Analysis: SWOT

Strengths
◦
◦
◦
◦

◦ Lost focus on core
competencies
◦ Corporate ethics
◦ Financial controls
Innovative
Talented personnel
Charismatic leadership
Goal-oriented
◦ BOD governance
◦ Conflicts of interest
◦ Steady growth history
◦ Excellent reputation

Opportunities
◦ Deregulation
◦ Emerging markets
Weaknesses

Threats
◦ Low barriers to entry
◦ Market analysts
Alternatives
Focus on profitable entities/core
competencies
 Disclose SPEs, properly book assets/debts
 Find independent auditors
 Replace executive management
 Remove other fraudulent employees
 Replace BOD with independents
 Establish new HR practices
 Promote new culture of ethics (through
actions)

Recommendations
Focus on profitable entities/core
competencies
 Disclose SPEs, properly book assets/debts
 Find independent auditors
 Replace executive management
 Remove other fraudulent employees
 Replace BOD with independents
 Establish new HR practices
 Promote new culture of ethics (through
actions)

Fallout








Share price < $.50
Employees, investors lost $
Bankruptcy
Criminal charges to executives
Arthur Anderson LLP
Audit/consulting companies
WorldCom, etc.
Sarbanes-Oxley Act
Sarbanes-Oxley Act
◦ Stronger penalties for fraud
◦ Public companies can no longer make loans to
management
◦ More transparency to financial statements
reported to public
◦ Public companies must maintain a stronger
independence from their auditors
◦ Public companies must audit and report on
financial internal control procedures