Strategic Management: Text and Cases

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Chapter fourteen
Analyzing Strategic Management Cases
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Topics

• Why?
• Steps involved in conducting a case analysis.
• Better decisions from conflict-inducing
  discussion techniques
• How to get the most out of case analysis.

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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

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Why Analyze Strategic Management Cases?

• Cases include
• 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

• 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

• 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

• 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

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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

• 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

• 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

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Five Steps for Conducting a Strategic Management
Case Analysis

• 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 What It Measures

• Short-term solvency, or liquidity, ratios

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.
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Financial Ratio Analysis Techniques
Ratio What It Measures
Long-term solvency, or financial leverage, ratios
Total debt ratio How much of a companys 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. ratio Cash coverage A companys ability
to generate cash from operations. ratio
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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. Days sales
in How many days on average inventory is on hand
before it inventory is sold. Receivables How
frequently each year a company collects on its
credit turnover 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. turnover Cap
ital intensity The dollar investment in assets
needed to generate 1 in sales.
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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 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
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Five Steps for Conducting a Strategic Management
Case Analysis

• 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

• 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 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.

• Organize your thoughts

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.

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Preparing an Oral Case Presentation
Rule 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.

• Be logical and consistent

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.
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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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Using Conflict-Inducing Decision-Making
Techniques in Case Analysis
Use conflict-inducing decision-making techniques
to help prevent groupthink and lead to better
decisions.
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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 groups shared allusions or
  question the validity of arguments proposed
• Practice of self-censorship
• Appointment of mindguards

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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 groups
  viewpoints and positions
• Divide into subgroups, meet at different times,
  reconvene to resolve differences
• Hold a second chance meeting

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Using Conflict to Improve Decision Making

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

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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)