Case Analysis Worksheets for Strategic Management Cases Jonathon Rakich, Ph.D Professor of Management School of Business Indiana University Southeast 4201 Grant Line Road New Albany, IN 47150 Phone 812, 246-4505 jrakich@ius.edu Kathleen Voelker, MBA Visiting Lecturer School of Business Indiana University Southeast New Albany, Indiana 47150 kvoelker@ius.edu
Case Analysis Worksheets for Strategic Management Cases Abstract This paper, Case Analysis Worksheets for Strategic Management Cases, contains documents provided by the authors for use by students in the senior Business Policy course at Indiana University Southeast (IUS). It is a follow up to an accounting and financial audit teaching aid and tutorial paper presented at the 2008 Academy of Business Disciplines. 1 The purpose of this paper is to share with faculty, who teach using cases and who write cases, forms and processes that we have found to be successful in advancing student learning in case-oriented courses. THE WORKSHEETS The worksheets and forms have been classroom tested for over 5 years in our team-coordinated senior Business Policy course. They enable students to: Organize case information into categories and to identify salient points for each assigned case Derive and assess risk, performance, and control issues inherent in the assigned case Use specific terminology relative to categories of objectives and strategies, as well as apply strategic management textbook concepts Systematically analyze the current situation of a given organization and formulate and evaluate potential courses of action to create a competitive advantage for the organization Use a specified format to logically structure oral case presentations and written case analysis reports. Exhibit 1 presents a Case Analysis Form students use to systematically record and organize information as they read a case. The first page focuses on the categories of industry/environment, as well as the traditional functional areas of business (i.e., management, marketing, finance, and production/operations). The second page of the case analysis form contains categories for identifying stated and implied objectives/strategies, mission, the SWOT analysis, listing problems (or issues), and identifying potential future strategies for the organization that is the focus of the case. Both pages of the form are blank with the exception of the headers and italicized embedded items. There are numerous strategic management concepts related to each and students are to apply them, as appropriate, in the written analysis. These concepts are derived from the course required textbook by Hunger and Wheelen. 2 The attached form provides examples for a typical strategic management case. Finally, each potential strategy is to be evaluated according to a specified circuit analysis: Will the strategy accomplish an objective, will it solve a problem or issue, and what impact the strategy would have on the 1 Bauder, S., K. Voelker, and J. Rakich, Financial Audit Teaching Aid for Case Analysis, Casewriters Workship presentation, Proceedings of the Academy of Business Disciplines, 2008. 2 Hunger, J. David and Thomas L. Wheelen. Essentials of Strategic Management, 4 th edition: Prentice Hall, 2007. 1
functional areas if implemented. That is, why and how critical organizational functions must be changed in order to implement the proposed strategic alternative. Exhibit 2 presents a worksheet that outlines three strategic management categories students use in their case analysis. They are generic objectives (profit, growth, citizenship, and survival), corporate strategies (forward integration, backward integration, horizontal integration, diversification, and retrenchment), and business-level competitive strategies (cost leadership, differentiation, and focus). These objectives and strategies are fully developed in the Hunger/Wheelen textbook. Exhibit 3 presents a Financial Audit Worksheet. The instructor provides students with industry numbers for each ratio. Based on balance sheets and income statements contained in the case, or provided by the instructor 3, students calculate the company s ratios using the definitions in the left margin of the exhibit. Students are to interpret the calculated ratios relative to the industry averages (a cross-sectional analysis) and the prior years ratios for the organization (a time-series analysis) and then draw conclusions about risk, capital structure, performance, and control. The conclusions yield information that may be appropriate in the development of the SWOT analysis and the problem/issues section of the report. (See Bauder, Voelker, and Rakich for a full explanation of ratio analysis, a sample completed financial audit worksheet with industry ratios, and interpretation of results). 4 Exhibit 4 presents a Written Case Analysis Format worksheet that specifies the components required in the written case report. Information contained in exhibits 1-3 is used when students write each section in this worksheet. Together, these exhibits provide students with a process for synthesizing and integrating information contained in a case. Exhibit 4 provides students with a structured format to use in writing (or orally presenting) a comprehensive case analysis report. Our intent is to share these documents with faculty who teach using cases or write cases. We believe they will find them useful. 3 Income statements and balance sheets for a selected set of given years can be printed from Compustat. Recent 3 or 5 year statements for publicly traded companies can be printed from www. finance.yahoo.com or www. moneycentral.msn.com 4 Bauder, Susanna, Kathleen Voelker, and Jonathon Rakich. Financial Audit Teaching Aid for Case Analysis, Casewriters Workshop presentation and Proceedings of the Academy of Business Disciplines, 2008. 2
EXHIBIT 1. CASE ANALYSIS FORM (page 1) BUSINESS POLICY Industry/Environment Management Marketing Finance (Diagnosis/Li mits) How many Companies? Org. Structure Durable or Nondurable? -Simple, functional, Consolidated or Fragmented? matrix, divisional, complex Consumer or Industrial Manufacturing or Service? -Bureaucratic costs Goods? Societal Environment Forces -Political -Technological -Economic -Demographic -Sociocultural Porter s Five Forces Analysis Bargaining Power of Buyers and Suppliers Threat of New Entrants Threat of Substitutes Rivalry Among Existing Firms Strategic Groups Multidomestic or Global Decision Making -Proactive/reactive (mode) Phase of Srategic Planning Board Continuum - Phantom/Catalyst BOD Resp. Exec. Leadership 4 Respon. of Bus. Economic Legal Target market(s)? Push or Pull Strategy? Convenience, specialty, shopping: Product Price Place (distribution) Promotion Global products/global markets? Product life cycle Introduction, growth, maturity, decline 1. Liquidity 2. Capital Structure 3. Performance 4. Activity 5. Limits Production Value Chain Primary Activities Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Support Activities General Administration HRM Research, Tech, & Systems Development Procurement Other Corporate Culture Core Competencies Competitive Advantage Life Cycle Progression BCG Growth Share Matrix Timing Tactics Triggering Event(s) Economies of Scale? Economies of Scope Industry Life Cycle Ethical Discretionary 3
EXHIBIT 1 (CON T) CASE ANALYSIS FORM (page 2) BUSINESS POLICY Stated/Implied Objectives/Strategies SWOT Problems (Issues) Objectives Profits Growth Citizenship Survival Mission Strategies Strategic Group? INTERNAL EXTERNAL Weaknesses Threats Link to Value Chain/ Adverse Firm Functional areas Porter s 5-forces* Societal Environ. EQIC -Efficiency *New Entrants -Quality Bargain Power Supp -Innovation Bargain Power Buy -Customer Rivalry Responsiveness Substitutes Future Strategies (Generic) Forward Integration Backward Integration Horizontal Integration Diversification (Concentric or Conglomerate) Retrenchment Competitive Strategy (Cost Leadership, Differentiation, or Focus) Evaluation/Selection/ Implementation CIRCUIT ANALYSIS 1. Accomplish objectives 2. Solve problem(s) 3. Impact on functional areas (feasible?) Objective(s) Addressed Issue(s) Addressed Impact on functions -Management -Marketing -Production/operations Strategic Type? Current Strategies Corporate-level Business-Level Strengths Opportunities Competitive Advantageous Advantage Porter s 5-forces* (Resources/ Societal Environ. Capabilities) EQIC Link to Value Chain -Finance -HRM -R&D -IT/MIS 4
EXHIBIT 2 Business Policy Categories of Objectives and Strategies Generic Objectives 1. Profit (returns or residuals) 2. Growth (sales level and/or market share) 3. Citizenship (corporate culture and/or commitment/responsibility to stakeholders) including community/society) 4. Survival A. CORPORATE STATEGIES (WHAT INDUSTRY) Hunger & Wheelen Growth Concentration Horizontal Integration Diversification Retrenchment Turnaround Captive Sellout/Divest Bankruptcy Liquidation Vertical Integration (F) Vertical Integration (B) Horizontal Integration Diversification (related or unrelated) Rakich Generic Strategies 1. Forward Integration 2. Backward Integration 3. Horizontal Integration 4. Diversification (concentric or conglomerate) 5. Retrenchment Stability Pause Proceed with caution No change -------------------------- ------------------------------- Cost leadership Differentiation B. BUSINESS/COMPETITIVE STRATEGY (HOW COMPETE) Broad Broad Narrow Cost focus, Differentiation focus Cost leadership Differentiation Focus 6. Competitive Strategy choose 1 of 3; cost leadership, differentiation, or focus (i.e., cost focus or differentiation focus) CORPORATE STATEGIES (WHAT INDUSTRY) Method -Merger/acquisition; strategic alliances; internal development. Competitive Advantage -Resources and capabilities (value chain) Horizontal Integration = Expanding firm s products/services into other geographic locations and/or increasing the range of products/services offered to current markets. Or, merger/acquisition (same point in the value chain). Related Diversification = Using the firm s distinctive competence in a different industry or different product area where product knowledge, manufacturing capabilities, marketing skills can be applied; points of commonality may be technology, customers, distribution, etc. Unrelated Diversification = No Connection to any value chain activities. 5
EXHIBIT 3 Financial Audit Worksheet Financial Audit for Dollars in millions Industry Assets $ Sales $ Net profit $ Total Debt Stockholder Equity LIQUIDITY (draw risk conclusion) Current Ratio (CA/CL) Net Working Capital (CA-CL) Quick Ratio [(CA-Inv) / CL] CAPITAL STRUCTURE (draw risk and cost of capital conclusions) Tot. Liab./Eq. [(TCL+LTD)/SE] Tot. Liab./A [(TCL+LTD)/TA] Curr.Debt/Tot.Debt (CD/TD) PERFORMANCE (look at all ingredients) Gross Profit Margin % CGS % Sales (CGS/Sales) NP % Sales (NP/Sales) RR Assets % (NP/TA) RR Net Worth % (NP/SE) SAE % Sales (Ad Ex./Sales) ACTIVITY (Draw control conclusion) Inv. Turn. (CGS/Inv.) Inv. Days O/S (365/Inv. Turn.) A/R Turn. (Sales/AR) AR Coll. (Days) (365/AR Turn.) FA Turnover (Sales/NFA) TA Turnover (Sales/TA) LIMITS Stock Debt Improved Operations 6
OTHER 7
EXHIBIT 4 Business Policy Written Case Analysis and Oral Presentation Format Structure of Case Analysis Report 1. Very brief background and overview. Include a statement of the firm s stated or implied mission (1-2 sentences) (double space) 2. Stated and implied objectives (list) (single space) [generic with example] (see Exhibit 2 for list of generic objectives) 3. Stated and implied strategies those doing now (list) (single space) [generic with example] (see Exhibit 2 for list of generic strategies) 4. Diagnostic financial audit including analysis of (a) liquidity (including risk), (b) capital structure (including risk and cost of capital), (c) performance, (d) activity (including control), and (e) limits (including resource availability from external sources and improved operations). [Narrative (double space); Financial Audit worksheet to be attached] 5. SWOT ANALYSIS; internal and external environment assessment listing weaknesses, opportunities, threats, and strengths (list with descriptor format is acceptable) (single space) 6. Issue (problem) section [narrative; double space] 7. Alternatives (6 strategies) [generic with example] section (list) (rejects listed first, accepted strategies follow) (single space), five corporate-level and one business-level 8. Evaluation and recommendations determine feasibility of each alternative (i.e., strategy) listed in #7 (double space). Circuit Analysis: Application of three tests with examples for all strategies: (a) will it accomplish objectives; (b) will it address/solve issue (s); and (c) what is the impact of implementation on all functional areas (i.e., Management, Marketing, Production, and Finance). That is, what must be done to implement each strategy. [Note: production (operations) equals the value creation activity.] - Collect, use, and integrate appropriate information from library/internet sources. * Attachments, appendices, and table of financial ratios are not counted as part of the written analysis pages. Table of financial ratios is not required to be typed (may be hand written). First written group case analysis = 5 pages + flop; second written analysis = 6 pages + flop; third/fourth written analysis = 7 pages + flop. NOTE: A. All papers are to be typed double spaced (except where noted above) (10 or 12 cpi) with one-inch margins. Papers will be downgraded for improper grammar, spelling, punctuation, and lack of proofreading. B. An in-depth diagnostic financial audit is required. Turn in 8.5 x 14 worksheet with paper and financial audit worksheet. C. Use of concepts introduced in previous cases, lectures, and the text material is expected. 8