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. Become familiar with the material

2. Identify problems
3. Conduct strategic analysis
4. Propose alternative solutions
5. 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 Long-term solvency
(liquidity) ratios (leverage) ratios
Current ratio Total debt ratio
Quick ratio debt-equity ratio
Cash ratio Equity multiplier
Times interest ratio
Cash coverage ratio

9-14
 Financial Ratio
Analysis Techniques
Asset utilization Profitability ratios
(turnover) ratios Profit margin
Inventory turnover Return on assets (ROA)
Days sales in Return on Equity (ROE)
inventory
Receivables turnover
Market value ratios
Days sales in
receivables Price-earnings ratio
Total asset turnover Market-to-book ratio
Capital intensity

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

Were on the side of angels. Were taking on the

entrenched monopolies. In every business weve
been in, were 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 Americas Most Innovative Company for
6 consecutive years (1996-2001) by Fortune
Named to Fortunes 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 Economic
Lobbied for Bull market
deregulation Deregulation of
$7M in contributions markets
Clinton/Bush era Making markets

Societal 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 General administration
Service Culture
Branching out to offer Opportunistic
more services Low ethics/improper
Procurement controls/fraud
Purchase suppliers Human resource
Technology management
development Peer Review Committee
EnronOnline (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 Weaknesses
Innovative Lost focus on core
Talented personnel competencies
Charismatic leadership Corporate ethics
Goal-oriented Financial controls
Steady growth history BOD governance
Excellent reputation Conflicts of interest

Opportunities Threats
Deregulation Low barriers to entry
Emerging markets 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