1. 14-1

2. 14-2 Analyzing Strategic Management Cases McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Chapter fourteen Part 3: strategic implementation

3. 14-3 Learning Objectives  After reading this chapter, you should have a good understanding of :  How strategic case analysis is used to simulate real-world experiences.  How analyzing strategic management cases can help develop the ability to differentiate, speculate, and integrate when evaluating complex business problems. McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

4. 14-4 Learning Objectives  After reading this chapter, you should have a good understanding of :  The steps involved in conducting a strategic management case analysis.  How conflict-inducing discussion techniques can lead to better decisions.  How to get the most out of case analysis. McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

5. 14-5 Learning Objectives  After reading this chapter, you should have a good understanding of :  How to use the strategic insights and material from each of the 13 previous chapters in the text to analyze issues posed by strategic management cases. McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

6. 14-6 Why Analyze Strategic Management Cases? McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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?

7. 14-7 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 McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

8. 14-8 Why Analyze Strategic Management Cases?  Strategic management cases  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 McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

9. 14-9 Skills Developed from Case Analyses McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 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

10. 14-10 Skills Developed from Case Analyses McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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 Speculate Differentiate

11. 14-11 Skills Developed from Case Analyses McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  Look at the big picture  Have an organization-wide 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 Integrate Speculate Differentiate

12. 14-12 How to Conduct a Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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

13. 14-13 How to Conduct a Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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

14. 14-14 Five Steps for Conducting a Strategic Management Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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 Step One

15. 14-15 Five Steps for Conducting a Strategic Management Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 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 Step One Step Two

16. 14-16 Five Steps for Conducting a Strategic Management Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 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 Step Two Step Three

17. 14-17 Financial Ratio Analysis Techniques McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Short-term solvency, or liquidity, ratios: Current ratioAbility to use assets to pay off liabilities. Quick ratioAbility to use liquid assets to pay off liabilities quickly. Cash ratioAbility to pay off liabilities with cash on hand. RatioWhat It Measures Adapted from Exhibit 14.1 Summary of Financial Ratio Analysis Techniques

18. 14-18 Financial Ratio Analysis Techniques McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Long-term solvency, or financial leverage, ratios: Total debt ratioHow much of a company’s total assets are financed by debt. Debt-equity ratioCompares how much a company is financed by debt with how much is it finance by equity. Equity multiplierHow much debt is being used to finance assets. Times interest How well a company has its interest obligations covered. ratio Cash coverageA company’s ability to generate cash from operations. ratio RatioWhat It Measures Adapted from Exhibit 14.1 Summary of Financial Ratio Analysis Techniques

19. 14-19 Financial Ratio Analysis Techniques McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Asset utilization, or turnover, ratios: Inventory turnoverHow many times each year a company sells its entire inventory. Day’s 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 Capital intensityThe dollar investment in assets needed to generate $1 in sales. RatioWhat It Measures Adapted from Exhibit 14.1 Summary of Financial Ratio Analysis Techniques

20. 14-20 Financial Ratio Analysis Techniques McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. RatioWhat It Measures Profitability ratios: Profit marginHow much profit is generated by every dollar of sales. Return on assetsHow 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 Adapted from Exhibit 14.1 Summary of Financial Ratio Analysis Techniques

21. 14-21 Five Steps for Conducting a Strategic Management Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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? Step Three Step Four

22. 14-22 Five Steps for Conducting a Strategic Management Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 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 Step Five

23. 14-23 Preparing an Oral Case Presentation McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Organize your thoughts Adapted from Exhibit 14.2 Preparing an Oral Case Presentation Begin by becoming familiar with the material. Compare notes about key points of the case and share insights among team members. Make an outline. RuleDescription 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 Statement10-20%  Strategic Analysis/Options60-75 %  Recommendations/Action Plan10-20% Emphasis should be on analysis. You may need to reorganize the material so that the tools of strategic analysis can be applied.

24. 14-24 Preparing an Oral Case Presentation McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Be logical and consistent Adapted from Exhibit 14.2 Preparing an Oral Case Presentation 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. RuleDescription 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.

25. 14-25 How to Get the Most from Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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

26. 14-26 Preparing an Written Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Be thorough Adapted from Exhibit 14.3 Preparing a Written Case Analysis Many ideas about oral presentations also apply to written case analysis. However, a written analysis typically has to be more complete. Write out the problem statement and articulate assumptions. Support your arguments and reference case materials and other facts more specifically. RuleDescription Coordinate team efforts Written cases are often prepared by small groups. Within a group you may disagree about the diagnosis or recommended plan of action. Healthy disagreement may lead to a richer understanding of the case, but, before committing your ideas to writing make sure you coordinate your responses. Don’t prepare a written analysis that appears contradictory or looks like a patchwork of disconnected thoughts.

27. 14-27 Preparing an Written Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Avoid restating the obvious Adapted from Exhibit 14.3 Preparing a Written Case Analysis There is no reason to restate the case content. This uses up valuable space and accomplishes little. Stay focused on key points. Only restate information that is most central to your analysis. RuleDescription Present information graphically Tables, graphs, and other exhibits are usually one of the best ways to present supporting factual material. Financial calculations such as break-even analysis, sensitivity analysis, or return on investment are best presented graphically. Even qualitative information such as product lists or rosters of employees can be summarized and viewed quickly by using a table or graph. Exercise quality control Use good grammar, avoid misspelling words, and eliminate typos and other visual distractions. Make your written presentation appear as professional as possible. Don’t let a poor appearance of your written case keep the reader from recognizing the importance and quality of your analysis.

28. 14-28 Using Conflict-Inducing Decision-Making Techniques in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Groupthink Devil’s Advocacy Dialectical Inquiry Use conflict-inducing decision-making techniques to help prevent groupthink and lead to better decisions.

29. 14-29 Symptoms of Groupthink and How to Prevent It McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 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 group’s shared allusions or question the validity of arguments proposed  Practice of self-censorship  Appointment of mindguards Groupthink

30. 14-30 Symptoms of Groupthink and How to Prevent It McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 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 group’s viewpoints and positions  Divide into subgroups, meet at different times, reconvene to resolve differences  Hold a “second chance” meeting Groupthink

31. 14-31 Using Conflict to Improve Decision Making McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Devil’s Advocacy  Devil’s advocacy  One of the groups (or members) acts as a critic to the plan  Devil’s 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

32. 14-32 Using Conflict to Improve Decision Making McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.  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) Devil’s Advocacy Dialectical Inquiry

33. 14-33 Two Conflict-Inducing Decision-Making Processes McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Adapted from Exhibit 14.4 Two Conflict-Inducing Decision-Making Processes

34. 14-34 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 1.Analyzing organizational goals and objectives  Has the company developed short- term objectives that are inconsistent with its long-term mission?  Has the company considered all of its stakeholders equally in making critical decisions?  Is the company faced with an issue that conflicts with one of its longstanding policies?

35. 14-35 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 2.Analyzing the external environment  Does the company follow trends and events in external environment?  Is the company effectively scanning and monitoring the competitive environment?  Has the company analyzed the impact of competitive forces in its industry on profitability?

36. 14-36 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 3.Analyzing the internal environment  Does the company know how the various components of its value chain are adding value to the firm?  Has the company accurately analyzed the source and vitality of its resources?  Is the company’s financial performance as good as or better than that of its close competitors?

37. 14-37 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 4.Assessing a firm’s intellectual assets  Does the company have underutilized human capital?  Is the company missing opportunities to forge strategic alliances?  Has the company developed knowledge-management systems that capture what it learns?

38. 14-38 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 5.Formulating business-level strategies  Has the company chosen the correct competitive strategy, given its industry environment and competitive situation?  Does the company use combination strategies effectively?  Is the company using a strategy that is appropriate for the industry life cycle in which it is competing?

39. 14-39 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 6.Formulating corporate-level strategies  Is the company competing in the right businesses, given the opportunities and threats that are present in the environment?  Is the corporation managing its portfolio of businesses in a way that creates synergies among the businesses?  Are the motives of the top corporate executives who are pushing diversification strategies appropriate?

40. 14-40 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 7.Formulating international-level strategies  Is the company’s entry into an international marketplace threatened by the actions of local competitors?  Has the company made the appropriate choices between cost reduction and local adaptation to foreign markets?  Can the company improve its effectiveness by embracing one international strategy over another?

41. 14-41 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 8.Formulating Internet strategies  Has the company correctly assessed shifts in the five competitive forces that have been brought about by the Internet?  Does the company have an opportunity to lower its transaction costs by using digital technologies or doing business over the Internet?  Is the company using the right mix of competitive strategies to make the most of Internet-based technologies?

42. 14-42 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 9.Achieving effective strategic control  Is the company employing the appropriate informational control systems?  Does the company have a strong and effective culture?  Has the company implemented control systems that match its strategies?

43. 14-43 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 10. Creating effective organizational designs  Has the company implemented organizational structures that are suited to the type of business it is in?  Is the company employing boundaryless organizational designs where appropriate?  Does the company use outsourcing to achieve the best possible results?

44. 14-44 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 11. Creating a learning organization and an ethical organization  Do company leaders promote excellence as part of the overall culture?  Is the company committed to being a learning organization?  Have company leaders exhibited an ethical attitude in their own behavior?

45. 14-45 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 12. Fostering corporate entrepreneurship  Has the company resolved the dilemmas associated with managing innovation?  Has the company developed autonomous work units that have the freedom to bring forth new product ideas?  Does the company have an entrepreneurial orientation?

46. 14-46 Analysis-Decision-Action Cycle in Case Analysis McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. 13. Creating new ventures  Is the company engaged in an ongoing process of opportunity recognition?  Do the entrepreneurs who are launching new ventures have vision, dedication and drive, and a commitment to excellence?  Have strategic principles been used in the process of obtaining valuable resources and crafting effective entrepreneurial strategies?