A Guide to Fast Case Analysis Prepared by Geoffrey G. Bell, Ph.D., CA

This paper outlines how to approach case analysis when time is of the essence (such as a final exam or case competition setting). It is similar to the format for “normal” case analysis where time is not pressing, but likely the analysis will be less detailed. The first thing to do is identify the critical issue(s) facing the company. I suggest you consider no more than 2-3 issues. In the context of tight time deadlines, you will not have enough time to consider more than 2-3 issues. In the context of “the real world,” managers are probably unable to consider more than 2-3 issues at once. Additionally, if you have the time, you can think about what appears to be critical that is fact (generally identifiable as prose provided by the case writer) versus what appears to be critical that is opinion (identifiable by comments such as, “Bill Smith was worried about the intensifying competition.”). This allows you to determine what may be a “smokescreen” presented to throw you off real issues. For example, I saw one case that was framed in terms of a corporate reorganization. However, lurking just beneath the surface was the fact the firm would lose patent protection on a major project in two years that would reduce the firm’s revenue by about 15%. Students who noted that the firm’s managers were debating the necessity of the reorganization but didn’t take it as fact were able to observe the emerging revenue crisis. Once you have identified the “critical” issues, examine how critical they are, and why. Overall, how serious is the company’s situation? One way to approach this is to ask the question, “If the company does nothing differently, what will be the result?” If your answer is, “The company will be fine,” then your recommendations will involve a tune-up of the existing strategy and organization. If your answer is, “The company will go bankrupt almost immediately,” then you need to recommend relatively fast and drastic action. How do you know how serious the company’s situation is? First, look at the financial statements to see whether the company is losing money, for how long, and how much. If the company is losing money, how long before it runs out of cash / credit? If the company is losing money and you have time and data, calculate the break even, in either units or sales. This helps you know how much the company needs to improve sales to be profitable. Can it attain this level of sales given market conditions (market size, growth, competitors)? You should also look at whether sales and profits are trending up or down. This indicates whether the market appears to be accepting the firm’s products. Are sales increasing faster or slower than industry sales? If they’re increasing faster, this indicates that the market is increasingly preferring the firm’s products. Look at gross profit margins. Are they increasing or shrinking? This tells you whether the firm appears to be producing its products more or less efficiently. Look over the rest of the firm’s expenses. Are there any that appear to be out of line? Are they increasing faster or slower than sales? This helps tell you whether the firm is becoming more or less efficient at translating its sales into profits. Second, are there key strategic indicators of serious failure (problems with customer service, quality, etc.)? Are there any areas that seem to be problematic? (Marketing, production, human resource policies, etc.) Third, is the company attaining its organizational objectives? How far short has it fallen? Has it tried to remedy problems already? Do the problems appear to be working?

After you have a sense of the seriousness of the situation, determine why the problem arose. Are the company’s problems primarily a result of industry competitive conditions, poor strategy formulation, or poor strategy implementation? Your answer to this question helps shape your recommendations to company management. If the industry is fundamentally unattractive, either the firm will have to find ways to prosper in the face of an inclement climate, or it will have to diversify away from the industry. (For classroom purposes, I suggest that diversification not be a selected option, as you will likely not have enough case facts to support this course of action!) To understand the industry conditions, consider the basic tools of industry analysis – Porter’s 5-force model, industry driving forces, and industry key success factors. Also, examine the stage of the product life cycle the industry is in. You can do this by examining the past, current, and expected future growth rates. If growth is accelerating, the industry is probably in the growth stage. If growth is decreasing, then the industry is probably maturing. Consider the pitfalls lurking in each stage of industry development. If it’s in the growth phase, is there yet a dominant design? Is the firm’s design the dominant one? If the industry is in maturity, has an industry shake-out occurred yet? Is the firm well-positioned to withstand the shake-out when it occurs? Why or why not? (Additionally, if you had more time, you would likely want to use a strategic group map to understand the different positions of different rivals in the industry. This would allow you to understand whether different firms will be differently affected by the 5 competitive forces, driving forces, etc. You could also compare how major rivals stack up on the key success factors in the industry. Together, these would allow you to estimate the likely moves by the rivals in the industry.) If the company’s primary problems result from poor strategy, you will need to focus on improving the strategy. To do so, you need to understand the firm’s current strategy. Is it pursuing a low-cost strategy, a differentiation strategy, a best-cost provider strategy, or is it “stuck-in-the-middle?” Is it pursuing a niche strategy or a broad market strategy? Is the firm’s chosen strategy appropriate for the industry conditions? For example, if the industry sells a relatively undifferentiated product (gasoline, airplane seats, etc.) a differentiation strategy may be very difficult to pursue. Has the firm implemented its strategy well? For example, does the firm have the core competencies required to implement its strategy? Are there any weaknesses preventing the firm from achieving its goals? Are the core competencies well matched to the firm’s strategy? For example, if the firm is pursuing a differentiation strategy based on product quality, but one of its weaknesses is high defect rates, then it needs to address this problem urgently. How strong a sustainable competitive advantage does the firm’s advantages provide? Are they sustainable or merely temporary? Do they inter-relate in any way? (A firm’s whose sources of sustainable competitive advantage integrate into a coherent package may find that the ensuing advantage is much more sustainable than any of the individual components would indicate.) How serious are the firm’s weaknesses? Do they lack resources that are relatively common or rare in the industry? How serious a disadvantage does this create? Are the firm’s costs under control? If costs appear exorbitant, where along the value chain do they occur? How can the firm overcome its cost control problems? Once you have completed your analysis of the company’s situation, you can begin to evaluate the strategic options open to it, along with your recommendations and plan of

action. In many cases, company management is considering a specific course of action and wants your comments about it. In such cases, you should specifically consider these alternatives. In other cases, you have to develop your own. In any event, observe the following rules. First, your alternatives should be mutually exclusive. In the short term at least, if the company chooses to do A, it should not also choose to do B. Second, your alternatives should be viable. All the options you consider should be feasible for the company to contemplate. Third, establish a set of criteria against which you can evaluate the alternatives. Your best bet is to evaluate the extent to which each of the alternatives resolves the critical issues facing the firm. Fourth, develop some financial projections of the benefits and costs of each alternative so you can evaluate which one is best for the firm financially. The ideal would be to develop a set of pro-forma financial statements for each alternative. The final section of your paper is the plan of action. In this section, outline specifically how you plan to implement your chosen alternative. (That is, you discuss your strategy implementation.) Your goal in this section is to be as specific as you can. You need to consider both costs and timelines (what to do tomorrow, next week, next month, next year…). Does the firm have the necessary resources (financial, managerial, competence) required to implement your plan? If not, how will it acquire the resources? These interconnect as well. For example, if the firm needs a skilled manufacturing manager, does it have the cash available to hire one? If not, where can it get the cash? In the implementation, consider other factors involved in strategy implementation. Does the reward structure need to be reworked to reflect new strategic priorities? Does the company’s culture support the new strategy? What modifications can you make to the culture, over what time frame? Should you instead modify the strategy to adapt to the culture? Do you have concerns about resistance to the strategy? How will you overcome this resistance? Once you have done this, it should be clear that your action plan addresses the critical issues facing the company. There should be no “loose ends” left to tie up. End of case analysis. Go relax!