**For Prof Mac.Queen Only** (B313 week 7 forum)
JayMcc1
chapter_12_busn_313.docxFormat for Case Analysis: The Strategic Audit
There is no one best way to analyze or present a case report. Each instructor has personal preferences for format and approach. Nevertheless, in Appendix 12.B we suggest an approach for both written and oral reports that provides a systematic method for successfully attacking a case. This approach is based on the strategic audit, which is presented at the end of Chapter 1 in Appendix 1.A. We find that this approach provides structure and is very helpful for the typical student who may be a relative novice in case analysis. Regardless of the format chosen, be careful to include a complete analysis of key environmental variables—especially of trends in the industry and of the competition. Look at international developments as well.
If you choose to use the strategic audit as a guide to the analysis of complex strategy cases, you may want to use the strategic audit worksheet in Figure 12–1. Print a copy of the worksheet to use to take notes as you analyze a case. See Appendix 12.C for an example of a completed student-written analysis of a 1993 Maytag Corporation case done in an outline form using the strategic audit format. This is one example of what a case analysis in outline form may look like.
Case discussion focuses on critical analysis and logical development of thought. A solution is satisfactory if it resolves important problems and is likely to be implemented successfully. How the corporation actually dealt with the case problems has no real bearing on the analysis because management might have analyzed its problems incorrectly or implemented a series of flawed solutions.
FIGURE 12–1 Strategic Audit Worksheet
(Wheelen 341-342)
APPENDIX 12.B Suggested Case Analysis Methodology Using the Strategic Audit
First Reading of the Case
■ Develop a general overview of the company and its external environment.
■ Begin a list of the possible strategic factors facing the company at this time.
■ List the research information you may need on the economy, industry, and competitors.
Over the past six years, increases in yearly revenues have consistently reached 12%. Byte Products Inc., headquartered in the U.S. Midwest, is regarded as one of the largest-volume suppliers of specialized components and is easily the industry leader.
Second Reading of the Case
■ Read the case a second time, using the strategic audit as a framework for in-depth analysis. (See Appendix 1.A on pages 32-39.) You may want to make a copy of the strategic audit worksheet (Figure 12–1) to use to keep track of your comments as you read the case.
■ The questions in the strategic audit parallel the strategic decision-making process shown in Figure 1–5 (pages 26-27).
■ The audit provides you with a conceptual framework to examine the company’s mission, objectives, strategies, and policies, as well as problems, symptoms, facts, opinions, and issues.
■ Perform a financial analysis of the company, using ratio analysis (see Table 12–1 ), and do the calculations necessary to convert key parts of the financial statements to a common-size basis.
Library and Online Computer Services
■ Each case has a decision date indicating when the case actually took place. Your research should be based on the time period for the case.
■ See Appendix 12.A for resources for case research. Your research should include information about the environment at the time of the case. Find average industry ratios. You may also want to obtain further information regarding competitors and the company itself (10-K forms and annual reports). This information should help you conduct an industry analysis. Check with your instructor to see what kind of outside research is appropriate for your assignment.
■ Don’t try to learn what actually happened to the company discussed in the case. What management actually decided may not be the best solution. It will certainly bias your analysis and will probably cause your recommendation to lack proper justification.
■ Analyze the natural and societal environments to see what general trends are likely to affect the industry(s) in which the company is operating.
■ Conduct an industry analysis using Porter’s competitive forces from Chapter 4. Develop an Industry Matrix ( Table 4–4 on page 113).
■ Generate 8 to 10 external factors. These should be the most important opportunities and threats facing the company at the time of the case.
■ Develop an EFAS Table, as shown in Table 4–5 (page 121), for your list of external strategic factors.
■ Suggestion: Rank the 8 to 10 factors from most to least important. Start by grouping the three top factors and then the three bottom factors.
Internal Organizational Analysis: IFAS
■ Generate 8 to 10 internal factors. These should be the most important strengths and weaknesses of the company at the time of the case.
■ Develop an IFAS Table, as shown in Table 5–2 (page 154), for your list of internal strategic factors.
■ Suggestion: Rank the 8 to 10 factors from most to least important. Start by grouping the three top factors and then the three bottom factors.
■ Review the student-written audit of an old Maytag case in Appendix 12.C for an example.
■ Write Parts I to IV of the strategic audit. Remember to include the factors from your EFAS and IFAS Tables in your audit.
Strategic Factor Analysis Summary: SFAS
■ Condense the list of factors from the 16 to 20 identified in your EFAS and IFAS Tables to only the 8 to 10 most important factors.
■ Select the most important EFAS and IFAS factors. Recalculate the weights of each. The weights still need to add to 1.0.
■ This is a good time to reexamine what you wrote earlier in Parts I to IV. You may want to add to or delete some of what you wrote. Ensure that each one of the strategic factors you have included in your SFAS Matrix is discussed in the appropriate place in Parts I to IV. Part V of the audit is not the place to mention a strategic factor for the first time.
■ Write Part V of your strategic audit. This completes your SWOT analysis.
■ This is the place to suggest a revised mission statement and a better set of objectives for the company. The SWOT analysis coupled with revised mission and objectives for the company set the stage for the generation of strategic alternatives.
A. Alternatives
■ Develop around three mutually exclusive strategic alternatives. If appropriate to the case you are analyzing, you might propose one alternative for growth, one for stability, and one for retrenchment. Within each corporate strategy, you should probably propose an appropriate business/competitive.
■ Construct a corporate scenario for each alternative. Use the data from your outside research to project general societal trends (GDP, inflation, and etc.) and industry trends. Use these as the basis of your assumptions to write pro forma financial statements (particularly income statements) for each strategic alternative for the next five years.
■ List pros and cons for each alternative based on your scenarios.
B. Recommendation
■ Specify which one of your alternative strategies you recommend. Justify your choice in terms of dealing with the strategic factors you listed in Part V of the strategic audit.
■ Develop policies to help implement your strategies.
Implementation
■ Develop programs to implement your recommended strategy.
■ Specify who is to be responsible for implementing each program and how long each program will take to complete.
■ Refer to the pro forma financial statements you developed earlier for your recommended strategy. Use common-size historical income statements as the basis for the pro forma statement. Do the numbers still make sense? If not, this may be a good time to rethink the budget numbers to reflect your recommended programs.
Evaluation and Control
■ Specify the type of evaluation and controls you need to ensure that your recommendation is carried out successfully. Specify who is responsible for monitoring these controls.
■ Indicate whether sufficient information is available to monitor how the strategy is being implemented. If not, suggest a change to the information system.
Final Draft of Your Strategic Audit
■ Check to ensure that your audit is within the page limits set out by your professor. You may need to cut some parts and expand others.
■ Make sure your recommendation clearly deals with the strategic factors.
■ Attach your EFAS and IFAS Tables, and SFAS Matrix, plus your ratio analysis and pro forma statements. Label them as numbered exhibits and refer to each of them within the body of the audit.
■ Proof your work for errors. If on a computer, use a spell checker.
SPECIAL NOTE: Depending on your assignment, it is relatively easy to use the strategic audit you have just developed to write a written case analysis in essay form or to make an oral presentation. The strategic audit is just a detailed case analysis in an outline form and can be used as the basic framework for any sort of case analysis and presentation.
(Wheelen 347-350)
Wheelen, Thomas L., J. Hunger, Alan Hoffman, Charles Bamford. Concepts in Strategic Management and Business Policy, 14th Edition. Pearson Learning Solutions, 01/2014. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
APPENDIX 1.A Strategic Audit of a Corporation
I. Current Situation
A. Current Performance
How did the corporation perform in the past year overall in terms of return on investment, market share, and profitability?
B. Strategic Posture
What are the corporation’s current mission, objectives, strategies, and policies?
1. Are they clearly stated, or are they merely implied from performance?
2. Mission : What business(es) is the corporation in? Why?
3. Objectives : What are the corporate, business, and functional objectives? Are they consistent with each other, with the mission, and with the internal and external environments?
4. Strategies: What strategy or mix of strategies is the corporation following? Are they consistent with each other, with the mission and objectives, and with the internal and external environments?
5. Policies: What are the corporation’s policies? Are they consistent with each other, with the mission, objectives, and strategies, and with the internal and external environments?
6. Do the current mission, objectives, strategies, and policies reflect the corporation’s international operations, whether global or multidomestic?
II. Corporate Governance
A. Board of Directors
SOURCE: T. L. Wheelen and J. D. Hunger, Strategic Audit of a Corporation, Copyright © 1982 and 2005 by Wheelen and Hunger Associates. Thomas L. Wheelen, “A Strategic Audit,” paper presented to Society for Advancement of Management (SAM). Presented by J. D. Hunger and T. L. Wheelen in “The Strategic Audit: An Integrative Approach to Teaching Business Policy,” Academy of Management (August 1983). Published in “Using the Strategic Audit,” by T. L. Wheelen and J. D. Hunger in SAM Advanced Management Journal (Winter 1987), pp. 4–12. Reprinted by permission of the copyright holders. Revised 1988, 1994, 1997, 2000, 2002, 2004, 2005, 2009, and 2013.
1. Who is on the board? Are they internal (employees) or external members?
2. Do they own significant shares of stock?
3. Is the stock privately held or publicly traded? Are there different classes of stock with different voting rights?
4. What do the board members contribute to the corporation in terms of knowledge, skills, background, and connections? If the corporation has international operations, do board members have international experience? Are board members concerned with environmental sustainability?
5. How long have the board members served on the board?
6. What is their level of involvement in strategic management? Do they merely rubberstamp top management’s proposals or do they actively participate and suggest future directions? Do they evaluate management’s proposals in terms of environmental sustainability?
B. Top Management
1. What person or group constitutes top management?
2. What are top management’s chief characteristics in terms of knowledge, skills, background, and style? If the corporation has international operations, does top management have international experience? Are executives from acquired companies considered part of the top management team?
3. Has top management been responsible for the corporation’s performance over the past few years? How many managers have been in their current position for less than three years? Were they promoted internally or externally hired?
4. Has top management established a systematic approach to strategic management?
5. What is top management’s level of involvement in the strategic management process?
6. How well does top management interact with lower-level managers and with the board of directors?
7. Are strategic decisions made ethically in a socially responsible manner?
8. Are strategic decisions made in an environmentally sustainable manner?
9. Do top executives own significant amounts of stock in the corporation?
10. Is top management sufficiently skilled to cope with likely future challenges?
III. External Environment: Opportunities and Threats (SWOT)
A. Natural Physical Environment: Sustainability Issues
1. What forces from the natural physical environmental are currently affecting the corporation and the industries in which it competes? Which present current or future threats? Opportunities?
a. Climate, including global temperature, sea level, and fresh water availability
b. Weather-related events, such as severe storms, floods, and droughts
c. Solar phenomena, such as sunspots and solar wind
2. Do these forces have different effects in other regions of the world?
B. Societal Environment
1. What general environmental forces are currently affecting both the corporation and the industries in which it competes? Which present current or future threats? Opportunities?
a. Economic
b. Technological
c. Political-legal
d. Sociocultural
2. Are these forces different in other regions of the world?
C. Task Environment
1. What forces drive industry competition? Are these forces the same globally or do they vary from country to country? Rate each force as high, medium, or low.
a. Threat of new entrants
b. Bargaining power of buyers
c. Threat of substitute products or services
d. Bargaining power of suppliers
e. Rivalry among competing firms
f. Relative power of unions, governments, special interest groups, etc.
2. What key factors in the immediate environment (that is, customers, competitors, suppliers, creditors, labor unions, governments, trade associations, interest groups, local communities, and shareholders) are currently affecting the corporation? Which are current or future threats? Opportunities?
D. Summary of External Factors (List in the EFAS Table 4–5, p. 121)
Which of these forces and factors are the most important to the corporation and to the industries in which it competes at the present time? Which will be important in the future?
IV. Internal Environment: Strengths and Weaknesses (SWOT)
A. Corporate Structure
1. How is the corporation structured at present?
a. Is the decision-making authority centralized around one group or decentralized to many units?
b. Is the corporation organized on the basis of functions, projects, geography, or some combination of these?
2. Is the structure clearly understood by everyone in the corporation?
3. Is the present structure consistent with current corporate objectives, strategies, policies, and programs, as well as with the firm’s international operations?
4. In what ways does this structure compare with those of similar corporations?
B. Corporate Culture
1. Is there a well-defined or emerging culture composed of shared beliefs, expectations, and values?
2. Is the culture consistent with the current objectives, strategies, policies, and programs?
3. What is the culture’s position on environmental sustainability?
4. What is the culture’s position on other important issues facing the corporation (that is, on productivity, quality of performance, adaptability to changing conditions, and internationalization)?
5. Is the culture compatible with the employees’ diversity of backgrounds?
6. Does the company take into consideration the values of the culture of each nation in which the firm operates?
C. Corporate Resources
1. Marketing
a. What are the corporation’s current marketing objectives, strategies, policies, and programs?
i. Are they clearly stated or merely implied from performance and/or budgets?
ii. Are they consistent with the corporation’s mission, objectives, strategies, and policies and with internal and external environments?
(Wheelen 32-35)
Wheelen, Thomas L., J. Hunger, Alan Hoffman, Charles Bamford. Concepts in Strategic Management and Business Policy, 14th Edition. Pearson Learning Solutions, 01/2014. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
APPENDIX 12.C Example of Student-Written Strategic Audit (For the 1993 Maytag Corporation Case)
I. Current Situation
A. Current Performance
Poor financials, high debt load, first losses since 1920s, price/earnings ratio negative.
■ First loss since 1920s.
■ Laid off 4500 employees at Magic Chef.
■ Hoover Europe still showing losses.
B. Strategic Posture
1. Mission
■ Developed in 1989 for the Maytag Company: “To provide our customers with products of unsurpassed performance that last longer, need fewer repairs, and are produced at the lowest possible cost.”
■ Updated in 1991: “Our collective mission is world class quality.” Expands Maytag’s belief in product quality to all aspects of operations.
2. Objectives
■ “To be the profitability leader in the industry for every product line Maytag manufactures.” Selected profitability rather than market share.
■ “To be number one in total customer satisfaction.” Doesn’t say how to measure satisfaction.
■ “To grow the North American appliance business and become the third largest appliance manufacturer (in unit sales) in North America.”
■ To increase profitable market share growth in the North American appliance and floor care business, 6.5% return on sales, 10% return on assets, 20% return on equity, beat competition in satisfying customers, dealer, builder, and endorser, and move into third place in total units shipped per year. Nicely quantified objectives.
3. Strategies
■ Global growth through acquisition, and alliance with Bosch-Siemens.
■ Differentiate brand names for competitive advantage.
■ Create synergy between companies, product improvement, investment in plant and equipment.
4. Policies
■ Cost reduction is secondary to high quality.
■ Promotion from within.
■ Slow but sure R&D: Maytag slow to respond to changes in market.
II. Strategic Managers
A. Board of Directors
1. Fourteen members—eleven are outsiders.
2. Well-respected Americans, most on board since 1986 or earlier.
3. No international or marketing backgrounds.
4. Time for a change?
B. Top Management
1. Top management promoted from within Maytag Company. Too inbred?
2. Very experienced in the industry.
3. Responsible for current situation.
4. May be too parochial for global industry. May need new blood.
III. External Environment (EFAS Table; see Exhibit 1)
A. Natural Environment
1. Growing water scarcity
2. Energy availability a growing problem
B. Societal Environment
1. Economic
a. Unstable economy but recession ending, consumer confidence growing—could increase spending for big ticket items like houses, cars, and appliances. (O)
b. Individual economies becoming interconnected into a world economy. (O)
2. Technological
a. Fuzzy logic technology being applied to sense and measure activities. (O)
b. Computers and information technology increasingly important. (O)
3. Political-Legal
a. NAFTA, European Union, other regional trade pacts opening doors to markets in Europe, Asia, and Latin America that offer enormous potential. (O)
b. Breakdown of communism means less chance of world war. (O)
c. Environmentalism being reflected in laws on pollution and energy usage. (T)
4. Sociocultural
a. Developing nations desire goods seen on TV. (O)
b. Middle-aged baby boomers want attractive, high-quality products, like BMWs and Maytag. (O)
c. Dual-career couples increases need for labor-saving appliances, second cars, and day care. (O)
d. Divorce and career mobility means need for more houses and goods to fill them. (O)
C. Task Environment
1. North American market mature and extremely competitive—vigilant consumers demand high quality with low price in safe, environmentally sound products. (T)
2. Industry going global as North American and European firms expand internationally. (T)
3. European design popular and consumer desire for technologically advanced appliances. (O)
4. Rivalry High. Whirlpool, Electrolux, GE have enormous resources and developing global presence. (T)
5. Buyers’ Power Low. Technology and materials can be sourced worldwide. (O)
6. Power of Other Stakeholders Medium. Quality, safety, environmental regulations increasing. (T)
7. Distributors’ Power High. Super retailers more important: mom and pop dealers less. (T)
8. Threat of Substitutes Low. (O)
9. Entry Barriers High. New entrants unlikely except for large international firms. (T)
IV. Internal Environment (IFAS Table; see Exhibit 2)
A. Corporate Structure
1. Divisional structure: appliance manufacturing and vending machines. Floor care managed separately. (S)
2. Centralized major decisions by Newton corporate staff, with a time line of about three years. (S)
B. Corporate Culture
1. Quality key ingredient—commitment to quality shared by executives and workers. (S)
2. Much of corporate culture is based on founder F. L. Maytag’s personal philosophy, including concern for quality, employees, local community, innovation, and performance. (S)
3. Acquired companies, except for European, seem to accept dominance of Maytag culture. (S)
C. Corporate Resources
1. Marketing
a. Maytag brand lonely repairman advertising successful but dated. (W)
b. Efforts focus on distribution—combining three sales forces into two, concentrating on major retailers. (Cost $95 million for this restructuring.) (S)
c. Hoover’s well-publicized marketing fiasco involving airline tickets. (W)
2. Finance (see Exhibits 4 and 5)
a. Revenues are up slightly, operating income is down significantly. (W)
b. Some key ratios are troubling, such as a 57% debt/asset ratio, 132% long-term debt/equity ratio. No room for more debt to grow company. (W)
c. Net income is 400% less than 1988, based on common-size income statements. (W)
3. R&D
a. Process-oriented with focus on manufacturing process and durability. (S)
b. Maytag becoming a technology follower, taking too long to get product innovations to market (competitors put out more in last six months than prior two years combined), lagging in fuzzy logic and other technological areas. (W)
(Wheelen 350-353)
Wheelen, Thomas L., J. Hunger, Alan Hoffman, Charles Bamford. Concepts in Strategic Management and Business Policy, 14th Edition. Pearson Learning Solutions, 01/2014. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
Wheelen, Thomas L., J. Hunger, Alan Hoffman, Charles Bamford. Concepts in Strategic Management and Business Policy, 14th Edition. Pearson Learning Solutions, 01/2014. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
