Analyzing a Case Using “IDEAS IN ACTION”By Santiago Ibarreche[(] and Linda M. Sama[(]
Introduction
In this chapter we want to present a methodology for case analysis and interpretation. The analysis of cases is a tool that helps in the understanding of businesses and organizations management. The scheme that is presented here is based on a paradigm designed and used by Dr. Santiago Ibarreche.[i] This scheme has been successfully used in the classroom to explain the process of strategic management. It also has been used in businesses and organizations of all sizes and shapes in guiding the process of strategic management. This chapter explains the paradigm and presents students and instructors with a series of questions for each point that may or may not apply in all occasions but, at least, it would make the analysis process more orderly and focused.
The Scheme of “IDEAS IN ACTION”
The scheme “IDEAS IN ACTION” is based on three stages of strategic management. The first stage is environmental scanning, the second is strategy formulation and matching, and the third is strategy implementation, evaluation and control. Each of the three stages corresponds to each of the words forming the phrase “IDEAS IN ACTION”
The word “IDEAS” represents environmental scanning. The process for environmental scanning consists of five sub-processes; each represented by one of the letters of the word “IDEAS”. These sub-processes are:
Identify what is relevant,
Define parameters,
Examine Expectations,
Analyze trends, and
Synthesize features of internal and external environment.
The word “IN” represents the strategy formulation stage. The process of strategy formulation has two sub-processes; each represented by one letter of the word “IN”. These sub-processes are:
Identify ideas for strategies, and
Nurture strategies with creativity and innovation.
The third stage is the key for success in strategic management. It is putting the ideas into action. To implement strategies we use six sub-processes. Each one corresponds to a letter in the word “ACTION”. These sub-processes are:
Analyze options for strategy implementation and potential scenarios,
Change structures to fit the proposed strategy,
Train people to create capacity and capability to act,
Implement strategies according to the environment,
Organize for learning and establish controls, and remember to verify that
Nothing is as permanent as change.
To apply this scheme to the analysis of business cases, it is necessary to follow the decision making process. Each stage includes several elements of strategy. In the following sections we will have a brief explanation of each sub-process followed by a series of questions to help in the application of the concept.
Identify what is relevant
Defining three basic concepts is important to begin the process. These concepts are the purpose of the case, the issues of the case and the actors of the case. Each of these elements will allow better understanding of the context in which the case develops.
To define the purpose of the case is important to define the mission of the organization, may it be implicitly or explicitly included in the case. In some cases the mission is not expressed as such but through the reading of the case the main elements of a mission statement appear.
The issues of the case may involve a variety of topics. To define these issues, it is useful to list environmental aspects. These aspects may include internal or external environmental issues. When defining external issues it is important to define the degree of control or influence that the actors of the case had to be able to modify them. In the case of internal issues, it is important to define what are the elements of the issue in question, its consequences, and potential reason for having that circumstance as an issue.
In defining the actors it is important to understand the relationship between the different people participating, be it internally or externally in the organization. A good way to have a broad picture of the actors is by creating an organization chart or a diagram that shows the existing relationships.
Some questions applicable to the sub-process “Identify what is relevant” are:
· Is it clear the purpose of the case?
· Is there a mission statement or statement of purpose for the organization under analysis?
· Does the mission statement specify clearly the commitment with different stakeholders?
· Is the mission statement implemented?
· Is it clear what were the external circumstances during the period of the case? If, not, does information exist that could complement the information on the case?
· How important are the economic aspects of the environment? Is information available that could help define the economic variables?
· How important are the cultural or demographic aspects in the case? Is information available that could help define the cultural and demographic variables?
· How important are the technological aspects of the environment? Is information available that could help define the technological variables?
· How important are the political and legal aspects of the environment? Is information available that could help define the political and legal variables?
· How is the industry organized? What is the level of competition? Who are the main competitors of the business under analysis?
· Who are the main actors of the case? What is their role in the organization and in the case? What is the relationship between the different actors?
· What is the organization structure and main strategies of the case?
· Who play what, when do they play it, and how do they play?
Define parameters
The purpose of this sub-process is to determine the relative importance of the issues. The emphasis is in developing measures that help in the understanding of the actions. Parameters have two basic elements, relevance and congruence. The first element, relevance, deals with measuring what is important to measure. The second element, congruence, deals with measuring well what is measured.
In this section it is important to define hierarchies and to evaluate the relative importance of individual issues and the interaction that exists among them. The process includes defining the issues in terms of their magnitude. It deals with subjective and objective measures that help the perception of the issues.
Measuring deals with perception and with interpretation. Therefore the questions that should be made deal with both aspects. Perception can be biased through the sources of information, the base of knowledge, the value system, the organization internal and external knowledge, and personal biases. The interpretation depends on the capacity to analyze and mainly the capacity to make inference and deduction.
Some questions applicable to the sub-process “Define parameters” are:
· What are the main events in the case?
· Who are the actors and what is their role?
· What actions were taken? Is there a logical sequence of events? What are the milestones and what type of information exists about them?
· Is the information in the case relevant? Are there alternative sources of information?
· What are the main measures in economics, technology, demographic and cultural, and political and legal aspects of the case?
· What are the measures for operational aspects (such as marketing, finance, manufacturing, service, information systems, accounting etc.)?
· Are these measures relevant and congruent?
· What type of analytic tools can be used in the case?
· How can the time of the case affect the analysis?
· What events were occurring outside the organization that could affect the perception of the actors of the case?
· What things happened after the case time that could affect the analysis? (For example, changes in technology or economic conditions that did not exist at the time of the case), How could these things change the type of decision makings or the strategies selected by the actors of the case during the time that it happened?
Examine Expectations
Each one of the actors in a business situation has different expectations. This aspect is vital in understanding the specifics of a case. People act according to their expectations. A problem is defined in philosophical terms as a deviation from what is expected. The examination of expectations addresses problems and situations that changed or can be forecasted to change.
In some cases expectations are based on hypothesis that are invalid; in other cases there are based on the wrong sources of information; lastly, they may be based on subjective interpretations of information that may not be realistic. On either case, the analysis of trends should be made in the more objective form possible. Expectations of the different actors come from different perceptions of reality. The purpose of this sub-process is to define relevant gaps between implicit or explicit expectations and actual situations.
Some questions applicable to the sub-process “Examine Expectations” are:
· What did the actors in the case expect regarding the economics and what was the economic condition at the time of the case?
· What did the actors expect regarding cultural issues (customs, mores, behaviors, social reactions, rituals, etc.) at what conditions did they find at the time of the case?
· What did the actors in the case expect regarding technological changes and what did they find at the time of the case?
· Were there changes in the political or legal environment that the actors in the case did not expect? If they expected these changes, was there a difference in the impact they considered?
· What did the actors of the case expect regarding competition? Was the reality of competition what they expected? What were the gaps that existed regarding barriers to entry and exit, substitutes, rivalry among competitors, bargaining power of supplier or customers, and external factors affecting competition in the industry?
· What changes occurred in the leadership of the organization? Did people expect the changes? What were the elements of resistance that affected the situation of the organization at the time of the case?
· What expectations were unclear in the case? What assumptions do you make for the analysis? What is the basis for those assumptions?
Analyze trends
Observing one point in time yields a limited picture. Trends signify a direction and in many ways a more accurate picture of any situation.
Trends have to be analyzed in two dimensions, direction and strength. The analysis of the direction is in terms of constancy of change. In other words, looking at the permanence of the trend or its change of direction. The strength of the trend is given by the relative magnitude of the change. The trends that must be analyzed are those phenomena that affect the external and internal environment.
Traditionally there are five aspects that are included in the external environment; they are the economy, the technology, the politics and legal aspects, the demographic and cultural aspects, and the competitive aspects. In the internal environment it is recommended to look at trends in terms of people, size of the organization, general policies, financial situation, and implementation practices.
Some questions applicable to the sub-process “Analyze Trends” are:
· What are the main changes in the external environments that affect the situation of the case? Were those changes sudden? How long took it to complete the change?
· What are the main tools that could be used to define the strength of these trends? Which of the main elements of the case has the greatest change? How do different changes affect the performance of the actors in the case?
· What are the main changes in the organization? What is the trend that each case follows? What can be inferred from those changes?
· What consequences are there for the internal and external changes and their interaction?
Synthesize features of internal and external environment
Too much information about a situation can be, and normally is, overwhelming. The main importance of this sub-process is to identify the essence of the events related in the case. There are several forms to do this. One that is recommended by several authors is the analysis of three aspects of the environment and the definition of issues depending on the degree of control that the actors have. The three levels of environment are the external, sometimes called societal, environment, the competitive, also known as industry, environment, and the internal or task environment. The level of control that most actors have is the lowest in the societal environment and the highest in the task environment.
Changes and trends in the societal and business environments imply either opportunities or threats to the organization. Changes and trends in the task environment represent either strengths or weaknesses. A summary of each of these four aspects is essential to summarize the case elements.
Some questions applicable to the sub-process “Synthesize features of the external and internal environment” are:
· What are the main changes or trends in the economic, technological, social and demographic, political and legal, and competitive environment? Which of these changes or trends represent opportunities or threats? Which of these opportunities or threats have the greatest impact?
· What is the relative importance of each opportunity? What is the relative importance of each threat?
· What are the main changes and trends in the organization regarding the structure, policies, leadership, and operations? Which of these changes or trends are strengths of the organization? Which represent weaknesses? What is the hierarchy of strengths? What is the hierarchy of weaknesses?
Identify ideas for strategies
Once we have knowledge of the main facts about the internal and external environments, it is necessary to match them so that strategies to achieve goals could be formulated. At this stage in the analysis the sources of information for new strategies are diverse. One main source is the previous experiences of the organization. If the organization is new or if they have had no previous similar situations there are alternative sources of ideas. Some of these sources of ideas are the theory that applies to the situation, benchmarking against other companies, either on the same industry or on different industry with similar issues, and innovation through the creation of new strategies.
Each of the sources of ideas has its limitations and it is advisable to generate several alternative ideas. In some cases the purpose of the case is to design strategies for the specific situation narrated in the case. In other cases the purpose of the analysis is to judge the quality of the strategies formulated and their implementation. In either case, the analysis of alternatives is fundamental to judging the strategy formulation process.
Some questions applicable to the sub-process “Identify Ideas for strategies” are:
· What is the experience of the organization in similar circumstances? Which strategies worked? Which did not work? Why? What basic elements of strategy appear to be the most important?