The comments that I have included are things that really helped me in the understanding of what was expected of me in this project. Many of the comments coincide with the lecture that you included in class about the outline. I would like for any other professors to be able to express to their students what is expected as you did for us in lecture. Most of them are things that I feel are necessary for a student to properly do this project.
Strategic Management Case Analysis
This is the first of a planned two part series dealing with one approach to case analysis in Strategic Management classes. I use this method at both the undergraduate and graduate levels. The only difference is that graduate students are expected to show more sophistication in their presentations.
This paper takes the view that Strategic Management is a cap-stone course intended to integrate the material students have accumulated throughout there course of study within a business school. Strategic Management is, in fact, the only course that has as its stated purpose the integration and application of key management concepts. Normally, students are expected to have a working knowledge of accounting, economics, finance, marketing, operations, sociology and psychology when entering the course.
The challenges for the instructor are interesting to say the least. First, there is the need to understand the intent of each of those disciplines, as well as what the student is expected to be able to accomplish. Second, there is the need for instruments that will provide the necessary integration and opportunity for application of acquired knowledge. Third, there is the reality that students don’t remember all that they should. This leaves a great deal to be accomplished within one semester.
Equally important is the necessity to impart the basics of Strategic Management as a discipline in its own right. It is the theoretical foundation of Strategic Management that provides the rational for the integration. More importantly, the students needs an understanding of ‘when’ to use ‘what’ techniques in the business world.
Given these challenges, I use – among other classroom techniques – case analysis. Students are required to provide analysis and discussion for as many short cases as I can push throughout the semester. All are taken from current publications such as, Business Week, Fortune, Forbes and The Economist. These cases are used to demonstrate the theory under discussion, and to show the relevance of specific elements of the major written projects. I also require two major written cases. The first is an analysis of an industry, and the second is an analysis of a firm within that industry. Both are essential to achieve the learning objective for the course.
The learning objective for the course is: to understand how the top manager (CEO) is responsible for ensuring the long term survival of the firm within its competitive environment.
The learning objective for the written case analyses is: to arrive at a point where they can develop a sound business plan to ensure the survival of their chosen firm within its competitive environment. Also, to appreciate the complexities of collecting and understanding the relevance of the vast amount of information available.
The learning objective for the industry analysis is: to determine the opportunities and threats that exist for firms within a competitive environment. They should be able to appreciate how the various forces operating in an industry create or limit the chances for survival.
The learning objective for the firm analysis is: to determine the strengths and weaknesses of a firm; and, to determine the core competence that can be built on to establish a competitive advantage. The final step is to develop a business plan that will align the capabilities of the firm with the requirements of the competitive environment.
Students are required to work in teams to complete two major analyses: one of an industry, and another of a firm that is performing poorly within that industry. They will later make a presentation of their findings. I require teams because the most difficult part of management is the management of human resources. By setting specific guidelines for students I make their grade contingent on their management abilities as well as their ability to complete the projects.
They are free to chose their firm and its industry. I encourage them to select an industry that would be suitable for employment based on their particular interests and primary area of concentration. For example, accounting majors are encouraged to examine an accounting firm. Finance majors are pointed toward the banking industry. In the end, the students make choices based on group consensus and person interests. However, a mixture of majors is an advantage when working on the papers. If a mixture of majors is collaborating, each should at least work on a part vital to their major. How firm performance is defined is left to the student. I must approve all choices prior to the student beginning work. In this way, I am sure that the projects are do-able. No two groups are allowed to do the same firm, but they can do different firms within the same industry. There are no ‘easy’ industries or firms. Each has its own challenges.
A significant amount of time is spent covering analysis techniques, and the resources available for their work, prior to the students starting on the projects. They are also encouraged to divide the work up into specific areas. For example, for the industry paper: 1) do the five forces first, then do the introduction and conclusion; 2) divide the work up along these lines: threat of new entrants, buyers and suppliers and substitutes, and rivalry. This gives a reasonable balance to the workload. The problem is that it causes a great deal of knowledge to be missed by each participant. The person that is working on a particular section is able to learn a great deal about the section but not very much at all about the other sections. Some attempt should be made to help all group members learn about all sections, even the ones not “assigned” to them. **I personally feel I missed out on learning about some sections.** I also feel that I can not sufficiently include comments on some sections because I did not have enough experience working with these sections. I really would have liked to get more work on each section when doing the paper.
It is important to note that I do not give the students specific directions. I want them to do their own research and make discoveries along the way. There is no one right answer. Correctness – if such exists – is a product of the logic used in the analysis. For example, two measures of economies of scale are required. It does not matter which measures are used, what matters is that the student reasons through the problem and finds a means of justifying a position. If I give too much detail it limits the imagination of the student and prevents discoveries that could be significant.
In what follows, I cover in detail the outlines for the industry project (in this paper), and, in a subsequent paper, the firm project. An industry analysis outline is attached for reference. Elements of the outline are in blue for emphasis. Please include that you evaluate as the students go along. It is a great tool to have you as a sounding board and a great deal of the material would have been “learned” or used incorrectly without you as a guide. Even though you did not give too much more than a ‘yes you are on the right path’ or ‘no, you are way off base”.
Industry Analysis
Learning objective: to determine the opportunities and threats that exist for firms within a competitive environment.
Method: Apply an adapted model of Porter’s five forces.
Student perspective and instructions: You are a team of analyst hired to answer a corporate-level question: should we, the Mega-Bucks Corporation, enter this industry? My perspective was more along the lines of, “When analyzing an industry, taking all factors into account, should a new company enter this industry.” I did not look at it from the perspective that we were a new company ourselves but as an outsider looking in.
Industry selection: Firm and industry selections are concurrent activities. Start with the firm. It must be publicly traded to give you access to an annual report and 10K, and it must have a definable problem. You are strongly advised to choose a firm with a production function, but exceptions are possible. Discuss with your instructor first. From your initial reading about the firm, what industries does it compete in? Make a choice of industry based on personal interest, firm problems, or in consultation with your instructor. The firm’s primary source of revenue will in most cases define the industry.
Maintain your focus on the questions being asked. Provide conclusions for each element and sub-element. The conclusions are in a form of “does this make the industry attractive or unattractive to a new company”. A decision matrix should be provided at the end of each major section, and an overall matrix provided in the conclusion section.
**Where quantitative analysis is required, provide average industry numbers expressed as ratios. Use five years of data to establish trends. Reach conclusions for each sub-section and major section. Where qualitative analysis is required, provide citations to support your arguments. Assumptions and common knowledge are not accepted. Perhaps this should be more strongly expressed as this is very crucial to the paper.
INDUSTRY PAPER
1. Introduction This part of the paper is the only concession I make to an English paper – which every student begins writing. More emphasis is needed on the fact that this is not an English paper, but a business paper, something many students have never before been required to write. Maybe this should be stressed more in the case analysis above.
A. Description This is to be a general introduction to the particular nature of the industry. A brief history, key players, and general information to set the stage.
B. Segments Almost every industry has segments – some have too many, such as the computer industry. Students can not be expected to do all segments within one semester. They must identify the segments of the industry, and specifically state the focus of their paper.
C. Caveats Something always happens. Here I have students state limitations encountered in the study that prevent a complete analysis. It is written because I can’t remember all the conversations.
II. Socio-Economic
Learning objective: Determine the power of various stakeholder groups likely to have an impact on future competitive moves of firms within this industry.
Most texts cover in detail the many factors that can be relevant to any industry. Here the student must research their industry to find specific factors likely to impact firms within their industry. The orientation is toward the future. It is assumed that firms have adapted to past events. This material is available in magazine articles, and industry surveys, among other sources. Obviously this section will be very short for, say, the PC computer industry, and very large for the forestry products industry.
A. Relevant governmental or environmental factors An example would be the periodic efforts of the government to regulate auto gas mileage and emissions. It is important for the instructor that uses this outline to understand the importance of relating the information in black to the student. I feel that your explanations written here are a valuable resource that is greatly needed for understanding. If we were left with only the outline that you provided to us and were not given this information in class in the form of lecture a great deal would have been missed out on.
B. Economic indicators relevant for this industry An example would be disposable income for firms in industries selling discretionary goods or services.
III. Porter’s Five Forces
Learning objective: Determine the relative strengths of each of the five forces.
A. Threat of New Entrants Those industries with high entry barriers will have fewer firms entering. With fewer firms, there is less environmental complexity, and it is easier for one firm to begin to dominate the industry. Economic rents are usually higher in such an environment. This makes the industry attractive. For industries with low barriers to entry, such as the restaurant industry, new firms come and go with great rapidity. This prevents dominance by any one, or a few, firms. Economic rents are usually low. This makes the industry unattractive. The following elements will help determine the level of threat from new entrants.
1. Economy of scale. If economies of scale exist, it represents a high barrier to entry. Firms within the industry will have achieved these economies, and if we enter, we will have to match their scale size, but without the benefits of the associated learning curve. Since economies of scale do not exist in any tangible way, you must prove their existence or non-existence. Provide two measures related to the basic premise that increases in capital expenditure should lead to lower unit costs. Reach a conclusion: based on your analysis, do economies exist? What does this do the threat of new entrants? Does this make the industry attractive or unattractive? Provide similar conclusions for each of the following sub-sections. This section is very important to the paper and can not be left out or simplified, please stress this as so.
2. Working capital requirements. How much money will we have to tie up to keep the doors open? This is money that can not be invested in any other way. It will never earn an income. This is also a barrier to entry in that if firms must tie up large amounts of capital for daily operations, this will deter smaller firms from entering. Working capital requirements are usually provided in the sources and uses financial statements.