Provide a brief overview of the mission, business, markets, products and scope of operations the company is in. The past/current strategic direction of the firm can be briefly summarized but the focus should be on the most recent events that will impact the decisions and future direction of the firm. Identify past strategic actions by the generic strategy or strategies.
This is NOT a long historical view. It shows how capable you are of describing the company’s business and current strategy using strategic vocabulary.
Common Errors
Focusing on history rather than the current situation.
Not using strategic vocabulary for strategies.
Giving too much detail about the case—assume I’ve read the case.
Strategic Issue
In one or two paragraphs, summarize the company and strategic situation. This should characterize the fundamental state of affairs that exists in the focus company and industry with enough background information to understand it. See page 83 in the textbook for a definition of strategic issue and review page 8-9 for the tests of a winning strategy.
This section MUST summarize the strategic situation the company faces. “Situation” means “state of affairs.” Summarize and connect to the key findings of each section. Weave these findings into a summary story leading to a clear and specific statement about the future prospects for strategic success for the company. Make a specific statement about whether the company’s prospects are good, indefinite, or poor.
The strategic issue must be a single, well-crafted sentence that captures the fundamental problems and concerns that came out of the analysis. This single sentence must be formed as a question and will end with a question mark. Write this in very specific terms addressing both the company’s short-term situation and the broader strategic situation. Incorporate the need to provide shareholder value, sales growth, profitability and sustained competitive advantage but incorporate the specific challenges with which the focus company must deal. Everything prior to this question is headed toward this one culminating formulation of the problem. This question forms the basis for the recommendations.
Do not make recommendations in this section. For example, a strategic issue for ZU could be “What degree programs should be offered to meet the labor needs of the UAE government? This can be followed up with more specific questions such as:
Should ZU offer degrees in engineering or medicine?
How can ZU differentiate their brand from other universities?
What degrees are desired by prospective students?
What degree programs are needed that are not offered by other universities?
What programs need to be in place so that students are prepared better for higher education?
Common Errors
Failure to introduce the key conditions or “givens” in a problem statement.
Addressing only the external or the internal situation rather than both.
Not addressing the major, strategic challenges that may significantly affect the company.
Making recommendations.
- External Environment
Provide an introduction that characterizes the essence of the external environment and industry situation at the time of the case and sets the stage for the analysis that follows. ALL the discussion in this section relates to the INDUSTRY, not the focus company. You may use examples of the focus company or other competitors to justify your analysis.
Common Errors
Writing about historical events rather than the current state of the industry.
Identifying the topics you are about to discuss without discussing the state of the industry.
Not using the vocabulary and discussion in the textbook supported with facts from the case.
Porter’s 5 Forces Analysis. Use the Porter model to evaluate the strength of the five forces that affect the strategic choices of all firms in the industry. Discuss the balance of power in the industry. Relatively weak forces (low threats) place power in the hands of the firms that comprise the industry, and, therefore, broaden their freedom of choice of strategic actions. Relatively strong forces (high threats) reduce the power of the industry firms and limit their strategic choices. An industry with strong forces tends to be less attractive than an industry with weak forces.
Specifically state your assessment of the strength of each of the 5 forces—intense, strong, moderate or weak. Justify and show why you reached your conclusion. For example, it is not enough to write, “Competitive rivalry is strong because the number of competitors is high, barriers to entry are low and product differentiation is low.” A better explanation is, “The many competitors in this industry must aggressively battle for market share in this slow-growth market. They each have considerable investments in the physical plant, which makes it difficult to leave the industry. The products are difficult to distinguish from one another, so companies must focus on aggressive, marketing programs to win customers away from their competitors. All these factors contribute to a strong rivalry and continued downward pressure on profit margins.”
Put the actual diagram of the model in the APPENDIX and discuss each force in the body of this section. Include a closing paragraph on the implications of the analysis to the overall attractiveness of the industry and the potential for companies to be profitable.
Common Errors
Not identifying the strength of a force or the conditions that lead you to your finding of a force as being strong or weak.
Getting supplier, firm and buyer mixed up.
Overlooking key factors you previously identified in the external/industry analysis.
Not recognizing the strength of competitive rivalry.
Key Success Factors
Key success factors affect industry players’ ability to be competitive and successful. They are so important that firms must consider them in developing their strategy or risk significant loss of sales, profits, market standing, etc. Develop three key success factors for the focus industry and identify WHAT they are, WHY they are key success factors, and HOW they affect the industry. Finish each key success factor by discussing the strategic implication.
For example, it is not enough to say, “Distribution capabilities are essential for success in the online order fulfillment industry.” Go on to say why and present a convincing argument for your position. To illustrate, “A web site that is appealing and easy to navigate, coupled with fast order delivery is essential to customer satisfaction in internet selling. Today’s consumer, especially the younger consumer, is technically savvy and has a myriad of ways to access internet sales, e.g., ipads, computers, iphones. Brick and mortar retail stores provide buyers with a quick solution for their shopping needs but are not as convenient. In order to be competitive, companies must develop the ability to respond with fast delivery times or potentially lose sales to competitors who are able to provide high levels of customer service.”
Common Errors
Being too general.
Not specifically identifying why the factor force is important.
Failure to convince why the factor is important.
Industry Profile and Attractiveness. Summarize the characteristics of the industry. Draw together all of the key findings from each area of the external analysis. What conclusions can you draw about the nature of the industry? How attractive is it to its current incumbents? What are the future prospects for the industry? Why? What challenges does the industry face? Provide a summary statement about whether it is highly attractive, moderately attractive, etc., to current players re profits, sales and competitive intensity.
- Company Situation
Provide an introduction that characterizes the essence of the company situation and sets the stage for the analysis that follows. Calculate the past sales growth rate for the company if there is historical data. If the case has data on historical industry sales, calculate the sales growth rate and determine whether the industry is in the introduction, growth, maturity or decline phase of their life cycle. If there is information such as the revenue of the top 3 competitors for the last few years, combine their sales and calculate the change in sales growth to infer where the industry is in their life cycle. Then discuss this analysis in any of the sections where it is appropriate. Based on the conclusions from the preceding section and the case analysis, determine the stage of the industry life cycle (introduction, growth, maturity or decline). Identify the key company-specific issues with which the company is dealing.
Financial Analysis. Be sure to distinctly address each of the four areas of financial analysis—profitability, liquidity, leverage and activity—identify each in the topical sentence for that paragraph. The financial analysis must be thorough and accurate. Look at trends and compare the company’s performance to industry targets, if available. Evaluate the primary financial indicators, provide supporting data and interpret them to show how they affect the company regarding its present and future strategic performance.
Put the calculations of the ratios in a table in the APPENDIX.
Close this analysis by writing a paragraph that draws conclusion about the company’s overall financial situation, prospects and the impact of its financial condition on its potential strategic plans. The fundamental question you are trying to answer is, “What is the overall financial status of the company now, and what does its current financial status mean for its future strategic success or ability to grow sales?”
Common Errors
Incorrect computation of the ratio.
Incomplete computations of the ratios (trends, etc.).
Focusing on the definition rather than the strategic impact that the ratio implies.
SWOT Analysis. Discuss each of the four legs of the SWOT fully—strengths, weaknesses, opportunities and threats in this section. Be clear that events are not the same as attributes. SWOT is about attributes, not events. An attribute describes the characteristics of the company. For example, you might say, “The company isn’t profitable.” True, but what is its weakness attribute? What characteristics of the company drives its lack of profitability? A better way to express it is, “The company has not managed costs in its value chain. This is supported by the sustained increase in cost of goods sold accompanied by flat sales reflecting a weakness that must be overcome to improve profitability.”
Summarize the SWOT analysis in a one-page table and place in the APPENDIX. Discuss the table in the body of the paper.
SWOT is the “integrator” of the analysis. SWOT draws from the findings resulting from the Macroenvironment, Industry Analysis, and Financial Analysis. No new information is provided. Use the terminology in the previous sections. For example, “An opportunity identified in the discussion of the competitive analysis . . .” Another example, “The dumping of foreign products into this industry, identified earlier as a driving force, is a significant threat to incumbents.”
Common Errors
Not linking the findings to the previous analysis through the use of common terminology.
Omitting important findings discussed previously.
Focusing on historical events rather than inherent strengths and weaknesses.
Not recognizing obvious strengths and weaknesses in the business functions: financial analysis, marketing (product, price, place and promotion), human resource management, operations, etc.
- Recommendations
Strategic Issue. This is the same question that is presented at the end of Section 2.
Strategy Recommendations. Identify the GENERIC and functional strategy recommendations. These will tie closely to the SWOT analysis. The recommendations should play into the company’s strengths and opportunities. They should minimize the company weaknesses and overcome its threats. Discuss each strategic initiative in detail including the actions required in the functional areas to support the strategic recommendations: marketing, operations, human resource management, finance, etc.
Objectives. Specify the performance objectives that should be monitored and result from the strategic recommendations and earlier analysis. What key performance indicators should be reported and what are the appropriate targets? For example, what are the sales and profitability goals? What goals should be established for nonfinancial indicators?
Strategic Justification. Justify why your recommendations are the best option and why other options are not. This is a comparative analysis. Develop this fully, tying it back to the various factors in your strategic analysis. Evaluate the pros and cons of the recommended direction. Demonstrate that you understand the implications of your recommendations.
Sample Solution
