CHAPTER THIRTEEN
SUGGESTIONS FOR CASE ANALYSIS
This chapter discusses case analysis and the case method as a means of examining strategic management in action. It
presents various techniques and approaches to the analysis of complex strategy cases. The basics of financial
analysis from ratio analysis to common-size statements and adjusting for inflation are presented as a way to begin
LEARNING OBJECTIVES
1. Explain the issues involved in researching a case situation.
TOPICS OUTLINE COVERED
1. The Case Method
2. Researching the Case Situation
3. Financial Analysis: A Place to Begin
a. Analyzing Financial Statements
4. Format for Case Analysis: The Strategic Audit
SUGGESTED ANSWERS TO MYMANAGEMENTLAB QUESTIONS
13-1. What ratios would you use to begin your analysis of a case?
In order to analyze a case, we must examine some of the most important financial rations. These would include
13–2. What are the five crucial steps to follow in basic financial analysis?
The five steps in basic financial analysis are: (1) scrutinize historical income statements and balance sheets; (2)
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
13-3. Why should one begin a case analysis with a financial analysis? When are other approaches
appropriate?
Starting with a financial analysis of a case is a good way to assess the seriousness of the situation. Because one of
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13-4. Discuss the importance of the common-size financial statements in strategic evaluation and control
process.
The importance of common-size financial statements is well acknowledged and used in strategic evaluation and
control. A common-size financial statement displays all items as percentages of a common base figure, allowing for
13-5. Financial statement analysis is considered useful for students in handling and analyzing case studies.
Is this true? Why?
For a student, the role and use of financial information is an important aspect of analyzing a case study. After all,
financial data represents the factual results of a company’s strategy and structure. Although analyzing financial
13-6. When is inflation an important issue in conducting case analysis? Why bother?
The impact of inflation upon daily life strikes a person when watching old movies on television. For example, in the
movie The Man in the Grey Flannel Suit, the character played by Gregory Peck works in public relations for a
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13-7. Why is strategic audit recommended in case study analysis for students?
A strategic audit is a review of an organization’s business plan and strategies to identify weaknesses and
shortcomings. It evaluates how appropriate an organization’s business strategy is and how well it is positioned for
ADDITIONAL DISCUSSION QUESTIONS FOR INSTRUCTORS
These are not found in the text and may be used by the instructor for classroom discussion or exams.
A13–1. What are the pros and cons of using the strategic audit as a framework for case analysis?
The advantages of using the strategic audit are presented clearly in the chapter. Its limitations are, however, not so
obvious. Like everything else in the world, a technique’s strengths can also serve as its weaknesses. For example,
Chapter 1 states that the strategic audit provides a checklist of questions, by area or issue, that enables a systematic
SUGGESTIONS FOR STRATEGIC PRACTICE EXERCISE
Convert the 1992 and 1991 income statements of Maytag Corporation into common-size statements. What does this
reveal?
This is a simple exercise to ensure that the class knows how to do a common-size income statement. You would be
surprised how many students failed to learn this in previous classes. An examination of the 1991 and 1992 common-
size income statements reveals some useful information. First, even though sales increased from 1991 to 1992, cost
of sales as a percentage of net sales also increased. This suggests that either the company was less efficient in 1992
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COMMON-SIZE INCOME STATEMENT: MAYTAG CORPORATION
1992
%
1991
%
Net Sales
$3,041,223
100.00
$2,970,626
100.00
Cost of sales
2,339,406
76.92
2,254,221
75.88
Gross profits
701,817
23.08
716,405
24.12
Selling, general,
admin expenses
528,250
17.36
524,898
17.67
Reorganization
Expenses
95,000
3.12
—-—
—-–
Operating income
78,567
2.58
191,507
6.45
Interest expense
(75,004)
(2.46)
(75,159)
(2.53)
3,983
0.13
7,069
0.23
Income before Taxes and
Accounting Changes
7,546
0.25
123,417
4.15
Income taxes
(15,900)
(0.52)
(44,400)
(1.49)
Income before
account changes
(0.27)
2.66
Net income (loss)
$(315,354)
(10.36)
$79,017
2.66
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ADDITIONAL TEACHING SUGGESTIONS AND MATERIALS
Following are some teaching suggestions and materials you may find helpful in teaching the business
policy/strategic management course. These may be of some value to you. Feel free to use them as-is or modify them
to suit your needs.
• The first is a suggested assignment to get students to do ratio analysis and to construct scenarios.
I. ASSIGNMENT FOR RATIO ANALYSIS AND SCENARIO CONSTRUCTION
This is an assignment developed by Tom Wheelen to force students to learn how to do ratio analysis and to construct
scenarios. He uses this at the beginning of case analysis so students will be able to use these techniques in their case
analyses later in the course.
Ratio Analysis:
Compare the last year of financial ratios for the case to the ratios of the industry. List any ratios that you feel are
Scenario Construction
There will be three paragraphs for the scenario. The first paragraph will cover the economic conditions for the time
II. IMPROVING DAILY CLASS PARTICIPATION USING EFAS, IFAS, AND SFAS
We have sometimes found it difficult to get quality daily class participation from our undergraduate students after
assigning a case for open class discussion. We suggest the following:
1. Have each class member prepare individually or as a team (a) EFAS and IFAS Tables, and an SFAS Matrix or (b)
just an SFAS Matrix for the assigned case.
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2. Ask each class member to write down his/her Total Weighted Score(s) for the case under discussion on a separate
sheet of paper, sign it, and hand it in to the instructor.
III. USING A CUT SHEET TO GRADE ORAL AND WRITTEN CASE PRESENTATIONS
On the next page is an example of a “cut sheet” Tom Wheelen developed to help his teaching assistants grade oral
STRATEGIC ALTERNATIVES
4
RECOMMENDATION (PRIORITY)
8
EVALUATION & CONTROL
4
RATIO ANALYSIS
2
SCENARIO
5
PRO FORMA
1
EXHIBITS
5
Cut Sheet for Written/Oral Presentations
67 = 100 A+
62 = 92.5 A-
58 = 86.5 B
53 = 79.0 C+
49 = 73.0 C-
44 = 65.5 D
WT.
PRESENTATION/LOGICAL ORDER
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ADDRESS TOP MANAGEMENT
1
PAST PERFORMANCE
4
MISSION
4
OBJECTIVES
STRATEGIES
POLICIES
BOARD OF DIRECTORS
4
TOP MANAGEMENT
SOCIETAL (O&T)
4
TASK (O&T)
CORPORATE STRUCTURE (S&W)
8
CORPORATE CULTURE (S&W)
MARKETING (S&W)
FINANCE (S&W)
RESEARCH & DEVELOPMENT (S&W)
OPERATIONS (S&W)
HUMAN RESOURCES (S&W)
MANAGEMENT INFORMATION SYSTEMS (S&W)
STRATEGIC FACTORS
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