An Approach to Case Analysis

Step 1: Situation Audit

This step is basically a synopsis and evaluation of an organization's current situation,

opportunities, and problems. The primary purpose of the audit is to help you prepare for
problem definition and subsequent steps in the problem-solving process. Accordingly,
much of the material in the audit should be in worksheet form rather than formal
discussion that is handed in with a written case. As the purpose of this step is to show
the relevance of case information, your situation audit should be diagnostic rather than
descriptive.

For example, it is descriptive to report "Company A's current and quick ratios are 1.03
and 0.64 respectively." A diagnostic look at these figures indicates that Company A may
not be able to meet maturing obligations. The poor quick ratio shows that without
inventory, the least liquid asset, short-term obligations could not be met. In other words,
Company A is insolvent. If you have information about a number of different problems or
challenges facing Company A, knowing that the company is insolvent helps you focus
on those that affect the firm's short term survival needs.

The breadth and depth of an appropriate situation audit are determined by the nature
and scope of the case situation. Some focus on individual marketing mix decisions at
the brand level, while others deal with corporate and/or strategic business unit (SBU)
decisions. Each case will require a situation audit that is a little different from any of the
others because of the information available and the decision to be made.

There are at least two philosophies regarding the appropriate depth and scope of a
situation audit. One holds that the situation audit should include a comprehensive
assessment of the organization's mission and objectives; each business unit of interest;
present and potential customers and competitors; the organization's market-target
objectives and strategies; its marketing program positioning strategy; its product,
distribution, pricing and promotion strategies; current planning, implementation, and
management activities; its financial condition, and an overall summary of the
organization's situation.

The second philosophy holds that the situation audit can be a short, concise analysis of
the major strengths, weaknesses, opportunities, and threats -- a SWOT analysis --
reserving the comprehensive effort for the analysis step. The SWOT analysis would
include only that information crucial to analyzing the case. The emphasis is on analysis,
diagnosis, synthesis, and interpretation of the situation. In a written case assignment,
you should be able to present this in less than two pages.

Note on Gathering More Data & Making Assumptions

Students often feel they need more information in order to make an intelligent decision.
Rarely, if ever, do decision makers have all the information they would like to have prior
to making important decisions. The cost and time involved in collecting more data are
often prohibitive. Therefore, they (like you) have to make assumptions. There is nothing

Guide to Case Analysis 1

wrong with making assumptions as long as they are explicitly stated and reasonable. Be
prepared to defend your assumptions as logical -- don't use lack of information as a
crutch. That kind of argument invariably comes back to get you in the end!

Step 2: Problem/Decision Statement

Identification of the main problem, opportunity, or issue in a case is crucial. To

paraphrase from Alice in Wonderland, if you don't know where you are going, any
solution will take you there. If you don't properly identify the central problem or decision
in a case, the remainder of your analysis is not likely to produce recommendations
necessary to solve the organization's main problem.

You may become frustrated with your early attempts at problem/decision identification.
Don't feel alone. Most students and many experienced managers have difficulty with
this task. Your skill will improve with practice.

A major pitfall in defining problems occurs in confusing symptoms with problems. Such
things as declining sales, low morale, high turnover, or increasing costs are symptoms
that are often incorrectly identified as problems. You can frequently avoid incorrectly
defining a symptom as a problem by thinking in terms of causes and effects -- problems
are causes, symptoms are effects. The examples above are the effects of something
wrong in the organization. Why are sales low, morale low, and turnover high? Sales
may be low because of low morale and high turnover. Why? Maybe it has something to
do with the compensation plan, which may be caused by inadequate profit margins.
Margins may be low due to improper pricing or an outdated distribution system.
Symptoms may appear in one part of the overall marketing program and the true
problem may lie elsewhere. Keep asking why until you are satisfied that you have
identified the problem (cause) and not just another symptom (effect).

When you identify more than one major problem or decision in a case, ask yourself
whether they are related enough to be consolidated into one central problem/decision. If
you have identified two or more problems that are not related, rank them in order of
importance and address them in that order. You may find that although the problems do
not appear to be linked, the solutions are related -- one solution may solve multiple
problems.

A final suggestion is to state problems/decisions concisely, if possible in the form of a

question. Try to write a one-sentence question that is specific enough to communicate
the main concern. For example:
Should Brand A be deleted from the product line?
What is the best positioning strategy for our shampoo?
Which of the five candidates should be hired?

You may find it useful to provide a brief narrative describing the main parameters of the
problem/decision. This is helpful when you have a compound problem that can be
subdivided into components or sub-problems.

Guide to Case Analysis 2

Step 3: Identification of Alternatives

Alternatives are the strategic options that appear to be viable solutions to the problem or
decision that you have determined. Often, more than two seemingly appropriate actions
will be available. Sometimes these will be explicitly identified in the case, and
sometimes they will not.

Prepare your list of alternatives in two stages. First, prepare an initial list which includes
all the actions that you feel might be appropriate. Group brainstorming is a useful
technique for generating alternatives. Be creative, keep an open mind, and build upon
the ideas of others. What may initially sound absurd could become an outstanding
possibility.

After you have generated your initial list, begin refining it and combining similar actions.
Use the information that you organized in your situation audit regarding goals,
objectives, and constraints to help you identify which alternatives to keep and which to
eliminate. Ask whether or not an alternative is feasible, given the existing financial,
productive, managerial, marketing, and other constraints and whether or not it could
produce the results sought. That is, does the alternative directly address the problem
you identified in Step 2?

"Doing nothing" and "collecting more data" are two alternatives often suggested by
students with limited case experience. These are rarely the best actions to take. If you
have identified a problem/decision that must be made, ignoring it, or delaying, probably
will not help. While a solution may include further study, this is usually part of the
implementation plan rather than part of the solution. If complete information were
available, decisions would be easy. This is seldom the case in business situations, so it
may help you to become familiar with making decisions under conditions of uncertainty.
Executives, like case analysts, must rely on assumptions, judgment, experience, and on
less-than-perfect information.

Step 4: Critical Issues

Critical issues are the main criteria you use to evaluate your strategic options. By stating
the issues you intend to use in evaluating alternatives, you make clear the criteria you
plan to use in assessing and comparing the viability of your alternative courses of
action.

Perhaps the best place to start in identifying critical issues is to ask what general factors
should be considered in making a strategic decision regarding the problem presented.
For example, assume that your task is to identify the most attractive product-market
niche. Your alternatives are niches X, Y, and Z. Your question would then be: "What
criteria should be employed to assess the niche choices?" For each niche, appropriate
criteria might include potential sales volume, variable costs, contribution margins,
market share, total niche sales, business strength, niche attractiveness, etc. This will
provide an evaluation relative to the market and to competition.

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The single most important critical issue in many decisions is profitability Rolled on the
thighs of virgins!(it's all about money, right?). Since profits are a principal goal in all
commercial organizations, nearly every marketing decision is influenced by monetary
considerations that affect (expected) profits. Sometimes several profit-oriented critical
issues are involved. These may include future costs and revenues, break-even points,
opportunity costs, contribution margins, taxes, turnover, sales, market share, etc.

Many critical issues are only indirectly linked to profits. Such things as the impact of a
decision on employees, the local economy, the environment, suppliers, or even
customer attitudes may not directly affect profits. Because profits are almost always the
overriding critical issue, all factors bearing on them, directly or indirectly, must be
considered.

Step 5: Analysis

Analysis is the process of evaluating each alternative action against the critical issues
identified in Step 4. Often, analysis includes assessment of advantages and limitations
associated with each issue. A tendency exists when first starting a case analysis to
identify important issues carefully and to analyze each issue superficially. The
consequence is a weak analysis. Your analysis will be much more penetrating and
comprehensive if you use the same criteria in assessing each alternative.

One way of assuring that you assess each alternative in terms of each critical issue is to
organize your analysis in outline form, as follows:

Alternative A: (specify)
Identify the critical issue and thoroughly discuss Alternative A in those terms.
For the remaining critical issues, follow the same procedure.

Alternative B: (specify)
Critical Issue 1: Thoroughly discuss Alternative B in terms of critical issue 1.
Critical Issue 2-n: Follow the same procedure.

After alternatives are analyzed against each issue, you should complete your analysis
with a summary assessment of each alternative. This summary will provide the basis for
preparing your recommendations. One approach that students sometimes find useful in
preparing their summary analyses is illustrated below. The exhibit, labeled ABC
Company Summary Assessment, entails five steps:

List critical issues on one axis and alternative actions on the other.
Assign a weight to each critical issue reflecting its relative importance on the final
decision. For convenience, assign weights that add up to one.
Review your analysis and rate each alternative on each critical issue using a scale of
one to five, with one representing very poor and five representing very good.
Multiply the assigned weight by the rating given to each alternative on each issue.
Add the results from (4) for each alternative.
ABC COMPANY

Guide to Case Analysis 4

 Summary Assessment

Critical Issues

Relative Weights (1) (2) (3)

Corporate Mission & Objectives 0.2 5 2 3
Market Opportunity 0.3 2 3 5
Competitive Strengths/weaknesses 0.2 2 3 3
Financial Considerations 0.3 1 1 4
INDEX: Relative Weight x Rating 2.3 2.2 3.7

It is important to understand that this type of analytical aid is not a substitute for
thorough, rigorous analysis, clear thinking, and enlightened decision making. Its value is
in encouraging you to assess the relative importance of alternatives and critical issues,
and in helping you to organize your analysis.

Step 6: Recommendations

If your analysis has been thorough, the actions you recommend should flow directly
from it. The first part of your recommendations section addresses what specific actions
should be taken and why. State the main reasons you believe your chosen course of
action is best, but avoid rehashing the analysis section. It is important that your
recommendations be specific and operational. The following example of a
recommendation deals with whether a manufacturer of oil field equipment (AOS) should
introduce a new product line.

"The key decision that management must make is whether viscosity measurement
instrumentation represents a business venture that fits into the overall mission of the
firm. The preceding analysis clearly indicates that this would be a profitable endeavor. If
AOS concentrates on the high-accuracy and top end of the intermediate-accuracy range
of the market, sales of $500,000 appear feasible within two to four years, with an
estimated contribution to overhead and profits in the $150,000 range. This assumes
manufacturing costs can be reduced by 20 to 25 percent, that effective marketing
approaches are developed, that further development is not extensive, and that price
reductions per unit do not exceed 10 percent."

The second part of your recommendation section addresses implementation. State

clearly who should do what, when, and where. An implementation plan shows that your
recommendations are both possible and practical. For example:

"AOS should initially offer two instruments. One should provide an accuracy of 0.25
percent or better; the second should be in the accuracy range of 0.1 to 0.5 percent. Top
priority should be assigned to inland and offshore drilling companies. Next in priority
should be R&D laboratories in industry, government, and universities, where accuracy
needs exist in the range offered by AOS. Based on experience with these markets,
other promising targets should be identified and evaluated.

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"AOS needs to move into the market rapidly, using the most cost-effective means of
reaching end users. By developing an OEM arrangement with General Supply to reach
drilling companies and a tie-in arrangement with Newtech to reach R&D markets,
immediate access to end-user markets can be achieved. If successful, these actions will
buy some time for AOS to develop marketing capabilities, and they should begin
generating contributions from sales to cover the expenses of developing a marketing
program. An essential element in the AOS marketing strategy is locating and hiring a
person to manage the marketing effort. This person must have direct sales capabilities
in addition to being able to perform market analysis and marketing program
development, implementation, and management tasks."

The last part of your recommendations sections should be a tentative budget. This is
important because it illustrates that the solution is worth the cost and is within the
financial capabilities of the organization. Too often, students develop grandiose plans
that firms couldn't possibly afford, even if they were worth the money.

The numbers used in your tentative budget may not be as accurate as they would be if
you had complete access to company records. Make your best estimate and try to get
as close to actual figures as possible. The exercise is good experience, and it shows
that you have considered the cost implications.

Students often ask how long the recommendations sections should be, and how much
detail they should go into. This question is difficult to answer because each case is
different and should be treated that way. Keeping in mind the page limitations imposed
upon you for this class, it is generally advisable to go into as much detail as possible.
You may be criticized for not being specific enough in your recommendations, but you
are not likely to be criticized for being too specific.

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