Instructions to Candidates

- You are advised to start with reading the questions before the case.
- You are advised to take no more than 45 – 60 min. to read the case.
- You are advised to bring colored pens or highlighters to easily identify S,W,O,Ts
within the case to easily refer to it again while answering case.
- In most exams the case is about 6-8 pages.

Content:
1. Financial analysis (Not more than 7 ratios, 20 Min., 1.5 pages)

2. Segmental analysis (1/2 or 1 page, not more than 20 min.)

3. External factors analysis(porter 5 forces , PEST model)

4. Internal factors analysis (using marketing , finance which already

done above)

5. SWOT analysis (select 5 from internal and external factors)

6. Select corporate strategies(2 or3 strategies)

7. Competitive business strategies (porter 3 generic forces)

8. Recommendations (Your Input to Overcome the case’s problems)

Functional strategies / marketing plan

a. STP

b. 4Ps

c. BCG Matrix (for products)

d. Anasoff and or product components model

9. Conclusion

Analyzing a Case Study

When evaluating a case, it is important to be systematic. Analyze the case in a
logical fashion, beginning with the identification of operating and financial
strengths and weaknesses and environmental opportunities and threats.
Move on to assess the value of a company's current strategies only when you
are fully conversant with the SWOT analysis of the company. Ask yourself
whether the company's current strategies make sense, given its SWOT
analysis. If they do not, what changes need to be made? What are your
recommendations? Above all, link any strategic recommendations you may make
to the SWOT analysis. State explicitly how the strategies you identify take
advantage of the company's strengths to exploit environmental opportunities, how
they rectify the company's weaknesses, and how they counter environmental
threats. Also, do not forget to outline what needs to be done to implement
your recommendations.

The purpose of the case study is to let you apply the concepts you've learned when
you analyze the issues facing a specific company. To analyze a case study,
therefore, you must examine closely the issues with which the company is
confronted. Most often you will need to read the case several times - once to grasp
the overall picture of what is happening to the company and then several times
more to discover and grasp the specific problems.

The Role of Financial Analysis

Another important aspect of analyzing a case study and writing a case study
analysis is the role and use of financial information. Financial data represent the
concrete results of the company's strategy and structure. A general idea of a
company's financial position can be determined through the use of ratio analysis.
Financial performance ratios can be calculated from the balance sheet and income
statement. These ratios can be classified into five different subgroups: profit ratios,
liquidity ratios, activity ratios, leverage ratios, and shareholder-return ratios. These
ratios should be compared with the industry average or the company's prior years
of performance.

- Profit Ratios
Profit ratios measure the efficiency with which the company uses its
resources. The more efficient the company, the greater is its profitability. The
change in a company's profit ratios over time tells whether its performance is
improving or declining.

1. Gross profit margin. The gross profit margin simply gives the percentage of
sales available to cover general and administrative expenses and other
operating costs. It is defined as follows:

Sales Revenue - Cost of Goods Sold

Gross Profit Margin =
Sales Revenue

2. Net profit margin. Net profit margin is the percentage of profit earned on
sales. This ratio is important because businesses need to make a profit to
survive in the long run. It is defined as follows:

Net Income
Net Profit Margin=
Sales Revenue
 3. Return on total assets. This ratio measures the profit earned on the
employment of assets. It is defined as follows:

Net Income Available to

Return on
= Common Stockholders
Total Assets
Total Assets

Net income is the profit after preferred dividends (those set by contract)
have been paid. Total assets include both current and noncurrent assets.

4. Return on stockholders' equity. This ratio measures the percentage of profit

earned on common stockholders' investment in the company. In theory, a
company attempting to maximize the wealth of it stockholders should be
trying to maximize this ratio. It is defined as follows:

Net Income Available to Common

Return on Stockholders
=
Stockholders' Equity
Stockholders' Equity

- Liquidity Ratios
A company's liquidity is a measure of its ability to meet short-term
obligations.

1. Current ratio. The current ratio measures the extent to which the claims of
short-term creditors are covered by assets that can be quickly converted into
cash. Most companies should have a ratio of at least 1, because failure to
meet these commitments can lead to bankruptcy. The ratio is defined as
follows:

Current Assets
Current Ratio=
Current Liabilities

2. Quick ratio. The quick ratio measures a company's ability to pay off the
claims of short-term creditors without relying on the sale of its inventories.
This is a valuable measure since in practice the sale of inventories is often
difficult. It is defined as follows:

Current Assets - Inventory

Quick Ratio=
Current Liabilities

- Activity Ratios
Activity ratios indicate how effectively a company is managing its assets.
Inventory turnover and days sales outstanding (DSO) are particularly useful:
1. Inventory turnover. This measures the number of times inventory is turned
over. It is useful in determining whether a firm is carrying excess stock in
inventory. It is defined as follows:

Cost of Goods Sold

Inventory
=
Turnover
Inventory

Cost of goods sold is a better measure of turnover than sales, since it

is the cost of the inventory items. Inventory is taken at the balance
sheet date. Some companies choose to compute an average inventory,
beginning inventory, plus ending inventory, but for simplicity use the
inventory at the balance sheet date.

2. Days sales outstanding (DSO), or average collection period. This ratio is the
average time a company has to wait to receive its cash after making a sale.
It measures how effective the company's credit, billing, and collection
procedures are. It is defined as follows:

Accounts Receivable
DSO =
Total Sales/360

3. Accounts receivable is divided by average daily sales. The use of 360 is

standard number of days for most financial analysis.

- Leverage Ratios
A company is said to be highly leveraged if it uses more debt than equity,
including stock and retained earnings. The balance between debt and equity
is called the capital structure. The optimal capital structure is determined by
the individual company. Debt has a lower cost because creditors take less
risk; they know they will get their interest and principal. However, debt can
be risky to the firm because if enough profit is not made to cover the interest
and principal payments, bankruptcy can occur.

Three commonly used leverage ratios are debt-to-assets ratio, debt-to-equity

ratio, and times-covered ratio.

1. Debt-to-assets ratio. The debt-to-asset ratio is the most direct measure of

the extent to which borrowed funds have been used to finance a company's
investments. It is defined as follows:

Total Debt
Debt-to-Assets
=
Ratio
Total Assets

Total debt is the sum of a company's current liabilities and its long-term
debt, and total assets are the sum of fixed assets and current assets.
 2. Debt-to-equity ratio. The debt-to-equity ratio indicates the balance between
debt and equity in a company's capital structure. This is perhaps the most
widely used measure of a company's leverage. It is defined as follows:

Total Debt
Debt-to-Equity
=
Ratio
Total Equity

3. Times-covered ratio. The times-covered ratio measures the extent to which a

company's gross profit covers its annual interest payments. If the times-
covered ratio declines to less than 1, then the company is unable to meet its
interest costs and is technically insolvent. The ratio is defined as follows:

Profit Before Interest and Tax

Times-Covered Ratio =
Total Interest Charges

History, Development and Growth

- Market Profile
- Vision and Mission
- How its past affects its present.
- Chart the critical incidents (most unusual and essential events)

Opportunities and threats

- PEST analysis.
- Michael Porter’s 5 Forces Model.
 What should I ask myself to figure out my Opportunities?

- Market developments? - Tactics: surprise, major

- Competitors' vulnerabilities? contracts?
- Industry or lifestyle trends? - Business and product
- Technology development and development?
innovation? - Information and research?
- Global influences? - Partnerships,agencies,
- New markets, vertical, distribution?
horizontal? - Volumes, production,
- Niche target markets? economies?
- Geographical, export, import? - Seasonal, weather, fashion
- New USP's? influences?

What should I ask myself to figure out my Threats?

- Political effects? - Vital contracts and partners?

- Legislative effects? - Sustaining internal capabilities?
- Environmental effects? - Obstacles faced?
- IT developments? - Insurmountable weaknesses?
- Competitor intentions - - Loss of key staff?
various? - Sustainable financial backing?
- Market demand? - Economy - home, abroad?
- New technologies, services, - Seasonality, weather effects?
ideas?

(Focuses mostly on competitive position and the organization’s

performance in the dynamic environment surrounding it)

Strengths and weaknesses

- Value Chain or Creation functions (marketing, HR, Finance,…..)

What should I ask myself to figure out my strengths?

- Advantages of proposition? - Innovative aspects?

- Capabilities? - Location and geographical?
- Competitive advantages? - Price, value, quality?
- USP's (unique selling points)? - Accreditations, qualifications,
- Resources, Assets, People? certifications?
- Experience, knowledge, data? - Processes, systems, IT,
- Financial reserves, likely communications?
returns? - Cultural, attitudinal, behavioral?
- Marketing - reach, distribution, - Management cover, succession?
awareness? - Philosophy and values?
 What should I ask myself to figure out my weaknesses?

- Disadvantages of proposition? - Cash flow, start-up cash-drain?

- Gaps in capabilities? - Continuity, supply chain
- Lack of competitive strength? robustness?
- Reputation, presence and - Effects on core activities,
reach? distraction?
- Financials? - Reliability of data, plan
- Own known vulnerabilities? predictability?
- Timescales, deadlines and - Morale, commitment,
pressures? leadership?

(It Includes Marketing, Finance, HR, R&D and Production analysis.)

The Role of Marketing Analysis

It is the art and science of choosing target markets; getting, keeping, and growing
customers through creating, delivering, and communicating superior customer
value. Making sure that my organization effectively communicates my core
competitive values to my existing and potential customers through TV, Radio,
Magazines, etc. Also making sure that distribution channels are rigid and consumer
wants and needs and satisfied in the market which I exist in.

Questions to help analyze my marketing position

- Are markets segmented - Are product quality and

effectively? customer service good?
- Is the organization positioned - Are the firm’s products and
well among competitors? services priced appropriately?
- Has the firm’s market share - Does the firm have an effective
been increased? promotion strategy?
- Are present channel of - Are marketing planning and
distribution reliable and cost budgeting effective?
effective? - Do the firm’s marketing
- Does the firm have an effective managers have adequate
sales organization? experience and training?
- Does the firm conduct market
research?

(SBUs, 4Ps, BCG, Segmentation, targeting, Positioning)

The Role of HR Analysis

In this type of analysis we mainly concentrate on the KSAs (Knowledge, skills and
Abilities) and behavior of the employees and the culture that gathers them
together. What type of vision do we have for our employees how are our employees
branded among competitors? What kinds of development and training programs are
given to our employees and how that is reflected on their performance?

The extent to which departments are related and communicated seriously effects
the organizations efficiency as employees that have the ability to work in cross
functional teams are always a benefit to the organizations outputs.

The amount of my employees in comparison with my competitors of the same size

is also a stress point. How to attract and maintain the best of the best is also a
challenge that distinguishes successfully operating organizations from others.

Questions to help analyze my HR position

- Are company objectives and - Are job descriptions and job

goals measurable and well specifications clear?
communicated? - Is employee morale high?
- Do managers at all hierarchical - Are employee turnover and
levels plan effectively? absenteeism low?
- Is the organization’s structure - Are organizational reward and
appropriate? control mechanisms effective?

(While reading the case you should try to realize the culture, value,
competencies, morale, leadership, motivation, authority and reporting
channels)

Evaluate SWOT analysis into a SWOT Matrix

(It helps me to achieve and/or improve the following):
- Balance S & W with O & T.
- See if your current corporate level strategy is profitable or not.
- How to cope to changing factors
- Define my competitive position and how to strengthen it if weak and
maintain it if strong.
- How to develop strategies out of the solutions recommended in the SO, ST,
WO, WT.
Select corporate strategies
Identify from the case the company’s current strategy and how it affects the
organization and what changes are recommended using the 12 different Grand
(Corporate) Strategies. All with consideration to financial and marketing position in
the industry.

Competitive business strategies

Recommend and comment on which business strategies (Porter’s business
strategies) should be used to enhance competitive position with consideration to
financial and marketing position in the industry. And follow it with a brief
explanation for the reason behind your choice.

Recommendations

Functional Strategies:

“Modifications to the current organizational functional areas (HR, Marketing,

Finance, Production) wherever a threat or weakness exists we will try to overcome
it by recommending corrective actions, Ex: having a more flat organizational
hierarchy, developing cross functional teams, monitoring, training programs, more
expenditure on R&D,… etc.)

Marketing Plan
“Identify existing problems and recommend the most appropriate marketing plan
that best fits the current situation and helps the organization to overcome any
drawback in the current marketing plan”

- STP ( Segmenting, Targeting, Positioning)

Segmentation
Geographic Psychographic
- Region - Social Class
- County size - Lifestyle
- City size - Personality
- Density
- Climate Behavioral
- Use occasion
Demographic - Benefits sought
- Age - User status
- Family Size - Usage rate
- Family Life Cycle - Loyalty status
- Income/Occupation - Readiness stage
- Education - Attitude toward product
- Religion
- Race/Nationality

Targeting
- evaluate attractiveness of each segment
- select the target segment(s)

Positioning

Product positioning
- Best quality - Best value for the money
- Best performance - Least expensive
- Most reliable - Most prestigious
- Most durable - Best designed or styled
- Safest - Easiest to use
- Fastest - Most convenient

Value Positioning
- More for More.
Example : Mont Blanc, Gucci apparel, Haagen-Dazs
- More for the Same.
Example: Lexus automobile
- The Same for Less.
Example: Arrow shirts, Goodyear tires, Panasonic TV
- Less for Much Less.
Example: VCRs offering fewer features
- More for Less
Example: Toys ‘R’ Us, Wal-Mart store
- BCG (Boston Consulting Group)

Question Marks
 Low relative market share – compete in high-growth industry
 Cash needs are high
 Case generation is low
 Decision to strengthen (intensive strategies) or divest
Stars
 High relative market share and high growth rate
 Best long-run opportunities for growth & profitability
 Substantial investment to maintain or strengthen dominant position
 Integration strategies, intensive strategies, joint ventures
Cash Cows
 High relative market share, competes in low-growth industry
 Generate cash in excess of their needs
 Milked for other purposes
 Maintain strong position as long as possible
 Product development, concentric diversification
 If weakens—retrenchment or divestiture
Dogs
 Low relative market share & compete in slow or no market growth
 Weak internal & external position
 Liquidation, divestiture, retrenchment

- 4Ps (Marketing Mix: Product, Place, Price and Promotion)

Product Place Promotion Price

Quality Distribution Sales promotion Level
channels
Features Outlet location Advertising Discounts &
allowances
Style Inventory Personal selling Payment terms
levels/locations
Brand name Transportation Publicity
carriers
Packaging Sales territories

Product line Distribution

channels
Service level Distribution
coverage
Warranty

Promotion: Place:
- Intensive advertising (magazine - Expand in new markets with
& newspapers advertisements) maintaining the share in
- Media (Ads in TV entertainment existing markets.
channels & radio channels) - Encourage acquisitions and
- Increase outlets and banners in backward joint ventures.
malls, streets and clubs.
- Increase booths in famous clubs Price:
and malls. - Maintain the price to enhance
the demand.
Product: - Provide special offers especially
- Increase and develop features, for loyal customers.
designs.
- Enhance the quality and after Distribution:
sale services. - Increase distributors.
- Innovation of new products to - Increase forward integrations
reach new segments (optional).

- Ansoff’s model

Existing Products New Products

Existing
market penetration product development
Markets

New Markets market development diversification

Conclusion

In your conclusion you give a brief explanation of how your recommendations will
solve the problems of the organization and help it be more successful with a light
comparison between the company’s current and recommended strategies.
Also briefly clarify upon what were your strategic decisions made. And how are the
corporate and business strategies are linked to the finance, marketing and HR
departments and how that helps in solving the case