Analysing and Writing Cases

Introduction

Case studies are used in business policy and strategic management courses to
simulate real business situations. A much better educational experience would be to
have students evaluate a large number of live businesses in the current time frame.
However, problems of logistics and cost prohibit this approach in most business
school programs.

Case analysis is not an end in itself and is employed in the classroom to accomplish
several results. First, analysis of comprehensive cases introduces students to
problems that are "cross-functional" in nature. That is, rather than analyzing only
marketing problems, only finance problems, or only the problems of other functional
areas in relative isolation, case analysis can force students to view each business
function within a context defined by many factors, including other functions, the firms
environment, the owner's expectations, and so on. In fact, this cross-functional or
integrative role of cases is, to many people, a major purpose of the overall business
policy or strategic management course.

Second, through the need for more information than is normally presented in case
studies, students are introduced to sources of business information and their content
while conducting case analyses. An important part of the educational experience
afforded by case analysis is the need to conduct a search for information about the
firm's economic, industry, social, political, legal and technological environment, and,
when the company analyzed is real, about the firm itself. This process involves an
understanding of sources of aggregate data available on both printed page and in
computerized data banks and requires the ability to organize large quantities of
initially unrelated information.

Third, case analysis affords students the opportunity to attempt strategy formulation
in a classroom setting. Although strategy formulation in a case analysis only begins
to duplicate the process as it would apply to a live business, cases provide a useful
introductory vehicle.

Fourth, through cases students can be introduced to some common business

problems and practices quickly. The same exposure would take many years
experientially. Such things as starting a new business, matching strategy to
environment, and making the transition from centralized to decentralized
management can be efficiently studied in a case framework.

Finally, the use of formally prepared case write-ups or in-depth case discussions in
class gives students a chance to develop their own approaches to business analysis
and decision making. This process can then be followed in problem analysis in career
jobs.

PROCESSES OF CASE ANALYSIS AND SYNTHESIS

In its most comprehensive form, the study of cases involves two phases: Analysis and
synthesis. Case analysis is undertaken rationally to "dissect" the business
circumstances portrayed in the cases, separate facts from opinions, and isolate
symptoms from their real causes. Procedurally the case analysis phase is a matter of
reading and studying case material, taking notes, obtaining additional data,
discussing choices, and generally reducing the case to a set of workable ideas. The
synthesis phase entails either writing the case report, preparing an oral presentation,
or, usually, both. This is a matter of structuring ideas in a way that is most conducive
to the reader's understanding and interpreting the writer's ideas and
recommendations.

Analysis Phase

This phase is comprised of two steps: data collection and data set reduction.
Collection consists of amassing information that is relevant to the case company, its
time frame, industry, and so on. Reduction is the activity of paring down this set of
data to a useful, factual set of ideas and organizing it in a coherent structure.

Data Collection

To analyze a case, the analyst must first read and reread the case study and
accompanying material, not taking notes until the second or third reading.

Case write-ups and the industry notes that occasionally accompany them contain
both internal and external data. That is, some of the information contained in them
refers to the internal operations of the firm: Its financial structure, personnel
characteristics, organizational structure, production problems, etc.

Other information either is included in the case study or is found by analyzing

company- or industry-related publications, and is external in its relationship to the
firm. In this category are environmental characteristics such as legal requirements,
political circumstances, the economic scenario, and competitors' activities.

Within all the internal and external data relevant to the firm are four categories of
information: Internal strengths and weaknesses and external opportunities and
threats, as portrayed in the data framework in Exhibit 1-A. Strengths are things the
organization does especially well or attributes that positively distinguish it from its
competitors. Included would be strong financial ratios, strong brand recognition for its
products, above average profit growth, special skills of employees or key people, and
other particularly positive aspects of its internal operations.

Weaknesses are characteristics that negatively distinguish the organization from

others like it. Weak financial ratios (relative to industry averages), product quality
problems, high employee turnover, declining revenue trend, and other operational
problems would be examples. The key features of weaknesses and strengths is that
they are attributes that describe the internal operations of the organization and they
are things within the sphere of control of management. They are not characteristics
of the external environment which are outside the control of management.

Environmental positive and negative factors are called opportunities and threats,
respectively. Opportunities constitute either actual or expected favorable occurrences
outside the firm that were not brought about by management's activities or
decisions. They are events or situations that management could capitalize on to the
organization's advantage if they are strategically relevant. An improving economic
scenario, an improvement in the demographic characteristics of the company's
customers, and the impending bankruptcy of a major competitor are examples of
opportunities.

Threats include unfavorable circumstances outside the firm. These are environmental
characteristics or events that should be avoided or compensated for by management
in its operation of the organization. Again, threats are not things that were caused by
management or even within its control. A high rate of inflation that is raising the
company's costs of operations, entrance of a new foreign competitor into the market,
or approval of a new trade agreement that puts the organization at a disadvantage
relative to its international competitors, are examples of possible threats.
Management can't eliminate these things, it instead can only manage the firm in
such a way as to either minimize their negative impact or possibly turn them from
threats into opportunities by making the firm less susceptible to them than
competitors.

While taking notes from the case study, only facts and supportable inferences should
be recorded, and they should be arranged according to whether they constitute
strengths or weaknesses of the firm or opportunities or threats surrounding it. The
internal factors may be further arranged by strategy level and, for the functional
strategy level, by functional department. When the information contained in the case
is exhausted, the analyst has a list of well-substantiated internal characteristics
broken down into categories that include each appropriate level of strategy and,
within each category, into strengths and weaknesses. Similarly, external factors
organized into threats and opportunities can be further divided by external categories
such as economic, legal, political, technological and social.

Special care must be taken to focus on facts, verifiable observations, or well-

reasoned supporting arguments. Some things stated in cases are facts simply
because they were stated as facts in the case. Inferences have to be proved and
require that appropriate supporting data be recorded. For example, a statement by
the analyst that the firm's payroll checks are bouncing can be taken as a fact when it
is so stated in the case. However, were a statement by the analyst that the firm has a
strong market position mentioned in the case, the analyst would be expected to
investigate further to derive appropriate data to either support or refute the claim.

Sometimes it is necessary to prove, or at least explain, that a certain negative or

positive factor is indeed negative or positive in its implications. To state that a firm
has a current ratio of 1.0 and categorize this attribute as a negative factor is not
enough. Appropriate industry data or a trend analysis should also be included to
substantiate that the firm's current position constitutes a weakness and not a
strength.

In addition to the industry note and the case itself, reference material and popular
publications (Business Week, Wall Street Journal, Forbes, Fortune, Time, Newsweek,
among others, along with various computer and Internet data services such as
Bloomberg, CD Disclosure, ABI/Inform, etc.) should be searched for articles and data
relevant to the case, its industry, and its time frame. Information uncovered in these
sources is categorized in the data framework. Most of it will tend to fall into the
external category.

A bit of caution is in order at this point. Constructing a data framework for a case can
generate a plethora of information. To prevent becoming choked with data, each
observation as it is made should be forced into the strength-weaknesses/threat-
opportunity framework. This practice will keep the data set in manageable form.

Data Reduction. Once the analyst is satisfied that the data framework is complete, it
must be reduced to strategy terms. This can be accomplished by focusing first on the
internal and external orientation of negative factors, and then on cause and effect
relationships.

Patterns will emerge in the data as to internal and external orientation. Externally
oriented factors, threats, will tend to point toward possible strategic problems at the
corporate or business levels; weaknesses will tend to be caused by operational
shortcomings or, in other words, by functional strategy or organizational problems.
For example a high turnover rate among salespersons, or narrowing gross profit
margins in the presence of other supporting data, could indicate that the
salespersons' compensation system is inappropriate. This, of course, is a marketing
strategy problem. Along the same lines, shrinking market share, rising industry sales,
a small advertising budget, low R&D intensity ratio, few new product developments,
and so on, with more supporting information, could indicate a business-level strategy,
and possibly several functional strategy problems.

Further, the inability of present strategy to deal with a certain threat, in the analyst's
opinion, might constitute a strategy problem. The heart of the data-reduction process
is the ability to spot patterns that indicate societal, corporate, and business-wide
strategy problems (mismatches), as well as functional strategy and organizational
problems.

Central Problems. Patterns within the data framework and discrepancies between
expected and actual operating results usually indicate several possible
interpretations of what strategy problems--central problems--are causing symptoms
to appear. The analyst has to select as central problems those management
shortcomings for which there is the most support in the data set and which are also
correctable.

It is easy during the process of reducing data into a comprehensive set of correctable
central problems to confuse symptoms, or operational weaknesses, with central
problems. For example, a sales decline is usually a symptom of a deeper problem.
The management shortcoming actually leading to declining sales has to be searched
for by analysis of the data set. Whatever information is uncovered, "declining sales"
itself should not be identified as the central problem.

There is also a tendency for students to look upon environmental threats as

"problems." But a threat is a circumstance that should be handled by a constructive
goal or action plan alteration. Obviously a chief executive officer (CEO) is not going to
"solve" the energy crisis, only possibly its impact on the firm. Thus a threat such as
high energy costs, which may be causing a firm's operational expenses to increase
dramatically, is not itself a central problem. Instead the central problem in this simple
example is the aspect of strategy that enables high energy costs to be disruptive.
Thus, a central problem involving an environment threat is normally the inability of a
goal or action plan to deal with the threat.

Central Problem Defense. Identifying one or a set of central problems in a case is just
the beginning. The real challenge is defending one's choices.
The key to the defense is to support the choice with inarguable evidence or clear,
logical explanation. Evidence is already available in the data set constructed during
the analysis phase. In fact, it was the nature of that data that would have led the
analyst to selection of the central problems in the first place. Developing a central
problem defense is a matter of reconstructing the conceptual process through which
the problem was chosen initially.

The central problem defense should be exclusively problem oriented (that is,
solutions should not even be mentioned). Its purpose may be viewed as essentially
an attempt to explain to the CEO how he/she has mismanaged the firm, how
expected environmental changes will interfere with present strategies, or how
impending internal characteristics will interfere will a goal achievement.
Consequently evidence must be irrefutable in order to gain agreement. Inclusion of
discussions of possible solutions at this stage would detract from problem
acceptance.

Solutions. Just as the central problem section should contain no solution-oriented

statements, so should the solution section have no problem defense statements.
Problems can be referenced in the solution section, but they should have been clearly
defined and defended earlier in the central problem defense arguments.

Proposed solutions should be cast in terms of goal and action plan (strategy)
recommendations divided by strategy level. They are presented as goals and action
plans according to the structure explained in the appropriate chapters herein. For
example, for a corporate-level strategy involving a merger, merger strategy would be
designed according to parameters set forth in the section on merger strategy.

Solution Implementation. In this section the analyst explains, in as much detail as

necessary, how to put the proposed solution into operation. Of major importance are
matters of organizational structure. The fewer questions left unanswered, the more
believable are the recommended solutions.

Results of the analysis phase contain detailed support data for the implementation of
solutions. Case analysts can also investigate functional strategy and organizational
methods chapters to receive guidance on how to implement solutions.

This is one of the most important sections in the entire report because it contains the
analyst's explanation of how to do what they are recommending. The best approach
is to assume the reader does not know how to do what has been recommended. This
assumption makes it necessary, then, to explain in intricate detail how to proceed
with the solution.

Solution Defense

Central problems are defended by explanation of their relationships to proven

weaknesses and threats. Defending solutions--that is, justifying the ones that are
selected--is a matter of demonstrating how the firm's strengths can be brought to
bear on opportunities in such a way that weaknesses are corrected and threats
ameliorated. The data needed for this series of arguments are already available in
the data framework, but for the solution defense, focus is on the set of positive
factors.
Solution defense arguments are highly correlated with central problem defense
arguments. After all, the solutions recommended are designed to solve the central
problems and thereby correct the weaknesses and constructively respond to threats.
If analysis of weaknesses and threats led to the analyst's selection of a central
problem, then implementation of his/her solutions should essentially eliminate the
effects of weaknesses and threats. Therefore, the content of the solution defense is a
series of explanations of how solutions are expected to correct the central problems,
and also how weaknesses and threats would be corrected.

Synthesis Phase

After completion of analysis of the case, the next phase is to prepare either an oral
presentation or a written report. Some instructors prefer that students concentrate
on parts of the analysis rather than all of it. The remainder of this section outlines the
sections included in a case report.

The comprehensive case report has three parts, as shown in Exhibit 1-B (not
included): Historical data, central problem, and solution.

Historical Data section

This part consists of two sections, the data framework and a description of the firm’s
strategies. The data framework is presented simply as a numbered list organized by
whether items are strengths, weaknesses, threats, or opportunities, and also by
function if possible.

The partial list of strengths, weaknesses, threats and opportunities presented in

Exhibit 1-C (not included) have been constructed to demonstrate the nature of a
formal data set--formal in the sense that the lists have been written down. Whenever
applicable the conclusion about a piece of evidence should be stated first and the
supporting argument or information should follow. A statement by an authoritative
source is generally taken as factual. For this reason references are included in the
example to show that much data set information can be derived by research of
outside material, that is, from sources beyond the case study itself.

Present Strategy

An important part of analyzing a company is obtaining a detailed explanation of its

present strategy. In the case analysis, the description can be placed immediately
after the data set.

Students should adhere to the structure for strategy at each organizational level as
presented in the text, always looking for goals and action plans that are as specific as
possible. The more detailed the analyst's understanding of present strategy, the
more he/she will be able to identify shortcomings and recommend constructive
alterations.

Case studies and other sources very often do not explain an organization's present
strategy at all, let alone cast the explanation within the frameworks presented earlier.
Therefore, students may have to infer present strategy from published information
about the organization and its industry, as well as its characteristics as presented in
the case study. This requires clear understanding of the nature of goals and action
plans at each level.
A description of selected parts of General Electric's strategies at the enterprise and
corporate levels is presented in Exhibit 1-D (not included). This strategy description
was inferred from published sources as indicated in the references. Of course, the
firm's annual report provided much insight. Exhibit 1-D (not included) shows how
goals and action plans should be tied together in strategy statements. Whenever
possible and applicable, goals should be stated in quantitative terms. Space
limitations prohibit reprinting the entire strategy section for GE.

Central Problem Section.

The second major part of the report has two sections: Central problem statement and
central problem defense. The nature of each central problem is briefly identified in
this problem statement, along with its strategy level.

The art of stating a central problem directly is demonstrated in Exhibit 1-G (not
included). Most students identify Hasbro's problem as "seasonal sales." But the
problem was not seasonality itself, but rather how the company handled seasonal
sales. Management obviously could not eliminate seasonality. It could, however, do
several things to stop or at least reduce its adverse effects.

The next part, central problem defense, presents irrefutable arguments and evidence
to support the analyst's interpretation of central problems. Contents of the data
framework, primarily the negative factors, are the best support data for central
problems. When developing the defense section, try to keep in mind that you are
actually criticizing a management group or CEO. Thus only if problems are well
substantiated with facts and logical deduction will recommended solution be
adopted. Your interpretation of "what's wrong" must be accepted before your
suggestions on what to do about it have a chance of being adopted.

Rather than include an entire central problem defense section as an example, we

have chosen instead several examples of both good and bad arguments. These
segments would be part of a much larger section of a case analysis report.

Probably the most common problem students encounter in defending a set of central
problems is the use of hollow or unsupported arguments. In an analysis of Polaroid,
one student wrote, "Polaroid has not developed distribution channels to the extent of
the competition," as part of his defense of the contention that the company's
marketing strategy was inappropriate. The problem with this argument was that it
lacked irrefutable facts to support it. A more effective argument would describe
Polaroid's distribution channels, then describe those of competitors, and highlight the
differences.

Similarly, the following statement is not convincing enough to change management's

behavior: "Inconsistency in production planning through 1979 has caused instability
in inventory levels and in personnel needs." Here the important points are the alleged
instability in inventory and in personnel staffing requirements. Both of these
symptoms could better have been supported by quantitatively describing inventory
and staffing levels.

For an analysis of the Playboy case, students included the effective defense in Exhibit
1-H (not included) of the contention that Playboy's corporate-level strategy had
resulted in an imbalanced portfolio of SBUs.
In the "Wendy's International" case, it is tempting to assume everything is all right
with the company because of its 20 percent revenue increase between 1978 and
1979 (to $274 million in 1979 from $228 million in 1978). Further analysis by
students will show that net income fell by about 6 percent over approximately the
same period. The good analyst would explore further to find out why this happened
rather than simply identify that it did. Doing so reveals that operating expenses rose
about 6 percent over this period. Then the question, "why did operating expenses
rise?" surfaces. More analysis would show that selling expenses rose by about $32
million. Finally, one would conclude that the increase is gross profit precipitated by
the rise in revenues was not worth the cost.

Rather than stop at this point though, one must ask how serious the problem is. In
the Wendy's case, it can be shown with some outside research that during the 1978-
1979 time period, both variable and fixed costs rose so that the number of customers
needed to break even rose by about 23 million. The actual number of customers went
up by only about 13 million. In other words, although actual sales increased even
faster, and were approaching actual sales at a rapid rate.

The Wendy's example demonstrates the need to dig feebly into the data surrounding
a case or business problem to explain thoroughly in the central problem defense
section what happened and why it happened. Break-even analysis is often useful to
show the severity of a because it can be the basis of computation of the amount of
time remaining until operations reach the break-even point, and thus how much time
the firm's management has to implement a solution before profits swing negative. It
applies, of course, to both increasing and decreasing profit situations.

Solution. Three sections make up the solution part of the report. First, several
rejected solutions are explained. These are the most likely alternatives to the
recommended solutions that were not suggested for one reason or another. Their
purpose is to "clear the way" for accepted solutions by explaining why they would
likely not succeed in solving the firm's problems.

Exhibit 1-I demonstrates (not included) the appropriate amount of generality for sets
of rejected solutions. Each rejected solution should consist of a brief description and
an explanation of why it was rejected.

Next the major dimensions of proposed solutions are identified in the solution
statement section. Here the analyst introduces recommended strategic changes.
Examples of selected sections of a solution statement for the Playboy case are
presented in Exhibit 1-J (not included). It is organized by strategy level, and at the
business level by SBU.(Only segments of the business-level strategy and functional-
level strategy and strategy-level strategy proposals are included. In the original
analysis, strategy solutions were proposed for each of the four strategy levels.)

The details of how proposed solutions are expected to work are explained in the
solution implementation section. It has five parts: explanations of how each element
will operate, an implementation schedule, presentation of pro formas, organization
structure requirements, and solution defense.

First each solution element's operational characteristics are explained. Since the
solution is actually a set of strategies, it is made up of a set of goals and action plans
that follow the formats presented in those chapters. It is important to go into as much
detail as necessary so that there are no unanswered about how the set of
recommendations is intended to work.
Exhibit 1-K (not included) shows a solution implementation that was part of a
proposed solution strategy recommended for the Playboy case. Notice the specificity
of the recommendations. The price per copy of the new magazine has been set, the
break-even level necessary for success has been computed, required circulation has
been estimated, and so on. This group's analysis went on to present the plan in which
the demographics of the target market were explained, target proportions of each
distributions channel were estimated, and the numbers of potential buyers in each
US geographical region were identified.

The expected revenues and costs for this and other proposed solutions were
ultimately brought together in the company's pro forma financial statements. (This
group also proposed new strategies for the enterprise, corporate, and functional
levels.)

Next an implementation schedule is designed for the appropriate parts of the

solution. Its purpose is to ,show the timing of strategy and policy changes. A useful
approach is to name the parts of the overall solution set and then array them on one
matrix with time on the other axis. In other words, a Gantt chart ( or even a PERT
chart ) can be used to display the time phasing of solution elements.

Then a set of pro forma financial statements is prepared to show the financial impact
of the proposed solution over the appropriate planning horizon(s). Specifically, a pro
forma income statement and balance sheet, along with a cash budget, are needed to
illustrate financial efforts comprehensively. As a rule of thumb, they should include
enough accounting periods to reflect the major cost and benefit impacts associate
with the set of proposed solution, but not beyond a reasonable predictable time
frame. All assumptions made to construct the pro formas should be footnoted. The
idea here is to develop the pro formas as if no solutions had been implemented, and
then to modify them to reflect the financial implications of recommendations as if
they had been adopted. If a 10 percent increase in sales is reported, the pro formas
should be modified to reflect this change. New investments should show up on the
balance sheet along with whatever financing they require.

Part of the implementation section is an explanation of whatever organization

structure changes the solution requires. Organization charts are included that show
booth the old organization structure and the one. Personnel strategy is set to show
the nature of new jobs that have to be established and staffed to implement the new
strategy set. A full explanation of intended changes should accompany the
organization charts.

The final section of the case is the explanation of how the solution is expected to
solve the problems described in the central problem. This last section is the solution
defense. In it the analyst explains the short-and long term implications of the
solution. The best way to do this is to explain point by point how each of the
problems is identified in the central problem statement will be effected by the various
parts of the recommended solutions.

Summary
Procedures for case analysis and a structure for formal case reports were in this
appendix. There are many other formats for case reports which may be preferred by
the analyst. The one presented here has been used in our classes for many years and
effectively have served the purposes of the strategic management course.
Variations of the format can be used with good results for analytical reports outside
the classroom as well. However, only the central problem and recommended solution
sections would typically be included.

In either case the final report should be carefully organized and free of typing,
spelling, and grammatical errors. The substance of a report can be significantly
hidden by what may otherwise seem to be minor style and structural mistakes. In
addition to being carefully conceived, good ideas must be effectively presented.
Otherwise the report may never be acted upon.