Net worth of bob's barricades

Case studies Introduction A summary of the case

analysis process C-2

Preparing an effective case analysis – the full story C-5

Case 1 Hearing with the aid of implanted technology: The case of Cochlear™, an Australian high-technology leader C-19

Case 2 The Australian retail wars: Coles Myer and Woolworths battle for brand value C-26

Case 3 eBay.com: Profitably managing growth from start-up to 2000 C-32

Case 4 Gillette and the men’s wet-shaving market C-50

Case 5 Gunns and the greens: Governance issues in Tasmania C-70

Case 6 Growth at Hubbard’s Foods? C-79

Case 7 Incat Tasmania’s race for international success: Blue-riband strategies C-89

Case 8 The Golden Arches in India: A case of strategic adaptation C-95

Case 9 Monsanto: Better living through genetic engineering? C-106

Case 10 Nucor Corporation and the US steel industry C-121

Case 11 Philip Condit and the Boeing 777: From design and development to production and sales C-152

Case 12 Resene Paints C-168

Case 13 Sony Corporation: The vision of tomorrow C-184

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Introduction

A summary of the case analysis process Dallas Hanson University of Tasmania

Case analysis is an essential part of a strategic man- agement course and is also perhaps the most enter- taining part of such a course. The ‘full story’ that follows this summary gives you considerable detail about how to go about a case analysis, but for now here is a brief account.

Before we start, a word about attitude: make it a real exercise; you have a set of historical facts and use a rigorous system to work out what strategies should be followed. All the cases are about real companies, and one of the entertaining bits of the analysis pro- cess is to compare what you have said they should do with what they really have done. So, it is best not to check the Net to see current strategies until you have completed your analysis.

What follows is one analytical system, a fairly tight one that you may want to adapt according to how much time you have and the style of the case.

External analysis

Step 1 What industry is it? You must decide on this early. This is an important step, because it changes the analysis – for example, your industry analysis will yield different conclusions depending on what industry you determine.

Step 2 General environment analysis Analyse the six generic elements – economic, socio- cultural, global, technological, political/legal and demographic – and work out what the important facts are. There may be many issues and facts in each element, but you put down only the important ones. It is also important to avoid the common error of over- emphasis on the firm in question. So, assuming the firm operates in the Australian ice-cream industry, the demographic analysis may have this comment: ‘A large baby boomer generation is now becoming more health-conscious. This presents opportunities in health foods and healthy alternatives for conventional foods. It also presents opportunities for low-fat ice creams.’ Or, in analysing the demographics of the Cochlear™ firm, you may conclude that there is a global market of 1.8 million profoundly deaf people and that this pro- vides a huge undeveloped market for the implantable hearing devices industry.

Step 3 The industry environment Analyse the five forces (that is, supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each. For example, what are the issues involved in new entrants into the industry? For

Introduction • A summary of the case analysis process C-3

the implantable hearing devices industry, these may include the need for understanding of intricate new technology, possession of a reputation in the global deaf community for safe and effective product devel- opment, and links to research institutions. This makes the industry hard to enter. Each force needs a brief dis- cussion followed by a short conclusion.

One extra consideration before you pull the anal- ysis together and work out if this is an attractive industry (the main conclusion) is: Is there a key force or forces in your industry? Porter argues that there is a key force in any industry, one that exerts more influ- ence than the other forces.

Now, is it an attractive industry? You need to explain, briefly, why or why not. Bear in mind that it is often not a clear decision because the forces are mixed – for example, there may be little concern about new entrants, suppliers or substitutes, but buyers may be fickle and rivalry high. In such cases, the key force analysis is very important

Remember: it is the industry you analyse, not the firm.

Step 4 Competitive environment Is there a strategic group that you need to take account of? What is the rivalry like in this group? What capa- bilities do the relevant firms have? What strategies do they follow? What threats do they represent?

Step 5 You now have material about opportunities and threats

It is easy to pull this together from the four steps you have now completed.

Internal analysis

Step 6 The firm’s resources, tangible and intangible

List all relevant resources. It is useful to distinguish between tangible and intangible resources. Remem- ber: firms have many resources.

At this point, if you have the skills and time, you can analyse the financial information that almost all cases provide. This provides material for a financial resources paragraph.

Step 7 Capabilities identification Here you make a list of capabilities. Capabilities tell you what the firm can do.

Remember: each firm may have a dozen or more capabilities, so include some that are very unlikely to be core competencies. This is a difficult step, because you must explain the capabilities carefully to indicate what the firm really does. For example, Cochlear has a capability for research in cochlear-related technol- ogy. It does not have a generic research capability.

Step 8 Core competency analysis For each capability, indicate which of the four tests for a core competency it meets. An easy way to do this is through use of a table. For example:

Rare? Valuable? Costly to imitate?

Non- substitutable

Logistics management in cochlear technologies Yes Yes No No

Research knowledge and skill in cochlear- related areas Yes Yes Yes Yes

Etc.

This is an important step, because the core compe- tencies are fundamental in the strategies you suggest – firms use their core competencies.

Step 9 Weaknesses What major weaknesses does the firm have – for example, old technology, very limited finance and poor cash flow, no succession planning?

Step 10 Pulling it together You now have all the material for an excellent SWOT (strengths/weaknesses, opportunities/threats) analysis. Pull together the earlier identification of opportunities and threats (step 5) with the internal analysis you have done. This resources-based, theory- oriented system gives you a powerful vocabulary to describe what simpler systems call ‘strengths’, and the other elements of the system allow you to systematically identify other significant factors in the mix.

C-4 Introduction • A summary of the case analysis process

Step 11 Current strategies Work out the firm’s current strategies.

Step 12 Strategies Here you take advantage of opportunities and handle threats. You should be able to make use of core com- petencies to do this.

You may need strategies at the business level, cor- porate level and international level (but it depends on the industry and on whether all are required). Also, bear in mind that you may need to specify functional- level strategies to fit the generic strategies at the business level. For example, if your ice-cream compa- ny adopts a differentiation strategy, you must specify how it is differentiated (on what grounds – low fat?) and there must be associated innovation and market- ing strategies (or, in the corporate-level strategy, a supporting acquisition strategy may be used to handle the innovation issue).

Make a list of alternative possibilities and use the external and internal analyses that you have con- ducted to assess them. Choose one set of alternatives. How do these differ from current strategies?

Make sure the strategies chosen fit in with your earlier analysis. Use all the conclusions in the earlier analysis. For example (and bear in mind that this is simplified to make the idea clearer), if you are in a rivalrous industry which has good growth prospects because of useful demographic change and you have good financial resources, you may argue for expan- sion into the new segment using available resources. If the finances were not there, this strategy would be difficult to support.

Using the Cochlear™ case as a training case This case analysis process is easy to use once you have learned it, and the best way to learn is to try it out. The Cochlear™ case in this book is designed as a training case to help you do this. Don’t be concerned if you get a slightly different analysis to other people: one of the glories of case analysis is that they are never ‘right’; some are, however, more plausible than others.

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Preparing an effective case analysis – the full story

In most strategic management courses, cases are used extensively as a teaching tool.1 A key reason is that cases provide active learners with opportunities to use the strategic management process to identify and solve organisational problems. Thus, by analysing situations that are described in cases and presenting the results, active learners (that is, students) become skilled at effectively using the tools, techniques and concepts that combine to form the strategic manage- ment process.

The cases that follow are concerned with actual companies. Presented within the cases are problems and situations that managers and those with whom they work must analyse and resolve. As you will see, a strategic management case can focus on an entire industry, a single organisation, or a business unit of a large, diversified firm. The strategic management issues facing not-for-profit organisations also can be examined using the case analysis method.

Basically, the case analysis method calls for a care- ful diagnosis of an organisation’s current conditions (as manifested by its external and internal environ- ments) so that appropriate strategic actions can be recommended in light of the firm’s strategic intent and strategic mission. Strategic actions are taken to devel- op and then use a firm’s core competencies to select and implement different strategies, including business- level, corporate-level, acquisition and restructuring, international and cooperative strategies. Thus, appro- priate strategic actions help the firm to survive in the long run as it creates and uses competitive advantages as the foundation for achieving strategic competitive- ness and earning above-average returns. The case

method that we are recommending to you has a rich heritage as a pedagogical approach to the study and understanding of managerial effectiveness.2

As an active learner, your preparation is critical to successful use of the case analysis method. With- out careful study and analysis, active learners lack the insights required to participate fully in the discussion of a firm’s situation and the strategic actions that are appropriate.

Instructors adopt different approaches in their application of the case analysis method. Some require active learners/students to use a specific analytical procedure to examine an organisation; others pro- vide less structure, expecting students to learn by developing their own unique analytical method. Still other instructors believe that a moderately structured framework should be used to analyse a firm’s situa- tion and make appropriate recommendations. Your lecturer or tutor will determine the specific approach you take. The approach we are presenting to you is a moderately structured framework.

We divide our discussion of a moderately struc- tured case analysis method framework into four sections. First, we describe the importance of under- standing the skills active learners can acquire through effective use of the case analysis method. In the sec- ond section, we provide you with a process-oriented framework. This framework can be of value in your efforts to analyse cases and then present the results of your work. Using this framework in a classroom set- ting yields valuable experiences that can, in turn, help you to successfully complete assignments that you will receive from your employer. The third section

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is where we describe briefly what you can expect to occur during in-class case discussions. As this descrip- tion shows, the relationship and interactions between instructors and active learners/students during case discussions are different than they are during lectures. In the final section, we present a moderately struc- tured framework that we believe can help you to pre- pare effective oral and written presentations. Written and oral communication skills also are valued highly in many organisational settings; hence, their develop- ment today can serve you well in the future.

Skills gained through use of the case analysis method The case analysis method is based on a philosophy that combines knowledge acquisition with significant involvement from students as active learners. In the words of Alfred North Whitehead, this philosophy ‘rejects the doctrine that students had first learned passively, and then, having learned should apply knowledge’.3 In contrast to this philosophy, the case analysis method is based on principles that were elab- orated upon by John Dewey:

Only by wrestling with the conditions of this

problem at hand, seeking and finding his own way

out, does [the student] think ... If he cannot devise

his own solution (not, of course, in isolation, but

in correspondence with the teacher and other

pupils) and find his own way out he will not learn,

not even if he can recite some correct answer with

a hundred percent accuracy.4

The case analysis method brings reality into the classroom. When developed and presented effectively, with rich and interesting detail, cases keep conceptu- al discussions grounded in reality. Experience shows that simple fictional accounts of situations and collec- tions of actual organisational data and articles from public sources are not as effective for learning as fully developed cases. A comprehensive case presents you with a partial clinical study of a real-life situation that faced managers as well as other stakeholders, includ- ing employees. A case presented in narrative form provides motivation for involvement with and analy- sis of a specific situation. By framing alternative stra- tegic actions and by confronting the complexity and ambiguity of the practical world, case analysis pro- vides extraordinary power for your involvement with a personal learning experience. Some of the poten- tial consequences of using the case method are sum- marised in Exhibit 1.

As Exhibit 1 suggests, the case analysis meth- od can assist active learners in the development of their analytical and judgement skills. Case analy- sis also helps students to learn how to ask the right questions. By this we mean questions that focus on the core strategic issues that are included in a case. Active learners/students with managerial aspirations can improve their ability to identify underlying prob- lems rather than focusing on superficial symptoms as they develop skills at asking probing, yet appropriate, questions.

The collection of cases your instructor chooses to assign can expose you to a wide variety of organisa- tions and decision situations. This approach vicari- ously broadens your experience base and provides insights into many types of managerial situations,

Exhibit 1

1 Case analysis requires students to practise important managerial skills – diagnosing, making decisions, observing, listening and persuading – while preparing for a case discussion.

2 Cases require students to relate analysis and action, to develop realistic and concrete actions despite the complexity and partial knowledge characterising the situation being studied.

3 Students must confront the intractability of reality – complete with absence of needed information, an imbalance between needs and available resources, and conflicts among competing objectives.

4 Students develop a general managerial point of view – where responsibility is sensitive to action in a diverse environmental context.

Source: C.C. Lundberg and C. Enz, 1993, ‘A framework for student case preparation’, Case Research Journal, 13 (summer), p. 134.

Introduction • Preparing an effective case analysis