Strategic Management Case Analysis

Part Two: Firm Analysis

by Roy L. Simerly

Roy L. Simerly is a professor of management at East Carolina University.

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            This is the second part of an article dealing with the complexities of case analysis in strategic management courses. Go to the first part: Industry Analysis.

The purpose of this part of the  article is to provide an outline for the analysis of a firm. The author uses this method at both the undergraduate and graduate levels at East Carolina University. The only difference between the course for undergraduate and  graduate students is that the latter are expected to show more sophistication in their presentations.

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The learning objective for the firm analysis is to determine the strengths and weaknesses of a firm and to determine the core competence that can be built on to establish a competitive advantage. The final step is to develop a business plan that will align the capabilities of the firm with the requirements of the competitive environment. How a firmís performance is defined is left to the student. 

The firm paper analysis that follows has been adapted from the work of Wheelen and  Hunger (2000)[1]. Their model for the evaluation of firms has been evolving for over a decade, and it represents one of the more concise approaches to firm analysis. This approach is compatible with a number of strategic management texts and can easily be adapted to most situations. In addition, my own experiences in the business world are incorporated.

Covered below in some detail is the outline for the firm paper. This outline is given to the students in its entirety.


This outline is only a guide. Each firm is unique, and you are responsible for adapting your paper to fit the circumstance. Form is important, but it must not replace reason.

Learning Objective: to determine the strengths and weaknesses of a firm and to determine the core competence that can be built on to establish a competitive advantage.

Method: Firm analysis and the development of an abbreviated business plan to ensure long term survival within the competitive environment. Compare your firm to a better performing firm within the same industry or to the industry trends that you revealed in the industry paper.

Maintain your focus on the questions being asked. Provide conclusions for each section and sub-section. A decision matrix should be provided at the end of each section and an overall matrix provided in the conclusion section.

Where quantitative analysis is required, provide numbers expressed as ratios. Use five years of data to establish trends. Where qualitative analysis is required, provide citations to support your arguments. Assumptions and common knowledge are not accepted.

Continuity: I do read these papers! Be sure that if you make a declarative statement in one section, you do not contradict yourself in another. While it is a team project, I read it as the work of one person. Integrate the paper. Please number pages and use section headings and sub-headings.

Help is just a mouse-click away! I strongly encourage you to show me your work as you progress. I can and will save you hours of frustration if you will show me what you are doing.

I. Current Situation

A. Brief firm history

What industries and industry segments is your firm involved in, and what will be the focus of the paper? You can not do all of the industries or segments in one semester. Make a rational choice that aligns the firm paper with the industry paper. Provide a statement of the current position or situation of your firm within the industry (i.e., how goes it). How diversified is this firm? Related or unrelated (you may discuss this wherever you think most appropriate)?

B. Strategic Posture

1. What is the current mission? Did you have to deduce it, or was it stated? Is there a clear point B (an objective that we can quantify)? You should be concerned with both the quality of the mission statement and its appropriateness for the competitive environment. You will be able to address this issue after you complete the firm analysis.

2. What is the current (Porterís generic) strategy? Since you are only doing one segment, you are concerned with business-level strategy only. Is this strategy consistent with the mission, appropriate for the environmental context, being followed by management? Again, this is best answered after the analysis is complete.

II. External Environment (Opportunities and Threats)

This section is a restatement of some of your industry paper work. You restate your findings with respect to this specific firm.

A. Socio-cultural

What general environmental factors among the socio-cultural, economic, political-legal, and technological forces are currently affecting both the firm and the industry in which it competes? Which present, current, or future threats or opportunities are important to your firm?

B. Task Environment

Which of the five forces (Porterís) in the immediate environment are currently affecting the level of competitive intensity within the industry? Which present current or future threats or opportunities important to your firm?

III. Internal Environment (Strengths and Weaknesses)

The only way to know if your firm is doing well is through comparison. Therefore, almost all of the elements that follow require the analysis of your firm and then a comparison to a better performing firm or to industry standards.

A. Management

The objective of the management function is to ensure the long-term survival of the firm within its competitive environment. Begin with your assessment of how management has addressed this objective.

1. Board of Directors The objective of the board is to provide oversight of the firm. Based on your observations, is this board appropriate for the competitive environment of this organization?

a. What is the board size and composition (averages for all firms is 74% external, with 14 members total)?

b. What are their skills? Do you have the four functional areas covered?

c. Do they own a significant percentage of stock? Here you are testing elements of agency theory.

d. What is their level of involvement in the oversight of the corporation? That is, what committees are they on? How often do they meet?

2. Top Management (usually only the CEO) The objective of management is to ensure the survival of the organization within its environment. Is management achieving that objective?

a. What are top management's chief characteristics in terms of knowledge, skills, background, and management style? Is top management sufficiently skilled to cope with likely future challenges? Has it established a systematic approach to the formulation, implementation, evaluation and control of strategic management? Is there a vision, clearly articulated, guiding corporate activities (i.e., does this manager know where the organization is headed)? What is the degree of stock ownership, and is it appropriate?

b. Organizational Structure: What is the present structure? Discuss decision making authority, degree of autonomy, team building, empowerment, etc. Is the structure appropriate for the competitive environment and consistent with the current strategy and mission?

c. Culture: Is there a well defined or emerging culture composed of shared beliefs, expectations, and values? Is the culture a source of support or hindrance to achieving the mission/strategy of the corporation?

B. Marketing

The objective of the marketing function is to maximize market share. Are they achieving this objective? You should be able to provide a graph of market share change over time compared to another firm or the industry. What is the market share change of the firm in relation to market growth? Remember to use ratios; not raw numbers. How well is the corporation performing in terms of market position and marketing mix? You answer this by comparing the 4 P's to a better performing firm.

1. How well does your firm's product offering (product mix) compare to a better performing firm?

2. Is the firm's pricing appropriate?

3. Compare the place (distribution system) of the product offering.

4. Evaluate the promotional efforts of the firm. What is the payoff for the money spent on advertising? Is there a relationship between advertising and market share change?

Provide a conclusion to this section. What trends do you see from analysis of their past performance? I suggest using a decision matrix. From your analysis, what are the strengths and weaknesses of this function?

C. Operations/Production 

This section will be revised for those teams doing a service firm. While the basic arguments are the same, the methods will be different. Consult with your instructor before beginning this section if you are doing a service organization.

The objective of the operations function is to increase productivity. Are they achieving this objective? This is also the functional area where you can best evaluate whether your firm is following the logic of re-investing in itself (the logic of the managerial enterprise)?

1. In order to achieve improvements in productivity, the firm must be re-investing itself. What is the trend in capital spending? What is the trend in productivity improvement?

2. In combination with the marketing section, has this firm emphasized product development, or diversification, for growth (the Chandler argument)?

3. Operating leverage: How has the mix of people to capital changed over time--are fixed costs rising? What are the trends in costs per unit of labor, inventory control, etc.?

4. Research and Development: What return is the corporation receiving from its R&D investment? Is the firm technologically competent? How well does the firm's investment compare with similar corporations? What is the bang for the buck!

Provide a conclusion to this section. I suggest using a decision matrix. From your analysis, what are the strengths and weaknesses of this function?

D. Finance

The objective of the finance function is to maximize shareholder wealth. Are they achieving this objective? I would prefer total returns to investors over time as the measure here. The data are available.

1. Remember to use at least five years of data for the most important factors. What trends do you see emerging from this analysis? Suggested ratios are contained in the text.

2. How well is the corporation performing compared to competition?

3. Capital asset pricing model (class lecture notes): What is the cost of capital for this firm? What impact does this have on competitiveness? What does your analysis tell you about the probability that management will reinvest in the firm?

4. Debt to equity policy and susceptibility to external forces, such as debt covenants, take over attempts, etc.: As the lecture material points out, the capital structure decision is very important to the survival of the firm.

Crunching of numbers is not the objective here. You are looking for significant trends that can impact the survivability of the firm. As you find negative trends that could effect other organizational functions, tell your team mates. What have they discovered? This section can not stand on its own; it has to be integrated into the overall paper.

Provide a conclusion to this section. I suggest using a decision matrix. From your analysis, what are the strengths and weaknesses of this function?

E. Human Resource Management

 If applicable!  Are unions involved? If so, you are concerned with the HRM function of the organization.

F. Management Information Systems

 If applicable! Is you firm having problems with its MIS system? Readings from articles should give a clue. If no problem is noted, you do not have to include this section.

IV. Critical Success Factors

From your industry paper, discuss how your firm is addressing these factors. Most of these factors (2 of 3) will lend themselves to quantitative analysis and comparison.

V. Strategic Problem

From your analysis, what is THE strategic problem of this firm? This is only one paragraph and not a laundry list. Clue Ė your paragraph will begin: Management has failed to ensure the long-term survival of this firm becauseÖ..

VI. Strategic Alternatives

 Provide appropriate strategic alternatives stated as strategies, not as elements of a strategy. Discuss the pro's and con's of each. The current strategy, if appropriate, could be one of the alternatives if the firm simply needs to improve the implementation of that strategy.

VII. Recommendation

From your alternatives, what ONE strategy do you recommend, and why? This is only one or two paragraphs.

VIII. Implementation

This is the section where most teams lose it. Remember that strategy is a pattern of actions and activities.

A. Give SPECIFIC recommendations on how you would implement your strategic choice.   Provide details addressing each of the four functional areas.

B. Show how you are solving the weaknesses and building on the strengths of each functional area.

C. What is the core competence of this organization? Can we build a sustainable competitive advantage within this industry?

D. Include a basic pro forma for at least five years out to see the impact of your changes. Use your best guess on the numbers, indicating your assumptions.

E. Conclude the paper with your prognosis for the firm.

This is the grade sheet for the firm paper

Case Name_________________________



Appendices, graphs, tables: 

Firm Business Segments:        



Corporate ownership: 

Board of Directors:        


Type and Degree of Diversification: 

Capital investment related to performance:

Social/Environmental programs: 

Growth rate of firm: 

Cost of Capital (CAPM): 

Take over target: 

Asset base compared to competitors:

Historical financial data: 



Analysis of the functional areas:





[1] Wheelen, T.L. & Hunger, J.D. 2000. Strategic Management. Upper Saddle River, N.J. U.S.A: Prentice Hall


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