FEBRUARY 24, 2013. Don Thompson looked over the 2012 Annual .docx

FEBRUARY 24, 2013. Don Thompson looked over the 2012
Annual Report that was to be released to
McDonald’s shareholders the next day. This year had been a
disappointment compared to the company’s past
success. In 2011, McDonald’s had outperformed nearly all of its
competitors while riding the economic recovery
from a deep economic recession. In fact, McDonald’s was the
number-one performing stock in the Dow 30 with
a 34.7 percent total shareholder return. 1 But in 2012,
McDonald’s dropped to number 30 in the Dow 30 with a
–10.75 percent return. The company went from first to last in
just 12 brief months (see Exhibit 1 ). As Thompson
read the report, he wondered how McDonald’s could win again.
This was not good news for Don Thompson, who became Chief
Executive Officer (CEO) in July of 2012.
He replaced the popular Jim Skinner, who had been with the
company for over 40 years. Skinner had guided
McDonald’s through the last decade with his “Plan to Win,”
which was fundamental to McDonald’s continued
growth in a challenging economic environment. Breaking from
McDonald’s historical emphasis on new store
growth, Skinner emphasized the importance of improving the
food, service, and atmosphere at existing stores. 2
Instead of accumulating real estate, he modernized McDonald’s
restaurants to create a more café-like ambience
and introduced new menu items that appealed to a more diverse
customer base. 3
Thompson, who served as Chief Operating Officer (COO) and
President of McDonald’s USA under Skinner,
had successfully implemented the first stages of “Plan to Win.”

Now as CEO, his job was to build upon Skinner’s
success and continue to foster McDonald’s growth by focusing
on three strategic goals: (1) optimizing and evolv-
ing the menu; (2) modernizing the customer experience; and (3)
broadening accessibility to the brand. 4
Thompson knew that early results were well below
expectations. In October 2012, McDonald’s sales growth
dropped by 1.8 percent, the first monthly decline since 2003. 5
Annual system-wide sales growth in 2012 barely
met the minimum 3 percent goal, while operating income
growth was just 1 percent (compared to a goal of 6
to 7 percent). 6 Sales declined yet again in January and
February of 2013. 7 Despite stock prices at relative highs,
McDonald’s was struggling to convince its cash-strapped
customers to purchase more food, which was hamper-
ing the company’s free cash flows. Meanwhile, the weak global
economy was dragging down its meager gains
in domestic sales. 8 When the dollar was relatively weak, it
had been an asset for the company to generate almost
70 percent of its revenues from overseas, 9 but the dollar’s
current strength made McDonald’s trademark products
even more expensive for its international consumers.
In addition, the company faced tough competition on multiple
fronts. Traditional quick-service competitors
such as Burger King, Wendy’s, and Taco Bell had strikingly
similar strategic plans: to modernize their architecture
and improve their menus. Initial reports indicated their efforts
were working, even as McDonald’s struggled to
revitalize its brand image. Sandwich places such as Subway
were well positioned in the health segment, whereas
Starbucks and Dunkin’ Donuts were formidable competitors in
the “specialty coffee wars.” Semi-upscale, fast-
casual restaurants such as Panera Bread and Chipotle were also
taking a cut of the fast-food market, with better

0 0 7 7 6 4 5 0 6 5
McDonald’s (in 2013): How to Win Again?
M A R N E L . A RT H AU D - DAY
F R A N K T. ROT H A E R M E L
J U S T I N C O L L I N S
Professors Marne L. Arthaud-Day and Frank T. Rothaermel and
Justin Collins (GT MBA ’14) prepared this case from public
sources. This case is developed for
the purpose of class discussion. It is not intended to be used for
any kind of endorsement, source of data, or depiction of
efficient or inefficient management. All
opinions expressed, and all errors and omissions, are entirely
the authors’. © by Arthaud-Day, Rothaermel, and Collins, 2015.
rot45065_cases21_01-16.indd 1 12/24/13 10:10 PM
MH0021
For the exclusive use of Q. Huang, 2018.
This document is authorized for use only by Qingfeng Huang in
Global Business Policies taught by Dr. W. Christian Buss,
Temple University from January 2018 to May 2018.
2

tasting options that were still timely and affordable enough.
Premium burger chains such as Five Guys and
California’s In-N-Out Burger were actively redefining burger
quality and value. 10
Thompson’s main response thus far had been to reassure
investors that McDonald’s was focused on the long
term, despite these more immediate setbacks:
We remain strategically focused on the global growth
priorities that help us better serve our customers. While the
informal eating out market remains challenging and economic
uncertainty is pressuring consumer spending, we’re
continuing to differentiate the McDonald’s experience by
uniting consumer insights, innovation and execution. 11
He just hoped the company’s efforts would be sufficient for
him to still have his job by this time next year.
A Brief History of McDonald’s
McDonald’s was started by the McDonald brothers in 1940 in
San Bernardino, California. By limiting the
menu to burgers, fries, and drinks, Dick and Mac McDonald
were able to emphasize quality and streamline
their operations. As a result, the popularity of the restaurant
grew quickly, and the brothers started franchising
McDonald’s to nearby locations. Alerted to their success when
the McDonalds placed a large order for eight
multi-mixers, Ray Kroc joined the brothers in 1954. Together,
they founded the McDonald’s Corporation in 1955,
with the vision of establishing McDonald’s franchises
throughout the United States. Kroc bought out the broth-
ers’ shares in 1961, the same year that he founded the now
infamous Hamburger University (graduates receive

a bachelor’s degree in Hamburgerology). He continued his plans
for rapid expansion throughout the 1960s and
1970s, establishing more than 700 new McDonald’s restaurants.
12 In 1965, the company held its first public offer-
ing, debuting at $22.50 per share. 13
Kroc described his management philosophy as a three-legged
stool: one leg was the parent corporation, the
second leg was the franchisees, and the third was McDonald’s
suppliers. His motto became, “In business for
yourself, but not by yourself,” as he built an ever larger network
of store owners and an integrated supply chain
management system. 14 Many new menu items, such as the
Big Mac and Egg McMuffin, were developed by the
franchisees. Kroc encouraged his local owners to be
entrepreneurial as long as they maintained the company’s
four main principles: quality, service, cleanliness, and value.
Because of the volume of McDonald’s business,
Kroc found many supply partners willing to adhere to his high
standards. 15
The company opened its first international locations in 1967 in
Canada and Puerto Rico. The first McDonald’s
stores in Japan and Europe followed shortly thereafter in 1971.
16 Meanwhile, Kroc continued to add new items to
the restaurant’s menu. After the success of the Big Mac (1968),
the quarter pounder debuted in 1973, and the Egg
McMuffin in 1975. A full breakfast menu was available by
1977. The first Happy Meals—complete with a circus
wagon theme—arrived in 1979. 17 The company’s first drive-
thru opened in Sierra Vista, Arizona, in 1975 to serve
soldiers stationed at a nearby post, and the idea quickly spread
to other locations. 18
Competition heated up in the “burger wars” of the 1980s as
Burger King and Wendy’s tried to steal market

share from McDonald’s. Despite their advances, McDonald’s
continued to expand globally into more than 30
countries. Even more new products were introduced, such as
Chicken McNuggets in 1983 and fresh salads in
1987. At the same time, McDonald’s used efficiency and
technological advances such as microwaves to gain
operational advantages over its competitors. When Ray Kroc
passed away on January 14, 1984, he left behind a
sprawling McDonald’s empire with more than 7,500 restaurants
worldwide. 19 He stayed involved in corporate
affairs up until the end, visiting the San Diego office almost
daily in his wheelchair. 20 Three years later, Fred
Turner, his long-time colleague and successor as CEO, likewise
stepped down and left the company in the capable
hands of Michael Quinlan. As the first McDonald’s CEO to
have completed an MBA, Quinlan was a savvy busi-
nessman who continued to grow the company aggressively both
at home and abroad. 21
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3
Events in the 1990s finally slowed McDonald’s rapid pace of
domestic expansion, though the company’s
international locations nearly doubled to 114 from 1991 to

1998. Several of the newer locations required unique
adaptations, which McDonald’s proved increasingly willing to
make: kosher menus in Israel, Halal menus in
Arab countries, and lamb patties for non-beef-eating India. 22
, 23 At home, however, the company was plagued
by multiple failed attempts to add new menu items such as
pizza, fried chicken, fajitas, and pasta. The Arch
Deluxe sandwich line, targeted to adults, was similarly short-
lived. When Jack Greenberg became CEO in 1998,
he quickly took corrective action, announcing a geographic
reorganization, a new food preparation system (“Made
for You”), and McDonald’s first job cuts ever, all while
scrapping plans for numerous store openings. 24 Instead, he
diversified the company’s portfolio by buying different
restaurant chains such as Chipotle Mexican Grill, Donatos
Pizza, Boston Market, and Aroma Cafe coffee shops. 25 These
purchases were later divested when McDonald’s
strategy shifted yet again in the early 2000s.
From 2003 to 2004, McDonald’s leadership underwent a rapid
string of successions that would have crippled
a company with a less talented executive bench. Greenberg
stepped down amidst financial woes in 2003, yield-
ing the reins to Jim Cantalupo, who died suddenly of a heart
attack the next year. The board immediately named
Charlie Bell to the head position after Cantalupo’s death, only
for Bell to be diagnosed with colorectal cancer and
relinquish the post after just a few months in office. This left
Jim Skinner, previously Vice Chairman, in charge
of introducing and implementing the company’s “Plan to Win”
starting in late 2004. 26 He wanted to focus the
company on 5 P’s—People, Products, Price, Place, and
Promotion—believing that McDonald’s success was not
dependent on one product or initiative but on focused execution
and innovation. 27 Skinner’s new strategic mind-
set was reflected in the company’s “i’m lovin’ it” 28

advertising campaign, which featured healthier and
higher-quality foods such as white-meat chicken and salads.
Nutrition facts were placed on all food items. Even
Ronald McDonald was given a more slimmed-down look. At the
same time, restaurants were redesigned to pro-
mote a more modern experience for the customer.
Thompson’s rise to the top at McDonald’s is an unlikely story.
Thompson, McDonald’s first black CEO, was first
hired by defense contractor Northrup Grumman, after
graduating from Purdue University with an electrical engi-
neering degree. After a cold call from a recruiter at
McDonald’s, who Thompson initially thought was calling from
competing defense contractor McDonnell Douglas, Thompson
joined McDonald’s to design robotics for food trans-
port and control circuits for cooking equipment. He soon
changed his career focus from engineering to operations,
working a wide range of jobs from fry cook to regional manager
in order to understand the company’s day-to-day
activities. 29 After several key leadership positions, he
became COO in 2010. As COO, Thompson was the driving
force behind the successful McCafé campaign, which introduced
hot and iced espresso drinks, real fruit smoothies,
and caramel mochas to McDonald’s menu lineup. 30 When
Jim Skinner retired later that same year, Thompson was the
obvious choice of successor. He inherited a global enterprise
with 34,000 locations that serve nearly 69 million cus-
tomers in 118 countries on any given day, 31 which
unfortunately was starting to show signs of problems once
again.
Trends in the Quick-Service Restaurant Industry
Despite expectations for growth, the economic trends for the
quick-service industry suggest challenges ahead.

ECONOMIC TRENDS
The U.S. quick-service restaurant industry grew by 12 to 15
percent from 2007 through 2012, and is expected
to grow another 22 percent to reach a value of $224 billion in
2017 (see Exhibit 2 ). 32
Yet despite its overall positive trajectory, the quick-service
restaurant industry faces several challenges. The
slow pace of recovery from the economic recession continues to
exert a negative influence on discretionary
income and consumer spending habits. With unemployment
rates still hovering around 8 percent (and another
rot45065_cases21_01-16.indd 3 12/24/13 10:10 PM
4
15 percent of the population underemployed), people are eating
out less 33 and looking for increased quality and
value when they do venture outside the home for meals. 34 In
a survey of people who had eaten at a fast-food
restaurant in the past month, 36 percent of respondents
indicated they were spending less compared to last year,
46 percent indicated their spending levels remained comparable,
and only 17 percent reported an increase in

spending. 35 Moreover, a large proportion (60 percent) of
these patrons are ordering exclusively from the value
menu. 36 As shown in Exhibit 3 , customers in the lowest
income category tend to purchase single value menu
items, while those in the $25K to $49.9K income bracket piece
together meals from the value menu, completely
avoiding the higher-priced options. 37
In fact, value for the money (59 percent) appears to be the
primary determinant of restaurant selection, fol-
lowed by convenience (53 percent), and only then by taste of
food (50 percent), as shown in Exhibit 4 . 38
HEALTH CONCERNS
At the same time, customers are looking for healthier menu
items. While beef still comprises the highest pro-
portion (58 percent) of meat consumed in the United States,
consumer preferences are shifting toward poultry
and other lean meats. 39 The gluten-free movement is
pressing restaurants to offer more items for the 30 percent
of Americans who are gluten intolerant. 40 The Patient
Protection and Affordable Care Act, which was signed into
law in March 2010, stipulates that calorie counts must be
displayed on all food service menus of chains with at
least 20 units, and that restaurants must provide additional
nutritional information upon request. 41 All of these
trends place considerable pressure on a fast-food industry that is
still dependent on hamburgers for the main
portion of its income. McDonald’s has actually been sued
(unsuccessfully) for making its customers fat and was
featured in an unflattering documentary ( Super Size Me ), in
which Morgan Spurlock grew increasingly ill and
gained 25 pounds after eating only McDonald’s food for one
month. 42

INCREASING SUPPLY COSTS
Healthier and more diverse menu items mean increased supply
costs for restaurants, even as customers remain
very price sensitive. In addition, fuel costs started rising in the
first half of 2012, making it more expensive to raise
agricultural products and transport them to market. This was
further compounded by a severe drought later the
same year, which prompted the USDA to pronounce the corn
crop a disaster. 43 Not only is corn one of the main
products used to feed both cattle and chickens, but corn oil,
meal, and other byproducts are a significant compo-
nent of many grocery items. 44 The resulting price increases
for supplies ranging from bread to eggs to meat are
squeezing already tight operating margins. Beef prices are
expected to increase another 4 to 5 percent in 2013, as
farmers reduce their herds to control their own costs of
production. 45
Current Competitors
Traditionally, McDonald’s main competition has come from
other quick-service restaurants such as Wendy’s,
Burger King, and Yum! Brands’ Taco Bell. McDonald’s is
roughly twice the size of its next largest global competi-
tor (all three Yum! Brands combined), but has slightly fewer
stores. 46 It controls almost half of the U.S. hamburger
market, which is more than three times larger than the market
share held by either Wendy’s or Burger King. 47 Yet,
each of these competitors’ stock outperformed McDonald’s in
2012, a worrying trend for the company’s future.
WENDY’S
Wendy’s recently superseded Burger King as the number-two
burger chain, 48 with more than 6,500 locations

in 28 countries. 49 Wendy’s strives to differentiate itself as “a
cut above” its competitors, with higher-quality food
that is made fresh-to-order. 50 Its current strategy is to focus
on long-term brand development by redesigning its
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5
stores, offering an expanded menu including breakfast, and a
new advertising campaign. At a price tag of up to
$700,000 per store, the remodeling was estimated to cost the
company $225 million in capital expenditures in
2012 alone. The good news for Wendy’s is that the physical
upgrades appear to be associated with an increase in
same-store sales of 5 to 25 percent (i.e., the stores are generally
recouping their expenses). 51 Recent additions to
Wendy’s menu such as its sea-salt French fries, a new collection
of salads, and Dave’s Hot ’N Juicy burgers have
proven quite popular, 52 helping to generate several
consecutive quarterly sales increases for the corporation. 53
The
company’s decision to sell 425 company-owned stores to
franchisors, reducing the level of corporate ownership
from 22 percent to 15 percent, has also been greeted warmly by
investors, causing its stock to rally. 54

BURGER KING
Burger King is currently the third-largest quick-service
restaurant chain in the United States based on sales vol-
ume. It was acquired by private equity firm 3G Capital in 2010,
taken private, and then went public again in mid-
2012. Changes made by the new ownership appear to be
positive, as the company reported a 6.4 percent growth in
sales during its first quarter back on the stock market. 55 The
chain boasts some 12,700 outlets in 73 countries, with
over 60 percent of its restaurants concentrated in the United
States; only 5 percent of Burger King restaurants are
company owned. 56 Burger King likewise continues to
aggressively attack McDonald’s market share, by adding a
variety of new menu items and modernizing its stores. 57 , 58
TACO BELL
Taco Bell (a division of Yum! Brands) is the most widely
recognized Tex-Mex option in the quick-service
restaurant category, with approximately 5,800 restaurants (80
percent of which are franchises) in the United
States. After a string of food contamination and quality issues
from 2006 through 2011, the company has started
to rebound, posting a 13 percent increase in same-store sales in
the second quarter of 2012. Taco Bell’s leadership
credits its comeback to the successful introduction of its new,
healthier Cantina Bell product line and the popular
“Doritos Locos Tacos.” It is currently experimenting with
breakfast options in several states, with a nationwide
rollout planned for 2014. 59 The chain plans to double its
revenues from $7 billion to $14 billion over the next
10 years. 60
SUBWAY

A different sort of quick-service competitor that challenges
McDonald’s dominance is Subway. Known for
its healthier menu items and fresh ingredients, Subway recently
surpassed McDonald’s in the number of total
restaurants (39,618 globally, including 25,936 in the United
States). 61 The chain has become a popular lunchtime
destination for many Americans who value convenience but do
not want to compromise their health. For those
customers who might still crave an occasional ground beef fix,
however, Subway is testing a new line of Angus
Melt sandwiches in limited markets. 62 In 2012, Subway’s
sales totaled $18.1 billion; Subway’s co-founder envi-
sions that the chain could expand to 100,000 locations by 2030.
63
In the meantime, boundaries between quick-service and other
restaurant segments have become increasingly
blurred. Fast-casual restaurants provide high-quality food
without table service, in a comfortable atmosphere, at
prices that are “low enough.” Due to this successful
combination of high quality and relatively low prices, the
fast-casual segment is one of the few areas in the restaurant
industry that is experiencing steady growth. 64
Restaurants such as Panera Bread and Chipotle are changing the
expectations of customers, which is causing
traditional fast-food chains to change as well. Even traditional
sit-down restaurants are looking at ways to move
into the fast-casual arena by offering selected scaled-down
dishes that appeal to value-seeking diners. 65
A sub-segment of the fast-casual restaurant industry is the
premium burger segment. Customers have been
flocking to burger chains such as Five Guys, In-N-Out Burger,
Shake Shack, Smashburger, and Fatburger for
higher-priced, higher-quality burgers, while fast-food joints

such as McDonald’s, Burger King, and Wendy’s
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6
have scrambled to counter with their own premium offerings.
But much like the Arch Deluxe in the 1990s, 66
McDonald’s one-third pound Angus burger was short-lived.
Customers could not justify paying $4 to $5 for a
single burger when there were sandwiches on McDonald’s
Dollar Menu for much less. 67 In light of the rising price
of beef, the company has decided to offer three new Quarter
Pounders with whole grain buns 68 as well as non-beef
items like the brand new chicken McWrap instead. 69
STARBUCKS
McDonald’s expansion into specialty coffee drinks with the
McCafé line means that it also competes with more
traditional coffee shops such as Starbucks and Dunkin’ Donuts.
Starbucks answered the introduction of McCafé
by distributing its Seattle’s Best brand to other quick-service
restaurants such as Burger King and Subway, as well
as by adding new food offerings. 70

DUNKIN’ DONUTS
Dunkin’ Donuts, which has served coffee for more than 60
years, recently made a failed bid to trademark its
brew as the “Best Coffee in America.” 71 It plans to triple its
presence to 15,000 shops and is likewise expanding
its warm breakfast options to compete more effectively. 72 As
coffee shops sell more food and restaurants dispense
specialty coffees, competition between these once distinct
market segments is becoming much more intense.
Target Market
Market research indicates that the typical American dines out
five times per week. One of the main reasons so
many quick-service restaurants are focusing on new breakfast
items is that the early morning meal is the least sat-
urated. For every restaurant breakfast, the NPD Group estimates
that the average American consumes 2.5 lunches
and almost 2 dinners outside the home. 73 Around 11 to 12
percent of these meals are eaten at McDonald’s. 74 , 75
A quick breakdown of a typical McDonald’s franchise in a
middle-class suburb of 25,000 residents provides
additional market insight. Roughly 1 out of 16 or 1,500 people
in town visit the local McDonald’s over the
course of a given day. Breakfast accounts for the largest
proportion (30 percent) of sales, followed by lunch (24
percent); afternoon, dinnertime, and late night/early morning
each account for another 15 to 16 percent of sales.
The noon lunch hour is the busiest and most profitable time of
day, bringing in $200,000 in revenues. 76 Annually,
the average franchise can be expected to bring in about $1.7
million in sales, with an operating profit of around
$150,000. 77

McDonald’s three main target market segments are mothers,
children, and young adults. 78 Moms view
McDonald’s as a quick, easy, and affordable meal for families
on the go, and usually are the ones who bring the
children. But with 17 percent of U.S. youth considered obese,
fast-food chains find themselves in an awkward
position when marketing directly to children. In response to
parental demands for healthier kid meal options,
McDonald’s has already reduced its Happy Meal calorie count
by 20 percent by adding apples and halving the
amount of French fries. McDonald’s has also promised to
reduce the sodium content of its food by 15 percent
by 2015, and to make further reductions in calories, sugars,
saturated fats, and portion sizes by 2020. 79 Even this
was not enough for a 9-year-old girl who publicly took CEO
Thompson to task at a recent shareholders’ meeting,
accusing the company of tricking kids into eating junk food by
using toys and cartoon characters. 80 Other chains,
such as Jack in the Box, have opted to eliminate toys from their
kids’ meals, 81 while Taco Bell has dropped its
children’s menu altogether. 82
However, the key demographic group for most fast-food
restaurants is comprised of young, single profession-
als who earn above-average incomes. These so-called “heavy
users” frequent a given chain twice or more per
week, providing a steady source of sales and profit. 83
Unfortunately, a recent study indicated that McDonald’s
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7
was not even in the top 10 of the 18-to-32-year-old age group’s
favorite restaurants. Instead, millennials are more
likely to eat at fast-casual restaurants that emphasize ingredient
quality and demonstrate an awareness of social
issues such as environmental sustainability. Transparency is
also important to young adults. Restaurants such as
Chipotle and Panera Bread are known for demonstrating
openness about their food sourcing and preparation, 84
whereas McDonald’s has been plagued by perceived deceptions.
Vegetarians raised an uproar once it was discov-
ered that McDonald’s had continued to use a small amount of
beef tallow as flavoring when cooking its French
fries. 85 It was also forced to discontinue making burgers out
of “boneless lean beef trimmings” mixed with ammo-
nium hydroxide, after Jamie Oliver exposed the company’s use
of “pink slime” on national television. 86
“Plan to Win”
After McDonald’s ended 2002 with its first quarterly loss ever,
87 CEO Jim Skinner introduced his original
“Plan to Win,” based on the three pillars of “brand direction,
freedom within a framework, and measureable mile-
stones.” The plan was focused on four goals: to attract more
customers, to convince customers to purchase more
often, to increase brand loyalty, and to become more profitable.
Skinner further distinguished five Ps—People,
Product, Place, Price, and Promotion—as essential to
McDonald’s efforts in achieving these goals. 88

In a saturated market, the main thrust of Skinner’s plan was to
shift from acquiring expensive real estate to
generating increased sales from existing restaurants. 89 In the
early 2000s, McDonald’s was opening a new store
somewhere in the world every 4.5 hours; under Skinner’s watch,
the pace slowed to just 50 to 100 new U.S. sites
per year. 90 To compensate, existing stores started to stay
open longer, extending their hours into the late night and
early morning. A restaurant in Garner, North Carolina, saw its
annual revenues rise by 4.5 percent ($90,000) when
it converted to being open 24/7. 91 By 2007, roughly 40
percent of McDonald’s locations were open nonstop, 92 in
subsequent years, some even experimented with staying open on
holidays. 93
Among other things, Skinner used the money saved on aborted
new openings to revamp existing restaurants.
The “new” McDonald’s look utilized a gentler color scheme,
replaced fiberglass and steel chairs with leather seat-
ing, eliminated fluorescent lighting, and added such amenities
as flat-screen TVs, free Wi-Fi, live plants, piped-in
music, and the occasional fireplace. 94 Headquarters provided
grants of up to $600,000 per site, with some projects
costing as much as $1.5 billion. 95 By the time all of the
renovations are completed in 2015, the company will have
invested over $1 billion in the hope that “nicer-looking stores
attract more business.” 96
At the same time, Skinner sent McDonald’s chefs back to the
drawing board to research new menu possibili-
ties more in line with current health trends. The company had
grown lax in its product development efforts, as
evidenced by its $100 million Arch Deluxe mistake 97 and
other failures such as the McPizza, McHotDog, and
McSalad Shaker. 98 McDonald’s also lagged significantly

behind its competitors in purging trans fats from its
recipes, in apparent disdain of consumer preferences. 99
Under Skinner, the company took the time to conduct
extensive market research and developed a new passion for
numbers. Potential new menu items had to pass a
series of tests before they could move on to the next stage of
development, based on an analysis of their sales,
margins, costs, and time and ease of production. 100 This
more rigorous approach led to the development of the
“Oven Selects” sandwiches, 101 a southern-style fried
chicken biscuit for breakfast, 102 and of course, the McCafé
line of coffees, smoothies, and other beverages. 103
The other half of the equation involved cost cutting by
improving operational efficiency. Adamant that
McDonald’s would not make its burgers smaller just to save
money, Skinner directed his executives to find more
creative ways to increase margins. So, the company cut travel,
held meetings at Hamburger University instead of
expensive hotels, and increased personal usage fees on company
vehicles. When McDonald’s COO learned that
major networks were cutting their advertising rates for
struggling car manufacturers, he renegotiated for a better
deal. Meanwhile, the company continued to invest in time- and
cost-saving technologies such as more efficient
drive-through windows and computer systems that enable stores
to price items according to local demand and
income level. 104
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8
The Current Challenge
As Don Thompson looked over the results from the past year,
he realized that most of the low-hanging fruit had
already been plucked. Neither the incremental gains from the
remaining store modernizations nor convincing the
rest of the franchisees to remain open for longer hours would be
enough to offset the troubling downward trend
in profitability (see McDonald’s financial data in Exhibit 5 ).
Instead, he would have to focus on optimizing the
menu to keep pace with evolving consumer preferences,
improving the customer experience so that they would
come back again, and making McDonald’s more accessible to a
broader market base. 105
First, it was clear to Thompson that McDonald’s needed a
“McHit.” 106 Personally, he was pinning his hopes
on the universal launch of the McWrap chicken sandwich in
2013. The McWrap’s predecessors first appeared in
Europe as early as 2004, as variations of a chicken roll-up and
kebab meat wrapped in a tortilla. U.S. versions of
the sandwich were tested locally as early as 2010, but it had
taken three more years to perfect the recipe, conduct a
thorough market analysis, and streamline the production
process. The kitchens had explored ingredients as diverse
as hoisin sauce, goat cheese, and shrimp, but ultimately
abandoned them in favor of flavors with more mass
appeal: sweet chili, creamy garlic, and ranch. They added one
new vegetable—the cucumber—to McDonald’s

repertoire, which required finding companies that could reliably
supply the six million pounds of new produce
that would be needed each year. Market researchers tested
names such as the “Grande Wrap” and “Fresh Garden
Wrap,” only to discard them for the more recognizable
“McWrap.” Inside the restaurants, they had to figure out
how to steam the tortillas and where to place the sauce, all
while ensuring that a trained employee could assemble
the sandwich in 60 seconds or less. Despite public protestations
to the contrary, McDonald’s was clearly looking
to the McWrap as a “Subway buster” that would lure the
millennials back into its stores. 107 And indeed, a recent
survey showed that 22 percent of young diners would choose
Subway over McDonald’s if its stores did not carry
the McWrap. 108 If McDonald’s could not recapture the
young adult market segment with this and other new,
healthy menu options, then it risked losing an entire generation
of restaurant-goers.
Second, the company had serious service and staffing issues
that needed to be addressed if it was to improve
customer loyalty. An internal report that found its way to the
media showed that one out of every five customer
complaints was about “rude or unprofessional employees.”109
According to a national survey of quick-service
restaurants, McDonald’s was ranked next to last in
“friendliness,” beating only Burger King. Complaints about
speed of service also “had increased significantly over the past
six months,” with the McDonald’s service experi-
ence described as “chaotic.” Customers currently placed their
order with a cashier and then waited off to the side
as that cashier pulled the ordered items together or took care of
the next person in line. Having cashiers doubling
as order gatherers was inefficient and contributed to increased
waiting times. Drive-through patrons did not fare
much better. The average service time for a McDonald’s drive-

through was 188.83 seconds, which lagged behind
rival Wendy’s average by almost a minute. Part of the problem
was that too many restaurants were understaffed
during peak breakfast and lunch hours. Stressed-out employees
struggled to take care of both the vehicles lined up
in the drive-through and long lines of dine-in customers within
the store. It was hard to be friendly while work was
piling up and while customers grew increasingly irritated at how
long it took to place and get their orders. Because
employees were only trained to handle a few specific duties,
there was little extra help available for anyone who
fell behind. Consequently, the annual turnover rate in the fast-
food industry was 60 percent, as frustrated workers
sought to move on to less stressful, not to mention higher
paying, jobs. 110
Third, McDonald’s had to continue to draw in brand new
customers if it was to maintain its historical rate of
revenue growth. To Thompson, appealing to a broader market
base meant reaching out to new segments in cur-
rent markets as well as strategically selecting which new global
markets to enter. Yet this was perhaps the most
challenging task of all. If customers were not already attracted
by McDonald’s classic combination of convenient
food at a good price, what would it take to lure them into its
stores? More importantly, was it something that
McDonald’s could afford to offer? Realistically, the only places
the company could add new stores were in devel-
oping markets such as the Asia Pacific, Middle East, and Africa
regions (see Exhibit 6 for a comparison of number
of McDonald’s locations worldwide), but these areas came with
their own unique set of risks. 111 Traditional busi-
ness wisdom suggested that global companies fare better than
their domestic counterparts in part because they
rot45065_cases21_01-16.indd 8 12/24/13 10:10 PM

9
can diversify their exposure across multiple financial markets.
However, the extent of McDonald’s international
presence had in some ways increased its vulnerability to the
recent recession, raising the question of whether it
was perhaps getting too big to be safe in today’s modern, global
economy.
Mr. Thompson knew that addressing all of these issues would
come with a tremendous increase in complex-
ity and cost, 112 at a time when margins were already tight.
McDonald’s “upscale” eateries now had 145 items on
the menu, including six different types of McWraps. 113
While a greater variety of menu options was necessary to
draw new customers into stores, too many items slowed down
the order fulfillment process, increasing employee
stress and customer frustrations. Adding one new ingredient
required a near logistical miracle to ensure that six
million pounds of cucumber could be found and delivered on
time to 34,000 restaurants in 118 countries. 114 The
need for such standardized processes and equipment vied with
franchisees’ desire for greater autonomy so that
they could respond better to local demands. 115 If the days of
mass market appeal were truly over, how could a

restaurant franchise such as McDonald’s build and sustain a
coherent strategic identity? Mr. Thompson was no
longer sure that price and convenience were enough to sustain
McDonald’s sprawling empire into the future. He
looked at the “Plan to Win” poster hanging on his wall and
thought, “How can we win again? ”
rot45065_cases21_01-16.indd 9 12/24/13 10:10 PM
10
EXHIBIT 1 McDonald’s Stock Performance, January 2012–
March 2013
Time
%
C
ha
ng
e
in
S

to
ck
P
ri
ce
Ja
n-
12
Fe
b-
12
M
ar
-1
2
M
ar
-1
3
A
pr
-1
2

M
ay
-1
2
Ju
n-
12
Ju
l-
12
A
ug
-1
2
S
ep
-1
2
O
ct
-1
2
N
ov

-1
2
D
ec
-1
2
Ja
n-
13
Fe
b-
13
0
5
10
15
20
25
30
225

220
215
210
25
McDonald’s
S&P 500
Burger King
Yum! Brands
Wendy’s
Source: Authors’ depiction of data drawn from Yahoo Finance.
EXHIBIT 2 U.S. Quick-Service Restaurant Sales and Fan
Chart Forecast (in $ billions)
Source: Mintel; based on Bureau of Labor Statistics, Consumer
Expenditure Survey.
Actual
Est.
To
ta
l S
al
es

(
$
bi
lli
on
s)
Forecast
240
230
220
210
200
190
180
170
160
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Best case (bn)
$230
Mintel forecast (bn)

$224
Worst case (bn)
$217
Confidence intervals
95%
90%
70%
50%
(bn)
$183
rot45065_cases21_01-16.indd 10 12/24/13 10:10 PM
11
Household Income Level: All $25K $25K–49.9K
$50K–74.9K $75K–99.9K $100K 1
Base: adults aged 18 1 with Internet
access who have been to a fast-food
restaurant in the past month and order off
the dollar/value menu 1,066 219 248 243 141 215

% % % % % %
Order dollar/value menu option with other
dollar/value menu items 36 29 40 39 38 36
Order dollar/value menu option alone 24 31 25 20 19 24
Order dollar/value menu option in addition
to a combo meal 20 19 18 21 26 18
Order dollar/value menu option with other
regular menu items, not combo meals and
not other dollar/value menu items 20 21 17 20 18 23
Source: Mintel, http://academic.mintel.com/display/636768/ .
EXHIBIT 3 Dollar/Value Menu Behavior, by Household
Income, May 2012
“When you order off the dollar/value menu, which of the
following do you typically do?”
All 18–24 25–34 35–44 45–54 55–64 65 1
Base: adults aged 18 1 with Internet access
who have been to a fast-food restaurant in the
past month 1,774 244 332 338 349 247 264
% % % % % % %
Best value for the money 59 61 56 62 64 59 52
Convenience 53 53 48 55 54 58 48
Best-tasting food 50 54 52 48 49 49 49

Fresh food 45 43 40 43 49 49 48
Specific kind of sandwich/burger I really like 35 27 32 38
36 39 41
Dollar menu 35 41 37 39 34 29 29
Good variety of food and beverage options 30 25 26 32 34
28 35
Healthy food 30 30 30 23 30 35 35
Combo meal offerings that I like 27 24 28 33 30 23 22
Easy to customize my order 23 20 24 21 23 30 23
Self-serve fountain beverages 14 14 16 15 14 12 15
Good coffee 11 7 10 8 8 11 21
Free Wi-Fi 7 14 11 5 5 5 2
Online ordering or an order-in-advance feature 4 5 7 3 3 2
3
Programs/offerings that demonstrate it is
environmentally responsible 4 6 6 3 3 2 2
Source: Mintel.
EXHIBIT 4 Quick-Service Selection Factors, by Age, May
2012
“When picking any restaurant that offers quick service and
does not have a wait staff, which of the following are important
to you?”

rot45065_cases21_01-16.indd 11 12/24/13 10:10 PM
12
Fiscal Year 2008 2009 2010 2011 2012
Cash and short-term investments 2,063 1,796 2,387 2,336
2,336
Receivables–total 931 1,060 1,179 1,335 1,375
Inventories–total 112 106 110 117 122
Property, plant, and equipment–total (net) 20,255 21,532
22,061 22,835 24,677
Depreciation, depletion, and amortization (accumulated)
10,898 11,909 12,422 12,903 13,814
Assets–total 28,462 30,225 31,975 32,990 35,387
Accounts payable–trade 620 636 944 961 1,142
Long-term debt 10,186 10,560 11,497 12,134 13,633

Liabilities–total 15,079 16,191 17,341 18,600 20,093
Stockholders’ equity–total 13,383 14,034 14,634 14,390
15,294
Sales (net) 23,522 22,745 24,075 27,006 27,567
Cost of goods sold 13,722 12,792 13,237 14,990 15,349
Selling, general, and administrative expense 2,356 2,234
2,333 2,394 2,455
Income taxes 1,845 1,936 2,054 2,509 2,614
Income before extraordinary items 4,313 4,551 4,946 5,503
5,465
Net income (loss) 4,313 4,551 4,946 5,503 5,465
Earnings per share (basic) excluding extraordinary items 3.83
4.17 4.64 5.33 5.41
Earnings per share (diluted) excluding extraordinary items
3.76 4.11 4.58 5.27 5.36
Source: Compustat.
EXHIBIT 5 McDonald’s Financial Data (in $ millions, except
EPS data)
Country # of McDonald’s
U.S. 13,381
Japan 3,598

Canada 1,400
Germany 1,276
UK 1,250
China 660
EXHIBIT 6 Number of McDonald’s Outlets in Selected
Countries
Source: Authors’ depiction of data from IndexMundi Blog (
http://bit.ly/17EPmjo ).
rot45065_cases21_01-16.indd 12 12/24/13 10:10 PM
13
Endnotes
1. McDonald’s, 2011 Annual Report, http://bit.ly/NaoJsc
.
2 . “McDonald’s seeks way to keep sizzling,” The Wall
Street Journal, March 10, 2009.

3 . “McDonald’s tackles repair of ‘broken’ service,” The
Wall Street Journal, April 10, 2013.
4 . McDonald’s, Don Thompson, http://bit.ly/GJI5AD .
5 . “McDonald’s first monthly sales drop in a decade,”
USA Today, November 8, 2012.
6 . McDonald’s 2012 10-K, http://buswk.co/GIYBkI .
7 . “McDonald’s fish McBites flounders. New product line
doesn’t hook consumers,” Forbes, March 12, 2013.
8 . “McDonald’s—Shares might offer even better value
than its value menu,” Seeking Alpha, July 23 2013, http://bit.
ly/16p58Pe .
9 . “McDonald’s shifting expansion plan to Asia: Analysts
mixed in outlooks,” Medill Reports Chicago, June 6, 2012,
http://bit.ly/MoQmwJ .
10 . “McDonald’s: Stale growth means a future that you
won’t love,” Forbes, January 23, 2013.
11 . “McDonald’s—Shares might offer even better value
than its value menu,” Seeking Alpha, July 23 2013, http://bit.
ly/16p58Pe .
12 . McDonald’s, The Ray Kroc story,
http://bit.ly/dwFmjY .
13 . McDonald’s, McDonald’s history,
http://bit.ly/w3YNhe .
14 . McDonald’s, The Ray Kroc story.

15 . Ibid.
16 . McSpotlight, “A brief history of McDonald’s,”
http://bit.ly/cWKxji .
17 . McDonald’s, McDonald’s history.
18 . McSpotlight, “A brief history of McDonald’s.”
19 . McDonald’s, McDonald’s history.
20 . McDonald’s, The Ray Kroc story.
21 . McSpotlight, “A brief history of McDonald’s.”
22 . “How McDonald’s copes with international tastes,”
Strategic Creative, May 1, 2013, http://bit.ly/19XCjf0 .
23 . “Why the French secretly love the golden arches,”
Slate, August 9, 2013, http://slate.me/19RRs4Z .
24 . “McDonald’s CEO: Faster food ahead,” Chicago
Tribune, January 20, 2003.
25 . “Brand revitalization: Background to the turnaround at
McDonald’s,” Financial Times Press, February 18, 2009,
http://
bit.ly/1b56yRH .
26 . “How McDonald’s got CEO succession right,” CNN
Money, August 23, 2011.
27 . McDonald’s, 2003 Annual Report,
http://goo.gl/kWdw3o .
28 . “McDonald’s lovin’ its turnaround,” The Motley Fool,

October 8, 2003, http://bit.ly/16pcOko .
29 . “New McDonald’s CEO stays true to his roots,”
Chicago Tribune, March 23, 2013.
rot45065_cases21_01-16.indd 13 12/24/13 10:10 PM
14
30 . “McDonald’s next CEO: Don Thompson, the man
behind McCafé,” Daily Finance, March 22, 2012,
http://aol.it/
GSjAoh .
31 . McDonald’s, McDonald’s system,
http://bit.ly/QEdHSj .
32 . Mintel, Market size and forecast,
http://bit.ly/18ApEjU .
33 . “What’s eating McDonald’s?” BusinessWeek,
November 23, 2009.
34 . Mintel, Market drivers, http://bit.ly/18ApEjU .
35 . Mintel, Changes in fast food spending,

36 . Mintel, Dollar menu usage, http://bit.ly/18ApEjU .
37 . Mintel, Trend applications, http://bit.ly/18ApEjU .
38 . Mintel, Quick service selection factors,
39 . Daniel, C. R., A. J. Cross, C. Koebnick, and R. Sinha
(2011), “Trends in meat consumption in the United States,”
Public
Health Nutrition, 14(4): 575–583.
40 . “10 trends for 2013,” QSR, January 2013,
http://bit.ly/1fOzenz .
41 . Mintel, Trend applications, http://bit.ly/1bN2M0c .
42 . “Big Mac’s makeover,” The Economist, October 14,
2004.
43 . Mintel, Market drivers.
44 . “Rising corn prices and your grocery bill,” Market
Watch, July 18, 2012.
45 . Mintel, Market drivers.
2004.
47 . “Up all night,” BusinessWeek, February 5, 2007.
48 . Mintel, Quick service restaurants–US–September
2012. Selected companies, http://bit.ly/15VFBjm .

49 . Wendy’s, The Wendy’s Company,
http://bit.ly/1gPlnwn .
50 . Ibid.
51 . Mintel, Insights and opportunities. Quick service
restaurants–US–September 2012, http://bit.ly/19VxaC5 .
52 . “Wendy’s sees big growth plans for 2012,” Market
Watch, January 30, 2012, http://on.mktw.net/1gwtPmD .
53 . “The Wendy’s Company reports 2012 second-quarter
results,” Wendy’s, August 9, 2012, http://bit.ly/15VGqJh .
54 . “Wendy’s posts profit, will sell more restaurants to
franchisees,” Forbes, July 23, 2013.
2012. Selected companies.
56 . “Burger King franchise CEO Jean Templeton talks
McDonald’s, business challenges,” AL.com , June 25, 2013,
http://bit.
ly/12nLIqu .
58 . “Burger King’s strategy: Cut costs, sell coffee,” The
Wall St. Cheat Sheet, February 15, 2013, http://bit.ly/1i7ejsS
.

60 . “Taco Bell names marketing chief Brian Niccol
president, announces new CMO,” Ad Age, May 14, 2013,
http://bit.
ly/19oDv9N .
rot45065_cases21_01-16.indd 14 12/24/13 10:10 PM
15
61 . “How to make a McHit,” BusinessWeek, July 8–14,
2013.
2012. The lines continue to blur between segments and within
seg-
ments, http://bit.ly/15VFBjm .
63 . “How to make a McHit,” BusinessWeek.
64 . “10 trends for 2013,” QSR, January 2013,
http://bit.ly/1fOzenz .
65 . “12 for ’12,” QSR, December 2012,
http://bit.ly/15VHZqC .

67 . “McDonald’s removes Angus burgers as it tries to
reverse declining sales,” Time, May 10, 2013.
68 . “Three new Quarter Pounders to replace McDonald’s
Angus burgers,” San Jose Mercury News, May 14, 2013.
70 . “Burger King adds Seattle’s Best Coffee to menu,”
Associated Press, February 16, 2010.
71 . “Dunkin’ Donuts lays claim to ‘best coffee in America’
trademark,” The Boston Globe, October 4, 2012.
73 . Ibid.
2004.
75 . McDonald’s, Getting to know us,
http://bit.ly/3m7TXc .
76 . “Up all night,” BusinessWeek.
77 . “Big Mac’s makeover,” The Economist.
79 . “McDonald’s trims its Happy Meal,” The New York
Times, July 26, 2011.
80 . “Girl who scolded McDonald’s CEO not impressed with
his response,” ABC News, May 25, 2013.

81 . “McDonald’s trims its Happy Meal,” The New York
Times.
82 . “Taco Bell will drop kid’s meal,” CNN Money, July
23, 2013.
84 . “McDonald’s fires volley at ‘underground’ competitor,”
Yahoo! Finance, March 27, 2013.
85 . “McDonald’s to settle suits on beef tallow in French
fries,” The New York Times, March 9, 2002.
86 . “McDonald’s announces end to ‘pink slime’ in
burgers,” ABC News, February 1, 2012.
88 . “Brand revitalization: Background to the turnaround at
McDonald’s,” Financial Times Press, February 18, 2009,
http://
bit.ly/1b56yRH .
91 . Ibid.
92 . Ibid.
rot45065_cases21_01-16.indd 15 12/24/13 10:10 PM

16
93 . “Who eats at McDonald’s on Christmas,” Bloomberg
Businessweek, December 18, 2012.
94 . “McDonald’s to look like Starbucks,” Huffington
Post, May 9, 2011.
96 . “McDonald’s to look like Starbucks,” Huffington
Post, May 9, 2011.
98 . Ibid.
99 . “McDonald’s fries, hold the trans-fat,” CBS News,
February 11, 2009.
103 . McDonald’s, McCafé: What goes into building a

brand within a brand? August 20, 2012, http://bit.ly/Qs6THx .
104 . “McDonald’s seeks way to keep sizzling,” The Wall
Street Journal.
105 . McDonald’s, Don Thompson, March 27, 2013,
http://bit.ly/GJI5AD .
107 . Ibid.
108 . “McDonald’s fires volley at ‘underground’
competitor,” Yahoo! Finance.
109. McDonald’s tackles repair of ‘broken’ service,” The Wall
Street Journal, April 10, 2013.
110 . “McDonald’s tackles repair of ‘broken service,’” The
Wall Street Journal.
111 . “McDonald’s shifting expansion plan to Asia:
Analysts mixed in outlooks,” Medill Reports Chicago, June 6,
2012,
http://bit.ly/MoQmwJ .
114 . McDonald’s, Getting to know us.
115. “Big Mac’s makeover,” The Economist, October 14,
2004.
rot45065_cases21_01-16.indd 16 12/24/13 10:10 PM

A Guide to
Case Analysis
I keep six honest serving men
(They taught me all I knew);
Their names are What and Why and When;
And How and Where and Who.
— Rudyard Kipling
A Guide to Case Analysis2
In most courses in strategic management, students use cases
about actual companies to practice strategic
analysis and to gain some experience in the tasks of crafting and
implementing strategy. A case sets forth, in
a factual manner, the events and organizational circumstances
surrounding a particular managerial situation.
It puts readers at the scene of the action and familiarizes them
with all the relevant circumstances. A case on
strategic management can concern a whole industry, a single
organization, or some part of an organization;
the organization involved can be either profi t seeking or not-

for-profi t. The essence of the student’s role
in case analysis is to diagnose and size up the situation
described in the case and then to recommend
appropriate action steps.
Why Use Cases to Practice Strategic Management?
A student of business with tact
Absorbed many answers he lacked.
But acquiring a job,
He said with a sob,
“How does one fi t answer to fact?”
The foregoing limerick was used some years ago by Professor
Charles Gragg to characterize the plight
of business students who had no exposure to cases.1 The facts
are that the mere act of listening to lectures
and sound advice about managing does little for anyone’s
management skills and that the accumulated
managerial wisdom cannot effectively be passed on by lectures
and assigned readings alone. If anything had
been learned about the practice of management, it is that a
storehouse of ready-made textbook answers does
not exist. Each managerial situation has unique aspects,
requiring its own diagnosis, judgment, and tailor-
made actions. Cases provide would-be managers with a valuable
way to practice wrestling with the actual
problems of actual managers in actual companies.
The case approach to strategic analysis is, fi rst and foremost,
an exercise in learning by doing. Because cases
provide you with detailed information about conditions and
problems of different industries and companies,
your task of analyzing company after company and situation
after situation has the twin benefi t of boosting
your analytical skills and exposing you to the ways companies
and mana gers actually do things. Most college

students have limited managerial backgrounds and only frag
mented knowledge about companies and real-life
strategic situations. Cases help substitute for on-the-job
experience by (1) giving you broader exposure to a
variety of industries, organizations, and strategic problems; (2)
forcing you to assume a managerial role (as
opposed to that of just an onlooker); (3) providing a test of how
to apply the tools and techniques of strategic
management; and (4) asking you to come up with pragmatic
managerial action plans to deal with the issues
at hand.
Objectives of Case Analysis
Using cases to learn about the practice of strategic management
is a powerful way for you to accom plish
fi ve things:2
1. Increase your understanding of what mana gers should and
should not do in guiding a business to
success.
2. Build your skills in sizing up company resource strengths and
weaknesses and in conducting strategic
analysis in a variety of industries and competitive situations.
3A Guide to Case Analysis
3. Get valuable practice in identifying strategic issues that need
to be addressed, evaluating strategic
alternatives, and formulating workable plans of action.
4. Enhance your sense of business judgment, as opposed to
uncritically accepting the authoritative
crutch of the professor or “back-of-the-book” answers.

5. Gaining in-depth exposure to different industries and
companies, thereby acquiring something close
to actual business experience.
If you understand that these are the objectives of case analysis,
you are less likely to be consumed with
curiosity about “the answer to the case.” Students who have
grown comfortable with and accustomed to
textbook statements of fact and defi nitive lecture notes are
often frustrated when discussions about a case do
not produce concrete answers. Usually, case discussions
produce good arguments for more than one course
of action. Differences of opinion nearly always exist. Thus,
should a class discussion conclude without
a strong, unambiguous consensus on what do to, don’t grumble
too much when you are not told what
the answer is or what the company actually did. Just remember
that in the business world answers don’t
come in conclusive black-and-white terms. There are nearly
always several feasible courses of action and
approaches, each of which may work out satisfactorily.
Moreover, in the business world, when one elects a
particular course of action, there is no peeking at the back of a
book to see if you have chosen the best thing
to do and no one to turn to for a provably correct answer. The
best test of whether management action is
“right” or “wrong” is results. If the results of an action turn out
to be “good,” the decision to take it may be
presumed “right.” If not, then the action chosen was “wrong” in
the sense that it didn’t work out.
Hence, the important thing for you to understand about
analyzing cases is that the managerial exercise
of identifying, diagnosing, and recommending is aimed at
building your skills of business judgment.

Discovering what the company actually did is no more than
frosting on the cake—the actions that company
managers actually took may or may not be “right” or best
(unless there is accompanying evidence that the
results of their actions were highly positive.
The point is this: The purpose of giving you a case assignment
is not to cause you to run to the library or
surf the Internet to discover what the company actually did but,
rather, to enhance your skills in sizing up
situations and developing your managerial judgment about what
needs to be done and how to do it. The
aim of case analysis is for you to become actively engaged in
diagnosing the business issues and managerial
problems posed in the case, to propose workable solutions, and
to explain and defend your assessments—
this is how cases provide you with meaningful practice at being
a manager.
Preparing a Case for Class Discussion
If this is your fi rst experience with the case method, you may
have to reorient your study habits. Unlike
lecture courses where you can get by without preparing
intensively for each class and where you have
latitude to work assigned readings and reviews of lecture notes
into your schedule, a case assignment
requires conscientious preparation before class. You will not get
much out of hearing the class discuss a case
you haven’t read, and you certainly won’t be able to contribute
anything yourself to the discussion. What
you have got to do to get ready for class discussion of a case is
to study the case, refl ect carefully on the
situation presented, and develop some reasoned thoughts. Your
goal in preparing the case should be to end
up with what you think is a sound, well-supported analysis of
the situation and a sound, defensible set of

recommendations about which managerial actions need to be
taken. The Case-TUTOR soft ware downloads
that accompany the text and that are available on this same Web
site will assist you in preparing the cases—
the Case-TUTOR fi les contain a set of study questions for each
case and step-by-step tutorials to walk you
through the process of analyzing and developing reasonable
recommendations.
To prepare a case for class discussion, we suggest the following
approach:
1. Skim the case rather quickly to get an overview of the
situation it presents. This quick overview should
give you the general fl avor of the situation and indicate the
kinds of issues and problems that you will
need to wrestle with. If your instructor has provided you with
study questions for the case, now is the
time to read them carefully.
2. Read the case thoroughly to digest the facts and
circumstances. On this reading, try to gain full
command of the situation presented in the case. Begin to
develop some tentative answers to the study
questions your instructor has provided or that are provided in
the Case-TUTOR software package which
you can download at the Web site for the text. If your instructor
has elected not to give you assignment
questions or has elected not to use Case-TUTOR, then start
forming your own picture of the overall
situation being described.

3. Carefully review all the information presented in the
exhibits. Often, there is an important story in the
numbers contained in the exhibits. Expect the information in the
case exhibits to be crucial enough to
materially affect your diagnosis of the situation.
4. Decide what the strategic issues are. Until you have identifi
ed the strategic issues and problems in the
case, you don’t know what to analyze, which tools and
analytical techniques are called for, or otherwise
how to proceed. At times the strategic issues are clear—either
being stated in the case or else obvious from
reading the case. At other times you will have to dig them out
from all the information given; if so, the
study questions and the case preparation exercises provided in
the Case-TUTOR software will guide you.
5. Start your analysis of the issues with some number
crunching. A big majority of strategy cases call
for some kind of number crunching—calculating assorted fi
nancial ratios to check out the company’s
fi nancial condition and recent performance, calculating growth
rates of sales or profi ts or unit volume,
checking out profi t margins and the makeup of the cost
structure, and understanding whatever revenue-
cost-profi t relationships are present. See Table 1 for a summary
of key fi nancial ratios, how they are
calculated, and what they show.
6. Apply the concepts and techniques of strategic analysis you
have been studying. Strategic analysis is
not just a collection of opinions; rather, it entails applying the
concepts and analytical tools described
in Chapters 1 through 13 to cut beneath the surface and produce
sharp insight and understanding. Every
case assigned is strategy related and presents you with an

opportunity to usefully apply what you have
learned. Your instructor is looking for you to demonstrate that
you know how and when to use the
material presented in the text chapters. The case preparation
guides on Case-TUTOR will point you
toward the proper analytical tools needed to analyze the case
situation.
7. Check out confl icting opinions and make some judgments
about the validity of all the data and
information provided. Many times cases report views and
contradictory opinions (after all, people don’t
always agree on things, and dif fer ent people see the same
things in different ways). Forcing you to
evaluate the data and information presented in the case helps
you develop your powers of inference
and judgment. Asking you to resolve confl icting information
“comes with the territory” because a great
many managerial situations entail opposing points of view,
confl icting trends, and sketchy information.
8. Support your diagnosis and opinions with reasons and
evidence. The most important things to prepare
for are your answers to the question “Why?” For instance, if
after studying the case you are of the opinion
that the company’s managers are doing a poor job, then it is
your answer to “Why?” that establishes just
how good your analysis of the situation is. If your instructor has
provided you with specifi c study questions
for the case or if you are attempting to complete any one of the
case preparation exercises on Case-TUTOR,
by all means prepare answers that include all the reasons and
number-crunching evidence you can muster

to support your diagnosis. Work through the case preparation
exercises on Case-TUTOR conscientiously or,
if you are using study questions provided by the instructor,
generate at least two pages of notes!
9. Develop an appropriate action plan and set of
recommendations. Diagnosis divorced from corrective
action is sterile. The test of a manager is always to convert
sound analysis into sound actions—actions
that will produce the desired results. Hence, the fi nal and most
telling step in preparing a case is to
develop an action agenda for management that lays out a set of
specifi c recommendations on what to do.
Bear in mind that proposing realistic, workable solutions is far
preferable to casually tossing out off-the-
top-of-your-head suggestions. Be prepared to argue why your
recommendations are more attractive than
other courses of action that are open. You’ll fi nd the case
preparation exercises on Case-TUTOR helpful
in performing this step, too.
Table 1
Key Financial Ratios: How to Calculate Them and
What They Mean
Ratio How Calculated What It Shows
Profi tability ratios
1. Gross profi t margin Sales – Cost of goods sold
Sales
Shows the percentage of revenues available to cover
operating expenses and yield a profi t. Higher is
better and the trend should be upward.

2. Operating profi t margin
(or return on sales)
Sales – Operating expenses
Sales
or
Operating income
Sales
Shows the profi tability of current operations without
regard to interest charges and income taxes. Higher
is better and the trend should be upward.
3. Net profi t margin (or net
return on sales)
Profi ts after taxes
Sales
Shows after tax profi ts per dollar of sales. Higher is
better and the trend should be upward.
4. Return on total assets Profi ts after taxes + Interest
Total assets
A measure of the return on total investment in the
enterprise. Interest is added to after tax profi ts to
form the numerator since total assets are fi nanced by
creditors as well as by stockholders. Higher is better
and the trend should be upward.
5. Return on stockholders’
equity
Profi ts after taxes
Total stockholders’ equity

Shows the return stockholders are earning on their
investment in the enterprise. A return in the 12-15%
range is “average”, and the trend should be upward.
6. Earnings per share Profi ts after taxes
Number of shares of common stock
outstanding
Shows the earnings for each share of common stock
outstanding. The trend should be upward, and the
bigger the annual percentage gains, the better.
Liquidity Ratios
1. Current ratio Current assets – Current liabilities Shows a fi
rm’s ability to pay current liabilities using
assets that can be converted to cash in the near term.
Ratio should defi nitely be higher than 1.0; ratios of 2
or higher are better still.
2. Quick ratio (or acid-test
ratio)
Current assets – Inventory
Current liabilities
Shows a fi rm’s ability to pay current liabilities
without relying on the sale of its inventories.
3. Working capital Current assets – current liabilities Bigger
amounts are better because the company

has more internal funds available to (1) pay its
current liabilities on a timely basis and (2) fi nance
inventory expansion, additional accounts receivable,
and a larger base of operations without resorting to
borrowing or raising more equity capital.
Leverage Ratios
1. Debt-to-assets ratio Total debt
Total assets
Measures the extent to which borrowed funds have
been used to fi nance the fi rm’s operations. Low
fractions or ratios are better—high fractions indicate
overuse of debt and greater risk of bankruptcy.
2. Debt-to-equity ratio Total debt
Should usually be less than 1.0. High ratios
(especially above 1.0) signal excessive debt, lower
creditworthiness, and weaker balance sheet strength.
3. Long-term debt-to-
equity ratio
Long-term debt
Shows the balance between debt and equity in
the fi rm’s long-term capital structure. Low ratios
indicate greater capacity to borrow additional funds
if needed.
4. Times-interest-earned (or
coverage) ratio

Operating income
Interest expenses
Measures the ability to pay annual interest charges.
Lenders usually insist on a minimum ratio of 2.0, but
ratios above 3.0 signal better creditworthiness.
Activity Ratios
1. Days of inventory Inventory
Cost of goods sold ÷ 365
Measures inventory management effi ciency. Fewer
days of inventory are usually better.
2. Inventory turnover Cost of goods sold
Inventory
Measures the number of inventory turns per year.
Higher is better.
3. Average collection
period
Accounts receivable
Total sales ÷ 365
or
Accounts receivable
Average daily sales
Indicates the average length of time the fi rm must
wait after making a sale to receive cash payment. A
shorter collection time is better.
Other Important Measures of Financial Performance
1. Dividend yield on

common stock
Annual dividends per share
Current market price per share
A measure of the return that shareholders receive in
the form of dividends. A “typical” dividend yield is
2-3%. The dividend yield for fast-growth companies
is often below 1% (maybe even 0); the dividend
yield for slow-growth companies can run 4-5%.
2. Price-earnings ratio Current market price per share
Earnings per share
P-e ratios above 20 indicate strong investor
confi dence in a fi rm’s outlook and earnings growth;
fi rms whose future earnings are at risk or likely to
grow slowly typically have ratios below 12.
3. Dividend payout ratio Annual dividends per share
Earnings per share
Indicates the percentage of after-tax profi ts paid out
as dividends.
4. Internal cash fl ow After tax profi ts + Depreciation A quick
and rough estimate of the cash a company’s
business is generating after payment of operating
expenses, interest, and taxes. Such amounts can
be used for dividend payments or funding capital
expenditures.
Table 1 continued

As long as you are conscientious in preparing your analysis and
recommendations, and have ample reasons,
evidence, and arguments to support your views, you shouldn’t
fret unduly about whether what you’ve
prepared is “the right answer” to the case. In case analysis there
is rarely just one right approach or set of
recommendations. Managing companies and crafting and
executing strategies are not such exact sciences
that there exists a single provably correct analysis and action
plan for each strategic situation. Of course,
some analyses and action plans are better than others; but, in
truth, there’s nearly always more than one good
way to analyze a situation and more than one good plan of
action. So, if you have carefully prepared the case
by either completing one of the Case-TUTOR case preparation
exercises or developing your own answers to
the assignment questions for the case, don’t lose confi dence in
the correctness of your work and judgment.
Participating in Class Discussion of a Case
Classroom discussions of cases are sharply different from
attending a lecture class. In a case class students
do most of the talking. The instructor’s role is to solicit student
participation, keep the discussion on track,
ask “Why?” often, offer alternative views, play the devil’s
advocate (if no students jump in to offer opposing
views), and otherwise lead the discussion. The students in the
class carry the burden for analyzing the
situation and for being prepared to present and defend their
diagnoses and recommendations. Expect a
classroom environment, therefore, that calls for your size-up of
the situation, your analysis, what actions
you would take, and why you would take them. Do not be
dismayed if, as the class discussion unfolds, some

insightful things are said by your fellow classmates that you did
not think of. It is normal for views and
analyses to differ and for the comments of others in the class to
expand your own thinking about the case.
As the old adage goes, “Two heads are better than one.” So it is
to be expected that the class as a whole will
do a more penetrating and searching job of case analysis than
will any one person working alone. This is
the power of group effort, and its virtues are that it will help
you see more analytical applications, let you
test your analyses and judgments against those of your peers,
and force you to wrestle with differences of
opinion and approaches.
To orient you to the classroom environment on the days a case
discussion is scheduled, we compiled the
following list of things to expect:
1. Expect the instructor to assume the role of extensive
questioner and listener.
2. Expect students to do most of the talking. The case method
enlists a maximum of individual participa–
tion in class discussion. It is not enough to be present as a silent
observer; if every student took this
approach, there would be no discussion. (Thus, expect a portion
of your grade to be based on your
participation in case discussions.)
3. Be prepared for the instructor to probe for reasons and
supporting analysis.
4. Expect and tolerate challenges to the views expressed. All
students have to be willing to submit their
conclusions for scrutiny and rebuttal. Each student needs to
learn to state his or her views without

fear of disapproval and to overcome the hesitation of speaking
out. Learning respect for the views
and approaches of others is an integral part of case analysis
exercises. But there are times when it
is OK to swim against the tide of majority opinion. In the
practice of management, there is always
room for originality and unorthodox approaches. So while
discussion of a case is a group process,
there is no compulsion for you or anyone else to cave in and
conform to group opinions and group
consensus.
5. Don’t be surprised if you change your mind about some
things as the discussion unfolds. Be alert to
how these changes affect your analysis and recommendations
(in the event you get called on).
6. Expect to learn a lot in class as the discussion of a case
progresses; furthermore, you will fi nd that
the cases build on one another—what you learn in one case
helps prepare you for the next case
discussion.
There are several things you can do on your own to be good and
look good as a participant in class
discussions:
Although you should do your own independent work and
independent thinking, don’t hesitate before (and
after) class to discuss the case with other students. In real life,
managers often discuss the company’s
problems and situation with other people to refi ne their own

thinking.
• In participating in the discussion, make a conscious effort to
contribute, rather than just talk. There
is a big difference between saying something that builds the
discussion and offering a long-winded,
off-the-cuff remark that leaves the class wondering what the
point was.
• Avoid the use of “I think,” “I believe,” and “I feel”; instead,
say, “My analysis shows —” and “The
company should do ______.because ______.” Always give
supporting reasons and evidence for your
views; then your instructor won't have to ask you “Why?” every
time you make a comment.
• In making your points, assume that everyone has read the case
and knows what it says; avoid reciting
and rehashing information in the case—instead, use the data and
information to explain your
assessment of the situation and to support your position.
• Bring the printouts of the work you’ve done on Case-TUTOR
or the notes you’ve prepared (usually
two or three pages’ worth) to class and rely on them extensively
when you speak. There’s no way
you can remember everything off the top of your head—
especially the results of your number
crunching. To reel off the numbers or to present all fi ve
reasons why, instead of one, you will need
good notes. When you have prepared thoughtful answers to the
study questions and use them as
the basis for your comments, everybody in the room will know
you are well prepared, and your
contribution to the case discussion will stand out.

Preparing a Written Case Analysis
Preparing a written case analysis is much like preparing a case
for class discussion, except that your analysis
must be more complete and put in report form. Unfortunately,
though, there is no ironclad procedure for
doing a written case analysis. All we can offer are some general
guidelines and words of wisdom—this
is because company situations and management problems are so
diverse that no one mechanical way to
approach a written case assignment always works.
Your instructor may assign you a specifi c topic around which
to prepare your written report. Or, alternatively,
you may be asked to do a comprehensive written case analysis,
where the expectation is that you will
(1) identify all the pertinent issues that management needs to
address, (2) perform whatever analysis and
evaluation is appropriate, and (3) propose an action plan and set
of recommendations addressing the issues
you have identifi ed. In going through the exercise of identify,
evaluate, and recommend, keep the following
pointers in mind.3
Identifi cation It is essential early on in your paper that you
provide a sharply focused diagnosis of
strategic issues and key problems and that you demonstrate a
good grasp of the company’s present situation.
Make sure you can identify the fi rm’s strategy (use the
concepts and tools in Chapters 1–8 as diagnostic aids)
and that you can pinpoint whatever strategy implementation
issues may exist (again, consult the material in
Chapters 9–11 for diagnostic help). Consult the key points we
have provided at the end of each chapter for

further diagnostic suggestions. Review the study questions for
the case on Case-TUTOR. Consider beginning
your paper with an overview of the company’s situation, its
strategy, and the signifi cant problems and issues
that confront management. State problems/issues as clearly and
precisely as you can. Unless it is necessary
to do so for emphasis, avoid recounting facts and history about
the company (assume your professor has
read the case and is familiar with the organization).
Analysis and Evaluation This is usually the hardest part of the
report. Analysis is hard work! Check out the
fi rm’s fi nancial ratios, its profi t margins and rates of return,
and its capital structure, and decide how strong
the fi rm is fi nancially. Table 1 contains a summary of various
fi nancial ratios and how they are calculated.
Use it to assist in your fi nancial diagnosis. Similarly, look at
marketing, production, managerial competence,
and other factors underlying the organization’s strategic
successes and failures. Decide whether the fi rm has
valuable resource strengths and competencies and, if so,
whether it is capitalizing on them.
Check to see if the fi rm’s strategy is producing satisfactory
results and determine the reasons why or why
not. Probe the nature and strength of the competitive forces
confronting the company. Decide whether and
why the fi rm’s competitive position is getting stronger or
weaker. Use the tools and concepts you have
learned about to perform whatever analysis and evaluation is
appropriate. Work through the case preparation
exercise on Case-TUTOR if one is available for the case you’ve
been assigned.

In writing your analysis and evaluation, bear in mind four
things:
1. You are obliged to offer analysis and evidence to back up
your conclusions. Do not rely on unsupported
opinions, over-generalizations, and platitudes as a substitute for
tight, logical argument backed up
with facts and fi gures.
2. If your analysis involves some important quantitative
calculations, use tables and charts to present
the calculations clearly and effi ciently. Don’t just tack the
exhibits on at the end of your report and
let the reader fi gure out what they mean and why they were
included. Instead, in the body of your
report cite some of the key numbers, highlight the conclusions
to be drawn from the exhibits, and
refer the reader to your charts and exhibits for more details.
3. Demonstrate that you have command of the strategic concepts
and analytical tools to which you have
been exposed. Use them in your report.
4. Your interpretation of the evidence should be reasonable and
objective. Be wary of preparing a
one-sided argument that omits all aspects not favorable to your
conclusions. Likewise, try not to
exaggerate or overdramatize. Endeavor to inject balance into
your analysis and to avoid emotional
rhetoric. Strike phrases such as “I think,” “I feel,” and “I
believe” when you edit your fi rst draft and
write in “My analysis shows,” instead.
Recommendations The fi nal section of the written case
analysis should consist of a set of defi nite
recommendations and a plan of action. Your set of

recommendations should address all of the problems/
issues you identifi ed and analyzed. If the recommendations
come as a surprise or do not follow logically
from the analysis, the effect is to weaken greatly your
suggestions of what to do. Obviously, your
recommendations for actions should offer a reasonable prospect
of success. High-risk, bet-the-company
recommendations should be made with caution. State how your
recommendations will solve the problems
you identifi ed. Be sure the company is fi nancially able to carry
out what you recommend; also check to see
if your recommendations are workable in terms of acceptance
by the persons involved, the organization’s
competence to implement them, and prevailing market and
environmental constraints. Try not to hedge or
weasel on the actions you believe should be taken.
By all means state your recommendations in suffi cient detail to
be meaningful—get down to some defi nite
nitty-gritty specifi cs. Avoid such unhelpful statements as “the
organization should do more planning” or
“the company should be more aggressive in marketing its
product.” For instance, if you determine that
“the fi rm should improve its market position,” then you need to
set forth exactly how you think this should
be done. Offer a defi nite agenda for action, stipulating a
timetable and sequence for initiating actions,
indicating priorities, and suggesting who should be responsible
for doing what.
In proposing an action plan, remember there is a great deal of
difference between, on the one hand, being

responsible for a decision that may be costly if it proves in error
and, on the other hand, casually suggesting
courses of action that might be taken when you do not have to
bear the responsibility for any of the
consequences. A good rule to follow in making your
recommendations is: Avoid recommending anything you
would not yourself be willing to do if you were in
management’s shoes. The importance of learning to develop
good managerial judgment is indicated by the fact that, even
though the same information and operating data
may be available to every manager or executive in an
organization, the quality of the judgments about what
the information means and which actions need to be taken does
vary from person to person.4
It goes without saying that your report should be well organized
and well written. Great ideas amount to
little unless others can be convinced of their merit—this takes
tight logic, the presentation of convincing
evidence, and persuasively written arguments.
Preparing an Oral Presentation
During the course of your business career it is very likely that
you will be called upon to prepare and give a
number of oral presentations. For this reason, it is common in
courses of this nature to assign cases for oral
presentation to the whole class. Such assignments give you an
opportunity to hone your presentation skills.
The preparation of an oral presentation has much in common
with that of a written case analysis. Both
require identifi cation of the strategic issues and problems
confronting the company, analysis of industry
conditions and the company’s situation, and the development of
a thorough, well-thought out action plan.
The substance of your analysis and quality of your

recommendations in an oral presentation should be no
different than in a written report. As with a written assignment,
you’ll need to demonstrate command of the
relevant strategic concepts and tools of analysis and your
recommendations should contain suffi cient detail
to provide clear direction for management. The main difference
between an oral presentation and a written
case is in the delivery format. Oral presentations rely
principally on verbalizing your diagnosis, analysis,
and recommendations and visually enhancing and supporting
your oral discussion with colorful, snappy
slides (usually created on Microsoft’s PowerPoint software).
Typically, oral presentations involve group assignments. Your
instructor will provide the details of the
assignment—how work should be delegated among the group
members and how the presentation should
be conducted. Some instructors prefer that presentations begin
with issue identifi cation, followed by
analysis of the industry and company situation analysis, and
conclude with a recommended action plan to
improve company performance. Other instructors prefer that the
presenters assume that the class has a good
understanding of the external industry environment and the
company’s competitive position and expect
the presentation to be strongly focused on the group’s
recommended action plan and supporting analysis
and arguments. The latter approach requires cutting straight to
the heart of the case and supporting each
recommendation with detailed analysis and persuasive
reasoning. Still other instructors may give you the
latitude to structure your presentation however you and your
group members see fi t.

Regardless of the style preferred by your instructor, you should
take great care in preparing for the
presentation. A good set of slides with good content and good
visual appeal is essential to a fi rst-rate
presentation. Take some care to choose a nice slide design, font
size and style, and color scheme. We
suggest including slides covering each of the following areas:
• An opening slide covering the “title” of the presentation and
names of the presenters.
• A slide showing an outline of the presentation (perhaps with
presenters’ names by each topic).
• One or more slides showing the key problems and strategic
issues that management needs to
address.
• A series of slides covering your analysis of the company’s
situation.
• A series of slides containing your recommendations and the
supporting arguments and reasoning
for each recommendation—one slide for each recommendation
and the associated reasoning
has a lot of merit.
You and your team members should carefully plan and rehearse
your slide show to maximize impact and
minimize distractions. The slide show should include all of the
pizzazz necessary to garner the attention of
the audience, but not so much that it distracts from the content
of what group members are saying to the
class. You should remember that the role of slides is to help you
communicate your points to the audience.
Too many graphics, images, colors, and transitions may divert

the audience’s attention from what is being
said or disrupt the fl ow of the presentation. Keep in mind that
visually dazzling slides rarely hide a shallow
or superfi cial or otherwise fl awed case analysis from a
perceptive audience. Most instructors will tell you
that fi rst-rate slides will defi nitely enhance a well-delivered
presentation but that impressive visual aids, if
accompanied by weak analysis and poor oral delivery, still adds
up to a substandard presentation.
Researching Companies and Industries via the Internet
and Online Data Services
Very likely, there will be occasions when you need to get
additional information about some of the assigned
cases, perhaps because your instructor has asked you to do
further research on the industry or company or
because you are simply curious about what has happened to the
company since the case was written. These
days it is relatively easy to run down recent industry
developments and to fi nd out whether a company’s
strategic and fi nancial situation has improved, deteriorated, or
changed little since the conclusion of the
case. The amount of information about companies and industries
available on the Internet and through
online data services is formidable and expanding rapidly.
It is a fairly simple matter to go to company Web sites, click on
the investor information offerings and
press release fi les, and get quickly to useful information. Most
company Web sites allow you to view or
print the company’s quarterly and annual reports, its 10K and
10Q fi lings with the Securities and Exchange
Commission, and various company press releases of interest.
Frequently, a company’s Web site will also
provide information about its mission and vision statements,
values statements, codes of ethics, and

strategy information, as well as charts of the company’s stock
price. The company’s recent press releases
typically contain reliable information about what of interest has
been going on—new product introductions,
recent alliances and partnership agreements, recent acquisitions,
summaries of the latest fi nancial results,
tidbits about the company’s strategy, guidance about future
revenues and earnings, and other late-breaking
company developments. Some company Web pages also include
links to the home pages of industry trade
associations where you can fi nd information about industry
size, growth, recent industry news, statistical
trends, and future outlook. Thus, an early step in researching a
company on the Internet is always to go to
its Web site and see what’s available.
Online Data Services
Lexis-Nexis, Bloomberg Financial News Services, and other on-
line subscription services available in many
university libraries provide access to a wide array of business
reference material. For example, the web-
based Lexis-Nexis Academic Universe contains business news
articles from general news sources, business
publications, and industry trade publications. Broadcast
transcripts from fi nancial news programs are also
available through Lexis-Nexis, as are full-text 10-Ks, 10-Qs,
annual reports, and company profi les for more
than 11,000 U.S. and international companies. Your business
librarian should be able to direct you to the
resources available through your library that will aid you in
your research.

Public and Subscription Websites with Good Information
Plainly, you can use a search engine such as Google or Yahoo!
or MSN to fi nd the latest news on a company
or articles written by reporters that have appeared in the
business media. These can be very valuable in
running down information about recent company developments.
However, keep in mind that the information
retrieved by a search engine is “unfi ltered” and may include
sources that are not reliable or that contain
inaccurate or misleading information. Be wary of information
provided by authors who are unaffi liated with
reputable organizations or publications and articles that were
published in off-beat sources or on Web sites
with an agenda. Be especially careful in relying on the accuracy
of information you fi nd posted on various
bulletin boards. Articles covering a company or issue should be
copyrighted or published by a reputable
source. If you are turning in a paper containing information
gathered from the Internet, you should cite your
sources (providing the Internet address and date visited); it is
also wise to print Web pages for your research
fi le (some Web pages are updated frequently).
The Wall Street Journal, Business Week, Forbes, Barron’s, and
Fortune are all good sources of articles on
companies. The Wall Street Journal Interactive Edition contains
the same information that is available daily
in its print version of the paper, but also maintains a searchable
database of all Wall Street Journal articles
published during the past few years. Fortune and Business Week
also make the content of the most current
issue available online to subscribers as well as provide archives
sections that allow you to search for articles
related to a particular keyword that were published during the

past few years.
The following Websites are particularly good locations for
company and industry information:
Securities and Exchange Commission EDGAR
database (contains company 10-Ks, 10-Qs, etc.)
http://www.sec.gov/cgi-bin/srch-edgar
CNN Money http://money.cnn.com
Hoover’s Online http://hoovers.com
The Wall Street Journal Interactive Edition http://www.wsj.com
Business Week http://www.businessweek.com
Fortune http://www.fortune.com
MSN Money Central http://moneycentral.msn.com
Yahoo! Finance http://fi nance.yahoo.com/
Some of these Internet sources require subscriptions in order to
access their entire databases.
Learning Comes Quickly With a modest investment of time,
you will learn how to use Internet sources
and search engines to run down information on companies and
industries quickly and effi ciently. And it
is a skill that will serve you well into the future. Once you
become familiar with the data available at the
different Web sites mentioned above and with using a search
engine, you will know where to go to look for
the particular information that you want. Search engines nearly
always turn up too many information sources
that match your request rather than two few; the trick is to learn
to zero in on those most relevant to what you

are looking for. Like most things, once you get a little
experience under your belt on how to do company and
industry research on the Internet, you will fi nd that you can
readily fi nd the information you need.
Th e Ten Commandments of Case Analysis
As a way of summarizing our suggestions about how to
approach the task of case analysis, we have compiled
what we like to call “The Ten Commandments of Case
Analysis.” They are shown in Table 2. If you observe
all or even most of these commandments faithfully as you
prepare a case either for class discussion or for a
written report, your chances of doing a good job on the assigned
cases will be much improved. Hang in there,
give it your best shot, and have some fun exploring what the
real world of strategic management is all about.
Table 2
The Ten Commandments of Case Analysis
To be observed in written reports and oral presentations, and
while participating in class discussions.
1. Go through the case twice, once for a quick overview and
once to gain full command of the facts;
then take care to explore the information in every one of the
case exhibits.
2. Make a complete list of the problems and issues that the
company’s management needs to
address.
3. Be thorough in your analysis of the company’s situation
(either work through the case preparation
exercises on Case-TUTOR or make a minimum of 1 to 2 pages

of notes detailing your diagnosis).
4. Look for opportunities to apply the concepts and analytical
tools in the text chapters—all of the
cases in the book have very defi nite ties to the material in one
or more of the text chapters!!!!
5. Do enough number crunching to discover the story told by the
data presented in the case. (To help
you comply with this commandment, consult Table 1 in this
section to guide your probing of a
company’s fi nancial condition and fi nancial performance.)
6. Support any and all off-the-cuff opinions with well-reasoned
arguments and numerical evidence;
don’t stop until you can purge “I think” and “I feel” from your
assessment and, instead, are able
to rely completely on “My analysis shows.”
7. Prioritize your recommendations and make sure they can be
carried out in an acceptable time
frame with the available resources.
8. Support each recommendation with persuasive argument and
reasons as to why it makes sense
and should result in improved company performance.
9. Review your recommended action plan to see if it addresses
all of the problems and issues you
identifi ed—any set of recommendations that does not address
all of the issues and problems you
identifi ed is incomplete and insuffi cient.
10. Avoid recommending any course of action that could have
disastrous consequences if it doesn’t
work out as planned; therefore, be as alert to the downside risks

of your recommendations as you
are to their upside potential and appeal.
1 Charles I. Gragg, “Because Wisdom Can’t Be Told,” in The
Case Method at the Harvard Business School,
ed. M. P. McNair (New York: McGraw-Hill, 1954), p. 11.
2 Ibid., pp. 12–14; and D. R. Schoen and Philip A. Sprague,
“What Is the Case Method?” in The Case
Method at the Harvard Business School, ed. M. P. McNair, pp.
78–79.
3 For some additional ideas and viewpoints, you may wish to
consult Thomas J. Raymond, “Written
Analysis of Cases,” in The Case Method at the Harvard
Business School, ed. M. P. McNair, pp. 139–63.
Raymond’s article includes an actual case, a sample analysis of
the case, and a sample of a student’s
written report on the case.
4 Gragg, “Because Wisdom Can’t Be Told,” p. 10.
Endnotes

FEBRUARY 24, 2013. Don Thompson looked over the 2012 Annual .docx

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