May 8, 2015MemorandumT0 FromDate ReWAC Grup.docx

May 8, 2015
Memorandum
T0:
From:
Date:
Re: WAC: Grupo Elektra
DESCRIPTION RATING
Confidential
CONTENT:
Excellent
Good
Fair
Poor
Competition (Strength Analysis)
Industry Drivers (Change)
Key Success Factors
SWOT Analysis

Financial Analysis
WRITTEN PRESENTATION:
Organization -
Creativity
Narrative Quality:
OVERALL SCORE/ Points Possible = 20
*Important: The key question in Rodriguez’s mind can be found
at the bottom of the 1st page of the case, and the 1st paragraph

of page two…the classic strategy question: “where do we go
now”.
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R E V : J U N E 2 7 , 2 0 0 3
_____________________________________________________
_____________________________________________________
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Senior Researcher Luiz Felipe Monteiro of the Harvard
Business School Latin America Research Center (LARC)
prepared this case under the
supervision of Professor David Arnold and Gustavo Herrero,
Excecutive Director of the LARC. HBS cases are developed
solely as the basis for
class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of
effective or ineffective
management.
Copyright © 2001 President and Fellows of Harvard College.
To order copies or request permission to reproduce materials,
call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163,
or go to http://www.hbsp.harvard.edu. No part of this
publication may be
reproduced, stored in a retrieval system, used in a spreadsheet,
or transmitted in any form or by any means—electronic,

mechanical,
photocopying, recording, or otherwise—without the permission
of Harvard Business School.
D A V I D A R N O L D ,
G U S T A V O H E R R E R O ,
L U I Z F E L I P E M O N T E I R O
Grupo Elektra
We will continuously seek acquisition opportunities that
provide upside potential for Grupo Elektra1 and
our shareholders. We will continue to add new brands, products
and services for distribution through our store
network that fit our markets and have the potential to contribute
to the bottom line. Most important, I look for
continued profitable growth.
— Javier Sarro, Elektra’s CEO, Annual Report 2000
Scuba diving 50-feet deep in the turquoise Caribbean Sea in
Cancun, Mexico, Alvaro Rodriguez
Arregui, the CFO of Elektra, wondered about which path he
should take. Spectacular coral
formations, colorful fish, caves, marine turtles, and unique reefs
surrounded him yet he doubted that
his air bottle would be sufficient to explore so many different
options. This situation, for a second,
made him forget the peaceful and silent underwater world and
remember that a couple of hours
later, above on the surface, he would face another crossroads. It

was October 2001, and Rodriguez
(HBS MBA ’95) knew that in this year’s Annual Convention in
Cancun, he and the top management
of Elektra would have the difficult task of choosing, among
several promising opportunities, the
options that would promote and maintain sustainable and
profitable growth for the company.
Rodriguez reflected that:
We have been growing steadily in the last decade. In 1990, we
just had the Elektra chain
format and did business only in Mexico, through 225 stores. In
2000, our sales reached US$1.53
billion, we had 4 different chains—Elektra, Salinas y Rocha,
Bodega de Remates and The One--
almost 1,000 stores, and we were in 6 different countries
In 2001, this 51 year-old family-owned company was the largest
specialty retailer in Latin
America, with stores in Mexico, Guatemala, El Salvador,
Dominican Republic, Honduras and Peru.
See Exhibits 1 and 2 for information on these countries. With
over 65% of its sales being made on
credit, Elektra was also the largest consumer finance company
in Latin America, with 2 million active
credit accounts. In addition to its core retailing business, the
firm offered its clients other services
including wire transfer services and savings accounts. The
main question in Rodriguez’s mind was
how far the company could stretch its business model:
1 Herein after referred to as Elektra.

502-039 Grupo Elektra
2
In the early 1990s, we basically offered hard goods and credit.
Then, we introduced
international money transfers, and today we are the largest
Western Union distributor in the
world. Then, we started with the clothing business, initiated our
international expansion,
acquired a new chain of stores and provided our customers with
other services such as
domestic money transfers, extended warranties and savings
accounts. But, how far does the
Elektra model go? Our resources are limited and we are entering
a period of slowdown: where
do we go now?
Tradition with Vision
Elektra was founded in 1950 by Hugo Salinas Rocha, the
grandfather of Ricardo Salinas Pliego,
Elektra’s chairman. Elektra was the first Mexican manufacturer
of TV sets and during its first years
the company sold its products directly from its manufacturing
facilities to end consumers through
door-to-door vendors.
Elektra’s credit program had been initiated as early as 1954, and
three years later the first store
was inaugurated. During the following decades the company
experienced alternating periods of
marginal growth and moments of extreme difficulties. In 1976,
after the first devaluation of the peso
in 22 years, Elektra had to change its sales policy to cash only.
In 1982, Elektra filed for bankruptcy

protection (equivalent to Chapter XI in the United States).
The retirement of Hugo Salinas in 1987 and the appointment of
his grandson Ricardo Salinas as
Elektra’s new CEO was a turning point in the company’s
history. After a couple of years heading the
company, Ricardo realized that Elektra needed to be managed
by a professional team. Sarro recalled:
Ricardo was very conscious that the company had to get out of
the family trap. His first
major move in this direction was hiring Pedro Padilla, who was
only 24 at that time, in 1989.
Ricardo prepared him to be the new president of Elektra,
culminating in his appointment as
the company’s CEO in 1993. Ricardo knew that he himself
would add more value by being the
chairman, and giving the management of Elektra to a group of
talented and competent
professional managers.
See Exhibit 3 for the Biographical data on Elektra’s main
officers
The early 1990s saw an unparalleled growth of Elektra. The
company started a new credit
program (Credifacil) and created Dinero en Minutos, money
transfer service in partnership with
Western Union2. In 1995, Elektra acquired Hecali, a clothing
retailer, and increased its distribution
network to more than 500 stores all over Mexico. Elektra also
introduced a new set of services: Dinero
Express (domestic wire transfer), Milenia (extended warranty
program), Fotofacil (photo products and
processing services) and Guardadito (savings accounts). See
Exhibit 4 for a list of Elektra’s services.

The organizational consequences of this diversification were
reflected in Javier Sarro’s description
of Elektra in 2001:
I see two cultures co-existing in Elektra: on the one hand, we
have the traditional retailer
mindset, results-oriented, tough culture. On the other, in the last
decade there has been a
renovation in the management of the company and we have
forged a group of young
managers with a strategic vision and creative ways of managing
this company.
2 Credifacil translates as “Easy Credit,” and Dinero en Minutos
as “Money in Minutes.”
Grupo Elektra 502-039
3
The Best Defense Is Attack
In 1996, an aggressive competitive move prompted Elektra to
start its international expansion. The
Dutch-owned chain La Curacao, which had already done
business in Latin America for more than 10
years and had 400 stores in the region, decided to enter the
Mexican market, opening 20 stores in the
southeast of Mexico.
La Curacao belonged to Ceteco Holding NV, had a format
similar to the Elektra chain, and also

made a significant portion of its sales on credit. Feeling
threatened in its home market, Elektra
decided to attack the competition abroad. Filiberto Jimenez,
Elektra’s Store Operations General
Director, then assistant to the company’s CEO, was sent to El
Salvador to benchmark the competition,
establish local partnerships, and look for potential locations
where Elektra’s stores could be built.
I was only 25, recently married and didn’t know much about
store operations.
Nevertheless, the company decided that I should live in Central
America and prepare the
business plan for the international expansion. We decided to
focus on Guatemala first, but at
the time we judged that the risk of kidnapping was too high
there, and so I actually moved to
live in El Salvador in January 1997. I traveled extensively in
Central and South America and it
was not hard to realize that La Curacao was creaming the
market. They were the kings of
what was virtually a monopoly, enjoying extremely high
margins due to the lack of
competition. It became clear to us that if we cut-off its cash
flow in those countries, we would
force La Curacao to refocus its business and get out of Mexico.
In April 1997, the first Elektra store abroad was opened in
Guatemala. In that same year, 43 other
stores were inaugurated in El Salvador, Guatemala, the
Dominican Republic and Honduras. The
following year, Elektra decided to enter the Peruvian market,
opening 20 stores in that country.
Filiberto commented:
All our stores abroad were green fields; we started everything

from scratch. For that purpose, I
benefited from the help of a group of 15-20 of Elektra’s
Mexican managers. The only local
partnerships we formed were with local business people of
influence, who could represent us in
dealing with local governments and other authorities. Working
with influential local people is
essential to doing business in this part of the world.
Elektra entered these markets with the same margin levels it had
in Mexico, and as a result its
prices were roughly 20% lower than those of La Curacao. “The
customers’ reaction could not have
been better for Elektra. They simply became mad at La Curacao
because they realized they had been
exploited for years,” declared Filiberto.
New Store Chains
In parallel with the international expansion, Elektra continued
to grow the number of its stores in
Mexico, and also started to operate new store formats. In 1995,
Elektra created Bodega de Remates, a
channel to retail refurbished and repossessed goods and
discontinued models, targeted at low-
income customers of class E of the Mexican population. This
new format enabled the company to
compete with regional players without damaging the Elektra
chain’s brand whose target customers
belonged to classes C and D. See Exhibits 5 and 6 for a
description of the socioeconomic levels in
Mexico.
In 1999, Elektra acquired the Salinas y Rocha stores, a furniture
and home appliances retail chain
founded in 1906 by the great grandfather of Ricardo Salinas and

one of his cousins. Salinas y Rocha
4
had a brand with a very strong national recognition, and was
targeted at higher income customers of
classes C+ and B. In that same year, Elektra decided to
transform the old Hecali stores into a new
chain of clothing stores called The One. The US$6 billion
clothing market in Mexico was very
fragmented and Elektra considered that The One could suit the
lifestyle of the majority of the
Mexican people. See Exhibits 7 and 8 for detailed information
on each store format.
Elektra in Early 2001
The year 2000 was the best ever in Elektra’s history. Grupo
Elektra, comprising Elektra, Bodega de
Remates, Salinas y Rocha and The One chain, posted sales of
US$1.53 billion and an EBITDA of
US$244 million, representing a growth of 15% and 16%,
respectively, over the previous year. See
Exhibits 9, 10, and 11 for Elektra’s financial performance.
Throughout the 1990s, the number of stores rocketed both in
Mexico and abroad, and both the
volume and the range of financial services grew significantly.
See Exhibit 12. With the four different
chains, Elektra estimated that it covered 87% of the Mexican
population.

Elektra had approximately 2 million active credit accounts, and
a database of more than 4 million
customers. Alvaro Rodriguez commented:
Our consumer credit portfolio is larger, in terms of number of
customers, than that of any
bank in Mexico. We have 2 million active customers who go
every week to our stores to pay
their installments. Citibank tried to provide consumer credit to
the C and D socioeconomic
segment and has gotten only 30,000 accounts. In fact,
investment analysts often have trouble
categorizing us, and are unsure whether to rank us against a
retailing multiple benchmark, or
that of a financial services company. Our wire transfer
businesses are also huge. We transfer
US$700 million a year with Dinero en Minutos and US$200
million with Dinero Express. We also
made an agreement with Banco Serfin, a subsidiary of Banco
Central Hispano from Spain, to
offer savings accounts in our stores, which we brand
Guardadito. This requires a minimum
deposit of only two dollars, with no opening fee, and at the end
of 2000, we had 1.5 million
accounts.
Credifacil
In 2001, roughly 65% of all sales of the Elektra group were on
credit. See Exhibit 13 and 14 for the
breakdown of credit and cash sales in each chain and in
Elektra’s subsidiaries abroad. The typical
applicant for Elektra credit did not have access to consumer
credit from the traditional financial
institutions. Also, since there was no credit bureau in Mexico
rating an individual’s creditworthiness,

Elektra had to develop its own credit approval process and its
own database.
The process started when a customer asked for the credit price
of a product. The salesperson
invited the customer to sit down, and used the company’s
proprietary ADN software to show the
customer the repayment schedule. The interest rate charged was
a fixed rate determined at the time
of the purchase. In Mexico, the Consumer Protection Act did
not impose a ceiling on the interest rate
charged by merchants, and did not require disclosure of the
effective interest rate charged. In October
2001, flat interest rates charged by Elektra were 42.45% per
year. Mario Gordillo, Elektra’s Financial
Services Head, explained:
5
Our customers are not concerned about the interest rates they
are paying. All they want to
know is the amount of the weekly installment. If they think they
can afford it, they buy the
product. Many people say that our interest rates are high. In
fact, the rates are high but lower
than those of many banks. Besides, it is important to bear in
mind that providing this type of
credit involves a very expensive operation.
The customer having decided for a specific term, he or she
filled in a credit application form with
the corresponding personal information, and also nominated a

guarantor. Then, in no more than 24
hours, a home visit by one of the store’s portfolio managers was
scheduled.
The next day, early in the morning, one of the 3,000 Elektra’s
portfolio managers (PMs) would ride
a motorcycle to visit an average of 30 customers and check the
information provided by them. If the
credit was approved, a refundable down payment of no more
than 5% of the case price was paid, and
the client could take possession of the product immediately. As
described by Rodriguez:
Elektra’s customers do not live in fancy neighborhoods, but
rather in poor areas where
access is quite complicated. The first challenge for our PMs is
to find out where the customer
actually lives. Here in Mexico we have hundreds of streets
called Reforma, for instance, and
there is no reliable zip code. Indeed, in many cases, there is no
address, and the customer fills
out Domicilio Conocido on the form3. So the first thing our
PMs do is draw a map of the address
of each customer, which turns out to be valuable information.
We reach certain streets that not
even the mail service gets to!
Elektra developed a unique internal credit rating system, as
described by Mario Gordillo:
The system is both very simple and at the same time very
sophisticated. The PM visiting
the customer’s home will try to build up a picture of the cash
flow of the household, trying to
identify the sources of income of the customer and family and
also their expenses. Even if the

customer does not have a formal statement of income, we have
developed over the years our
own income estimates for several jobs, such as a taxi driver or a
taco salesman. This is the
quantitative part, but what really makes the difference is the
subjective assessment of our
employees. They will pay attention to small details such as
whether the customer’s home is
clean; how many appliances or electronic items the family has
in the home; whether there
seems to be a stable family set-up, and so on. Our PM will also
knock on the doors of the
customer neighbors to get some customer references. Finally,
the PM will visit a couple of
stores in the neighborhood, such as bakeries and grocery shops,
to get more information on the
prospect customer.
The maximum authorized loan amounts were approximately
US$800 and US$1150 for a first time
buyer and a repeat customer respectively. In both cases, the
weekly installment could not exceed 20%
of the household income. A repeat customer did not have to
make a down payment, but was still
visited by the PM in what the company described as a “courtesy
visit,” conducted after the sale had
been confirmed. See Exhibit 15 for the repeat purchase rates of
the 2000 Elektra credit customer base.
In Mexico, at the end of 2000, the average loan was
approximately US$251, with an average term of
44 weeks. The approval rate on credit applications was
approximately 50%. Elektra had a credit
portfolio of US$446 million. See Exhibit 16.
The same PM who visited the customer authorized the credit,
and was also responsible for

collection if the credit was past due. “Each employee should be
accountable for the whole process
3 Domicilio Conocido translates as “known residence,” i.e., if
the PM arrives in the neighborhood and asks around, he or she
is
directed to the home of the customer.
6
and be compensated according to his or her performance,”
explained Gordillo. The compensation of
PMs was 10% fixed and 90% variable, depending on the
performance of their portfolio. Each PM
typically handled 650 accounts, and if more than 220 accounts
were past due for more than 2 weeks,
the ADN system automatically started to decrease the number of
active accounts of the respective
PM. If the PM’s accounts started to be 13 weeks or more late, or
the PM’s compensation had declined
to the minimum wage level because of poor payment
performance by his or her accounts, then the
system automatically fired the PM. Gordillo commented, “We
have very rigid controls, and if the PM
is not performing well, there will not be any excuse. The
“system” will fire him or her.” Rodriguez
added:
Giving loans is very easy; anyone with available funds can do
it. It is the collection that is
difficult, and I think this ability is in the blood of our

employees. They can “smell” whether or
not a customer will pay a loan. . . . The secret is in the way you
talk to people, the things you
say and the questions you ask.
Elektra’s credit process proved to be consistently profitable and
efficient. Customers with past-due
credits paid a penalty fee of 0.47% per day, but in 2000, its
delinquency rate was only 2.7%, compared
to the average of 15% of banks in Mexico. See Exhibit 16.
Synergies with Other Salinas’s Companies
In 2001, Grupo Elektra was part of an even larger concern: the
Salinas Group. Ricardo Salinas,
Elektra’s chairman, had over the years acquired and launched
several new companies. When Pedro
Padilla left Elektra’s presidency in 2000, it was to become the
COO of the Salinas Group, and his
replacement, Javier Sarro, was the former head of Elektra’s
Financial Services.
Group Salinas consisted of five companies: Elektra (commerce
and credit); Todito.com (Internet
portal); [email protected] (two-way pager); Unefon (mobile
telephone company), Telecosmo (broad band
internet connection) and TV Azteca (television).
The management of Elektra believed that TV Azteca was a
major factor in Elektra’s success. It was
one of only two TV chains with nationwide coverage in Mexico,
the other being Televisa. Elektra
advertised only on TV Azteca, and the channel did not carry
advertising for any of Elektra’s
competitors. “We belong to the same family and this helps a
lot,” commented Rodriguez. In 1996,

when TV Azteca was a new entrant into the Mexican TV market
with only a few customers, TV
Azteca and Elektra entered into a 10-year agreement through
which the latter would be entitled to air
5,200 minutes a year at a cost of US$1.5 million. According to
Mario Gonzalez, VP of Marketing and
Channel:
We are the largest advertiser in Mexico, in terms of airtime,
with roughly 14 minutes every
day of the year. Our partnership with TV Azteca has helped us
be very effective with our
advertising efforts. Having the same controlling shareholders
allows us to work better
together.
Elektra had a media budget of US$27 million per year and
developed approximately 200 TV ads
annually, most of them highlighting the brand values, the credit
terms, and sometimes the cash price.
See Exhibit 17 for some samples of printed advertisements.
Since October 2001, TV Azteca was able
to air different ads for different regions in Mexico. “We don’t
have nationwide competition but local
competition from more than 7,000 moms-and-pops stores. That
is why it’s so important to have this
regional advertising at TV Azteca,” explained Mario Gonzalez.
7
Crises and Opportunities

During 2001, Elektra’s executive committee had been analyzing
new growth opportunities. While,
on the one hand, the company acknowledged that the economic
scenario was not favorable, it also
believed that this was a moment of unique opportunities for
consolidation. Javier Sarro commented:
We have plenty of experience with crises, and in general we
have done extremely well. In
1995, after the Tequila crisis, we were able to open 86 new
stores and increase our EBITDA by
30% year-on-year. Then in 1998, following the Russian and
Brazilian crises, Elektra again
increased its revenues and opened 139 stores. In 2000, despite
all political uncertainty, we had
an exceptional performance. We are the 800-pound gorilla in
this market, so I think that in the
next 18 months, we’ll have a lot of acquisition opportunities. In
this market, the strong get
stronger and the weak get weaker. I believe that in 2001 we are
stronger than ever.
Elektra’s top management was aware, though, that the company
had expanded on several new
fronts in the last couple of years and that it was going to be
very challenging to continue to grow in
all of them. Some investment analysts even considered that
“Elektra might have been overstretching
itself by entering into new lines of businesses that may add only
marginally to Elektra’s bottom
line.”4
The One
Rodriguez, as Elektra’s CFO, knew better than anyone else that
the company had to be very clear

with its investors regarding each of its business lines. One of
his major concerns was in relation to the
clothing chain The One.
The idea behind The One was: “we are a basic needs retailer so
let’s explore the clothing
business.” Yet there is a lot of fashion in this business, and we
might not have fashion in our
DNA. We have had some problems with the supply chain, and
have not always managed to
turn lines over quickly enough, or to maintain the right stock
levels in all colors and sizes.
Today, I wonder if selling clothes is really fulfilling a basic
need. There is a lot to be done to
improve the performance of The One and we are working on it,
changing the inventory
management, relocating a lot of the stores to better sites, and
analyzing the critical mass we
need to make The One profitable.
North or Latin Americans?
In 2001, Elektra had 102 stores abroad, and the main goal of its
international expansion had been
achieved: La Curacao went bankrupt and had to sell its
operations to local players in each of the Latin
American countries in which it operated. In July 2001, Elektra
acquired the 35 stores that La Curacao
had in Mexico for US$5.4 million.
Yet, the performance of the international subsidiaries in
financial rather than strategic terms was
not so obviously successful. Indeed, Elektra was facing serious
problems in some countries. See
Exhibit 18. Rodriguez explained:

4 Meredith Jensen, “Elektra—Margin Pressures to Weigh on
Market Leader,” J.P. Morgan Securities Inc. Equity Research,
24 September 2001.
8
We thought we could replicate our model in other countries. In
some of them, it worked
well but in others, such as El Salvador and the Dominican
Republic, the model simply did not
work. There are many subtleties that make each country
different. For instance, in the
Dominican Republic, you can’t charge a penalty fee; customers
simply don’t accept it. Thus, we
decided to work the other way round: we told our customers that
if they pay on time they
would get a bonus. At the end of the day, economically
speaking, it’s the same thing but it
takes time until you learn how to deal with each country’s
idiosyncrasies. In contrast, in Peru,
we‘ve been extremely successful. La Curacao and Carsa of
Peru, which were our competitors,
both went bankrupt and now we are the only one in the market.
In Honduras and Guatemala,
we are doing OK.
Entering the U.S market was something that the management of
Elektra had spent a lot of time
discussing. Elektra’s estimates were compelling: 75% of the
U.S. Hispanic population lived in 15
cities; Los Angeles was the second largest city in number of

Mexicans after Mexico City; the U.S.
Hispanics’ spending was equivalent to 80% of Mexico’s GNP.
Besides, according to the U.S. Census
of 2000, the Hispanic population living in the United States
increased by more than 50% from 1990 to
2000, reaching 35 million people.5 Elektra also expected that
the U.S Hispanic consumer spending
would grow significantly in the following years. See Exhibit 19.
Mexicans were the largest Hispanic-
origin group, accounting for 59% of the U.S. Hispanic
population.6 Elektra also believed it could
replicate in the United States the successful association with TV
Azteca, using its TV sister company
to reach the Hispanic population. Sarro commented: “Indeed,
upon analyzing our international
expansion, the first question we ask ourselves is whether we are
a Latin or a North American
company. I think we’re a NAFTA company.”
Operating in the United States, though, was a completely
different game, acknowledged Alvaro:
“We are in a low volume-high margin market while in the U.S.
we would have to be high volume-
low margin.” Filiberto Jimenez who was responsible for the
launching of all of Elektra’s stores
abroad also had concerns about a possible expansion to the
United States:
I’m very apprehensive about the U.S regulations. It’s something
that we don’t know well
enough. If we are to enter the U.S. market, it should be through
a joint venture or an
acquisition and I want to spend some time as an assistant of the
CEO of the company learning
how the market works. I don’t want to be sued and have Elektra
liable for millions of dollars

because one customer fell down in my store and broke a leg. In
Latin America, we know how
things work and how to fix them when something goes wrong.
It’s also important to bear in
mind that operating in the United States would require different
capabilities both in terms of
operation and meeting the customers’ needs. In addition, in
Mexico we have bargaining power
with our suppliers, which would not be true in the United
States. But, all the same, it’s
definitely right to say that we have many opportunities in the
United States. For instance, I
love the idea of entering Puerto Rico: it’s the typical Latin
American country, yet it is part of
the United States. I think it would be the perfect market for us.
Offering financial services to the U.S. Hispanics was also an
option. According to a market survey
done by Gallup, Telmex and Fundacion Solidariedad Mexicano
Americano in July 2001, 50.4% of the
U.S. Hispanics had never used any type of banking services and
56.8% had never had access to
5 U.S. Census Bureau. Available through
http://www.census.gov/statab/www/part1a.html (15 October
2001.)
6 U.S. Census Bureau. Available through
http://www.census.gov/mso/www/rsf/hisorig/sld024.htm (15
October 2001.)

9
banking credit.7 According to the same survey, only 41.7% of
the U.S. Hispanics had a bank account
and 7.4% a credit card.8 Rodriguez commented:
Most Hispanics are Mexicans and Central Americans. We know
them better than anyone
else and they are very familiar with our brands. They seldom
have access to credit in the US
and we would feel comfortable in providing them credit in the
US. It’s a huge market with a
lot of upside potential.
Specialty (Finance) Retailer
One of the most successful businesses of Elektra had been
financial services. Elektra’s
management considered that there was a huge avenue for
providing new financial services such as
mortgages, loans for used car purchase or home improvement
projects, and even personal loans.
Elektra was also considering using its retail network to install
ATMs, a business that was not
developed in Mexico. According to Alvaro:
We know that our financial services business is already a big
business but we think it can
grow even more. We have a database with 4,000,000 credit
accounts. We could be the provider
of every type of financial services to this segment of the
population. We understand them and
they feel at ease dealing with us. That does not happen when
they go to a bank.
In 2001, Elektra created a new business unit for the credit

business called Credimax. This unit
consolidated the credit operations of Elektra, Salinas y Rocha,
The One and Bodegas de Remates.
Elektra expected a huge growth in this business based on the
fact that, according to the company’s
estimates, the penetration of consumer loans in Mexico was
only 1.5% of GDP while in the United
States it reached 16%. The management of Elektra was also
analyzing the possibility of transforming
Credimax into an autonomous company or even into a bank.
Sarro commented:
To a certain extent, we could be considered a bank even though
we don’t have a license. We
have credit operations, wire transfer services and even savings
accounts. The only difference is
that today we still have to outsource the back end process and
we cannot tap into the interbank
financial circuit.
See Exhibits 20 and 21.
With all those questions in mind, Alvaro could hardly realize
that he had spent more than 20
minutes diving. It was time to get back to the surface and as
Alvaro took off his mask he looked for
inspiration in that paradisiacal landscape.
Where do we go now? Where should the company allocate its
resources? Mexico, Latin
America, the United States? In what kind of business: hard
goods, clothing, financial services?
These are tough questions that we have to answer now. I’m very
optimistic but I don’t
underestimate the challenges we have ahead. We’re pushing a
lot of things through the same

window. But, Alvaro wondered, how much is enough?
7 Gallup, Telmex and Fundacion Solidariedad Mexicano
America, “Estudio de los Habitos de Consumo de la poblacion
mexicana en los Estados Unidos,” July 2001, p. 18.
8 Ibid, p. 19.
10
Exhibit 1 Map of Latin America
Source: Elektra.
11
Exhibit 2 Macroeconomic Data of Selected Countries in Latin
America, 2000
Dominican
Republic El Salvador Guatemala Honduras Mexico Peru
GDP at market prices

(US$billion)a 19.89 13.21 19.04 5.93 574.51 53.88
Population (million)a 8.55 6.27 11.38 6.48 97.96 25.66
Urban population, % of totalb 65 47 40 53 74 73
GDP per capita
(US$)b 2,320 2,130 1,670 898 5,800 2,083
Average interest rate charged by
banks in local currency (%)b 26.8 13.9 20.9 26.8 18.2 27.9
Consumer prices (% change pa;
end-period)b 9.01 4.28 5.06 10.10 8.95 3.73
Sources: aWorld Bank, available through http://sima-
ext.worldbank.org/data-query/ (15 October 2001),
bEconomist Intelligence Unit Country Data, 15 October 2001.
12
Exhibit 3 Bio of Elektra's Main Directors and Officers
Ricardo Salinas, 45, has served as Elektra’s President since
1989 and Chairman of the Board of
Directors since 1993. Prior to joining Elektra in 1981 he worked
for Arthur Andersen and The
Brinkman Company. Mr. Salinas studied public accounting at
the Instituto Tecnologico y de Estudios

Superiores in Monterrey (ITESM) and graduated with honors in
1977. He received his Master is
Finance from University of Tulane and was the first foreigner to
be recognized as a Distinguished
Alumnus.
Pedro Padilla, 35, has served as a board member since 1993 and
was Elektra’s CEO from 1993 until
2000, and now serves as CEO of TV Azteca. Mr. Padilla has
extensive experience in cross border
financial and commodities transactions and holds a degree in
Law from UNAM.
Javier Sarro, 40, was appointed Elektra’s CEO in 2000. He
originally joined Elektra in 1995 as the Vice
President for Financial Services. He served as the first CEO of
Unefon, building its management
team, strategic supplier relations and financial structure. Mr.
Sarro has an MBA from Instituto
Panamericano de Alta Direccion de Empresas (IPADE) and
completed undergraduate studies in Law
at the Universidad Iberoamericana.
Alvaro Rodriguez, 34, has served as Elektra’s Chief Financial
Officer since 1999. He was appointed
CFO of Unefon in 1997 and helped raise US$1 billion to start
that company, establishing its
accounting, administration, budget, finance, legal and treasury
departments. Before joining Unefon,
he worked for several years as a banker in Latin America,
Europe and the United States. Mr.
Rodriguez holds a bachelor’s degree from the Instituto
Tecnologico Autonomo de Mexico (ITAM)
and an MBA from the Harvard Business School.
Mario Gonzalez, 47, joined Elektra in 1999, as Vice President

of Marketing. Prior to it, Mr. Gonzalez
spent 23 years in marketing, marketing research, sales and
operations in both local and international
markets, and worked for companies including Nabisco, Gillette,
PepsiCo and Casa Cuervo. He holds
a degree in Business Administration and a Marketing
specialization from Universidad
Iberoamericana.
Filiberto Jimenez, 30, has served as the General Director of
Store Operations since 2000. He joined
Elektra in 1996 and oversaw the launch of the company’s Latin
American operations as one of his
early job responsibilities. He served as the Director of
Operations of Elektra and as the CEO of Salinas
y Rocha. Mr. Jimenez holds a degree in Marketing and an MBA
from the Instituto Tecnológico de
Estudios Superiores de Monterrey (ITESM), with a major in
International Business.
Mario Gordillo, 33, joined the Budgeting Department of Grupo
Elektra 8 years ago. He has occupied
several positions in the company within the departments of
purchasing, financial services,
distribution, Hecali and The One operations. In 2001, he was
appointed head of Financial Services.
Mr. Gordillo holds an undergraduate degree in Industrial
Engineering and Systems from the
Instituto de Estudios Superiores de Monterrey (ITESM), a
Master’s degree from the Instituto
Panamericano de Alta Dirección Empresarial (IPADE) and a
master of Finance degree from the
ITESM in Mexico City, Mexico.
Source: Elektra.

13
Exhibit 4 Elektra's Services
First financial service provided by Elektra, Credifacil (later
Credimax) accounted for approximately 65% of Grupo Elektra’s
total sales. It had 2 million active accounts and an accumulated
database of more than 4 million accounts. Credimax had more
than 3,000 credit employees and Elektra had a recovery rate of
over 97%.
As the first service to leverage Elektra’s store network, Dinero
en Minutos is a money transfer service in association with
Western Union. Western Union has 27,000 branch offices in the
United States, through which any of the 22 million Mexicans
living there can send money back to their families in Mexico to
be collected at any of the Grupo Elektra chains. Senders and
receivers are current and potential customers and the business
generates an important stream of U.S. dollar revenues.
In February 1996, Elektra launched a second money transfer
service and, in the process, created an entirely new market.
Dinero Express was created for money transfers within Mexico
and is an Elektra-owned service. From its launch in 1996 to
December 2000, Dinero Express has exceeded the company’s
projections and has provided 4.3 million secure money transfers
within Mexico so far.

Through a joint venture with Serfin Bank, Elektra created an
innovative approach to savings that answers the needs of a large
majority of the Mexican population to put some money aside for
the future. Elektra uses monthly raffles to motivate and reward
Guardadito customers, and no commissions or fees are charged.
Elektra began selling extended warranties in 1997 and it has had
an outstanding record to date. Two, three and five-year
warranties are offered in fourteen different product groups,
with an emphasis on home electronics and white goods. Elektra
believes that Milenia encourages the purchase of its products.
Fotofacil kiosks offer film processing, inexpensive cameras,
film,
batteries, photo albums and portable electronics. The kiosks
take up very little sales space and answer a great demand
among Elektra’s customers.
Source: Elektra.
14
Exhibit 5 Socioeconomic levels in Mexico
Class Description
Percentage of the
Mexican Population
A/B Household income per month over US$7,000

Checking account and more than two credit cards
Homes or apartments with more than three or four bedrooms,
and
two or three bathrooms
Two or more luxury automobiles, two telephone lines, two or
more
televisions sets and one computer
6%
C+ Household income per month between US$3,000 and
US$7,000
One or two credit cards
Homes or apartments with two or three bedrooms and one or
two
bathrooms
One or two cars, two telephone lines, two television sets and
20% of
this segment has a computer
9%
C Household income per month between US$1,000 and
US$3,000
Some have a credit card
Homes or apartments with two bedrooms and one bathroom
One basic automobile, one telephone line, two television sets
and
one radio

26%
D+ Household income per month between US$600 and
US$1,000
No credit cards
Homes or apartments with one or two bedrooms and one
bathroom
No automobile, one telephone line and one radio
22%
D Household income per month between US$200 and US$600
No credit cards
Homes or apartments with one bedroom and one bathroom
No telephone, one television set and one radio
30%
E Household income per month under US$200
Small homes, a third of which have a bathroom, but most do not
have a connection to a municipal sewage system
No telephone, most have only one television set and one radio
7%
Source: Elektra, 2000 Annual Report.
15
Exhibit 6 Socioeconomic Profiles of Elektra's Customers,
October 2001

Elektra Salinas y Rocha Bodegas de Remate The One
Class
C+ 19% 28% 13% 20%
C 25 29 23 35
D+ 27 29 34 30
D 29 14 30 15
Age
18-25 18 8 21 45
26-35 32 21 35 35
36-45 27 28 27 15
46-55 23 43 17 5
Sex
Male 52 50 50 65
Female 48 50 50 35
Source: Elektra.
16
Exhibit 7 Chains
• Most important chain of the Group
• More than 600 stores in Mexico and Latin America
• Attends market segments D, D+ and C

• Focus in electronics, white goods, home appliances and
furniture
• Locations in strategic neighborhoods
• Average surface per store: 743m² (7998 sq. ft.)
• More than 50 stores
• Attends market segments D, D+
• Focus in remanufactured and repossessed goods as well as
discontinued models
• Excellent format to confront local competition
• More than 85 stores in Mexico
• Attends market segments C and C+
• Focus in furniture and Hi-Tech electronics
• Average surface per store: 968 m² (10,419 sq.ft)
• More than 130 stores in Mexico
• Attends market segments D, D+ and C
• Focus in casual clothing and accessories
17

Exhibit 8 Sales Mix per Store Format, by Type of Product
2000
Elektra Mexico
Electronics 42.8%
Appliances 28.7
Furniture 16.8
Small appliances 10.5
Telephones 1.2
Elektra Latin America
Electronics 50.1
Appliances 23.7
Furniture 19.5
The One
Men’s clothes 50.5
Children’s clothes 24.7
Ladies’ clothes 22.4
Sport shoes 0.3
Telephones 2.1
Salinas y Rocha
Electronics 33.0
Appliances 29.5
Furniture 27.6

Telephones 0.6
Source: Elektra.
18
Exhibit 9 Historic Sales and EBITDA, in US$ million
1,533
1,301
1,156
941
730
96 97 98 99 00
SALES EBITDA
244
206
182
150
107
96 97 98 99 00

FX: 9.60 per US$1
Source: Elektra.
502-039 -19-
Exhibit 10 Financial Performance in 2000, in US$ million
Contribution per Business Unit
Elektra
Merchandise
S y R
Merchandise Credit
The One
Merchandise
Money
Transfer
Extended
Warranties Total
Revenues
Sales 996.7 97.7 73.4 59.7 16.3 1,243.8

Credit income 313.9 313.9
Monetary loss of credit operation (23.8) (23.8)
Total revenue 996.7 97.7 290.1 73.4 59.7 16.3 1,533.9
Cost
Cost of goods sold 685.9 66.2 44.0 1.4 4.9 802.4
Interest expense 32.0 32.0
Provision for doubtful accounts 59.8 59.8
Monetary gain of credit operation (15.5) (15.5)
Total direct cost 685.9 66.2 76.4 44.0 1.4 4.9 878.8
Gross profit 310.8 31.5 213.7 29.4 58.3 11.4 655.1
Gross margin 31% 32% 74% 40% 98% 70% 43%
Percentage contribution 47% 5% 33% 4% 9% 2% 100%
20
Exhibit 10 (continued)
INCOME STATEMENT IN US$ MILLION
Elektra Merchandise 996.66
Hecali Merchandise 73.43

S y R Merchandise 97.72
Extended Warranties 16.29
Credit Income 313.90
Monetary (Loss) of Credit Operation -23.82
Money Transfers Mexico 13.05
Domestic Sales 1487.22
Export Sales 46.67
T O T A L R E V E N U E S 1,533.9
Interest Expense 32.01
Provision for Doubtful Accounts 59.83
Monetary (Gain) of Credit Operation -15.48
Credit Cost of Goods Sold 76.36
Merchandise Cost of Goods Sold 796.12
Cost of Extended Warranties 4.89
Cost of Inventory (Money Transfer) 1.42
C O S T O F G O O D S S O L D 878.8
G R O S S P R O F IT 655.1
S. G. & A. 419.43
Depreciation & Amortization 63.03
O p e ratio n E x p e n s e s 482.5

E . B. I. T. 172.6
E .B.I.T.D.A . 244.0
Interest Expense 68.39
Interest (Income) -20.43
Foreign Exchange Loss (Gain) 11.38
Net Monetary Loss (Gain) -29.65
C o m p reh e n s iv e F in a n c in g (In c o m e ) E x p e n s e
29.7
INC O M E B E F O R E T A X E S & P R O F I T S H A R
ING 142.9
Taxes and Profit Sharing 21.58
INC O M E A F T E R T A X E S & P R O F IT S H A R
ING 121.4
Equity in income (loss) of TVA -2.32
INC O M E B E F O R E E X T R A O R D INA R Y IT E M S
119.0
Extraordinary Items 0.00
Minority Stockholders -2.12
0.00
N E T INC O M E 116.9
0.00
N E T INC O M E L A S T 12 MO N T H S 116.9

E .B.I.T.D.A . L A S T 12 M O N T H S 244.0
Source: Elektra.
21
Exhibit 11 Balance Sheet in US$ Million
ASSETS
Cash and Cash Equivalents 766.6 79.86
Customers 2,181.0 227.19
Accounts Receivable 586.4 61.08
Inventory 2,861.4 298.06
Other Current Assets 1,548.5 161.30
Total Current Assets 7,943.9 827.49
Investment in TVA 0.0 0.00
Investment in Others Shares 828.5 86.31
Deferred Taxes 45.7 4.76
Property Plant and Equipment (Net) 3,675.5 382.86
Goodwill 1,265.5 131.82
Other Assets 416.3 43.37
TOTAL ASSETS 14,175.5 1476.61

LIABILITIES AND STOCKHOLDERS' EQUITY
Bank Loans 1,440.3 150.03
Financial Leasing and Others 102.2 10.65
Current Liabilities with Cost 1,542.5 160.7
Suppliers 2,502.1 260.64
Other Current Liabilities 1,063.5 110.78
Current Liabilities without Cost 3,565.6 371.4
Total Current Liabilities 5,108.1 532.1
Long-Term Liabilities with Cost 2,783.5 289.951354
Long-Term Liabilities without Cost 80.5 8.39
Long-Term Liabilities 2,864.1 298.3
TOTAL LIABILITIES 7,972.1 830.4
Deferred Income 739.3 77.0
Common Stock 2,200.8 229.254063
Retained Earnings 3,263.2 339.912917
Total Stockholders' Equity 5,464.0 569.2
LIABILITIES + EQUITY 14,175.5 1,476.6

22
Exhibit 12 Number of Stores in December 2000
Mexico El Salvador Guatemala Honduras
Dominican
Republic Peru
Elektra 545 14 26 16 23 23
Salinas y Rocha 89 0 0 0 0 0
The One 161 0 0 0 0 0
Bodegas de Remate 53 0 0 0 0 0
Total 852 14 26 16 23 23
Source: Elektra 20-F, SEC filing, 2000, pp. 32, 38, 42 and 44.
Exhibit 13 Cash and Credit Mixes per Store Format
Percentage in September 2001
Elektra
Cash 37%
Credit 63
Salinas Y Rocha
Cash 45
Credit 55

The One
Cash 61
Credit 39
Bodegas de Remates
Cash 46
Credit 54
Source: Elektra.
23
Exhibit 14 Credit Sales at Elektra´s Subsidiaries Abroad,
December 2001
Guatemala El Salvador Honduras
Dominican
Republic Peru
Credit sales as a percentage of
merchandise revenues 69.4% 71.7% 70.3% 81.3% 78.2%
Total number of accounts 39,574 20,161 25,135 30,388 47,081
Average balance per customer

(US$) 190.66 188.27 259.76 224.41 240.06
Source: Elektra 20-F, SEC filing, 2000, p. 39.
Exhibit 15 Number of Purchases per Customer, 2000
Number of purchases Percentage
1 17%
2-3 38
4-5 23
6-7 8
8-9 3
More than 10 3
Do not remember 8
Source: Elektra
24
Exhibit 16 Elektra Credit Portfolio
Gross Credit Portfolio, Elektra vs. Mexican Banks
299
312

345
446
230
290
350
410
470
1997 1998 1999 2000
Million Dollars
2,923
2,836
2,943
3,200
2,800
3,000
3,200
1997 1998 1999 2000
Million Dollars

Elektra Mexican Banks
Delinquency Rates, Elektra vs. Mexican Banks
1.9 2.5
2.7
16.7
18.4
15
0
5
1 0
1 5
2 0
1998 1999 2 0 0 0
Source: Elektra.

25
Exhibit 17 Sample Printed Advertisements
26
Exhibit 17 (continued)
27
Exhibit 18 Income Statement, Elektra´s Subsidiaries in Latin
America, December 2000, in US$
million
Guatemala El Salvador Honduras
Dominican
Republic Peru Total
Products and services revenues 20,806 5,744 11,492 11,546
20,263 69,851

Products and services cost 14,304 4,075 8,102 8,207 14,407
49,095
Products and services gross
profit 6,502 1,669 3,389 3,339 5,856 20,755
Credit revenues 4,772 1,733 3,527 3,415 4,676 18,123
Credit cost 1,835 890 1,642 2,285 2,531 9,184
Credit gross profit 2,937 843 1,885 1,130 2,145 8,939
Total gross profit 9,439 2,512 5,274 4,468 8,001 29,694
Source: Elektra.
Exhibit 19 U.S. Hispanic Consumer Spending Growth, in U.S.
billion
2000e 2010p
$458
$965+111%
e: estimated
p: projected
Source: Elektra.
28
Exhibit 20 Number of Savings Accounts in Mexico, Elektra vs.

Mexican Banks
3,446
3,391
3,680 3,675
3,000
3,100
3,200
3,300
3,400
3,500
3,600
3,700
1997 1998 1999 2000
Saving Accounts (000)
103
486
967
1,500
90

290
490
690
890
1,090
1,290
1,490
1997 1998 1999 2000
Saving Accounts (000)
Source: Elektra.
Exhibit 21 Distribution Network, Elektra vs. Mexican Banks
6,129
6,563
6,891 6,905
6,000
6,200
6,400

6,600
6,800
7,000
1997 1998 1999 2000
Stores
680
819
946 950
600
700
800
900
1,000
1997 1998 1999 2000
Points of Sales
Source: Elektra.

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

May 8, 2015MemorandumT0 FromDate ReWAC Grup.docx

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