This document provides a framework for conducting a strategic case analysis. It outlines performing an external analysis of the PEST factors, five forces, and industry attractiveness. An internal analysis includes examining the value chain and core competencies. Key steps are identifying the strategic issues facing the business, generating alternatives for the corporate and business level strategies, and selecting strategies that address the issues based on the external and internal analyses. The framework provides a comprehensive approach for strategic decision making.

1. Case Analysis
Framework - Strategic
Management
Ian Lee, Ph.D
Carleton University
Ottawa, Canada
ianlee@ibm.net
Stratrategic Management
National/Macro Industry Company Resources,
Context Context Capabilities, and
Strategies
Company
Performance
Strategic Analysis = Choices
Thinking Strategically
About Industry
and Competitive
Conditions
ID Choice of
Strategic Options Best
Open to Firm Strategy
Thinking Strategically
About Firm’s
Own Situation
1

2. Case Background
xBrief factual summary
x1/2 page or so
xname of firm, time of case
xbroad issue(s)
PEST or TESP Analysis
xTechnological O/T
xEconomic O/T
xSocio-cultural O/T
xPolitical-legal O/T
Macro and Competitive Environments
General Environment
Demographics
Global Political/Legal
Competitive
Environment
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products
Competitive rivalry
Sociocultural Technological
Macroeconomic
2

3. Summary
xMost important or significant O/T
xnot all O/T equally significant
xfocus on those with greatest impact
Industry Analysis
5 Forces Model of Competition
Substitute
Products
Rivalry
Among
Suppliers Buyers
Competing
Sellers
Potential
New
Entrants
3

4. Porter’s 5 Forces
xHead to head competition L-M-H
xsubstitutes L-M-H
xthreat of entry L-M-H
xpower of buyers & suppliers L-M-H
Strategic Group Map
xCluster the major competitors
xaccording to their “niche”
xgraphically
Strategic Groups in Department Store Industry
High
Upscale
Perceived
Quality National
Chain
Warehouse
Discount
Low
Low High
Retail Price
4

5. Major Competitor Analysis
xWho are they?
xwhat strategies are they pursuing
xrelative market share? profitability?
Driving Forces
xmajor forces of change affecting all firms
xe.g. entry of new competitors
xde-integration
xglobalization of industry
Key Success Factors
xGeneric characteristics for all firms
xnecessary for success
xregardless of particular business strategy
xwhether low cost or differentiation
5

6. Overall Industry Attractiveness
xBased on:
x Porter’s 5 forces analysis
xdriving forces, KSFs, competitor analysis
xindustry (un)attractive e.g. ROI?
Business Unit Analysis
Value Chain
xApply S/W to Porter’s VC
xunder each heading
xalso helps understand Hamel Framework
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7. Value Chain
Primary Activities and Costs
Inbound Outbound Sales and Profit
Operations Service
Logistics Logistics Marketing Margin
Product R&D, Technology, Systems Development
Human Resources Management Support
Activities
General Administration and Costs
Value Chain System
Upstream Company Downstream
Value Chains Value Chains Value Chains
Activities,
Internally
Activities, Costs, &
Performed Buyer/User
Costs, & Margins of
Activities, Value
Margins of Foward
Costs, & Chains
Suppliers Channel
Margins
Allies
Hamel’s Framework
xCore Competencies
xCore Product
xEnd Product
xSCA
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8. Hamel’s Competency Framework
Capabilities
Source of Source of
Teams of
Resources
Core
Competencies
Resources
Sources of
* Tangible Competitive
* Intangible Components of Advantage
Internal Analysis
Strategic Sustained
Competitiveness Competitive Foundation
Advantage of
Above-Average
Above-
Above-Average
Returns Gained through
Core Competencies
Pathway to
What a firm Does...
Core Competencies
that is Strategically
Core Competencies must be: Valuable
Valuable
Rare
Costly to Imitate
Nonsubstitutable
Outcomes from Combos of Criteria for SCA
Costly to Nonsub-
Nonsub- Competitive Performance
Valuable Rare
Imitate stitutable Consequences Implications
Below
Competitive
NO NO NO NO Average
Advantage
Returns
Competitive Average
YES NO NO YES/NO Parity Returns
Temporary Aver./Above
YES YES NO YES/NO Competitive Average
Advantage Returns
Above
YES YES YES YES SCA Average
Returns
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9. Financial Statement Analysis
A. Investment Return
xCapital Market Ratios:
!EPS
!P/E
B. Financial Strength
xLiquidity Ratios:
!Current, Acid Test
xSolvency Ratios:
!D/A, D/E, Interest Coverage, Cash Flow/Debt
C. Management Performance
xProfitability Ratios:
!Gross Margin
!Net Profit Margin
!Return on Assets
!Return on Equity
!Return on Capital
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10. D. Resource Utilization Ratios
xAsset Turnover
xPayables Turnover
Mission Statement
xConstruct firm’s mission from data
xmay recommend changes in mission
xunder strategies
Corporate Objectives
xPresently followed by firm
xquantitative objectives
xqualitative objectives
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11. Relationships between ...
Level 1 Overall Scope Corporate Corporate
and Strategic Level Level
Corporate-Level
Mission Objectives Strategy
Mgrs
Two-Way Influence Two-Way Influence Two-Way Influence
Level 2 Business Business Business
Business-Level Level Level Level
General Mgrs Missions Objectives Strategies
Two-Way Influence Two-Way Influence Two-Way Influence
Level 3 Functional Functional Functional
Heads of Major Area Area Area
Functional Areas Missions Objectives Strategies
Two-Way Influence Two-Way Influence Two-Way Influence
Level 4 Operating Field Unit Operating
Missions Objectives Strategies
Plant Managers,
Lower-Level Supervisors
External Environment
PEST
Five Forces Analysis Sustainable
Competitive
Advantage
Internal Environment
Resources, Capabilities and
Core Competencies
Business Level
Strategy
Overall Firm (un)Attractiveness
xBased on:
! value chain analysis
!core competency analysis
!F/S analysis
!sustainable competitive advantage
xis firm attractive e.g. ROI or profitability?
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12. Strategic Issues
A Diversified Company
Corporate
Corporate-Level Strategy
Managers
Two-Way Influence
Business-Level Business
General Managers Strategies
Two-Way Influence
Heads of Major
Functional Areas Functional Strategies
Two-Way Influence
Plant Managers,
Lower-Level Operating Strategies
Supervisors
Corporate Issues
1. What businesses should we be in?
xre macro, industry, firm O/T, S/W analysis
!vertical, horizontal, international diversification
!internal growth vs acquisitions vs alliances
2. How should corporate govern SBUs?
!Centralized vs decentralized
!large HQ vs small HQ
!portfolio approach vs competencies approach
12

13. Business Level Issues
1. What product markets should we be in?
!horizontal (McDonalds sells chicken)
!vertical (outsourcing)
2. How should firm produce SCA?
!Which of 4 generic strategies?
Functional Level Issues
xHow should the functional depts support the
SBU strategy
xwhat functional strategies needed
Corporate and Business Strategy
13

14. Corporate Strategy Alternatives
xList and analyze major alternatives:
!vertical, horizontal, intl diversification
!internal growth vs acquisitions vs alliances
xshould address issues defined above
Business Strategy Alternatives
xList and analyze strategy alternatives
xshould address issues at SBU defined above
Generic Business Level Strategies
Source of CA
Cost Uniqueness
Broad Cost Differen-
Target
Market Leadership tiation
Breadth of
Competitive
Scope
Focused
Narrow Focused
Target Differen-
Market Low Cost
tiation
14

15. Factors Shaping Strategy
Societal,
Opportunities
External Factors
Political, Industry
and
Regulatory Attractiveness
Threats
Factors
Conclusions
about Identification Crafting
How and Strategy
Company’s Strategic Situation Internal/
External
Evaluation for
of Overall
Factors Alternatives Situation
Matter
Internal
Strengths Key Shared Values
Executives’ and
and
Influences Culture
Weaknesses Internal Factors
Summary
xSummarize major O/T in PEST
xsummarize strength of 5 forces
xsummarize industry (un)attractiveness
xsummarize VC & major competencies
xsummarize major strategic issues
xsummarize corporate & business strategies
xsummarize how strategy recommendations
solve problems
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