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PART FOUR CASE STJDIES
Case analysis is an essential part of a strategic management course and is also perhaps the most entertaining part of such a course.
Before we start, a word about attitude — make it a real exercise. You have a set of historical facts, so use a rigorous system to work out what strategies should be followed. All the cases are about real companies, and one of the entertaining things about the analysis process is to compare what you have said they should do with what they really have done. So, it is best not to check the internet to see current strategies until you have completed your analysis.
What follows is one analytical system, a fairly tight one that you may want CO adapt according to how much time you have and the style of the case.
Step 1 What industry is it?
You MUSE decide this early on. T h is is an important step because it changes the analysis; for example, your industry analysis will yield difkrent conclusions depending on what industry you determine.
Step 2 General environment analysis
Analyse the seven generic elements — economic, physical, sociocultural, global, technological, political:legal and demographic — and work out what the important facts are. There may be many issues and facts in each element, but you put down only the important ones. It is also important to avoid the common error of over-emphasis on the firm in question. If, for example, the firm operates in the Australian ice-cream industry the demographic analysis may have this comment: 'A large baby boomer generation is now becoming more health-conscious. This presents opportunities in health foods and healthy alternatives tor conventional foods. It also presents opportunities for low-fat ice-creams'. Or, in analysing the demographics of David Jones, you may conclude that there is a good market of middle- to cop-end income people in Australian cities that need stylish clothing from globally sourced manufacturers.
Step 3 The industry environment
Is this a mature industry? An emerging one? This carries with it messages about possible strategies.
NOW; analyse the five forces (i.e., supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each. For example, what are the issues involved regarding new entrants into the industry? For high-end retailing in Australia, the need for a brand, some large stores, scores of excellent clothing brands and the need for central city locations are big limitations on entry. This makes the industry hard co enter. Each force needs a brief discussion followed by a short conclugion
One extra consideration before you pull the analysis together and work out if this is an attractive industry (the main conclusion) is whether there is a key force or forces in your industry. Porter argues that there is a key force in any industry one thar exerrc mire infinenre rhan the nth, forces
Now, is it an attractive industry? You need to explain, briefly, why or why not. Bear in mind that it is often not a dear decision because the forces are mixed; for example, there may be little concern about new entrants, suppliers or substitutes, but buyers may be fickle and rivalry high. In such cases, the key force analysis is very important. It is also useful Co think specifically about threats that the analysis has offered; for example, buyers or suppliers.
Remember: it is the industry you analyse, not the firm.
Step 4 Competitive environment
Is there a strategic group that you need CO take account of? What is the rivalry like in this group? What capabilities do the relevant firms have? What strategies do they follow? What threats do they represent? A good example of how this may work is the New Zealand company Hubbards, which makes cereal for the NZ market. It is a relatively small firm, and although it is well established and very well branded in NZ, it has severe price ceilings in its industry position: if it goes too high, competition will win with lower prices, and if it goes too low; the large competitors (Sanitarium and Untie Tobys, for example) will kill it in the marketplace because they can.
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