Case Analysis

Decision-Making Process
1. Decision-Making Process Define the Problem Enumerate the Decision Factors Consider Relevant Information

Identify the Best Alternative

Develop an Implementation Plan Evaluate the decision and decision process

Preparing and Presenting a Case Analysis

2. Preparing and presenting a case
analysis Approaching the case analysis Formulating the case analysis Communicating the case analysis

Decision Making

Decision making is a rational and

systematic process. Its organization is a definite sequence of steps, each of them in turn rational and systematic.

- Peter Drucker

Decision Making
Define the Problem Enumerate Decision Factors Consider Relevant Information Identify the Best Alternative Develop a Plan for Implementing the Chosen Alternative Evaluate the Decision and the Decision Process

Define the Problem

A well-defined problem outlines the
framework within which a solution can be derived. It includes: Objectives of the decision maker Recognition of constraints Clear success measure or goal for assessing progress toward solving the problem e.g., El Nacho Foods

Enumerate the Decision Factors

Factors to be enumerated

Controllable
Alternative
Courses of Action

Uncontrollable
Uncertainties in the Competitive Environment

e.g., Arrow Shirts

Consider Relevant Information

The truly successful managers and leaders of the [twenty-first] century willbe characterized not by how they can access information, but how they can access the most relevant information and differentiate it from the exponentially multiplying masses of non-relevant

information.

Consider Relevant Information

Characteristics of the industry and
competitive environment

Characteristics of the organization

Characteristics of the alternatives under consideration

Consider Relevant Information

Points to Remember

1. Resist the temptation to consider

everything in a case as a fact 2. Create relevant information, if not available, by blending together data given in the case

Identify the Best Alternative

Decision analysis
Matches each alternative identified by
the manager with the uncertainties

existing in the environment and

assigns a quantitative value to the outcome associated with each match.

Identify the Best Alternative

Sample Decision Tree

Company Action

Competitive Response Maintain price

Financial Outcome

$150,000
$110,000 $175,000 $90,000

Reduce price Reduce price further Maintain price

Maintain price
Reduce price further

Identify the Best Alternative

Expected Monetary Value The Expected Monetary Value (EMV) of a decision alternative is:

Outcome of Uncertainty1 x P(Uncertainty1)

+ Outcome of Uncertainty2 x P(Uncertainty2) + + Outcome of Uncertaintyn x P(Uncertaintyn)

Identify the Best Alternative

Sample Payoff Table
Uncertainties Competitors maintain price (Probability=0.9) $150,000 Competitors reduce price (Probability=0.1) $110,000

Alternatives Reduce Price

Maintain Price

$175,000

$90,000

Expected value of reducing price:

(0.9) ($150000) + (0.1) ($110000) = $146,000

Expected value of maintaining price: (0.9) ($175000) + (0.1) ($90000) = $166,500

Identify the Best Alternative

Expected Value of Perfect Information
Uncertainties Competitors maintain price (Probability=0.9) $150,000 Competitors reduce price (Probability=0.1) $110,000

Alternatives Reduce Price

Maintain Price

$175,000

$90,000

Expected value of certainty:

(0.9)($175000) + (0.1)($110000) = $168,500

Expected value of perfect info: EMVcertainty EMVbest alt.: $168500 - $166500 = $2,000

Familiarity with decision analysis is important for FOUR reasons:

1. It is a fundamental tool for considering what if situations

2. It forces the case analyst to quantify outcomes associated with specific actions
3. It is useful in a variety of settings product, communication, channel, or pricing decisions 4. It can be used in determining the value of perfect information

Develop a Plan for Implementing the Chosen Alternative

Resource allocation and timing Strategy formulation Strategy implementation

Evaluate the Decision

Was a decision made? Was the decision appropriate, given the situation identified in the case setting?

Evaluate the Decision Process

1. Did I define the problem accurately? 2. Did I identify all pertinent alternatives and uncertainties? Were my assumptions realistic? 3. Did I consider all information relevant to the decision? 4. Did I recommend the appropriate course of action? 5. Did I consider how my recommendation could be implemented?

Case Analysis
Approaching the Case

Become familiar with the issue(s) at hand Identify key facts and assumptions Do not rush to a conclusion Do not work the numbers until you understand their meaning

Do not confuse supposition with fact

Case Analysis
Formulating the Analysis Framework for Analysis Nature of the industry, market, and buying behavior The organization A plan of action Potential outcomes

Formulating the Analysis

Nature of the Industry, Market, and Buying Behavior
What is the nature of industry structure, conduct, and performance? Who are the competitors, and what are their strengths and weaknesses?

How do consumers buy in this industry or market?

Can the market be segmented? How? Can the segments be quantified? What are the requirements for success in this industry?

Formulating the Analysis

The Organization
What are the organizations mission, objectives, and distinctive competency?

What is its offering to the market? How

can its past and present performance be characterized? What is its potential?

What is the situation in which the

manager or organization finds itself? What factors have contributed to the

present situation?

Formulating the Analysis

A Plan of Action
What actions are available to the organization? What are the costs and benefits of actions in both qualitative and quantitative terms? Is there a disparity between what the organization wants to do, should do, can do, and must do?

Formulating the Analysis

Potential Outcomes
What will be the buyer, trade, and competitive response to each course of action? How will each course of action satisfy buyer, trade, and organization requirements? What is the potential profitability of each course of action?

Will the action enhance or reduce the organizations ability to compete in the future?

Case Analysis
Communicating the Analysis

Class discussion Oral presentation Written report

Communicating the Analysis

The oral presentation should have five major sections:
1. Title of presentation and presenters names Key problems and strategic issues Analysis of companys situation Recommendations with supporting arguments and reasoning for each recommendation

2. Presentation outline
3. 4. 5.

Communicating the Analysis

Written Report should have three major sections: 1. Identification of the strategic issues and problems 2. Analysis and evaluation 3. Recommendations

For Suggestions and Comments contact

Vijay (Alumnus of IIT-M and IIM-K) Founder, S!GN Consulting (Web) www.signconsulting.com (Mail) vijay@signconsulting.com (M) 91 - 97049 63979