Case analysis is not an end in itself and is employed in the classroom to accomplish several results. First, analysis of comprehensive cases introduces students to problems that are "cross-functional" in nature. That is, rather than analyzing only marketing problems, only finance problems, or only the problems of other functional areas in relative isolation, case analysis can force students to view each business function within a context defined by many factors, including other functions, the firms environment, the owner's expectations, and so on. In fact, this cross-functional or integrative role of cases is, to many people, a major purpose of the overall business policy or strategic management course.

Second, through the need for more information than is normally presented in case studies, students are introduced to sources of business information and their content while conducting case analyses. An important part of the educational experience afforded by case analysis is the need to conduct a search for information about the firm's economic, industry, social, political, legal and technological environment, and, when the company analyzed is real, about the firm itself. This process involves an understanding of sources of aggregate data available on both printed page and in computerized data banks and requires the ability to organize large quantities of initially unrelated information.

Third, case analysis affords students the opportunity to attempt strategy formulation in a classroom setting. Although strategy formulation in a case analysis only begins to duplicate the process as it would apply to a live business, cases provide a useful introductory vehicle.

Fourth, through cases students can be introduced to some common business problems and practices quickly. The same exposure would take many years experientially. Such things as starting a new business, matching strategy to environment, and making the transition from centralized to decentralized management can be efficiently studied in a case framework.

Finally, the use of formally prepared case write-ups or in-depth case discussions in class gives students a chance to develop their own approaches to business analysis and decision making. This process can then be followed in problem analysis in career jobs.

PROCESSES OF CASE ANALYSIS AND SYNTHESIS
In its most comprehensive form, the study of cases involves two phases: Analysis and synthesis. Case analysis is undertaken rationally to "dissect" the business circumstances portrayed in the cases, separate facts from opinions, and isolate symptoms from their real causes. Procedurally the case analysis phase is a matter of reading and studying case material, taking notes, obtaining additional data, discussing choices, and generally reducing the case to a set of workable ideas. The synthesis phase entails either writing the case report, preparing an oral presentation, or, usually, both. This is a matter of structuring ideas in a way that is most conducive to the reader's understanding and interpreting the writer's ideas and recommendations.

Analysis Phase
This phase is comprised of two steps: data collection and data set reduction. Collection consists of amassing information that is relevant to the case company, its time frame, industry, and so on. Reduction is the activity of paring down this set of data to a useful, factual set of ideas and organizing it in a coherent structure.

Data Collection. To analyze a case, the analyst must first read and reread the case study and accompanying material, not taking notes until the second or third reading.

Case write-ups and the industry notes that occasionally accompany them contain both internal and external data. That is, some of the information contained in them refers to the internal operations of the firm: Its financial structure, personnel characteristics, organizational structure, production problems, etc.

Other information either is included in the case study or is found by analyzing company- or industry-related publications, and is external in its relationship to the firm. In this category are environmental characteristics such as legal requirements, political circumstances, the economic scenario, and competitors' activities.

Within all the internal and external data relevant to the firm are four categories of information: Internal strengths and weaknesses and external opportunities and threats, as portrayed in the data framework in Exhibit 1-A. Strengths are things the organization does especially well or attributes that positively distinguish it from its competitors. Included would be strong financial ratios, strong brand recognition for its products, above average profit growth, special skills of employees or key people, and other particularly positive aspects of its internal operations.

Weaknesses are characteristics that negatively distinguish the organization from others like it. Weak financial ratios (relative to industry averages), product quality problems, high employee turnover, declining revenue trend, and other operational problems would be examples. The key features of weaknesses and strengths is that they are attributes that describe the internal operations of the organization and they are things within the sphere of control of management. They are not characteristics of the external environment which are outside the control of management.

Environmental positive and negative factors are called opportunities and threats, respectively. Opportunities constitute either actual or expected favorable occurrences outside the firm that were not brought about by management's activities or decisions. They are events or situations that management could capitalize on to the organization's advantage if they are strategically relevant. An improving economic scenario, an improvement in the demographic characteristics of the company's customers, and the impending bankruptcy of a major competitor are examples of opportunities.

Threats include unfavorable circumstances outside the firm. These are environmental characteristics or events that should be avoided or compensated for by management in its operation of the organization. Again, threats are not things that were caused by management or even within its control. A high rate of inflation that is raising the company's costs of operations, entrance of a new foreign competitor into the market, or approval of a new trade agreement that puts the organization at a disadvantage relative to its international competitors, are examples of possible threats. Management can't eliminate these things, it instead can only manage the firm in such a way as to either minimize their negative impact or possibly turn them from threats into opportunities by making the firm less susceptible to them than competitors.

While taking notes from the case study, only facts and supportable inferences should be recorded, and they should be arranged according to whether they constitute strengths or weaknesses of the firm or opportunities or threats surrounding it. The internal factors may be further arranged by strategy level and, for the functional strategy level, by functional department. When the information contained in the case is exhausted, the analyst has a list of well-substantiated internal characteristics broken down into categories that include each appropriate level of strategy and, within each category, into strengths and weaknesses. Similarly, external factors organized into threats and opportunities can be further divided by external categories such as economic, legal, political, technological and social.

Special care must be taken to focus on facts, verifiable observations, or well-reasoned supporting arguments. Some things stated in cases are facts simply because they were stated as facts in the case. Inferences have to be proved and require that appropriate supporting data be recorded. For example, a statement by the analyst that the firm's payroll checks are bouncing can be taken as a fact when it is so stated in the case. However, were a statement by the analyst that the firm has a strong market position mentioned in the case, the analyst would be expected to investigate further to derive appropriate data to either support or refute the claim.

Sometimes it is necessary to prove, or at least explain, that a certain negative or positive factor is indeed negative or positive in its implications. To state that a firm has a current ratio of 1.0 and categorize this attribute as a negative factor is not enough. Appropriate industry data or a trend analysis should also be included to substantiate that the firm's current position constitutes a weakness and not a strength.

In addition to the industry note and the case itself, reference material and popular publications (Business Week, Wall Street Journal, Forbes, Fortune, Time, Newsweek, among others, along with various computer and Internet data services such as Bloomberg, CD Disclosure, ABI/Inform, etc.) should be searched for articles and data relevant to the case, its industry, and its time frame. Information uncovered in these sources is categorized in the data framework. Most of it will tend to fall into the external category.

A bit of caution is in order at this point. Constructing a data framework for a case can generate a plethora of information. To prevent becoming choked with data, each observation as it is made should be forced into the strength-weaknesses/threat-opportunity framework. This practice will keep the data set in manageable form.

Data Reduction. Once the analyst is satisfied that the data framework is complete, it must be reduced to strategy terms. This can be accomplished by focusing first on the internal and external orientation of negative factors, and then on cause and effect relationships.

Patterns will emerge in the data as to internal and external orientation. Externally oriented factors, threats, will tend to point toward possible strategic problems at the corporate or business levels; weaknesses will tend to be caused by operational shortcomings or, in other words, by functional strategy or organizational problems. For example a high turnover rate among salespersons, or narrowing gross profit margins in the presence of other supporting data, could indicate that the salespersons' compensation system is inappropriate. This, of course, is a marketing strategy problem. Along the same lines, shrinking market share, rising industry sales, a small advertising budget, low R&D intensity ratio, few new product developments, and so on, with more supporting information, could indicate a business-level strategy, and possibly several functional strategy problems.

Further, the inability of present strategy to deal with a certain threat, in the analyst's opinion, might constitute a strategy problem. The heart of the data-reduction process is the ability to spot patterns that indicate societal, corporate, and business-wide strategy problems (mismatches), as well as functional strategy and organizational problems.

Central Problems. Patterns within the data framework and discrepancies between expected and actual operating results usually indicate several possible interpretations of what strategy problems--central problems--are causing symptoms to appear. The analyst has to select as central problems those management shortcomings for which there is the most support in the data set and which are also correctable.

It is easy during the process of reducing data into a comprehensive set of correctable central problems to confuse symptoms, or operational weaknesses, with central problems. For example, a sales decline is usually a symptom of a deeper problem. The management shortcoming actually leading to declining sales has to be searched for by analysis of the data set. Whatever information is uncovered, "declining sales" itself should not be identified as the central problem.

There is also a tendency for students to look upon environmental threats as "problems." But a threat is a circumstance that should be handled by a constructive goal or action plan alteration. Obviously a chief executive officer (CEO) is not going to "solve" the energy crisis, only possibly its impact on the firm. Thus a threat such as high energy costs, which may be causing a firm's operational expenses to increase dramatically, is not itself a central problem. Instead the central problem in this simple example is the aspect of strategy that enables high energy costs to be disruptive. Thus, a central problem involving an environment threat is normally the inability of a goal or action plan to deal with the threat.

Central Problem Defense. Identifying one or a set of central problems in a case is just the beginning. The real challenge is defending one's choices.

The key to the defense is to support the choice with inarguable evidence or clear, logical explanation. Evidence is already available in the data set constructed during the analysis phase. In fact, it was the nature of that data that would have led the analyst to selection of the central problems in the first place. Developing a central problem defense is a matter of reconstructing the conceptual process through which the problem was chosen initially.

The central problem defense should be exclusively problem oriented (that is, solutions should not even be mentioned). Its purpose may be viewed as essentially an attempt to explain to the CEO how he/she has mismanaged the firm, how expected environmental changes will interfere with present strategies, or how impending internal characteristics will interfere will a goal achievement. Consequently evidence must be irrefutable in order to gain agreement. Inclusion of discussions of possible solutions at this stage would detract from problem acceptance.

Solutions. Just as the central problem section should contain no solution-oriented statements, so should the solution section have no problem defense statements. Problems can be referenced in the solution section, but they should have been clearly defined and defended earlier in the central problem defense arguments.

Proposed solutions should be cast in terms of goal and action plan (strategy) recommendations divided by strategy level. They are presented as goals and action plans according to the structure explained in the appropriate chapters herein. For example, for a corporate-level strategy involving a merger, merger strategy would be designed according to parameters set forth in the section on merger strategy.

Solution Implementation. In this section the analyst explains, in as much detail as necessary, how to put the proposed solution into operation. Of major importance are matters of organizational structure. The fewer questions left unanswered, the more believable are the recommended solutions.

Results of the analysis phase contain detailed support data for the implementation of solutions. Case analysts can also investigate functional strategy and organizational methods chapters to receive guidance on how to implement solutions.

This is one of the most important sections in the entire report because it contains the analyst's explanation of how to do what they are recommending. The best approach is to assume the reader does not know how to do what has been recommended. This assumption makes it necessary, then, to explain in intricate detail how to proceed with the solution.

Solution Defense. Central problems are defended by explanation of their relationships to proven weaknesses and threats. Defending solutions--that is, justifying the ones that are selected--is a matter of demonstrating how the firm's strengths can be brought to bear on opportunities in such a way that weaknesses are corrected and threats ameliorated. The data needed for this series of arguments are already available in the data framework, but for the solution defense, focus is on the set of positive factors.

Solution defense arguments are highly correlated with central problem defense arguments. After all, the solutions recommended are designed to solve the central problems and thereby correct the weaknesses and constructively respond to threats. If analysis of weaknesses and threats led to the analyst's selection of a central problem, then implementation of his/her solutions should essentially eliminate the effects of weaknesses and threats. Therefore, the content of the solution defense is a series of explanations of how solutions are expected to correct the central problems, and also how weaknesses and threats would be corrected.

Synthesis Phase
After completion of analysis of the case, the next phase is to prepare either an oral presentation or a written report. Some instructors prefer that students concentrate on parts of the analysis rather than all of it. The remainder of this section outlines the sections included in a case report.

The comprehensive case report has three parts, as shown in Exhibit 1-B: Historical data, central problem, and solution.

Historical Data section. This part consists of two sections, the data framework and a description of the firm’s strategies. The data framework is presented simply as a numbered list organized by whether items are strengths, weaknesses, threats, or opportunities, and also by function if possible.

The partial list of strengths, weaknesses, threats and opportunities presented in Exhibit 1-C have been constructed to demonstrate the nature of a formal data set--formal in the sense that the lists have been written down. Whenever applicable the conclusion about a piece of evidence should be stated first and the supporting argument or information should follow. A statement by an authoritative source is generally taken as factual. For this reason references are included in the example to show that much data set information can be derived by research of outside material, that is, from sources beyond the case study itself.

Present Strategy. An important part of analyzing a company is obtaining a detailed explanation of its present strategy. In the case analysis, the description can be placed immediately after the data set.

Students should adhere to the structure for strategy at each organizational level as presented in the text, always looking for goals and action plans that are as specific as possible. The more detailed the analyst's understanding of present strategy, the more he/she will be able to identify shortcomings and recommend constructive alterations.

Case studies and other sources very often do not explain an organization's present strategy at all, let alone cast the explanation within the frameworks presented earlier. Therefore, students may have to infer present strategy from published information about the organization and its industry, as well as its characteristics as presented in the case study. This requires clear understanding of the nature of goals and action plans at each level.

A description of selected parts of General Electric's strategies at the enterprise and corporate levels is presented in Exhibit 1-D. This strategy description was inferred from published sources as indicated in the references. Of course, the firm's annual report provided much insight. Exhibit 1-D shows how goals and action plans should be tied together in strategy statements. Whenever possible and applicable, goals should be stated in quantitative terms. Space limitations prohibit reprinting the entire strategy section for GE.

Central Problem Section. The second major part of the report has two sections: Central problem statement and central problem defense. The nature of each central problem is briefly identified in this problem statement, along with its strategy level.

The exhibits that follow present excerpts from central problem statements that were part of complete analyses of management case studies. Exhibit 1-E shows a central problem statement that focuses on all four strategy levels of Playboy Enterprises, Inc.

Exhibit 1-F presents a problem statement that depicts Polaroid's entrepreneurial style as a cross-level problem. Notice that it is unclear on which strategy level the analysts will focus.

The art of stating a central problem directly is demonstrated in Exhibit 1-G. Most students identify Hasbro's problem as "seasonal sales." But the problem was not seasonality itself, but rather how the company handled seasonal sales. Management obviously could not eliminate seasonality. It could, however, do several things to stop or at least reduce its adverse effects.

The next part, central problem defense, presents irrefutable arguments and evidence to support the analyst's interpretation of central problems. Contents of the data framework, primarily the negative factors, are the best support data for central problems. When developing the defense section, try to keep in mind that you are actually criticizing a management group or CEO. Thus only if problems are well substantiated with facts and logical deduction will recommended solution be adopted. Your interpretation of "what's wrong" must be accepted before your suggestions on what to do about it have a chance of being adopted.

Rather than include an entire central problem defense section as an example, we have chosen instead several examples of both good and bad arguments. These segments would be part of a much larger section of a case analysis report.

Probably the most common problem students encounter in defending a set of central problems is the use of hollow or unsupported arguments. In an analysis of Polaroid, one student wrote, "Polaroid has not developed distribution channels to the extent of the competition," as part of his defense of the contention that the company's marketing strategy was inappropriate. The problem with this argument was that it lacked irrefutable facts to support it. A more effective argument would describe Polaroid's distribution channels, then describe those of competitors, and highlight the differences.

Similarly, the following statement is not convincing enough to change management's behavior: "Inconsistency in production planning through 1979 has caused instability in inventory levels and in personnel needs." Here the important points are the alleged instability in inventory and in personnel staffing requirements. Both of these symptoms could better have been supported by quantitatively describing inventory and staffing levels.

For an analysis of the Playboy case, students included the effective defense in Exhibit 1-H of the contention that Playboy's corporate-level strategy had resulted in an imbalanced portfolio of SBUs.

In the "Wendy's International" case, it is tempting to assume everything is all right with the company because of its 20 percent revenue increase between 1978 and 1979 (to $274 million in 1979 from $228 million in 1978). Further analysis by students will show that net income fell by about 6 percent over approximately the same period. The good analyst would explore further to find out why this happened rather than simply identify that it did. Doing so reveals that operating expenses rose about 6 percent over this period. Then the question, "why did operating expenses rise?" surfaces. More analysis would show that selling expenses rose by about $32 million. Finally, one would conclude that the increase is gross profit precipitated by the rise in revenues was not worth the cost.

Rather than stop at this point though, one must ask how serious the problem is. In the Wendy's case, it can be shown with some outside research that during the 1978-1979 time period, both variable and fixed costs rose so that the number of customers needed to break even rose by about 23 million. The actual number of customers went up by only about 13 million. In other words, although actual sales increased even faster, and were approaching actual sales at a rapid rate.

The Wendy's example demonstrates the need to dig feebly into the data surrounding a case or business problem to explain thoroughly in the central problem defense section what happened and why it happened. Break-even analysis is often useful to show the severity of a because it can be the basis of computation of the amount of time remaining until operations reach the break-even point, and thus how much time the firm's management has to implement a solution before profits swing negative. It applies, of course, to both increasing and decreasing profit situations.

Solution. Three sections make up the solution part of the report. First, several rejected solutions are explained. These are the most likely alternatives to the recommended solutions that were not suggested for one reason or another. Their purpose is to "clear the way" for accepted solutions by explaining why they would likely not succeed in solving the firm's problems.

Exhibit 1-I demonstrates the appropriate amount of generality for sets of rejected solutions. Each rejected solution should consist of a brief description and an explanation of why it was rejected.

Next the major dimensions of proposed solutions are identified in the solution statement section. Here the analyst introduces recommended strategic changes. Examples of selected sections of a solution statement for the Playboy case are presented in Exhibit 1-J. It is organized by strategy level, and at the business level by SBU.(Only segments of the business-level strategy and functional-level strategy and strategy-level strategy proposals are included. In the original analysis, strategy solutions were proposed for each of the four strategy levels.)

The details of how proposed solutions are expected to work are explained in the solution implementation section. It has five parts: explanations of how each element will operate, an implementation schedule, presentation of pro formas, organization structure requirements, and solution defense.

First each solution element's operational characteristics are explained. Since the solution is actually a set of strategies, it is made up of a set of goals and action plans that follow the formats presented in those chapters. It is important to go into as much detail as necessary so that there are no unanswered about how the set of recommendations is intended to work.

Exhibit 1-K shows a solution implementation that was part of a proposed solution strategy recommended for the Playboy case. Notice the specificity of the recommendations. The price per copy of the new magazine has been set, the break-even level necessary for success has been computed, required circulation has been estimated, and so on. This group's analysis went on to present the plan in which the demographics of the target market were explained, target proportions of each distributions channel were estimated, and the numbers of potential buyers in each US geographical region were identified.

The expected revenues and costs for this and other proposed solutions were ultimately brought together in the company's pro forma financial statements. (This group also proposed new strategies for the enterprise, corporate, and functional levels.)

Next an implementation schedule is designed for the appropriate parts of the solution. Its purpose is to ,show the timing of strategy and policy changes. A useful approach is to name the parts of the overall solution set and then array them on one matrix with time on the other axis. In other words, a Gantt chart ( or even a PERT chart ) can be used to display the time phasing of solution elements.

Then a set of pro forma financial statements is prepared to show the financial impact of the proposed solution over the appropriate planning horizon(s). Specifically, a pro forma income statement and balance sheet, along with a cash budget, are needed to illustrate financial efforts comprehensively. As a rule of thumb, they should include enough accounting periods to reflect the major cost and benefit impacts associate with the set of proposed solution, but not beyond a reasonable predictable time frame. All assumptions made to construct the pro formas should be footnoted. The idea here is to develop the pro formas as if no solutions had been implemented, and then to modify them to reflect the financial implications of recommendations as if they had been adopted. If a 10 percent increase in sales is reported, the pro formas should be modified to reflect this change. New investments should show up on the balance sheet along with whatever financing they require.

Part of the implementation section is an explanation of whatever organization structure changes the solution requires. Organization charts are included that show booth the old organization structure and the one. Personnel strategy is set to show the nature of new jobs that have to be established and staffed to implement the new strategy set. A full explanation of intended changes should accompany the organization charts.

The final section of the case is the explanation of how the solution is expected to solve the problems described in the central problem. This last section is the solution defense. In it the analyst explains the short-and long term implications of the solution. The best way to do this is to explain point by point how each of the problems is identified in the central problem statement will be effected by the various parts of the recommended solutions.

Summary
Procedures for case analysis and a structure for formal case reports were in this appendix. There are many other formats for case reports which may be preferred by the analyst. The one presented here has been used in our classes for many years and effectively have served the purposes of the strategic management course.

Variations of the format can be used with good results for analytical reports outside the classroom as well. However, only the central problem and recommended solution sections would typically be included.

In either case the final report should be carefully organized and free of typing, spelling, and grammatical errors. The substance of a report can be significantly hidden by what may otherwise seem to be minor style and structural mistakes. In addition to being carefully conceived, good ideas must be effectively presented. Otherwise the report may never be acted upon.