Case Analysis Process

There is no single correct way to approach analyzing and solving a business case. The following
is a suggested approach that can be used to simplify the process. Additionally, because every
case is different, there is no “one-size-fits-all” method for addressing a case. Cases will
generally be solved in groups, so it is necessary to get a sense of how much time and work will
be involved in analyzing a case to plan the group’s work. Therefore, before thoroughly reading
the case and beginning to perform analysis, it is useful to perform a quick read. Once the quick
read has been completed, a thorough reading is necessary before performing analysis. Once
the analysis is complete, formulating your recommendation and deliverable (either a memo,
case write-up, or presentation) follows.

Quick Read
Most cases include a set of case questions or prompts to guide students’ analysis and
discussion. Before reading the case, it is useful to read the case questions first. This will give
you a sense of what to look for during the quick read. Additionally, look at the exhibits
provided, as this will give you a sense of the data you will be working with when analyzing the
case.

During the quick read, you should skim the case to determine the following:
1. What is the issue involved and what decisions must be made?
2. How did the issue arise?
3. Who is making the decision?
4. When must the decision be made?

After having answered these questions, review the exhibits once more, as this will help you
devise a strategy for analyzing the case and you can plan with your group how to tackle the
case.

Thorough Read
Now that you have a sense of the issue(s) to be addressed, the context of the decision
to be made, and the data available for the analysis, it is necessary to thoroughly read the case.
While reading the case more thoroughly, it may be useful to note in the margin of the case
where important information is located or highlight important information. In the real world,
there is an abundance of information available, and not all information is relevant. Business
cases often contain irrelevant information to simulate the real world. While reading the case
thoroughly, it is important to keep in mind the analysis (outlined below) that will ultimately be
performed to solve the case.
Case Analysis
The steps below are not necessarily sequential, that is, they may be performed in a
different order, and you may jump back and forth between steps.

1. Succinctly define the issue(s) (Problem Statement)

The issue should be defined as succinctly as possible. Consider the IKEA case we
covered. The problem statement could read:

“Consumers and the media are increasingly concerned about child labor being used in
the production of consumer goods. A German TV program alleges that Indian rugs sold
by IKEA were produced in factories that employ children. Though IKEA’s purchasing
contracts contain a clause prohibiting the use of child labor, IKEA does not have a well-
defined strategy for monitoring its suppliers and addressing the issue of child labor.”

Be careful to distinguish between symptoms of the issue and the underlying issue. For
example, Sears Holdings revenue and earnings has declined substantially over the past
decade, while its share price has tanked and debt ratios have climbed. These facts are
not the underlying issues; these are symptoms of the issue. I would suggest that the
underlying issue is that Sears failed to appeal to consumers and did not respond to the
threat posed by Amazon and other online retailers. Sears lack of an online strategy
combined with their location in or near malls (which have seen decreased traffic) led to
all of the financial symptoms mentioned above.

2. Identify the data available and the analytical framework(s) or model(s) most
appropriate for analyzing it.
In corporate finance, we are ultimately interested in achieving the fiduciary
responsibility of maximizing shareholder value, while in investments management, we
are generally interested in forming an optimal portfolio for investors (either by
minimizing risk or maximizing return). Therefore, most case analysis will involve some
sort of valuation or risk/return analysis. There are several different models and
frameworks for performing valuation and risk/return analysis. Identifying the
appropriate model/framework for addressing the issue is critical.

3. Identify constraints the business faces in addressing the issue.

Firms do not have unlimited resources with which to solve problems. Identifying
constraints that the firm faces will help you rein in the potential alternative solutions
you will generate in the step below.

4. Generate several different alternative solutions to the issue

There are often numerous solutions to solving the same problem. For example, in the
mid-2000s, Disney’s hand-drawn, animated feature films were failing to attract the
audiences that they had in the past. Computer generated animated films from Pixar,
DreamWorks, and other studios were outperforming Disney’s films at the box office.
 Disney’s exclusive distribution deal with Pixar was about to expire, and Disney needed
address the failure of its in-house animation. Among potential alternatives:
a. Negotiate a new exclusive distribution deal with Pixar
b. Develop computer animation expertise in house
c. Negotiate a deal with another CG animation studio
d. Acquire Pixar
e. Do nothing
The potential alternatives should be viable solutions to the problem that are feasible
within the constraints faced by the business.

Students often make the mistake of deciding what the best solution is, and then
devising clearly suboptimal solutions to make their selected solution appear better.
Students also often overlook the “do nothing” solution. Some problems may not be able
to be solved. Revisiting Sears’ problem discussed in point 1 above, recommending that
Sears invest heavily in developing an online presence is not a very good solution. It is
highly likely too late for them to compete in the online space. The solution to Sears’s
problem is likely how to wind down operations while maximizing the value delivered to
Sears shareholders.

5. Define Decision Criteria

What should the best alternative accomplish? These criteria should be short and
measurable across all potential alternatives. Additionally, there may be several criteria.
For example, a firm may want to increase profitability while increasing worker
satisfaction.1 As mentioned above, finance problems typically involve valuation or risk
analysis, so decision criteria may be relatively standardized. When analyzing
investment/capital budgeting projects, for example, Net Present Value (NPV) is a likely
decision criteria. When analyzing an investment portfolio, the standard deviation of
portfolio returns or value-at-risk are likely decision criteria.

6. Evaluate the Alternatives per the Decision Criteria

If you have well-defined alternatives and decision criteria, this step should be
straightforward. Which of the alternatives ranks highest according to the decision
criteria? Which alternative best accomplishes the objective or best solves the problem?

7. Formulate Your Recommendation

This step varies drastically across cases. Some recommendations will be very simple and
straightforward. For example, accept project A instead of project B. Other
recommendations may be much more complex. You may need to recommend how the
firm should implement the solution you have devised. Revisit the Disney example

1
While the implications of worker satisfaction on shareholder value are difficult to quantify,
creating a positive working environment may also serve to maximize shareholder value.
Companies with a reputation for being good places to work are likely better able to attract top
talent.
 discussed above, for example. If Disney were to acquire Pixar, how should the combined
firm be structured? Should Pixar continue to operate as a subsidiary of Disney with its
own management team or should Disney and Pixar animation studios be combined
under a single management team? If you recommend that Disney develop in-house
animation capabilities, how much should they plan to invest? If you recommend that
Disney negotiate a contract with another production studio, what studio should Disney
approach and what should the terms be?

A Generic Format for Constructing your Case

Case solutions can be presented in many forms. Some cases may require a short memo,
while others may require a more extensive write-up, while others may be presented as if to a
board of directors or management team. Whatever the form of the case solution, the structure
should be similar and generally follows that presented below.

Executive Summary
The executive summary should be short, sweet, and to the point. Someone should be
able to read the executive summary in a minute or two and understand the problem being
addressed, your recommended solution, and some basic justification for that recommendation.
That order: problem statement, recommended solution, and justification, is generally
appropriate.

Data Analysis/ Framework/Decision Criteria

This section should explain to the reader how you approach analyzing the case and data
and how you evaluate potential alternatives.
Students commonly make the mistake of “teaching” the reader how to perform the
analysis. For example, students will say that they are using DCF analysis to value a firm and will
go into great lengths to explain how to perform a DCF. It is generally safe to assume that your
audience is well versed in business jargon and knows how a DCF analysis is performed. Over-
explaining such concepts wastes the readers’ time and potentially insults them.

Alternative Presentation and Analysis

Present the alternative solutions that you have devised and analyze them all in the same
section. The alternatives available to Disney discussed above could be formatted as presented
on the following page (in italics to differentiate it from this guide to case analysis):
 Alternatives Available to Disney

Acquire Pixar
Description of this alternative solution. Pros/cons. Cost/Benefit. Risks. Analysis.

Renegotiate Contract with Pixar

Description of this alternative solution. Pros/cons. Cost/Benefit. Risks. Analysis.

Negotiate Contract with Studio X

Description of this alternative solution. Pros/cons. Cost/Benefit. Risks. Analysis.

Develop Computer Animation Expertise In-House

Description of this alternative solution. Pros/cons. Cost/Benefit. Risks. Analysis.

Do Nothing
Description of this alternative solution. Pros/cons. Cost/Benefit. Risks. Analysis.

Be sure that you are evaluating the alternatives according to the decision criteria discussed
above. Be completely “fair” to each alternative. Students often overlook or omit potential risks
or costs associated with their recommended alternative. Similarly, they may omit potential
opportunities or benefits of the alternatives they do not recommend. Your audience will likely
consider the omitted risks, costs, opportunities, and benefits. Failing to address these in the
case presentation may make you appear less thorough and thoughtful in your analysis, which
may lead the reader to discount your analysis. You will present your recommendation in the
next section, so save discussion of comparing the alternatives to one another for that section.
In other words, in the Acquire Pixar section above, for example, only discuss that alternative
and avoid comparing acquiring Pixar to the other alternatives.

Recommendation
This is where you make the case for your recommendation. Explain why your recommended
alternative is the best. Compare your recommended alternative those not selected. If
appropriate for the case under consideration, discuss the actions necessary to implement your
recommendation.

Appendix. Figures and Exhibits

Over the course of your analysis, you should generate exhibits and figures that support your
writing and analysis. For example, you may be forecasting cash flows associated with different
alternatives. Presenting those in a table is much simpler than presenting them in the text.
Tables can often be used to shorten the text. For example, we often must make many
assumptions in finance. Rather than listing your assumptions in the text, you could put a table
of all assumptions in the Appendix.
Other General Guidelines to What Makes a Good Case
As mentioned above, we make many assumptions and forecasts in finance. Predicting the
future is difficult, and the actual realized future is likely going to be different than the forecast
future. We also must estimate certain inputs to models (like discount rates). We may make
errors in estimating these parameters. In general, there is uncertainty about forecasts and
uncertainty about estimates. Performing scenario, sensitivity, breakeven, and other forms of
what if analysis on model inputs that involve uncertainty can strengthen your case.

Students often just tack exhibits and figures on at the end of the case without referring to them
in the text. If you don’t need to refer to the figures in the text, then the figures are likely
unnecessary. Suppose you have forecast cash flows for one of your alternatives, and you
present them in a table in the Appendix. When discussing that alternative, a simple sentence
like “Cash flow forecasts for this project are presented in Figure XXX.” Label your exhibits and
figures.

Good business writing is direct and to the point. An unfortunate consequence of having
minimum page requirements on high school English papers is that students are trained to write
long-winded sentences and repeatedly make the same statements. In other words, you have
learned to say the same thing multiple times just to create extra length to satisfy minimum
page requirements. Put another way, students unnecessarily repeat or rephrase statements
that need not be repeated or rephrased. For example, my last three sentences say the same
thing. Don’t do that.

Spend some time formatting your tables and exhibits. Common mistakes include taking
screenshots of tables that end up looking pixelated, having different fonts and/or sizes of text,
reporting too many decimal places,2 misalignment of numbers, having unreadable fonts, etc.

PROOFREAD YOUR CASE. We all have different abilities; some are stronger writers than others,
while others may be more mathematically inclined. Consider assigning the best writer in your
group the task of doing a final proofread. Compensate that person for the extra work by cutting
their work elsewhere. When making the final proofread, try to make sure that the voice is
consistent. It is apparent with many write-ups where one writer ends and another begins;
eloquent writing suddenly turns into broken English.

If presenting a case, limit the amount of text on your slides. As a teacher, I have gotten away
from PowerPoint presentations because often students read the slides instead of listening to
me. If you have less text on the slides, then there is less to distract the audience from paying
attention to you. You can present tables and exhibits (like what’s in the write-up) and talk about
those rather than writing out your talking points on the slides.

2
Suppose we’re talking about a project with an NPV of about $100 million. Students have
reported numbers like $99,847,412.3567. Is the 4 th decimal place meaningful? Consider
reporting a number like that as $99.85 and labeling the table with something like
Table 1. NPV Calculation (all numbers reported in millions)