13 Assignment of Management Strategic

Name : Lidwina Friska Adriana Pijoh

NIM : 20180103175

1. Why should you begin a case analysis with a financial analysis? When are other
approaches appropriate?

Before we find out why financial analysis should we begin in a case analysis,
we need to know what is the finance analysis function in the company.
Financial analysis is an aspect of the overall business finance function that
involves examining historical data to gain information about the current and future
financial health of a company. Financial analysis can be applied in a wide variety of
situations to give business managers the information they need to make critical
decisions. The ability to understand financial data is essential for any business manager.
Finance is the language of business. Business goals and objectives are set in financial
terms and their outcomes are measured in financial terms. Among the skills required to
understand and manage a business is fluency in the language of finance—the ability to
read and understand financial data as well as present information in the form of financial
reports.
The finance function in business involves evaluating economic trends, setting
financial policy, and creating long-range plans for business activities. It also involves
applying a system of internal controls for the handling of cash, the recognition of sales,
the disbursement of expenses, the valuation of inventory, and the approval of capital
expenditures. In addition, the finance function reports on these internal control systems
through the preparation of financial statements, such as income statements, balance
sheets, and cash flow statements.
Finally, finance involves analyzing the data contained in financial statements in
order to provide valuable information for management decisions. In this way, financial
analysis is only one part of the overall function of finance, but it is a very important
one. A company's accounts and statements contain a great deal of information.
Discovering the full meaning contained in the statements is at the heart of financial
analysis. Understanding how accounts relate to one another is part of financial analysis.

1
 Another part of financial analysis involves using the numerical data contained in
company statements to uncover patterns of activity that may not be apparent on the
surface.
A careful analysis of the company's financial condition immensely improves a
case write-up. After all, financial data represent the concrete results of the company's
strategy and structure. Although analyzing financial statements can be quite complex,
a general idea of a company's financial position can be determined through the use of
ratio analysis. Financial performance ratios can be calculated from the balance sheet
and income statement. These ratios can be classified into five different
subgroups: profit ratios, liquidity ratios, activity ratios, leverage ratios,
and shareholder-return ratios. These ratios should be compared with the industry
average or the company's prior years of performance. It should be noted, however, that
deviation from the average is not necessarily bad; it simply warrants further
investigation. For example, young companies will have purchased assets at a different
price and will likely have a different capital structure than older companies.

2. What are common-size financial statements? What is their value to case analysis?
How are they calculated?

Common size financial statements make it easier to determine what drives a

company's profits, and then compare it to similar businesses. A common size financial
statement displays all items as percentages of a common base figure rather than as
absolute numerical figures. This type of financial statement allows for easy analysis
between companies or between time periods for the same company. The values on the
common size statement are expressed as ratios or percentages of a statement
component, such as revenue.
While most firms don't report their statements in common size format, it is
beneficial for analysts to compute it to compare two or more companies of differing
size or different sectors of the economy. Formatting financial statements, in this way,
reduces bias that can occur and allows for the analysis of a company over various time
periods, revealing, for example, what percentage of sales is the cost of goods sold, and
how that value has changed over time. Common size financial statements commonly
include the income statement, balance sheet, and cash flow statement.

2
Below is three basic common size Financial Statements are calculated;
Common size financial statements reduce all figures to a comparable figure,
such as a percentage of sales or assets. Each financial statement uses a slightly different
convention in standardizing figures.

a. Common Size Balance Sheet Statement

The balance sheet provides a snapshot overview of the firm's assets, liabilities
and shareholders' equity for the reporting period. A common size balance sheet is set
up with the same logic as the common size income statement. The balance sheet
equation is assets equals liabilities plus stockholders' equity.
As a result, analysts define the balance sheet as a percentage of assets. Another
version of the common size balance sheet shows asset line items as a percentage of total
assets, liabilities as a percentage of total liabilities and stockholders' equity as a
percentage of total stockholders' equity.

b. Common Size Cash Flow Statement

The cash flow statement provides an overview of the firm's sources and uses of
cash. The cash flow statement is divided among cash flows from operations, cash flows
from investing and cash flows from financing. Each section provides additional
information about the sources and uses of cash in each business activity.
One version of the common size cash flow statement expresses all line items as
a percentage of total cash flow. The more popular version expresses cash flow in terms
of total operational cash flow for items in cash flows from operations, total investing
cash flows for cash flows from investing activities, and total financing cash flows for
cash flows from financing activities.

c. Common Size Income Statement

The income statement (also referred to as the profit and loss (P&L) statement)
provides an overview of flows of sales, expenses, and net income during the reporting
period. The income statement equation is sales, minus expenses and adjustments, equals
net income. This is why the common size income statement defines all items as a
percentage of sales. The term "common size" is most often used when analyzing

3
 elements of the income statement, but the balance sheet and the cash flow statement
can also be expressed as a common size statement.
There are some key to takeaway this comman size financial statement:
 A common size financial statement displays all items as percentages of a common base
figure, rather than as absolute numerical figures.
 Common size statements let analysts compare companies of different sizes, in different
industries, or across time in an apples-to-apples way.
 Common size financial statements commonly include the income statement, balance
sheet, and cash flow statement.

3. When should you gather information outside a case by going to the library or using
the Internet? What should you look for?

An average, or typical case, is often not the richest in information. In clarifying

lines of history and causation it is more useful to select subjects that offer an interesting,
unusual or particularly revealing set of circumstances. A case selection that is based on
representativeness will seldom be able to produce these kinds of insights. When
selecting a case for a case study, researchers will therefore use information-oriented
sampling, as opposed to random sampling.
Information outside the case (that is, those which are extreme, deviant or
atypical) reveal more information than the potentially representative case, as seen in
cases selected for more qualitative safety scientific analyses of accidents. A case may
be chosen because of the inherent interest of the case or the circumstances surrounding
it. Alternatively it may be chosen because of researchers' in-depth local knowledge;
where researchers have this local knowledge and thereby to offer reasoned lines of
explanation based on this rich knowledge of setting and circumstances.
Three types of cases may thus be distinguished for selection:
1. Key cases
2. Outlier cases
3. Local knowledge cases
Whatever the frame of reference for the choice of the subject of the case study
(key, outlier, local knowledge), there is a distinction to be made between
the subject and the object of the case study. The subject is the "practical, historical
unity" through which the theoretical focus of the study is being viewed. The object is

4
that theoretical focus – the analytical frame. Thus, for example, if a researcher were
interested in US resistance to communist expansion as a theoretical focus, then the
Korean War might be taken to be the subject, the lens, the case study through which
the theoretical focus, the object, could be viewed and explicated.
Beyond decisions about case selection and the subject and object of the study,
decisions need to be made about purpose, approach and process in the case study. Gary
Thomas thus proposes a typology for the case study wherein purposes are first
identified (evaluative or exploratory), then approaches are delineated (theory-testing,
theory-building or illustrative), then processes are decided upon, with a principal choice
being between whether the study is to be single or multiple, and choices also about
whether the study is to be retrospective, snapshot or diachronic, and whether it is nested,
parallel or sequential.

Data Collection Methods

“Data collection is the process of gathering and measuring information on variables of
interest, in an established systematic fashion that enables one to answer stated research
questions, test hypotheses and evaluate outcomes.” –Wikipedia
The task of data collection begins after a research problem has been defined and
research design/ plan chalked out. While deciding about the method of data
collection, the researcher should keep in mind two types of data viz., primary
and secondary.
a. Primary Data:
The primary data are those which are collected afresh and for the first time, and
thus happen to be original in character. Primary data originally obtained through the
direct efforts of the researcher through surveys, interviews and direct observation.
Primary data is more costly to obtain than secondary data, but it is also more current
and more relevant to the research project.
As for example, data collected by a student for his/her thesis or research project.
b. Secondary Data:
The secondary data are those which have already been collected by someone
else and which have already been passed through the statistical process. Such data are
cheaper and more quickly obtainable than the primary data.
As for example, Census data is being used to analyze the impact of education on
career choice and earning.

5
Data collection methods:
The methods of collecting primary and secondary data differ since primary data
are to be originally collected, while in case of secondary data the nature of data
collection work is merely that of compilation. In below the different methods of data
collection, with the pros and cons of each method.

Collection of Primary Data:

There are several methods of collecting primary data like –
1. Observation method
2. Interview method
3. Questionnaires method
4. Schedule method

Collection of Secondary Data

Secondary data means data that are already available i.e., they refer to the data
which have already been collected and analyzed by someone else. When the researcher
utilizes secondary data, then he has to look into various sources from where he can
obtain them. In this case he is certainly not confronted with the problems that are
usually associated with the collection of original data. Secondary data may either be
published data or unpublished data. Usually published data are available in:
(a) various publications of the central, state are local governments;
(b) various publications of foreign governments or of international bodies and their
subsidiary organizations;
(c) technical and trade journals;
(d) books, magazines and newspapers;
(e) reports and publications of various associations connected with business and
industry, banks, stock exchanges, etc.;
(f) reports prepared by research scholars, universities, economists, etc. in different
fields; and
(g) public records and statistics, historical documents, and other sources of published
information.
The sources of unpublished data are many; they may be found in diaries, letters,

6
unpublished biographies and autobiographies and also may be available with scholars
and research workers, trade associations, labor bureaus and other public/private
individuals and organizations.
Selection of Appropriate Method for Data Collection/ Considerable Factors to
Choose Research Methods:
There are various methods of data collection. As such the researcher must judiciously
select the method/methods for his own study, keeping in view the following factors:
1. Nature, scope and object of enquiry:
This constitutes the most important factor affecting the choice of a particular method.
The method selected should be such that it suits the type of enquiry that is to be
conducted by the researcher. This factor is also important in deciding whether the data
already available (secondary data) are to be used or the data not yet available (primary
data) are to be collected.
2. Availability of funds:
Availability of funds for the research project determines to a large extent the method to
be used for the collection of data. When funds at the disposal of the researcher are very
limited, he will have to select a comparatively cheaper method which may not be as
efficient and effective as some other costly method. Finance, in fact, is a big constraint
in practice and the researcher has to act within this limitation.
3. Time factor:
Availability of time has also to be taken into account in deciding a particular method
of data collection. Some methods take relatively more time, whereas with others the
data can be collected in a comparatively shorter duration. The time at the disposal of
the researcher, thus, affects the selection of the method by which the data are to be
collected.
4. Precision required:
Precision required is yet another important factor to be considered at the time of
selecting the method of collection of data. But one must always remember that each
method of data collection has its uses and none is superior in all situations. For instance,
telephone interview method may be considered appropriate if funds are restricted, time
is also restricted and the data is to be collected in respect of few items with or without
a certain degree of precision. In case funds permit and more information is desired,
personal interview method may be said to be relatively better. When funds are ample,
time is also ample and much information with no precision is to be collected, then either

7
 personal interview or the mail-questionnaire is appropriate. Where a wide geographic
area is to be covered, the use of mail-questionnaires supplemented by personal
interviews will yield more reliable results. The secondary data may be used in case the
researcher finds them reliable, adequate and appropriate for his research.

4. When is inflation an important issue in conducting case analysis? Why bother?

Some case analysis of company will be find out when we begin with financial
analysis. And of course, when we talk about financial, one important thing of that is
about “inflation”.
Inflation can mean either an increase in the money supply or an increase in price
levels. When we hear about inflation, we are hearing about a rise in prices compared to
some benchmark. If the money supply has been increased, this will usually manifest
itself in higher price levels—it is simply a matter of time.
In other words, the common usage of the word inflation is the effect that people
see. When they see prices in their local stores going up they call it inflation. But what
is being inflated? Obviously prices are being inflated. So this is actually “price
inflation”. Price inflation is a result of “monetary inflation”. Or “monetary inflation” is
the cause of “price inflation”. So what is “monetary inflation” and where does it come
from?
“Monetary inflation” is basically the government figuratively cranking up the
printing presses and increasing the money supply. In the old days that was how we got
inflation. The government would actually print more money. But today the government
has much more advanced methods of increasing the money supply. Remember,
“monetary inflation” is the “increase in the amount of currency in circulation”.

5. How can you learn what date a case took place?

As a business owner, chances are that at some point you would have
experienced a number of case that comes with running a business. You try to find a
solution to these problems with case analysis, however it can become frustrating when
you find yourself dealing with the same issues over and over again.

8
 The truth about facing problems in business is that many business owners are
often only dealing with the symptoms instead of fixing the core issue. They end up
working harder and harder only to have the problem remain.
This is not unique to business. For example, if a plant is not producing fruit,
sometimes you need to fix a nutrient deficiency in the roots. You can treat the fruit or
leaves as much as you like but without diagnosing the true cause (in this case, a problem
with the roots) the problem will keep happening.
The same can happen when you go to a chiropractor with a sore neck. Correct
diagnosis may reveal that there is actually a problem with the alignment in your hips
and this is having a relay affect on your neck. It is not until the root cause is diagnosed
that the problem can be correctly identified and remedied.

So how do you identify where the business case took place?

Most often the recurring issues that surface are external symptoms that stem
from the real underlying problem. For example, businesses that assume sales is the
cause of a business case when, in fact, they have a marketing problem. If they had
enough leads coming in, they wouldn’t have that so-called sales problem or Businesses
that assume cash flow is the problem but if they just looked at their pricing and margins
(and sorted them out), their cash flow problem would disappear.
So rather than spending more time, more money and overall working harder to
get back on track you need to look deeper at what the cause is. It is about taking the
time to diagnose the problem and find the source of where these problems are coming
from. One way to approach this is to look at the business as a whole to explore the
different causes that can lead to the symptoms you are experiencing so the correct
course of action can be taken.
For example, poor cashflow can be caused by:
 Poor sales
 Too much stock
 Outstanding debtors
 Too much debt
 Too many drawings
 Not enough leads

9
 The list goes on and is often different for different businesses. We believe in
equipping small business owners with the tools to correctly diagnose their business
problems in order for the business to move forward.
Talk about business as an owner will quickly learn starting the business.
Generating a business idea is a great starting point, but an idea doesn't become a
business without effort. Some budding entrepreneurs understand the effort necessary to
create a business, but they might not be familiar with the many steps required to launch
a business venture. If you're willing to put in the effort to build a business, you're going
to want to know the steps needed to reach your goals.
When you feel your own business, a good business case will explain the
problem, identify all the possible options to address it, and allow decision-makers to
decide which course of action will be best for the organisation.
It will also allow any changes to the scope or time-scale of the project to be assessed
against the original purpose.
Before you write a business case, you should have carried out a fair amount of
research into the problem and possible solutions. This page assumes that you have
already done that work, whether on your own or as part of a working group.
 The Structure of the Business Case
A business case needs to lead the reader through the problem, to consider
various solutions, and finally decide on which option is best. It therefore needs a clear
structure, with plenty of headings and sub-headings to guide the reader.
Sections that are usually required in a business case are:
1. Executive Summary
The executive summarises the business case, including your recommendation.
It is often best written last, when you’re clear about your recommended course of
action, and why. Remember that some decision-makers may only read the executive
summary, so you need to make sure that you have included everything relevant.
2. Introduction
This section introduces the business case and briefly sets out what it is about.
3. Statement of the problem
This should be a brief paragraph stating the problem. It should relate back to the
organisation’s strategy or vision to demonstrate how solving the problem is important
to the organisation.

10
 4. Analysis
This section provides a more detailed account of the problem and why it is
important to address it. It should include any analysis you or others have carried out to
identify the impact of, or the reasons for, the problem. Hard evidence is always helpful:
the number of people affected, or the cost to the company or to its customers. At this
point, it is appropriate to mention anyone who has been involved in the work within or
outside the organisation.
5. Discussion of Possible Options
You should identify and discuss all possible options for addressing the problem,
including doing nothing. For each one, you need to discuss:
 The benefits: why it would be a good idea to do it, including how far it addresses the
problem;
 The costs, including resource requirements. It’s often helpful to include figures
and graphs here;
 The likely time-scale for the project, and to see a return on the investment, with
reasons; and
 The risks, both of doing it, and that might prevent successful implementation.
As far as possible, these should be realistic, and preferably supported by solid data.
Where you have estimated, this should be based on a reasonable source, which you
should cite if possible.
6. Recommendation
Finally, you should make a recommendation for which option is best, weighing
up the costs and benefits.
7. Details of your Chosen Option
Depending on your organisation’s preferences, the nature of the business case,
and how you feel about it, you may at this stage wish to include a more detailed
consideration of your chosen option. Alternatively, you could include a more detailed
analysis in an appendix, including all the supporting data, or provide a later report with
all the project details.
If you are including more details, this is a good opportunity to include an outline
project plan and more thorough and complete risk analysis. These will demonstrate that
you have thought through the project in some detail, and have a reasonable idea of how
long it will take, what resources will be necessary, and how to mitigate the risks. This

11
should help you assess whether the organisation is currently capable of carrying out the
work, or whether additional resources will be needed.
You should also make some proposals for project governance, including a group
to oversee the project and any critical decision points. Your organisation may require
a detailed financial appraisal, including opportunity costs of the project, and some
discounting if the payback period is several years. If so, there will almost certainly be
detailed guidelines somewhere, including a discounting factor, which you will need to
follow.
With the structure of the business case above it will help to find out when the
case took place and how to solve.

12