Topic: Case Study Method – Preparation, Tactics, Examples

The Process
Overall Process

I. Individual Analysis and Preparation

II. Team Analysis, Discussion and Preparation

III. Classroom Presentation and Discussion

IV. End-of-Class Generalization about the Learning

Student Commitments

I. Preparation (one page analysis)

II. Presence (credit only on presentation day)

III. Participation (points for relevant comments)

Objectives of Case Method

Harvard Approach

 There is no solution

 Discuss Concerns, Approaches, Scope of Study, …

Learn How to Solve the Case

Consulting Approach

 There is always one/several solutions

 Present Underlying Problems and Alternatives

Recommend at least two potential solutions

Case Structure
 Preface – Situation description

 Background Information

 Analytical/Finding Information
  Other Related Information

 Conclusion of the Case: What to Do? Decision to make, approaches, Alternative analysis, etc.

Tactics…Important Things on Reading The Case

 Read the case!…more reading, more understanding

 Identify the actors, check background

 Check the case date, internet browsing will help to understand the background of the company

 Find the issue…critical issues

 Analysis: Use theoretical/conceptual framework..ask the lecturer to provide one or two

 Identify the alternatives…make groupings…positive vs negative impact

 Numbers matters….try to play with the numbers

 Exhibit matters…read it, find info..digest it

 Ask yourself….”What if….” “What will I do if I were…”

 Think out of the box….Relate with your own experience

 Marking is good…but over-marking will confusing

 Discussion: Go get the learning process…learn from others…not a “I win You loose” approach

 Group discussion: careful of groupthink and escalation of commitment

7- Steps in the Case Method Study Approach

Using an organized 7-step approach in analyzing a case will make the entire process easier and increase
learning benefits.

1. Read the case thoroughly. To understand fully what is happening in a case, it is necessary to read
the case thoroughly. You may want to read the case rather quickly the first time to get an
overview of the industry, the company, the people, and the situation. Read the case again more
slowly, making notes as you go.

2. Define the central issue. Many cases will involve several issues or problems. Identify the most
important problems and separate them from the trivial issues. After identifying what appears to
be major underlying issue, examine related problems in the functional areas (eg; marketing,
finance, personnel, and so on). Functional area problems may help you identify deep-rooted
problems that are the responsibility of top management
 3. Define the firm's goals. Inconsistencies between a firm's goals and its performance may further
highlight the problems discovered in step 2. At the very least, identifying the firm's goals will
provide a guide for the remaining analysis

4. Identify the constraints to the problem. The constraints may limit the solutions available to the
firm. Typical constraints include limited finances, lack of additional production capacity,
personnel limitations, strong competitors, relationships with suppliers and customers, and so on.
Constraints have to be considered when suggesting a solution.

5. Identify all the relevant alternatives. List all the relevant alternatives that could solve the
problem(s) that were identified in step 2. Use your creativity in coming up with alternative
solutions. Even when solutions are suggested in the case, you may be able to suggest better
solutions

6. Select the best alternative. Evaluate each alternative in light of the available information. If you
have carefully taken the proceeding five steps, a good solution to the case should be apparent.
Resist the temptation to jump to this step early. You will probably miss important facts,
misunderstand the problem, or skip what may be the best alternative solution. You will also need
to explain the logic you used to choose one alternative and reject the other

7. Develop an implementation plan. The final step in the analysis is to develop a plan for effective
implementation of your decision. Lack of an implementation plan even for a very good decision
can lead to disaster for a firm and for you. Don't overlook this step. Your faculty will surely ask
you or someone in the class to explain how to implement the decision.

Useful Frameworks
Example:
Case Study: Arrow Electronics Inc
Synopsis:
 Jan Salsgiver, President - Arrow/Schweber division of Arrow Electronics, a semiconductors /
electronics distributor must decide whether or not to sign onto Express Parts new internet
broker service

 >$2 b sales in1996, it’s largest division of Arrow and Jan’s boss has given financial goal to keep
margins >15%

 Due to manufacturer incentives structure Arrow obtains margin from Book and Ship. Express
proposal opens opportunity to sell commodity products thru an electronic bidding site.
 Usefulness of the Case:
 Highly structured electronics industry have careful balance of power between manufacturer and
distributor. Case provides avenue to discuss role of e-commerce in firm’s channel strategy.

 Internet based e-commerce emergence challenges a traditional distributor Arrow’s value

proposition; it must decide its response

 From cross-selling & managing products/ services of transactional to relationship customers;

need to change customer management model due to changing environment

 Express threaten to undermine cross-subsidization model by siphoning high-margin commodity

product sales from relationship purchase to a competitive internet auction channel

 Manage marketing module such as customer selection, CRM and innovative channel strategies,
de-link value creation and value extraction (pricing) process, b2b e-commerce response of
incumbent players

Case Questions
1. How do Arrow’s sales people build their relationship with customers? How do they leverage
product line B&S vs VA?

2. What is Arrow’s business model? What value does it add to its Suppliers? What value does it
add to its Customers?

3. How does Express affect Arrow’s business model and its selling effort? Will Arrow be able to
keep its margins above 15%?

4. What action Arrow should take to respond to Express proposal; accept or reject it or take other
measures?

5. Explore relationship between Arrow and its suppliers, how do suppliers reward franchised
distributors? What are design wins, jump balls?

6. How do Arrow sales person build relationship with customers that buy B&S and VA product line.

7. Internet is a friend or foe of Arrow? How Arrow can leverage it to facilitate its sales effort

Accept Express Proposal?

 Assess to new customers (25% current sales of Arrow from transactional customers)

 Potential to use the internet to align its selling effort with customer type – high cost salesforce
for high value added activities and low cost internet channel to serve low cost customers

 Express offer provides the opportunity to understand the intricacies of doing business on the
internet without making huge investments
 Reject Express Proposal
 Express presents all customers to cherry-pick products from different channels that could
destroy the Cross-Subsidization Model of Arrow

 Adding another intermediary has the potential to cut into Arrow’s profits. Arrow faces threat of
being dis-intermediated by its suppliers over a period

 Arrow is the largest distributor, and its acceptance of Express proposal legitimizes the new
Internet auction model instantly. It cannot afford to validate the new model.

Breakup of Arrow’s Sales

To understand impact of accepting Express, analysis required on;

 Sales to relationship and transaction customers

 Sales of B&S and VA products

Express’s impact on Arrow’s Profitability

 Base Margins; VA 10-15%: Avg 12.5%; B&S 20-25%: Avg 22.5%

 Base case overall gross margin; (1,443 x 12.5% + 867 x 22.5%) / 2,310 = 16.23%

 On internet purchase customers look for price only and do not want additional service. Arrow is
likely to lose its B&S products to Express channel if it accepts new proposal

 Optimistic scenario; all transaction customers likely to switch to Express channel. $293 m is total
B&S business that will be lost.

Optimistic Scenario Gross Margin: [1,443 x 12.5% + 293 x (22.5–6)% + 574 x 22.5%] / 2,310 = 15.5%
Higher than corporate goal set by Steve Kaufman
Pessimistic Scenario Gross Margin; Arrow will lose all B&S business with transactional as well as
40% with relationship customers.
Pessimistic scenario gross margins [1,443 x 12.5% + 601 x (22.5 – 6)% + 206 x 22.5%] / 2310 = 14%
Lower than corporate goal

Product, Gross Margin & Cost Relationship

What Value Arrow creates for Suppliers

Arrow performs a variety of functions including; breaking bulk, carrying inventory and offering short
lead times on deliveries, bundling products from multiple manufacturers, credit management,
kitting (e.g., putting together a bill of materials requested by the customer), accepting returns, offering
engineering, programming and other value added services, etc.

Salsgiver explains the two fundamental needs that suppliers want distributors to fulfill: “to win business
in their commodity products to help them grow and gain both profit and market share” and “to
represent their new technologies and products to our customers.” The main areas discussed in the case
are listed below from general to specific.

 Aggregating small customer demand. Microelectronics manufacturers generally serve only their
larger customers directly, finding it more cost effective to let distributors maintain the order
processing capacity necessary to address the multitude of small orders originating from small
customers.

 Providing credit. Suppliers generally do not see providing credit as a core competency and are
therefore reluctant to maintain the facilities necessary to support that service in-house.
 Providing value added services that customers want but that are not cost effective for
suppliers to provide. This includes not only logic programming but materials management for
large OEMs as well (see case page 4)

 Providing data on small customers for suppliers. On case page 7, Salsgiver comments that “an
operation in someone’s garage this year could be the multi-billion dollar giant five years from
now,” a situation that makes suppliers very interested in who is buying what.

 Generating demand as customers move from transactional buying to relational buying.

SG&A Expenses for a Distributor