Firm Analysis Group Writing Project

The business environment is extremely complicated and significantly impacted by many economic, political and societal variables. The purpose of this project is to create a simulated learning experience whereby you will have the opportunity to study many of these variables within the context of a firm and its industry environment. Hence, your group will be assigned a well-known, publicly traded firm, evaluate its internal and external environment, and analyze its overall competitive environment through strategic analysis.

Project Outline

Specifically, the following components must be part of the paper. An expanded description of the sections can be found below.

You’ll need to put these references in APA format. Visit the Penn State Library site for a guide on citing and references. When completed, please choose one member of your team to submit your reference list as a Word Document, and be sure that the document includes the names of all group members who participated.

1. Introduction 1 page

  • Introduction of the paper

2. Overview of Industry and Firm (Lesson 1) 1-2 pages

  • Summary of firm’s current profile (industry type and dynamics: who, what, where, when, how)
  • Discussion of vision and mission and recent strategies

3. External Analysis of Industry (Lesson 2) 4-5 pages

  • General environment factors with a discussion of threats and opportunities
  • Brief overview of competitors and any strategic partners
  • Industry environment analysis using Porter’s Five Forces

4. Internal Analysis of Firm (Lesson 3) 4-5 pages

  • Financial ratio analysis, VRIN analysis
    • Summary of 5 types of financial ratios can be found in Chapter 3 of your textbook and Summary of financial ratio analysis techniques can be found in the appendix to the Case Analysis Chapter.
    • All financial ratio calculations should be investigated for any trend over a period of time. Profit margin should be reviewed over a minimum of five year period.
  • Strengths: Core competencies? Resources? Capabilities?
  • Weaknesses

5. Strategic Competitive Analysis 5-6 pages

A. Firm’s Competitive Advantage (Lesson 4)

  • Does it have it? Why or why not? Use both VRIN and profitability analysis to justify your answer

B. Business Level Strategy (Lesson 5)

  • Differentiation strategy vs. price (cost leadership)

To Identify a Busi­ness-level Strategy:

  1. Determine whether the firm is pursuing:
    • Low-cost leadership
    • Broad differentiation
    • Best-cost provider
    • Focused low-cost
    • Focused differentiation
    • Stuck in the middle
  2. Support your choice with appropriate evidence from company and/or media reports. For example:
    1. Cost leadership strategy
      • List all the ways the firm is trying to cut costs.
    2. Differentiation strategy
      • Name the unique feature(s).
      • Note the price premium.
      • Highlight marketing and/or R&D.
    3. Focus strategy
      • Identify the market niche.
      • Show how the firm understands the niche better than anyone else; how it is likely to provide both cost and differentiation advantages.
    4. Best cost
      • Discuss the relationship between price and product features.

To Evaluate a Business-level Strategy:

  1. Implementation
    • Determine whether the firm has appropriately implemented its chosen strategy.
    • Is it ‘stuck in the middle’? Discuss how the business strategy may be ineffective.
      • Examine revenue and profits in comparison to their competition.
    • Pay particular attention to organization structure and controls.
    • NOTE: This is the hardest information to obtain about a company and is often missing.

C. Corporate Level Strategy (Lessons 6 and 7)

  • How diversified is the company? (Hint: 5 choices from single business to unrelated diversification).
  • How has the company grown (or contracted) over the last decade? (Hint: 3 choices – Concentration, Integration, and Diversification).
  • Assess the success/failure of their corporate strategy.

To Identify a Corporate-level Strategy

  1. Consider both the breakdown of revenues and the similarities in the primary activities of the value chains across lines of business. Then classify the strategy as:
    • concentration (either pure concentration or via market development or product development)
    • integration
    • diversification (related diversification or unrelated diversification)
    • vertical or horizontal integration
    • international
  2. Support your choice with appropriate evi­dence about revenues and primary activities in the value chains.

To Evaluate a Corporate-level Strategy

  1. Determine whether value is added using company and/or media sources. The ways that corporate-level strategies can add value are:
    1. vertical integration
      1. market power
        1. build entry barriers
        2. increase firm’s bargaining power over suppliers
        3. increase firm’s bargaining power over buyers
          • through clout/leverage
          • by protecting a differentiated feature, like product quality or proprietary technology
          • related diversification
        4. pooled negotiating power
        5. multipoint competition
      2. economies of scope
        • leveraged/transferred core competencies or distinctive competencies (esp. intangible resources)
        • shared activities (esp. tangible resources)
    2. horizontal integration
    3. unrelated diversification
      1. acquisition and restructuring
      2. portfolio management
      3. parenting
        • implementation
  2. Determine whether the firm has appropriately implemented its chosen strategy. Pay particular attention to organization structure and controls.
  3. Verify that value was added for stockholders by examining shareholder returns. Examine such factors as:
    • cumulative total return
    • increase in stock price
    • market/book value
    • EPS
    • dividend payout ratio
    • P/E

D. International Strategy (Lesson 8)

  • What international strategy is the firm using? Note: International expansion is a part of the international level strategy.

6. Recommendations 2-3 pages

  • Suggest at least 3 specific recommendations for the firm including a brief action plan for each recommendation.
  • Advantages and disadvantages of each recommendation