Company Financial Analysis Financial Ratios
The Appendix should be organized into the following sections:
Company’s External Analysis
Your External Analysis should be completed from the perspective of the industry. Use point form.
1) Porter’s Five Forces analysis
Identify the power of each force as either Weak, Weak to Moderate, Moderate, Moderate to Strong, or Strong with supporting point form evidence. You must state conclusions about the effect of the four forces on rivalry and the overall attractiveness of the industry by identifying which force(s) contribute the most to making it more attractive and which force(s) make it less attractive.
2) The General Environment
Your answer should include all 8 categories discussed in the chapter, and should explain which are relevant, which are not, and why. This is an analysis of the categories in the external environment that affect the entire industry, and not a list of how each category can affect specific internal aspects of the case company. These categories are produced by long term, structural elements in the external environment and are generally outside the control of firms in the industry. What are the strategic opportunities and/or threats to the profitability of the industry?
3) Innovation and the Industry Life Cycle
Identify the stage of the industry with respect to the S Curve (, and explain why you believe it is in this stage. Has the industry been subject to the forces of innovation? Explain why or why not. If so, identify the type of innovation using categories identified
4) Strategic Group Map
Create a strategic group map for the industry. You must identify two dimensions that drive the relative positioning of all relevant firms to create the X and Y axis of the map. These factors are usually criteria that customers use to make purchase decisions. Characterize the importance of each competitor based on market share, or a similar, relevant metric. This is a total of three factors that are used to create the strategic group map. Identify any barriers that might create subgroups of competitors. Identify potential empty space opportunities for movement on either axis, using arrows, and the resulting changes in competitive structure in the industry.
Company’s Internal Analysis
5. Financial Analysis (4 pages max) D2L Financial Template (16 marks for all calculations; 4 marks for noting the relevant strategic impacts and stating a general conclusion.)
Evaluate the current financial health of the company by presenting your findings of relevant
financial information based on a subset of the following:
Ratios: 1) liquidity 2) profitability, 3) leverage, 4) efficiency, 5) operating, and 6) market value and investment ratios. (See the template)
Also, using trend analysis, and/or common size analysis, and/or longitudinal analysis based on CAGR (Compound Annual Growth Rate – see CAGR in Investopedia.com ) to either reinforce staying with the company’s status quo or to suggest changes in strategy in light of the results.
If applicable, also include competitive financial analysis and/or other relevant financial findings by investigating all quantitative information provided.
For each of your calculations or observations note whether a trend is up, down or flat (see template) and note the strategic impact of each finding.
A concluding summary statement should address the strategic implications arising from your analysis of the financial health of the company.
An excel template for your financial analysis will be provided by your instructor on D2L.
You will need to export your analysis into a Table and insert it into your report, which should be submitted as a word document. Financial analysis submitted as a separate Excel file will not be graded.
6. Competitive Advantage Pyramid & VRIO
Identify a minimum of 3 resources, 3 capabilities and 2 priorities of the case company. Assess the potential of each to create sustainable competitive advantage based on the criteria found in Figure 3.2 and 3.3, and Tables 3.1 and 3.2). Your assessment should identify dynamic capabilities and whether the firm can achieve sustainable competitive advantage with any of these factors. Be sure to identify the strategic implications.
7. Current and Generic Strategy
Identify the Mission of the company. Is the firm pursuing a cost or differentiation strategy? Explain, what factors enables it to achieve a low cost or product differentiation strategy. How well is the company’s present strategy working, based on the data in the case?
8. Strategic Issue
Identify one strategic issue you think merits front-burner managerial attention.
The issue should be framed as a question (How to…? What to do about …? and Whether to
…?). Identify one strategic issue only. While there may be more issues that deserve managerial attention, the focus of your report will be based on supporting only the one issue you identified. Make sure your issue is not too general; for example, to improve profits is a generalized statement. The issue you identify must be actionable. Provide a minimum of 5 supporting and relevant observations based on various conclusions up to now from the External and Internal Analysis. Do not include any observations not discussed and analyzed previously (issues out of nowhere = 0). You should be able to identify all the relevant facts from your Appendix that led you to conclude that the issue you identified deserves managerial attention. Every fact that you think supports your main issue should be identified as they will ultimately become an outline for the analysis section of your report, referencing each of the facts identified from the Appendix.
Your answer should include a short and succinct paragraph identifying the key issue facing the company that has emerged from your work.
The Report to the CEO
• Group assignment: 60 marks – This total includes 5 marks for a revised appendix submission.
• Individual assignment: 55 marks – There is no revised appendix grade for this assignment.
The Report to CEO is your recommendation to top management. Be sure the Report to CEO is a useful decision-making tool, based on facts. It should persuade top management to act on the recommendation.
The use of headings and sub-headings will help organize your discussion and focus the reader’s attention. Headings should have a consistent style. The Report to the CEO should include the following sections and headings:
Report Body Introduction—5 marks
• Introduce the industry, the company, its current strategy and the issue you identified at the end of the Appendix. Establish the scope of the Report. Don’t include a lot of background material. An introduction of no more than 150 words is sufficient.
Analysis– 15 marks
• This is the heart of the Report where the issue is analysed.
• Identify the issue more fully. Demonstrate its importance by examining the factors that contributed to the issue and how they relate to strategy.
• Include only relevant and significant background information that supports the issue identified.
• Be sure to support your analysis by referencing specific data from your Appendix. This can be accomplished by inserting the number from the appendix identifying the section referred to (your Appendix will use numbered headings, and the numbered heading will be sufficient for your reference). For example, if you reference something from section
2.1 of your Appendix, then you place (2.1) immediately after the fact you are referencing from the Appendix. Do not reference case material directly; if there is an important fact from the case you would like to include in your analysis, that fact should be included in your Appendix. If you want to include facts from the case in your analysis, they must be added to the Appendix.
• Using facts referenced from the Appendix, convince the reader that the issue you identified needs to be dealt with by management.
Alternatives– 15 marks
• Identify three alternatives for management’s consideration to address the issue identified.
• Include a brief discussion of each alternative, clearly identifying each alternative with sufficient detail that it is clearly specific to the case.
• Identify the pros and cons for each alternative. Refer to relevant material from the analysis and the Appendix (remember to reference the Appendix if you use facts from the Appendix), including the financial feasibility or implications for each alternative. Use point form for you Pro/Con analysis.
• Be critical in the Cons section of your discussion. Management needs to assess both the pros and the cons of the alternative.
• A clear and convincing rationale for your recommendation should emerge from your analysis of the alternatives.
• Don’t use trivial alternatives; each alternative should be strategic and executable.
Recommendation– 20 marks
Make a recommendation. Your recommendation must be actionable, realistic, and in line with company resources. It must be strategic and have a reasonable chance of leading the company to success. Please include the following:
• Summarize the support for your recommendation. Illustrate how your recommendation will address the issue identified as the major issue facing the company.
• Discuss how your selected strategy fits with the external/internal variables, especially with the financial resources.
• Discuss how your strategy will achieve a competitive advantage and enhanced profitability over time.
• Discuss why you did not pursue the other alternatives keeping in mind the pros and cons you identified for each.
• Discuss why the con you identified for your recommended alternative can be mitigated.
Important suggestions for success
Only use data from the case. Case data reflect real life and can be imperfect at times. If there are insufficient data available, the section or subsection will be eliminated from the grading rubric.
Failing to conduct the External Analysis consistently from the perspective of the industry you identified on your cover page will result in a poor grade.
Always cite your sources and make direct quotes of other people’s words (” “). Always follow Policy 60. Turnitin similarity scores do not reliably indicate whether you have plagiarized.
In the group assignment, read, understand and help revise everyone’s contribution.