Outline: Case Study
Example: quality-control problems that are undermining the firm’s reputation. Opportunities: These come from outside the firm. The two most common such external factors are changes in the market (either at the economy-wide level or in the market for the firm’s product), and changes regarding competitors. Example: an economic boom is forecasted; demographic developments that favor the firm’s product; withdrawal of a competitor from the market.
Threats: Threats also come from outside the firm, and involve similar factors as opportunities.
Example: a recession is forecasted; demand for the firm’s product Is declining; new competitors are entering the market. PEST Analysis (Industry wide) Analyzes external forces or trends that may have an impact on the company’s equines. Political – are there political signs on the horizon that may change. Is the company dependent on a particular regulatory regime? NONFAT? Economic – trends in GNP/GAP or inflation that might have a sizable impact on the company.
For example, globalization of trade, outsourcing etc. Social – trends In society.
For example, children now spend more time gaming and on their computers than watching television or playing sports. Laconically – Lustrously changes In technology Tortures or startling to snow up. Ho example, internet shopping, mobile telecommunications, etc.
Forces (industry Wide) During the sass’s Michael Porter of Harvard Business School devised a framework to determine whether an industry was attractive or not (I. E. Could produce high financial returns). He then developed some generic strategies based on an examination of the five forces.
Buyer’s Power – First determine who the buyers are.
It’s not always simple (for example, the buyers of Ideas or Puma shoes are not individuals, but sporting goods stores). Then determine whether the buyer has relative power over the company (for example, can Ideas force stores to buy shoes that aren’t selling? ) Suppliers’ Power – First determine who supplies the company that you are analyzing. Then determine who has the power in the relationship. For example, if the company is buying a commodity, it will have almost no influence over the price that it pays.
The price is set in a global market. Substitutes – Are substitute products available for the ones that you are selling? Substitutes for running shoes might include sandals, regular shoes, etc.
Potential Entrants – How easy is it to enter the industry? If it costs a lot of money to set up a factory, it is likely to be more difficult to do so than in retail, for example, here all you have to do is come up with first and last month’s rent on a shop. Industry Competition – How intense is the competition in the industry? If there are lots of small companies, it’s likely intense.
If there are only two or three large companies, then likely less intensive. The key to financial analysis is to examine the trends (how have various ratios changed over the past few years) and how the company compares to others in the industry or industry averages. Do not recopy financial information from the case.
Look at trends and comparisons. It may be necessary, in some cases, to do projections. The best starting point for projections is the growth rate of recent years. Remember though, that companies don’t grow at 100% per year forever.