Strategic Management in Action: The Appendixes

1. Strategic Management in Action: The Appendixes Lauren Sterna, Jennifer Eccles, Scott Addison, Clint Chapman, Craig Crowell, and Collin Gillaspie

2. Appendix 1: How to do a Comprehensive Case Analysis What is a Case? • Simply a short story of a company and the strategic issues its strategic decision makers are facing. What Should a Case Analysis Include? • A case analysis usually includes 6 parts: external analysis, internal analysis, strategic issues, strategic alternatives, recommendations, and implementation.

3. How to do a Comprehensive Case Analysis: External Analysis • Includes a description of the opportunities and threats found in the specific and general external environmental sectors. • General sectors include economic, demographic, sociocultural, political-legal, and technological forces. • Based on the analysis of these sectors you should describe what opportunities and threats you see in each area, and why you see them.

4. How to do a Comprehensive Case Analysis: Internal Analysis • Includes strengths and weaknesses found in the internal functional areas that include production-operations, marketing, HR management, R&D, information systems, and financial-accounting. Also, an assessment of top managers, and culture and structure of the organization. • Do not leave out a through financial analysis, because this is how strategic managers base their decisions. This should cover 4 parts: ratio analysis and comparison to industry trends, graphs and charts of sales, profits, and other financial measures, financial strengths and weaknesses, and a statement of the overall financial condition.

5. How to do a Comprehensive Case Analysis: Strategic Issues • Issues are weaknesses that need to be corrected, opportunities that need to be taken advantage of based on strengths and distinctive competencies, or possible threats that need to be avoided or buffered against. • Focus on what the issue is and why it is a problem, these need to come from the information that was included in your previous analysis.

6. How to do a Comprehensive Case Analysis: Strategic Alternatives • You need to develop at least 2 alternatives to the current situation when addressing strategic issues. • Describe who, what, when, and where to the question “What is the alternative being proposed?”

7. How to do a Comprehensive Case Analysis: Recommendations • Once the alternatives have been developed, you are ready to make choices about what alternatives you are choosing and why, also which are being rejected and why. • Do not forget to explain how your alternatives will resolve the strategic issue.

8. How to do a Comprehensive Case Analysis: Implementation • Implementation of course is always the decision of the organization, so you need to include descriptions of how things would have to take place, and where the funding would come from to put those changes into place.

9. How to do a Comprehensive Case Analysis: Written and Oral Presentation • The written analysis should cover all 6 parts described and include anything that is required for the analysis. • Oral presentations need to be easy to follow and sometimes requirements are included with the oral presentation, so follow them exactly.

10. Appendix 3: Southwest Airlines • Simple, fun, and profitable • 36 consecutive years of profitability • Began service in 1971 with 3 planes flying to Houston, Dallas, and San Antonio • Herb Kelleher, cofounder said, “A lot of people figured us road kill at that time.”

11. Background • The strategic approach that Southwest took was unlike any other airline company at the time • In the early 1970’s the airline industry was characterized by: • High fares • Inconvenient flight schedules • Complicated ticketing • Long and inconvenient flying experiences

12. Southwest’s Strategy • They wanted something to be simple • Get customers to their destinations • When they want to get there, on time • Lowest fare • Have a good time while doing it • Fly short-haul routes where the fares are comparable to driving

13. Current Operations • Southwest is known for the nation’s low-fare and high customer satisfaction • Serves as short and medium haul routes with single-class service for mostly business and leisure travel • Point-to-point service • 79% of customers fly non-stop with an average trip length of 846 miles

14. Low-Cost Advantage • Use a single type of aircraft- Boeing 737 • More than 530 aircrafts with an average age of 9 years • Fuel Hedging- where they pay for gas upfront for the right to buy fuel at certain prices • Use of technology- automated processes • southwest.com- first airline to establish website • Downtown and conveniently located airports

15. Legendary Customer Service • Great service at low prices • The American Customer Satisfaction Index ranked Southwest first among airlines for highest customer satisfaction for 14 years • Customer Service Commitment • Southwest’s mission statement establishes a foundation for its commitment to servicing customers

16. A Black Eye for the Company- Plane Maintenance and Inspection Trouble • In early 2008, two FAA officials had noticed problems with some of the planes • Southwest had failed to do required inspections because Southwest officials tried to keep the problems hidden • 8% of the fleet was grounded until inspections were completed • In March 2009, SW announced that they resolved all issues and are now working with the FAA to ensure safety for the public

17. Southwest’s Culture and People • High-spirited, irrelevant culture • At the company headquarters there are over 10,000 pictures of employees • Their focus is the customers • Southwest went where no other airline had gone before- blogging- Nuts about Southwest • Southwest’s people are their most valuable asset • More than 4 out of 5 employees are union members

18. Financial Highlights • 36 consecutive years of profitability • In 2008, revenues were up 11.8% to over $11 billion even though net income was down 72.4% • A testament of Southwest’s strategies is to post a net income

19. Company Awards and Reognitions • One of the most admired companies- Fortune Magazine • Business Week’s Customer Service Champs • America’s Most Shareholder Friendly Companies- Institutional Investor Magazine • Airline of the Year- for excellent air cargo delivery service *from 2007-2009

20. The Airline Industry and Major Competitors • The airline industry is extremely competitive • One major uncertainty is fuel costs • There are many things that make the industry vulnerable: • Capital intensive • Fixed costs • Fuel and labor intensive • Heavily regulated and taxed

21. The Future • Keeping costs under control and keeping its culture alive • No longer paying commissions on flights booked by travel agents • Motivating employees to continue to look for innovative ways to better run the business

22. McDonald’s

23. On the Downward slope • By 2000 known for poor service and quality  • Came in last in survey of fast food restaurants in 2001  • First time in 15 years more people disliked than liked McDonalds  • 2002 first quarterly loss

24. On the Mend • 2003 old CEO fired and replaced by Jim Cantalupo • Cantalupo obsessed over the basics(fast service, hot food, and clean restaurants)   • “Plan to Win” • Operational Excellence • Retake the lead in Marketing(I’m Loving It) • Innovation

25. McDonalds Today • Company employees and suppliers aligning fully  • Ranked 8th by BusinessWeek in best global brands  • Investment in different restaurant formats including Chipotle  • Since first quarterly loss in 2002 they have increased profits every quarter since

26. Ford • Car manufacturer based in Detroit, MI • CEO and President: Alan Mulally • 2008- suffered worst loss ever ($14.8 billion)

27. Ford History • 108 year old company • First to manufacture products using a mass production assembly line. • Hits: • Model T • Mustang (Sold 1 Million in 24 months) • Explorer (First SUV) • Taurus • F-Series Pickups • Failures • Pinto (exploding gas tanks) • Edsel (unusual design that never caught on) • Firestone Tires/Ford Explorer • 1998- CEO Jacques Nasser tried to diversify the company away from their core competencies and he was ultimately fired because of the failures.

28. Ford Industry and Competitors • Industry • Technology driven • Fierce competition • Fickle customers • Manufacturing overcapacity worldwide • Declining demand for certain car models • Competitors • GM • Toyota • Chrysler • Honda • 2007- beginning of recession and decline in car sales • Early 2008- Ford sells Land Rover and Jaguar to Tata • Late 2008- GM and Chrysler took bailout money from the US Government

29. Ford Motor Company Today • CEO Alan Mulally • Came to Ford from Boeing • Way Forward Plan • Bold leadership • Customer focus • Strong brands • Bold, innovative products • Great quality • Clear pricing • Competitive costs and capacity • Four Key Priorities • Aggressively restructure the cmpant to operate profitably at the current demand and changing model mix • Accelerate product development with new products that customers really want and value while achieving manufacturing excellence by reducing complexity and improving quality • Obtain financing to do these things and improve the balance sheet • Work together with accountability with all partners

30. Manufacturing and Product Design • 1st and foremost and manufacturing company • Japanese and Korean car companies out earn Ford on each car made by delivering more feature at a lower cost. • Ford will close 16 plants and eliminate 44,000 jobs by 2012. • Remaining plants will be as efficient and effective as possible. • Reduce costs by $6 billion by 2010 • Mulally demanded that engineers create uniform parts that could be use on most models. • Created a single global product development organization • “…work together more effectively to continuously improve quality, productivity, and speed of product development.”

31. Marketing • “ONE FORD” Marketing Vision • The plan is to have common Ford vehicles competing in global segments. • 2010 Ford Focus global car was introduced • “The Ford Challenge” • Asks consumers to compare their current car to a Ford car. • Values statement- “The customer is Job 1.” • Working closer with dealers.

32. Employees • Laying off employees and offering early retirements as part of the Way Forward plan. • 44,000 by 2012 • Increasing healthcare costs • $3.1 billion in 2006 • The increasing healthcare costs will continue to affect the companies ability to meet it’s profitability goals.

33. Corporate Culture • Not a drive for perfection, instead they focus on continuous improvement. • Weekly meeting with no distractions. • Use of data and data sharing between divisions. • Change in approach to grooming managers. • Commitment to environmental responsibility.

34. Financial • Ford should break even by the end of this year.

35. Ford Motor Company-The Future • Commitment to ONE FORD • “In a global market, success flows from having ONE TEAM working on ONE PLAN with ONE GOAL in mind.” • ONE TEAM- Including everyone with a stake in the outcome in the decision-making process. • ONE PLAN- Changing the way the company has been run. • ONE GOAL- Build more of the products that people want and value.