Wednesday, 28 March 2012

Notes on Analysis of Strategic Alternatives

Aim for analyzing at least 3 strategic alternatives in-depth

Pros and Cons
  • Pros and cons should come from information in your situational analysis (swot, constraints, stakeholder preferences, available financing, etc.) – if you can come up with a pro or con that is not related to anything in your situational analysis that often means the situational analysis is not complete and you may need to add to it.
  • Word the pros and cons so that it is easy for the marker to see the integration (i.e. state that it mitigates a risk/meets a specific constraint/is not in line with a stakeholder preference, etc.)
  • Consider and state the implications of one issue or alternative on another (i.e. Expanding into Canada would take up all the available financing and not allow for any other strategic alternatives.)
  • Provide a quick and simple evaluation criteria matrix for each alternative and summarize it before  the overall strategic recommendations – this will help with bias issues.
  • Provide a brief conclusion at the end of each alternative.

Quantitative Implications
  • Not too much time or detail – ballpark if out of time. The key is to be reasonable and to show that you have incorporated and took into account the key information.
  • Calculate NPV for all the strategic alternatives (if possible)
  • State your assumptions - expect the case to include ambiguous and useless info. 
  • NPV should be somewhere around the 0$ mark – if it is positive in the millions then it is probably wrong (review your assumptions - are they reasonable?).
  • Do not recommend an alternative with a negative NPV. At the end of the day, any company, a NFP as well, needs $ to survive.
  • Calculate and identify wether constraints are met and if there is sufficient financing available.
  • List under Pros or Cons (if you crunched #s but did not include them in the analysis, you will not get marks for it)
  • Don’t forget to link it to the right appendix (ie. ‘See Appendix A’)
  • Remember to use after tax cash flows for NPV


  1. Thanks!

    Can you post most important quants to review.
    I know NPV shows up most of the time.

    What other types of quants tools we should use?

  2. List of Quant tools you may choose to use in addition to NPV:

    Sensitivity analysis
    Payback period
    Trend Analysis (horizontal and vertical)


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