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

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Effective Approach To Operational Issues

Operational Issues are not a deal breaker in the exam but you can earn some easy and quick marks here as there is likely minimal if any calculations required and a paragraph to solve 3-4 operational issues can earn you some quick marks.

There may be 10 operational issues in the May 2012 CMA Case Exam and you will not have the time to solve all of them, which is fine. As long as you address the main 3-4 operational issues you should be fine. However, you should still identify all of the operational issues in the case. 

Properly Addressing Operational Issues in the 2012 CMA Case Exam:
Have a section in your report entitled 'Operational issues'. Under this heading you should state that several operational issues have been identified and state which appendix these can all be found in (in that appendix you should put down in point form all the operational issues that you were able to identify).
You should then state that the three (or four - depending on how many you have time to address) top priority operational issues are discussed below.

Address these top priority issues by:

1. Briefly identifying the issues
2. Discussing what may happen if not resolved/what will happen if an improvement is implemented, and
3. Resolving them (make sure to mention who in the organization should be responsible for the resolution/implementation).

Operational issues are often weaknesses/risks that were not resolved through the strategic alternatives, or opportunities for organizational improvement.

Examples of operational issues:

• Outdated/inefficient IT systems
• High AR/Inventory
• Poor internal controls
• High employee turnover
• Poor employee morale

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Strategic Issue vs Strategic Alternatives

Students often loose track of what the main issue is. Many people often read the case and right away write down each of the strategic alternatives as the strategic issues, which is not wrong in itself as each of the strategic alternatives is a strategic issue in a way but these are not the main issue that the company is facing. All of these strategic issues have something in common, and once you identify it, you will know what the main strategic issue is.

Examples of Strategic Alternatives:

• Diversify into health food products
• Expand into Europe
• Offer a new brand
• Introduce a new service

The main Strategic Issue may be to 'increase market share and profitability' and these strategic alternatives are the potential alternatives that are available for consideration in order to increase market share and profitability and hence address the main strategic issue.

You can look at it as the Strategic Issue representing the problem at hand, with the strategic alternatives representing the possible solutions.

In the 2012 CMA Case Exam, identify the Main Strategic Issue and then provide 4 Strategic Alternatives. It is important to list the Strategic Alternatives in priority order, starting with the most significant alternative.

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