Capstone Project – IBM Transforming, 2012–2016: Ginni Rometty Steers Watson

Instructions

The capstone comprehensive case analysis (CCCA) report requires you to address nine sub-sections, which are weighted differently. Please refer to the grading rubric for the capstone comprehensive case analysis – available through dropbox – to understand how each sub-section will be graded. Please do not leave out any of the nine sub-sections. I need to see each sub-section to award points for that sub-section. It is therefore very important for you to understand the relative importance of each sub-section.

Please see below the suggested break-up of the CCCA report in terms of my expectations for those who think that writing a 25-page report would be difficult.

  • Problem Summary: 2 Pages [3 to 5 paragraphs]
  • Analysis 1: 5 Pages
  • Analysis 2: 2 Pages [excluding the calculations]
  • Analysis 3: 3 Pages [excluding the calculations]
  • Analysis 4: 5 Pages
  • Analysis 5: 5 Pages
  • Strategic Alternative 1: 1 – 2 pages.
  • Strategic Alternative 2: 1 – 2 pages.
  • Strategic Recommendation: At least 1 page

Problem Summary (2 Points)

Identify a strategic problem that confronts the company featured in the case. 

Identifying the strategic problem is the first of the nine sub-sections and is worth 2 points. If executed well it should fetch you a straight 2 out of 2 points.

While you might have to go outside the case to collect additional information for some analyses, I would like you to firmly ground the strategic problem in the text of the case.

You should be able to identify the strategic problem in the case after reading the first few paragraphs of the case. While the articulation of the strategic problem itself may be short you should elaborate on why the problem that you identify is indeed of a strategic nature. Additionally, you can present a lot of facts to support your line of thinking. Please check out the grading rubric for more details on what would be a good problem summary section.

Analysis 1 (4 Points)

Identify and describe the strategy of the company featured in the case. 

Analysis 1, which carries 4 points, is pretty straight forward. I expect everyone to score 4 out of 4 in this ‘easiest’ part of the Comprehensive case analysis. Analysis 1, which has two parts weighted equally, requires you to address both parts for full points.

You might have to get some additional information about the company from external sources to conduct Analysis 1.

First, please refer to the following framework in Chapter 1: “Strategy as a link between the firm and its environment”. You need to collect some information from the case and outside sources to fill in the two boxes in the template below. (Please refer to Chapter 1 for more details on the framework.) The idea is to explain whether the given company’s current strategy is a good fit between the firm’s internal and external environment. You can either take a position that it is a good fit or take a position that it is a bad fit. I will be satisfied if you simply collect information to fill in the various boxes!

Strategy as a Fit

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 1

Second, please refer to the following framework in Chapter 1: “Describe the firm’s strategy”. You need to collect information about the given firm to fill in the two boxes in the template below. The idea is to explain/ criticize the given firm’s current strategy and understand how it is preparing for the future.

Describe Firm Strategy

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 1

Analysis 2 (3 points)

Identify the relevant performance data and explain how the company is performing.   

Analysis 2 – Data Interpretation – carriers 3 points.

While some data is provided in the case, it is not sufficient. Please feel free to use Mergent online or other data sources (e.g., Bloomberg Terminals) for the remaining data. You can access Mergent online through UCO library’s database page and Bloomberg Terminals are located in the Business Building. One Bloomberg Terminal is located in the library as well.)

Yes, you should, and in fact, you will have to use external sources to support your analyses if you think that the case does not provide enough material. (Please cite your sources.)

In Analysis 2, I would simply like you to use relevant ‘Firm Performance’ metrics to explain how the given company has performed over the last few years. (You need to take a long-term view.)

PLEASE CREATE TABLE(S) FOR FIRM PERFORMANCE DATA

You could focus on a subset of the following questions in Analysis 2.

1. How well or badly is the company performing? 

Answer the above using some financial metrics. It is very important that you use several measures of firm performance to analyze the given company’s performance. Additionally, you should compare these metrics over an extended time period. Further, you should compare these metrics with those of the best performers in industry. (You will have to identify the company’s industry for Analysis 4 as well.)

2. What does your financial analysis reveal about the company?

A good financial analysis goes beyond the numbers and makes conjectures about emerging trends and likely strategic implications of the numbers, often by combining insights from multiple elements of the financial statements.

3. Is there a gap between the company’s current performance and desired performance, i.e, what the company’s performance should be?

Use financial ratios. Analyze them in terms of trends, industry comparisons, etc. Financial data presented without some solid comparisons tends to be relatively meaningless. Therefore, compare the changes within the company over 3-5 years if possible. Furthermore, it is usually best to compare with the industry norms and averages or combine several of the closest competitors into a single basket.

4. Based on your analysis, does it appear that the given comany’s financial performance is headed in the right direction?

THE ABOVE QUESTIONS REQUIRE VERY DETAILED ANSWERS.

I am not expecting you to answer all these questions for Analysis 2 of the Capstone Case. I am providing you with the above as suggestions that will make you think. Please use your discretion since analysis 2 is worth only 3 points. You can either answer one or two of the above questions in detail or all of them in very general terms. While the best answers for Analysis 2 will touch all (Q1 to Q4), I expect you to address at least Q1 and Q2.

Analysis 3 (4 Points)

Diagnose the performance of the company featured in the case.  

Please refer to the following framework in Chapter 2, which is titled: “Performance Diagnosis: Disaggregating Return on Capital Employed”? This framework forms the basis for Analysis 3.

Firm Performance

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 2

You will calculate (or find) the firm’s RoCE for at least three years. (You can calculate this from data obtained through Mergent online. Bloomberg provides this information for active companies.)

You will then calculate other data points (i.e., Return on Sales, asset productivity, CoGS/ Sales, etc.).

The idea is to diagnose the problem that is either currently confronting or might confront the given firm in the future. (What is point of this diagnosis?) This diagnosis helps companies take corrective action.

For instance, the RoCE should ideally increase over the three year period. (I do not know but let us say that it did increase in the given company’s case.) You will then diagnose which of the two – Return on Sales or Asset productivity – contributed more to the growth in RoCE over the three year period. Let us say that the RoS declined while the asset productivity increased. This gives you a clue that the RoS is not going in the desired direction. You will then further disaggregate the RoS into various components to find out which of the components (or activities) are causing the problem. It is always better to simultaneously disaggregate RoS and Asset Productivity even if one of them does not seem problematic.

THIS ANALYSIS IS WORTH 4 POINTS. Please understand that I cannot award you any points if I do not see at least a table of all calculations. I will award 2 out of four points for the calculations. The other two points are reserved for explaining the data.

While I am asking you to disaggregate the RoCE into two components, another method referred to as the “Dupont formula” breaks up the RoE into three components. (You can google out “Dupont Formula”.)

I have attached an alternate template for cross-sectional analysis wherein you can compare the data for the given firm with its closest rival. (Pick up any company that you think competes with the given company head-on.) In this template the author Robert Grant compares the data for UPS and Fedex to explain why UPS earns a higher RoCE than its close rival Fedex.

Firm Performance 2

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 2

Analysis 4 (4 Points)

Explain how each of the five forces of competition [in Porter’s model] influences the profitability of the featured company’s industry.   

Analysis 4 is associated with Chapter 3 on “lndustry Analysis” and requires you to use Porter’s Five Forces model.

Porter's Five Forces Model

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 3

You will apply Porter’s five forces of competition framework to analyze how the five competitive forces influence the profitability of the industry in which the given firm competes. You will also use the Porter’s five forces model to (a) describe the structure of the given firm’s industry, and (b) also talk about how some of these forces are changing or will change in the future. Although the industry of the future could possibly look very different from the industry of today, the fundamental structure and competitive forces will probably remain the same.

Alternative 1 (1.5 Points)

What will be the key success factors in the featured company’s industry in the future? 

Analysis 4 should lead to this sub-section on alternative 1. Basically, your strategic alternative 1 should help a hypothetical firm in this industry improve its competitive position or alter the industry structure. Start by thinking about the basis for competitive advantage [of a hypothetical company] in this industry. What will this industry look like in five to ten years? How will the factors that influence competitive advantage shift during this time? Which of the Porter’s five forces will change in the future? Use these questions as a basis to develop strategic alternatives for a hypothetical company to either achieve competitive advantage in the future or sustain its current competitive advantage in the future.

Please refer to the following framework in Chapter 3 titled: Identifying Key Success Factors

KSFs

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 3

Analysis 5 (4 Points)

Analysis 5 is associated with Chapter 5 (Analyzing Resources and Capabilities). Please refer to the following framework in Chapter 5 titled: “A framework for Analyzing Resources and Capabilities”.

Analyzing Resources and Capabilities

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 5

Step 1: In which of the firm’s principal (functions or) value chain activities do its main competitive advantages lie? Use the Porter’s Value Chain to identify a handful of resources and capabilities in the company’s primary value chain activities.

Porter's Value Chain

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 5

 

Step 2: Please refer to Chapter 5 for an explanation on how to appraise the firm’s resources and capabilities in terms of (a) strategic importance, and (b) relative strength.

Appraising Strategic Importance

Source: Grant (2016) Contemporary Strategy Analysis, Chapter 5

Alternative 2 (1.5 Points)

How can the firm exploit internal strengths while defending against internal weaknesses? 

Step 3: Once you have appraised the firm’s resources and/or capabilities, the next step is to develop strategic implications.

Again, the alternatives are potential solutions to the strategic problem you would have articulated in the first section.

More specifically, please refer to point # 3 (Develop strategy implications ……) in the above figure (“A framework for Analyzing Resources and Capabilities”).

      • Exploiting key strengths or
      • Managing key weaknesses

Recommendation (1 Point)

One of the two alternatives should be your recommendation. You will explain why you think this is the better alternative.

The recommendation basically answers the strategic problem you identified in the first section.

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