:E

=:Pllasis on problem ide nt i ticaIion and i Ls speci f ici ty in direcLing Llre student
:o carry out the Lasks that are necessary for a Elrorough case
itnalysis.

Fig ur e )1 Framework for Case Analvsis

-<tep I : Compreirend case situation.

Task j.l: Speed read case.
iast< 1.2: Read case carefully, taking notes, underlinins.
S:ep 2: Diagnose problem Area.
Task 2.1: ldentifv problem areas.
Task 2'2: tt:r^I?!!: b-v-problem area from nores and a rereading ot case.
rask 2.3: use evidence Lo diagnose each probJ.em area i.n turn.

-::ep 3: State Probl-em.

lask 3.1: State ma io r problem.
Task 3.2 : ( Optional ) State minor problems.
Siep 4: Generate A-l_[ernatives.
iask 4.1 ; List sol-ut.ions to ma ior problem.
Task 4.2: (optional) rist sofuiionS-;;-;i;o, problems.
q.
i-on Eval-uate Alternatives and Sel-ect.
Task 5.1
qt Construct T-account for each alternati-ve.
ldbK List "pros" on one side and ;;;;.,on the other for
Task <? carefullv weieh pros_a"a each.
AdDK \/, (optional ) td 5'. t , 5.i; JJ"sl"u"a
;;;"i.5' ;o;i"r";; #;;'airernative.
;i;;r"pioui"*".
j:ep 6: Defend Irnplementation.
Task 6.i: List questions abour
Task 6 .2 : Develop a defense -i or the workability of the solution.
eacn question.
Task 6.3 : (optionbl ) oo-6. i ina 6.2 for the solutions to the minor problems.

r iic sf >: s teps are itoi aiwa,vs followeC r.ictif

s t in :ire c::der given. i: tnat
r.: of ten returns to an earlier step as a nerw idea occLrrs . Nevertheles s, one
:-.:s rqt_ jur,lir airead to aitempt a laie,r v!1!- !L; -
r.. -l
u,l so i.s to inr,ite a
;-:cerficial result to tlre ana11'sis.

.x: ,-E
,r-, It

s
i
-'a;l:i l-€
 'r: '- ?l

will be rereading' page flipping' and addltional note takirrg'

Examp I e of : !9gg-'11-
--9ry-ql*91d--9119-! 'I
I

h,achSteplnthecaSeanalysisfraneworki,sexenpllfjedwithIhecase I

Sj:ln-d:!-!-1-1-4--I-Lq-1-1I1.1, g'iven in Section 2'2'

ln order :'r comlrehcnd 6|1p case i

I'ines suggesLed above '

situation, Lfre sLuderlt f irst reads the case aI<-rng ttre
Thar is' fhe SEudent first skims the case rapidly,
taking no notes and doing no
underlining.Next,t'hestudentreadsthecasecarefullyandrakesnoteof
(using a tirick felt narker with a
significanE facts by underl-ining, highligirting
lieht color), marginal notes, and summary notes'

.-2 Diasnos s!9p--1)

2.3 e J:qqlqt-t1911-lf'rlqgYotLt-
Thecaseanalysisisleadingtowardadefinitionofaproblern.Theword
,,problern" here means a situation where effecrive action can be planned to
improve the sltuation of the organizacion' Thus
the word "probJem" includes not
but indicates both areas
only its everyday meaning of a lerp-l9TTg.*:i-tl:9-*9:'
for new actions' "}Je are
needing corrective action and areas of opportunities
opportunities," said John l^l'
all continually faced with a series of great.
Gardner, "brilliantly disguised as unsolvable problems.''
was the first step in
The general acquainlanceship wlth the case situation
thlsprocess.ThissecondstepistoScrutinizetheevidencetoidenti.fyand
investigategeneralareaswlrereproblemsmayexist.Oneoftenapplies
quantitatrvecools(seeChapter3)ormarketingandbe}ravrota\colLe}ts\see
Chapter 4) in this analYsis '
TheactivitesoftlrestudentinthediagnosisStepbeginwithan
jienLriicatrc_rn of probie,r, ireas, i. e., situaiiorLs exirib:"tin;l !..ri1-sg!--l- -Q!!sti-,':L'
cjli;isLs-, c!1s.,9, 'lli5ilgtt' etc' Tire s1-iiocni mtrsL irL:!: Ir cx;efirtrr:' 5

lcerlt:-fv tllese arci]s'

ttiorollg,h nasterv of lhe ci;se facts, and cret'tivit)'Lr:
Tfrese problem areas rnay'be rucrefineci
as tiit':;':i;ivr' -:1'!1 i)r-i::'r-'r-rSr
.ill{: ::.i,.ii...i]'. r.lgiS signif lCanit 1l.i'.ls
Aiter .lire probl€Ifi i:i€il5 ai:e del.ined '
;' 1;1 i-';-d rereracing of lhe case' '{jr)r
uncier eacli ireading. T'hi s c'i Len requircsr
I alr }'ear iri se"'era1 problem ai..ei-is '
review c>f notes . S'.rlte Kei' poi-n"s l'ii
iIl turn aild brings tcigether alI the
I'i-nal1y, the student takes elrch problern arera
in tlie case'
facts to understand what is really happening
Thisill-definedcreativeprocessofconcepIualizingt'irebasisofproblems
isimpossibletocodify.lntheremainderofthissecIion,wef'resentt\,JO
checklists whj-ch give insights to the process'
32

'ilre way Lllat one intel-lectually identif ies problem a reas is described here
by liil liam Pounds. l,ounds conLends that :

"The word problem is associated with the dif ferences beLween some existi ng
situation and some desired situati-on. .. the process of problem f i rrrl i no t5
the process of finding di{lerences."
The ptrrpose of di agnos ing er,'idence is tc deterrnine areas wirere the current
situation (or future situation if no effectjve action is taken) differs from
some more desir:ab1e state. Tirus, the problem-finder must comprehend both the
oviqtino ct.l-o cnd idont-ifrr r arrcjn6slg
-'*--.Y. -_.:...:b "::-_-- "... StateS.
l..l.ll.-
Consider now some examples of
identifying problems by comparing actual
situaLiol.ts with desirable situations. The "desirable situations" wi l1 be called
"nodels of desirable siLuaLions, " or simply "models". We divide the
identif ication of problem areas int o comparing the aclual situation with models
of a ciesirable situation. !o11ouing the ideas of Pounds, we find four seLlrces
for recoqnizing models of ciesirable situations. Tirese models are presented in
checklist format. Each item begins with a general explanaLion wirich is followed
by a fictitious il-lustrative example.

CHECKLIST 2.3.2A: THE ''I'{ODELLING'' APPROACH TO PROBLEI.l IDENTIT-ICATIOI..i

I. _H_i_s_t!_r_ita_1_l'{.iS]rj Historical rnodels are based on situations of the

organization at a previous time, which are usec as a sLandard for comparjson of
lurrenL or ruture perlormance of the same organizaLion. For example, each :-ear
:rom I975 through i978, the liacro Corporation has experienced annual sales of
t,U00 two-horsepoi.ter electric motors all produced in its A1 bany' p1ant, and
i0'000 one-horsepower electric motors all produced in its Boston plant. In
sales of two-horsepower motors remain at 5,000 units. but sales of one-
"919,
--riSt'llr,rn:i:l- li'iois Clo| ia f,.'ii' u:its. The rr,:l-.,',i;'.*)- ..ce,niii:i t:: t, ;,:-:,iti,n r.'.il:
-.r.-iltr:tr','.;!\'r j: sal es tirrouglr :he Liist.cr:ical nocei ::l:-rt i9 jlt .,;:ii s a:e a !arget
-..'r 1979 si:f*s. jlte nanager iias icenLlfjed tiii-'.'Liic pt-obr€.i: is::ssociaIed wit]r
.al es oi oirer-i,(.ir-seilower notLrt s; lrohc\r€r, Lite ;L:,iti-!€ t- i.r,: s t'.,. I i-.re
---ti-riqe the
:ituaiiCrll i-cr 5., iC,r e>:alt.;,a, i-i.usra- D\ ifr:-rlt.s rt-, liie BCSt-On plant, oi-
:frnPetiic-rr's; i-rrocuci, price, e,tc. tn c'tirer- ur(rt..:. l-iLt iiroblt,m area is sales ol
-ne-hr,rse'Dower moLors in ttre ijoston pi:iriL. l..rrirr cirnii.iL nal.:e a precise staternent
: Llre underlying problem from tiie iniormaLic.rr., gir.en :rbove.

- . t1qg9l1-!3gq:lf_u_nfUs1qe tg-. The use of a br-rsjness enr'ironment rnodel sLt?-*s'

wJ th organi zatlons tli::i f :rce sini_lar markets or
_,rmnrrinr' .n nroo-i7.ti'^n
ul Fo llf 4d Liurr '.'i

situations. .b or example, lhe llacro Cc-rrporation's earnings per doliar of

,-#*r
 33

invested capital declined 2 per cent in 1979, whiLe tseta Corporation's increased
by 3 per cent. Each firm is one of 100 smal1 organizations in the same
competitive market. The use of the Beta Corporation as an rnodel fron the
environment suggests that the llacro Corporation has a problern (or opportunity)
in its earnings on invested capital.
Students need access to information about the business environment. to
ldentify these models. This information may be included in the case, may be in
a special teaching note, or perhaps may only be available if the student does
library research. Appendix B of this text contains the Dun and Bradstreet Key
Business Ratios. A1so, Appendix C describes a wi.de variety of sources for
economic and industry data that is useful for case analysis.

3. Planning l"lodels: A planning model is a standard set by Ehe management of an

organiza tion as a iarge t for future perforrnance. One compares actual
performance against the plans (often expressed as budgets or sales quotas). For
example, the Macro Corporation has sales targets for the first 2 quarters of
I979 set at $600,000 and.9620,000. In the first quarter, sales were $580,000.
This deviation of actuals from the plan suggests a problen where action is
neeied. Note also, that f irst qurrter sales of , say, $650,000 rnight intlicate an
opportunity - sales are so good that llacro must ensure the opportunities are
fully exploited.

4. Personal l'{odels: A oersonal model is a standard of comparison that one has

derived frorn rnany experiences. Although the source of the model may be from an
historical or business environment rnodel, the earlier experiences have been
internalized to become part of one's business judgment. For example, two design
engineers conpl-ained to the vice-presidenf of research and development that they
nai been agil": ;,:: seireral occasicrs :r- na-lketirg tc :-evise the :'rocuc: cesign.
The R & D vice-pr:esident believes ihat market-ir:g sitouid have ;lnal- sai' in
--^;,,^q
ii!vuuLL r-.- j -- anci that the des 1g:: e;rgineeis _ql-,cuiC not have the need tc
ucsitsrr

complain if thev a:e proDe:'i\' f,lilr'.af ec. Tl,c t,:-:: i:'iai model, ga:';re i f rcr j-qi-
experteqce, eglfr_iijgn, rgacing, uii.. ,:;: 'rhe k 6 D vice-presideni, i,ni,r-ca:.es
lhat the::e i,s: e slt.'*atlon in F. & L', r--::r:renicn" neeciing corrective action " Tiris:
subject of pcrsonal models is i,l i-cu-t to ieach, but an imporcanc area ior
prospective managers wishing to deveiop their problem idencification ski1ls.

At some point, the case analyst begins to detect key differences between
actual and desirable situations. The evidence must be scrutinizeci and
hypotheses abouE problems carefully formulated. There are a rrumber of "Do's"
 34

and "Don't s Ln irucllL

f,^-F i t,,l
!t Yaltl,-.,- ttre problems, wlricfr .rre sulnmarized below 2q
checklist.

CHECIILIST 2.'3.'2tJ: pROBLEti lDENTtf ICATlON AOVicE

L-tlu-q-c--cont use-sy*tP-!gts--q1!n-jlqlt"_tf ; The term "symprom" iras rire same meaning

in case anaJ-ysis as it does in medicine. 1f a patient has a hlgh Lemperature
and a freadache, lhe doctor knows something is wrong, but must search carefully
Io f ind tlte cause. lf the problem is a mild flu, it goes away; if the problem
i s scarlet fever, drastic corrective action is requirecl. Similarl-y, there are
svrnl)Lolir s attd Ilroblerns in situatiorrs encounLered by org.anizit,.j91s.

A new employee complains of faulty too1s, noisy working conditions. and bad
caf eteria lunches. 1s tire problem tlle Lool,s, thc noise, or f he f ood?
Is the
problci:i tire:rdjusLnent t.o tire job? ls Lirc problen rhe er:rpiol,ee's supe,rvisur,s
abilitY to manage people? Procluct s;jles are down and customers are conpla1ning
abouE quality control. Is marketing proniising too much? ls production sloppy?
Are products damaged in shipping?

2. _D_ql_t_ |i4u J3qar1g11_E_y1$1!ri1s_: There is a rendency ro apply value

udgemenEs to situations before making a thorough investigation.
-.1
For example, a
union nav be immediatell'judged as bad wlren it makes dernands on manapement. fhe
case analyst may be "pro managenent" and i-nterpret all union demands as
interferences in management prerogatives and fair profi[-making. The union
demands may well be in line wlth those made of sinilar organizations. Then,
since company survi.val may well be dependent on a fair union agreement, the
person wi.ro makes a premature judgement without a full sorting of the facts mav
f ;;il tc r)ursrte an essential course oi act ion.

.'i Appiv S rereorypes -, c :\cw Proi-r[]s: ^it]routir DasL rr!llr '.'J _' r, r,naDc
'_D_u*1_t__{iindlir
are powerful toois in case anaivsis . onc nu:lL lr0i let ther;t stifle crcitli,,'ity.
-.''-', :: -..'-rr. .; U,ari:ketilt5: ;:-l,alllr :ll:)\' Srj-'r' ililv
lillr-i:riing si-riiiiii:lr:.. Sirnil:lrl !:C r.llle ilas Si:ett .;

i. :r(i-\'!riJ i_lre pri)biem ! ulltr gliarL;.t-d not

automaticallV assune tirett Lltr s;iiilr, so-iuL jon :ii)r)li€'s t<-r tire nc\^' i;robiem.
Problems in organizations invofve scr nanv conp1e::, int er;lc t i n.q r,'ariables that
siLuations are alnost ncver i-denticaf.

4. Don'L Accept Inforrnation aL lace Value: I nJ orni:i Lion i n orgran j-za t.ions must be
scrutinized, in the saine wav evidence is in a court of law. Pe,bple are .i mnr'rf ont
 35

gathering and reporting information; they have their own biases which cause
them to perceive events in certain ways. Blame, value judgements, and even
facts are seen quite differently by each observer. For example, reported crimes
in a large U.S. city increased drastically in one year - di.d actual crime rise?
Further examination showed that the year of the lncrease coincided with a new
incentive system wirerein officers received credit when citizens filed fonnal
complaints. As another example, anyone who has been to court to hear the
deseription of an auto accident by two drivers will scarcely believe they are
describing the same accidenE. In any analysis of situations involving people,
the source of data and biases of the observers rnust be carefully examined so
that appropriate credibility is given to evidence'

5. Consider Multiple Causallty: It is a natural and perhaps useful human

tendency to seek simple soluiions to problems. This often results in seeking
single causes for problems. For example, R & D has haC a prcblem keeping staff,
and sales of new products have declined seriously. Although R & D may be
primarily to blame, the case analyst should be sure to investigate other
contributory causes, sueh as inadequate marketing, high production costs, or
co*p-etitive responses .

Example of "Diagnose Problem Areas"

After reading the ease in the fashion described in step 1, the following
problen areas were identified for the reasons indicated:
* F.esearch and Developmen!: This area is identified immediately because.of
the obvious significahce of the Burton process and the recent cutbacks in
R & D.
* Competitive Industry: This area is identified because of our knowl-edge
that |he dvnamics of i con.petitive market can make profits_scarce,^hence
the F.rec r:ri* i:e inpor:e::t ic::he ccnDeiitive markc::ne: indiana 5tence:c
adi t i .

* Retu:::: on irivestnent: Tire ueii:r'o:aLie clnlar-scn ri'i:; !lLancarc 0i1 of

neii ;erse.v (t b.;siness environment ucciei, sbe abcle) 'clent:-f 1es thls a:-ea.
* Litile Suopi-v Orientation: ^Some - trial anci error wes necessarv to airive
ur"liiii--p;;'ti;; ;;;;.--0;"--of icaiior, *s -.he
the nain clues to iLs identif t-i:h
COf,:LiI-i lrIl r;r tlrr cdrrent SySLems f O:- -p.irlhaSing c:'uce cil tiie
p;;"ioi;i;.: oi...osful situalion engencilred by the Eur:ton p:ocess (an
rri s : '. :-i a.- r n,oc t- i ,j .

Each of tlrese areas will be diagnosed in turn, foliowing the pattern sttc-

gesteci above - namely, list significant fact.s and then integrate them.

t ._R.."*9."h und D*""lop

". Burton Process. . . left Standard with one of the,

. . the industryrs best
7, line 2)
research divisions which it maintains to this day." (paragraph
36

tt. ..project system set up in research department. . .

.cut. in depa rtment
budget of ,, $l mllIion t . .? .l".gg. manpower lay-of f , and s t ringen t
bookkeeping. \paragrapn I4, trne /.)
"The cut in 1eve1s of.-supervision wl11 curtall the amount of communrcation
withln the d ivisions." (paragraph l5,line 5)

The case first indicates that Indiana Standard has one of the best R & D
departmenLs in the industry, parti-cularJ-y as witnessed by the breakthrough
discovery of the Burton process. Further investigation suggests that there are
problems. The Burton process is decades o1d (patent protection has lapsed) and
management has recently attempted to trim R & D presumably because
j"nefficiencies were suspecfed. The cutbacks seem strict ("theory X
roanagement"), which is not 1ikely to win too man,v friends for management among
ereative scientists. The million dollar savings in R & D expenses is negligible
for a company as large as Indiana Standard (it onlf increases ROI from 6.BAi( to
6
|i.vJ,o,.
R 10l \

"rn 19ll.
tt
. . thirty-fou r companies. . .became
_ free, independent, and
separaf e. (paragiaph 4, line l)
tt...faced by the indu stry as a whole....crude oi1
1s becomi-ng scarce. tt
(paragraph 18, line 2)
ttPrice wars and intense conpetition" (paragraph
20, line 1)
As [he above excerpts and our own experience suggest, there is intense
competition at the gas purap 1evel. Also, many petroleum products can be
protectec by patent for seventeen years after invention, but after this tirne
they can be produced and marketed by anyone. Presr.rmably many prof itable
products developed by Indiana Standard have met this fate. Thus, Standard has
no choice but to accept :he ci.allerce of staying in comoetitive narkets. p,o:h
r.;:ri:e:i::i si:il:s :t;c a:.:_::-*:-: ir:;l: :at *artrF - in E:i{.:,... :-..:. i,.i..:,e Se:n€.1: e3,*t. :i..--
1:-ne - r^'. 1-l be esse:^;iia1"

3. Return c:n Jitvi.s,irrent

Tlre:,.ranc-al- c:,ia in the case can be anal,lzed as fc-iows.

The following data is given in the case (rND = lnciianar NJ = New Jersey):

Toial lr.ssets: IND $3 billion, NJ - g12 billion.

Sales: IND $2.15 bilLion, NJ - 910 billion
I'ie t lncome : IND , NJ - 7 tirnes Il{D.
ROI: tliD -6 .BZ, NJ = ?.
We may use tlris daLa to cornpuLe some revealing financial ratios:

Net Income: lND - .204 billion, liJ - (7) (.ZOa) = 1.48 bil1ion.
(fo11ows from: R0I = net income/toL:rl assets)
ROI: IND - 6.8'A, N.l - I .48/ 12 = 11.567
(follows from: R0I = net income/tota1 assets)
Net Incomc Le-r Sales: ItiD - .204/2.I5 = 9 .37,, li.l - 1.1.2?:,1(' - li:'
(fo11ows fron: ni.'L incom{r L() sales = l:t,L income /s:i1e,s)
Asset Turnover: IND - 2.1513 = .7(\1 , NJ - 10/I2 -- o??
.\)JJ

(follows frorn: asset turnover = salcs/assets)

The results of the above computaLions are the foJ-lowing intcresting comParisons:

Asset Turnover: NJ's is t3.5"1 iiigher Liran IND's.

R01: r-J's is 4I.9"A higher tiran liiD's.
Net Income lo Sales: NJ's is 33.5% higher ttlan IND's '

Thus, we ccncl-ude that Standard of New Jersey is making substantially

greager use of its assets, as measured by return on investment (6.82 vs.
I1.6"/"). Although New Jersey is doing this partially by selling more products
for -given assets (asset turnoyer of .833 vs. .707), the main effect is more
profit on each dollar of sales (I4Z vs. 9.32). The much higher ROI of Standard
of New Jersey can only indicate a fundamentally different way of doing business
fron that of Indiana Slandard.

4. Lj.ttle Supply 0rientation

any pipeline system to ship its crude oi1

at first because the company remained a

" (par:ae raph 4, line 10)
accuis i j i|l
/ir: r:'
-l

ts overs€':rs: crtiil .,r

nf
ne 2)
1
u .-,.,1. .,
lrci dFi * ' .

Ildiarra Sfapdard iras de-emplrasizt'C iire ci ri,1 lintl iirl.j si,;r; ivj:rt oj crucie oi1,
and been contenL to buy Irom others. Tirc irurcllase of ,''-l:,triciln Oil represcnLed i,
large investment 1n the retail end of tire business, witi<:it in turn tneanL an t'verr
orp1rpr riernan4 bv Indiana Standard for crude oi1. However, the dril-ljne and
operation of wells in Limes ot scarcity ma!'be the mosl profitable end of the
business, because rnany buyers will bid up tire price of Limited supplies. In any
38

casr', L lrose cuml)anics with control ol ttreir supplies will be ab.Le to eng,age 1n
cconomic ircLi,.'l ties to consolidaIe their retail markct positions and majntain
nrnf ilq drrrino
I I rrl) le;rn
I nn riods.

,?? s_!u !g_p_tql_1_qq

_Lllqt :tu lL,_ _$ gp_ 3 )_
I'lte first two steps in case analysis lead up to Ihis tlrird step, formation
of a precise staLement of tlre problem to be solved. Ilany find the unsLructured
activities involved in defining probLems psychologically discomfortingr
especially when they have not done enough background investigation to thoroughly
comprehend tfre environment. However, after careful compJ-eIion of the fi rst two
steps ol, this f rancwork, one is in a powerf u1 posit.on to rnake an J nsightf u1
statenrent of the probJ-em.
Tlie problem staternent itself is about one to five sentences in l-enitir and
expj-ains tite basic disequilibrium or opportuniLy that underlies thc sirlration.
llost of ttre major syirlptoms of disorder should be explai.ned by ti're problern
statement. A.lso, the problem defined should be the one that is most sienificant
to the health of the organization.
I-n a thorough analysis, one also states problems which are of less
importance to the organization than the major problem. These are typically
call-ed "minor problerns" and relate to different problem areas than Lhe major
problem. One should be able to defend the deslgnation of one problem as the
major problem and che otlr€rs as minor problems.
The following checkli st describes important factors in the problem
statement.

CHECKLIST 2.3.3: PROBLEI't STATET1ENT ADVICE

l. St:rt-e ir-o en I xp j j ci t1r': 1,-i.thouEh o:e r:,r' ::r'-'iitivelr. under:stanci

oi a irri.tl)-.rii, c)ne can ilc) i ilfcessaril]- connunlcate tr)c prob-Len Lo sL)lirr,()iti r, lse.
Tran,.i:L::t!-t a prOblem StialemerL :ron Lhougitts j.ntc expl-icit h.a. l:cS can be
I j;i-u'u---. ito:: exampie, Lhe sLaLcnrnt: "Ther ilacro Corpoi'ation i-ras too Loru' a
:-!L\1ll/ L,ii itivcstment", is noL expri.c.iL enougtr Lo be used lo guide the subsequcnt
gLiilerillj-on and evaluatit,-n ot scrluiic;ns to the problem. Tlr-is is cioser rr-; being
i1 sLALeuleIlt of a sympIom, not a prc)bieril - -l.ow reLurn on i,nvestment is tlre result
of tire irroblerr. Pcriraps a more useful- statemenl would be, "l'lie )racro
Lorporatiofl iias naintained sales vol-ume and prlce, but experienced a decreasing
margin in sales acconpanied by jncreased production costs. This iias resulted in
a decrease in return on i.nrrestment. ''
 {g

i.-_"-i,nl a !_S_iAnr-t_L(_1ll:Ll: The problem selected musl be a situaI i-on wtrere acLion
will produce important gains (or arrest large impending losses) for []re
organization. It is onl)' Loo casy Lo misLakenlv conccntr;rt e on small problems
or symptoms of tltc underJ,ying problern, as discussed earlier. tor example,
suppose quallty conLrol is becominli a problr,n, and workers are discontented with
an r;,bnr-r>:ii.,us 1r-rreman. l irc l lrrcln,tll's ()ir.lri L iorrable. be iravi or mav bc caused hv
more signiricanL problerns - capital equiprnenL may havc have become obsolete, the
pruducLion rneLliods mav be antiquaLed, manirgemcnL's relaLion with labor nay lravt'
been de teriorat ing, e tc.

J_:. _D-i_!t-i1_g_u1_str_S]r_rr_r!-_li_r,jr_3_',d_l,-t,ry,-_J!{_g!s_p_e_c1-s: i'luny organizations face problems

wiricir have boLtr sirr.,rL- ai'rcl -Long-term aspects. There are ma jor underlying
problems which eventually lead Eo immediate crises. For example, a cornpany
tinds tiraL it 1s liard-pressed Io meet next month's financial obligations. Tl:-;.s
crisis musl be solved (i.e., secure casir for next monLh) and Lhe soufces of tfris
crisis remedied. ls the organization's capitalization sound? Are customers
paying on time? ls invenIory building? tai]ure to identify and solve the long-
tern'nrohlcn' nf ren rcsu_lts in secrrrinp short-ferm crises.
ru! r'15

Example of "State Probl-em"

The financial comparison to Standard of New Jersey shows that Standard of

Indiana does not handle its assets with the same efficiency. ln comparing the
problem areas described in the previous sLel. we concludc the following probtren
sLatement for lnciiana Standard:
lnciiana Standard has fai.led LU PTULCcL ir ^
rLs bUU! Ue (JL
^5 -,.^^1,,
bUPPr.v

j - - - i -r..-
arr drr atluuDLI),'-.. with lini ted sUPyf -.,-^t,,
J ^-J
dllU
.'^^-^^-i-^
lrlL I sdJ Ir16
J^---l
uEllldllu.

lq : roqlll -..e conpanv ls iL the merc\'(,i s::ali suppliers

tlr

ulru v'--(-- 1--L.>

i,
--..'-: - I si:ai-r:it-r'. a:ji-. .'-:r -a,i.r-:erii
profi:zi,:iirf is J-n jeoi;.1d1

.i Lr'rnatjves (F::aneri,'ol-i:" :l :e I 4)

1.,:,', 1)L:r)i) ie iind dlf f icr.rl.t"' ir !eir.raiirr;' rrore than one or two a.lternaLivc
sl,.:'.-::.ri: L() a p)roblem wiLirout c.1rrrfui Llii,irl'lrt. iiowevci:, before careful lhor.ighi
connen.fs, panic ensues and one tencs lo accept the first solution that comes to
tnjnC. hitlr careful tfrought, sLudenLs can devise a great manv soLutions to an
org_tanizaLion's i;rubiem. 1t is an excellent idea to initally generare as man)'
.ii Lerna Li r.res as pc,ssible, cven tirough sone ma)' be irrelevant. Further study and
moClficat.ions rnav well transforin one of tire ordinary or impractical solutions