The final project for this course is the creation of an Individual Case Analysis. The primary objective of this project is for students to understand how to analyze the capital structure of a company. Students will also improve their understanding of some basic forms of debt financing and learn to formulate strategies in structuring debt financing. The case will also expose students to the process of debt rating and its importance. Because of its international setting, the case provides an excellent opportunity for students to obtain an understanding of international capital markets and offshore offerings. Students will apply the case method described in this document. They will define the problem, build an analysis separating the important facts from the peripheral data, develop alternative courses of action citing advantages and disadvantages, and make final recommendations on policies that will maximize value for the business.
The case method is an important tool in educating managers by allowing students to bring to life conceptual material that is often difficult to understand without application, and aiding in integrating tools and theories students have learned by applying them to relevant management decisions.
The cases used in this course are a record of issues and problems actually faced by business executives, with supporting facts, opinions, and financial data that decisions were based on. These real-life situations are summarized by case writers who provide you with all of the relevant information that was available to the decision makers involved. If the information presented seems incomplete, remember that this only mirrors the business world reality of decision making with limited information. Obtaining more information costs time and money, resources that are scarce in most situations.
Each case, like each management situation, is unique. Since there is no one best procedure for solving problems or making decisions, there are no right or wrong answers in case analysis. Each class member will approach the case in a different manner. However, the following procedure can serve as a rough guide to your analysis which can be fine-tuned to personal preferences.
Read the Case. The first step is to get acquainted with the situation. Read through the case quickly, getting a general feel for what is going on. Who are the main players? What types of information are available to you? Go back and reread the case carefully, paying particular attention to case facts, figures, and diagrams. Be careful to separate symptoms and problems. Case writers will often flag important issues by italics, headings, or questions at the end of the case.
Define the Problem. Put yourself in the place of the decision makers in the case (managers, investors, debt holders, banks, employees, etc.). What are the critical issues? Does one problem stand out as primary, with other problems secondary or contingent upon it? Establish a time dimension to the problems; which problems demand immediate action, and which are long-term or strategic in nature? What critical assumptions are being made by the decision makers in the case, and how do these assumptions influence their chosen strategies? Try to state the problems so as to identify (a) who must take action, (b) why action must be taken, and (c) when should action be taken.
Build your Analysis. Gather the important facts and concepts in the case, and discard unimportant or fringe issues and data. Build a theme for your analysis, and establish the importance of the problems you have identified. Incorporate your knowledge of cultural impact on the situation, financial analysis, accounting techniques, marketing methods, economics, and human behavior into your analysis. Put theory to work in your paper, by using concepts from the readings and module overviews to analyze the problems and issues and explain why they require responses by management.
Develop Alternatives. Examine the alternative courses of action that are available to the firm. Make a list of the advantages and disadvantages of each. Don’t use “straw-man” alternatives (those that are patently unfeasible or undesirable). Develop a few well-reasoned responses that could solve the problems, and critically evaluate them.
Make a Recommendation. Based on your analysis of alternative courses of action, choose the best and recommend course of action. Be specific in your statements. How will your recommendation be implemented? Circle back through the case to identify possible points of inconsistency between your recommendation and case facts. What potential problems might crop up? How will internal constituencies (e.g., management, employees) and external constituencies (e.g., competitors, stockholders) react, and how will you handle their responses? What assumptions have you made in developing your recommendation?
Please review Writing and Revising/ Editing the Case Analysis for additional information on structuring a case analysis.
Deliverable: Case Write-Up
The write-up must include the following items:
Title page containing case name and date
Brief summary of the business situation in the case
Identification of problems or issues
Analysis of the problems or issues including the nature of the problems, causes of the problems, constraints, and related theories (framework for your analysis)
List of alternatives for solving problems, including pros and cons of each alternative
Your recommended alternative and clear reasoning for you decision
Supporting spreadsheets or charts
Read this Example of Case Analysis Writing for an example of a case analysis report from Ashford University.
Since most cases used in the class require a composite of careful thinking, conceptualization, quantitative analysis, and some form of decision making, your comments will be evaluated based on breadth and depth of your thought process demonstrated in your discussion. While you should put the problem in a context, you should not merely repeat case facts. You will get credit for only meaningful and high quality analysis.
Hutchison Whampoa Limited: The Capital Structure Decision
Obtain the Hutchison Whampoa Case from Harvard Business Publishing Coursepack. After reading the case, you are expected to submit a preliminary case analysis report (progress report) at the end of Module Five and a final case analysis report at the end of Module Ten. You are highly encouraged to utilize the Individual Case Analysis Questions forum to help you with this task. To help you with the analysis of this case, below are suggested questions for you to discuss on when analyzing it. Note that while these questions are helpful, your reports should not be written to answer these questions but to provide a full analysis of the case.
What kind of capital structure would you propose to Hutchison Whampoa in light of its future needs and why?
What bond rating do you think Hutchison Whampoa will be able to obtain from Standard and Poor’s?
What are the debt financing options? Why you are for/against the Yankee bond option?
Assume Hutchison Whampoa will require $1 million USD of financing in 1996. Assume that new equity can be raised at $48.8 a share and that a long-term debt issue will carry an interest cost of HIBOR plus 70 basis points (bps). How would an equity or debt issue impact Hutchison’s financial position and performance?
In 8-4 Final Project: Milestone Two: you will submit a rough draft. The draft should contain the work from the progress report, reflecting the incorporation of the previous feedback. In addition, the identification and the evaluation of alternatives for solving problems as well as the recommended courses of action should be included in this rough draft. Be sure to provide convincing arguments, supporting information, and spreadsheet analysis to support your views and recommendations. The draft should be 8–10 pages, not including tables, charts, and references.
Final Project Rubric
Requirements of submission: Written components of projects must follow these formatting guidelines when applicable: double spacing, 12-point Times New Roman font, one-inch margins, and APA-style citations. Your case write-ups should be approximately 8-10 pages long including charts and figures.
Instructor Feedback: Students can find their feedback in the grade book as an attachment.