introduction to corporate research chapter 5 research is a structured enquiry that relies on...
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WELCOME TO CLASS 11
Introduction to Corporate Research
Chapter 5
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Research Overview
Research is a structured enquiry that relies on scientific methodology to answer questions and create NEW knowledge.
Remember “research” is comprised of two syllables – “re” and “search”
This means the careful “re”thinking what is assumed and conducting a systematic search for facts related to the area of curiosity.
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Research OverviewResearch is divided into two broad
categories: (1) Basic (2) Applied
Basic Research is the pursuit of NEW Knowledge for the sake of Knowing
Applied Research is the pursuit of NEW Knowledge for a specific Purpose.
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Research Differentiation
Basic Research attempts to improve the "knowledge of humanity.“
Applied Research attempts to improve the "condition of humanity."
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Applied Research: Corporate Research
Corporate research is a branch of applied research.
It involves two initial steps:(1) Formulating a research question or questions.
(2) Pursuing answers by exploring (mining) multiple data sources.
Sources include: Independent technical reports by performance analysts Media reports about the firm's achievements and behaviors The 10-K, 10-Q, 8-K, Annual Report, Proxy Statements, etc. Direct observations of the firm – specifically on site visitations
and inspections
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Research
Basic Applied
CorporateResearch
Context Performance
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Components of:Corporate Research Questions
YOUR SEMESTER PROJECT…The Corporate Research question
contains three dimensions:1) Did the company appropriately fulfill its
social responsibilities?2) Did the company adequately fulfill its
financial objectives?3) Did the company position itself for future
growth and prosperity?
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1) Did the company appropriately fulfill its social responsibilities?
Ethical Appropriately People-sensitive Environmentally sensitive Balanced for all stakeholders
Were decisions and actions:
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2) Did the company adequately fulfill its financial objectives?
Was firm performance in each of the four crucial financial measurement areas satisfactory?
The four areas are known as the Financial Four:
1. Profit, Equity, & Share Value Management
2. Debt Management 3. Cash Management 4. Asset Management
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3) Did the company position itself
for future growth and prosperity? Does the firm have clear vision and mission statements?
Does the mission statement seem grounded in logic? Do these statements suggest a company committed to
forward thinking? Has the TMT suggested the need to balance between
long-term and short-term priorities? Has the company achieved a sustainable competitive
advantage? Can the firm cope with rapid changes in the general and
competitive environments? Does the TMT appear to be capable of innovative
thinking? Has the TMT entertained expansion plans? Does the firm have a history of making plans without
successful implementation?
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Corporate Research, The Triple Cs, and The CAT
Corporate research is a process of:
I. Gathering [1] current, [2] correct, [3] complete data
The Triple Cs of research
I. Organizing the findings by using a “validated” model (analysis template)
III. Assessing the findings
IV. Reporting findings and conclusions
The CAT is an analysis template that can ensure reliable corporate research
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The CAT & Corporate Research
The Corporate Analysis Template (CAT) guides three crucial activities:
1. Research Activities (gathering &
organizing)
2. Evaluation Activities (assessing)
3. Reporting Activities (reporting)
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CAT
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CAT Corporate Analysis Template
Evaluation Activities
(Target and Benchmark)
1. Profit, Equity, & Share Value
2. Debt (financial leverage) 3. Cash 4. Asset
(utilization) 5. Organizational
Citizenship 6. Strategic Positioning
Reporting Activity
(Findings and Conclusions)
1. Grade assigned to each
performance category
2. Overall performance
assessment 3. Rationale for
conclusions
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Data Mining
I. Two categories of “data mining” in the CAT system:
(1) Context (The firm’s external environment – general & competitive)
(2) Performance (The firm’s behavior and achievements).
II. Data mined involves both: primary and secondary information.
“Primary” refers to observable data directly related to performance
“Secondary” refers to opinions of other analysts about performance
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DataMining
Context Data
PerformanceData
Target Company
Benchmark Company
General Environment
Competitive Environment
Qualitative
Financial
Qualitative
Financial
Research Activities
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Context Data
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Context Data
Context data relate to the external environment
Context data are crucial to the understanding of the conditions and challenges confronting TMTs
Context data help identify strengths and weaknesses as well as its opportunities and threats.
Context Data are crucial to the accurate and fair assessment a firm’s Performance Data.
The External Environment = General + Competitive
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Context DataGeneral
Environment
Competitive
Environment
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Sociocultural
Technological
Political/Legal
Demographics
Economic
Target Company
General Environment
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Competitive Environment
Suppliers
Unions
Associations
New Entrants
Other Interest Groups
Competitors
Creditors
Customers
Substitutes
Target Company
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General Environment
Competitive Environment
Demographic
Sociocultural
Political/Legal
Economic Technological
Customers
Creditors
Competitors
Suppliers
Substitutes
Unions
Associations
New Entrants
Interest Groups
Target Company
ResourcesLeadershi
p
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Performance Data
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Performance DataIncludes a firm’s decisions, actions, & results –
Examples: Reputation Relationships Behaviors Competitive advantages Strategies Financial achievements
There are multiple sources for performance data:1. The firm’s annual report and/or 10K 2. The Internet3. Newspapers and periodicals including The Wall Street
Journal, Barron’s, Fortune, Newsweek, etc. These can reveal additional data related to the firm’s financial
health, credit rating, rumors, scandal, litigation, or bankruptcy potential.
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Performance Data
Qualitative
Financial
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Qualitative Performance
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Organizational
Citizenship
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StrategicPositionin
g
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Financial Performance
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Financial Performance focus:
Balance Sheets Assets Liabilities Equity
Income Statements Revenues Expenses
Statement of Cash Flows Operating Activities Investing Activities Financing Activities
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Financial Performance
Profit, Equity, &
Share ValueDebt Cash Asset
The Financial Four
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The Financial Four are:
1) Profit, Equity, & Share Value Management
2) Debt Management
3) Cash Management
4) Asset Management
The Financial FourEffective TMTs create harmony
by simultaneously balancing the attention given to each of the Financial Four.
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Summary
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DebtManagement
Asset Utilization
StrategicPositioning
OrganizationalCitizenship
CashManagement
Profit, Equity, &Share Value
Performance Scorecard
PSC
The CAT system guides the collection of crucial data that is then entered into the computerized PSC
analysis program for a coalesced summary of corporate performance.
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PerformanceEvaluation
Qualitative Data
Financial Data
OrganizationalCitizenship
StrategicPositioning
Profit, Equity, &Share ValueManagement
DebtManagement
CashManagement
AssetManagement
Evaluation Activities
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End: Introduction to Corporate Research
Read Chapter 6: Research Methodologies
Elect New Officers
Essay #1
Questions?