Corporate Research (Ch 5) Research Methodologies (Ch 6) Welcome to Class 6 Introduction to Corporate Research (Ch 5) & Research Methodologies (Ch 6) Chapter 5 & 6

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 and systematic search for facts related to some area of curiosity.

Research is divided into two broad categories: (1) Basic (2) Applied Basic Research is the pursuit of NEW Knowledge for the sake of Knowing It attempts to improve the "knowledge of humanity.“ Applied Research is the pursuit of NEW Knowledge for a specific Purpose. It attempts to improve the "condition of humanity."

Research Applied Corporate Context Performance Basic Corporate Research is a branch of Applied Research

Components of: Corporate Research Questions 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? See textbook for an extended list of questions.

CAT Corporate Analysis Template Research Activities (Contextual and Performance Data) 1. General Environment 2. Competitive Environment 3. Internal Environment 4. Qualitative Performance 5. Financial Performance 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

Data Mining for: Context Data & Performance Data

primary and secondary information. Data Mining I. Two categories of “data mining” in the CAT system: (1) Collect Context Data (The firm’s external environment – general & competitive) (2) Collect Performance Data (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

Research Activities Data Mining Context Performance Target Company Benchmark General Environment Competitive Qualitative Financial Research Activities

Competitive Environment Collect Context Data Context Data General Environment Competitive Environment

CONTEXT data: General & Competitive Environments General Environment Demographic Sociocultural Competitive Environment Customers Target Company Resources Leadership Suppliers Creditors Unions Competitors Associations Substitutes Internal Environment is not CONTEXT New Entrants Interest Groups Political/Legal Economic Technological

Collect Performance Data How well did the company perform within the general and competitive environments? Performance Data Qualitative Financial

Qualitative Performance: Organizational Citizenship Employees Customers Competitors Directors Government Environment Community Stockholders Communication Persona Vendors / Suppliers

Qualitative Performance: Strategic Positioning Vision Mission Competitive Advantage Environment Adaptability Innovation Plan & Progress

Financial Performance Balance Sheets Assets Liabilities Equity Income Statements Revenues Expenses Statement of Cash Flows Operating Activities Investing Activities Financing Activities

Financial Performance Profit, Equity, & Share Value Debt Cash Asset The Financial Four

BRIEF BREAK

Data Collection Categories SUMMARY of: Data Collection Categories Debt Management Asset Utilization Strategic Positioning Organizational Citizenship Cash Profit, Equity, & Share Value Performance Scorecard PSC

Data Mining Methods PSC CAT Corporate research is a process of mining (extracting) valuable informational gems from existing databases.

Data Mining Methods What is an industry? 1. Start by understanding the concept of INDUSTRY and INDUSTRIAL CODES What is an industry? An industry is an environment in which a number of companies are providing services or producing products that are closely related. Remember: The condition of an industry is a window into the challenges and opportunities that a company is facing.

SIC & NAICS Industrial Classifications These are government codes to identify industries. They are helpful in identifying and collecting data about the target’s competitive environment. SIC = Standard Industrial Classification NAICS = North American Industrial Classification System For more information on SIC & NAICS see Chapter Two in your text.

They are: The Mother Lode of important information What are Annual Reports? They are: The Mother Lode of important information The annual report is “The Mother Lode” of company-specific performance data. It includes information about both – ► Financial Performance ► Qualitative Performance The letters to the stockholders contain numerous clues about the internal environment of the company and how management is coping with the competitive and general environments.

General segments of the Annual Report Report of Management Board Chair accepts responsibility for annual report and asserts that it complies with SEC requirements. Also indicates control systems and internal auditing procedures are in place. Auditor’s Report Public accounting firm summarizes its independent audit of the company and indicates whether or not the company appears to be fairly representing its financial condition. It also states an opinion about the adherence to generally accepted accounting principles. Management Discussion This is management’s interpretation of its own performance. It includes a gamut of items both quantitative and qualitative. It will discuss results of operations and funding items.

General segments of the Annual Report (cont) Financial Statements Statement of Earnings (Income Statement), Statement of Financial Position (Balance Sheet), and Statement of Cash Flows are basic requirements by the SEC. Other items can be included. Selected Financial Data This provides information helpful for making comparisons over longer periods of time.

Financial Statements in The Annual Report Statement of Earnings (Income Statement) – The Income Statement summarizes the revenues and expenses for a complete accounting period. Generally three years of data are included in the Income Statements Statement of Financial Position (Balance Sheet) – The Balance Sheet reveals the year-end values of assets, debts, and equity. Generally two years of data are included in the Balance Sheets.

Financial Statements in The Annual Report (cont) Statement of Stockholders’ Equity – The NET value in the stockholder’s account is simply… Assets less Debts. A comprehensive detail of changes in stockholders’ equity is usually provided. Statement of Cash Flows – Consists of a three-category summary of how cash has been flowing through the company. The broad categories are: Operating Activities Investing Activities Financing Activities

It contains information such as: Proxy Statement & DEF 14A Proxy statements are available from all publicly traded companies. It contains information such as: → Invitation to the annual meeting → Legal rights and administrative details available to the shareholders → Biographies of all directors (most with pictures) → Board committees & board compensation → Executive compensation → Shareholder proposals SEC Form DEF 14A is a filing with the Securities and Exchange Commission (SEC) used in combination with an annual proxy. It includes: Adequate information to allow shareholders to make informed decision when voting their shares. Date, time and place of shareholder meetings, Dissenter’s right of appraisal, modification or change of securities, voting procedures, and other relevant issues and data.

Competitive Advantage Corporate Analysis Template [CAT] Research Evaluation Report Financial Qualitative Synthesize Defend Recommendation Recommend Action Profit, Equity, Share Value Debt Cash Asset Organizational Citizenship Strategic Positioning Holistic Judgment Data Review Employees Investors Customers Directors Governments Competitors Environmental Community Vision and Mission Competitive Advantage Innovation Cultural sensitivity Creditors Other Stakeholders Growth Plans

The End http://www.albany.edu/faculty/vanness/481NEW/TeamClass.pdf Read Chapter 7: Research: Qualitative Domain Remember: Class 7, you will meet in your individual teams. For more information, click on the site below. http://www.albany.edu/faculty/vanness/481NEW/TeamClass.pdf