American Eagle Outfitters

Strategic Report

Purpose

You work in the business development office of a mid-size, public firm active in a dynamic industry. The top management team has been rather busy in the last few quarters with all kinds of operational activities (IT breakdowns, settling some lawsuits, agreeing on new labor contracts with unions, etc.). Moreover, a new CEO has recently been appointed that previously worked in another industry. As the top management team has been so busy, it is afraid the current strategy may not be completely appropriate anymore in the current business context. The executives therefore asked you to develop an analysis of the external environment, the internal environment, and the various strategic options the corporation could pursue. They have asked you to write a complete yet concise report with the elements of your strategic analysis and recommendations.

Materials

For this assignment, you will write report about mid-size public corporation (American Eagle Outfitters) that is active in a single, unregulated industry. Your corporation needs to be in a single industry to make external and internal analysis easier. It needs to be public to make sure sufficient information is available. It needs to be in an unregulated industry so multiple strategic options are feasible.

For most public firms, you will have the following information sources:

  • Annual report, investor presentations, and 10K filings: contains information about the company’s business activities and opportunities, risks, and threats identified by the management. It also has financial information about the company, including recent performance. These are usually available on the company’s investor relations website, otherwise on the SEC Edgar website (www.sec.gov/edgar/).
  • Industry reports: have information on the dynamics and statistics of entire industries.
    • IBISWorld: industry reports on nearly any industry, with details about industry growth and profitability search for company name (American Eagle Outfitters).
    • MergentOnline: has macro-level and micro-level industry reports. When in the database website, go to the ‘Industry analysis’ tab and click on ‘Reports’. It shows available macro-industry reports. Click on ‘Mergent Reports’ for micro-level reports (PDF file attached).
  • Analysts reports: reports performing a strategic analysis from an investor’s point of view. Note: not all companies get analyst reports and not all their reports are equally good, so read them critically. Potential sources:
    • Seeking Alpha (www.seekingalpha.com): search for company name (American Eagle Outfitters).
    • Motley Fool (www.fool.com): some available for free search for company name (American Eagle Outfitters).
  • News articles: they inform you about recent actions the firm performed or problems it faced. Valuable sources are Bloomberg, Dealbook, Forbes, and Fortune.

Format and length

Your report should follow business writing conventions. Use Calibri, font size 12, double-spaced on Letter size paper. The total length of your report should be between 4,000 and 5,000 words (including references, tables, etc.).

Structure and content

Your final report should have the 4 following elements:

  • Introduction

In the Introduction, provide a short description of the corporation (American Eagle Outfitters): its mission and vision, its industry and markets, its size and structure, its recent performance, and other major developments (M&A, lawsuits, etc.).

  • Strategic analysis
    • External analysis (PEST, Five Forces, Efficiency frontier, etc.)
    • Internal analysis (value chain, VRIN, etc.)
    • Summary of analysis (SWOT)

In the Strategic analysis, describe the conclusions from your external analysis regarding industry growth, competition and profitability, strategic groups and market positions, etc. Also include the conclusions from your internal analysis about resources, activities, and benchmarks. This should result in a SWOT: an overview of the key strengths and weaknesses of the firm and the opportunities and threats within its industry.

  • Strategic options
    • Strategic options: repositioning
    • Strategic options: vertical and horizontal integration
    • Strategic options: diversification and internationalization
    • Strategic options: innovation

In the Strategic options, consider the most relevant strategic opportunities: should the firm reposition itself in the industry, enter new industries, integrate, internationalize, or innovate. When you discuss these options, be detailed about how to implement that, how it would influence firm performance, and what are the risks and costs of failure. For example, if you advise the corporation to diversify into a related industry, specify if this should happen through greenfield (and how it should position itself in that market) or through M&A (and which company it should acquire in that case). It is better to have only 3 or 4 strategic options that are really well-explained than dozens without detail.

  • Conclusion: final recommendation

In the Conclusion, summarize the key issues the corporation is facing and the strategic options address these. Then recommend which strategic options to take and in which order.

NOTE: It is important to have both ‘claims’ and ‘evidence’. Claims are your conclusions or insights that you gained from studying the materials about the company. Evidence is practical information, either qualitative or quantitative, that supports the claim.

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