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Study Skills

Choosing a Company to Research

If you are required to investigate a company, you need to be efficient and effective in the use of your time and areas of research.

Initial thought starters!

Searching for company Web sites - try the following 'search engines':

Use the 'search' facility and type general phrases like:

  • 'Stakeholder information'
  • 'Mission statement' 'Statement of Purpose'
  • 'Strategy' ... in fact any business like phrases that will lead you to a company's Web site in order to get started!

Consider using Web sites of official organisations too:

Once you think you have found a possible company, explore whether it can answer the following key questions to consider:

  • Do they have an Educational Officer or similar?
  • Is their key business activity specified (What do they do? What is their 'product'?)
  • Is a company structure or hierarchical chart available?
  • Competitor analysis - is it shown, known or demonstrated?
  • Are any recent changes to or within the organisation signposted (recent capital expenditure/investment)?
  • Is their Annual Report available?
  • Are you able to arrange a visit?

Now consider the wealth of information to be had from the various functions/departments of the organisation, for example Finance and Human resources.

The tracking of corporate and financial wealth

Critical issues to consider:

  • Where a company is strong?
  • Where is it weak?
  • How strong?
  • How weak?
  • The underlying causes
  • The historical trend of each measure
  • The effect in terms of risk

Notes to aid your thinking

When evaluating a company's merits as a possible investment, you should examine how it finances its operations. This is referred to as a company's 'capital structure'. It's usually a mix of cash, debt financing (borrowing from a bank or issuing bonds), and equity financing (selling a chunk of the company and/or issuing shares of stock).

At a glance some (admittedly extreme) examples will shed more light on the concept. Imagine a company financed completely through debt. If it's paying 5% interest on its debt, but is growing earnings at 10% yearly, its payments can be met and the financing is working well. The lower the interest rate and the greater the difference between it and the company's earnings growth rate, the better it is. If a company is carrying a lot of debt at high interest rates, but is growing slowly, this is bad news. Fluctuating earnings can also be problematic, as interest payments may sometimes completely wipe out earnings.

Next, imagine a company that raises funds only by issuing more stock. This is an appealing option when the market is buoyant; cash is generated with little effort. It's not as easy or effective when the market is in the doldrums, though. The downside to equity financing is that the value of existing shareholders' stock is diluted every time new shares are issued.

The management of people - 'people' analysis

Some of the following questions may be phrased 'commercially sensitive' by a company, but they are worth asking!

  • Does the HR function have a strategic focus? (What evidence do they have to substantiate this claim?)
  • To what extent does it know about the labour market (internal and external)?
  • Where, when and how does recruitment take place?
  • What is sent out to anyone interested in applying for a job?
  • Commitment to staff in terms of training and development (Do they have the Investors in People Award, for example?)
  • Appraisals, when are they done and by whom?
  • Is the workforce full-time/part-time/contracts?
  • What is the average rate of turnover? (Is it higher/lower than industry standards?)
  • Induction - is there a specific programme? What is in the programme? How long does it take?