Abstract

This caselet is about the decision of a small software company ITsol to change its strategy and to decide which head it should invest in so to improve its financial performance. It used a regression analysis for this purpose and based on the results, made certain changes to its strategy. However, the company failed to meet its forecasts. The caselet provides an opportunity to students to analyze the results and discuss what went wrong.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the issues related to regression analysis
• Analyze and interpret the regression results correctly
• Appreciate the importance of missing variables (specification of model)
• Analyze the pros and cons of Regression analysis
• Understand why Regression analysis should not be used when the model is not correctly specified

Keywords

Regression analysis, Model specification, strategy, Null Hypotheses, ROCE, F stat, ANOVA, t stat, multi-collinearity, autocorrelation