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MGMT 449 > Cells 15-21 > Flashcards

Cells 15-21 Flashcards

0
Q

Unrelated diversification: Financial synergies and parenting

A

Firms entering a business that has little horizontal interaction with other businesses of a firm
Finance driven approach to create shareholder wealth
NO SYNERGY IN VALUE CHAIN

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1
Q

Related Diversification: The transaction cost perspective

A

Useful in understanding vertical integration (when a firm becomes its own supplier or distributor)
Every transaction involves a transaction cost and are the sum of the following:
Search costs
Negotiating
Contract
Monitor
Enforcement
* transaction costs can be avoided by internalizing the activity

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2
Q

The means to achieve diversification

A
  1. Acquisition or mergers: can attain 3 bases of synergies by leveraging core competences, sharing activities, building market power
    Pooling resources of other companies with firms own resource base: (1) joint venture of two or more firms to contribute equity to form new entity (2) strategic alliance: cooperative relationship with 2 or more firms
    Internal development: corporate entrepreneurship or new venture
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3
Q

How managerial motives can erode value creation (3 ways)

A
  1. Growth for growth’s sake: management self interest
  2. Egotism: pride is at stake
  3. Anti-takeover tactics:
    Greenmail: pmt to firm to a hostile party for the firms stock at a premium price
    Golden parachute: prearranged contract with managers specifying that in the event of a hostile takeover the target firms mangers will be paid a significant package.
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4
Q

Factors affecting a nations competitiveness

A
  1. Factor endowments= infrastructure
  2. Demand conditions (must be high): consumer preferences
    Ex: US needs faster PC, but third world country need running water
  3. Related and supporting industries: presence or absence of supplier industries that are internationally competitive
  4. Firm strategy, structure, and rivalry: strongest indicator of global competitive success. ( strong consumer demand, strong supplier base, high new entrants from related industries)
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5
Q

International expansion: a company’s motivation

A
  1. Increase the size of potential markets
  2. Taking advantage of arbitrage opportunities: buying cheap selling it somewhere else for more
  3. Extend a product’s life cycle in maturity stage( may have greater demand somewhere else)
  4. Optimize the location of value chain activities ( helps performance enhancement, cost and risk reduction)
  5. Explore reverse innovation, it is possible to sell first world versions of products
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6
Q

Achieving competitive advantage in global markets: opposing forces that firms face when expanding into global markets

A
  1. Cost reduction

2. Adaption to local markets

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7
Q

Ch.1 what is strategic mgmt and what is the purpose of all strategy?

A

ADA: analysis, decision, action

Purpose is to build a sustainable competitive advantage.

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8
Q

Ch. 2 role of scanning

A

Surveillance of a firms external environment to predict environmental changes and detect changes already underway

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9
Q

Ch. 2 role of monitoring

A

Tracks evolution of environmental trends, sequence of events, or streams of activities

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10
Q

Ch.2 role of competitive intelligence

A

Collecting and interpreting data on competitors, defying and understanding the industry, and identifying competitors strengths and weaknesses

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11
Q

Ch. 2 forecasting

A

Development of plausible projections about direction, scope, speed, and intensity of environmental change

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12
Q

Ch.2 define general environment

A

Factors external to an industry, usually beyond a firm’s control

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13
Q

Ch. 2 general environment key trends and events

A

Demographic, sociocultural, political/legal, technological, economic, global

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14
Q

Ch.2 define competitive environment

A

External factors beyond a firms control and affects a firms strategy, this includes: competitors, customers, and suppliers. Measured with the porter five forces.

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15
Q

When is Threat of new entrants high?

A

New industry, new entrants and profit margin, above average and low investment.

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16
Q

Where do substitutes come from?

A

Outside the industry that produce products or services that satisfy the same customer need( new or adjacent industries)

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17
Q

What is most powerful force

A

Rival competitors: price competition, advertising battles, product introductions, increased customer service or warranties.

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18
Q

Value chain analysis

A

Organization that uses value creating activities where porter says value must be greater than costs

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19
Q

Value chain 3 primary activities

A

Physical creation of products
Sale and transfer to buyer
Service after sale
Ex: in bound logistics, ops, outbound logistic, marketing and sales, customer service

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20
Q

Value chain support activities

A

Adds value by themselves
Or through important relationships with primary activities and other support activities
Ex: stay the same for every industry: procurement, IT, HR, general admin, firm infrastructure

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21
Q

Interrelationship among value chain activities within and across organizations

A 
Collaborative and strategic exchange relationships between value chain activities either
1. Within firms
2. Between firms
* involve exchange of resources that contribute to success of firm
exchange of 
Info
People
Tech
Money
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22
Q

Integrating customers in value chain

A

Prosumer: customer and producer

Concentrates on most important stakeholder, the customer to satisfy their particular needs.

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23
Q

Applying value chain to service industry

A

Retail: vendors, purchasers, manage and distribute inventory, operate stores, market and sell

Engineer: R&D, engineer, design and solutions, market and sells, service

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24
Q

Resource based

A

Perspective that firms competitive advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, costly to substitute

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25
Q

Types of resources:

A

Tangible: financials like cash, physical buildings, tech like trade secrets and patents/copyright/trademarks, organizational like control systems

Intangible: human experience or skills, innovation like scientific skills, reputation like brand name

Organizational capabilities: combine tangibles and intangibles to attain desired end: customer service, retain employee capital

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26
Q

More than 50% of value GDP of developed countries is based on….

A

Knowledge

27
Q

Role of knowledge in today’s economy: 3 capital

A

Intellectual capital: difference between the market value of firm and book value of firm (assets, rep, loyalty, brand)

Human capital: individual capabilities, knowledge, skills, and experience of a company’s employees and managers

Social capital: the network of friendships and working relationships between talented people both in and outside of org.

28
Q

How social capital helps attract and retain talent

A

Is necessary, but not sufficient condition for creating a competitive advantage

Knowledge workers are more loyal to colleagues and profession than employers.

How social capital helps attract and retain
Hiring via networking
Teams or networks of people are leaving one company for another
Some bring other job candidates with them
Emigration of talent to form a start up
Can provide mechanisms for obtaining resources and info from outside the org.

29
Q

Codifying knowledge for competitive advantage: tacit knowledge

A

Personal experience

Shared only with consent and participation of the individual

30
Q

Codifying knowledge for competitive advantage: explicit (codified) knowledge

A

Knowledge that is: documented, widely distributed, and easily replicated
Can be reused many time at a low cost once knowledge asset is developed and paid for, assuming that doesn’t need to be modified

31
Q

Ch5 What is business level strategy?

A

Designed for a firm or a division for a for that competes within a single business

32
Q

Ch5 what is generic strategy?

A

An analysis of business strategy into basic types based:
on breadth of target market (is industry wide or narrow)
and type of competitive advantage (low cost v. Uniqueness)

33
Q

Ch.5 Porter presents 3 generic strategies plus 1

A
  1. Overall cost leadership: creating low cost position throughout the value chain
  2. Differentiation: firm creates product that is unique and valued
  3. Focus: focuses on narrow product lines, buyer segments, or targeted geographic markets that attain an advantage through the first 2 points.
  4. Combo of differentiation and overall low cost
34
Q

Overall cost leadership

A

Low cost
Manage relationships through value chain
Low cost in ever activity
Have to be parity with differentiation

35
Q

Experience curve

A

Key to overall cost leadership strategy. refers to how firm learns to lower costs as it gains experience with production process. The decline in unit costs of production as cumulative output increase.

36
Q

Competitive parity

A

Generate above average performance following overall cost leadership position on the basis of differentiation on par to competitors.

37
Q

Overall cost: position vis a vis the five forces

A

Think of each force
Protects a firm against rivalry from competitors, powerful buyers
Provides a more flexibility to cope with demand from powerful suppliers for input costs increase and provides substantial entry barriers from economies of scale and cost adv.
Favorable position with respect to subs.

38
Q

Pitfalls of overall cost leadership

A

Too much focus on one or few value-chain activities
All rivals share a common input or raw mater.
Easy to imitate
Lack parity of differentiation
Erosion of cost adv. when pricing info. available to customers

39
Q

Differentiation strategy

A 
Create p/s that are unique and valued
Prestige brand
Tech.
Innovation
Features
Customer. Serv.
Dealer network
40
Q

Differentiation strategy vis a vis porter five forces

A

Creates higher barrier due to customer loyalty
Higher margarines that enable the firm to deal with supplier power
Establishes customer loyalty hence less threat of sub.

41
Q

Differentiation strategy pitfalls

A

Uniqueness not valued
Too much differentiation
Price too high
Easily imitated
Diffusion of brand ID. through product-line extension
Perception of different ion may vary between buyers and sellers

42
Q

Focus strategy

A

Based on the choice of a narrow competitive scope within an industry (niche markets) and dedicates itself to the segments.
Cost focus: strives to create a cost advantage in its target segment
Differentiation focus: firm seeks to differentiate in it target market

43
Q

Focus: competitive position vis a vis 5forces

A

Creates barriers of either cost leadership or differ. Or both
Used to select niches that are least vulnerable to substitute or where competitors are weakest

44
Q

Focus pitfalls

A

Erosion of cost advantage within narrow segment
Focused p/s still subject to competition from new entrants and imitation
Too focused to satisfy buyer

45
Q

Combination of differentiation and overall cost

A

Automated and flexible Manu. Systems
Exploiting profit pool concept of competitive advantage
Coordinating extended value chain by way of information tech.

46
Q

Combo vis a vis porter 5

A

Think of Walmart

47
Q

All the following are potential pitfalls of an integrated overall low cost and differentiation strategy except:

A

Firms fail to attain both strategies may end up with neither and become “stuck in the middle”
Underestimate the challenges and expenses associated with coordinating value creating activities in the extended value chain
Miscalculating sources of revenue and profit pools in the firms industry.

NOT targeting to large markets that causes unit costs to increase

48
Q

Are combination strategies the key to e-business success?

A

Greatest beneficiaries are the focusers who can use the Internet to capture a niche that use to be inaccessible. Many experts agree that the net effect of the digital economy is fewer rather than more opportunities for sustainable advantages.
It challenges a company to carefully blend alternative strategic approaches and remain mindful of different decisions of a firms value creating process and value chains.
Strong leadership is needed to maintain birds eye view on overall approach and coordinate the multiple dimensions of a combo strategy.

49
Q

Life cycle stages

A

Intro, growth, mature, decline

50
Q

Turnaround strategy

A

Reverses decline in performance and returns to growth and profitability.
Asset and cost surgery
Selective product and marketing pruning
Piecemeal productivity improvements

51
Q

When to pursue a harvest strategy?

A

High growth
Strong competitive advantage
Mergers and acquisitions
Decline in the market life cycle

52
Q

diversification

A

The process of firms expanding their operations by entering new businesses outside their industry.
Two questions:
1. What business should a corporation compete in?
2. How should it be jointly managed to create more value than if it were free standing?

SYNERGY IN THE VALUE CHAIN
Related= synergy

53
Q

Synergy =

A

Economies of scope: cost saving from leveraging core competences or sharing related activities among businesses in a corporation

54
Q

Ch. 6 the sale of Boeing commercial aircraft and Microsoft operating systems in many countries enables companies to benefit from_____?

A

Economies of scale

55
Q

McKesson, a large distribution company, sells many product lines such as pharmaceuticals and liquor through it super warehouses. This is an example of:

A

Achieving economies of scope through related diversification.

56
Q

Phillip Morris bought miller brewing and used its marketing expertise to improve Millers market share. The justification for diversification is best described as:

A

Capitalizing on core competences

57
Q

Ch. 6 when is vertical integration good/bad?

A

Bad: If transaction costs are lower than admin cost ( mcDs high cost of raising cattle, easier to buy)
Good: if admin costs are lower than transaction costs ( think of automobiles and high cost of making an engine, suppliers will not invest to create unique pieces)

58
Q

Unrelated diversification: parenting

A 
Help increase revenues and profits by creating value through mgmt expertise: 
Improve plans and budgets
Legal
Financial
Hr mgmt
Procurement
59
Q

Unrelated diversification: restructuring

A

The “buy low sell high” mentality
Acquire undervalued companies or competing businesses with a high potential for transformation
*trouble=restructure
Assets, sale unproductive assets or whole lines of business
Capital, changes in debt-equity mix or the mix between different classes of debt or equity
Mgmt, changes in composition of mgmt team, org structure, reporting relationships

60
Q

Unrelated diversification: portfolio mgmt

A

Creation of synergies and shareholder value by portfolio mgmt and the corporate office
Assessing competitive position of a portfolio
Suggesting strategic alternatives of each business
Identify priorities for allocation of resources
Allocate resources using BCG growth/ share matrix: stars, question marks, cash cow, dogs
Experts of corporate office

61
Q

Portfolio mgmt matrices are applied to what level of strategy?

A

Corporate level

62
Q

International expansion: a company’s risk

A
  1. Political and economic risks ( social unrest, military turmoil, violence, laws and enforcement)
  2. Currency risks (exchange fluctuations, appreciation of US dollar)
  3. MGMT risks (culture, customs, language, income level, customer preference, distribution systems)
63
Q

Achieving competitive advantage in global markets:

4 types of international strategies

A
  1. International strategy
  2. Global strategy
  3. Multi-domestic strategy
  4. Transnational strategy
    * the selection of one of these depends on a firms relative pressure to address each of the two forces.
64
Q

Which strategy offers lowest risk, but highest control?

A

Not enough info, if you want control, up your risk.

Ex: eBay in China: started global strategy, but should have been transactional strategy ( had to adapt).

65
Q

Entry modes of international expansion: Exporting

A

Produce goods in one country and sell to another. This strategy enables a firm to invest the least amount of resources in terms of its product, it’s org, and overall corporate strategy.
Benefits: partnerships with local distributors who have knowledge of their market and hiring and managing local personal is cheaper and minimizes risk.
Risks: partners with distributors carry competing products

MGMT 449 (1 decks)

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