Chapter 9 - pt 2 Flashcards
strategic control (behavior control)
Controlling subsidiary/unit operations based on whether they engage in desirable strategic behavior (such as cooperation)
financial control (output control)
Controlling subsidiary/unit operations strictly based on whether they meet financial output criteria
business group
a term to describe a conglomerate, which is often used in emerging economies
economic benefit
Benefit brought by the various forms of synergy in the context of diversification
bureaucratic cost
additional cost associated with a larger, more diversified organization
marginal economic benefit (MEB)
the economic benefit of the last unit of growth (such as the last acquisition)
marginal bureaucratic cost (MBC)
the bureaucratic cost of the last unit of organizational expansion (such as the last subsidiary established)
refocusing
Narrowing the scope of the firm to focus on a few areas
downscoping
reducing the scope of the firm through divestitures and spin-offs
downsizing
reducing the number of employees through layoffs, early retirements, and outsourcing
merger and acquisition (M&A)
Merging with or acquiring other firms
acquisition
the transfer of control of assets, operations, and management from one firm (target) to another (acquirer); the former becomes a unit of the latter
merger
the combination of assets, operations, and management of two firms to establish a new legal entity
horizontal M&A
an M&A deal involving competing firms in the same industry
vertical M&A
an M&A deal involving suppliers (upstream) and/ or buyers (downstream)
conglomerate M&A
an M&A deal involving firms in product-unrelated industries
friendly M&A
an M&A deal in which the board and management of a target firm agree to the transaction
hostile M&A (hostile takeover)
an M&A deal undertaken against the wishes of
target firm’s board and management, who reject the M&A offer
hubris
Managers’ overconfidence in their capabilities
acquisition premium
the difference between the acquisition price and the market value of target firms
strategic fit
the complementarity of partner firms’ “hard” skills and resources, such as technology, capital, and distribution channels
organizational fit
the complementarity of partner firms’ “soft” organizational traits, such as goals, experiences, and behaviors, that facilitate cooperation
dominant logic
a common underlying theme that connects various businesses in a diversified firm
institutional relatedness
a firm’s informal linkages with dominant institutions in the environment that confer resources and legitimacy
restructuring
reducing firm size, scope, and complexity
