Cumulative Exam

Question 1

What are the three strategic alliances?

Answer 1

Joint Venture: 2 or more firms form a new entity to share resources to achieve competitive advantage. Each partner owns equal shares and contributes equally. (Ex. Microsoft + GE = Caradigm)
Equity Strategic Alliance: 2 or more firms own different percentages of a company. Addition of resources allows firm(s) to refocus efforts. (Ex. Tesla and Panasonic batteries)
Nonequity Strategic Alliance: less formal relationship of 2 or more firms that share resources. Outsourcing manufacturing. (Ex. McDonald’s and Coke)

Question 2

Why form a strategic alliance?

Answer 2

To create value that couldn’t have been generated by one firm alone. Also, helpful in entering a new market faster with more resources.

Question 3

What is innovation?

Answer 3

Make changes in something established; introduce something new. The use of knowledge to transform organizational processes or create commercially viable products and services

Question 4

What is the difference between product and process innovation?

Answer 4

Process innovation does the opposite by keeping benefits but reducing cost or adding some other value such as time to market

Question 5

What is radical innovation?

Answer 5

Major departure from existing practices. Can transform or revolutionize a whole industry. Can be so radical that some people tend to shy away from. (Ex: AI, email, smartphone)

Question 6

What is incremental innovation?

Answer 6

Enhance existing practices (Ex: Each new smartphone is an incremental innovation)

Question 7

Who should lead an innovation project?

Answer 7

Mid-level employees - closer to the process but need to be supported

Question 8

Name innovation challenges

Answer 8

Seeds vs weeds
Experience vs initiative
Internal vs external staffing
Building capabilities vs collaborating
Incremental vs preemptive launch
Defining strategic envelope
Managing the pace of innovations

Question 9

How do you know if your company has an entrepreneurial culture?

Answer 9

The search for opportunities permeates every part of the organization

Question 10

In Simon Sinek’s TED Talk, he talks about the golden circle. What is the best definition of the golden circle?

Answer 10

A strategic framework advocating for a reverse engineering process, starting with “Why” then “How” and the “What”

Question 11

What increases motivation?

Answer 11

Set up meetings with beneficiaries to allow employees to learn about how the beneficiaries life was impacted

Question 12

Describe the Ikea effect?

Answer 12

The tendency for people to place a higher value on products that they have partially created or assembled themselves

Question 13

What is a key distinguishing feature between an equity SA and a non-equity SA?

Answer 13

Equity SA involve exchange of company shares and ownership stakes while non-equity SA do not involve such ownership transfers

Question 14

What is a common reason for companies to enter into a SA or JV?

Answer 14

Enhance innovation and technology capabilities

Question 15

Why are SA commonly formed in slow cycle markets?

Answer 15

To enter restricted markets and navigate regulatory barriers

Question 16

How does successful diversification impact the variability in a firm’s profitability?

Answer 16

It reduces variability by offsetting losses in one business with gains in others, making overall performance more stable

Question 17

What does the term “Corporate-level Strategic Value” refer to in the context of a company’s portfolio?

Answer 17

The extent to which the businesses within the portfolio are more valuable under the company’s management compared to other ownership

Question 18

What is an arm’s length transaction?

Answer 18

Buyer and seller do not know each other and are not concerned about each other’s outcomes. They’re both looking to get the best deal. They’re adversarial.

Question 19

What is an arm-in-arm transaction?

Answer 19

Buyer and seller know each other and are concerned about outcomes. The seller will feel compelled to take lower offer from family or friend.

Question 20

A large retail corporation operates in various sectors, including electronics, fashion, and home appliances. They are currently reviewing their strategic plans. Which of the following statements correctly distinguishes between corporate-level strategy and business-level strategy for this corporation?

Answer 20

Corporate-level strategy pertains to if/how the company competes in each sector, while business-level strategy involves decisions about marketing and sales within each sector

Question 21

According to the Resource-Based View (RBV) theory, what is the central premise regarding a firm’s competitive advantage?

Answer 21

It stems from the unique resources and capabilities the firm possesses.

Question 22

What are core competencies? Why are they essential for a firm’s competitive advantage?

Answer 22

Core competencies are unique strengths and capabilities that contribute to long-term competitive advantage

Question 23

What is fiduciary?

Answer 23

A particular type of agent that holds property for another in trust. Must have a higher standard of care and loyalty. Cannot enrich himself at the expense of the prinicipal.

Question 24

What are Porter’s 3 generic strategies?

Answer 24

Overall cost leadership, differentiation, focus

Question 25

What is economy of scale?

Answer 25

A proportionate saving gained by an increased level of production.

Question 26

What is economies of scope?

Answer 26

Can result when a firm leverages it core competencies to expand their portfolio. Ex: decreasing marginal costs with a greater number of different types of items produced. Kimberly Clark producing Kleenex, towels, masks, …

Question 27

What is diseconomies of scope?

Answer 27

Can result when a firm moves away from its core competency. Ex: Ford sedan discontinuing

Question 28

What is the Business Judgment Rule?

Answer 28

Provides the absolute limits (envelope) of decision making for managers and Board members/ Protects a manager or board member if they acted on an informed basis (duty of care), good faith (duty of loyalty), and honest belief that the action was in the best interests of the company.

Question 29

What is perceptual acuity?

Answer 29

ability to sense what is coming before the fog clears

Question 30

Name 6 reasons why acquisitions are good

Answer 30

Increase market power, overcome entry barriers, lower cost/risk of new product development, increase speed to market, reshape firm’s competitive scope, learn and develop new capabilities

Question 31

What is the top problem in acquisition?

Answer 31

Integration difficulties. Humans are risk adversed. Research corporate culture.