Cumulative Exam Flashcards
What are the three strategic alliances?
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)
Why form a strategic alliance?
To create value that couldn’t have been generated by one firm alone. Also, helpful in entering a new market faster with more resources.
What is innovation?
Make changes in something established; introduce something new. The use of knowledge to transform organizational processes or create commercially viable products and services
What is the difference between product and process innovation?
Process innovation does the opposite by keeping benefits but reducing cost or adding some other value such as time to market
What is radical innovation?
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)
What is incremental innovation?
Enhance existing practices (Ex: Each new smartphone is an incremental innovation)
Who should lead an innovation project?
Mid-level employees - closer to the process but need to be supported
Name innovation challenges
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
How do you know if your company has an entrepreneurial culture?
The search for opportunities permeates every part of the organization
In Simon Sinek’s TED Talk, he talks about the golden circle. What is the best definition of the golden circle?
A strategic framework advocating for a reverse engineering process, starting with “Why” then “How” and the “What”
What increases motivation?
Set up meetings with beneficiaries to allow employees to learn about how the beneficiaries life was impacted
Describe the Ikea effect?
The tendency for people to place a higher value on products that they have partially created or assembled themselves
What is a key distinguishing feature between an equity SA and a non-equity SA?
Equity SA involve exchange of company shares and ownership stakes while non-equity SA do not involve such ownership transfers
What is a common reason for companies to enter into a SA or JV?
Enhance innovation and technology capabilities
Why are SA commonly formed in slow cycle markets?
To enter restricted markets and navigate regulatory barriers
How does successful diversification impact the variability in a firm’s profitability?
It reduces variability by offsetting losses in one business with gains in others, making overall performance more stable
What does the term “Corporate-level Strategic Value” refer to in the context of a company’s portfolio?
The extent to which the businesses within the portfolio are more valuable under the company’s management compared to other ownership
What is an arm’s length transaction?
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.
What is an arm-in-arm transaction?
Buyer and seller know each other and are concerned about outcomes. The seller will feel compelled to take lower offer from family or friend.
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?
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
According to the Resource-Based View (RBV) theory, what is the central premise regarding a firm’s competitive advantage?
It stems from the unique resources and capabilities the firm possesses.
What are core competencies? Why are they essential for a firm’s competitive advantage?
Core competencies are unique strengths and capabilities that contribute to long-term competitive advantage
What is fiduciary?
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.
What are Porter’s 3 generic strategies?
Overall cost leadership, differentiation, focus
What is economy of scale?
A proportionate saving gained by an increased level of production.
What is economies of scope?
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, …
What is diseconomies of scope?
Can result when a firm moves away from its core competency. Ex: Ford sedan discontinuing
What is the Business Judgment Rule?
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.
What is perceptual acuity?
ability to sense what is coming before the fog clears
Name 6 reasons why acquisitions are good
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
What is the top problem in acquisition?
Integration difficulties. Humans are risk adversed. Research corporate culture.
