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Corporate Strategy > Exam > Flashcards

Exam Flashcards

1
Q

Corporate Strategy

1.

A

The way a company creates value through the configuration and coordination of its multi-market activities.

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2
Q

Vision

1.

A

Where a company wants to be or what it wishes to become in the long-term.

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3
Q

Objectives and Goals

1.

A

Shorter-term objectives that serve as milestones to achieve the vision.

  • Goals: qualitative
  • Objectives: quantitative
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4
Q

Resources

1.

A

Assets, skills and capabilities of the firm.

  • They determine WHAT the firm can do, its competitive advantages and the range of its market opportunities.
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5
Q

Businesses

1.

A

The different industries where the firm competes and their respective competitive strategies.

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6
Q

Structure, Systems and Processes

1.

A

The way a firm coordinates and controls its different business units.

  • Structure: the way the firm is divided into discrete units
  • Systems: the formal policies that govern organizational behaviour
  • Processes: the set of informal elements of an organization
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7
Q

Corporate Strategy

1.

A

How Resources, Businesses and Structure, Systems and Processes work together as a system of value creation through multi-market activity.

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8
Q

3 Questions to Test Corporate Advantage

1.

A
  • Does ownership of the business create value somewhere in the firm?
  • Are the benefits created superior to the costs of corporate overhead?
  • Does the corporation create more value with the business than any other corporate parent?
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9
Q

Imperfect Markets

2.

A
  • Limited participants
  • Heterogeneous products
  • Asymmetric information
  • Product scarcity
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10
Q

Purposes of Strategy

2.

A
  • External Positioning: positioning in the market, relative to competitors (Porter’s 5 Forces, Generic Strategies)
  • Internal Alignment: of investments and activities. Aligned with External Positioning and coherent with eachother.
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11
Q

Types of Resources

2.

A
  • Tangible
  • Intangible
  • Capabilities
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12
Q

Assumptions about RBV

2.

A
  • Heterogeneity
  • Immobility
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13
Q

Resource-Based View (RBV)

2.

A

Resources are seen as the main profit generator.

  • Different resource bundles in each firm justifies different performances.
  • Resources determine the stratigies that each firm can adopt.
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14
Q

What makes resources valuable?

2.

A
  • Demand
  • Scarcity
  • Appropriability
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15
Q

Economic Rents

2.

A
  • Ricardian rents: scarcity
  • Schumpeterian rent: uniqueness
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16
Q

Resource-Based Strategy

2.

A
  • Identify
  • Invest
  • Upgrade
  • Leverage
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17
Q

Integration

3.

A

Expansion of the firm within the same industry.

  • Horizontal: in the same level
  • Vertical: within the supply chain
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18
Q

Diversification

3.

A

Expansion of the firm’s acitvites to different markets/industries.

  • Related: related industries
  • Unrelated: unrelated industries
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19
Q

Dimensions of Scope

3.

A
  • Geography
  • Value chain
  • Product market
20
Q

Economies of Scale

3.

A

When AC decreases with the production of an additional unit.

  • Single-Site Economies: physical production, one plant
  • Multiple-Site Economices: non-physical production, multiple plants

c = aQ^b
c2/c1 = (Q2/Q1)^b

21
Q

Minimum Efficient Scale (MES)

3.

A

Smallest scale at which economies of scale are exhausted.

22
Q

Experience/Learning Curves

3.

A

Reductions in AC from increases in cummulative production.
“Learn by doing”.
Explain why transfers of knowledge across different locations can be difficult.

c = aP^b
c2/c1 = (P2/P1)^b

23
Q

Economies of Scope

3.

A

When the costs of producing/selling multiple products together is inferior to the cost of producing/selling the same quantity of products individually.

24
Q

Obstacles to Exploiting Scale and Scope

3.

A
  • Poor analysis
  • Implementation difficulties (bureaucracy)
  • Core rigidities
  • Inertia
  • Relatedness
25
Q

Value Chain

3.

A

Dividing a company into discrete processes.

  • Primary activites
  • Support activities
26
Q

Why Firms Diversify

4.

A

External Inducements
- Conditions in external environment (threats, opportunities)
- Growth-share matrix

Internal Inducements
- Conditions withing the company (market power, synergies)

Excess Capacity
- Resources that are being underutilized

27
Q

Choice of Business

4.

A
  • Competitively superior to competitors in new industry
  • Key success factors in new industry
  • Competitive parity in essetial resources in industry
  • Leverage current resources in new industry
28
Q

Dynamic Resource Management

4.

A
  • Resource-product matrix
  • Sequetial entry
  • Exploit and develop
  • Stepping stones
29
Q

Diversification and Firm Performance

4.

A

Specialized resources
- High marginal rents in the beggining
- Rents decrease as diversification distance increase

General resources:
- Lower initial marginal rents
- Rents keep value with higher diversification

29
Q

Diversification and Shareholder Value

4.

A
  • Attractivness test
  • Entry cost
  • Better-off test
30
Q

Modes of Expansion

4.

A
  • Mergers and acquisitions
  • Internal development
  • Strategic alliences
31
Q

Types of Mergers

4.

A
  • Vertical: same business
  • Horizontal: related business
  • Concentric: similar sales/production process
  • Conglomerate: no connection
32
Q

Market

5.

A

Use of the price system to coordinate the flow of products across firms.

33
Q

Hierarchy

5.

A

The production and exchange of products happen within the confines of the company.

34
Q

Why should a particular activity be performed inside of the firm hierarchy?

5.

A

If it reduces transaction costs.

Transaction Costs = Production + Governance

35
Q

Benefits/Costs of the Market

5.

A

Benefits:
- Efficient information processing
- High incentives
- Competition
- Flexibility

Costs:
- Transaction costs
- Market failures

36
Q

Benefits/Costs of the Hierarchy

5.

A

Benefits:
- Unifien ownership structure
- Authority
- Coordination
- Process optimization

Costs:
- Bureaucracy
- Agency costs
- Adverse selection
- Lower flexibility

37
Q

Limits of the Firm Scope

5.

A

Include only activities where benefits > costs of ownership.

38
Q

Choosing the Scope

5.

A
  • Disaggregate the value chain
  • Competitive advantage?
  • Market failure?
  • Need for coordination?
  • Importance of incentives?
39
Q

Administrative Context

6.

A

All elements of the SSP that influence delegation of decisions in organizations.

40
Q

Bower Study (1970)

6.

A

Top managers don’t make decisions directly, they control them over the administrative context within which the decisions are made.

Functional Managers => Identify projects

Mid-Level Managers => Pursue promising projects

Top Managers => Make final decision

41
Q

Principles of Administrative Context Design

6.

A

Internal Allignment: elements of SSP are designed to reinforce signals and motivations provided to managers

Contingent Design: no single design is optimal for every corporation

42
Q

Organizational Economics

6.

A

Information Theory: there are costs associated with transferring information within the firm

Agency Costs: when given the power to, managers might decide to make decisions that maximize their welfare instead of the firm’s interest

43
Q

Design Principles

A
  • Attribution of decision rights
  • Information structure
  • Incentives structure
44
Q

Types of Structures

A
  • Simple structure
  • Functional structure
  • M-Form
  • Matrix form

Corporate Strategy (1 decks)

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