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EM432 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

How does porter describe corporate strategy?

A

overall plan for a diversified company

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2
Q

How does collis + Montgomery describe corporate strategy

A

it is a way a corporations seeks to create value through configuration and coordination of its multi market activites

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3
Q

What questions so Corporate strategy address

A
  • what is the purpose of our company
  • what strategic path should we take?
  • what business should we be in
  • what is best scope for company
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4
Q

Corporate Advantage and Corporate Strategy

A

The value a company creates and sustains through the configuration and coordination of multi-business activites

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5
Q

What does corporate strategy focuses on

A
  • resources and capabilities the company possesses
  • what businesses the company adopts or should
  • form the org that the company adopts or should
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6
Q

What is Asnoffs Market/Product matrix

A

a company can pursue growth through a combination of market characteristics and product characteristics

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7
Q

Market characteristics

A

concentrating on exploiting existing market or exploring new markets

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8
Q

Product Characteristics

A

Pushing existing products into market or producing/offering new products

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9
Q

What is in Ansoffs Market/product matrix

A

Market development strategy: new Market and existing Products
Diversification strategy: new Market and new products
Market Penetration strategy: Existing market and existing product
Product Development Strategy: Existing market and new product

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10
Q

Market penetration strategy

A

Produces and sells more of same product in existing market (lowest risk

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11
Q

Product Development Strategy

A

Produces and sells new product in existing market (moderate risk)

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12
Q

Market development strategy

A

produces and sells existing products in new markets (moderate risk)

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13
Q

Diversification Strategy

A

Produces and sells products in new markets (highest Risk)

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14
Q

What is BCG’s Growth/share matrix

A

Tool to help companies allocate resources based on the attractiveness of their market and level of competitiveness

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15
Q

How can the BCG’s growth matrix be adapted to drive strategic experimentation for unpredictable markets

A
  • accelerating innovation
  • balancing investments
    -selecting investments in a disciplined way
  • carefully measuring and monitoring experimentation
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16
Q

What is the BCG growth share matrix

A

Market Star Question Mark
Growth Cash Cow Dog
Rate. Relative Market Share

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17
Q

What is an SBU

A

Strategic Business Unit

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18
Q

What is in a balanced portfolio

A

Star: SBU with high market share and high growth rate
Question mark: SBU with low market share and high growth rate
Cash Cow: SBU with relative market share and low growth rate
Dog: SBU with low relative market share and low growth rate

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19
Q

Limitations and Extensions of Portfolio Frameworks

A
  • Static framework
  • Based largely on demand/product sideview; corporate advantage based on adapting to external factors
  • Assumed that conglomerate was dominant form of org
  • Strategic advantage is achieved through growth but based on redeployment and reinvested of internally generated cashflows
  • overemphasis on planning
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20
Q

What is the collis and Montgomery framework

A

Corporate strategy is the creation of value through the configuration and coordination of the companies multimarket activities

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21
Q

What are the 5 elements of Collis and Montgomery Framework

A

Vision; Goals and objectives, resources; businesses; structure, systems, and processes

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22
Q

What are the stages in the Raw material to consumer value chain?

A

Raw materials (upstream)
intermediate manufacturer
assembly
Distribution
End user (downstream)

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23
Q

Vertical integration Backward into supplier functions does what?

A
  • Assures constant supply of inputs
  • protects against price increases
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24
Q

Vertical integration forward to distributor function does what?

A
  • Assures proper disposal of outputs
  • Captures additional profits beyond activity costs
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25
Q

How to choose vertical integration type?

A

which value adding activites to compete in and which are better suited for others to carry out

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26
Q

What is full integration

A

Suppliers straight to customers

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27
Q

What is taper integration

A

combines vertical integration with market exchange

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28
Q

What are the advantages of a vertical integration strategy

A
  • builds entry barriers to new competitors
  • facilitates investments in efficiency enhancing assets that solve internal mutual dependence problem
  • protects product quality
  • Improves internal scheduling
29
Q

Disadvantages of vertical integration

A
  • Cost disadvantages of internal supply purchasing
  • remaining tired of obsolescent tech
  • aligning input and output capacities is difficult for integrated companies
30
Q

What do burecratic costs do to vertical integration

A

reduce the value

31
Q

Why do the costs of running an organization rise with integration?

A
  • lack of incentive for internal suppliers to reduce operating costs
  • lack of strategic flexibility in times of change
32
Q

What are some alternatives to vertical integration?

A
  • Short-term contract and competitive bidding
  • strategic alliances and long-term contracting
33
Q

How to build long-term cooperative relationships?

A
  • hostage taking
  • credible commitments
  • maintaining market discipline
34
Q

What is hostage taking

A

both parties arrange to become mutually dependent on each other

35
Q

What are credible commitments

A

believable commitment to support long-term relationships

36
Q

Maintaining market discipline requires:

A
  • periodic renegotiation of contract
  • developing parallel sourcing policy with 2 suppliers for critical inputs
37
Q

advantages of outsourcing

A
  • subcontractors reduce cost
  • better product differentiation
  • concentration on available resources
  • firm is more flexible and responsive
38
Q

Disadvantages of outsourcing

A
  • failure to learn from activity
  • too much dependence on single supplier
  • danger of leading to competitive advantage
39
Q

Related diversification

A

Entry into new business activity based on shared commonalities in the components of the value chains of a firm

40
Q

Unrelated Diversification

A

Entry into new business area that has no obvious relationship with any area of existing business

41
Q

How to create value through diversification

A
  • superior internal governance
  • acquisition and restructuring strategy
  • Economies of scope
42
Q

What are economies of scope

A

When production of one good reduces the cost of producing another related good

43
Q

When is acquisition an attractive strategy

A
  • competencies important in a new business are are lacking
  • speed of entry is important
  • acquisition is a less risky form of entry
  • Barriers to entry can be overcome by acquisition of a firm in the target industry
44
Q

Limits of acquisitions

A
  • failing to follow through on postaqusition integration of acquired firm
  • overestimating and underestimating the economic benefits
  • Failing to properly screen candidates before acqusistion
45
Q

Guidelines for successful acquisition

A
  • properly identify acquisition targets and conduct thorough preacquisition screening of target firm
  • use bidding strategy with proper timing to avoid overpaying
  • follow through on postacquisition
  • dispose of unwanted residual acquisition assets
46
Q

What are the attractions of a joint ventures as entry strategies

A
  • sharing costs and risks
  • increasing probability of success
47
Q

What are the drawbacks of a joint ventures as entry strategies

A
  • requires sharing control
  • requires sharing of profits
  • risks giving away critical knowledge
  • risks creating potential competitor
48
Q

What are the causes of corporate decline?

A
  • poor management
  • overexpansion
  • inadequate financial controls
  • high costs
  • new competition
  • unforseen demand shifts
  • organisational inertia
49
Q

What are the main steps of turnaround

A
  • changing the leadership
  • redefining strategic focus
  • asset sales and closures
  • improving profitability
  • acquisitions
50
Q

What is the 7 S framework

A

Strategy, Structure, Style, Staff, Skills, Systems, Superordinate Goals

51
Q

Strategy

A

plans for allocation of resources to achieve specific goals

52
Q

Style

A

approach to leading people and providing direction

53
Q

Structure

A

way the orgs business units relate to each other

54
Q

Systems

A

practices and procedures that org uses to get things done

55
Q

Superordinate goals

A

what org stands for and believes in

56
Q

staff

A

number and type of people employed by org

57
Q

skills

A

learned capabilities of staff within org

58
Q

Elements of Organizational Design

A
  • organizational structure
  • planning and control systems
  • human resource management
  • culture and style
59
Q

Functional Structure

A

more responsive to related diversification

60
Q

What is Multi-divisional (M-form) structure more responsive to

A

More responsive to unrelated diversification

61
Q

Advantages of the M-form Structure

A
  • Adaptation to bounded rationality
  • Allocation of decision making
  • minimizing coordination costs
  • avoiding goal conflict
62
Q

What does the M-form address

A
  • challenges of resource allocation through internal capital market and resolution of agency problems
63
Q

What is corporate governance

A

relationships between the firms capital providers and top managers

64
Q

What does a seperation of ownership and control lead to?

A

Agency Problems

65
Q

What are some agency conflicts

A
  • maximizing growth, not earnings
  • diversifying risk
  • managerial risk aversion
  • managerial self-preservation
  • contextual factors
66
Q

What are evidence of governance failure

A
  • managerial indulgencies
  • empire building
67
Q

What is empire building

A

engaging in acquisitions of unrelated business

68
Q
A

EM432 (3 decks)

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