Exam 2 Flashcards

Question

Unrelated diversification

Answer 1

based on Investment Portfolio Theory

Answer 2

Portfolio Theory

Answer 3

Diminishing Returns: 1. Dilution of Dominant Logic - the "big picture" could become blurred 2. Control costs - Information technology/ administrative costs to track and manage multiple businesses/ regions

Answer 4

Exists whenever one or more activities in the value chains of different businesses are sufficiently similar to present opportunities for: Transferring competitively valuable expertise or technological know-how from one business to another Combining performance of common value chain activities to achieve lower costs Exploiting use of a well-known brand name

Answer 5

Information technology/ administrative costs to track and manage multiple businesses/ regions

Answer 6

a common way of thinking about strategy across different businesses in a diversified firm, and making them ‘work’ Dominant logic is a common way of applying/using strategy across different geographic segments in a globally diversified firm. - It is an interpretation of how a company has succeeded in one country…. - and applies that dominant logic to succeed other global apply to all markets

Answer 7

sometimes what works well in one culture will not work well in another culture.

Answer 8

Refocusing -Contraction through business segment divestiture -Eliminate business segments that Are Losing Money Dilute Dominant Logic Just Don’t ‘Fit’ -Stick to What You Know Best (a mantra in strategic management)

Answer 9

Limited Intermediate Extensive

Answer 10

U-Shape relationship Negative returns before positive returns - Often due to Liability of Foreignness - Takes time to learn new markets, adapt

Answer 11

Inverted-U relationship Implies a positive relationship between global diversification, and performance as risk is diversified. But possibly… -Performance begins to suffer when you become “too” global -Sometimes, firms chase “bad” markets with profits from “good” ones. Why? Hubris Dilution of Dominant Logic

Answer 12

“Additional costs a firm operating in a market overseas incurs that a local firm would not incur” - The “rules of the game” in different countries can be different - Foreign firms are often discriminated against, sometimes formally and other times informally

Answer 13

overconfidence in their capabilities ( or that of the firm) that can lead to flawed decisions

Answer 14

the CEO is also the chairman of the board

Answer 15

governance - Advise, review, and approve management strategic plans, decisions, and actions in managing the company

Answer 16

Director who is an executive employed by the corporation

Answer 17

Director who is not an executive employed by the corporation

Answer 18

if they are affiliated with the company in any way. If they have family or friends in the company or top management. If they are retired from the company.

Answer 19

- shareholders - board of directors - top management

Answer 20

shareholders oversee board of directors who oversees top management

Answer 21

board of directors

Answer 22

shareholders

Answer 23

top manager

Answer 24

Refers to the relationship among the shareholders, board of directors, and top management in determining the direction and performance of the corporation.

Answer 25

- Meet regularly without management present | - Audit committees should meet at least 4 times a year

Answer 26

- Need at least one independent member with experience in the firm’s core business - Outsider Directors should not sit on more than 4 boards

Answer 27

- No more than two insiders | - Audit, compensation, and nominating committees should be outsiders only (i.e., “true” outsiders)

Answer 28

- Each director should have at least $150,000* equity in the company - Should be paid only in equity

Answer 29

- Smaller boards And fewer insiders… One CEO and one Chairperson