Exam 3 Flashcards

1
Q

cooperative strategy

A

means by which firms collaborate to achieve a shared objective

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2
Q

strategic alliance

A

a cooperative strategy in which firms combine some of their resources to create a competitive advantage

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3
Q

joint venture

A

strategic alliance in which two or more firms create legally independent company to share some of their resources to create a competitive advantage
- improve a firms ability to compete in uncertain conditions

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4
Q

equity strategic alliance

A

an alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources to create a competitive advantage

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5
Q

non-equity strategic alliance

A

an alliance in which two or more firm develop a contractual relationship to share some of their resources to create a competitive advantage

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6
Q

Reasons Firm develop Strategic Alliances

A
  • alliances account for up to 25% or more of a firm’s sales revenue
  • increase competitiveness
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7
Q

slow-cycle markets reasons for using a strategic alliance

A
  • gain access to restricted market
  • establish a franchise in a new market
  • maintain market stability
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8
Q

fast-cycle markets reasons for using a strategic alliance

A
  • speed up development of new goods or services
  • speed up new market entry
  • maintain market leadership
  • form an industry technology standard
  • share risky R&D expenses
  • overcome uncertainty
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9
Q

standard-cycle markets reasons for using strategic alliances

A
  • gain market power
  • gain access to complementary resources
  • establish better economies of scale
  • overcome trade barriers
  • meet competitive challenges from other competitors
  • pool resources for very large capital projects
  • learn new business techniques
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10
Q

business level cooperative strategy

A

strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product market

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11
Q

complementary strategic alliances

A

business level alliances in which firms share some of their resources in complementary ways to create a competitive advantage

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12
Q

vertical complementary strategic alliance

A

firms share some of their resources from different stages of the value chain for the purpose of creating a competitive advantage.

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13
Q

horizontal complementary strategic alliance

A

firms share some of their resources from teh same stage(stages) of the value chain for the purpose of creating a competitive advantage.

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14
Q

diversifying strategic alliance

A

strategy in which firms share some of their resources to engage in product and/or geographic diversification
- typically seek to enter new markets

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15
Q

synergistic strategic alliance

A

strategy in which firms share some of their resources to create economies of scope

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16
Q

franchising

A

strategy in which a firm (franchisor) uses a franchise as a contractual relationship to describe and control the sharing of its resources with its partners(franchisees)
- attractive to use in highly fragmented markets (where no firm has a dominant market share)

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17
Q

cross border strategic alliance

A

firms with HQ in different countries combine their resources to create a competitive advantage

  • limited growth opportunities and foreign gov econ policies are reasons to create this alliance
  • more complex and risky than domestic strategies
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18
Q

network cooperative strategy

A

strategy where several firms agree to form multiple partnerships to achieve shared objectives

  • effective way to create value for customers by offering many goods in many geographical locations
  • effective social relationships are key to a successful network cooperative strategy
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19
Q

alliance network

A

set of strategic alliance partnerships that firms develop when using a network cooperative strategy

  • stable = demand is constant and predictable
  • built to exploit economies of scale and/or scope that exist between partners
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20
Q

dynamic alliance networks

A

used in industries characterized by frequent product innovations and short product life cycles.

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21
Q

competitive risks in cooperative strategies

A
  • inadequate contracts
  • misrepresentation of competencies
  • fail to use complementary resources
  • holding alliance partners’ specific investments hostage
22
Q

Primary approaches to manage cooperative strategies

A
  • cost minimization: greater cost bc uses more detailed contracts and extensive monitoring
  • opportunity maximization: partners take advantage of unexpected opportunities and learn from each other, fewer constraints on partners
23
Q

3 internal governance mechanisms

A
  1. ownership concentration, represented by types of shareholders and their different incentives to monitor managers;
  2. the board of directors; and 3. executive compensation
24
Q

corporate governance

A

set of mechanisms used to manage the relationships among stakeholders and to determine and control the strategic direction and performance of organizations

25
Q

agency relationship

A

exists when one party delegates decision-making responsibility to a second party for compensation

  • separation between owners (principals) and managers (agents)
  • problems can arise when owners(principals) and top level mangers (principal’s agents) have different interests/ goals
26
Q

managerial opportunism

A

seeking of self-interest with deceit (both an attitude and set of behaviors)

27
Q

managerial employment risk

A

risk of job loss, loss of compensation, and loss of managerial reputation

28
Q

agency costs

A

sum of incentive costs, monitoring costs, enforcement costs, and individual costs, and individual financial losses incurred by principals because governance mechanisms cannot guarantee total compliance by the agent

29
Q

ownership concentration

A

defined by the number of large-block shareholders and the total percentage of the firm’s shares they own

30
Q

large-block shareholders

A

typically own at least 5 percent of a company’s issued shares.

31
Q

institutional owners

A

financial institutions, such as mutual funds and pension funds, that control large-block shareholder positions

32
Q

market for corporate control

A

external governance mechanism that is active when a firm’s internal governance mechanism fail.
- individuals and firms buy ownership positions in or purchase all of undervalued corporations to form new divisions

33
Q

organizational structure

A

specifies the firm’s formal reporting relationships, procedures, controls, and authority and decision making processes

34
Q

organizational controls

A

guide the use of strategy, indicate how to compare actual results with expected results, and suggest corrective actions to take when the difference is unacceptable

35
Q

strategic controls

A

largely subjective criteria intended to verify that the firm is using appropriate strategies for the conditions in the external environment and the company’s competitive advantages
-fit between what firm might do (external opportunities) and what it can do (internal capabilities)

36
Q

financial controls

A

largely objective criteria used to measure the firm’s performance against previously established quantitative standards (ROI, ROA)

37
Q

relationship pattern between strategy and structure

A

Chandler found firms grow first by volume, then by geography, then integration (vertical, horizontal), and finally through product/business diversitfication

38
Q

simple structure

A

owner-manager makes all major decisions and monitors all activities, and the staff serves as an extension of manager’s supervisory

39
Q

functional structure

A

consists of a chief executive officer and a limited corporate staff, with functional line managers in dominant organizational areas such as production, accounting, marketing, R&D, engineering, and human resources

40
Q

M-form(mulidivisional) structure

A

consists of a corporate office and operating divisions, each operating division representing a separate business or profit center in which the top corporate officer delegates responsibilities for day-to-day operations and business-unit strategy to division managers

41
Q

Three important structural characteristics

A
  • specialization (type and # of jobs required to complete work)
  • centralization (degree to which decision-making authority is retained at higher managerial levels)
  • formalization (degree to which formal rules and procedures govern work)
42
Q

functional structure to implement cost leadership strategy

A

contribute to low cost culture:

  • few layers in decision making and authority structure
  • centralized corporate staff
  • strong focus on process improvements through manufacturing function rather than R&D
  • work divided into subgroups for specialization and efficiency
43
Q

using functional structure to implement the differentiation strategy

A
  • cross-selling
  • focus on marketing and product R&D
  • employees look for ways to differentiated products
  • rapid responses, strategic flexibility needed
  • jobs not highly specialized
44
Q

functional structure to implement integrated cost leadership/differentiated strategy

A
  • marketing and new product R&D need to be emphasized while production and process engineering are not
  • decision making patterns that are partly centralized and partly decentralized
  • jobs semispecialized
45
Q

cooperative form

A
  • M-form structure in which horizontal integration is used to bring about interdivisional cooperation
  • divisions in a firm use related constrained diversification strategy (share resources and activities across BU’s)
46
Q

matrix organization

A

organizational structure in which there is a dual structure combining both functional specialization and business product or project specialization
- lead to improved coordination among firms divisions

47
Q

strategic business unit (SBU) form

A

M-form consisting of 3 levels; corporate HQ, SBUs, and SBU divisions

48
Q

competitive form

A

M-form structure characterized by complete independence among the firm’s divisions that compete for corporate resources (Legal affairs, finance, and auditing)

49
Q

worldwide geographic area structure

A

emphasizes national interests and facilitates the firm’s efforts to satisfy local differences

50
Q

combination structure

A

characteristics from both the worldwide geographic area structure and the worldwide product divisional structure

51
Q

strategic network

A

group formed to create value by participating in multiple cooperative arrangements