Final Exam Flashcards
• Porter’s Diamond of National Competitiveness
diamond of national advantage - a framework for explaining why countries foster successful multinational corporations; consists of four factors—factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry
In effect, these attributes
jointly determine the playing field that each nation establishes and operates for its industries. These factors are:
• Factor endowments. The nation’s position in factors of production, such as skilled
labor or infrastructure, necessary to compete in a given industry.
• Demand conditions. The nature of home-market demand for the industry’s product
or service.
• Related and supporting industries. The presence or absence in the nation of supplier
industries and other related industries that are internationally competitive.
• Firm strategy, structure, and rivalry. The conditions in the nation governing how
companies are created, organized, and managed, as well as the nature of domestic
rivalry
• Motivations for going International
A company also decides to become a multinational firm in order to:
Optimize the location of value chain activity.
To enhance performance.
To reduce cost.
To reduce risk.
Take advantage of learning opportunities.
Why should a US firm care about IB?
The global marketplace provides many opportunities for firms to increase their revenue base and their profitability.
However, managers face many opportunities and risks when they expand abroad.
What if the US company has no short-term intentions to expand internationally? Why should it care about IB?
• Reverse innovation
Design and manufacture products for emerging markets.
Export no-frills products to developed markets for price conscious customers.
• Outsourcing vs. offshoring
Outsourcing refers to an organization contracting work out to a 3rd party, while offshoring refers to getting work done in a different country, usually to leverage cost advantages.
Offshoring may be costly.
Common savings from offshoring include:
Lower wages, benefits, energy costs, regulatory costs, taxes.
Hidden costs from offshoring include:
Higher total wage and indirect costs, wage inflation.
Increased inventory due to longer lead time.
Reduced market responsiveness.
Increased coordination costs.
Cost of protecting intellectual property.
International Strategy
An international strategy requires diffusion and adaptation of the parent company’s knowledge and expertise to foreign markets.
Kind of an “export” strategy. You do the same that you do at home internationally.
The primary goal is worldwide exploitation of the parent firm’s knowledge and capabilities.
All sources of core competencies are centralized.
Pressure for both local adaptation and low costs are rather low.
• Regionalization
regionalization increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region such as Europe, North America, or Asia.
• The progression of entry modes
Exporting, Licensing, Franchising, Strategic Alliance, Joint Venture, Wholly Owned Subsidiary
• The three attributes needed for entrepreneurship to occur in detail (Opportunity, Resources and Entrepreneur(s))
For an entrepreneurial venture to create new value, three factors must be present—an
entrepreneurial opportunity, the resources to pursue the opportunity, and an entrepreneur
or entrepreneurial team willing and able to undertake the opportunity.
opportunity recognition the process of discovering and evaluating changes in the business environment, such as a new technology, sociocultural trends, or shifts in consumer demand, that can be exploited
resources are an essential component of a successful entrepreneurial launch. For start-ups, the most important resource is usually money because a new
firm typically has to expend substantial sums just to start the business. However, financial
resources are not the only kind of resource a new venture needs. Human capital and social capital are also important. Many firms also rely on government resources to help them thrive.
entrepreneurial leadership leadership appropriate for new ventures that requires courage, belief in one’s convictions, and the energy to work hard even in difficult circumstances; and that embodies vision, dedication and drive, and commitment to excellence.
• Sources, phases and characteristics of opportunities
Entrepreneurial opportunity recognition involves two phases:
Discovery
Becoming aware of a new business concept, product, service..
Evaluation
Analyzing the opportunity to determine whether it is viable or feasible to develop further
Entrepreneurial opportunity recognition involves two phases:
Discovery
Becoming aware of a new business concept, product, service..
Evaluation
Analyzing the opportunity to determine whether it is viable or feasible to develop further
Discovery phase — Period when you first become aware of a new business concept, product, service.
They can come from change, hobbies, customers.
Can be spontaneous and unexpected.
Can also result from a deliberate search.
Are there frustrations with current products or processes?
What might be a creative solution to a business problem?
Do stakeholders have unmet needs?
What do other markets or industries do?
Can we revive old ideas?
• Issues regarding financing for entrepreneurial start-ups
• Elements of entrepreneurial leadership
Vision is an entrepreneur’s most important asset. Requires transformational leadership. Ability to envision realities that do not yet exist. Ability to share this vision with others. Drive & dedication are necessary. Involves internal motivation. Calls for intellectual commitment. Requires patience. Stamina, willingness to work long hours. Enthusiasm that attracts others. Commitment to excellence is required. Commit to knowing the customer. Provide quality goods and services. Pay attention to details. Continuously learn. Connect the dots. Hire people smarter than themselves.
• New entry strategies
pioneering new entry a firm’s entry into an industry with a radical new product or highly innovative service that changes the way business is conducted
New-entry strategies typically fall into one of three categories—
pioneering new entry,
imitative new entry, or
adaptive new entry.
pioneering new entry a firm’s entry into an industry with a radical new product or highly innovative service that changes the way business is conducted.
imitative new entry a firm’s entry into an industry with products or services that capitalize on proven market successes and that usually have a strong marketing orientation
adaptive new entry a firm’s entry into an industry by offering a product or service that is somewhat new and sufficiently different to create value for customers by capitalizing on current market trends.
- Competitive Dynamics Model and its different stages and what they entail
new competitive action acts that might provoke competitors to react, such as new market entry, price cutting, imitating successful products, and expanding production capacity
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threat analysis a firm’s awareness of its closest competitors and the kinds of competitive actions they might be planning
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Motivation and Capability to Respond
Once attacked, competitors are faced with deciding how to respond. Before deciding, however, they need to evaluate not only how they will respond but also their reasons for responding and their capability to respond. Companies need to be clear about what problems a
competitive response is expected to address and what types of problems it might create.56
There are several factors to consider
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Types of Competitive Action
strategic actions - major commitments of distinctive and specific resources to strategic initiatives.
tactical actions - refinements or extensions of strategies usually involving minor resource commitments
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Likelihood of Competitive Reaction
The final step before initiating a competitive response is to evaluate what a competitor’s
reaction is likely to be. The logic of competitive dynamics suggests that once competitive
actions are initiated, it is likely they will be met with competitive responses.63 The last step
before mounting an attack is to evaluate how competitors are likely to respond.
• Coopetition and Forbearance
forbearance
a firm’s choice of not
reacting to a rival’s new
competitive action.
co-opetition
a firm’s strategy of both
cooperating and competing
with rival firms
• Informational Organization
informational control a method of organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organization’s goals and strategies and the strategic environment.
• Levers of behavioral control
Boundaries, Culture & Rewards
Behavioral control is focused on implementation—doing things right. Effectively implementing strategy requires manipulating three key control “levers”—culture, rewards, and boundaries (see Exhibit 9.3). There are two compelling reasons for an increased emphasis on culture
and rewards in a system of behavioral controls.1
Organizational culture a system of shared values and beliefs that shape a company’s people, organizational structures, and control systems to produce behavioral norms.
reward system
policies that specify who
gets rewarded and why.
boundaries and constraints rules that specify behaviors that are acceptable and unacceptable.
Culture: A system of unwritten rules
that forms an internalized influence
over behavior.
• Often found in professional organizations.
• Associated with high autonomy.
• Norms are the basis for behavior.
Rules: Written and explicit
guidelines that provide external
constraints on behavior.
• Associated with standardized output.
• Most appropriate when tasks are generally repetitive and routine.
• Little need for innovation or creative activity.
Rewards: The use of performance based incentive systems to
motivate.
• Measurement of output and performance is rather straightforward.
• Most appropriate in organizations pursuing unrelated
diversification strategies.
• Rewards may be used to reinforce other means of control.
• What constitutes corporate governance and the role of each party
corporate governance the relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors.
• External and Internal control mechanisms of corporate governance
external governance control mechanisms methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system.
• Agency theory,
relationship between principals (stockholders) and agents (management)
• What an organizational structure is
Organizational structure refers to the formalized patterns of interactions that link a firm’s
tasks, technologies, and people. Structures help to ensure that resources are used effectively in accomplishing an organization’s mission. Structure provides a means of balancing two conflicting forces: a need for the division of tasks into meaningful groupings and the need to integrate such groupings in order to ensure efficiency and effectiveness. Structure identifies the executive, managerial, and administrative organization of a firm and indicates responsibilities and hierarchical relationships. It also influences the flow of information as well as the context and nature of human interactions.
• 4 types of traditional organizational structures (simple, functional, divisional (with the variants of strategic business unit and holding company) and matrix structures are and the dominant growing patterns of US corporations.
• Remember that strategy and structure influence each other
• A firm’s strategy and structure typically changes as it
increases in size, diversifies into new product markets,
and expands its geographic scope.
• Firms often start with simple structures and
move to functional structures as it grows. As firms
expand their product and geographic scope, they
often employ divisional or geographic-area
structures
Discussions of the relationship between strategy and structure usually strongly imply that
structure follows strategy. The strategy that a firm chooses (e.g., related diversification)
dictates such structural elements as the division of tasks, the need for integration of activities, and authority relationships within the organization. However, an existing structure can
influence strategy formulation. Once a firm’s structure is in place, it is very difficult and
expensive to change.25 Executives may not be able to modify their duties and responsibilities
greatly or may not welcome the disruption associated with a transfer to a new location. There
are costs associated with hiring, training, and replacing executive, managerial, and operating
personnel. Strategy cannot be formulated without considering structural elements
• Modular organization
modular organization an organization in which nonvital functions are outsourced, using the knowledge and expertise of outside suppliers while retaining strategic contro
• Issues to consider when thinking about international organizational structures (no need to know international structures themselves).
In firms with international operations, three major
contingencies influence the chosen structure:
• the type of strategy that is driving a firm’s foreign
operations
• the level of product diversity
• the extent to which a firm is dependent on
foreign sales
