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Strategic Management > Final Exam > Flashcards

Final Exam Flashcards

1
Q

If internal resources are essential, what would you do to acquire resources and capabilities as a firm?

A

Build (internal development)

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2
Q

If trading resources are readily available, what would you do to acquire resources and capabilities as a firm?

A

Borrow (License/Contract)

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3
Q

If you can easily integrate the target firm, what would you do to acquire resources and capabilities as a firm?

A

Buy (Acquisition)

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4
Q

If you are close to your trading partner, what would you do to acquire resources and capabilities as a firm?

A

Borrow (Alliance)

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5
Q

Why did Lyft enter into strategic alliances with GM and Waymo?

A

–Expand Lyft’s reach in the ridesharing market.
–GM provided vehicles and services, while Waymo provided self-driving technology.
–Both of these strategic alliances allowed Lyft to access resources that it would not have had before.

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6
Q

What are strategic alliances?

A

Voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.

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7
Q

Why are strategic alliances important to firms?

A

-Allows firms to achieve goals faster and at a lower cost, and allow firms to circumvent potential legal repercussions including potential lawsuits filed by U.S. federal agencies or European Union.

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8
Q

What caused strategic alliances to grow and become mainstream?

A

The speed of technology changing and innovation increasing

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9
Q

What are Non-Equity Alliances?

A

o Partnership based on contracts.
o Supply agreements, distribution agreements, licensing agreements, franchises

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10
Q

What are Non-Equity Alliances?

A

o Partnership based on contracts.
o Supply agreements, distribution agreements, licensing agreements, franchises

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11
Q

What are Equity Alliances?

A

One partner takes a partial equity stake in another (GM/Lyft)

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12
Q

What are Joint Ventures?

A

Standalone organization, created and jointly owned by two or more parent companies (HULU)

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13
Q

What three components contribute to effective alliance management capability?

A
  • Relation-Specific Investments
  • Knowledge-Sharing Routines
  • Interfirm Trust
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14
Q

Mergers

A

describes the joining of two independent companies to form a combined entity. (tend to be friendly) (ex. Live Nation merged with Ticketmaster)

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15
Q

Acquisitions

A

describes the purchase or takeover of one company by another. They can be either friendly or unfriendly. (Disney’s acquisition of Pixar was friendly)

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16
Q

Hostile Takeover

A

When a target firm does not want to be acquired.

17
Q

What are the benefits of Horizontal Integration?

A

o Reduction in competitive intensity- changes industry structure
o Lower costs- economy of scale
o Increased differentiation- fills product gaps

18
Q

Why do firms acquire other firms?

A
  • To access new markets, new distribution channels
  • To overcome entry barriers
  • To access new capabilities and competencies
  • To pre-empt rivals
    o Facebook acquisitions of Instagram, WhatsApp, Oculus
    o Google acquisitions of YouTube, FitBit, Nest, Double Click
19
Q

What is the risk of Horizontal integration?

A
  • Integration difficulties
  • Inadequate evaluation of the target
  • Extraordinary debt
  • Inability to achieve synergy
  • Too much diversification
  • Managers overly focused on acquisitions
  • Too large
20
Q

How do mergers impact competitive advantage and value creation? %%%%

A

20/60/20.
Failure merge
ok merge
Successful merge

21
Q

What principal-agent issue impacts mergers/acquisitions?

A

Managers may act in their own self-interest, eroding rather than enhancing value creation.

22
Q

Why does the principal agent happen?

A

EGO
buying a business is more interesting than running a business

23
Q

What is meant by strategic preemption?

A

A major move by a focal business ahead of moves by its adversaries. Related to the reduction in competitive intensity as a motivation to acquire.

24
Q

Managerial Hubris

A

A form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence of the contrary.

25
Q

Example of Managerial Hubris

A

Although most top-level managers are aware that the majority of acquisitions destroy rather than create shareholder value, they see themselves as the exceptions to the rule.

26
Q

What is corporate governance?

A

A strategic control mechanism focused on relationships among shareholders, management, and the board of directors.

27
Q

Who are the primary participants of corporate governance?

A

Shareholders
Managers
Board of Directors

28
Q

What is agency theory?

A

a theory of the relationship between principals and their agents, with emphasis on two problems:
(1) the conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents, and
(2) the different attitudes and preferences toward risk of principals and agents.

29
Q

What are the three primary internal governance mechanisms for monitoring and managing the behavior of managers?

A
  • A committed and involved board of directors that acts in the best interest of the shareholders to create long-term value.
  • Shareholder activism, wherein the owners view themselves as shareowners.
  • Managerial incentives, sometimes called “contract-based outcomes,” which consist of reward and compensation agreements.
30
Q

What are the duties of a board of directors?

A

Acts as a fulcrum between the owners and controllers of a corporation. Directors are the intermediaries who provide a balance between a small group of key managers in the firm.
- The board needs to allocate its scarce time to the most critical issues to which its members can add value.

31
Q

What are the characteristics of an effective board of directors?

A

o Active, critical participants
o Focus on forward-looking, strategic issues.
o Evaluate CEOs against high performance standards.
o Balance of insiders and independent outsiders.
 Insiders: strong operational knowledge, relationships with non-board member executives
 Outsiders: outside-industry experience, independent oversight of strategy
o Diverse board members

32
Q

What is shareholder activism? Individual shareholder rights: (least amount of power)

A

sell stock, vote the proxy, bring suit for damages, get information, receive residual rights if company liquidates.

33
Q

What is shareholder activism? - Collective shareholder power: (2nd)

A

direct the course of corporate direction, file shareholder action suits, demand key issues be brought up for proxy power.

34
Q

What is shareholder activism? - - Institutional investors: (Powerful)

A

o May pressure for leadership changes.
o Can take strategic actions through larger-scale stock purchase or sell-offs.

35
Q

What is the benefit of CEO duality?

A
  • Unity of command: in favor of duality
    o Provides clear focus.
    o Eliminations confusion, conflict
    o Enhances firm’s responsiveness.
    o Allows for quick decisions based on first-hand knowledge.
36
Q

What is the downside of CEO Duality?

A

o Safeguards against corruption or incompetence.
o Removes conflict of interest, particularly regarding CEO succession.

37
Q

EXTERNAL GOVERNANCE MECHANISMS

  • Market for Corporate Control
A

o Individuals and firms buy or take over undervalued firms- usually ineffective managers are replaced.
o Threat of takeover may lead firm to operate more efficiently.
o Changes in regulations have made hostile takeover difficult.

38
Q

EXTERNAL GOVERNANCE MECHANISMS

Government controls

A
  • Auditors: verify financial information.
  • Banks and analysts: conduct and publish in-depth studies of firms.
  • Governmental regulatory bodies: require disclosure of financial information (SEC)
  • Media, public activists: influence public perception.
39
Q

key global differences in corporate governance issues and solutions.

A
  • Outside the U.S. and U.K.- key issue with principal-principal conflicts:
    o Concentrated ownership, family ownership.
    o Motivation to pursue strategies that benefit controlling shareholders.
    o Few formal (regulatory) or informal constraints.
  • Existence of business groups who can take coordinated action

Strategic Management (1 decks)

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