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Business Policy > Final Review > Flashcards

Final Review Flashcards

1
Q

Porter’s 5 forces

A

threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes

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2
Q

5 forces in the airline industry

A

low entry barriers, powerful suppliers, powerful buyers, strong substitute threat, intense rivalry. low overall profit potential, an unattractive industry for investment

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3
Q

strategic planning model

A

environmental analysis, formulation, implementation, execution and control

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4
Q

environmental analysis

A

internal strengths and weaknesses, external opportunities and threats

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5
Q

formulation

A

goal, mission, objectives. STRATEGY held up by organizational structure and policy guidelines

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6
Q

implementation

A

budgets, programs, procedures

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7
Q

execution and control

A

monitor feedback

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8
Q

value

A

customers willingness to pay maximum price, sometimes called the reservation price

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9
Q

cost

A

cost to produce the good/service directly impacts the profit margin

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10
Q

profit

A

difference between the price charged and the cost to produce or (P-C)

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11
Q

stages of life cycle

A

introduction, growth, maturity, decline

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12
Q

introduction

A

R&D, tech change, attention to quality, design change, process cange

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13
Q

growth

A

improve product, economies of scale, process improve, distribution, value added, forecasting

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14
Q

maturity

A

focus on standardizing, efficiency, cost cuts, few changes, optimal capacity

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15
Q

decline

A

cost control, reduce capacity, cut products

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16
Q

competitive advantage

A

always relative, not absolute, compare to benchmark. strategy is not a grandiose statement, managers must met competitive challenge

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17
Q

organizational performance is determined by

A

industry effects and firm effects

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18
Q

industry effects

A

caused by the structure of the industry

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19
Q

firm effects

A

caused by the actions of management

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20
Q

merger

A

combining two companies usually similar in size, the friendly approach

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21
Q

acquisition

A

purchase or takeover of a company, can be friendly or can be a hostile takeover through stockholders

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22
Q

why do firms enter strategic alliances

A

strengthen competitive position, enter new markets, hedge against uncertainty, access critical complementary assets, learn new capabilities

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23
Q

merging with competitors

A

horizontal integration: process of merging and acquiring competitors.

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24
Q

benefits of merging with competitors

A

reduce competitive intensity, lower costs, increased differentiation, access to new markets and distribution channels

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25
Q

strategic alliance

A

a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services

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26
Q

strategic criteria

A

an alliance qualifies as strategic only if it has the potential to affect a firm’s competitive advantage

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27
Q

rational view of competitive advantage

A

framework where critical resources and capabilities are embedded in strategic alliances that span firm boundaries

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28
Q

governing strategic alliances

A

non-equity alliances, equity alliances, joint ventures

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29
Q

non-equity alliances

A

partnership based on contracts between firms. The most frequent forms are supply agreements, distribution agreements, and licensing agreements

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30
Q

explicit knowledge

A

knowledge that can be codified, concerns knowing about a process or product

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31
Q

equity alliances

A

partnership in which at least one partner takes partial ownership in the other

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32
Q

tacit knowledge

A

knowledge that cannot be codified, concerns knowing how to do a certain task and can be acquired only through active participation in that task

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33
Q

joint venture

A

a standalone organization created and jointly owned by two or more parent companies. strong ties, trust and commitment that can result. used to enter foreign markets

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34
Q

most common forms of alliance

A

supply agreements, distribution agreements, licensing agreements

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35
Q

three options to drive firm growth

A

organic growth through internal development, external growth through alliances, external growth through acquisition

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36
Q

the build borrow or buy framework

A

aids strategist in deciding whether to pursue internal development (build), enter a contract arrangement or strategic alliance (borrow), acquire new resources, and competencies (buy)

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37
Q

alliance management capability

A

a firms ability to effectively manage three alliance tasks concurrently. 30-70% of alliances yield disappointing results

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38
Q

three alliance related tasks

A
  1. partner selection and alliance formation
  2. alliance design and governance
  3. post formation alliance management
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39
Q

M&A and Competitive Advantage

A

many M&A actually destroy shareholder value. when there is value it often goes to the acquiree, acquireres tend to pay a premium

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40
Q

why still desire M&As?

A

principal agent problems, overcome competitive disadvantage, superior acquisition and integration capability

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41
Q

globalization

A

a process of closer integration and exchange between different countries and peoples worldwide

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42
Q

globalization made possible by

A

falling trade and investment barriers, advanced telecommunications, reduced transportation costs

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43
Q

globalization 1.0: 1900-1941

A

only sales and distribution took place overseas, knowledge flowed one way; home to international

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44
Q

globalization 2.0: 1945-2000

A

duplicating business functions overseas, knowledge flow back to headquarters remained limited

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45
Q

globalization 3.0: 21st century

A

MNE reorganizes to a more seamless global enterprise, MNEs become global collaboration networks

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46
Q

what defines a U.S. company

A

address, investment

47
Q

address

A

IBM, GE, and others are U.S. companies…despite the fact that a majority of their employees work outside the U.S.

48
Q

investment

A

carmakers from Japan and South Korea and engineering companies. all have made significant investments in the U.S., also created a large number of good jobs

49
Q

globalization has two consequences

A
  1. rising wages and other costs 2. as the standard of living rises in emerging economies
50
Q

rising wages and other costs

A

may negate any benefits of access to low cost input factors

51
Q

as the standard of living rises in emerging economies

A

MNEs are hoping that increased purchasing power will enable workers to purchase the products they used to make for export only

52
Q

Why go global?

A

gain access to a larger market, gain access to low cost input factors, develop new competencies

53
Q

gain access to a larger market

A

MNE has opportunities of scale and scope, firms in smaller home markets

54
Q

gain access to low cost input factors

A

labor, natural resources, technology, logistics. professionals less expensive in China and India

55
Q

develop new competencies

A

location economies, polycentric innovation strategies

56
Q

Does GM’s future lie in china

A

market opportunity in china (1.4 billion and onle 1 in 100 own a vehicle), GM entered china in 1997, 70% of GM revenues outside the US

57
Q

Disadvantages of expanding internationally

A

liability of foreignness, loss of reputation, loss if intellectual property

58
Q

liability of foreignness

A

additional cost of doing business in an unfamiliar cultural and economic environment

59
Q

loss of reputation

A

globalizing a supply chain can have unintended effects. this challenge directly concerns the MNEs corporate social responsibility

60
Q

loss if intellectual property

A

large scale infringements in software, movie, and music

61
Q

CAGE Distance Framework

A

a decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance

62
Q

cultural distance

A

increased distance with: different languages ethnicities, religions, social norms, and dispositions; lack of connective ethnic or social networks, lack of trust and mutual respect.

63
Q

administrative and political distance

A

distance increases with: absence of trading bloc, absence of shared currency, monetary or political association, absence of colonial ties, political hostilities, weak legal and financial institutions

64
Q

Geographic distance

A

distance increases with: lack of common border, waterway access, adequate transportation, or communication links, physical remoteness, different climates and time zones

65
Q

economic distance

A

distance increases with: different consumer incomes, different costs and quality of natural, financial, and human resources, different information or knowledge

66
Q

how to enter a foreign market

A

low investments and low level of control, high investments and high level of control

67
Q

low investments and low level of control

A

exporting, licensing, franchising

68
Q

high investments and high level of control

A

joint venture, acquisition, greenfield operations

69
Q

structure

A

determines how the work efforts of individuals and teams are orchestrated and how resources are distributed

70
Q

culture

A

collectively shared values and norms of an organization’s members; a key building block of organizational design

71
Q

control

A

internal governance mechanisms to align the incentives of principals (shareholders) and agents (employees)

72
Q

organizational design

A

goals is to translate strategies into realized ones. structure, processes, and procedures

73
Q

implementation (the graveyard of strategy)

A

poor implementation leads to loss of market value

74
Q

structure follows strategies

A

therefore structure must be flexible

75
Q

organizational structure

A

defines how jobs and tasks are divided and integrates, delineates the reporting relationships up and down the hierarchy, defines formal communication channels, prescribes how individuals and teams are coordinate their work and efforts

76
Q

key building blocks of sructure

A

specialization, formalization, centralization, and hierarchy

77
Q

specialization

A

degree to which task is divided

78
Q

division of labor

A

large firms may specialize, small firm may have an accountant be more of a generalist and take on different roles

79
Q

formalization

A

codified rules and formal procedures, detalied written rules and policies

80
Q

centralization

A

where the decision is made, top down strategic planing

81
Q

decentralization

A

planned emergence

82
Q

hierarchy

A

formal, position based reporting lines

83
Q

hierarchy: tall vs flat

A

tall structure: higher degree of centralization

flat structure: lower degree of centralization

84
Q

span of control

A

number of direct reports to a manager

85
Q

organic organizations

A

low degree of specialization and formalization, flat structure, decentralized decision making, uses virtual due to information technology

86
Q

mechanistic organizations

A

high degree of specialization and formalization, tall hierarchy, centralized decision making

87
Q

simple structure

A

small firms with low complexity, founders make all important strategic decisions, low degree of formalization and specialization, a basic organiational structure

88
Q

functional structure

A

groups of employees with distinct functional areas, the areas of expertise corresponded to distinct stages in the company’s value chain activities, recommended with limited diversification

89
Q

multidivisional structure

A

consists of several distinct SBUs, each SBU is independent and led by a CEO, Each CEO of SBU reports to the corporate office, m-form is a widely adopted organizational structure, as most large firms are diversifies to some extent

90
Q

related diversification

A

co-opetition among SBUs, trasfer core competences across SBUs, centralized decision making

91
Q

unrelated diversification

A

decentralized decision making, competing fo resources

92
Q

shared value framework

A

reestablish the relationship between superior firm performance and societal progress, externalities, creates a larger pie

93
Q

externalities

A

pollution, wasted energy, and costly accidents increase, internal costs in lost reputation if not directly on the bottom line

94
Q

traditional view- friedman

A

shareholder capitalism: shareholder- the providers of the necessary risk capital and the legal owners of public companies=have the most legitimate claim on profits

95
Q

shared value view: porter

A

corporate social responsibility: obligations extend beyond the economic responsibility and include legal, ethical, and philanthropic societal expectations

96
Q

agency theory

A

a theory that views the firm as a nexus of legal contracts

97
Q

board of directors

A

the centerpiece of corporate governance, composed of indiside and outside directors who are elected by the shareholders

98
Q

other governance mechanisms

A

executive compensation, the market for corporate control, financial statement auditors, governments regualtors, and industry analysis

99
Q

corporate governance

A

mechanisms to direct and control a firm, ensure the pursuit of strategic goal, address the principal-agent problem

100
Q

when corporate governance fails

A

accounting scandal, global financial crisis

101
Q

information asymetry

A

insider information, on he job consumption

102
Q

agency theory

A

views a firm as a nexus of legal contracts: relationships among shareholder, managers, and hierarchies, front line employees have an advatnage over management, firms need to design work tasks

103
Q

adverse selection

A

misrepresentation of a job: beyond his/her ability to do things

104
Q

moral hazard

A

difficulty to ascertain whether the agent gives his/her best

105
Q

The board of directors

A

centerpiece of corporate governance

106
Q

BOD different shareholder goals

A

institutional investors, individual short term investors

107
Q

inside directors

A

generally part of the company’s senior mangement team

108
Q

outside directors

A

not employees of the firm

109
Q

functions of the board of directors

A

selecting, evaluating, and compensating the CEO, overseeing CEO succession plan, providing guidance on executives & their compensation, reviewing, monitoring, and approving strategic initiatives, conducting a risk assessment and mitigation, ensuring a firm’s audited financial statements, ensuring a firm’s compliance with laws and regulations

110
Q

michael porter: managers focus on three things here:

A
  1. expand the customer base to bring in nonconsumers 2. expand traditional internal firm value chains to include more nontraditional partners 3. focus on creating new regional clusters
111
Q

four attractive charateristics of public firms:

A
  1. limited liability for investors 2. transferability of investor interest 3. legal personality 4. seperation of ownership and control
112
Q

executive compensation

A

salary, bonus, and stock options (long term incentives)

113
Q

ceo pay-two issues

A
  1. ceo pay compared to average employee pay 2. firm performance and ceo pay

Business Policy (3 decks)

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