Finals Flashcards
A plan designed to achieve a long-term aim
Strategy
The planning and directing of military activity in a war or battle.
Strategy
The pattern or plan that integrates a nation’s or organization’s major goals, policies, and action sequences into a chosen whole.
Strategy
The way or plan of attaining technological goals and technological changes
Technology Strategy
Formulated at the national level and at the enterprise level
Technology Strategies
Technology Strategies are formulated at which levels?
National and Enterprise
Involves externalized oriented strategy
Techonology Strategy at National Level
Strategy that aims at seeking technological development with an objective to tap external market
Techonology Strategy at National Level
Technology Strategy at National Level aims at seeking tech development with an objective to?
Tap external market
Has a restricted role for FDI
Techonology Strategy at National Level
This seeks to foster or encourage indigineous technology development
Techonology Strategy at National Level
An example of this is developing domestic technology capabilities in general or in selected strategic industries
Techonology Strategy at National Level
Some examples are minority joint ventures with minor share to collaborator, tech assistance to domestic firms, and encouraging import of capital goods
Techonology Strategy at National Level
A formal set of enterprise intentions that allocates available resources and sets priorities based on clearly stated technological and enterprise objectives and a perceived environment in which ths process is to be embedded. (Bentz, Martino, & Mintzberg)
Techonology Strategy at Enterprise Level
What are the 3 factors that influence an enterprise’s technology strategy? (Porter)
1) Sustainability of technological lead: Technological leadership can be sustained only if competitors cannot copy it.
2) First mover advantages: Enterprise gets many advantages like increased reputation, pre-empting competition, early profits, new sales etc. (Lakas ng companies when releasing new products)
3) First mover disadvantages: Certain disadvantages and risks can adversly affect the first mover like cost of regulatory approvals, cost of educating buyers, demand uncertainty, low cost imitation by competitors, risk of technological discontinuities of existing technology / products / processes. (Challenges: Government regulations)
Based on factor analysis, an enterprise may adopt any of the following tech strategies:
1) Technology Leadership Strategy – Under this strategy, a firm seeks to be the first to introduce technological changes / innovations.
2) Technology Followership Strategy – A conscious & active strategy, by which a firm chooses not to be first on innovations.
Technological leadership can be sustained only if competitors cannot copy it.
Sustainability of technological lead
Enterprise gets many advantages like increased reputation, pre-empting competition, early profits, new sales etc. (Lakas ng companies when releasing new products)
First mover advantages
Certain disadvantages and risks can adversly affect the first mover like cost of regulatory approvals, cost of educating buyers, demand uncertainty, low cost imitation by competitors, risk of technological discontinuities of existing technology / products / processes. (Challenges: Government regulations)
First mover disadvantages
What directly influences technology generation in a nation?
The government technology policy framework
What sets the direction for technology development in the organization and to some extent also influences the same of competitors?
The technology strategy of the organization
Technology develops through a process of?
Creativity, Invention, and Innovation.
At which level is generation of technology both an individual & group activity, but its management is solely an organizational responsibility and activity?
Organizational/Enterprise Level
T or F. At organizational / enterprise level, generation of technology is an organizational responsibility and activity, but its management is both individual and group activity.
F.
Generation of tech is both an individual and group activity but management is solely an organizational responsibility and activity.
What summarizes four major stages in the evolution of performance characteristics?
S Curve of Technology Evolution
What are the four major stages in the evolution of performance characteristics?
1) Emergence: when the new technology comes into existence, but shows little improvement in its performance characteristics (takes time before it fully develops)
2) Rapid Improvement: When performance characteristics improve at an accelerating pace
3) Declining Improvement: When the pace of improvement declines (decline due to environment)
4) Maturity: When further improvements become very difficult to achieve
This stage is when the new technology comes into existence, but shows little improvement in its performance characteristics (takes time before it fully develops)
Emergence
This stage is when performance characteristics improve at an accelerating pace.
Rapid Improvement
This stage is when the pace of improvement declines (decline due to environment).
Declining Improvement
This stage happens when further improvements become very difficult to achieve.
Maturity
S Curve Technological Evolution occurs due to:
1) Learning processes – which, in the first stage, generates more or less stable design and process and in the second stage generates rapid improvements (when introducing new processes, give time for employees to adjust / learning curve)
2) Technology Limits – Once a technology reaches full potential, technology limits come into play during later stages. These technology limits are also known as Technology Frontiers – as called by Dosi. In later stages, radical breakthrough occurs, as a result new technology emerges which replaces existing technology, This is known as Technology Progression
3) The performance of the newer technology initially is lower than that of the older technology, but because of their relative positions on their respective S-curves, the performance of the newer technology soon surpasses that of the older
In the first stage, generates more or less stable design and process and in the second stage generates rapid improvements (when introducing new processes, give time for employees to adjust / learning curve)
Learning Processes
Once a technology reaches full potential, this come into play during later stages.
Technology Limits
These technology limits are also known as ________ as called by Dosi.
Technology Frontiers
In later stages, radical breakthrough occurs, as a result, new technology emerges which replaces existing technology
Technology Progression
Concerns the selection and management of a mix of businesses competing in several industries or product markets.
Corporate Level Strategy
It is the way a company creates value through the configuration and coordination of multi-market activities.
Corporate Level Strategy
T or F. To add economic value, a corporate strategy should enable a company, or one of its business units, to perform one or more of the value creation functions at a higher cost, or in a way which supports a differentiation advantage.
F.
Value creation functions should be at a lower cost.
What are the two issues that a manager needs to separate in order to avoid confusion on the vertical coordination problem?
1) Issue #1: What is the objective for vertical coordination? Or put differently, what efficiencies, risk sharing, or market power advantage are being sought?
2) Issue #2: What organization form (e.g. vertical contracts, equity joint ventures, mergers & acquisitions) best achieves the desired objective/s?
What are the 2 major reasons to do vertical integration?
Market Power (Increase Revenue)
Efficiency (Lower Cost)
1) Specialized assets & the holdup problem
2) Protecting product quality
3) Improved scheduling
These fall under what reason for vertical integration?
Efficiency (Lower Cost)
1) Entry Barriers
2) Down-stream price maintenance
3) Up-stream power over price
These fall under what reason for vertical integration?
Market Power (Increase Revenue)
In optimal input procurement, if there is no substantial specialized investments relative to contracting costs, what occurs/must be done?
Spot Exchange
In optimal input procurement, if there is a substantial specialized investment relative to contracting costs, AND there is no complex contracting environment relative to costs of ingtegration, what occurs/must be done?
Contract
In optimal input procurement, if there is a substantial specialized investment relative to contracting costs, AND there is a complex contracting environment relative to costs of integration, what occurs/must be done?
Vertical Integration
What are the 3 risks in undertaking cooperative agreements or strategic alliances?
1) Adverse Selection
2) Moral Hazard
3) Holdup
Which risk in undertaking cooperative agreements or strategic alliances occurs when partners misrepresent skills, ability, and other resources?
Adverse Selection
Which risk in undertaking cooperative agreements or strategic alliances occurs when partners provide lower quality skills and abilities than they had promised?
Moral Hazard
Which risk in undertaking cooperative agreements or strategic alliances occurs when partners exploit the transaction specific investment made by others in the alliance?
Holdup
What are the 3 motivations for diversification?
1) Value Enhancing Motives
2) Motives that are “Value Neutral”
3) Motives that “Devaluate”
Which motivation for diversification increases market power and involves R&D and new product development?
Value Enhancing Motives
In value enhancing motives, what do you call the development or developing or new competencies?
Stretching
In value enhancing motives, what do you call the transfer or transferring of core competencies?
Leveraging
What are the 3 examples of transferring core competencies?
1) Utilizing excess capacity
2) Economies of Scope
3) Leveraging Brand Name
Which motivation for diversification involves being motivated by poor economic performance in current businesses?
Motivations that are “Value Neutral”
Which motivation for diversification involves agency problems, managerial capitalism (empire building), maximizing management compensation, and sales growth maximization?
Motivations that “Devaluate”
What are the 2 issues of diversification?
Issue #1: When there is a reduction in managerial (employment) risk, then there is upside and downside effects for stockholders
Issue #2: There may be no economic value to stockholders in diversification moves since stockholders are free to diversify by holding a portfolio of stocks. No one has shown that investors pay a premium for diversified firms — in fact, discounts are common.
T or F. A downside effect of reduction in managerial employment risk is when top-level managers may have the economic incentive to diversify to a point that is detrimental to stockholders.
T
T or F. A downside effect of reduction in managerial employment risk is when top-level managers may have the economic incentive to diversify to a point that is detrimental to stockholders.
T
T or F. An upside of reduction in managerial employment risk is managers will be more willing to learn firm-specific skills that will improve the productivity and long-run success of the company (to the benefit of stockholders).
T
A strategy through which two firms agree to integrate their operations on a relatively co-equal basis because they have resources and capabilities that together may create a stronger competitive advantage.
Merger
A strategy through which one firm buys a controlling or 100 percent interest in another firm with the intent of using a core competence more effectively by making the acquired firm a subsidiary business within its portfolio.
Acquisition
A type of an acquisition strategy wherein the target firm did not solicit the acquiring firm’s bid.
Takeover
What are reasons for acquisition?
1) Increased market power
2) Overcome entry barriers
3) Cost of new product development
4) Increased speed to market
5) Lower risk compared to developing new products
6) Increased diversification
7) Avoid excessive competition
What are problems in achieving success of an acquisition?
1) Integration difficulties
2) Inadequate evaluation of target
3) Large or extraordinary debt
4) Inability to achieve synergy
5) Too much diversification
6) Managers overly focused on acquisition
7) Too large
What are the attributes of effective acquisition?
1) Complementary Assets / Resources
2) Friendly Acquisitions
3) Careful Selection Process
4) Maintain Financial Slack
Which attribute of effective acquisition involves buying firms with assets that meet current needs to build competitiveness?
Complementary Assets / Resources
Which attribute of effective acquisition involves friendly deals that make integration go more smoothly?
Friendly Acquisitions
Which attribute of effective acquisition involves deliberate evaluation and negotiations are more likely to lead to easy integration and building synergies?
Careful Selection Process
Which attribute of effective acquisition involves providing enough additional financial resources so that profitable projects would not be foregone?
Maintain Financial Slack
T or F. If an industry is generally known to be highly profitable, there will not be as much firms bidding on the assets already in the market.
F.
There will be many firms bidding.
This occurs when the most optimistic bidder usually over-estimates the true value of the firm.
Winner’s Curse
Under what scenarios can the bidder do well?
1) Luck
2) Asymmetric Information
3) Specific-synergies between the bidder and the target
This scenario eliminates the competitive bidding premise implicit in the “efficient market hypothesis”
Asymmetric Information and/or Specific-synergies between the bidder and the target
Economic benefits from performing a value creation activity in the optimal location
Location Economies
Effects of location economies
Can lower costs
Can enable differentiation
Caveats of location economies
Transportation costs and trade barriers
Political and economic risks
Serving a global market from one or a few plants is consistent with moving down the experience curve and establishing a low-cost position
Experience Curve
Companies with distinctive competencies can realize large returns by expanding to global markets where competitors lack similar competencies and products
Transferring Distinctive Competencies
Competencies can be created anywhere within a multinational’s global network of operations
Leveraging the Skills of Global Subsidiaries
Managers must establish an incentive system to encourage local employees to acquire new competencies
Leveraging the Skills of Global Subsidiaries
Managers must have processes in place to identify valuable new competencies and help transfer them within the company
Leveraging the Skills of Global Subsidiaries
What are the 2 pressures firms usually face when competing in the global market?
Pressures for Cost Reductions and Local Responsiveness
This is when companies produce commodity products where differentiation on nonprice factors is difficult and price is the main competitive weapon
Pressures for Cost Reductions
This is where competitors are based in low-cost location and there is persistent excess capacity.
Pressures for Cost Reductions
This is where consumers are powerful and face low switching costs and involves the liberalization of the world trade and investment environment.
Pressures for Cost Reduction
This occurs when there are differences in customer tastes and preferences, infrastructure and traditional practices, distribution channels, and host government demands
Pressures for Local Responsiveness
What are the 3 differences for pressures for local responsiveness?
Differences in:
1) customer tastes and preferences
2) infrastructure and traditional practices
3) distribution channels
What are the 4 basic strategies in choosing a global strategy?
1) Global
2) Transnational
3) International
4) Multidomestic
This strategy is best for high pressures for C.R. and low pressures for L.R.
Global Strategy
This strategy is best for high pressures in C.R. and high pressures in L.R.
Transnational Strategy
This strategy is best for low pressures in C.R. and low pressures in L.R.
International Strategy
This strategy is best for low pressures in C.R. but high pressures in L.R.
Multidomestic Strategy
Which strategy involves creating value by transferring competencies and products to foreign markets where indigenous competitors lack those competencies and products
International
Which strategy makes sense if a company has a valuable competence that indigenous competitors in foreign markets lack and if it faces weak pressure for local responsiveness and cost reductions
International
Which strategy occurs in developing a business model that allows a company to achieve maximum local responsiveness and companies may become too decentralized and lose the ability to transfer skills and products
Multidomestic
Which strategy is focusing on increasing profitability by reaping cost reductions that come from experience curve effects and location economies; pursuing a low-cost strategy on a global scale
Global
Which strategy is simultaneously seeking to lower costs, be locally responsive, and transfer competencies in a way consistent with global learning
Transnational
A disadvantage of this strategy is the lack or local responsiveness, inability to realize location economies and failure to exploit experience curve effects
International
An advantage of this strategy is the ability to customize product offerings and marketing in accordance with local responsiveness
Multidomestic
A disadvantage of this strategy is the inability to realize lcoation economies, failure to exploit experience curve effects, and failure to transfer distinctive competencies to foreign markets
Multidomestic
An advantage of this strategy is the ability to exploit experience curve effects and location economies
Global
A disadvantage of this strategy is lack of local responsiveness
Global (but also international)
An advantage of this strategy is the ability to exploit experience curve effects exploit location economises, customize product offerings and marketing in accordance with local responsiveness, and is reaping the benefits of global learning
Transnational
A disadvantage of this strategy is difficulties in implementation due to organizational problems
Transnational
What are the four basic entry decisions?
1) Assessment of long un profit potential
2) Balancing the benefits, costs, and risks associated with doing busienss in a country
3) Timing of entry
4) Scale of entry and strategic commitments
T or F. Basic Entry Decisions involve which overseas markets to enter.
T
A function of economic development and political stability
Balancing the benefits, costs, and risks associate with doing business in a country
A function of the size of the market, purchasing power of consumers, the likely future purchasing power of consumers
Assessment of long-run profit potential
Entering on a large scale is a strategic commitment, both positive and negative and involves the benefits and drawbacks of small-scale entry
Scale of entry and strategic commitments
What are the choice of entry modes?
1) Exporting
2) Licensing
3) Franchising
4) Joint ventures
5) Wholly-owned subsidiaries
6) Choosing Among Entry Modes
An advantage of this entry mode is ability to realize location and experience curve economies
Exporting
A disadvantage of this entry mode ks high transport costs, trade barriers, and problems with local marketing agents
Exporting
An advantage of this entry mode is low ddvelopment costs and risks
Licensing (and Franchising)
A disadvantage of this entry mode is inability to realize location and experience curve econkmies and inability to engage in global strategic coordination
Licensing
A disadvantage of this entry mode is inability to engage in global strategic coordination and lsck of control over quality
Franchising
An advantage of this entry mode is access to local partner’s knowledge, shared development costs and risks, and political dependency
Joint venture
A disadvantage of this entry mode is inabilitg to engage in global startegic coordination, inability to realize location and experience curve economies and lack of control over technology
Joint venture
An advantage of this entry mode is protection of technology, ability to engage in global trategic coordination, and ability to realize location and experience curve economies
Wholly owned subsidiaries
A disadvantage of this entry mode is just high costs and risks
Wholly owned subsidiaries
Franchising, joint ventures, subsidiaries
Management competency
Wholly-owned subsidiary is preferred over licensing and joint ventures
Technological competency
Exporting and wholly-owned subsidiaries
Great pressure for cost reductions
Advantages of global strategic alliances
1) Facilitate entry into a foreign market
2) Share fixed costs and associated risks
3) Bring together complementary skills and assets
4) Set technological standards to the industry
Disadvantages of global strategic alliances
Give competitors a low-cost route to gain new technology and market access
T or F. A good partner helps the company achieve strategic goals, shares the firm’s vision for the purpose of the alliance, and is unlikely to try to exploit the alliance to its own ends
T
The probability of opportunism by ana lliance partner is reduced by
1) “Walling off” critical technology
2) Establishing contractual safeguards
3) Agreeing to swap valuable skills and technologies
4) Seeking credible commitments
A self regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social and environmental.
Corporate Social Responsibility (CSR)
In the ordinary course of business, a company is operating in way that enhance society and the environment instead of contributing negatively in them.
CSR
T or F. For a company to be socially responsible, it first needs to be accountable to itself and its shareholders
T
T or F. Companies that adopt CSR programs have often grown their business to the point where they can give back to society. Thus, CSR is typically a strategy that’s implemented by large corporations. After all, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.
T
What are the Types of CSR?
Philantrophic Responsibility (Be a good corporate citizen)
Ethical Responsibility (Be ethical)
Legal Responsibility (Obey the law)
Economic Responsibility (Be profitable)
The by system of rules, practices, and processes which a firm is directed and controlled. Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, senior management executives, customers, suppliers, financiers, the government, and the community.
Corporate Governance
F. Since corporate governance provides the framework for attaining a company’s objectives, it is difficult to include practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.
F. It encompasses practically every sphere of management
Set of rules, controls, policies, and resolutions put in place to direct corporate behavior. A board of directors is pivotal in this. Proxy advisors and shareholders are important stakeholders who can affect this.
Governance
________ a firm’s corporate governance is a key component of community and investor relations
Communicating
Give examples of how to assess corporate governance.
1) Disclosure practices
2) Executive compensation structure (whether it’s tied only to performance or also to other metrics)
3) Risk management (the checks and balances on decision-making)
4) Policies and procedures for reconciling conflicts of interest (how the company approaches business decisions that might conflict with its mission statement)
5) The members of the board of the directors (their stake in profits or conflicting interests)
6) Contractual and social obligations (how a company approaches areas such as climate change)
7) Relationships with vendors
8) Complaints received from shareholders and how they were addressed
9) Audits (the frequency of internal and external audits and how issues have been handled)
What are the 3 corporate governance models?
Anglo-American Model
Continental / German Model
Japanese Model
