OTD Chapter 8

Question 1

The strength of a company’s core competences is a product of:

Answer 1

Specialized resources

Coordination abilities

Question 2

Specialized resources

Answer 2

• Functional resources: skills possessed by an organization’s functional personnel.
• Organizational resources: attributes that give an organization a competitive advantage such as the skills of top-management or the possession of valuable and scarce resources.

Question 3

Coordination abilities

Answer 3

An organization’s ability to coordinate its functional and organizational resources to create maximum value and a competitive advantage.

Question 4

Four ways in which global expansion allows an organization to create value for stakeholders

Answer 4

• Transfer of core competences abroad
• Establishment of a global network (moving value-creation activities to countries where conditions enhance low-cost or differentiation advantage)
• Gaining access to global skills and resources
• Use of global learning to enhance core competences

Question 5

Risks associated with outsourcing important functional competences abroad

Answer 5

1. Risks losing control of its core skills and technology. (Partner may become competitor).
2. Risk of no longer being able to invest in resources to improve its skills in that activity.

Question 6

Functional-level strategy

Answer 6

A plan of action to strengthen an organization’s functional and organizational resources as well as its coordination abilities in order to create core competences.

E.g., Coca Cola investing heavily in innovative approaches to marketing.

Question 7

Business-level strategy

Answer 7

Entails creating a plan to combine functional core competences to position the company so that it has a competitive advantage in its domain.

E.g., Coca Cola using its marketing skills to defend its niche against Pepsi-Co.

Question 8

Low-cost business-level strategy

Answer 8

a plan whereby an organization produces low-priced goods and services for all customer group.

Question 9

Differentiation business-level strategy

Answer 9

A plan whereby an organization produces high-priced, quality products aimed at particular market segments.

Question 10

Focus strategy

Answer 10

Specialising in one segment of a market and focusing all the organization’s resources on that segment.

E.g., KFC specialising in the chicken segment of the fast-food market.

Question 11

Corporate-level strategy

Answer 11

Entails a plan to use and develop core competences so that the organization cannot only protect and enlarge its existing domain, but also expand into new domains.

Question 12

Two corporate level strategies that can help an organization create value

Answer 12

1. Vertical integration
   - Forward: distributors
   - Backward: suppliers
2. Diversification
   - Related: entering new domain related to company’s existing domain.
   - Unrelated: entering new domain that is not related to existing/core domain of company.

Question 13

Conglomerate structure

Answer 13

A structure in which each business is placed in a self-contained division and there is no contact between divisions.

It is a company that owns many small businesses operating in unrelated industries such as food, medicine, clothing, etc. Each business functions independently with separate CEOs. Still, they all report to the parent company.

Question 14

Global-level strategy

Answer 14

Entails a plan that involves choosing the best strategy to expand into overseas markets to obtain scarce resources and develop core competences as discussed above.

E.g., Netflix expanding into 190 countries in 7 years time through phases of expansion.