Test Flashcards
Q1 1. Read the text below:
a) Identify the strategy and its definition
“The Netflix streaming platform came with a new idea, but it became popular due to the ease it offered in watching movies and series from the comfort of home. However,the most attractive aspect of it was that it offered a wide catalogue with
interesting productions for the whole family.
However, to gain greater popularity, they ventured into the production of original content, transitioning from being a distributor to a producer. With this brand, what we learn is that once you understand how the industry works, you can leverage this knowledge to create your own products. With this, you can take advantage of the infrastructure you already have.
Netflix followed a vertical integration strategy, transitioning from a distributor to a producer of original content. By this, Netflix gains more control over its offerings and reduce dependency on external studios
- Read the text below:
b) Risks and reasons for the strategy
“The Netflix streaming platform came with a new idea, but it became popular due to the ease it offered in watching movies and series from the comfort of home. However,the most attractive aspect of it was that it offered a wide catalogue with
interesting productions for the whole family.
However, to gain greater popularity, they ventured into the production of original content, transitioning from being a distributor to a producer. With this brand, what we learn is that once you understand how the industry works, you can leverage this knowledge to create your own products. With this, you can take advantage of the infrastructure you already have.
b) Reasons
- Economies of scope
- Assuming the margin
- Reinforced differentiation strategy
- Market power of products
Risks
- Organizational complexity
- High production cost
- A firm’s overall risk (If the target market for that product goes down, all the other activities will also be affected, as there will be a fall-off in their demand)
Q2. Firm diversification:
- Concept
Diversification strategy involves a firm expanding into new products and markets, entering different competitive environments with new success factors. This requires acquiring new knowledge, techniques, and adapting its structure, management processes, and systems.
Q2.2 2. Firm diversification:
- Factors that trigger the diversification decision
- Saturation of traditional market
- Profitable investment opportunities
Q2.3 Firm diversification:
- Reasons firms diversify
Reasons:
- Overall risk reduction
- Surplus resources and capabilities
- Generation of synergies
- Diversification window
- Image diversification
Q3 3. Read the text below and:
a) Identify the strategy
“Uber and Spotify have partnered to allow users of the ride-hailing app to choose and control the playback of songs during their journey. This initiative will be implemented in ten cities starting on November 21.”
- This is an example of a strategic alliance, where two companies collaborate to enhance customer experience while maintaining their separate business operations.
Q3.2.1 3. Read the text below and:
b) Advantages of the strategy
“Uber and Spotify have partnered to allow users of the ride-hailing app to choose and control the playback of songs during their journey. This initiative will be implemented in ten cities starting on November 21.”
Advantages:
- No firm dominates the other; cooperation is voluntary
- Future actions are coordinated, with shared commitments.
- Firms lose some independence but remain autonomous in other areas.
- The goal is achieved more easily or under better conditions than alone.
Q3.2.2 Read the text below and:
b) Pitfalls of the strategy
“Uber and Spotify have partnered to allow users of the ride-hailing app to choose and control the playback of songs during their journey. This initiative will be implemented in ten cities starting on November 21.”
Pitfalls:
- A partner may exploit another’s skills or gain market access in international deals.
- Decision-making independence is limited by the agreement and partner influence.
- Negotiation, coordination, and monitoring add costs and complexity.
- Partners may have conflicting goals, making strategy alignment difficult.
Q4.1 Advantages of external development.
Advantages:
- Faster than internal growth, as it instantly adds capacity.
- Helps diversification and international expansion by reducing risk and acquiring resources.
- Allows firms to enter markets at the right time and compete immediately.
- Easier for mature industries, where internal growth is harder, but internal development suits emerging industries better.
Q4.2 4. Pitfalls of external development.
- It has highly cost. Acquiring or merging with another firm requires significant financial investment.
- Combining different company cultures, systems, and processes can be complex.
- The acquired firm may not deliver expected benefits, leading to financial losses. (Risk of Overpayment)
- While external development allows quick entry, it doesn’t guarantee perfect timing or success. (Limited Control Over Market Timing)
Q5.1 Reasons of internalization (internal)
Internal reasons (to improve its competitiveness)
- Reduction in costs
Companies save on materials, labor, taxes, and benefit from economies of scale or cheaper operations abroad.
- Search for resources
Companies expand abroad to find valuable resources like natural materials, skilled labor, or better infrastructure.
- Reduction in overall risk
Spreading operations across multiple countries lowers overall business risk, similar to diversifying products.
Q5.2 Reasons of internalization (external )
External reasons (for spreading in external markets):
- Industry life-cycle
When an industry matures or demand falls due to an economic crisis, companies expand into new markets where the industry is still growing.
- External demand
Even if a market is declining in one country, other regions may have high demand, making expansion beneficial.
- Competitive pressure
Companies go global to keep up with competitors and maintain their market position.
Q5.3 Reasons of internalization (conclusion)
In real life, firms’ internationalization based on the both internal and external reasons at the same time.
Q6. Regarding the text below:
“Belen García-Valenzuela, Group Compensation & Benefits & Mobility Senior manager at Equatorial Coca-Cola Bottling Company (ECCBC), a company present in 13 countries on the African continent with over 4,500 employees, highlighted……..thus offering more development opportunities.”
Identify what this text refers to and talk about it.
An example of a global industry.
Q6.1.1 Why it is THIS industry (part1)
Because:
1. Standardized Policies Across Countries:
- ECCBC follows a single “ONE ECCBC Mobility Policy” for all 13 countries.
- This ensures fairness and efficiency, rather than having separate rules for each country.
2. International Talent Mobility & Integration:
- ECCBC has a group of 30 employees assigned across multiple countries, reinforcing the idea of a globally integrated workforce.
- The company provides international career development opportunities, reinforcing its global HR strategy.
Q6.1.2 Why it is THIS industry (part 2)
- Centralized Benefits & Security Measures:
- ECCBC offers an international pension plan and global security measures. - Adaptation to Local Needs While Maintaining Global Consistency:
- This is common in global industries, where companies set international policies while allowing some local adjustments.
Q6.2 Conclusion
ECCBC is a global company because it manages employees and policies the same way across all countries instead of letting each country operate separately.
Q7.1 Leadership activities in the implementation of the strategy (part 1)
a)Organizing the Company
- Adjusting the organisation’s structure to support the strategy.
- Creating a positive culture that supports new goals.
- Hiring, training, or reassigning employees to fit the plan.
b)Providing Administrative Support Systems
- Planning: Breaking the strategy into clear steps, budgets, and tasks.
- Monitoring: Checking progress and making adjustments as needed.
Q7.2 Leadership activities in the implementation of the strategy (part 2)
c)Driving Organisational Change
- Helping employees adapt to new ways of working.
- Ensuring everyone understands and supports the strategy.
d)Ensuring Clear Responsibilities
- Appointing someone to oversee implementation.
- Clearly defining everyone’s role in the process.
Q7.3 Leadership activities in the implementation of the strategy (part 3)
e)Time Management and Sequencing
- Planning based on urgency—quick changes need careful coordination, while slower ones allow more flexibility.
- Prioritizing activities to minimize risks while maintaining the momentum of the implementation.
f) Strategic Alignment
- Matching the strategy with the company’s goals, resources, and structure.
g) Communication and Motivation
- Communicating the mission clearly.
- Encouraging employees with recognition and rewards.
