BMGT 4930 Exam 2

Competitive rivalry is focused solely on the initial action and reactions of firms as they maneuver for an advantageous market share

True

Franchising

Used to compete in service industries - Not much risk

unrelated diversification

When a company enters an industry that lacks any important similarities with its existing industry

Related diversification

When a company moves into a new industry that has important similarities with the company's existing industry or industries - Sometimes will exploit a core competency to become more successful

Stuck in the middle

When costs are too high and features are not unique enough

Liability of forgiveness (international mkt)

You are at a competitive disadvantage compared to domestic companies

Two competitive dimensions are key to business-level strategy

- Competitive advantage - Scope of operations

Differentiation strategy

- Convinces customers to pay a premium price for its good & services by providing unique and desirable features - Advantages: ability to obtain prices, strong margins, buyer loyalty - Disadvantages: Customers may not be willing to pay extra, prefer a cheaper alternative, or find competitors imitating the preferred features

Global Strategy

- Cost Leadership - Centralized - Assumes markets are similar - Standardized products - Do best in related countries - Advantage: High Efficiency - Disadvantage: Low responsiveness (international strategy)

Types of business level strategies to choose from

- Cost leadership - Differentiation - Focused cost leadership - Focused differentiation

Buying companies that compete in a similar market, have a similar strategy, or produce a similar product is considered ____________ integration

Horizontal

Company strategy, structure, and rivalry (diamond model)

How challenging it is for companies to survive domestic competition

Mutual forbearance

Implicit agreement not to compete with one another

Multidomestic strategy

- Differentiation - Decentralized - Creates unique products - Best in unrelated countries - Advantage: Locally responsive - Disadvantage: Low efficiency (International strategy)

Value of Diversification

- Economies of scope - Market Power - Financial Economies

Cost leadership

- Offers products or services with acceptable quality and features to a broad set of customers at a low price - Ties into economies of scale - Advantages: withstanding competitive advantage, discouraging new entrants, attract a large market share - Disadvantages: Need to maintain a high sales volume, minimizes time for advertising/marketing/R&D

Drivers of international business

- Opening up to larger economies like China to - Increase opportunities - Gain cost advantages - Diversify business risk

Two types of competitor actions

- Strategic (long term & larger) - Tactical (short term & smaller)

Economies of scale

- The bigger I am, the better I can do this - Many cost leaders rely on this

Economies of scope

-Controlling the value chain by making more than you buy

Options for Competing in International Markets

-Exporting -Wholly Owned Subsidiary -Franchising -Licensing -Joint Venture -Strategic Alliance

Joint venture

2 or more firms create a NEW Entity

Diversification strategy

Companies using these are those that enter entirely new industries

Portfolio planning

A process that helps executives make decisions involving their firms' various industries - BCG Matrix: Cash cows, stars, question marks, dogs

The Diamond Model

Based on these conditions, you will be more or less successful internationally: - Demand conditions - Factor conditions - Related & supporting industries - Company strategy, structure, & rivalry

Coopetition

Compete & cooperate on projects

Multipoint competition

Competitors are overlapping in multiple areas

Offshoring

Attempt to reduce costs even though it's becoming popular to reshore jobs

Competitor actions

Awareness Motivation Capability - Higher these are, the better you can compete

Scope of operations consists of

Broad targeting Narrow targeting

Micro brewery strategy level

Business level

Tha goal of vertical integration is to minimize the power of_______

Buyers and suppliers

Nationalization

Challenge of entering international mkt - Company's assets in a country are seized be the national government due to political upheaval

Best-cost strategy

Charge relatively low prices and offer substantial differentiation

Early in Toyota's US market penetration, they chose to engage in a strategic alliance with GM focused on automotive technology development. This supply chain collaboration between end market rivals is indicative of what type of competitive dynamics interaction between firms?

Coopetition

What should drive the decision to employ a low-cost or differentiation strategy?

Core competencies

The central purpose of a _________________ strategy is to create more value as a whole unit than the organizations would be worth separate or under other ownership.

Corporate level strategy

Big brewery strategy level

Corporate strategy bc they focus on brand management

Competitive advantage consists of

Cost Uniqueness

Big brewery strategy perspective

Cost leadership

Wholly-owned subsidiary

Creating everything from the ground up the way you want it to be - Advantage: No need to change anything - Large scale investment

What concept within the diamond model refers to the size and nature of a firm's domestic customer base?

Demand conditions

Micro brewery strategy perspective

Differentiated

An organization with a particular focus on innovation and a large R&D budget is likely to employ what strategy?

Differentiation

Growing into new business areas with the purpose of creating value using excess resources is __________________.

Diversification

Motivations of an acquisition

Expansion (mkt power) Entry Barriers (easier to enter) New competencies Increase diversification

Inorganic growth

Expansion by mergers, acquisitions, or takeovers

What is the easiest mode for organizations to go international?

Exporting

Frontier Airlines focuses on ultra low-cost fares by servicing a smaller market segment than their broad market competitors. This is an example of what business level strategy?

Focused cost leader

Generic Strategy

General way of positioning a company within an industry

Market power

Increasing market share to gain more autonomy and buyer/supplier power

Acquisitions are considered to bewhat type of growth?

Inorganic

What is it called when a firm grants another company the right to create/manufacture a company's product in exchange for a fee?

Licensing

Colocation

Location together ex/ motor mile

What is a potential risk associated with cooperative relationships among firms?

Loss of operational control Loss of intellectual property being taken advantage of by partner

Dogs

Low shares, low-growth

Transnational Strategy

Mix of global and multidomestic Ex/ Coca-cola selling different flavors in different countries - Challenge: Hard to be both at once

Signs of a competitor

Mkt Commonality Resource similarity

In terms of corporate level strategy, how diverse should a corporation's portfolio of strategic business units be (in general)?

Moderately diverse

Vertical Integration

More about value chain, requires changing more, and gives you more control - A company gets involved in new portions of the value chain Ex/ Backward & Forward vertical integration

Licensing

Most frequently used in manufacturing industries - The right to create a company's product - Biggest risk is losing Intellectual Property

International Strategies (strategic business units)

Multidomestic Global strategy Transnational strategy

Early in Toyota's US market penetration, they chose to engage in a strategic alliance with GM focused on automotive technology development. This supply chain collaboration between end market rivals is indicative of what type of competitive dynamics interaction between firms?

Mutual Forbearance

Rivalry

Outcome of competitive actions

Strategic Alliance

Partners with NO NEW entity

Honda's ability to sell engines for automobiles, personal watercraft, motorcycles, and other applications is an example of:

Related diversification

Focused cost leadership

Requires competing based on price to target a narrow market Ex/ Spirit airlines

Strengths & weaknesses of microbreweries

Strength: Innovative, quality, increased demand Weaknesses: Weaker relationships, scaling issues (can't meet demand)

Strengths & Weaknesses of Big breweries

Strengths: Capital, Marketing, lobbying, relationships, control over planogram Weaknesses: Low innovation, low demand

Exporting in international markets

The easiest way to enter the international market - Involves creating goods within a company's home country & shipping them to another - Risk is MINIMAL - Success is limited

Factor Conditions of Porter's Diamond

The inputs present in a country shape firms' competitiveness ex/ raw materials

Demand conditions of diamond model

The nature of domestic customers, especially whether they have high expectations of the goods/services

Horizontal integration

companies trying to expand their presence in an industry by acquiring or merging with one of their rivals - Acquisition - Merger Advantages are: lowering costs and gaining access to new distribution channels ---- Market power and lower costs

product development

creating new products to serve existing markets

Stars

high growth, high market share

question mark

high growth, low market share

Market development

involves taking existing products and trying to sell them within new markets

A strategy is that is more focused on efficiency than unique value

low cost, low leader

Cash cows

low-growth, high-share businesses or products

Challenges of entering international markets

political risk, economic risk, cultural risk

Concentration strategies

strategies that involve trying to successfully compete only within a single industry

Focused differentiation

strategy requires offering unique features that fulfill the demands of a narrow market

Related & supporting industries (diamond model)

the extent to which companies' domestic suppliers & other complementary industries are developed and helpful

Market penetration

trying to gain additional share of a company's existing markets using existing products