Exam 3 (CH. 7-9)

______ refers to situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary.

learning races

A ______ is a corporate strategy in which a firm is active in several different product markets.

product diversification strategy

_______ is when new or recombined knowledge is embodied in new products.

product innovation

________ refers to equity investments by established firms in entrepreneurial ventures.

corporate venture capital (CVC) **falls under the broader rubric of equity alliances

______ is a long-term strategic decision that is both difficult and costly to reverse.

credible committment

The ______ is a conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group.

crossing-the-chasm framework

______ is an innovation that leverages new technologies to attack existing markets from the bottom up.

disruptive innovation

______ is an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

diversification

A ______ is a situation in which the stock price of highly diversified firms is valued at less than the sum of their individual business units.

diversification discount

A _______ is a situation in which the stock price of related-diversification firms is valued at greater than the sum of their individual business units.

diversification premium

_____ are the agents that introduce change into the competitive system.

entrepreneurs

______ is the process by which people undertake economic risk to innovate - to create new products, processes, and sometimes new organizations.

entrepreneurship

_______ is a partnership in which at least one partner takes partial ownership in the other.

equity alliance

At the final stage of the industry life cycle (decline), managers generally have four strategic options:

1) exit 2) harvest 3) maintain 4) consolidate

Steps in the innovation process are as follows:

1) idea (abstract concepts or research findings) 2) invention 3) innovation 4) imitation (copying a successful innovation)

Some ways to develop innovation include:

1) induce it through structures and systems 2) allows for autonomous behavior (more freedom) 3) champion it through supporting new projects 4) cooperative strategies

______ is a firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.

absorptive capacity

An _______ is a firm's embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making.

innovation ecosystem

When innovating within existing companies, change agents are often called ______ - those pursuing _______ entrepreneurship.

intrapreneurs; corporate

An ______ is the transformation of an idea into a new product or process - or the modification and recombination of existing ones.

invention

When the costs of pursuing an activity in-house are less than the costs of transacting for that activity in the market, then the firm should ______.

vertically integrate **by owning production of the needed inputs or the channels for the distribution of outputs

______ are markets where the market leader captures almost all of the market share and is able to extract a significant amount of the value created.

winner-take-all markets

_______ is knowledge that can be codified.

explicit knowledge **concerns knowing about a process or product

______ are the costs of searching for a. firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract.

external transaction costs

_______ are competitive benefits that accrue to the successful innovator.

first-mover advantages

______ refers to changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain.

forward vertical integration

______ is a long-term contract in which a franchisor grants a franchisee the right to use the franchisor's trademark and business processes to offer goods and services that carry the franchisor's brand name.

franchising

A ______ is a corporate strategy in which a firm is active in several different countries.

geographic diversification strategy

Benefits of mergers and acquisitions are often _____ to achieve.

hard **anticipated synergies often do not materialize

______ is the process of merging with competitors, leading to industry consolidation.

horizontal integration

A ______ is an acquisition in which the target company does not wish to be acquired.

hostile takeover

_______ is an innovation that squarely builds on an established knowledge base and steadily improves an existing product or service.

incremental innovation

The ________ includes the five different stages - introduction, growth, shakeout, maturity, and decline - that occur in the evolution of an industry over time.

industry life cycle

Executives must determine their corporate strategy by answering three questions:

1) in what stages of the industry value chain should the company participate (vertical integration)? 2) what range of products and services should the company offer (diversification)? 3) where should the company compete. geographically (geographic scope)?

An innovation must have the following characteristics in order to help firms gain and sustain competitive advantage:

1) novel 2) useful 3) successfully implemented

For diversification to enhance firm performance, it must do at least one of the following:

1) provide economies of scale - which reduces costs 2) exploit economies of scope - which increases value 3) reduce costs and increase value

Commons reason to merge include:

1) reduction in competitive intensity 2) lower costs 3) increased differentiation 4) access new markets & distribution channels 5) access new capabilities or competencies 6) preempt rivals 7) principal-agent problems 8) desire to overcome competitive disadvantage 9) superior acquisition and integration capability

________ is the pursuit of social goals while creating a profitable business.

social entrepreneurship

The four main types of business diversification are:

1) single business 2) dominant business 3) related diversification (related constrained v. related linked) 4) unrelated diversification

Commons reasons firms enter strategic alliances include:

1) strengthen competitive position 2) enter new markets 3) hedge against uncertainty 4) access critical complementary assets 5) learn new capabilities

The different customer segments of the crossing-the-chasm framework include:

1) technology enthusiasts (2.5) 2) early adopters (13.5) *THE CHASM* 3) early majority (34) 4) late majority (34) 5). laggards (16)

By formulating corporate strategy, executives make important choices along three dimensions that determine the boundaries of the firm:

1) the degree of vertical integration (in what stages of the industry value chain to participate) 2) type of diversification (what range of products and services to offer) 3) geographic scope (where to compete)

Transaction cost economics helps managers decide:

1) which activities to perform in-house 2) which services and products to obtain from the external market

The ______ is a corporate planning tool in which the corporation is viewed as a portfolio of business units, which are represented graphically along relative market share (horizontal axes) and speed of market (vertical axes).

Boston Consulting Group (BCG) growth-share matrix **SBUs are plotted into four categories, each of which warrants a different investment strategy **pp. 280

_______ is the purchase or takeover of one company by another.

acquisition **can be friendly or unfriendly

_______ is a firm's ability to effectively manage three alliance-related tasks concurrently.

alliance management capability **(1) partner selection and alliance formation, (2) alliance design and governance, (3) post-formation alliance management **pp. 307

______ is a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets.

architectural innovation

______ refers to changes in an industry value chain that involve moving ownership of activities upstream to the originating (inputs) point of the value chain.

backward vertical integration

The ______ is a conceptual model that aids firms in deciding whether to pursue internal development (build), enter a contractual agreement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy).

build-borrow-or-buy- framework **pp. 297

______ is cooperation by competitors to achieve a strategic objective.

co-opetition

A ______ is a company that combines two or more strategic business units under one overarching corporation.

conglomerate **follows an unrelated diversification strategy

The _______ is a framework to guide corporate diversification strategy by analyzing possible combinations of existing/new competencies and existing/new markets.

core competence-market matrix **pp. 277

______ is the decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

corporate strategy

An ______ is a depiction of the transformation of raw materials into finished goods and services along distinct vertical stages, each of which typically represents a distinct industry in which a number of different firms are competing.

industry value chain **pp. 265

A ______ is a situation in which one party is more informed than another because of the possession of private information.

information asymmetry

______ is the commercialization of any new product or process, or the modification and recombination of existing ones.

innovation

Dominant positions can quickly change due to _____.

innovation ***can be a powerful strategic weapon to gain and sustain competitive advantage

______ are costs pertaining to organizing an economic exchange within a hierarchy.

internal transaction costs **also called administrative costs

______ is a stand-alone organization created and jointly owned by two or more parent companies.

joint venture

______ is a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

licensing

A ______ is a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary.

managerial hubris

The _______ is a conceptual model that categorizes innovations along the market (existing/new) and technology (existing/new) dimensions.

markets-and-technology framework ***pp. 232

A ______ is the joining of two independent companies to form a combined entity.

merger

Successful innovation affords firms a temporary _____.

monopoly **with corresponding monopoly pricing power

_______ are the positive effects (externally) that one user of a product. or services has on the value of that product for other users.

network effects **pp. 220

A ______ is a partnership based on contracts between firms.

non-equity alliance

_______ is a framework for R&D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from external ones.

open innovation **the sharing goes both ways - some external ideas and investors are in-sourced, while others. are spun out

A ______ is a form of intellectual property that gives the investor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.

patent

A ______ is a situation in which an agent performing activities on behalf of a principal pursues his or her own interests.

principal-agent problem

______ is the process of creating new ways to produce existing products or deliver existing services.

process innovation

A ______ is a corporate strategy in which a firm is active in several different product markets, and several different countries.

product-market diversification strategy

______ is an innovation that draws on novel methods or materials, is derived from an entirely different knowledge base, or from a recombination of the existing knowledge bases with a new stream of knowledge.

radical innovation

_______ is an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.

real-options perspective

A ______ is a corporate strategy in which a firm derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity.

related diversification strategy

A _______ is a kind of related diversification strategy in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business.

related-constrained diversification strategy

A _______ is a kind of related diversification strategy in which executives pursue various business opportunities that share only a limited number of linkages.

related-linked diversification strategy

______ describes the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.

restructuring

______ is an innovation that was developed for emerging economies before being introduced in developed economies.

reverse innovation **also known as frugal innovation

_______ are unique assets with high opportunity costs - they have significantly more value in their intended use than in their next-best use

specialized assets **three types - site specificity, physical asset specificity, and human asset specificity

A ______ is an agreed-upon solution about a common set of engineering features and design choices.

standard

_______ are voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.

strategic alliances **pp. 262

_______ is the pursuit of innovation using tools and concepts from strategic management.

strategic entrepreneurship

______ is moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain.

strategic outsourcing

An effective innovation ______ is critical in formulating a business strategy that provides the firm with a competitive advantage.

strategy

______ is knowledge that cannot be codified.

tacit knowledge **concerns knowing how to do a certain task and can be acquired only through active participation in that task

______ is a way of orchestrating value activities in which a firm is backwardly integrated but also relies on outside-market firms for some of its supplies and/or is forwardly integrated but also relies on outside-market firms for some of its distribution.

taper integration **this is an alternative to vertical integration **pp. 271

A _______ is valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy.

trade secret

______ is a theoretical framework in strategic management that explains and predicts the boundaries of the firm, which is central to formulating a corporate strategy that is more likely to lead to competitive advantage.

transaction cost economics

______ include all internal and external costs associated with an economic exchange, whether within a firm or in markets.

transaction costs

An ______ is a corporate strategy in which a firm derives less than 70 percent of its revenues from a single business and there are few, if any, linkages among its businesses.

unrelated diversification strategy

_______ is the firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.

vertical integration

_______ is when the markets along the industry value chain are too risky, and alternatives are too costly in time or money.

vertical market failure