MGT 247 Syracuse University Final (Chapters 7-12)
Disruptive Innovation
- Leverages new technologies in existing markets - New product/ process meets existing customer needs - Laptops disrupted desktops
External Growth
-Alliances (borrow) -Acquisitions (buy)
Incremental Innovation
-Builds on established knowledge base -Results from steady improvement -Targets existing markets with existing technology -Example: Gillette Blades: from one to six
Innovation
-Commercialization of any new product, process, or the modification and recombination of existing ones. -Commercialization of an invention by entrepreneurs.
Introduction Stage
-Core Competency: R&D -Strategic Objective: Market acceptance and future growth. -Emphasis: Uniqueness & Performance -Initial Market Size: small -Growth: slow -Barriers to entry: high **Few Competitors
CAGE framework (acronym)
-Cultural -Administrative and Political -Geographical -Economic
Decline Stage
-Demand fall (often rapidly) -Strong pressure on prices
Growth Stage
-Demand increases rapidly -Competitive rivalry: muted (due to growth) -Product/ service *standards* emerge -Basis of competition: process innovation -Core Competencies: Manufacturing, Marketing
Radical Innovation
-Draws on novel methods & materials -Forms from an entirely new knowledge base, or -Forms from a recombination of existing knowledge -Targets new markets with new technology -The iphone/ Airplane / X-ray / Genetic engineering
Maturity Stage
-Few Large Firms remain -Additional market demand is limited -Market has reached maximum size -Competitive Industry: increases
Shakeout Stage
-Firms begin to compete more intensely -Weaker firms forced out. Industry Consolidates. Strongest survive. -Biggest competitive weapon: low price
Mechanistic Organization
-High degree of specialization and formulation -Tall hierarchies -Centralized Decision making
Architectural Innovation:
-Leverages existing technology into new markets - Alters the architecture of a product - A new product, with known components, used in a novel way
Four Benefits of being Publicly Traded
-Limited Liability for investors -Transferability of investor ownership (through trading) -Legal personality (beyonf family) -Separation of legal ownership and management control
Non-Equity Alliances
-Partnerships based on contracts -(supply or distribution or licensing agreements)
Horizontal Integration
-The process of merging with competitors -leads to industry consolidation
Acquisition
-The purchase of one company by another
Invention
-Transformation of an idea into product or process -The modification and recombination of existing ones
Organic Organization
-low degree of specialization and formulation -Flat organizational structure -Decentralized Decision making
Four strategic options to pursue in when in decline stage
1) Exit: Bankruptcy / liquidation 2) Harvest: reduce further investments 3)Maintain: support at a given level 4) Consolidate: buy rivals
2 ways in which organizational cultures are shaped.
1) Founder imprinting 2) group think
5 reasons why firms need to grow
1) Increase Profits 2) Lower Costs 3) Increase market power 4) Reduce risk 5) Motivate management
Four types of innovation
1) Incremental 2) Radical 3) Architectural 4) Disruptive
INDUSTRY LIFE CYCLE (5 phases)
1) Introduction 2) Growth 3) Shakeout 4) Maturity 5)Decline
Why do firms enter strategic alliances?
1) Strengthen competitive position 2) Enter new markets 3) Hedge against uncertainty 4) Access critical complementary assets 5) Learn new capabilities
5 Groups of markets (In order)
1) Technology enthusiast (2.5%) 2) Early Adopters (13.5%) 3) Early Majority (34%) 4) Late Majority (34%) 5) Laggards (16%)
3 types of organizational structures
1) simple 2) Functional 3) multidivisional / matrix
4 types of diversification
1) single business diversification 2) Dominant business diversification 3) Related diversification strategy 4) Unrelated diversification
Four Step Innovation Process (Steps)
1)Idea 2)Invention 3)Innovation 4)imitation
Hierarchy of Authority
1. State Charter 2. Shareholders 3. Board of Directors 4. Management 5. Employees
Globalization 1.0
1900-1941 -Sales, operations, and some procurement -Strategy flowed from HQ to international sites -exporting goods
Globalization 2.0
1945-2000 -To reconstruct damage from the war -Focus on European Countries, Japan, and Australia -Greater local-responsiveness -HQ set goals, international sites influenced tactics
Globalization 3.0
21st century -Business function locations are based on costs, capabilities, and PESTEL factors.
Dominant Business Form
70-95% diversified from one business. -Harley-Davidson yields 10% revenues from clothing. Harley has diversified to cloths, but still makes the majority of profits from bikes.
Multinational Enterprises
A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least 2 countries.
Global Matrix
A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different geographical areas such as different countries of the world is most likely using a _____ structure.
What is innovation?
A novel and useful idea that is successfully implemented.
Globalization
A process of closer integration and exchange between countries and peoples worldwide
Idea
Abstract Concepts or research findings
When large, incumbent firms buy startup companies, the transaction is generally described as a(n) _____.
Acquisition
In publicly-traded companies, individuals who are delegated to perform duties on behalf of company owners are known as _____.
Agents
Hostile Takeover
An acquisition in which the target company does not wished to be acquired.
Process Vs. Product Innovation example
An automobile company using computer-aided design in its production
Patent
Any form of intellectual property that gives the inventor executive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.
Which of the following is an observable feature in the Globalization 3.0 stage?
Based on an optimal mix of costs, skills, and PESTEL factors, company's now freely locate business functions anywhere in the world.
Why do shareholders of public companies need to appoint a board of directors to represent their interests?
Because of the separation between ownership and control
Outside directors
Board members who are not employees of the firm but frequently senior executives from other firms or full-time professionals.
How has the administrative and political distance between Canada, Mexico, and the United States been reduced?
By establishing the North American Free Trade Agreement (NAFTA)
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?
By lowering competitive intensity in the industry overall.
How does horizontal integration within an industry affect the surviving firms?
By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?
CEO
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Imitation
Copying a successful Innovation
_____ is a mechanism to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally.
Corporate Governance
Transaction Costs
Costs associated with an economic exchange -Explain and predict the boundaries of a firm
Cultural Distance
Disparity between a firm's home country and its targeted host country.
Reverse Innovation
Disrupt your self, rather then wait for others to disrupt you. -Digits cameras continued to improve. -Laptops disrupted desktops.
Single Business Firm Diversification
Diversifies within business.( Firm diversifies, but still 95% of revenues come from original source)
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The customers entering the market in the growth stage are primary ______.
Early Adopters
what market is essential for a firm to capture in order to ensure the commercial success of an innovation? Why?
Early Majority -Because they enter the market in large numbers, creating a herding effect.
After Jeff Bezos read about how the Internet was growing by 2,000 percent a month, he set out to use the Internet as a new distribution channel and founded Amazon, which is now the world's largest online retailer. This is clearly an example of a(n):
Entrepreneur who commercialized invention into an innovation.
Which of the following modes of entering a foreign market allows for the lowest level of control.
Exporting
During the period of globalization 1.0, the mode of entry into foreign markets primarily involved?
Exporting goods
Related Diversification Strategy
ExxonMobil strategic move into natural gas -Expanding company into a related field
CAGE framework
Guides MNE decisions on which countries to enter
Star
High Market Growth High Market Share
Question Mark
High Market Growth Low market share
Open Innovation
Ideas and innovation can originate from external sources -Customers -Suppliers -Universities -Start-ups -Competitors
A greater cultural distance between two trading countries:
Increases the liability of foreignness
A factor favoring the success of disruptive innovation is that:
Incumbent firms are slow to change.
Each stage of the vertical value chain typically represents a distinct _____ in which a number of different firms are competing.
Industry
The risk of employee opportunism on behalf of agents in a public stock company is exacerbated by _____.
Information Asymmetry
_______ is best described as a situation in which one party is more informed than another, because of the possession of private information.
Information Asymmetry
What is a common risk of trading overseas?
Intellectual property exposure
Organic Growth
Internal Development
Common patterns in the internal transaction costs of big firms
Internal transition costs tend to increase with organizational size and complexity.
What best describes transferability of investor ownership in a public stock company?
Investors are allowed to trade shares of stocks.
Exporting
Involves producing goods in one country to sell to another
Which of the following is an advantage offered by a functional structure?
It allows for a higher degree of specialization and deeper domain expertise.
Why does a firm use an organic organization combined with a functional structure when implementing a differentiation strategy?
It allows the firm to constantly upgrade core competencies in R&D, innovation, and marketing.
Which of the following is a disadvantage of a horizontal integration corporate strategy?
It increases the potential for legal repercussions.
Organizational culture can be the basis of a firm's competitive advantage if _____.
It is valuable, rare, and difficult to imitate.
Which of the following is a characteristic of a public stock company?
Legal personality allows a firm's continuation beyond the founder or the founder's family.
_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms co commercialize intellectual property.
Licensing
Cash Cow
Low market growth High market share
Dog
Low market growth Low market share
In what stage does the market reach its maximum size?
Maturity Stage
Which of the following real-world scenarios best exemplifies formalization?
McDonald's use of standard operating procedures across the world
Which of the following is a feature of the globalization 2.0 stage?
Multinational enterprises (MNEs) began to create smaller, self-contained replicas of themselves in a few key countries.
Closed Innovation
New products are discovered, developed, and commercialized internally.
Equity Alliances
One partner takes partial ownership in the other
Franchising
Organization that requires low level of investment and control
_____ describes the collectively shared values and norms of an organization's members.
Organizational Culture
Which of the following statements is true of strategy in an organization?
Organizational structure must follow strategy in order for firms to achieve superior performance.
Process Vs. Product Innovation
Product Innovation sparks introduction into the growth phase. Process innovation then becomes important when battling competition in the growth and shakeout stages. The maturity stage see's less overall innovation, but the majority of the effort is put into process innovation.
Transnational Strategy
Product is the same but marketing strategy is different in different countries. (coke)
Incumbent firms favor incremental innovation over radical innovation because:
Radical innovation will disturb the existing power distribution within the firms.
A strategy of _____ will be most beneficial for a firm to enhance its overall corporate performance.
Related-linked diversification
_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.
Restructuring
All public companies listed on the U.S. stock exchanges must file a number of financial statements with the _____.
SEC
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Global-Standardization strategy
Same marketing tactics globally. (Standard marketing internationally) Redbull/ aribnb COST REDUCTIONS
Adverse selection
Sellers have information that buyers do not know. (john saying that he had experience when he really did not)
International Strategy
Sells the same products in both domestic and foreign markets . (takes an american product and sells it internationally)
In a public company, the board of directors is chosen by ______
Shareholders
Which of the following statements best supports the separation of ownership and control in publicly traded companies?
Shareholders own stocks but do not run the company.
What does "limited liability for investors" imply in a public stock company?
Shareholders who provide the risk capital are liable only to the capital specifically invested.
_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.
Strategic Alliances
Under the CAGE distance framework, the administrative and political distance between two countries primarily increases with:
The absence of a trading bloc.
Inside directors
The board members who are part of a company's senior management team appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.
Which of the following is an example of an internal transaction cost?
The cost of maintaining a production unit
Corporate Strategy
The decisions and actions taken to gain and sustain advantage in several industries and markets simultaneously.
Centralization
The degree to which decision making is concentrated at the top of the organization.
In public stock companies, which of the following expectations of principals is most likely to lead to principal-agent problems?
The expectation that the agent will act in the principal's best interest. (principle shareholders) (agent management)
Competitive benefit experienced by the first mover firm in an industry
The first mover will be able to reduce costs through economies of scale.
In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply?
The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.
What conditions prevail when an industry is at the end of its life cycle?
The level of process innovation reaches its maximum as firms attempt to lower cost.
What is important to keep in mind when expanding into new countries.
The liability of foreignness when entering a new market.
Local Responsiveness
The need to tailor product and service offerings to fit native consumer preferences and host-country requirements.
Which of the following is the source of the principal-agent problem in publicly traded companies?
The separation of ownership and control
Vertical Value Chain
The transformation of raw materials into finished goods and services along distinct vertical stage.
Which of the following factors is the most important determinant of economic distance?
The wealth and per capita income of consumers.
How will an increase in coordinated economic and political integration between countries affect the world economy.
There will be gains in social welfare and living standards across the globe.
Which of the following is an advantage of non-equity alliances?
They are flexible and easy to initiate and terminate.
Which of the following statements is true of shareholders in a public stock company?
They are granted a charter of incorporation by the state and legally own company stock.
Which of the following is a disadvantage of equity alliances?
They can entail significant investment
What is the advantage of using foreign acquisitions as a mode of entry?
They reduce a firms exposure to loss of reputation.
Social Entrepreneurs
Those who consider financial, ecological, and social metrics to evaluate their firm's performance.
Which of the following best explains why a board of directors may grant stock options as part of a compensation package?
To align incentives between shareholders and management
Which of the following is NOT a reason why firms enter alliances?
To replace competitive advantage with competitive parity
Strategic Organization
Transforms strategy into actions and business models.
Chasm
Transition from one stage of the industry life cycle to the next
Why is it easier for new entrants to involve in radical innovations when compared to incumbent firms?
Unlike incumbent firms, new entrants do not have formal organizational structures and processes.
A firm follows a(n) _____ when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.
Unrelated diversification
Decisions relating to "what stages of the industry value chain to participate in" determine a firm's:
Vertical Integration
_____ is best described as a firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs.
Vertical integration
Which of the following is true of the board of directors in a public stock company?
Votes at shareholder meetings determine whose representatives are appointed to the board of directors.
Radical Innovation
When a firm targets new markets by using new technologies.
Merger
When two firms of comparable size join to form a combined entity.
Are international strategy's characterized by limited local responsiveness?
Yes
Specialization
_____ describes the degree to which a task is divided into separate jobs.
Joint Ventures
a standalone organization created and jointly owned by two or more parent companies.
Process innovation is more important than product innovation during the growth stage because
a standard, in terms of engineering features and design choices, has been set across the industry.
Members of the board in a public company _____
are responsible to shareholders
Multi - domsetic stategy
arises out of the combination of high pressure for local responsiveness and low pressure for cost reductions. -Same brand but different product. (Mcdonalds)
Forward Vertical Integration
changes in an industry value chain that involve moving ownership of activities closer to the end (customer) point of the value chain. (Firm that manufactured and sold car engines to major automobile companies launched its own line of cars)
A _____ is best defined as a company that combines two or more strategic business units under one overarching corporation and follows an unrelated diversification strategy.
conglomerate
A functional structure is recommended when a firm:
has low level of diversification
Geert Hofstede's cultural dimensions
individualism - collectivism; uncertainty avoidance. power distance, and masculinity - felinity
Moral Hazard
lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance.
Are acquisitions strategic alliances?
no
Since an organic structure helps a firm build core competencies in areas such as R&D and marketing, this structure is employed by firms that:
pursue a differentiation strategy at the business level.
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that:
some of the firm's proprietary know-how may be appropriated by the foreign partner.
Organizational Design
the process of creating, implementing, and modifying the structure of an organization.
