Strat qz

information asymmetry

Situation in which one party possesses private information and is therefore more informed than another party.

diversification discount

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

diversification premium

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

learning races

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.

three benefits to horizontal integration strategy:

-lower costs -reduction in competitive intensity -increased differentiation

opportunism

A behavior characterized by self-interest seeking with guile.

real-options perspective

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

alliance management capability

A firm's ability to effectively manage three alliance-related tasks concurrently: (1) partner selection and alliance formation, (2) alliance design and governance, and (3) post-formation alliance management.

licensing

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

managerial hubris

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

related linked diversification strategy

A kind of related diversification strategy in which less than 70% of a firm's revenues come from a single business and some other business activities share linkages to the main business focus while others do not.

franchising

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.

credible commitment

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

spinout

A spinout describes the separation (sale) of a division (strategic business unit) to form a new, stand-alone corporation.

joint venture

A standalone organization created and jointly owned by two or more parent companies.

transaction cost economics

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

taper integration

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.

transaction costs

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

complementary assets

Assets such as marketing, manufacturing, and after-sales service that are needed to commercialize a new product or service successfully. They can be found upstream or downstream in the firm-level value chain.

real options

Choices that afford managers the right but not the obligation to make further investments.

co-opetition

Cooperation by competitors to achieve a strategic objective.

related diversification

Corporate strategy in which a firm derives less than 70% of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity.

unrelated diversification

Corporate strategy in which a firm derives less than 70% of its revenues from a single business and there are few, if any, linkages among its businesses.

geographic diversification strategy

Corporate strategy in which a firm is active in several different countries.

product-market diversification strategy

Corporate strategy in which a firm is active in several different product markets and several different countries.

product diversification strategy

Corporate strategy in which a firm is active in several different product markets.

industry value chain

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.

Corporate Venture capital

Equity investments by established firms in entrepreneurial ventures; CVC falls under the broader rubric of equity alliances.

explicit knowledge

Knowledge that can be codified; concerns knowing about a process or product.. the knowledge usually shared in non-equity alliances.

tacit knowledge

Knowledge that cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task. equity alliances allow for this type of knowledge to be shared

strategic outsourcing

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

hold-up problem

Occurs when it is mutually beneficial for two parties to cooperate, but one party may withhold cooperation because it does not want to give the other party increased bargaining power.

non-equity alliance

Partnership based on contracts between firms.

equity alliance

Partnership in which at least one partner takes partial ownership in the other.

vertical integration

The firm's ownership of the inputs needed for production or of the channels through which it distributes its outputs.

horizontal integration

The process of merging with competitors, leading to industry consolidation.

restructuring

The process of reorganizing and divesting business units and activities to refocus a company to leverage its core competencies more fully.

specialized assets

Unique assets with high opportunity cost: They have significantly more value in their intended use than in their next-best use. They come in three types: site specificity, physical-asset specificity, and human-asset specificity.

strategic alliances

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

vertical market failure

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

related constrained diversification

a firm that earns less than 70% of its revenue from its main line of business and its other lines of business share product, technological, and distribution linkages with the main business

principal-agent problem

a problem caused by an agent pursuing his own interests rather than the interests of the principal