BUS 498 Final

Early adopters

"what can this product do for me or my business?" they appreciate technology that can help them in their business and personal lives - enter during growth stage, make up 13.5% - communicate the products potential to capture them

Patents

- can be enforced in court - form of intellectual property - can be obtained when an invention is useful, novel, and nonobvious

Early majority

- enter during shakeout stage - "what can this do for me?" - confident in ability to master new technology (unlike the late majority)

Innovation process

1. Idea - abstract concepts or research findings 2. Invention - transformation of idea to product - modification & recombination of products 3. Innovation - commercialization of an invention 4. Imitation - copying successful innovation

INDUSTRY life cycle

1. Introduction - R&D, high costs 2. Growth - demand increases rapidly - product standards emerge - Product & process innovation 3. Shakeout - growth declines - firms intensely compete 4. Maturity - only few large firms remain - enjoy economies of scale - market reaches maximum size 5. Decline - demand falls rapidly Four strategic options: -exist, harvest, maintain, consolidate

Level of Diversification

Decisions relating to the range of products and services a firm will offer determine the firm's

A large conglomerate is deciding on the range of new products and services it can offer to its customers to further expand its operations. This decision determines the firm's

Levels of Diversification

Radical innovation

NEW product or service targeting new markets, new technology

Which of the following is an example of internal transaction cost?

Setting up a shop floor other examples: recruiting & retaining employees

Globalization

a process of closer integration and exchange between different countries and peoples worldwide, made possibly by falling trade investment barriers, advances in telecommunications, & reduction in transportation costs

In order to rejuvenate its floundering product lineup, Disney

acquired Pixar

Highly diversified firms experience a diversification discount in the stock market because they

are unable to create additional value - firms that pursue unrelated diversification are often unable to create additional value - they experience diversification discount in stock market

The rationale behind Related Diversification is to

benefit from economies of scale and economies of scope

conglomerate

business combination merging more than three businesses that make unrelated products

Backward vertical integration

changes in an industry value chain that involve moving ownership of activities upstream to the *originating (inputs)* point of the value chain ex: chocolate manufacturing company

crossing the chasm framework

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

Corporate strategy

decision that leaders make boundaries of the firm: - Vertical Integration - Diversification - Geographic scope

A strategic alliance has the potential to help a firm gain and sustain competitive advantage when it joins resources and knowledge that are

difficult to imitate

Related diversification

entering a new business or industry to create a competitive advantage in one or more of an organization's existing divisions or businesses

Architectural innovation

existing technology leveraged into a new market - known components, existing technology used in new markets

A platform business...

exists to help make matches among users and facilitate exchange of goods, services, and social currency ex: Uber ride-hailing services

Firms enter strategic alliances to

have a positive effect on economic value creation

Real-options perspective

hedge against uncertainty -breaks down a larger investment decision into a set of smaller decisions -staged sequentially over time and allows firms to obtain information in stages

To secure a strong strategic position in fast-growing emerging markets, which of the following corporate strategies did Kraft Foods primarily pursue by acquiring Cadbury?

horizontal integration

Build-Borrow-or-Buy Framework

how firms achieve growth 1. Relevancy - how relevant are the firms existing internal resources to solving the *resource gap*? 2. Tradability - how tradable are the targeted resources that may be available externally? - firms create a contract to transfer ownership - allow use of the resource 3. Closeness - how close do you need to be to your external resource partner? 4. Integration - how well can you integrate the targeted firm, should you determine you need to acquire the resource partner? - high costs - only acquire if theres an extreme need

Firms consolidate industries through horizontal mergers and acquisitions to...

increase their market power

Human-asset specificity

investments made in human capital to acquire unique knowledge and skills - skills that are not transferable ex: training employees on how to operate a customized furnace

Joint venture

jointly owned by 2 or more companies - stand alone organization

Explicit knowledge

knowledge that can be codified patents, user manuals, fact sheets, scientific publications ex: the findings of a research published in a scientific journal

The process of joining two independent companies with their consent to form a combined entity on a permanent basis

merger

Horizontal Integration

merging with a *competitor* at the same stage of a value chain

Strategic outsourcing

moving one or more internal value chain OUTSIDE the firms boundaries to other firms in the industry value chain

Forward vertical integration

moving ownership of activities closer to the end customer

Disruptive innovation

new technologies in existing markets - new product meets existing customer needs

Disadvantages of obtaining goods & services externally includes...

nontrivial search costs a firm faces search costs scouring the market trying to find reliable suppliers

Equity alliance

one partner takes partial ownership in the other

Equity alliance

partnership where at least one partner takes partial ownership in the other partner

Nonequity alliance

partnerships based onCONTRACTS easy to initiate and terminate

Acquisition

purchase or takeover of one company by another ex: large firms buying start up companies

Social Entrepreneurship

pursuit of social goals while creating a profitable business

Managerial hubris

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

Intrapreneur

someone who innovates within the existing company

Which of the following is true of the real-options perspetive?

the approach allows the incumbent firm to obtain additional information at predetermined stages

Merger

the joining of 2 independent companies to form a combined entity

Which of the following is one of the reasons that firms make acquisitions?

to gain access to new capability or competency

Which of the following reasons was one of the primary reasons why Adidas acquired Reebok?

to overcome competitive disadvantage

Invention

transformation of an idea into a new product/process, or modification of existing ones

Entrepreneur

undertaking economic risk to innovate

Strategic alliance

voluntary arrangements between firms involving the sharing of knowledge, resources, and capabilities w/ intent of developing processes, products or services

Corporate Diversification

when a firm operates in multiple industries or markets simultaneously 1. Single business: low level of diversification 2. Dominant business: additional business activity pursued 3. Related diversification - Constrained: ALL businesses share competencies - Linked: SOME businesses share competencies 4. Unrelated diversification (conglomerate): - no businesses share competencies