COB 487 Haensel Quiz 2
pooled negotiating power
Gaining greater bargaining power with suppliers & customers
asset and cost surgery
try to aggressively cut administrative expenses and inventories and speed up collection of receivables, costs can also be reduced by outsourcing production of various inputs for which market prices may be cheaper than in-house production
outsourcing
using other firms to perform value-creating activities that were previously performed in-house.
Issues platform businesses need to master to succeed include the following:
- draw in users - create easy and informative customer interfaces - facilitate the best connections between suppliers and customers - sequencing the growth of the business
For a core competency to create value and provide a viable basis for synergy among the businesses in a corporation it must:
- enhance competitive advantages by creating superior customer value - different businesses in the organization must be similar in at least one important way related to the core competence - be difficult for competitors to imitate or find substitutes for
pitfalls of integrated cost leadership and differentiation strategies
- failing to attain both strategies and possibly ending up with neither, ending up stuck in the middle - underestimating challenges and expenses associated with coordinating value-creating activities in the extended value chain - miscalculating sources of revenue and profit pools in the firm's industry
4 strategies that can be taken in the decline stage
- maintaining - harvesting - exiting - consolidation
4 practices essential to effective acquisition integration
- protecting the base business - accelerate capturing value - institutionalizing new ways of operating - catalyzing the transformation
Potential pitfalls of overall cost leadership strategies
- too much focus on one or more value chain activities - increase in the cost of inputs on which the advantage is based - a strategy that can be imitated too easily - a lack of priority on differentiation - reduced flexibility - obsolescence on the basis of cost advantage
Potential Pitfalls of Focus Strategies
-Erosion of cost advantages within the narrow segment -Competitors still around (existing or new firms) -Too focused to satisfy buyer needs
Potential Pitfalls of Differentiation Strategies
-Uniqueness that is not valuable -Too much differentiation -Too high a price premium -Differentiation that is easily imitated -Dilution of brand identification through product line extensions -Perceptions of differentiation may vary between buyers and sellers
Ways to establish a wholly owned subsidiary
1. acquire an existing company in the home country 2. develop a totally new operation - aka a Greenfield venture
trading blocs
A group of neighboring countries that promote trade with each other and erect barriers to limit trade with other blocs
Boston Consulting Group (BCG) Matrix
A portfolio planning approach that examines strategic business units based on their relative market shares and growth rates. Businesses are classified as stars, cash cows, question marks (problem children), or dogs.
Unscaling
Involves both the leveraging of technology, such as artificial intelligence, and the reliance on suppliers or customers to provide critical inputs to the process.
globalization
a term that has two meanings: (1) the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information; (2) the growing similarity of laws, rules, norms, values, and ideas across countries.
risks of international expansion
Political risk
Factor Endowments
The extent to which a country is endowed with such resources as land, labor, and capital.
mergers
The joining together of two or more companies or organizations to form one larger one. Company A + Company B = Company C relatively rare
retrenchment strategy
a strategy to cut costs and refocus the firm on attractive market segments to improve firm profitability. selectively cutting unprofitable market segments and asset investments to reverse performance decline and improve a firm's profitability
Reverse Positioning Strategy
a break in the industry tendency to continuously augment products, characteristic of the product life cycle, by offering products with fewer product attributes and lower prices. strips away sacred product attributes while adding new ones
breakaway positioning
a break in the industry tendency to incrementally improve products along specific dimensions, characteristic of the product life cycle, by offering products that are still in the industry but are perceived by customers as being different. associates the product with a different category
Wholly Owned Subsidiaries
a business in which a multinational company owns 100 percent of the stock.
franchising
a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its intellectual property; franchising usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising.
licensing
a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual property
strategic alliance
a cooperative relationship between two or more firms can be created with or without contracts ex: Barnes & Noble and Starbucks
Vertical Integration
a firm is its own supplier and distributor Benefits - secure source of raw materials or distribution channels - protection and control of assets - proprietary access to technology development by the unit - simplified procurement and admin procedures Risks - costs and expenses with increased overhead and capital - loss of flexibility (due to large investments) - unbalanced capacities issues - additional admin costs
mass customization
a firm's ability to manufacture unique products in small quantities at low cost.
competitive parity
a firm's achievement of similarity, or being "on par," with competitors with respect to low cost, differentiation, or other strategic product characteristic.
consolidation
a firm's acquiring or merging with other firms in an industry in order to enhance market power and gain valuable assets.
focus strategy
a firm's generic strategy based on appeal to a narrow market segment within an industry.
overall cost leadership strategy
a firm's generic strategy based on appeal to the industrywide market using a competitive advantage based on low cost.
differentiation strategy
a firm's generic strategy based on creating differences in the firm's product or service offering by creating something that is perceived industrywide as unique and valued by customers.
core competencies
a firm's strategic resources that reflect the collective learning in the organization.
diamond of national advantage
a framework for explaining why countries foster successful multinational corporations; consists of four factors: -factor endowments; -demand conditions; -related and supporting industries; -firm strategy, structure, and rivalry.
portfolio management
a method of... (a) assessing the competitive position of a portfolio of businesses within a corporation, (b) suggesting strategic alternatives for each business, and (c) identifying priorities for the allocation of resources across the businesses.
greenmail
a payment by a firm to a hostile party for the firm's stock at a premium, made when the firm's management feels that the hostile party is about to make a tender offer.
transaction cost perspective
a perspective that the choice of a transaction's governance structure, such as vertical integration or market transaction, is influenced by transaction costs, including search, negotiating, contracting, monitoring, and enforcement costs associated with each choice.
golden parachute
a prearranged contract with managers specifying that, in the event of a hostile takeover, the target firm's managers will be paid a significant severance package
global strategy
a strategy based on firms' centralization and control by the corporate office, with the primary emphasis on controlling costs; used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high. - standardization and uniformity
multidomestic strategy
a strategy based on firms' differentiating their products and services to adapt to local markets; used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low. -decentralized, very customizable for local markets -ex: different Oreos, translations of company names that are appropriate/favorable in the language
international strategy
a strategy based on firms' diffusion and adaptation of the parent companies' knowledge and expertise to foreign markets; used in industries where the pressures for both local adaptation and lowering costs are low. - some local adaptations are made, but very limited - ex. Mcdonalds
Transnational Strategy
a strategy based on firms' optimizing the trade-offs associated with efficiency, local adaptation, and learning; used in industries where the pressures for both local adaptation and lowering costs are high.
harvesting
a strategy of wringing as much profit as possible out of a business in the short to medium term by reducing costs.
arbitrage opportunities
an opportunity to profit by buying and selling the same good in different markets
generic strategies
basic types of business-level strategies based on breadth of target market (industrywide versus narrow market segment) and type of competitive advantage (low cost versus uniqueness).
related linked diversification
business units only share a few resources
economies of scope
cost savings from leveraging core competencies or sharing related activities among businesses in a corporation
related diversification
creating or acquiring companies that share similar products, manufacturing, marketing, technology, or cultures - horizontal benefits economies of scope - leveraging core competencies - sharing activities market power - pooled negotiating power - vertical integration
Selective product and market pruning
discontinue product lines that are losing money or are only marginally profitable and focus all resources on a few core profitable areas.
internal development
entering a new business through investment in new facilities, often called corporate enterpreneurship and new venture development.
unrelated diversification
entering a new industry or buying a company in a new industry that is not related in any way to an organization's current businesses or industries - hierarchal benefits parenting, restructuring, financial synergies - corporate restructuring and parenting - portfolio management
Platform Markets
firms act as intermediaries between two sets of platform users: buyers and sellers
multinational firms
firms that manage operations in more than one country
market power
firms' abilities to profit through restricting or controlling supply to a market or coordinating with other firms to reduce investment.
sharing activities
having activities of two or more businesses' value chains done by one of the businesses
offshoring
hifting a value-creating activity from a domestic location to a foreign location. - USA company A having facilities in China that perform R & D
Stars (BCG Matrix)
high growth, high market shares. These firms have long term growth potential and should continue to receive substantial investment funding
Question Marks (BCG Matrix)
high growth, low market share resources should be invested to enhance weak competitive positions
Piecemeal productivity improvements
improving business processes by reengineering them, benchmarking specific activities against industry leaders, encouraging employee input to identify excess costs, increasing capacity utilization, and improving employee productivity lead to a significant overall gain
Regionalization
increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region such as Europe, North America, or Asia.
exiting the market
involves dropping the product from a firm's portfolio
maintaining
keeping a product going without significantly reducing marketing support, technological development, or other investments, in the hope that competitors will eventually exit the market
related constrained diversification
large number of resource links between business units
Cash Cows (BCG Matrix)
low growth, high market share limited long run potential but are a source of current cash flows to fund investments in stars and ?
Dogs (BCG Matrix)
low growth, low market share divesting is recommended
growth for growth's sake
managers' actions to grow the size of their firms not to increase long-term profitability but to serve managerial self-interest.
egotism
managers' actions to shape their firms' strategies to serve their selfish interests rather than to maximize long-term shareholder value.
Joint Venture
new entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entity. may or may not be recognizable as parent companies
economic risk
potential threat to a firm's operations in a country due to economic policies and conditions, including property rights laws and enforcement of those laws.
currency risks
potential threat to a firm's operations in a country due to fluctuations in the local currency's exchange rate.
Political Risk
potential threat to a firm's operations in a country due to ineffectiveness of the domestic political system - absence of rule of law
management risks
potential threat to a firm's operations in a country due to the problems that managers have making decisions in the context of foreign markets.
exporting
producing goods in one country and selling them in another
counterfeiting
selling of trademarked goods without the consent of the trademark holder.
poison pill
shareholder rights plan in the case of a hostile takeover
Firm strategy, structure, and rivalry
the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry
experience curve
the decline in unit costs of production as cumulative output increases. businesses basically learn how to lower costs with experience - central to the overall cost leadership strategy
Divestment
the exit of a business from a firm's portfolio
introduction
the first stage of the industry life cycle, characterized by: (1) new products that are not known to customers, (2) poorly defined market segments, (3) unspecified product features, (4) low sales growth, (5) rapid technological change, (6) operating losses, and (7) a need for financial support.
decline
the fourth stage of the product life cycle, characterized by: (1) falling sales and profits, ' (2) increasing price competition, and (3) industry consolidation.
acquisitions
the incorporation of one firm into another through purchase company A buys company B
restructuring
the intervention of the corporate office in a new business that substantially changes the assets, capital structure, and/or management, including selling off parts of the business, changing the management, reducing payroll and unnecessary sources of expenses, changing strategies, and infusing the new business with new technologies, processes, and reward systems. - asset - capital -management
demand conditions
the nature of home demand for the industry's product or service
parenting advantage
the positive contributions of the corporate office to a new business as a result of expertise and support provided and not as a result of substantial changes in assets, capital structure, or management.
related and supporting industries
the presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain
Diversification
the process of firms expanding their operations by entering new businesses.
growth
the second stage of the product life cycle, characterized by: (1) strong increases in sales; (2) growing competition; (3) developing brand recognition; and (4) a need for financing complementary value-chain activities such as marketing, sales, customer service, and research and development.
Industry Life Cycle
the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry.
maturity
the third stage of the product life cycle, characterized by: (1) slowing demand growth, (2) saturated markets, (3) direct competition, (4) price competition, and (5) strategic emphasis on efficient operations.
profit pool
the total profits in an industry at all points along the industry's value chain.
