ba 4390: Exam 2

Strategic Actions

Entering new markets New product introductions Changing production capacity Mergers/alliances

pooled negotiating power

Gaining greater bargaining power with suppliers & customers

which statement regarding competitive advantage is true?

If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.

motivation for international expansion

Increase the size of potential markets Taking advantage of arbitrage opportunities Extend a product's life cycle Optimize the location of value chain activities Explore reverse innovation

Licensing and Franchising

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 Franchising: 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. Limits risk; but licensor gives up control and profit.

Offshoring

Moving operations from the country where a company is headquartered to a country where pay rates are lower but the necessary skills are available. e.g. nike hiring labor in china to produce their products

Government Resources

Small Business Administration (SBA) gives loans, training, counseling, and support for your ideas

Which of the following might best describe the motivations and actions of small firms as they respond to competitive attacks?

Small firms are more nimble and can respond quickly to competitive attacks.

competetive parity

a firm's strategy of setting prices that are similar to those of major competitors

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.

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

entrepreneurial strategy

a strategy that enables a skilled and dedicated entrepreneur, with a viable opportunity and access to sufficient resources, to successfully launch a new venture *entry strategies *generic strategies *combination strategies

BCG Portfolio Matrix

a tool for allocating resources among products or strategic business units on the basis of relative market share and market growth rate

Three ingredients are critical in order for an entrepreneurial startup to be successful. What are they?

a viable opportunity, available resources, and qualified and motivated founding team

Firm strategy, structure, and rivalry

affect competitiveness via: Strong consumer demand. Strong supplier base. High new entrant potential from related industries.

Outsourcing

any role in your business that you do outside of your business premises. e.g. letting your accountant do your company's accounting

Viable opportunities have the following qualities:

attractive, achievable, durable, value creating

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)

co-opetition

both cooperating and competing (working together behind the scenes to achieve industrywide efficiencies)

combination strategies

can combine the best features of low-cost, differentiation, and focused strategies: -Holding down expenses by having a simple structure -Creating high-value products & services by being flexible & innovative -Offering highly specialized products or superior customer service to a niche market

unrelated diversification: hierarchical relationship

collaborating with companies in completely unrelated businesses

related diversification: horizontal relationship

collaborating with companies that share similar products, manufacturing, marketing, technology, or cultures

A domestic corporation considering expanding into international markets for the first time will typically:

consider implementing a low risk/low control strategy such as exporting.

experience curve

cost leadership requires learning to lower costs through experience

Economies of scope (related diversification)

cost savings from leveraging core competencies or sharing related activities among businesses in a corporation

related and supporting industries

enable firms to manage inputs more effectively via: *A competitive supplier base. - Reduces manufacturing costs. *Close working relationships with suppliers. - Allows for joint research and development. *Development of related industries. - Forces existing firms to practice cost control, product innovation, better distribution methods.

different sources of financial resources:

financial resources human capital social capital government resources

When an industry is mature, a strategy may be considered to be an effective approach for a new entrant.

focus

wholly owned subsidiary

foreign subsidiary that is totally owned and controlled by an organization; Greatest control, highest returns; but expensive, greater potential for miss-steps.

forbearance

holding back on an attack - a firms choice to not reacting to a rivals new competitive action

multidomestic strategy on scale:

industries where the pressure for local adaptation is high and the pressure for lowering costs is low

Global strategy on scale:

industries where the pressure for local adaptation is low and the pressure for lowering costs is high.

International strategy on scale:

industries where the pressures for both local adaptation and lowering costs are high

transnational strategy on scale:

industries where the pressures for both local adaptation and lowering costs are high

Factor Endowments

involve factors of production. Land. Capital. Labor. Factors of production must be industry and firm specific. Must be rare, valuable, difficult to imitate, and rapidly and efficiently deployed.

Turnaround Strategies

involves reversing performance decline and reinvigorating growth toward profitability - more likely to occur during maturity or decline

antitakeover tactics

managers' actions to avoid losing wealth or power as a result of a hostile takeover

Entry Strategies (PIA)

need to: *quickly generate cash flow *build credibility *attract good employees *overcome the liability of newness Pioneering, Imitative, Adaptive

Generic Strategies

overall cost leadership, differentiation, focus

Exporting

producing goods in one country and selling them in another; low risk, locals know more, but products may not meet consumer expectations

In order to realize the strongest competitive advantage, firms engaged in worldwide competition must:

pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results.

competitive dynamics

refer to all competitive behaviors - that is, the total set of actions and responses taken by all firms competing within a market

International Strategy

requires diffusion and adaptation of the parent company's knowledge and expertise to foreign markets.

Strategic alliance or joint venture

shares risk; but trust and culture issues can lead to conflict

social capital

social connections or networks

multidomestic strategy

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

All of the factors below have made India's software services industry extremely competitive on a global scale except:

tax and antitrust legislation that protect the dominant players in the industry.

Why is vision such an important element of entrepreneurial leadership?

the entrepreneur has to envision realities that do not yet exist

Divestments

the exit of a business from a firm's portfolio; "cut their losses"

Demand Conditions

the nature of home demand for the industry's product or service: Upgrade existing products and services. Create innovative products and services. Better anticipate future global demand. Proactively respond to product and service requirements.

Globalization

the process by which businesses or other organizations develop international influence or start operating on an international scale.

Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that

the similarity required for sharing core competencies must be in the value chain, not in the product.

human capital

the skills and knowledge gained by a worker through education and experience

The industry life cycle:

the stages of introduction growth maturity decline that typically occur over the life of an industry

As markets mature:

there is increasing emphasis on efficiency

The profit pool is the

total profits earned in an industry along all points of the value chain.

Joint Ventures and Strategic Alliances

two or more businesses agree to contribute capital and resources for a common project

poison pill

used by a company to give shareholders certain rights in the event of takeover by another firm

Tesla, the automobile manufacturer, announced that it was building a "gigafactory" to supply all of the batteries needed for its cars. This is an example of:

vertical integration

Three Turnaround Strategies:

* Asset and cost surgery: reducing costs and increasing investments in receivables/assets that produce return. *Selective product and market pruning: discontinue products that are no longer producing revenue and focusing on few core profitable areas. *Piecemeal productivity improvements: eliminating costs and improving productivity (e.g. improving employee productivity)

overall cost leadership is based on:

*Creating a low-cost position relative to a firm's peers *Managing relationships throughout the entire value chain to lower costs

A focus strategy requires:

*Narrow product lines, buyer segments, or targeted geographic markets *Advantages obtained either through differentiation or cost leadership

Differentiation implies:

*Products and/or services that are unique & valued *Emphasis on nonprice attributes for which customers will gladly pay a premium

Threat analysis/assessment

*market commonality *resource similarity

Tactical Actions

-Doing price cutting (or offering increases) -Making product/service enhancements -Increasing marketing efforts -Developing new distribution channels

Opportunity Analysis Framework

1) Opportunity 2) Resources 3) Entrepreneurs NO PARTICULAR ORDER

opportunity recognition

1. Discovery - becoming aware of a new business concept 2. Evaluation - analyzing the opportunity to determining whether it is viable or feasible to develop further

Porter's Three Generic Strategies

1. Overall cost leadership 2. Differentiation 3. Focus

Four Basic Entry Modes of International Expansion

1. exporting 2. licensing 3. franchising 4. strategic alliance 5. joint venture 6. wholly owned subsidiary

Divestment can be the common result of an acquisition. Divesting businesses can accomplish many different objectives. These include:

A) enabling managers to focus their efforts more directly on the firm's core businesses. B) providing the firm with more resources to spend on more attractive alternatives. C) raising cash to help fund existing businesses. D) all of the above. ANSWER: D

strategic alliance (strategic partnership)

An agreement between two or more companies that involves the joint production and distribution of goods and services.

Vertical Integration

An approach typical of traditional mass production in which a company controls all phases of a highly complex production process. * A firm becomes its own supplier or distributor through: backward integration and forward integration

financial resources

Capital investments to support ongoing and long-term operations

Mergers and acquisitions (M&A)

Combination of two separate firms either by their joining together as relative equals (merger) or by one acquiring the other (acquisition).