bus 498 final
What are the 3 dimensions along which executives formulate corporate strategy?
1. degree of vertical integration 2. the type of diversification 3. the geographic scope
principal-agent problem
a problem caused by an agent pursuing his own interests rather than the interests of the principal who hired him
Which approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?
a real options perspective
an innovation that targets a new market with existing technologies is called a ____________
architechtural innovation
during the shakeout stage of the industry life cycle, does process innovation become more or less important?
becomes more important
advantages of vertical integration include:
bettering quality reducing costs facilitating scheduling
the introductory stage of the industry life cycle is a _______ intensive process
capital
Cash Cows (BCG Matrix)
compete in a low growth market but have high market share
The most common type of innovation is
incremental innovation
each stage of the vertical value chain represents a distinct _________ in which a number of different firms are competing
industry
one way to overcome the principal-agent problem is to _______
make managers owners through stock options
stages four and five of the industry value chain involve:
marketing, sales, after sales service and support
_______ level of diversification leads to the highest level of performance
moderate
a manager flying first class on all business trips is an example of _______________
principal agent problem
During the decline stage of the industry life cycle, some firms choose to consolidate, meaning that they...........
purchase rival firms in order to acheive near monopolistic control of the industry
because it targeted a new market and used new technologies, the first mass produced automobile is considered a ___________ innovation
radical
The two alternatives to vertical integration are ______
strategic outsourcing taper integration
firms that pursue a _________ strategy minimize the amount of resources devoted to product support in order to maximize cash flow
HARVEST
___________ refers to the assets whos physical and engineering properties are designed to satisfy a particular customer
Physical-asset specificity
What are the costs associated with related diversification strategies?
coordination costs influence costs
A state university hires an outside firm to develop and maintain their HR system. This is called _____
Strategic outsourcing
parent-subsidiary relationship
The most-integrated alternative to performing an activity within one's own corporate family. The corporate parent owns the subsidiary and can direct it via command and control.
a disadvantage of a short term contract as an alternative on the make or buy continuum is:
The supplying firm has little reason to perform
Firms that pursue an unrelated diversification strategy and are unable to create additional value tend to experience ________
a diversification discount
conglomerate
a group of diverse companies under common ownership and run as a single organization
fully vertically integrated
all activities are conducted within the boundaries of the firm
a partnership that is based on contracts between companies is called a
non equity alliance
what are the risks of vertical integration?
reduced quality reduced flexibility increased costs increased potential for legal reprecussion
Diversification discount
situation in which the stock price of highly diversified firms is valued at less than the sum of their individual business units
Why did coca-cola enter into a strategic alliance with monster?
so that it could gain private info to determine whether an acquisition might be beneficial
Long term contracts are classified as ________
strategic alliances
equity alliances allow for the sharing of ________, which involves information that cannot be codified for competing tasks
tactic knowledge
Shaniquas shirts uses both in house and outside suppliers and also sells its shirts through its own retail stores and through independent retailers. Shaniquas shirts uses:
taper integration
influence costs
the loss of efficiency that arises from deliberate information distortions for personal gain within an organization
_________ is a theoretical framework that helps explain and predict the boundaries of the firm
transaction cost economics
a conglomerate fits which type of corporate diversification mode?
unrelated diversification
Radical Innovation
uses new technologies to invade an existing market from the bottom up
A firm follows a(n) _____ diversification strategy when it 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
Related diversification
taper integration
a firm internally produces less than half of its own requirements and buys the rest from outside suppliers
Olivias, an olive oil company grows and harvests olives, makes olive oil, and distributes its oil to its retail shop. Olivias is an example of _______
a fully vertically integrated company
related linked diversification strategy
a kind of related diversification strategy in which executives pursue various businesses opportunities that share only a limited number of linkages
Architectural Innovation
a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets
an ________ is the best option if a company wants to show strong commitment to a partner without acquiring that firm
equity alliance
In general, related diversification leads to high levels of performance because ____________
it accesses numerous areas of value creation, such as economies of scale and scope
what is the main goal of corporate venture capital investments?
to create real options in terms of gaining access to new technologies
which types of diversification tend to have the lowest performances?
unrelated diversification single business