MGT 429 Exam 3
What are the benefits of a company staying in one industry?
allows a company focus on core competencies and focus on what it knows best.
A company pursuing a strategy of vertical integration may expand its operations:
backward into an industry that produces inputs for the company's products.
In a vertically integrated company, a commonly used pricing rule for transferred resources allows the selling division to add an appropriate markup to the cost incurred in the manufacturing process. This policy can be considered as a
behavior control.
free cash flow
cash in excess of that required to fund investments in the company's existing industry and meet any debt commitments (profitably reinvested)
Hierarchy of Authority
chain of command, that defines each managers relative Authority, from the CEO down to the middle managers and first-line managers
This organizational unit has the responsibility to oversee and control all divisions of a multi-business company
corperate headquarters staff
A corporate head office or headquarters is not responsible for
day-to-day operations of each division.
This BP oil spill that occurred in the Gulf Of Mexico in 2010 is an example of this ethical issue
environmental degradation
flat structure
fewer levels relative to company size
Staying in a single industry allows a company to
focus its resources on one area.
market structure
focus on may different Customer groups
Three skills of a company's top managers include entrepreneurial, organizational design, and strategic capabilities
general organization competencies
This type of structure is often used by chain stores such as Home Depot due to different needs from regional customers
geographic structure
A localization strategy should implement a ...
global area structure
Localization
global-area structure
This benefit of horizontal integration results in low prices from suppliers due to the larger size of the combined firm
increased market power
Product bundling
involves offering customers the opportunity to purchase a range of products at a single combined price.
An organizational culture
is a collection of values, norms, beliefs, and attitudes shared by members within an organization.
holdup
lack of trust, being taken advantage of by a trading partner after the investment in specialized assets has been made
backward integration
moving into the component parts manufacturing and raw material's production
risk capital
no guarantee that stockholders will ever recoup their investment and earn a decent return
This process is about creating, using, and combining structure, control, and culture to pursue a strategy successfully
organizational design
The process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully is referred to as:
organizational design.
This control system is often used in a company pursing unrelated diversification to evaluate divisional performance.
output control
This practice offers customers the opportunity to buy a complete range of products at a single combined price.
product bundling
When are bureaucratic cost substantial?
related diversification
This disconnection between this function and marketing leads to poor communication of new products
research and development
stock options
rights to buy a certain number of shares of stock at a specified price
When developing and implementing strategies a company must consider the claims of its
stakeholders
The unethical behavior of information manipulation violates the interest of
stockholders.
This practice aims at establishing informal pricing agreements without communication to reduce the risk of price wars
tacit price collusion
This term is used to describe an organizational structure with many levels of authority relative to company size
tall structure
product-team structure
tasks are divided along project or product lines, functional specialist become part of a permanent cross-functional team that focuses on the development of one particular range of products, such as luxury cars or computer workstations
span of control
the number of subordinates who report directly to a manager
Transferring competencies
the process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry
Leveraging Competencies
the process of taking a distinctive competency developed by a business unit in one industry and using it to create a NEW business unit in a different industry
Internal new venturing
the process of transferring resources to in creating a NEW business unit or division in a NEW industry or embryonic industry
takeover constraint
the risk of being acquired by another company
greenmail
the target company purchases the acquirer's shares at a premium over the market price
The condition to achieve economies of scope is that
there should be sufficient commonalities between one or more value-chain functions.
integrating roles
An experienced corporate manager assumes the responsibility for managing complex transfers between two or more divisions
How does increasing profitability help a company reduce industry rivalry?
By reducing the threat of damaging price competition
Which of the following statement is not true regarding the board of directors.
CEO duality is the most effective way to use the board of directors as a governance mechanism.
organizational culture
Collection of values, Norms, beliefs, and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization
behavior control
Control through the establishment of a comprehensive system of rules and procedures to direct the actions or behavior of divisions, functions, and individuals STANDARDIZE
what is the purpose of organizational structure?
Coordinate and integrate the efforts of all employees at all levels and across companies functions and business units that they work together in a way that will allow it to achieve the specific set of startegies
This group of stakeholders provides Ford with distribution channels
Dealers
This former CEO was convicted in 2005 of crimes related to his receipt of $81 million in unauthorized bonuses
Dennis Kozlowski
Which of the following corporate-level strategies is not covered in this chapter?
Diversification
Diversification strategy is used only by large corporations.
False
Divisional managers and corporate manangers share responsibilities of strategy-making at the business-level.
False
This strategy allows Apple to enhance differentiation advantages through opening its own retail stores
Forward integration
geographic structure
Geographic regions become the basis for grouping the organization activities
This company pulled out of European Iceland's market due to its standardization practice in importing goods
McDonalds
Which of the following is not a general organizational competency?
Product bundling
control system
Provides managers with incentives for employees as well as feedback on how the company performs
True or False: A strategic alliance becomes a substitute for vertical integration?
TRUE
True or False: Companies that base their diversification strategy on transferring competencies tend to acquire new business RELATED to their existing business because of commonalities of value chain functions
TRUE
True or False: New ventures has a high risk of failure
TRUE
true or false: IT is a form of both behavioral and output control
TRUE
organizational design
The process of deciding on a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully
personal control
To shape and influence the behavior of a person in a face-to-face interaction
The multidivisional structure allows corporate managers to allocate financial resources to divisions based on financial performance.
True
Pursuing which corporate-level strategy is most likely to cause the transfer pricing problem?
Vertical integration
Unrelated diversification
a corporate level strategy based on a mutli business model whose goal is to increase profitability through the use of General organization competencies to increase performance of the company's business units
code of ethics
a formal statement of ethical principles and rules of conduct
Problems with vertical integration
1) Increasing cost structure (in-house suppliers slack) 2) Technological change 3) Demand unpredictability
Benefits of outsourcing
1. Lower cost structure 2. Enhanced differentiation 3. Focus on the core business
Mergers and acquisitions are
1. conceptually different but can be used interchangeably. 2. means to realize horizontal integration. 3. popular corporate strategies to grow the company's size and market power.
Disadvantages of diversification
1.) Changes in industry or inside a company that occur over time 2.) pursued for the wrong reasons 3.) increasing bureaucratic costs
multidivisional organizational design advantages
1.) Corporate headquarters staff is pregnant to monitor division activities in exercise Financial control over each decision 2.) In each industry in which a company operates, strategic managers group all it's different business operations in the industry into one division or subunit
Problems with Horizontal Integration
1.) Difficult to implement 2.) Conflict with the Federal Trade Commission (FTC) 3.) Abuse of market power
Advantages of a multi-divisional structure
1.) Enhance corporate Financial control 2.) enhanced to strategic control 3.) profitable long-run grow stronger 4.) pursuit of internal efficiency
Disadvantages of multi-divisional structure
1.) Establishing the divisional corporate Authority relationship 2.) restrictive Financial controls lead to short-run focus 3.) competition for resources 4.) transfer pricing 5.) duplication of functional resources
Benefits of acquisition when entering into New Markets
1.) Fast 2.) less risky 3.) enter in an interest rate that is protected by High barriers-to-entry
Which of the following industries may face different needs from regional customers?
1.) Home improvement 2.) Retail clothing 3.) Food services
strategic control systems
1.) How to monitor and evaluate whether the strategy and structure working as intended, how they could be improved, and how they should be changed if they are not working 2.) Formal Target setting, measurement, and feedback systems that allows you to take me to superior quality, efficiency, Innovation, and customer responsiveness
Disadvantages of acquisition when entering new markets
1.) Management problems and turn over 2.) overestimate economic benefit 3.) expensive fail to recognize business model problems
Disadvantages of new Ventures
1.) Market entry onto smaller scale 2.) poor commercialization of new Venture products 3.) poor corporate management
Benefits of IT and strategy implementation
1.) Promotes development of functional competencies and capabilities 2.) transfer knowledge and expertise across functional groups and integrate into operations 3.) innovate and perform R&D
restructuring
1.) Streamlining the hierarchy of authority and reducing the number of levels in the hierarchy to a minimum 2.) reducing the number of employees to lower operating costs
Successful Acquisitions must have
1.) Target identification in pre-acquisition screening 2.) bidding strategy 3.) integration 4.) learning from experience
Diversification can increase profitability when
1.) Transferring competencies (related industries) 2.) leveraging competencies (new industries) 3.)sharing resources and capabilities (economies of scope) 4.) product bundling 5.) using general organizational competencies
Which of the following strategies allow a company to compete in multiple industries?
1.) Vertical integration 2.) Related Diversification 3.) Unrelated Diversification
Internal new ventures are a preferred entry strategy when
1.) a company is to enter a newly emerging or embryonic industry. 2.) a company possesses distinctive competencies that can be leveraged or recombined to enter a new industry. 3.) a company tries to avoid any integration problems.
Acquisitions are a preferred entry strategy when
1.) a company lacks the competencies necessary to compete in a new industry. 2.) a company is to enter an industry that is protected by high barriers to entry. 3.) a company needs to move fast to establish a presence in a new industry.
An organizational structure
1.) defines the reporting relationships between members in an organization. 2.) assigns employees to specific value creation tasks and roles. 3.) specifies ways to integrate and coordinate the efforts of all employees.
Entrepreneurship
1.) encouraging managers to take risks 2.) give them the time and resources to pursue novel idea 3.)not punish managers when a new idea fails 4.) make sure it's a free cash flow is not wasted in pursuing too many risky new Ventures
Benefits of Vertical Integration
1.) facilitating investments in specialized assets 2.) enhanced product quality 3.) improved sceudling
How companies can behave ethically
1.) hire and promote employees with good ethics 2.) organizational culture with high ethical value 3.) leaders are ethical 4.) ethics officers 5.) moral courage 6.) strong governance processes 7.) decision makers are ethical
risk of outsourcing
1.) holdup 2.) loss of information
Strategies to build long term cooperative relationships
1.) hostage taking 2.) credible commitments 3.) maintaining market discipline
A division in the multidivisional structure
1.) is self-contained with a full set of value-chain functions. 2.) operates independently and separately from other divisions of the same company. 3.) can choose an appropriate strategy as well as organizational structure that suits the business.
Benefits of diversification
1.) lower cost 2.) allows differentiation and pricing options 3.) manage rivalry
Benefits of Horizontal Integration
1.) lower cost structure (economies of scale and reduce duplication of resources) 2.) increased product differentiation (increase flow of innovative new products, product bundling, and cross-selling) 3.) replicating the business model (replicate model in new market segments) 4.) reduced industry rivalry (eliminate excess capacity and implement tacit price coordination) 5.) increased bargaining power (leverage to bargain down price)
Strategic control systems
1.) provide incentives to motivate employees. 2.) allow managers to evaluate the performance of employees at all levels. 3.) provide performance feedback so that corrective actions can be taken if needed.
To combat internal agency problems, companies may use internal governance mechanisms including
1.) strategic control systems. 2.) employee incentives. 3.) balanced score cards.
In mergers and acquisitions potential integration problems could come from
1.) the difficulty in merging two companies' management hierarchies and establishing a new line of authority. 2.) different cultures that two companies may have. 3.) different strategic control systems and financial reporting systems of two companies.
General organizational competencies
1.) transcend individual functions or business units. 2.) involve the capabilities residing with upper-level managers. 3.) allow diversification strategy to increase profitability of each business unit.
knowledge management system
A company-specific information system that system eyes and the knowledge of its employees and provide them with access to other employees who have the expertise to solve the problems that they encounter as they perform their jobs
new venture division
A separate and independent division established to give its managers the autonomy to develop a new product.
information asymmetry
Agent has more information about the resources being managed than the principal and they maximize their own interests at the expense of principles
Which of the following is not correct in a principal-agent relationship?
Agent is the person that delegates decision-making authority or control over the other person.
decentralized authority
An organization structure in which decision-making authority is delegated to lower-level managers more familiar with local conditions than headquarters management could be.
Which of the following companies uses forward vertical integration to enhance their product differentiation advantage?
Apple
All of the following are benefits of horizontal integration except: A.) Increased product differentiation B.) Reduced risk of coming into conflict with the FTC C.) Reduced industry rivalry D.) Reduced cost structure
B
principle of the minimum chain of control
Choose the higher key with the fewest levels of authority necessary to use organizational resources efficiently and effectively
virtual organization
Composed of people who are linked by laptops, smartphones, computer aided design systems, and Global video teleconferencing and who may rarely see another face to face
True or False: Achieving economies of scale is important to industries with a low fixed-cost structure?
FALE high fixed-structure
True or false: CEOs invest in empire building to help stockholders
FALSE
True or False: If I function off makes it easier to apply Behavior control
FALSE OUTPUT
True or false: Related diversification has lower costs than unrelated diversification
FALSE higher
True or False: When a company outsources a value-chain activity, it is choosing to focus on more numbers of value-chain activities
FALSE less
True or false: Companies pursuing a strategy of unrelated diversification have some intention of transferring or leveraging competencies between business units
FASLE NO INTENTION
A union and the general public are examples of internal stakeholders.
False
Different divisions in a firm with a Multidivisional structure are not given authority to adopt their own organizational structures.
False
If a company's core skills are highly specialized and have few applications outside the core business, then a company should pursue a related diversification strategy.
False
It is important for the strategy of unrelated diversification to have a corporate-wide culture.
False
Managers use corporate-level strategy to identify which countries a company should compete in to maximize long-run profitability.
False
The purpose of organizational structure is to provide managers with specific feedback on how well an organization and its members are performing and building competitive advantage.
False
Economies of scale arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because they can more effectively pool, share, and utilize resources or capabilities.
Fasle
reengineering
Fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service, and speed
International
Global Division Structure
Global standardization
Global Structure-group structure
Which global structure is compatible with the global strategy of localization?
Global area structure
Transnational
Global-matrix Structure
division
Grouping functions to allow an organization to better produce and transfer its goods and services to its customer
Which of the following is an advantage of the multidivisional structure?
It makes it easier for the corporate office to evaluate divisional performance
In the example of Philip Morris (Chapter 10, p314) which competency was transferred between Philip Morris and Miller Brewing?
Marketing
Outside Directors
Not full-time employees of the company, Provide objectivity to the monitoring and evaluation of processes
environmental degradation
Occurs when a company's actions directly or indirectly result in pollution or other forms of environmental harm
self-dealing
Occurs when managers find a way to feather their own nests with corporate Monies
adaptive culture
One that is innovative and that encourages and rewards middle and lower-level managers for taking the initiative
An automobile company enters into a long-term contract with two suppliers for the same automobile tool. This is to ensure the company is protected in the event of one of the suppliers adopting an uncooperative attitude. Which of the following concepts is illustrated in this scenario?
Parallel sourcing
functional structures
People on the basis of their common expertise and experience or because they use the same resources
ethics
Principles of right or wrong that govern the conduct of a person, the members are in possession, or the actions of an organization
When is transfer pricing most common
Pursuing a vertical integration or related diversification strategy
Which diversification strategy is based on the idea that the company creates value by applying the distinctive competencies it developed in one line of business to another business activity?
Related diversification
Which of the following corporate strategies results in the highest bureaucratic costs?
Related diversification
ethical dilemmas
Situations in which there is no agreement over exactly what the accepted principles of right and wrong are or where none of the available alternatives seem ethically available
Which of the following is true of stakeholders?
Stockholders are internal stakeholders that provide an enterprise with risk capital.
output control
Strategic managers estimate or forecast appropriate performance goals for each division, Department, an employee and the measure actual performance relative to those goals
management by objectives
System in which employees are encouraged to help set their own goals so that managers intervene only when they sense something is wrong
True or False: A short term contracting does not result in specialized investments
TRUE
True or False: United States, publicly owned companies must regularly file detailed financial statements with the Securities and Exchange Commission that are in accordance with generally accepted accounting principles
TRUE
True or false: An unrelated company does not have to achieve coordination between business units
TRUE
True or false: Effective organizational structure and controls for a incentives that encourage business unit managers to maximize efficiency and effectiveness of the unit
TRUE
True or false: a diversification strategy is not consistent with maximizing returns to shareholder
TRUE
True or false: horizontal integration is for a single market or industry?
TRUE
Which integrating mechanism provides the longest time frame for collaborations.
Teams
bureaucratic costs
The costs associated with solving the transaction difficulties between business units and corporate headquarters as a company obtains the benefits from transferring, sharing, and leveraging competencies.
strategic outsourcing
The decision to allow one or more of a company's value-chain activities to be performed by independent, specialist companies that focus all their skills and knowledge on just one kind of activity to increase performance.
horizontal integration
The process of acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope of operations.
A number of studies have suggested that many mergers and acquisitions do not create value and some even destroy value.
True
Agency theory is used to explain the relationship between stockholders and corporate managers, and between upper-level managers and the lower-level managers they supervise.
True
Company-owned suppliers lack incentives to reduce costs therefore develop a higher cost structure than those of the independent suppliers.
True
Diversification is the process of a company entering new industries distinct from its core industry, using a multibusiness model.
True
Firms may pursue both related diversification and unrelated diversification strategies simultaneously.
True
Horizontal integration may be accomplished by acquisitions or mergers.
True
In a firm with a Multidivisional structure, corporate managers oversee the actions of divisional managers.
True
In the product structure, the centralized support functions may contain product-specific teams that focus on the specific need of one particular product group.
True
Span of control refers to the number of subordinates who report directly to one supervisor.
True
Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.
True
Strategic control systems are the primary governance mechanisms established within a company to reduce the scope of the agency problem between levels of management.
True
Strategic outsourcing is the decision to allow one or more of a company's value chain activities or functions to be performed by independent companies
True
The global area structure is a multidivisional structure.
True
The multidivisional divisional structure enhances the company's internal efficiency and allows the company to grow into large sizes.
True
The multidivisional structure usually is adopted by large and complex corporations such as diversified and multinational companies.
True
Transfer pricing may lead to divisional battles in a multidivisional company.
True
matrix structure
Value chain activities are group vertically by function in horizontally by product or project, flat and decentralized
This term has been coined to describe companies that have pursued extensive strategic outsourcing
Virtual corporation
teams
When two or more functional division share many common problems a manager from each relevant function will be assigned to work together
A function in an organizational structure is
a collection of people who work together and perform similar tasks or hold similar positions.
cross-selling
a company taking advantage of or "leveraging" its established relationship with customers by acquiring additional product lines or categories that can sell to them
diversified company
a company that makes and sells products in two or more different or distinct industries
Organizational design
a company's ability to create a structure culture and control system that motivates and chordates employees to perform at a high level
Related diversification
a corporate level strategy that is based on the goal of establishing a business unit in a NEW industry that is RELATED to a company's existing business units by some form of commonality or linkage between the Vatican functions of the existing and new business units (Apple products)
Diversification strategy is
a corporate-level strategy regarding the company's decision to enter one or more new industries.
strategic alliance
a long-term agreement between two or more companies to jointly develop new products or processes that benefit all companies concerned.
hostage taking
a means of exchanging valuable resources to guarantee that each partner to an agreement will keep its side of the bargain (mutually dependent)
Leveraging competencies involves taking a distinctive competency developed by a business unit in one industry to create
a new business unit in a different industry.
anticompetitive behavior
a range of actions aimed at harming actual or potential competitors, most often by using monopoly power, and thereby enhancing the long-run prospects of the firm
business ethics
accepted principles of right or wrong governing the conduct of business people
This entry mode is often used when the barriers to entry into the target industry are high
acquisition
merger
an agreement between equals to pool their operations and create a new equity
centralized authority
an organization structure in which decision-making authority is maintained at the top level of management
credible commitments
are believable promises or pledges to support the development of a long-term relationship between companies.
corruption
arise when managers pay bribes to gain access to lucrative contracts
substandard working conditions
arise when managers underinvest in working conditions, or pay employees below-market rates, in order to reduce their production costs
organizational structure
assigns employees to specific value creation tasks and roles and specifies how test and rules are to be linked together in ways that increases efficiency, quality, Innovation, and responsiveness to customers
diversification strategy
based on a company's decision to enter one or more new industries to take advantage of its existing distinctive competencies and business model
Standardization is a form of:
behavior control
long term contracting
both companies agree to make specialized investments and work jointly to find ways to lower costs or increase product quality so both can gain from the relationship
These expenses are incurred by firm in solving transaction difficulties that often arise in diversification strategy
bureaucratic costs
A corporate-level strategy is about how to
compete across multiple industries.
The purpose of a(n) is to provide managers with incentives for employees as well as feedback on how the company performs.
control system
product structure
different kinds of products for many different market segments (large electronics, furniture makers)
How do stockholders make money?
dividends and capital appreciation
Board of Directors
elected by stockholders and under corporate law they represent the stockholder's of interest in the company, can be legally accountable for company actions
What are the three most important stakeholders?
employees, customers, stockholders
The unethical behavior of substandard working conditions violates the interest of
employees.
In the article "Self-Dealing at Computer Associates" (Chapter 11 page357) the behavior conducted by the three top managers
enriched the three executives themselves.
Agency Relationship
exists when one party delegates decision-making responsibility (principle) to a second party for compensation (agent)
vertical integration
expanding a company's operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes, or sells its products
This term refers to a collection of people who work together, perform the same types of tasks or hold similar positions
function
International strategy should implement a...
global division structure
This global structure is often used by multinational companies which pursue an international strategy
global division structure
A structure is a structure in which horizontal differentiation proceeds along two dimensions: product division and geographic area.
global matrix
Transnational strategy should implement a...
global matrix structure (decentralized)
Global standardization strategy should implement a
global product group structure
How can horizontal integration lower a cost structure?
increasing economies of scale
External Stakeholders
individuals or groups that have some claim on a firm such as customers, suppliers, and unions
This condition allows agents to posses more, better information to mislead principles and maximize their own interests.
information asymmetry
intrapreneurs
inside or internal entrepreneurs
The main difference between leveraging and transferring competencies is that
leveraging competencies requires an entirely new business to be created internally
These positions refer to managers representing a function or division and coordinating with the other
liaison roles
What are the challenges of strategic outsourcing?
loss of important information and becoming too dependent on the supplier.
What are the benefits of strategic outsourcing?
lower cost structures, enhanced differentiation, and allowing the company to focus and strengthen their business core.
tall structure
many levels of authority relative to company size
This type of organizational structure divides the company's business activities into different customer groups
market structure
forward integration
moving into distribution and sales
opportunistic exploitation
occurs when the managers of a firm seek to unilaterally rewrite the terms of a contract with suppliers, buyers, or complement providers in a way that is more favorable to the firm, often using their power to force the revision through
This behavior of spending company funds on perks such as executive jets, lavish offices, etc, is a typical agency problem
on the job consumption
When corporate CEOs and top managers use their power and control over funds to satisfy their personal desires for wealth or status, it is called
on-the-job consumption
liaison roles
one or more team members are responsible for regularly communicating with other teams and coordinating the teams' activities as needed
integrating mechanisms
organizing tools that managers can use to increase communication and coordination among functions and divisions
How do you increase profitability using a corporate level strategy?
perform value chain activities at a LOWER COST and in a way that allows for DIFFERENTIATION
This process gains knowledge about a potential takeover target and lessens the risk of purchasing a problem business
pre-acquisition screening
Apple uses this strategy to compete in different technology-related industries (PC, smartphone, music, tablet)
related diversification
Inside directors
senior employees of the company, such as the CEO
Corporate governance is primarily concerned with the agency relationship between
stockholders and managers.
Internal Stakeholders
stockholders, employees, and board members
governance mechanisms inside a comany
strategic control systems and incentives
To make sure that managers do not misrepresent their firm's financial information, the SEC requires that the accounts be audited by an independent and accredited accounting firm. However the auditor is not independent of the client firm if
the auditing firm has other business dealings with the client firm at the same time.
personal ethics
the generally accepted principles of right and wrong governing the conduct of individuals
stakeholders
the individuals or groups that have an interest, stake, or claim in the actions and overall performance of a company
Organizational structure can be defined as:
the means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation, and responsiveness to customers.
diversification
the process of entering new industries, distinct from a company's core or original industry, to make new kinds of products that can be sold profitably to customers in these new industries
Restructuing
the process of reorganizing and disgusting business units in exiting and Fisheries to refocus on a company's Core Business and rebuild its distinctive competencies
Diversification discount
the stock of Highly Diversified companies is value with lower, relative to their earnings, than the stock of less than versified companie
handoffs
the work exchanges or transfers among people, functions, and subunits
Governance Mechanisms
to ensure that agents act in a manner that is consistent with the best interests of their principles.
General organizational competencies
transcend individual functions or business unit and are found at the top of corporate level
This practice sets the fair price of a resource developed in one division to be transferred or sold to another division
transfer pricing
This benefit of diversification explains the motif of Phillip Morris to acquire Miller Brewing
transferring competencies
true or false: output control can create tension and competition between divisions
true
Parallel sourcing
two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other's parts
The need for integration is low in firms using this strategy because there are no exchanges or linkages among divisions
unrelated diversification
What is the cheapest strategy?
unrelated diversification
This relationship between this group and lower level management is an agency relationship
upper level management
on the job consumption
use position to invest in cooperate finds in various perks that enhance their status (Executive Jets, lavish offices, and expense paid trip to exotic location) rather than investing those funds in ways that increase stockholders returns
organizational socialization
used to describe how people learn organizational culture
This strategy allows a company to facilitate investments in specialized assets that are subject to the risk of holdup
vertical integration
virtual corporation
when companies pursued extensive strategic outsourcing to the extent that they only perform the central value creation functions that lead to competitive advantage
acquisition
when one company uses its capital resources, such as stock, debt, or cash, to purchase another company
economies of scope
when one or more of a diversified company's business units are able to realize cost saving or differentiation advantages because they can more effectively pool, share, and utilize expensive resources or capabilities. MUST BE SIGNIFICANT COMMONALITIES