BCOR 460 Final

one notable advantage of a mutlidomestic strategy is the

-lower exchange rate exposure

Why firms enter into strategic alliances?

-to learn new capabilities -to enter new markets -to strengthen their competitive position

Which of the following help shrink the administrative and political distance between countries?

-trade agreements -shared currency -a history of colonization1

Which of the following helped motivate globalization after the end of ww2?

-unfilled needs during the war years -the need to reconstruct economies damaged by war

how long do long-term contracts typically last

1 or more years

In order to assess whether ______ is working, managers can ask if the individual business are worth more under the firm's management or if they are worth more under individual management.

Diversification

A_____ is a situation in which the stock price of a highly diversified firms is valued as less than the sum of the individual business units.

Diversification discount

Taper integration

It is a way of orchestrating value activities in which a firm is backwardly integrated, but it also relies on outside-market firms for some of its supplies, and/or is forwardly integrated but also relies on outside-market firms for some if its distribution ex.Both Apple and Nike, for example, use taper integration: They own retail outlets but also use other retailers, both the brick-and-mortar type and online. Benefits: -allows a firm to retain and fine-tune its competencies in upstream and downstream value chain activities -enhances a firms flexibility -firms can combine nternal and external knowledge, for a path of innovation

Which approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?

Real-options perspective

The forms of specialized assets

Site specificity -physical-asset specificity -Human-asset specificity

The lemons problem suggests that information asymmetries cause...

Superior goods to be replaced by inferior ones. -situations in which one party is more informed than another, bc of the possession of private info

Why do incumbent companies enter into strategic alliances with startups?

To hedge against uncertainty

When companies get involved in a bidding ware and the winner overpays for the acquisition, the acquiring company has fallen victim to the

Winner's curse

When an established firm amkes an equity investment in an entrepreneurial venture it is known as______ investment

a Corporate venture capital CVC

The luxury car division of Tat Group, with the purchase of Jaguar and Land Rover, is pursuing which of the following?

a Focused differentiation strategy

Search Costs

are perhaps the major drawback of transacting in markets a firm faces search costs when it must scour the market to find reliable suppliers from among the many firms competing to offer similar products and services.

Economics of scope

are the savings that comes from producing two or more outputs or providing different services at less cot than producing each individually, though using the same resources and technology

at a basic level, the concept of "liability of foreignness' refers to the additional...

costs of doing business in an unfamiliar cultural and economic environment

To gain distribution channels and marketing expertise that would be an example of

critical complementary assets

A partnership in which at least one partner takes partial ownership in the other is

equity alliance

Knowledge that can be codified is called_____

explicit knowledge Patents, user manuals, fact sheets, and scientific publications are all ways to capture explicit knowledge, which concerns the notion of knowing about a certain process or product.

What must strategic alliances do i order to create the foundation for a competitive advantage?

form unique resources combinations that obey the VRIO criteria

Though natural resources can be a boon to a country's economy, more important than resources are a country's ___________ frameworks

institutional

Licensing

is a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property such as a patent

principal-agent problem

is a major disadvantage of organizing economic activity within firms, as opposed to within markets

Transaction-specific investments

is an advantage of a firm in organizing economic activity

______ and ___ are two types of long-term contracts

licensing and franchising

In global economy, according to Porter, competitive advantages increasingly exist in _______ knowledge, relationships, and motivation.

local

MNEs pursuing a multi domestic strategy hope that___

local consumers will perceive them to be a domestic company

Economics of scale

occurs when a firm's average cost per unit decreases as its output increase. -Large firm: given its size, it is able to spread its fixed cost over the millions of gallons of beer it brews each year,and significant buyer power, which leads to low cost

In the taper integration system, a firm has________ reliance on outside markets

partial

Two necessary conditions for successful alliance formation?

partner compatibility and commitment

Types of general diversification strategies

product: a firm that is active in several different product markets Geographic; a firm that is active in several different countries Product-market: a company that pursues both a product and a geographic strategy

In a global-standardization strategy, the main competitive element is______.

reduced cost

Diversification

refers to tan increase in the variety of product and services a firm offers or markets and the geographic regions in which it competes

Offshoring

refers tot he act of outsourcing some of the firms activities outside of the home country to another nation

A firm follows a _____ 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

Why did Coke enter into a strategic alliance with Monster?

so that it could gain private info to determine whether an acquisition might be beneficial

Which of the following is true of firms acquisition and integration capabilities?

some firms can consistently use mergers and acquisitions to increase their competition advantage

advantages of joint ventures

strong ties, trust, and commitment

global strategy

that enables them to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world.

Transaction costs include______ costs associated with an economic exchange

the internal and external

When a company has difficulty coordinating operations across geographic distance and between distinct culture environments, its experiences....

the liability of foreignness

The degree of vertical integration corresponds to

the number of industry value chain stages in which a firm directly participates

How can firms build alliance management capability

through repeated experiences over time

Diversification

to answer questions about thenumber of markets to compete in and where to compete geographically relate to the broad topic of diversification. -a firm that engages in diversification increases the variety of products and services it offers or markets and the geographic regions in which it competes. -A non-diversified company focuses on a single market.

Google's choice to hire programmers in-house suggest that they decided that the ___ costs associated with the strategy are_______ than the costs associated with contracting in the open market

transaction; lower

Companies facing high pressure for both local and responsiveness and cost reduction should follow a _____ strategy

transnational

T or F, MNEs employs 19% of the US workforce

true

Foreign direct investments are investments in....

value chain activities abroad

When a firm is more efficient in organizing economic activity than markets, they should do which of the following?

vertically integrate

What factors help define administrative and political distance?

-shared monetary associations -political hostilities -the strength of financial institutions

which of the following comprise culture?

-social mores -social norms -beliefs -values

Which of the three are advantages of equity alliances?

-strong ties -possible emergence of trust and commitment -a window into new technology (option value)

A multinational enterprise would likely be motivated to pursue a global standardization strategy in order to ....

-take advantage of economies of scale -take advantage of location economies

Short-term contracting

is an example of an alternative arrangement located on the continuum between buying and making

What does the incomplete nature of contracts mean for post-formation alliance management?

it means that trust is critical to success

how does horizontal integration affect Porter's five Forces for the surviving fimrs

it reduces the threat of entry -it reduces rivalry among existing firms -it strengthens bargaining power for suppliers

The extent which members of a society feel anxious when faced with an unknown situation known as

uncertainty avoidance

Alternatives in the make or buy continuum include which of the following

long-term contracts: licensing or franchising equity alliances joint ventures

Despite a growing belief in the death-of-distance hypothesis, there remains evidence that certain countries remain leaders in specific industries and maintain a kind of ________ competitive advantage.

national

Unrelated diversification

when less than 70 percent of its revenues comes from a single business and there are few, if any linkages among its business. -A company that combines two or more strategic business units one overarching corporation and follows this is called a conglomerate. -can be advantageous in emerging economies

Strategic outsourcing

which involves moving one or more internal value chain activities outside the firm's boundaries to other firms int he industry value chain- reduces vertical integration

An live company, grows and harvests olives, makes olive oil, and distributes its olive oil to its retail shops, this is an example of:

a fully vertically integrated company

Firms would be best served by developing ________ that allows for management of both strategic alliances and mergers and acquisitions.

a relational capability

non-diversified company focuses on

a single market

national culture, according to Geert Hofstede, can be defined as different groups' distinctive

"programming of the mind"

Examples of companies that were "born global"

-Google -Amazon -facebook -that enables them to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

Global collaboration networks freely locate business functions anywhere int he world based on an optimal mix of which factors?

-Pestel factors -capabilities -costs

Three choices in the build-borrow-buy framework

-acquisition of new resources -internal development -strategic alliances

All other things equal, the greater the cultural distance:

-the greater the liability of foreignness

Transaction Costs

all costs associated with an economic exchange. -enables managers to answer the question of whether it is cost-effective for their firm to expand its boundaries through vertical integration or diversification

Global standardizations strategy

ammpet to reap significant economies of scale and lcoation economies by pursuing a global divison of labor based on wherever best-of-class capabilities reside at the lowest costs -cost leadership, products are standardized and price becomes their competitive weapon.

When firms from wealthy countries trade with firms from poor countries, they benefit from economic________

arbitrage

Related diversification:

lead to superior performance

non-equity alliances

supply agreements, distribution agreements, licensing agreements

______ is a theoretical framework that helps explain and predict the boundaries of the firm.

transaction cost economics

Joint Venture

two or more partners create and jointly own a new organization -since the partners contribute equity to a joint venture they make a long-term commitment, which in turn facilitates transaction-specified investments

The four underlying strategic management concepts that determine he scope of a firm are which of the following?

-Core competences -Economics of scale -Economics of scope -Transaction costs

Product diversification strategy Geographic diversification strategy Product-market diversification strategy

-a firm that is active in several different product markets -a firm that is active in several different countries -a company that pursues both a product and a geographic diversification strategy.

the three options used by executives to drive firm growth?

-alliances -organic growth -acquisitions

Eli Lilly, a company known for its alliance management, managers its alliances using a three-person team consisting of which of the following?

-an alliance manager -an alliance champion -an alliance leader

Downsides of equity alliances?

-assembling the partnership may be slow and inflexible -the amount of investment involved can be great

Transnational strategy

-attempt to combine the benefits of a localization strategy (high local responsiveness) and of lgobal standardization strategy (lowest-cost position attainable)- -blue ocean strategy, that differentiations at low costs

Which of the following dimensions are considered in the cage distance framework?

-cultural -administrative and political -geographic -economic

What are three mechanisms that alliances can be governed by?

-equity alliances -joint ventures -non-equity alliances

The oldest form of internationalization is _____, which involves producing good in one country to sell in another country

-exporting

What are the factors in Michael Porter's model of national competitiveness?

-factor conditions -demand conditions -competitive intensity in focal industry -related and supporting industries/complementors

Diversification: Single business

-firm derives(obtains) more than 95% of its revenues from one business. The remainder of less than 5 % of revenue is not yet significant to the success of the firm ex. For example, although Google is active in many different businesses, it obtains more than 95 percent of its revenues ($70 billion in 2014) from online advertising

Three reasons why firms make acquisitions?

-gain access to new distribution and markets -gain access to a new capability or competency -to preempt rivals

Taper integration allows firms to

-gain knowledge from external sources -be more flexible when responding to market changes such as fluctuations in demand

What are some managerial advantages of building a firm into a large organization?

-greater prestige -increased power -more job security

some managerial advantages of building a firm into a large organization?

-greater prestige -more job security -increased power

Which of the following are advantages of organizing economic activity outside of a firm?

-high powered incentives -lower administrative costs

Risks of vertical

-increasing costs -reducing quality -reducing flexibility -increasing the potential for legal repercussions

Which of the following are extremely important aspects of alliance success?

-inter-organization trust -partner compatibility

Which of the following are true of alliance management capability?

-it involves partner selection and formation -a firm may need to employ it with several different alliances

Corporate strategy needs to be dynamic over time in order to:

-keep and maintain a competitive advantage -diversify to capture growth opportunities -respond to the ever-changing external environment

Which of the following characteristics help make an MNE's international strategy successful?

-large brand names -large domestic markets -strong reputation

Which of the following is an option for formulating strategy via core competencies?

-leverage existing core competencies to improve current market position

Advantages of vertical integration include?

-lowering costs -improving quality -facilitating scheduling and planning -facilitating investments in specialized assets -securing critical supplies and distribution channels

What should partners do in order to make a strategic alliance work?

-make relation-specific investments -build inter-firm trust -establish knowledge-sharing routines

Stages four and five of the industry value chain involve

-marketing and sales -after-sales service and support

four quadrants of the integration responsiveness framework?

-multi domestic -global standardization -international -transnational

What are extremely important aspects of alliance success?

-partner compatibility -inter-organizational trust

the primary reasons of why a firm might pursue a merger?

-principal agent problem -the desire to overcome competitive disadvantage -superior acquisition and integration capability

what makes globalization possible?

-reduced investment barriers -reductions in transportation costs -advances in telecommunications

What are sources of value creation in a horizontal integration strategy?

-reduction in competitive intensity -lower costs -increased differentiation

During the first stage of globalization, which of the following business functions typically took place abroad?

-sales -distribution

Which of the following are among the primary considerations when determining the mode in which a firm enters a foreign market?

-the desired level of control over foreign operations -the degree of investment

Which of the following risks do companies face when expanding internationally?

-the liability of foreignness -loss of intellectual property -loss of reputation

To help classify scheme that identifies four main types of diversification by looking at:

-the percentage of revenue from the dominant or primary business -the relationship of the core competencies across the business units.

Which of the following are some advantages of strategic alliances

-they might give companies a competitive advantage - they help firms achieve goals faster than they would alone

Which of the following are reasons firms expand internationally?

-to gain a low-cost input factors -to develop new competencies -to gain access to a larger market

Which types of diversification tend to have the lowest performance?

-unrelated diversification -single business

What are the main types of business diversification?

1. Single business 2. Dominant business 3. Related diversification 4. Unrelated diversification: the conglomerate

Related diversification

A firm follows this when it obtains less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business linked to the primary business activity. -the rationale behind this is to benefit from economies of scale and scope. -Theses multi-business firms an pool and share resources as well as leverage competencies across different business lines.

a global strategy is needed in order to.....

Achieve a competitive advantage against other companies

The BCG growth-share matrix requires managers to view their SBUs in terms of relative market______ and speed of the market______.

Boston consulting Group Relative market share (horizontal axis) and speed of market growtj

In the boston Consulting Group Matrix, _____ hold the small market share in a low-growth market.

Dog high market growth and low market share: question mark -earnings: low, unstable, or growing -Cash flow: negative -strategy: increase market share or harvest/divest

______are partners in which at least one partner takes partial ownership in the other partner

Equity Alliance -a partner purchases an ownership share by buying stock or asset (in private companies), and thus making an equity investment. -This is tends too signal greater commitment to the partnership

Related-Constrained Diversification:

Executives engage in such a new business opportunity only when they can leverage their existing competencies and resources, the business activities are limited- constrained- by the fact that they need to be related through common resources, capabilities and competencies ExxonMobil's strategic move into natural gas is an example of related diversification. In 2009, ExxonMobil bought XTO Energy, a natural gas company, for $31 billion.54 XTO Energy is known for its core competency to extract natural gas from unconventional places such as shale rock—the type of deposits currently being exploited in the United States. ExxonMobil hopes to leverage its core competency in the exploration and commercialization of oil into natural gas extraction.

T or F, the benefits of local responsiveness always outweighs the costs

False

T or F, though low-skilled laborers make much less in developing countries, no such difference in wages exists for high-skilled workers.

False

Dominant Business diversification

Firm obtains between 70-95 percent of its revenues from a single business, but it pursues at least one other business activity that accounts for the remainder of revenue. The dominant business shares competencies in products, services, technology, or distribution.

in order to implement a transnational strategy, MNEs typically adopt a global______ structure.

Global matrix structure: combines economies of scale along specific product divisions with economies of learning attainable in specific product divisions

Related-linked diversification strategy

If executives consider new business activities that share only a limited number of linkages ex/ one in which executives pursue various business opportunities that share only limited number of linkages.

Related-linked diversification:

If executives consider new business activities that share only a limited number of linkages.

kava Bot, a boutique retailer that sells high-end makeup and accessories, is owned by two makeup manufacturers. Which strategic alliance is this?

Joint venture

___ assets are unique assets that have significantly more value int heir intended use than in next-best use

Specialized

_______ assets are unique assets that have significantly more value in their intended use than in next-best use

Specialized - have a high opportunity cost *site *physical-asset *human-asset

The two alternatives to vertical integration are what?

Taper integration and strategic outsourcing

T or F: Multinational enterprise are the driving force behind globalization

True

Multinational enterprise (MNE)

a company that deploys resources and capabilties int he procurement, production, and distribution of goods and services in at least two countries. - to make investments in value chain activities abroad, MNEs engage in Foreign direct investment(FDI)

managerial hubris

a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence tot he contrary

Coordination costs influence costs

are a function of the number, size, and types of businesses that are linked -refers to the costs that arise from managing the linked business in a realted-constrained or related-linked diversification scenario occur due to political maneuvering by managers to influence capital and resources allocation and resulting inefficiencies stemming from suboptimal allocation of scarce resources

Core Competences

are unique strengths embedded deep within a firm. They allow firms to differentiate its products and services from their rivals, creating higher value for the customer or offering products and services of comparable value at lower cost. Activities that draw on what the firm knows how to do well (e.g., Google's core competency in developing proprietary search algorithms) should be done in-house, while non-core activities such as payroll and facility maintenance can be outsourced

Multidomestic strategy

attempt to maximize local responsiveness, hoping that local consumers will perceive their product as local ones -common in consumer products and food industries

When a manufacturer of computers starts to product its own computer components, the manufacturer engages in ____ vertical integration

backward vertical integration

Tacit knowledge

cannot be codified and can only be gained through active participation in the task -knowing how to do a certain task

Firms can achieve increased competitive advantage as a result of _______________, which are firms that product a good or service that increases the perceived value of a focal firm's offering when the two are combined

complementors

Parent-subsidiary relationship

describes the most integrated alternative to performing an activity within one's own corporate family

Parent-subsidiary relationship

describes 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. Transaction costs that arise are frequently due to political turf battles, which may include the capital budgeting process and transfer prices, among other areas.

Multinational enteprises that manufacture commodity products that focus on cost leadership tend to use a____________ strategy

global-standardization

A disadvantage of using short-term contract for the supplying firm is that they...

have little reason to perform transaction-specific investments

The acquisition of PeopleSoft enable Oracle to offer its customers expertise in human resource management systems (peopesoft core competency) in addition to database management systems (Oracle's core competency). This is an example of which source of value creation of M&As?

increased differentiation

as the standard of living rises in emerging economies, MNEs are hoping that_______

increased purchasing power will enable workers to purchase the product they used to make for exports only

Strategic alliance

is a voluntary arrangement between firms that involve sharing of resources and capabilities with the intent of developing processes, products, or services

International strategy

is essentially a strategy in which a company sells the same products or services in both domestic and foreign markets -this strategy is often used successfully by MNEs with relatively large domestic markets with strong reputations and brand names

Horizontal integration

is the process of merging with a competitor at the same stage of the industry value chain -large horizontal integration activity typically needs to be approved by government authorities

A firm should consider using mergers and acquisitions only when

it is important to be extremely close tot he resource partner in order to understand underlying information

When two firms form a strategic alliance to learn, but the rate at which they learn may vary, it is known as a

learning race

The benefits to be accrued from locating value chain activities in the world's optimal geographies for a specific activity are known as_________ economies.

location