MGMT 449 Exam 2

strategic alliance

A long-term partnership between two or more companies established to help each company build competitive market advantages.

joint venture

A partnership in which two or more companies (often from different countries) join to undertake a major project.

Broad Differentiation

Differentiating the firm's product offering from rivals' with attributes that appeal to a broad spectrum of buyers

Best-Cost Provider

Giving customers more value for the money by offering upscale product attributes at a lower cost than rivals

Strategies of firms that expand internationally are usually grounded in

Home-country advantages concerning demand conditions, factor conditions, related and supporting industries, firm strategy, structure, and rivalry

The Diamond Framework

Shows how the conditions at a company's locations affect its ability to compete

Alliances

Stand a reasonable chance of helping a company reduce competitive disadvantage

broad low cost

Ways to create profit: lower overall costs than rivals and appealing to broad spectrum Pitfalls/disadvantages: overly aggressive price cutting & too fixated on cost reduction When it works best: 1. Price competition is vigorous 2. Rival products are essentially identical 3. Few ways to achieve differentiation 4. Low switching costs

When comparing and contrasting the differences between a localized multidomestic strategy and a global strategy you would not say that

a global strategy involves striving to be the global low-cost provider by economically producing and marketing a mostly standardized product worldwide, whereas a multidomestic strategy entails pursuing broad differentiation and striving to strongly differentiate its products in one country from the products it sells in other countries.

Opportunities to differentiate a company's product offering

can exist in activities all along an industry's value chain.

To complement and supplement the choice of one of the five generic competitive strategies, Amazon, Apple, Facebook, and Google pursue offensive actions such as

employing the element of surprise as opposed to doing what rivals expect and are prepared for.

The essence of a broad differentiation strategy is to

offer unique product attributes in ways that are valuable and appealing and that buyers consider the cost worth it.

The risks of strategic alliances often include all of the following except

potential for royalty from trustworthy firms.

Dumping Strategy

selling goods in a foreign market at below their costs of production, or as selling goods in a foreign market at below their "fair" market value. can be harmful to domestic market

Global Strategy

selling the same standardized product and using the same basic marketing approach in each national market

The major difference between a low-cost provider strategy and a focused low-cost strategy is the

size of the buyer group to which a company is appealing.

The culture of a company can be a cost-efficient value chain activity because it can

spur worker pride in productivity and continuous improvement.

Strategic offensives make sense when a company is

trying to whittle away at a rival's competitive advantage.

A global strategy is one in which a company performs all of the following tasks, except it

uses local brand names to cater to a country's specific needs.

Three main international strategies

-Multidomestic -Global -Transnational

Competing in international markets allows companies to:

-gain access to new customers -achieve lower costs through economies of scale -lower cost inputs of production -exploit core competencies -gain access to additional resources outside of domestic market

Conditions that may cause first-mover advantages to arise:

-pioneering builds reputation and creates brand loyalty -When customers will face significant switching costs -property rights protections thwart rapid imitation of initial move -early lead enables first mover to reap economies of scale -First mover will set standard for industry -Strong network effects compel more customers to choose first mover's product

Horizontal Integration

Absorption into a single firm of several firms involved in the same level of production and sharing resources at that level

Strategic Offensives

Called for when a company spots opportunities to gain profitable market share at its rivals' expense or when a company has no choice but to try to whittle away at a strong rival's competitive advantage

Focused Low-Cost

Concentrating on a narrow price-sensitive buyer segment and on costs to offer a lower-priced product.

Why Alliances Fail

Diverging objectives and priorities, inability to work together, changing conditions, market rivalry

What are the main risks with expanding overseas?

Economic, political/governmental, exchange rates

Blue Ocean Strategy

Gaining a competitive advantage by abandoning efforts to beat out competitors In existing markets and instead inventing a new market segment that allows a company to capture all new demand

Defensive Strategies

Not intended to enhance a firm's competitive advantage, rather, to help protect your current market share in a highly competitive industry

divestiture

Sale by a company of an asset that is not performing well, that is not core to the company's business, or that is worth more as a separate entity.

Multidomestic Strategy

Think local, act local. Meets needs of each market precisely, can respond quickly to local demand

collaborative agreement

Umbrella term - companies working together - contractually

The difference between a merger and an acquisition is that

a merger is the combining of two or more companies into a single corporate entity, whereas an acquisition involves one company (the acquirer) purchasing and absorbing the operations of another company (the acquired).

retrenchment strategy

a strategy that focuses on turning around very poor company performance by shrinking the size or scope of the business

The best strategic alliances

are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit.

Greenfield Strategy

build a subsidiary from the ground up

An offensive to yield good results can be short if

buyers respond immediately (to a dramatic cost-based price cut or imaginative ad campaign).

Strategic alliances are more likely to be long lasting when they involve

collaboration with suppliers or distribution allies, or when both parties conclude that continued collaboration is in their mutual interests.

A production-based emphasis toward a low-cost provider strategy usually requires a company to strive for

continuous cost reductions without sacrificing acceptable quality and essential features.

Market size and growth rates in different countries can be influenced positively or negatively by

differing population sizes, cultures, income levels, infrastructure, and distribution networks among countries.

Strategic offensives should, as a general rule, be based on

exploiting a company's strongest competitive assets—its most valuable resources and capabilities.

A broad differentiation strategy generally produces the best results in situations where

few rival firms are following a similar differentiation approach.

The world economy is globalizing at an accelerated pace because

growth-minded companies are racing to build stronger competitive positions in the markets of more countries.

The advantages of using an acquisition strategy to pursue opportunities in foreign markets include

having a high level of control and speed as an entry strategy to overcome trade barriers.

A blue-ocean strategy

involves abandoning efforts to beat out competitors in existing markets and instead inventing a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand.

Companies aspiring for global market leadership have to prioritize competing in the markets

of emerging countries.

The objective of differentiation is to

offer customers something rivals can't, at least in terms of the level of satisfaction.

The difference between political risks and economic risks is that

political risks stem from instability or weakness in national governments, while economic risks stem from the stability of a country's monetary system, and its economic and regulatory policies.

A company that fails to manage its strategic alliance probably has

refrained from making commitments to its partners and ensured they do the same.

Transnational Strategy

strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable)

Vertical Integration

the combination in one company of two or more stages of production normally operated by separate companies.

First-mover disadvantages (or late-mover advantages) rarely arise when

the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment.

Globalization

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

Why do companies decide to enter a foreign market?

to capture economies of scale in product development, manufacturing, or marketing

International market

trading imports and exports with the rest of the world

Merger and Acquisition objectives

-create more cost-efficient operations -Expand company's geographic coverage -Expanding into new product categories -Gaining quick access to new tech or resources -Leading convergence of industries whose boundaries are being blurred by changing technology or market opportunities

Local companies in developing-country markets can seek to compete against large international companies by:

-developing business models that exploit shortcomings in local distributions -utilizing superior understanding of local customer needs -taking advantage in competitively important qualities of local workforce -using acquisition strategies and rapid-growth strategies to defend against expansion-minded international companies -transferring company expertise to cross-border markets

Methods of Entering International Markets

-exporting -Liscensing -Selling via international agents/distributors -Opening an operation overseas/subsidiary -Joint venture