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170 Cards in this Set
- Front
- Back
Creating and sustaining competitive advantage is the goal of ______ strategy
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business-level
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Business-level strategy deals with: ______, ______, and ______.
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who, what, how
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Questions business-level strategy addresses:
- ______ are our customers? - What unfulfilled ______ do they have? - How can we use our ______ to satisfy those needs in ways that are ______, ______, difficult to ______, and non-______? |
- Who
- needs - capabilities, valuable, rare, imitate, substitutable |
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Why do some firms outperform others and enjoy this advantage over time? {business-level}
Resource-based capabilities that are: - ______ - ______ - Difficult to ______ - Non-______ |
- Valuable
- Rare - imitate - substitutable |
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Specific avenues for creating and sustaining competitive advantage {business-level strategy}
- Business ______ and ______ - Answering the ______ question: Precisely defining and pursuing your target market - Answering the ______ question: Precisely defining the needs of the customers in that market |
- definition, positioning
- who - what |
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Answering the who and what questions: {business-level}
Ex: Harley-Davidson: clear market ______ and ______ of those in that market - Distinctive business definition: "wild one" image - Trademarked the term hog - Attempted to trademark "Harley sound" |
definition, needs
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Answering the who and what questions: {business-level}
- Unintended consequences of one firm's response - Ex: Coors - ______ distribution diluted its image - Distinction as ______ brewer, available only in the West, disappeared |
- National
- regional |
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Answering the how question: {business-level}
- ______ shall we compete? or On what ______ shall we compete? - 2 ways: 1. ______, 2. ______ |
- How, basis
- 1. overall-cost leadership, 2. broad market appeal or focused |
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Answering the how question: {business-level}
- ______ (low-cost leader) or ______: basis of competitive advantage |
overall cost-leadership, differentiator
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When answering the how question {business-level}, what type of strategy is the basis of competitive advantage?
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overall cost-leadership (low-cost leader) or differentiator
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When answering the how question {business-level}, what type of strategy deals with competitive scope?
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Broad market appeal or focused (niche)
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The key questions of business level strategy formulation:
1. ______ are our customers? 2. ______ are their needs? 3. ______ can we use our capabilities to satisfy those needs? |
Who, What, How
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Creating and sustaining competitive advantage in individual, specific product market or business is the definition of ______ strategy.
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business-level
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Business-level strategy deals with setting the firm apart in specific ______ or ______
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product market, business
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Business level strategy looks at strategy as ______.
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positioning
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What is business-level strategy?
- Can be described using ______ business-level strategies: - Well-rounded ______ strategies built around several strengths - ______, ______, and ______ |
- generic
- generalized - overall cost leadership, differentiation, focus |
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Types of generic business level strategies:
- ______: creating low-cost position relative to firm's peers - ______: offering products and services that are unique and valued - ______: targeting narrow product lines, buyer segments, or geographic markets (niche) |
- overall cost leadership
- differentiation - focus |
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A generic business level strategy where a firm is the lowest cost producer relative to competitors while maintaining product features that customers value
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overall cost leadership
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An firm pursuing an overall cost leadership {business-level} strategy typically produces a no-frills product or service to broad market using ______ to derive greatest benefits from economies of ______ and ______
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standardization, scale, learning
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With a(n) ______ {business-level} strategy, there is a continuous drive to lower costs through capital investment, control of production costs and overhead as well as costs of sales, service, and R&D.
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overall cost leadership
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There is a parity on ______ with overall cost leadership: including features acceptable to customers. {business-level}
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differentiation
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What is an example of an overall cost leader? {business-level}
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Walmart
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A source of low cost leadership {business-level}
- Reduction in variable costs due to firm's cumulative experience is known as a(n) ______ curve. |
experience
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A source of low cost leadership {business-level}:
- ______ - reduction in average (per unit) total cost from spreading total costs over larger number of units |
economies of scale
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Decline in unit costs resulting from learning is the definition of an ______ curve. {business-level}
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experience
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Production ______ fall under the experience curve {business-level}.
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innovations
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Increasing demand (if demand is price elastic) by cutting price ______ of the experience curve {business-level}
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ahead
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Concerning an experience curve, if first to market, may produce sustained ______. {business-level}
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competitive advantage
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Key differences between experience curve and economies of scale:
- Graphs show similar shape, but ______ driving that shape differ. - Experience curve results from cumulative ______, whereas - Economies of scale (size) result from high volume ______ {business-level} |
- relationships
- learning - production |
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Overall cost leadership may uniquely position a firm within its industry allowing some protection from the ______. {business-level}
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five forces
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Overall cost leadership and the five competitive forces:
- Rivalry with existing competitors: * existing rivals hesitate to compete on ______ * may not survive a price ______ {business-level} |
price
war |
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Overall cost leadership and the five competitive forces:
- Bargaining power of suppliers * Can more easily absorb price increases from suppliers due to ______ structure * May force suppliers to hold down prices due to ______ purchasing {business-level} |
low-cost
volume |
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Overall cost leadership and the five competitive forces:
- Bargaining power of buyers * Forcing prices too ______ may force cost leader out of industry - Increases power of next-most-efficient competitor, which has higher ______ - i.e., not in buyers' best interests to force prices too low eliminating firms' competitors and creating ______ conditions {business-level} |
low
costs monopolistic |
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Overall cost leadership and the five competitive forces:
- Threat of substitutes * Advantageous cost position may insulate from substitutes, which generally are also low ______ and lower ______ - Threat of new entrants * ______ and established supply chain relationships can be effective entry barriers {business-level} |
- cost, priced
- Economies of scale |
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Competitive risks of overall cost leadership strategy:
- Vulnerable to intense ______ competition - ______ of equipment, processes - Over emphasis on ______ may result in overlooking customer needs - Low price may cement customer ______ making subsequent price increases difficult {business-level} |
- price
- Obsolescence - costs - expectations |
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Continuous development of and investment in features that differentiate products in ways that customers value (without ignoring costs} is the definition of a ______ strategy.
[business-level} |
differentiation
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With a differentiation strategy, there are nearly infinite ways of ______ (unusual features, service, innovations, prestige, design, etc.).
{business-level} |
differentiating
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For a differentiation strategy to be successful, customers must:
1. ______ the differences and 2. be willing to ______ for them (perceive value in the differences) * Customers who perceive value in these differences tend to be relatively price ______ {business-level} |
1. perceive
2. pay *insensitive |
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Examples of differentiators?
{business-level} |
- Lexus: "relentless pursuit of perfection"
- Louis Vuitton - Polo Ralph Lauren |
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Rivalry with existing competitors
- Relationship between brand ______ and price ______ insulates from competition - ______ of differentiated products insulates from competition {differentiation and competitive forces} {business-level} |
- loyalty, insensitivity
- Uniqueness |
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Bargaining power of buyers: buyers lack comparable ______ and are therefore ______ price sensitive
{differentiation and competitive forces} {business-level} |
alternatives, less
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Bargaining power of suppliers:
- ______ margins insulate from ______ pressure of suppliers - ______ costs may be passed on to buyers {differentiation and competitive forces} {business-level} |
- High, pricing
- Increased |
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Threat of new entrants: customer ______ and product ______ present entry barriers (______ costs)
{differentiation and competitive forces} {business-level} |
loyalty, uniqueness, switching
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Product substitutes: ______ and ______ features reduce attractiveness of substitutes
{differentiation and competitive forces} {business-level} |
loyalty, unique
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Competitive risks of differentiation:
- Customers may consider ______ differential too high - ______ of differentiation may wear off - ______ by buyers can narrow perceptions of product ______ - ______: especially from foreign competition {business-level} |
- price
- Value - Learning, uniqueness - Counterfeiting |
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Competitive risks of differentiation:
- Too ______ differentiation (ex: Mercedes-Benz S-Class car: "functions nobody needed and nobody knew how to use") - ______ of differentiation wears off (ex: Hard Rock Café, Krispy Kreme) {business-level} |
- much
- Value |
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A ______ strategy has a narrow competitive scope within industry; similar to "niche marketing"
{business-level} |
focus
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Two variants of a focus strategy:
- ______ focus: cost advantage in target market - ______ focus: differentiation in target market {business-level} |
- Cost
- Differentiation |
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Examples of ______ focusers:
- Network Appliance - Ikea (Ikea is moving toward broader market) {business-level} |
Cost
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Examples of ______ focusers:
- Bessemer Trust - New Balance - Maserati {business-level} |
Differentiation
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Focus and competitive forces:
- Potentially ______ rivalry and ______ bargaining power - Established market presence ______ entry barriers - Often the domain of ______ business which is often better equipped to serve focused markets {business-level} |
- less, lower
- increases - small |
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Competitive risks of focus strategies:
- Erosion of cost ______ in target segment - Vulnerable to ______ from competitors and to threat of ______ entrants - ______ focus (too narrow a focus) - Being ______ focused by a competitor (ex: Big Dog and Harley) {business-level} |
- advantages
- imitation, new - Over - out |
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Combining strategies: integrating overall cost leadership and differentiation:
- Providing ______ value ______ - Generally ______ difficult to imitate - Successful combination of both strategies provides two sources of value: * ______ attributes * ______ prices {business-level} |
- unique, efficiently
- more * Differentiated * Lower |
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There are three approaches to combining overall cost leadership and differentiation:
- ______ and ______ manufacturing systems can lead to "mass customization" - Exploiting ______ pool by offering ______ products - Extending ______ along the supply chain (Ex: Wal-Mart's supplier links and in-house transportation system) {business-level} |
- Automated, flexible
- profit, complementary - value |
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Competitive risks of combining overall cost leadership and differentiation
- Attaining ______ strategy and becoming instead "stuck in the ______" - Challenges of coordinating ______-creating activities in the extended value chain - Inaccurate assessment of sources of ______ and ______ pools in industry {business-level} |
- neither, middle
- value - revenues, profit |
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Competing in specific, individual product markets is the definition of ______-level strategy.
{business-level} |
business
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What are the three business level strategies?
1. 2. 3. * * {business-level} |
1. Overall cost leadership
2. Differentiation 3. Focus * Cost focus * Differentiation focus |
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Industry life cycle:
- Industries ______ over time - Four distinct phases: ______, ______, ______, ______ - ______ creating activities may vary with stage of life cycle {business-level} |
- evolve
- introduction, growth, maturity, decline - Value |
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Characteristics of the introduction phase of the industry life cycle:
- ______ growth - ______ prices - ______ know-how in rare supply, source of temporary advantage - May result from one firm's ______ (ex: Apple, Hoover, Xerox) {business-level} |
- Slow
- High - Technical - innovation |
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Growth stage of the industry life cycle:
- ______-time use expands rapidly - ______ begin to fall - Diffusion of ______ know-how increases threat of new entrants - Rapid growth means ______ competitive pressure {business-level} |
- First
- Prices - technical - low |
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Maturity stage of the industry life cycle:
- Demand driven by ______ not first time adoption - Competition for market shares drives ______ prices - Firms strive to reduce ______, build brand ______ - Industry ______ (mergers & acquisitions) {business-level} |
-replacements
- down - costs, loyalty - consolidation |
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Decline phase of the industry life cycle:
- ______ growth (changes in technology, social tastes/preferences, demographics, international competition) - Increased ______ - Excess ______, ______ barriers lead to ______ competition {business-level} |
- Negative
- Increased - capacity, exit, price |
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In the introduction phase of the industry life cycle, ______ is the generic strategy used, the market growth rate is ______, the number of segments is very ______, the intensity of competition is ______, and the emphasis on product design is very ______.
{business-level} |
differentiation, low, few, low, high
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In the growth phase of the industry life cycle, ______ is the generic strategy used, the market growth rate is very ______, the number of segments is ______, the intensity of competition is ______, and the emphasis on product design is ______.
{business-level} |
differentiation, large, some, increasing, high
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In the maturity phase of the industry life cycle, ______/______ is the generic strategy used, the market growth rate is______ to ______, the number of segments is ______, the intensity of competition is very ______, and the emphasis on product design is ______ to ______.
{business-level} |
differentiation/overall cost leadership, low to moderate, many, intense, low to moderate
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In the maturity phase of the industry life cycle, ______/______ is the generic strategy used, the market growth rate is______, the number of segments is ______, the intensity of competition is ______, and the emphasis on product design is ______.
{business-level} |
overall cost leadership/focus, negative, few, changing, low
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In the introduction phase of the industry life cycle, the emphasis on process design is ______, the major functional area(s) of concern are ______ and ______, and the overall objective is to increase market ______ awareness.
{business-level} |
low, research and development, share
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In the introduction phase of the industry life cycle, the emphasis on process design is ______ to ______, the major functional area(s) of concern are ______ and ______, and the overall objective is to create consumer ______.
{business-level} |
low to moderate, sales and marketing, demand
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In the maturity phase of the industry life cycle, the emphasis on process design is ______ , the major functional area of concern is ______, and the overall objective is to defend market ______ and extend product ______ cycles.
{business-level} |
high, production, share, life
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In the decline phase of the industry life cycle, the emphasis on process design is ______ , the major functional area(s) of concern are ______ and ______, and the overall objective is to ______ , maintain, harvest, or ______ .
{business-level} |
low, general management and finance, consolidate, exit
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Innovation and sustaining competitive advantage-
Limitations of current discussion: 1. Suggests that competitive advantage is relatively ______ (It is not.) 2. Industry life cycle stages are neither ______ nor ______ and can ______ themselves. {business-level} |
1. enduring
2. gradual, predictable, repeat |
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Innovation and sustaining competitive advantage
- Innovations can lead to rapid ______ in stages - sustaining innovations: usually by industry ______ that reinforce market position - Destructive innovations: * Typically come from ______ the industry * Often appeal to customers not currently served by industry {business-level} |
- changes
- incumbents * outside |
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Business-level strategy looks at competing in ______ markets and the use of ______ strategies.
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specific, generic
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______ life cycle impacts choice of strategies.
{business-level} |
Industry
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______ can rapidly destroy competitive positions. {business-level}
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Innovations
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Choosing and managing the mix of business is the definition of ______ -level strategy
{corporate-level} |
corporate
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Corporate-level strategy concerns two issues:
1. What mix of ______ should the firm compete in? 2. How should these businesses be managed so they create ______ ? * ______ often fails. {corporate-level} |
1. businesses
2. synergy * Diversification |
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Relationship between Diversification and Performance - which type of diversification provides the peak performance?
{corporate-level} |
related diversification
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There are two key alternative approaches to diversification: ______ and ______ .
{corporate-level} |
related, unrelated
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Related diversification may create value through:
- ______ activities - Leveraging core ______ - Pooled ______ power - ______ integration {corporate-level} |
- Sharing
- competencies - negotiating - Vertical |
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Unrelated diversification may create value through:
- ______ - Corporate ______ - ______ analysis {corporate-level} |
- Restructuring
- parenting - Portfolio |
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Corporate-level strategy:Overview
- ______ means to achieving diversification - Real ______ analysis - Managerial behaviors related to diversification can ______ shareholder value: "growth for growth's sake," egotism, and antitakeover tactics |
- Multiple
- options - erode |
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Diversification often ______
- On average, diversification through ______ fails to add to shareholder value * Average returns of acquisitions for acquiring firms are near ______ * Only 20% of acquisitions may be considered successful {corporate-level} |
fails
- acquisition - zero |
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Making diversification work:
Proper justification for corporate diversification is: ______ . {corporate-level} |
synergy
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The creation of value that is greater than the operation of separate units
{corporate-level} |
synergy
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The proper justification for corporate diversification is NOT simply to diversify ______ , which investors can do at less ______ .
{corporate-level} |
risk, cost
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Value of diversification should stem from ______ not from ______ diversification.
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synergies, portfolio
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______ portfolio diversification distinct from ______ portfolio diversification. Investors diversify risk by building portfolio of ______ . Management is responsible for productive utilization of ______ not strictly risk reduction.
{corporate-level} |
Corporate, stock, stocks, assets
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Related diversification deals with economies of ______ and ______ enhancement through: ______ activities and leveraging ______ competencies.
{corporate-level} |
scope, sharing, core
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Cost savings (efficiencies) resulting from variety of activities that complement each other (complementarity)
[related diversification] {corporate-level} |
economies of scope
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Complementarities in revenue streams through diversification (ex: buyers may buy more if provided by one supplier)
[related diversification] {corporate-level} |
revenue enhancement
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Leveraging core competencies:
- Using core competencies to enhance customer ______ - Operating in multiple businesses that are related to a firm's core competence: ______ economies - To be a source of sustained competitive advantage, core competencies must be difficult to ______ or to ______ . [related diversification] {corporate-level} |
- value
- knowledge - imitate, substitute |
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Sharing tangible activities across business units is known as ______ .
[related diversification] {corporate-level} |
sharing activities
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Firms may share activities through common ______ facilities, ______ systems, or ______ force.
[related diversification] {corporate-level} |
manufacturing, distribution, sales
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The downsides to sharing activities include:
- Increased ______ of coordinating use of common activities by different business units - Risk of ______ of brands (ex: Gap and Old Navy} [related diversification] {corporate-level} |
- costs
- cannibalization |
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Capacity to operate at lower cost or charge higher price than most other players in an industry
[related diversification] {corporate-level} |
market power
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Related diversification can lead to increased ______ power through: pooled ______ power and ______ integration.
{corporate-level} |
market, negotiating, vertical
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Strengthening a firm's position in relation to suppliers and buyers is known as pooled ______ power.
[related diversification] {corporate-level} |
negotiating
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Expanding along firm's supply chain is known as ______ integration. ______ integration is toward the original source of raw materials. ______ integration is toward the ultimate end user, toward "the place where your customers buy your stuff."
[related diversification] {corporate-level} |
vertical, Backward, Forward
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The benefits of vertical integration include:
- Secure supply of ______ or ______ channels - Control over ______ - Access to new ______ and ______ - Simplified ______ chain support activities [related diversification] {corporate-level} |
- inputs, distribution
- assets - opportunities, technologies - value |
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Risks of vertical integration:
- Increased ______ and ______ costs - Reduced ______ - Unbalanced ______ or ______ along value chain - Administrative ______ due to increased complexity [related diversification] {corporate level} |
- overhead, capital
- flexibility - capacity, demand - overhead |
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Vertical integration: Four issues to consider
1. ______ of current supply chain partners (suppliers and distributors) 2. ______ activities as viable sources of future profits 3. Stability of ______ for firm's products 4. Need for additional ______ [related diversification] {corporate-level} |
1. Quality
2. Outsourced 3. demand 4. capacity |
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______ diversification results in financial synergies through parenting and restructuring and through portfolio management.
{corporate-level} |
Unrelated
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Corporate ______ and ______ : based on hierarchical relationship between business unit and corporate parent
[unrelated diversification] {corporate-level} |
parenting, restructuring
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Creating value among business units through corporate relationship between parent and business units is known as ______ .
[unrelated diversification] {corporate-level} |
corporate parenting
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Corporate parenting:
- Corporate parent provides: * improved ______ and ______ * internal ______ market - Centralized support functions: * ______ and ______ relations * ______ management systems * General ______ functions [unrelated diversification] {corporate-level} |
* budgeting, planning
* capital * Industry, government * Human resource * administrative |
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Corporate parenting:
- Executive management skills at corporate level can provide support for major ______ decisions (ex: acquisitions, divestiture, internal development) [unrelated diversification] {corporate-level} |
strategic
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Purchasing, reorganizing, and divesting parts of businesses
[unrelated diversification] {corporate-level} |
restructuring
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3 major types of restructuring:
- ______ restructuring: sale of unproductive assets or acquisitions that strengthen core - ______ restructuring: change in debt-equity mix - ______ restructuring: changes in composition of top management team, organizational structure, and/or reporting relationships [unrelated diversification] {corporate-level} |
Asset, Capital, Management
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Corporate portfolio management:
How do managers examine the relationships among business units held by a single firm? {corporate-level} |
Several approaches, BCG matrix is one of these
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Boston Consulting Group (BCG) Matrix:
- y-axis: ______ growth rate - x-axis: relative ______ share - Each circle represents one of the firm's ______ units. - Size of circle represents the relative size of the business unit in terms of ______ . - High market share implies economies of ______ and ______ effects (cost efficiencies) {corporate-level} |
- industry
- market - business - revenue - scale, experience |
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BCG Matrix:
- ______ : high growth potential & high market share - ______ : low growth potential, but high market share - ______ : low growth potential & low market share - ______ : high growth potential, but low market share {corporate-level} |
- Stars
- Cash cows - Dogs - Question marks |
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BCG Matrix - There are four BCG options for strategic managers:
- ______ market share (invest) with stars and question marks - ______ market share with cash cows - ______ (milk) as much short-term cash as possible - ______ dogs {corporate-level} |
- Build
- Hold - Harvest - Divest |
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Boston Consulting Group (BCG) Matrix:
- Model is ______ rather than ______ - Observe how business units move through the matrix - Avoid: * Over investing in cows while under investing in question marks, thereby trading future opportunities for present ones * Under investing in stars, allowing others to gain market share * Over milking the cash cows {corporate-level} |
- dynamic, static
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Limitations of BCG Matrix:
- High ______ does not necessarily imply success. - ______ often constrained from making such decisions (exit barriers, shareholders other stakeholders, dependence by other units) {corporate-level} |
- performance
- Managers |
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Managerial motives for diversification:
- ______ : tends to increase executive compensation - ______ : * ______ - irrational, overconfident belief in management abilities * Maintenance and extension of ______ - control of firm assets {corporate-level} |
- Growth
- Ego * Hubris * power |
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Managerial motives and organizational control:
- Corporate ______ * Operation of market for corporate control * Purchase of control by outsiders - Potential effect of takeovers on existing management * Loss of power, prestige, job loss {corporate-level} |
takeovers
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Managerial motives for diversification:
- Measures by management to prevent takeovers (antitakeover tactics) or protect themselves from effects of takeovers * ______ * ______ parachutes * ______ pills {corporate-level} |
- Greenmail
- Golden - Poison |
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______ thinking characterizes corporate-level strategy decisions.
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Options
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Managerial motives for diversification may ______ shareholder wealth while enhancing managerial power, prestige, and pay.
{corporate-level} |
decrease
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Selecting and managing the mix of businesses is known as ______-level strategy.
|
corporate
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Ultimate justification for diversification is increasing value through ______.
{corporate-level} |
synergy
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Two types of diversification:
1. 2. {corporate-level} |
1. Related
2. Unrelated |
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Related diversification may create value through: leveraging core ______ , ______ activities, pooled ______ power, and ______ integration.
{corporate-level} |
competencies, sharing, negotiating, vertical
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Unrelated diversification may create value through:
- ______ - corporate ______ - ______ analysis {corporate-level} |
- restructuring
- parenting - portfolio |
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Diversification is often driven by ______ behaviors rather than firm value considerations.
{corporate-level} |
managerial
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Treating diversification as real options affords opportunity to manage ______. {corporate-level}
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risks
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Creating value in global markets is the definition of ______ strategy.
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international
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International strategy looks at international ______ as strategy, as well as sources of national ______ advantage.
|
diversification, industry
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International strategy:
- Two opposing strategic forces: ______ reduction and ______ adaptation |
cost, local
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International diversification presents opportunities for ______ enhancement:
- Trade across nations to exceed train within nations by 2015 - Markets often dispersed across the globe - Investment in developing nations (international strategy} |
performance
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Economic ______ across globe persist:
- Latin American incomes grew by 6% in two decades - Average income declines in Eastern Europe and sub-Saharan Africa - 1.3 billion people live on less than $1 per day {international strategy} |
inequities
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Economic inequities present opportunities:
- Such populations also have unsatisfied ______ - 2007 Novel peace price awarded to Grameen Bank * Offers micro loans as low as $20 * Supports investment in such capital expenditures as purchasing a cow {international strategy} |
needs
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Four attributes affect a nation's competitiveness in a particular industry:
1. ______ conditions 2. ______ conditions 3. ______ and ______ industries 4. Firm ______ , ______ , and ______ |
1. Factor
2. Demand 3. Related, supporting 4. strategy, structure, rivalry |
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Factors of production that are industry and firm specific:
- ______ * Skill level, education - ______ * Transportation systems * Telecommunications systems * Banking system {international strategy} |
Labor, Infrastructure
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Demand conditions:
- Customer ______ set performance standards for local firms - Higher local demand leads local firms to develop ______ advantage - Strong, trend-setting local market helps local firms anticipate global ______ {international strategy} |
- expectation
- national - trends |
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Related and supporting industries:
- Supplying industries * Enables efficient management of production ______ * Strong supplier base adds ______ efficiency - Related industries * Enables ______ within industry * High probability of new ______ - forces existing firms to become more competitive {international strategy} |
* inputs
* downstream *coordination * entrants |
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Firm strategy, structure, and rivalry:
- Rivalry puts pressure on local firms to ______ and ______ - Local conditions affect firm ______ * German companies tend to be hierarchical * Italian companies tend to be smaller and run more like extended families * ______ and ______ help to determine in which types of industries a nation's firms will excel {international strategy} |
- innovate, improve
- strategy * Strategy, structure |
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Factors affecting national competitiveness: Final word:
- Firms successful in global markets usually first succeed in intensely competitive ______ markets. {international strategy} |
home
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International expansion - motivations:
- Increased market size enhances economies of ______ - Increased ______ and ______ base - Extending ______ cycle of product when home market cycle in maturity - Optimizing ______ location of value chain activities {international strategy} |
- scale
- revenue, asset - life - physical |
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International expansion (motivations):
- Optimizing physical location of value chain activities * Performance enhancement through ______ resources * ______ reductions through lower labor and operating costs (Downside: risks of exploitation_ * ______ reduction - management of currency fluctuations {international strategy} |
* location
* Cost *Risk |
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"Farming out" value chain activities to other firms {international strategy}
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outsourcing
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Shifting value chain activity from domestic to foreign location {international strategy}
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offshoring
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Outsourcing and offshoring are both increasing due to several factors:
- Decrease in ______ and ______ costs - ______ of customer needs - Growth of ______ economies and decline of ______ economies {international strategy} |
- transportation, coordination
- Homogenization - market, command |
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International expansion: risks:
- ______ risk: * ______ (ex: 9/11, kidnappings of 1970s and 1980s) * Unresolved ______ (ex: Israeli-Palestinian conflict, Kashmir, former Soviet republics, Yugoslavia, Latin American drug wars, war on terror, Syria, Pakistan, Afghanistan) * Political ______ of divided nations (Germany, Koreas, Chinas) {international strategy} |
- Political
* Terrorism * conflicts * integration |
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International expansion: risks:
- ______ risks: * National ______ and ______ systems * ______ fluctuations * Growth of ______ and trade blocs * Trade ______ * ______ in Eastern Europe and China {international strategy} |
-Economic
* fiscal, monetary * Currency * WTO * barriers * Privatization |
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International expansions: risks:
- ______ and ______ risks: * ______ costs * ______ * Cultural ______ and other country differences * ______ and product ______ {international strategy} |
- Organizational, management
* Coordination * Logistics * diversity * Marketing, modifications |
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International expansion: risks:
- ______ risks: variations in culture across the globe {international strategy} |
- Cultural
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Opposing forces in international strategy:
- Pressure to lower ______ * Competitive pressures drive firms toward increased ______ - Pressure for local ______ * National and cultural differences drive firms to ______ products to local preferences - Relative strength of opposing forces leads to four basic strategic choices |
- costs
* efficiency - adaptation * tailor |
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What are the 4 international strategic choices?
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1. International
2. Multidomestic 3. Global level 4. Transnational |
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When pursuing an international strategy:
- Pressures for cost reduction and local adaptation are ______ - ______ product extending into foreign markets * Local adaptation very limited - ______ of some value chain activities * Ex: McDonald's and Kellog centralize R&D and product development but decentralize production and marketing |
- low
- Standardized - Centralization |
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International strategy: risks:
- ______ may fail to take full advantage of optimally distributed value chain - Lack of local adaptation risks customer ______ |
- Centralization
- alienation |
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Global strategy:
- ______ emphasis on cost reduction and control and ______ on local adaptation - Economies of ______ - Corporate office provides ______ coordination {international strategy} |
- High, little
- scale - central |
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Global strategy: risks:
- Concentration of activities in one ______ * Output must be ______ * Isolated from ______ markets * Makes rest of company ______ on one or few locations - Mistakes multiplied across ______ operations {international strategy} |
- location
* exported * target * dependent - international |
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Multidomestic strategy:
- ______ emphasis on local adaptation with ______ emphasis on cost efficiencies - ______ subsidiaries operate independently from each other - Adaptation may not be limited only to ______ but may extend to other ______ (personal practices) {international strategy} |
- High, low
- Decentralized - product, activities |
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Multidomestic strategy: risks:
- Local adaptation * ______ * Specific ______ often difficult to identify * Increased ______ difficult to manage {international strategy} |
* Cost
* needs * complexity |
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Modes of entry into international markets: [lowest to highest degree of ownership, lowest to highest extent of investment risk]
- Exporting - Licensing - Franchising - Strategic alliance - Joint venture - Wholly owned subsidiary |
NOTE
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Exporting:
- ______ product extending into ______ markets - ______ -based export department, ______ sales branch, ______ sales representative, ______ -based distributors or export agents {international strategy} |
- Standardized, foreign
- Domestic, overseas, traveling, foreign |
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An advantage of exporting:
- avoids expense of establishing operations in ______ country {international strategy} |
host
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Disadvantages of exporting:
- High costs of ______ and possible ______ - ______ control over handling of products in foreign market {international strategy} |
- transportation, tariffs
- Low |
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______ - Firm sells rights to foreign firm to manufacture and market products in host country in exchange for royalty
{international strategy} |
Licensing
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An advantage of licensing:
- ______ assumes risk (fixed and variable costs of manufacturing, and marketing) {international strategy} |
Licensee
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Disadvantages of licensing:
______ control, limited ______ , risk that ______ will learn how to develop product on its own {international strategy} |
little, returns, licensee
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______ is a special case of licensing with a broader range of factors and longer term of license. It often involves complete business model (ex: fast food franchises).
{international strategy} |
Franchising
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Strategic alliances and joint ventures:
- Shares ______ and ______ with firm in ______ country - ______ country firm knows the market - Risk of ______ from partner incompatibility and conflict - Often an intermediate step towards ______ {international strategy} |
- risk, resources, host
- Host - failure - wholly owned subsidiary |
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Direct investments in other countries (Foreign direct investment - FDI/DFI) - where the home firm puts up 100% of equity is the definition of ______ .
{international strategy} |
wholly owned subsidiary
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With a wholly owned subsidiary, there is virtually complete control within ______ and ______ constraints. ______ subsidiaries operate independently from each other.
{international strategy} |
legal, regulatory, Decentralized
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International business is another form of ______.
{international strategy} |
diversification
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What are the four basic international strategies?
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1. International
2. Global 3. Multidomestic 4. Transnational |
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What are the four basic modes of entry concerning international strategy?
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1. Exporting
2. Licensing and franchising 3. Strategic alliances and joint ventures 4. Wholly owned subsidiaries |