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62 Cards in this Set
- Front
- Back
Strategy |
Actions that managers take to attain the goals of the firm |
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Profitability |
A rate of return concept |
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Profit growth |
Percentage increase in net profits over time |
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Value creation |
Performing activities that increase the value of goods or services to customers. Difference between the firm's production cost and quality perceived by customers |
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Strategic positioning (porter) |
A firm should be explicit about its choice of strategic emphasis with regard to value creation and low cost. All about strategy |
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How to gain competitive advantage |
The strategy, operations, and organization of the firm must all be consistent with each other |
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Core competence |
Skills within the firm that competitors cannot easily match or imitate. Bedrock of a firm's competitive advantage |
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Location economies |
Can lower the costs of value creation and help the firm achieve a low-cost position. Can enable a firm to differentiate its product offering from its competition. |
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Location economies are? |
Economies that arise from performing a value creation activity in the optimal location for that activity |
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Global web |
When different stages of the value chain are dispersed to those locations around the globe where value added is maximized or where the costs of value are minimized. Raising perceived value and lowering cost. |
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Caveats |
Transportation costs and trade barriers |
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Experience curve |
Systematic reductions in production costs that occur over the life of a product |
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Learning effects |
Cost savings that come from learning by doing. |
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Economies of scale |
Reductions in unit cost achieved by producing a large volume of a product |
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Leveraging the skills created within subsidiaries and applying them to other operations within the firm's global network may create |
Value |
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Pressures for cost reductions |
-require a from go try to lower the costs of value creation -greater in industries producing commodity-type products -also in industries where competitors are based in low cost locations, persistent excess capacity, consumers are powerful and face low switching costs |
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Universal needs |
When the tastes and preferences of consumers in different nations are similar if not identical |
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Pressures for local responsiveness |
Differences in customer tastes and preferences. Differences in infrastructure and traditional practices. Differences in distribution channels and host government demands. Rise of regionalism |
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Choosing a strategy |
The need to customize the product to local conditions may work against the implementation of a global standardization strategy |
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Global standardization strategy |
Goal is to pursue low-cost strategy on global scale. Few favorable locations for production, marketing, etc. Avoids customization. Makes the most sense when there are strong pressures for cost reductions and demands for local responsiveness are minimal |
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Localization strategy |
Focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets |
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Transnational strategy |
Plans to exploit experience-based and location economies, transfer core competencies within the firm, and pay attention to local responsiveness. Must focus on leveraging subsidiary skills. |
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International strategy |
Tries to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies |
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Organizational architecture |
Totality of a firm's organization, including formal organizational structure, control systems and incentives, processes, and people |
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Organizational structure |
Determined by the formal division into subunits, the location of decision making, and the coordination of activities of subunits |
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Control systems |
Metrics used to measure performance of subunits |
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Processes |
Manner in which decisions are made and work is performed |
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Organizational culture |
Norms and values shared by employees |
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People |
Part of the organizational architecture that includes strategy to recruit, compensate, and retain employees |
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Vertical differentiation |
Centralization and decentralization of decision-making responsibilities |
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Horizontal differentiation |
Division of the firm into subunits |
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Integrating mechanisms |
Mechanisms for achieving coordination between subunits within an organization |
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Functional structure |
Functions reflecting the firm's value creation activities |
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Product divisional structure |
Each division is responsible for a distinct product line |
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International division |
Responsible for a firm's international activities. Organized by geography. Typically replicates structure in home market. |
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Worldwide area structure |
Business organizational structure under which the world is divided into areas. Favored by firm's with a low degree of diversification |
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Worldwide product divisional structure |
Based on product divisions that have worldwide responsibility. Helps overcome coordination problems. |
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Global matrix structure |
Horizontal differentiation proceeds along two dimensions: product divisions and geographic area. Dual decision making. |
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Need for coordination |
-Lowest in firms pursuing a localization strategy. -higher in international companies -higher in global companies -highest in transnational companies |
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Formal integrating mechanisms |
The greater the need for coordination, the more complex the formal integrating mechanisms need to be. |
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Knowledge network |
Network for transmitting information within an organization that is based on informal contacts between managers within an enterprise and on distributed information systems |
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Personal control |
Achieving control by personal contact with subordinates |
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Bureaucratic control |
Achieved through a system of rules and procedures that directs the actions of subunits |
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Output control |
Setting goals for subunits to achieve and expressing those goals in terms of relatively objective performance metrics such as profitability, productivity, growth, market share, and quality |
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Performance ambiguity |
Often occurs when the causes of good or bad performance are not clearly identifiable |
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Transnational strategy |
Focus on the simultaneous attainment of location and experience curve economies, local responsiveness, and global learning |
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Pioneering costs |
Costs that an early entrant has to bear that a later entrant can avoid |
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Exporting advantages |
Avoids the often substantial cost of establishing manufacturing operations in host country. May help firm achieve experience curve and location economies |
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Exporting disadvantages |
May not be appropriate if lower-cost locations of manufacturing the product can be found abroad. Tariff barriers can be a problem as well as high transportation costs |
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Turnkey project |
A project in which a firm agrees to set up an operating plant for a foreign client and hand over the "key" when the plant is fully operational |
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Licensing agreement |
Licensor grants the rights to intangible property to another entity for a specific period, and in return, the licensor receives a royalty fee from the licensee. |
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Franchising |
Specialized form of licensing in which the franchisor not only sells a trademark to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business. |
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Joint venture |
Cooperative undertaking between two or more firms |
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Wholly owned subsidiary |
A firm that owns 100% of the stock |
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Pros and cons of acquisitions |
Quick. May help preempt competitors. Less risky than greenfield. Often produce disappointing results. Overpaying. Culture clash. Inadequate screening. Reducing the risks of failure |
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Pros and cons of greenfield venture |
Gives the firm a greater ability to build the kind of subsidiary company that it wants. Slower to establish. Risky, but less than acquisitions. |
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Choose a acquisition when |
The firm is seeking to enter a market where there are already well established enterprises. When global competitors are also interested in establishing a presence. |
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Choose a greenfield venture when |
There are no incumbent competitors to be acquired. The competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture |
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Advantages of strategic alliances |
May facilitate entry into a foreign market. Allow firms to share fixed costs. Brings together skills. May help establish technological standards |
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Disadvantages of strategic alliances |
May give competitors a low-cost route to new technology and markets. |
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Alliance structure |
Reduce the risk of giving away too much to partner. Use contractual safeguards. Agree to swap skills. Extract a significant credible commitment in advance from partner. |
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Managing the alliance |
Sensitivity to cultural differences. Build trust. Build relational capital. Learn from the partner and apply the knowledge within ones own organization. |