Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
4TECEPStrategicMngmt
Crafting Strategy-Diversified Companies & Going International
| Question | Answer |
|---|---|
| What is diversification? | A diversified enterprise is a collection of individual businesses. |
| What are the two fundamental approaches to diversification? | Diversification in unrelated businesses and diversification into related businesses |
| What is the rationale for related diversification? | To benefit from strategic fit: Diversify into businesses with match-ups along their respective value chains, and then capitalize on the strategic fit by sharing the resources and capabilities that enable the matching value chain activities. |
| What is the rationale behind unrelated diversification? | Surrendering the competitive advantage potential of strategic fit at the value chain level in return for the potential that can be realized from superior corporate parenting |
| What three ways can an outstanding corporate parent benefit its businesses? (answer 1-2) | 1. providing high level oversight and making available other corporate resources, 2. allocating financial resources across the business portfolio, 3. restructuring underperforming acquisitions |
| What are the four main diversification strategies? (answer 1-2) | Sticking closely with the existing business lineup and pursuing the opportunities these businesses present, Broadening the company's business scope by making new acquisitions in new industries, |
| What are the four main diversification strategies? (answer 3-4) | Divesting some businesses and retrenching to a narrower base of business operations, Restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup |
| What is international strategy? | A strategy for competing in two or more countries simultaneously. |
| Competing in international markets allows companies to do what five things? (answer 1-2) | Gain access to new customers, Achieve lower costs through greater scale economies, learning curve effects or purchasing power, |
| Competing in international markets allows companies to do what five things? (answer 3-5) | Leverage core competencies developed domestically in additional country markets, Gain access to resources and capabilities located outside a company’s domestic market, Spread business risk across a wider market base. |
| When evaluating strategy options, what five factors must be considered by companies electing to expand into international markets? (factor 1-2) | Cross-country variation in factors that affect industry competitiveness, Location based drivers regarding where to conduct different value chain activities, |
| When evaluating strategy options, what five factors must be considered by companies electing to expand into international markets? (factor 3-5) | Varying political and economic risks, Potential shifts in exchange rates, and Differences in cultural, demographic, and market conditions |
| The strategies of firms that expand internationally are usually grounded in home country advantages concerning what four things? | Demand conditions, factor conditions, related and supporting industries, and firm strategy, structure, and rivalry |
| The pattern of international competition varies in important ways from industry to industry. What are the two extremes? | Multi-domestic competition and global competition. |
| What is multidomestic competition? | A scenario in which the market contest among rivals in one country is not closely connected to the market contests in other countries - there is no world market, just a collection of self contained country (or maybe regional) markets. |
| What is global competition? | A scenario in which competitive conditions across national markets are linked strongly enough to form a true world market, wherein leading competitors compete head to head in many different countries. |
| What are the six strategic options for entering foreign markets? (strategies 1-3) | Maintaining a national (one country) production base and exporting goods to foreign markets, Licensing foreign firms to produce and distribute the company’s products abroad, Employing a franchising strategy, |
| What are the six strategic options for entering foreign markets? (strategies 4-6) | Establishing a wholly owned subsidiary by acquiring a foreign company, Creating a wholly owned subsidiary from the ground up via a greenfield venture, Using strategic alliances or other collaborative partnerships to enter a foreign market. |
| A company must choose from which three alternative approaches for competing internationally? | 1. a multidomestic strategy which is a think-local, act-local approach to crafting international strategy, 2. a global strategy - a think global, act global approach and 3. A combination think global, act local approach known as transnational strategy |
| For what setting is a think local act local or multidomestic strategy appropriate? | For industries or companies that must vary their product offerings and competitive approaches from country to country in order to accommodate different buyer preferences and market conditions. |
| When does the think global act global approach that characterizes a global strategy work best? | When there are substantial cost benefits to be gained from taking a standardized and globally integrated approach and little need for local responsiveness. |
| When is a transnational approach (think global, act local) called for? | When there is a high need for local responsiveness as well as substantial benefits from taking a globally integrated approach |
| What are the three general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets? (answer 1-2) | Benefiting from cross border coordination in ways that are unavailable to domestic only competitors, Locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation, |
| What are the three general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets? (answer 3) | Drawing on an international competitor’s ability to extend or deepen its competitive advantage by cost-effectively sharing , replicating, or transferring its most valuable resources and capabilities across borders |
| What are profit sanctuaries? | Country markets in which a company derives substantial profits because of its protected market position |
| What is cross-subsidization? | A practice of supporting competitive offenses in one market with resources and profits diverted from operations in another market |
| Where do companies racing for global leadership have to consider competing? | In developing markets/countries where the business risks are considerable but the opportunities for growth are huge |
| What three things do companies often have to do in order to succeed in developing markets? | Compete on the basis of low price, Be prepared to modify aspects of the company’s business model or strategy to accommodate local circumstances, Try to change the local market to better match the way the company does business elsewhere. |
| Why is profitability typically unlikely to come quickly or easily in developing markets? | Because of the investments needed to alter buying habits and tastes, the increased political and economic risk, and/or the need for infrastructure upgrades. |
| What are the three general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets? (answer 1-2) | Benefiting from cross border coordination in ways that are unavailable to domestic only competitors, Locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation, |
| What are the three general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets? (answer 1-2) | Benefiting from cross border coordination in ways that are unavailable to domestic only competitors, Locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation, |
| What are the three general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets? (answer 3) | Drawing on an international competitor’s ability to extend or deepen its competitive advantage by cost-effectively sharing , replicating, or transferring its most valuable resources and capabilities across borders |
| What are profit sanctuaries? | Country markets in which a company derives substantial profits because of its protected market position |
| What is cross-subsidization? | A practice of supporting competitive offenses in one market with resources and profits diverted from operations in another market |
| Where do companies racing for global leadership have to consider competing? | In developing markets/countries where the business risks are considerable but the opportunities for growth are huge |
| What three things do companies often have to do in order to succeed in developing markets? | Compete on the basis of low price, Be prepared to modify aspects of the company’s business model or strategy to accommodate local circumstances, Try to change the local market to better match the way the company does business elsewhere. |
| Why is profitability typically unlikely to come quickly or easily in developing markets? | Because of the investments needed to alter buying habits and tastes, the increased political and economic risk, and/or the need for infrastructure upgrades. |
| Local companies in developing country markets can seek to compete against large multinational companies by implementing what five strategies? (strategies 1-2) | Developing business models that exploit shortcomings in local distribution networks or infrastructure, Utilizing superior understanding of local customer needs and preferences or local relationships, |
| Local companies in developing country markets can seek to compete against large multinational companies by implementing what five strategies? (strategies 3-4) | Taking advantage of competitively important qualities of the local workforce with which large multinational companies may be unfamiliar, Transferring company expertise to cross -border markets and initiating actions to compete on a global level. |
| Local companies in developing country markets can seek to compete against large multinational companies by implementing what five strategies? (strategy 5) | Using acquisition strategies and rapid growth strategies to better defend against expansion minded multinational companies |
| What are political risks? | Risks that stem from instability or weakness in national governments and hostility to foreign business. |
| What are economic risks? | Risks that stem from the stability of a country’s monetary system, economic and regulatory policies, lack of property rights protections, and risks due to exchange rate fluctuation |
| Why do fluctuating exchange rates pose significant economic risks to a company’s competitiveness in foreign markets? | Because exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger relative to the currency of the importing country. |
| When are domestic companies facing competitive pressure from lower-cost imports benefited? | When their government’s currency grows weaker in relation to the currencies of the countries where the lower-cost goods are being made |
| When does multi-domestic competition exist? | when the competition among rivals in each country market is localized and not closely connected to the competition in other country markets-there is no world market, just a collection of self-contained local markets. |
| When does global competition exist? | When competitive conditions across national markets are linked strongly enough to form a true world marketd and when leading competitiors compete head to head in many different countries. |
| What is a greenfield venture? | A subsidiary business that is established by setting up the entire operation from the ground up |
| What is a popular way for companies to edge their way into the markets of foreign countries? | Collaborative strategies involving alliances or joint ventures with foreign partners |
| What do cross boarder alliances enable a growth minded company to do? | widen its geographic coverage and strengthen its competitiveness in foreign markets; at the same time, they offer flexibility and allow a company to retain some degree of autonomy and operating control. |
| What is an international strategy? | A strategy for competing in two or more countries simultaneously |
| What is a multidomestic strategy? | One in which a company varies its product offering and competitive approach from country to country in an effort to be responsive to differing buyer preferences and market conditions. |
| What is a global strategy? | One in which a company employes the same basic competitive approach in all countries where it operates, sells much the same products everywhere, strives to build global brands, and coordinates its actions world wide with strong headquarters control. |
| What is a transnational strategy? | A think global, act local approach that incorporates elements of both multidomestic and global strategies |
| How can companies that compete internationally pursue competitive advantage in world markets? | By locating their value chain activities in whatever nations prove most advantageous |
| What are profit sanctuaries? | Country markets that provide a company with substantial profits because of a protected market position or sustainable competitive advantage |
| What is cross market subsidization? | Supporting competitive offensives in one market with resources and profits diverted from operations in another market can - be a powerful competitive weapon. |
| Whether or not getting into a new business has potential to enhance shareholder value hinges on what three things? | Whether a company’s entry into that business can pass the attractiveness test, the cost-of-entry test, and the better-off test. |
| What is the purpose of diversification? | To build shareholder value. |
| When does diversification build shareholder value? | When a diversified group of businesses can perform better under the auspices of a single corporate parent than they would as independent, stand-alone businesses |
| Entry into new businesses can take any of what three forms? | Acquisition, internal start-up, or joint venture /strategic partnership |
| The choice of which form of new business is best depends on what four things? | The firm’s resources and capabilities, the industry’s entry barriers, the importance of speed, and the relative costs. |
| Why does related diversification provide a stronger foundation for creating share holder value than unrelated diversification? | Since the specialized resources and capabilities that are leveraged in related diversification tend to be more valuable competitive assets than the generalized resources and capabilities underlying unrelated diversification |
| What is the six step process for analyzing how good a company’s diversification strategy is? (step 1-3) | Step 1: Evaluate the long term attractiveness of the industries into which the firm has diversified. Step 2: Evaluate the relative competitive strength of each of the company’s business units. Step 3: Check for cross-business strategic fit. |
| What is the six step process for analyzing how good a company’s diversification strategy is? (step 4) | Step 4: Check whether the firm’s resource mix fits the resource requirements of its present business lineup. |
| What is the six step process for analyzing how good a company’s diversification strategy is? (step 5) | Step 5: Rank the performance prospects of the businesses from best to worst, and determine what the corporate parent’s priority should be in allocating resources to its various businesses. |
| What is the six step process for analyzing how good a company’s diversification strategy is? (step 6) | Step 6: Crafting new strategic moves to improve overall corporate performance. |
| Once a company has diversified, what is corporate management’s task? | To manage the collection of businesses for maximum long term performance. |
| What are the four strategic paths for improving a diversified company’s performance? (strategies 1-3) | Sticking with the existing business lineup, Broadening the firm’s business base by diversifying into additional businesses or geographic markets, Retrenching to a narrower diversification base by divesting some of its present businesses |
| What are the four strategic paths for improving a diversified company’s performance? (strategy 4) | Restructuring the company’s business lineup with a combination of divestitures and new acquisitions to put a whale new face on the company’s business makeup. |
| What does creating added value for shareholders via diversification require? | Building a multibusiness company where the whole is greater than the sum of its parts-an outcome known as synergy. |
| What is an acquisition premium? | The amount by which the price offered exceeds the preacquisition market value of the target company |
| What is corporate venturing? | The process of developing new businesses as an outgrowth of a company’s established business operations. It is also referred to as corporate entrepreneurship or intrapreneureship since it requires entrepreneurial like qualities within a larger enterprise. |
| What are transaction costs? | The costs of completing a business agreement or deal, over and above the price of the deal. |
| What do related businesses posses? | Competitively valuable cross-business value chain and resource matchups |
| What do unrelated businesses posses? | Dissimilar value chains and resource requirements, with no competitively important cross-business relationships at the value chain level. |
| Strategic fit exists when the value chains of different businesses present opportunities for what four things? (answer 1-2) | Cross-business resource transfer, Lower costs through combining the performance of related value chain activities or resource sharing |
| Strategic fit exists when the value chains of different businesses present opportunities for what four things? (answer 3-4) | Cross-business use of a potent brand name and Cross-business collaboration to build stronger competitive capabilities |
| What are economies of scope? | Cost reductions that flow from operating in multiple businesses (a larger scope of operation) |
| What are economies of scale? | Cost reductions that accrue from a larger-size operation. |
| Restructuring refers to overhauling and streamlining what four activities of a business? | Combining plants with excess capacity , Selling off underutilized assets, Reducing unnecessary expenses, and otherwise Improving the productivity and profitability of a company. |
| What is relative market share? | It measures a business against its single, strongest competitor. This is a way of measuring a business' strength in relation to either a company that is pursuing it or that it is pursuing. |
| What is absolute market share? | It is designed to show how a business is doing in its field alongside all of its competitors by lending context to a company's performance |
| What is the relationship between a business’ value of cross-business strategic fit and its strategy of related diversification? | The greater the value of cross-business strategic fit in enhancing a company’s performance in the marketplace or on the bottom line, the more competitively powerful is its strategy of related diversification. |
| When does a diversified company exhibit resource fit? | When its businesses add to the company’s overall resource strengths and have matching resource requirements and or when the parent company has adequate corporate resources to support its businesses’ needs and add value. |
| How does a strong internal capital market allow a diversified company to add value? | By shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential. |
| What is a cash hog? | A business that generates cash flows that are too small to fully fund its operations and growth and requires cash infusions to provide additional working capital and finance new capital investment. |
| What is a cash cow? | A business that generates cash flows over and above its internal requirements, thus providing a corporate parent with funds for investing in cash hog businesses, financing new acquisitions, or paying dividends. |
| Diversified companies need to divest low-performing businesses or businesses that don’t fit in order to do what? | Concentrate on expanding existing businesses and entering new ones where opportunities are more promising. |
| What does Companywide restructuring (corporate restructuring) involve? | Divesting some businesses and acquiring others so as to put a whole new face on the company’s business lineup. |
Created by:
tybouff
Popular Management sets