| Question |
Answer |
| Define Business level strategy? |
An action the form takes to gain/sustain a competitive advantage in a specific product market/single geographical market |
| what is the relationship between the firms customers and its business level strategy? (3 things) |
a. Who will be served.b. What customer needs the firm will satisfy.c. How those customer needs will be satisfied. |
| What are the three generic strategies? How do they differ? |
Cost Leadership: produces G/S with acceptable features at lowest costDifferentiation: produce G/S with unique features at acceptable cost.Focus: Include the other, except for a particular competitive segment. |
| What are the two Scopes of the BL matrix? |
Industry Wide and Niche. Niche includes buyer group, product line, and geographic market. |
| in the BL matrix what are the three competitive basis's? |
Price, Features, Integrated. |
| In which Scope of the BL matrix do you use a 'Focus' strategy? |
Niche |
| What are the industry 5 forces? |
Industry Forces: Rivalry, New entrants, substitute products, Buyers, and suppliers. |
| What are the Risks associated with Cost leadership? |
Risks: Processes could become obsolete, Competitive levels of differentiation, and imitation. |
| What are the Risks associated with Differentiation? |
Risks: Price differential too large, imitation, Experience narrows customers perception, and counterfeiting. |
| What are the Risks associated with Focus |
Focus within focus, attract industry wide competitor, and changing consumer needs. |
| What are the Risks associated with an Integrated Strategy? |
Stuck in the middle: Jack of all trades, master of none. |
| Define corporate level strategy |
An action the firm takes to gain/sustain a competitive advantage in a multiple product market/single geographic market. |
| The corporate level strategy addresses what 2 issues? |
What businesses a corporation should compete in. And how these businesses should be managed to create synergy |
| Vocab: Financial Economies |
Cost of savings realized through improved allocation of financial resources based on investments inside or outside the firm. |
| Vocab: Multi-point competition |
Exists when 2 or more diversified firms simultaneously compete in the same product areas or geographic markets. (another approach to gaining market power through diversification) |
| Vocab: Synergy |
Added Value (the whole is greater than the sum of its parts) e.g. 1+1=3 or 2+2=5 |
| Vocab: Cross subsidization |
Financial resources accumulated in one part of the world used to fight a competitive battle in another part of the world. it is used to undermine strong domestic market share. |
| What are the 2 corporate level strategies? |
Related Diversification and Unrelated Diversification. |
| What are the first 2 parts of related diversification? |
Leveraging core competencies: the transferring of accumulated skills and expertise across a corporations business units.Sharing activities: The sharing of tangible activities across a firms business units. e.g. Manufacturing facilities, distribution etc |
| What are the last 2 parts of related diversification? |
Pooled negotiation power: refers to similar businesses working together (or with a parent business) to strengthen the firms bargaining power.Vertical integration: refers to extending the firm by integrating preceding or successive productive processes. |
| What is the first part of unrelated diversification? |
Restructuring: corporation seeks firms with unrealized potential with the goal of improving their efficiency to sell for a profit. |
| What is the second part of unrelated diversification? |
Corporate parenting: the parent company creates value through its management expertise by improving the efficiency/effectiveness of the subsidiary. |
| What is the third/last part of unrelated diversification? |
Portfolio management/analysis: the corporate office seeks to balance (minimize the risk of) its portfolio of businesses. |
| There are 3 means to achieve diversification or pursue corporate level strategies, what are they? |
Mergers and acquisitions: purchase the assets and competencies of other firms.Strategic alliances and joint ventures: Partner/Pool resources to achieve a common end.Internal Development. |
| What are the limits to vertical integration? |
An outside supplier might be able to produce the product at a lower cost. Bureaucratic costs may occur. It can reduce the firms flexibility because it requires substantial investments in specific technologies. Changes in demand may create capacity issues |
| What are the advantages and disadvantages of single business, dominant business, and diversified business? |
Single business: more than 90% of revenue from a single businessDominant business: 70-95% of revenue from a single business.Diversified Business: less than 70% of revenue from a single business. |
| What incentives encourage diversification? |
a. External incentives: Anti-Trust regulation and tax lawsb. Internal incentives: Low performance, uncertain future cash flows |
| What resources encourage diversification? |
c. Tangible resources: Financial resources, free cash flowd. Intangible resources: Plant and Equipment, sales force |
| Define international level strategy |
An action the firm takes to gain/sustain a competitive advantage in multiple product markets/multiple geographic markets. |
| Why do firms expand internationally? |
Products life cycle, resources, low cost factors, universal demand, reduce costs, economies of scale, location of value chain activity, increase size of potential markets, enter developing markets. |
| Define factors of production. |
The inputs necessary to compete in any industry — land, labor, capital, natural resources, and infrastructure. |
| What are the factors of Michael porters Diamond of National Advantage? |
Factors of production, Demand Conditions, Related and supporting industries, and firm strategy, structure, and rivalry. |
| What are the types of factors of production? |
Basic: natural and labor resourcesAdvanced: highly educated work forceGeneralized: needed by all industries e.g. highways.Specialized: skilled personnel in specific industry. |
| What two factors of production equal a national advantage? |
Advanced + Specialized. |
| Define demand conditions |
The nature of size of buyers needs in the home market for the industry’s goods and services |
| Define related and supporting industries |
refers to the presence/absence of related/supplier industries that are internationally competitive |
| Define Firm strategy, structure, and rivalry |
national conditions that govern how firms are created, organized, and managed and the nature of domestic rivalry. |
| What are the 3 international corporate level strategies? |
Multi-domestic, Global, and Transnational. |
| Of the three international strategies, how do they differ? |
Global: focuses on economies of scale.Multi Domestic: focuses on competition within each countryTransnational: focuses on global efficiency and local responsiveness. |
| What are the risks of international expansion? |
Political and economic risk. Currency Risk. and Management Risk. |
| Define Political and economic risk |
Forces such as military turmoil, terrorism, and social unrest can pose serious threats to the organization |
| Define Currency risk |
Currency fluctuations can pose significant risks to a company with operations in several countries. Company must monitor exchange rates between currencies. |
| Define management risk |
This is the risk that managers will respond inappropriately to the difference encountered in foreign markets. e.g. Culture, language, customer preferences, etc. |
| What are the five choices of international entry mode |
Exporting, licensing, strategic alliances, acquisitions, and wholly owned subsidiary. |
| Define Exporting. |
ship products to satisfy foreign demand |
| Define licensing |
Allow foreign firm to manufacture and sell the firms product in a country |
| Define strategic alliances |
partner with foreign firm to enter international markets |
| define acquisitions |
acquire foreign firm to gain access to new market. |
| Define wholly owned subsidiary |
build plant in a new market. |
| What is entrepreneurship? |
Entrepreneurship is a process of “creative destruction” through which existing products or methods are destroyed and replaced with new ones. Thus, entrepreneurship is concerned with the discovery and exploitation of profitable opportunities. |
| What are the two parts of opportunity recognition? |
Discovery and formation |
| Define Discovery |
This may occur unintentionally or as the result of a deliberate search for creative solutions to business problems or new venture opportunities |
| Define formation |
Involves evaluating an opportunity to determine if it is viable and strong enough to be developed into a full-fledge new venture. A viable opportunity must have four qualities. |
| What are the four qualities for a viable opportunity? |
a. Attractive = market demandb. Achievable = practical and physically possiblec. Durable = sufficient window of opportunity d. Value creating = Profitable |
| Define entrepreneurial orientation |
It is a mindset toward entrepreneurship that is reflected in both the firms operations and culture. |
| What are the components of entrepreneurial orientation? |
Autonomy, innovativeness, proactiveness, competitive aggressiveness, risk taking. |
| Who is the father of modern business? |
Drucker |
| What are the two theories of competitive advantage? |
I/O model and RBV |
| What is forward integration? |
Ownership over distribution |
| What is horizontal integration? |
New unrelated products |
| Types of innovative activity? |
Invention, Innovation, Imitation. |
| 8 sub fields of strategy? |
Leadership, decision making, level strategies, organizational culture, entrepreneurship, strategic alliances, profit orientation, and ethics/values. |