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37 Cards in this Set
- Front
- Back
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What actions determine the company's horizontal scope? |
Decisions regarding the range of products/services the company will offer. |
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What activities describe the company's vertical scope? |
The activities the company does and doesn't perform in order to provide products/services. |
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What does synergies do? |
Enable businesses to create and claim value. |
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What is operational effectiveness? |
It is not strategy. It is an asset. |
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What are examples of tradeoffs? |
Tradeoffs enhance sustainability by making great strategies difficult or costly to replicate. |
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The rarer the source of advantage, |
The more sustainable. |
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The more difficult to replicate... |
The more sustainable. |
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More costly to replicate... |
The more sustainable. |
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What is the difference between backward and forward integration? |
Forward is towards their customers, backwards is towards their suppliers. |
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What are diseconomies of scale? |
Suppliers leverage greater economies of scale than a customer can realize internally. |
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What are diseconomies of scope ? |
Managing many activities distracts resources from core business. |
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What are development of capability costs? |
Difficult/costly to develop capabilities for many activities. |
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Lack of flexibility |
Performing an activity entails fixed costs that cannot adjust with demand fluctuations. |
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Incentive problems |
In house suppliers do not face external competition which may limit efficiency,quality, or innovation. |
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Compounded risk |
Poor performance of one internal activity influences later stage activities. |
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What is buy rationale? |
Markets might be more efficient due to high internal admin costs. |
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What is make rationale? |
Markets might be less efficient due to high transaction costs. |
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What is small numbers bargaining? |
Fewer suppliers, the more tue outcome depends on strategic negotiation and less on market forces. |
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Search costs/monitor costs |
Identifying suitable suppliers and verifying quality can be costly. |
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Transaction-specific investments |
Investments in relationship specific assets create the potential for hold up so suppliers won't make investment. |
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Contracting costs |
Difficult to specify contractual remedies for all contingencies in advance. |
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Opportunism |
Suppliers can distort, withhold, or leak info in order to enhance bargaining power. |
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Key components to a successful aquisition |
To be successful, acquisitions have to be strategic, earnings growth positive and easily understood by shareholders. |
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What are pitfalls of acquisition? |
- poor choice - overpay - underestimate integration costs -people leave - synergies and cost savings do not materialize |
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How do international strategies succeed? |
High need for global integration and high local responsiveness. |
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What is CAGE framework? |
Cultural- common language Administrative -legal system -common regional trading block -colony/colonizer -common currency Geographic -physical size -physical distance -common land border Economic- wealth and income |
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What are advantages of exporting? |
Minimizes risk Entry can be fast Maximizes scale Relatively low investment |
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What are disadvantages of exporting? |
Trade barriers Transportation costs Exposure to currency fluctuations Limited access to local information Company viewed as outsider Goal conflict with agents or distributors |
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What are advantages of licensing? |
Minimizes risk Speed in entering market Able to circumvent trade barriers Relatively high returns given low investment |
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What are disadvantages of licensing/ contracting? |
Lack control over use of assets Product quality may suffer Potential for knowledge spillovers Licensee may become competitor |
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Benefits of joint ventures? |
Overcomes ownership restrictions and cultural barriers Combines resources of two companies with potential for learning Viewed as insider Reduces investment compared to sole ownership |
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What are disadvantages of alliances? |
Difficulty maintaining Dilution of mgmt Partner must behave opportunistically Knowledge spillovers |
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Advantages of Cross border mergers and acquistions |
Rapid access Can overcome trade barriers Can overcome cultural differences Minimizes knowledge transfers Can be viewed as an insider |
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Disadvantages of mergers/aquisitions |
Risky and expensive Post acquisition integration is challenging due to cross country or cultural differences. |
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Wholly owned subsidiary disadvantages |
Most risky and expensive Slows entry into new market |
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Wholly owned subsidiary advantages |
Most potential to gain above average returns Minimizes knowledge transfers Maximizes control over quality and how business is done in new market |
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How do you solve sequential games? |
Solve with backwards induction. |
