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32 Cards in this Set

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What are the level 1 costs for business ethics failures?
* Gov't fines & penalties
* Civil penalties arising from class-action lawsuits and other litigation aimed at punishing the company
* Costs to shareholders in the form of a lower stock price
What are the level 2 costs for business ethics failures?
* Legal and investigative costs incurred by the company
* The costs of providing remedial education and ethics training to company personnel
* Costs of taking corrective actions
* Administrative costs associated with ensuring future compliance
What are the level 3 costs for business ethics failures?
* Customer defections
* Loss of reputation
* Lost employee moral and higher degrees of employee cynicism
* Higher employee turnover
* Higher recruiting costs and difficulty of attracting talented employees
* Adverse effects on employee productivity
* The costs of complying with often harsher gov't regulations
What causes unethical strategies and behavior in companies and individuals?
* Faulty oversight by top management and the board of directors that implicitly allows the overzealous pursuit of personal gain, wealth, and other self-interests.
* Heavy pressures on company managers to meet or beat performance targets.
* A company culture that puts profitability and good business performance ahead of ethical behavior.
Explain ethical universalism, ethical relativism and integrative social contracts.
1. Ethical Universalism contends that some concepts of what is right and wrong are universal and transcend most cultures, societies, and religions.
2. Ethical Relativism contends that it is appropriate for local moral standards to take precedence.
3. Social Contract theory provides for both positions but contends that universal ethical norms always take precedence over local norms.
What is corporate sustainability?
Corporate sustainability involves strategic efforts to meet the needs of today's customers, suppliers, shareholders, employees, and other stakeholders, while protecting, and perhaps enhancing, the resources needed by future generations.
What is social responsibility?
Social responsibility calls for companies to strive for a balance between (1) the economic responsibility to reward shareholders with profits, (2) the legal responsibility to comply with the laws of the countries where it operates, (3) the ethical responsibility to abide by societies norms of what is moral and just, and (4) the discretionary philanthropic responsibility to contribute to the non-economic needs of society.
What is corporate citizenship?
Corporate citizenship requires a corporate commitment to go beyond meeting society's expectations for ethical strategies and business behavior to demonstrating good citizenship by addressing unmet non-economic needs of society.
What are some reasons why the exercise of corporate social responsibility and corporate citizenship is good business?
1. It generates internal benefits (particularly concerning employee recruiting, workforce retention, and training costs).
2. It reduces the risk of reputation-damaging incidents and can lead to increased buyer patronage.
3. It is in the best interest of shareholders: (a) by helping to avoid legal and regulatory actions that could prove costly and otherwise burdensome, and (b) studies show that there is a positive correlation between corporate citizenship and corporate financial performance.
What is related and unrelated diversification?
Related Diversification - value chain mergers/acquisitions that allow the company to perform better under the same corporate umbrella than they would separately.

Unrelated Diversification - mergers/acquisitions in which their respective value chains are so dissimilar that no competitively valuable cross-business relationships are present.
How does related diversification generate value for shareholders?
* Transfer skills and capabilities from one business to another.
* Share facilities or resources to reduce costs.
* Leverage use of a common brand name.
* Combine resources to create new strengths and capabilities.
What is meant by cross-business strategic fits?
Ex: a cable operator that diversifies as a broadband provider can use the same customer data network, the same customer call centers and local offices, and the same accounting systems.
How does unrelated diversification generate value for shareholders?
* Spread risks across completely different businesses.
* Build shareholder value by doing a superior job of choosing businesses to diversify into and of managing the whole collection of businesses in the company's portfolio.
What are some disadvantages of unrelated diversification?
* Very demanding managerial requirements
* Limited competitive advantage potential
How are industry attractiveness and business strength scores developed?
1. Select measures
2. Assign weights to each measure (must add up to 1.0 total)
3. Score each measure 1-10 and then multiply it by the weight
4. add up all the weighted values to find a total score
What is a Nine-Cell Industry Attractiveness-Competitive Strength Matrix?
A portrait of the strategic positions of each business in a diversified company. It is recommended that resources be concentrated on businesses that enjoy higher degrees of attractiveness and competitive strength, being selective when investing in businesses with intermediate positions, and withdrawing resources from businesses that are lower in attractiveness and strength.
When do low-cost leadership strategies tend to be most successful?
1. When price competition among rival sellers is especially vigorous.
2. The products of rival sellers are essentially identical and are readily available from several sellers.
3. There are few ways to achieve product differentiation.
4. Buyers incur low switching costs
5. The majority of industry sales are made to a few, large volume buyers.
6. Industry newcomers use introductory low prices to attract buyers and build a customer base - The low-cost leader can cut prices to make it harder for them
When do differentiation strategies tend to be the most successful?
1. Buyer needs and uses of the product are diverse
2. There are many ways to differentiate the product or service that have value to buyers
3. Few rival firms are following a similar differentiation approach
4. Technological change is fast-paced and competition revolves around rapidly evolving product features
What is the difference between a broad and a focused strategy?
A broad strategy looks to appeal to a broad spectrum of buyers. A focused strategy concentrates on a narrow buyer segment (or niche) and out-competes rivals either in price or attributes.
Discuss Porter's Five Forces Model.
Porter's five competitive forces, as well as factors that increase their power are as follows:
1. Buyer - low switching costs, low number of buyers, weak demand, informed buyers, backward integration
2. Substitutes - few readily available/attractively priced, quality is not comparable, high switching costs
3. Suppliers - item is unique, high switching costs, inputs in short supply, supplier has lots of other customers
4. Potential New Entrants - economies of scale, major resources/distribution networks, or capital requirements not required; low brand preferences/customer loyalty; low regulatory restrictions; incumbent obstacles
5. Rivalry Among Competitors - members are active, demand is growing, competitors have excess inventory, many new rivals, weak differentiation, low switching costs
What are industry driving forces?
Driving forces are the major underlying causes of change in industry and competitive conditions. They include:
1. Changes in the long-term industry growth rate
2. Increased globalization
3. Emerging new Internet capabilities and applications
4. Changes in who buys the product and how they use it
5. Product innovation
6. Technological change and manufacturing process innovation
7. Marketing innovation
8. Entry or exit of major firms
9. Diffusion of technical know-how across more companies and more countries
10. Changes in cost and efficiency
11. Growing buyer preferences for more differentiated or more standardized products
12. Gov't regulation changes
13. Changing societal concerns, attitudes, and lifestyles
What are key success factors?
Key success factors are the product attributes, competencies, competitive capabilities, or intangible asses with the greatest impact on future success in the marketplace.
What is the difference between a competence, a core competence, and a distinctive competence?
Competence - an activity that a company performs well

Core Competence - a competitively important activity that a company performs better than other internal activities

Distinctive Competence - a competitively important activity that a company performs better than its rivals -- therefore offering the potential for competitive advantage
How is a SWOT analysis used in strategy making?
1. Drawing conclusions from the SWOT listings about the company's overall situation.

2. Matching the company's strategy to its resource strengths and market opportunities, correcting problematic weaknesses, and defending against worrisome external threats.
What are the benefits of an effective strategic vision?
1. It crystallizes senior executives' own views about the firm's long-term direction.
2. It reduces the risk of rudderless decision making by management at all levels.
3. It is a tool for winning the support of employees to help make the vision a reality.
4. It provides a beacon for lower-level managers in forming departmental missions.
5. It helps an organization prepare for the future.
What are the characteristics of effectively written goals/objectives?
1. Quantifiable
2. Measurable
3. Deadline for achievement
4. Challenging, yet achievable
What is the difference between strategic vs. financial goals/objectives and which is more important?
Strategic objectives are related to a company's marketing standing and competitive vitality. They are leading indicators of a company's future financial performance and business prospects.

Financial objectives communicate management's targets for financial performance. However, they are lagging indicators that reflect the results of past decisions and organization activities.

The best and most reliable predictors of a company's success in the marketplace and future financial performance are strategic objectives.
Explain multi-domestic, global, and transnational strategies.
Multi-domestic: think-local, act local

Global: think global, act global

Transnational: think-global, act local
What must a company do to be a successful low-cost leader?
They have to develop a cost-conscious corporate culture that scrutinizes each step in the production process and eliminates any nonessential steps or low-value activities. They normally operate with small staff and limited perks/frills for executives. They also use benchmarking to keep costs low. They usually don't skimp on investing in resources that promise to drive down costs in the long-run (such as Walmart's state-of-the-art distribution system).
What are some of the mistakes that managers can make when following the low-cost strategy?
1. Getting carried away with overly aggressive price cutting and ending up with lower, rather than higher, profitablity.
2. Relying on an approach to reduce costs that can be easily copied by rivals.
3. Reducing costs so much that the product ends up being too features-poor to gain interest of buyers.
4. Misreading buyer price sensitivity.
What must a company do to be successful using a differentiation strategy?
They must study buyers' needs and behavior to learn what they think has value and are willing to pay for, then include these desirable features to clearly set itself apart from rivals lacking such attributes. As a rule, differentiation yields a longer-lasting and more profitable competitive advantage when it is based on product innovation, technical superiority, product quality and reliability, comprehensive customer service, and unique competitive capabilities.
When do differentiation strategies fail?
1. The product or service is easily copied
2. The product exceeds buyers needs or they find little value in its unique attributes
3. Overspending on efforts to differentiate
4. Charging too high a price premium
5. Not opening a large enough gap in quality or service compared to rivals (tiny differences may not be important enough to buyers)