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129 Cards in this Set
- Front
- Back
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Location Economies |
economic benefits that arise from performing a value creation activity in the optimal location for that activity (p. 149) |
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Universal Needs |
needs arising from the similar, if not identical, tastes and preferences of consumers in different nations (p. 154) |
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Global Standardization Strategy |
a strategy that focuses on increasing profitability by reaping the cost reductions derived from economies of scale and location economies (p. 156) |
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Localization Strategy |
a strategy that focuses on increasing profitability by customizing the company’s goods or services so that they provide a good match to tastes and preferences in different national markets (p. 157) |
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Transnational Strategy
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a strategy in which firms try to simultaneously achieve low costs, differentiate the product offering across geographic markets, and foster a flow of skills among different subsidiaries in the company’s global network of operations (p. 159) |
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International Strategy |
a strategy in which firms try to centralize product development functions such as R&D at home but establish manufacturing and marketing functions in each major country or geographic region in which they do business (p. 160) |
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International Licensing |
an arrangement whereby a foreign licensee buys the rights to produce a company’s product in the licensee’s country for a negotiated fee (p. 162) |
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Franchising |
a specialized form of licensing in which the franchiser sells the franchisee intangible property (normally a trademark) and insists that the franchisee agree to abide by strict rules about how it does business (p. 163) |
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Joint Venture |
a separate corporate entity in which two or more companies have an ownership stake (p. 164) |
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Wholly Owned Subsidiary |
a subsidiary where the parent company owns 100% of the subsidiary’s stock (p. 165) |
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Concentration on a Single Industry |
the strategy a company adopts when it focuses its resources and capabilities on competing successfully within a particular product market (p. 173) |
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Horizontal Integration |
acquiring or merging within industry competitors to achieve the competitive advantages that come with large size (p. 174) |
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Acquisition |
a company’s use of capital such as stock, debt, or cash to purchase another company (p. 174) |
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Merger |
an agreement between two companies to pool their operations and create a new business entity (p. 174) |
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Product Bundling |
the strategy of offering customers the opportunity to buy a complete range of products at a single, combined price (p. 177) |
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Virtual Corporation |
a company that outsources most of its functional activities and focuses on one or a few core value chain functions (p. 179) |
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Vertical Integration |
a strategy in which a company expands its operations either backward into industries that produce inputs for its core products (backward vertical integration) or forward into industries that use, distribute, or sell its products (forward vertical integration) (p. 180) • Backward and Forward Vertical Integration |
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Specialized Asset |
a value creation tool that is designed to perform a specific set of activities and whose value creation potential is significantly lower in its next-best use (p. 182) |
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Diversification |
the process of entering into one or more industries that are distinct or different from a company’s core or original industry to find ways to use the company’s distinctive competencies to increase the value to its customers of the products it offers in those industries (p. 187) |
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Diversified Company |
a company that operates in two or more industries to find ways to increase long-run profitability (p. 187) |
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Acquisition and Restructuring Strategy |
a strategy in which a company acquires inefficient and poorly managed enterprises and creates value by putting a superior internal governance structure in place and restructuring the operating systems to improve performance of the acquired companies (p. 188) |
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Related Diversification |
the strategy of operating a business unit in a new industry that is related to a company’s existing business units through some commonality in their value chains (p. 192) |
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Unrelated Diversification |
the strategy of operating a business unit in a new industry that has no value chain connection with a company’s existing business units (p. 192) |
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Diversification Discount |
hen stock in highly diversified companies is assigned a lower market valuation than stock in less diversified companies (p. 193) |
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Divestment |
the sale a business unit to the highest bidder (p. 194) |
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Spinoff |
the sale of a business unit to another company or to independent investors (p. 194) |
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Harvest Strategy |
the halting of investment in a business unit to maximize short-to- medium-term cash flow from that unit (p. 194) |
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Liquidation Strategy |
the shutting down of the operations of a business unit and the sale of its assets (p. 194) |
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Strategic Change |
the movement of a company away from its present state toward some desired future state to increase its competitive advantage and profitability (p. 201) |
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Reengineering |
a process whereby, in their effort to boost company performance, managers focus not on the company’s functional activities but on the business processes underlying its value creation operations (p. 201) |
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Business Process |
any business activity, such as order processing, inventory control, or product design, that is vital to delivering goods and services to customers quickly or that promotes high quality or low costs (p. 201) |
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Internal New Venture |
a company’s creation of the value chain functions necessary to start a new business from scratch (p. 208) |
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Acquisition |
the purchase of one company by another (p. 212) |
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Strategic Alliance |
a cooperative agreement between two or more companies to work together and share resources to achieve a common business objective (p. 215) |
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Joint Venture |
a formal type of strategic alliance in which two companies jointly create a new, separate company to enter a new product market or industry (p. 215) |
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Organizational Design |
the process through which managers select the combination of organizational structure and control systems that they believe will enable the company to create and sustain a competitive advantage (p. 227) |
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Differentiation |
the way in which a company allocates people and resources to organizational tasks and divides them into functions and divisions so as to create value (p. 228) |
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Vertical Differentiation |
the process by which strategic managers choose how to distribute decision-making authority over value creation activities in an organization (p. 228) |
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Horizontal Differentiation |
the process by which strategic managers choose how to divide people and tasks into functions and divisions to increase their ability to create value (p. 228) |
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Integration |
the means a company uses to coordinate people, functions, and divisions to accomplish organizational tasks (p. 228) |
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Span of Control |
the number of subordinates a manager directly manages (p. 229) |
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Flat Structure |
a structure with few hierarchical levels and a relatively wide span of control (p. 229) |
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Tall Structure |
a structure with many hierarchical levels and a relatively narrow span of control (p. 229) |
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Principles of the Minimum Chain of Command |
the principle that managers should choose a hierarchy with the minimum number of levels of authority necessary to achieve its strategy (p. 231) |
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Functional Structure |
a structure in which people are grouped on the basis of their common expertise and experience or because they use the same resources (p. 234) |
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Matrix Structure |
a structure in which functional managers work with project managers in temporary teams to develop new products (p. 241) |
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Operating Responsibility |
in the multidivisional structure, the responsibility of divisional managers for the day-to-day operations of their divisions (p. 241) |
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Strategic Responsibility |
in the multidivisional structure, responsibility of managers at corporate headquarters for overseeing long-term plans and providing guidance for divisional managers (p. 241) |
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Transfer Pricing |
establishment of the prices at which the products produced by one business unit are sold to other company owned business units (p. 243) |
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Organizational Control |
the process by which managers monitor the ongoing activities of an organization and its members to valuate whether activities are being performed efficiently and effectively and to take corrective action to improve performance if they are not (p. 247) |
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Strategic Control Systems |
the formal target-setting, measurement, and feedback systems that enable strategic managers to valuate whether a company is implementing its strategy successfully (p. 248) |
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Output Control |
a system of control in which strategic managers estimate or forecast appropriate performance goals for each division, department, and employee and then measure actual performance relative to these goals (p. 251) |
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Behavior Control |
a system of control based on the establishment of a comprehensive system of rules and procedures to direct the actions or behavior of divisions, functions, and individuals (p. 252) |
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Operating Budget |
a blueprint that states how managers intend to use organizational goals most efficiently (p. 252) |
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Standardization |
the degree to which a company specifies how decisions are to be made so that employees’ behavior becomes predictable (p. 253) |
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Organizational Culture |
the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization (p. 254) |
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Organizational Values |
beliefs and ideas about what kinds of goals members of an organization should pursue and what behaviors they should use to achieve these goals (p. 254) |
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Organizational Norms |
unwritten guidelines or expectations that prescribe the kinds of behavior employees should adopt in particular situations and regulate the way they behave (p. 254) |
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Multinational Company |
a company that does business in two or more national markets |
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Cost Economies |
a company can realize cost savings from economies of scale by – spreading fixed costs, setting up production facilities over global sales volume, serving a global market to utilize production facilities more intensively, bargaining down cost of inputs with suppliers, increasing sales volume more rapidly (See Lecture 13) |
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Location Economies |
economic benefits that arise from performing a value creation activity in an optimal location |
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Global Standardization Strategy |
business model used on pursuing a low-cost strategy on a global scale; companies market a standardized product worldwide to reap maximum benefit from economies of scale; most appropriate when... Pressure for Cost Reductions – High Demand for Local Responsiveness – Low |
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Localization Strategy |
focuses on increasing profitability by customizing a company’s goods; most appropriately used when... Pressures for Cost Reductions – Low Demand for Local Responsiveness – High |
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Transnational Strategy |
simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between global subsidiaries; difficult to pursue due to conflicting demands Pressures for Cost Reductions – High Demand for Local Responsiveness – High |
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International Strategy |
when companies establish manufacturing and marketing functions in each major country they do business in; local customization of product offering and marketing strategy is limited in scope; most appropriate when product serves universal needs and companies are not confronted with cost pressures Pressures for Cost Reductions – Low Demand for Local Responsiveness – Low |
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Exporting |
manufacturing the product in a centralized location and then exporting it to other national markets |
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Licensing |
licensees purchase the rights to produce a company’s product in their country for a negotiated fee |
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Franchising |
specialized form of licensing in which the franchiser expects the franchisee to abide by rules governing how it does business |
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50/50 Venture |
most typical form of a joint venture |
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Wholly Owned Subsidiary |
parent company owns one hundred percent of the subsidiary’s stock |
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Global Strategic Alliances |
cooperative agreements between companies from different countries that are actual or potential competitors |
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Opportunism |
seeking one’s own self-interest, through guile |
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Relational Capital |
interpersonal relationships between the firms’ managers |
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Corporate Level Strategies |
chosen to promote the success of a company’s business-level strategies • Multibusiness Model – See Lecture 15 |
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Acquisition |
company uses its capital resources to purchase another company |
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Merger |
agreement between two companies to pool their resources and operations and join together to better compete in a business or industry |
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Horizontal Integration |
acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope of operations |
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Vertical Integration: : : : |
when a company expands its operations either backwards or forwards into an industry |
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Backward Vertical Integration |
produces inputs for the company’s products |
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Forward Vertical Integration |
uses, distributes, or sells the company’s products |
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Vertical Disintegration: |
when a company decides to exit industries either forward or backward in the industry value chain to its core industry to increase profitability |
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Competitive Bidding Strategy |
Independent component suppliers compete to be chosen to supply a particular component |
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Short Term Contracts: |
last for a year or less; does not result in specialized investments; signals a lack of long-term commitment to suppliers |
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Strategic Alliances |
long-term agreements between two or more companies to jointly develop new products or processes |
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Hostage Taking |
means of exchanging valuable resources to guarantee that each partner to an agreement will keep its side of the bargain |
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Credible Commitment |
believable promise or pledge to support the development of a long-term relationship between companies |
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Strategic Outsourcing |
decision to allow one or more of a company’s value chain activities to be performed by independent, specialist companies |
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Virtual Corporation |
companies pursued extensive strategic outsourcing to the extent that they only perform the central value creation functions that lead to competitive advantage |
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Holdup |
risk that a company will become too dependent upon the specialist provider of an outsourced activity; a risk of outsourcing |
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Transferring Competencies |
taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry |
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Commonality |
Skill or competency that when shared by two or more business units allows them to operate more effectively and create more value for customers |
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Leveraging Competencies |
taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry |
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Economies of Scope |
synergies that arise when one or more of a diversified company’s business units are able to lower costs or increase differentiation; more effectively pool, share, and utilize expensive resources or capabilities |
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Product Bundling |
providing products that are connected to each other together |
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General Organizational Competencies |
help business units within a company perform at a higher level than it could if it operated as a separate or independent company; results from the skills of a company’s top managers Types: Entrepreneurial capabilities, organizational design capabilities, and strategic capabilities Superior Strategic Management Capabilities |
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Organizational Design Skills |
ability of the managers to create a structure, culture, and control systems that motivate and coordinate employees to perform at a high level |
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Turnaround Strategy |
managers of a diversified company identify inefficient and poorly managed companies in other industries |
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Related Diversification |
corporate-level strategy based on the goal of establishing a business unit in a new industry related to a company’s existing business units... by some form of commonality or linkage between their value chain functions |
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Unrelated Diversification |
corporate-level strategy that uses general organizational competencies to increase the performance of all the company’s business units • Conglomerates – companies pursuing unrelated diversification |
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Internal Capital Market |
corporate-level strategy whereby the firm’s headquarters assesses the performance of business units and allocates money across them |
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Bureaucratic Costs |
costs associated with solving the transaction difficulties between business units and corporate headquarters |
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Internal New Venturing |
transferring resources and creating a new business unit in a new industry to innovate new kinds of products |
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Acquisition |
principal way companies enter new industries to pursue vertical integration and diversification |
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Joint Ventures |
two or more companies agree to pool their resources to create new business; allows a company to share the risks and costs associated with establishing a business unit |
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Restructuring |
reorganizing and divesting business units and exiting industries to refocus upon a company’s core business and rebuild its distinctive competencies |
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Organizational Design |
process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully |
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Organizational Structure |
means through which a company assigns employees to specific tasks and roles that are linked together to increase: • Efficiency, quality, innovation, and responsiveness to customers |
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Control System |
provides managers with incentives for employees as well as feedback on how the company performs |
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Function |
collection of people who work together and perform the same types of tasks |
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Division |
way of grouping functions to allow an organization to better produce and transfer its goods and services to customers |
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Handoffs |
transfers among people, functions, and subunits |
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Hierarchy of Authority |
clear and unambiguous chain of command that defines each manager’s relative authority |
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Span of Control |
number of subordinates reporting directly to a particular manager |
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Teams |
formation of a group that represents each division or department – facing a common problem or with a goal of finding a solution to the problem |
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Strategic Control Systems |
mechanism that allows managers to monitor and evaluate whether their business model is working as intended and how their business model could be improved |
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Personal Control |
way one manager shapes and influences the behavior of another in a face-to-face interaction in the pursuit of a company’s goals |
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Output Control |
establishes performance goals and then measures performance relative to these goals |
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Behavior Control |
establishes comprehensive system of rules that specify the appropriate behavior through – operating budget, standardization, rules and procedures |
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Organizational Culture |
specific collection of values, norms, beliefs, and attitudes that – are shared by people and groups in an organization and control the way people interact with each other and with stakeholders outside the organization |
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Organizational Socialization |
describes how people learn organizational culture |
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Functional Structure |
grouping of employees on the basis of their common expertise and experience or because they use the same resources |
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Management by Objectives |
employees are encouraged to help set their own goals; managers manage by exception, intervening only when something goes wrong |
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Multidivisional Structure |
allows a company to grow and diversify while reducing coordination and control problems; uses self-contained divisions and has a separate corporate headquarters staff |
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Self-Contained Division |
independent business unit or division that contains all the value-chain functions it needs to pursue its business model successfully |
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Corporate Headquarters Staff |
team of top executives and their support staff who are responsible for: overseeing a company’s long-term multibusiness model, and providing guidance to increase the value created by the company’s self-contained divisions |
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Profit Center |
each self-contained division is treated as a separate financial unit and financial controls are used to establish its performance goals and measure profitability |
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Organizational Slack |
unproductive use of functional resources by divisional managers that go undetected unless corporate manager monitor their activities |
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Transfer Pricing |
problem of establishing the fair price of a resource or skill developed in one division that is to be sold to another division |
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Attributes that determine the national competitive advantage in a global market |
