Business Strategy Test #2

Front 1

Creating and sustaining competitive advantage is the goal of ______ strategy

Back 1

business-level

Front 2

Business-level strategy deals with: ______, ______, and ______.

Back 2

who, what, how

Front 3

Questions business-level strategy addresses:
- ______ are our customers?
- What unfulfilled ______ do they have?
- How can we use our ______ to satisfy those needs in ways that are ______, ______, difficult to ______, and non-______?

Back 3

- Who
- needs
- capabilities, valuable, rare, imitate, substitutable

Front 4

Why do some firms outperform others and enjoy this advantage over time? {business-level}
Resource-based capabilities that are:
- ______
- ______
- Difficult to ______
- Non-______

Back 4

- Valuable
- Rare
- imitate
- substitutable

Front 5

Specific avenues for creating and sustaining competitive advantage {business-level strategy}
- Business ______ and ______
- Answering the ______ question: Precisely defining and pursuing your target market
- Answering the ______ question: Precisely defining the needs of the customers in that market

Back 5

- definition, positioning
- who
- what

Front 6

Answering the who and what questions: {business-level}
Ex: Harley-Davidson: clear market ______ and ______ of those in that market
- Distinctive business definition: "wild one" image
- Trademarked the term hog
- Attempted to trademark "Harley sound"

Back 6

definition, needs

Front 7

Answering the who and what questions: {business-level}
- Unintended consequences of one firm's response
- Ex: Coors
- ______ distribution diluted its image
- Distinction as ______ brewer, available only in the West, disappeared

Back 7

- National
- regional

Front 8

Answering the how question: {business-level}
- ______ shall we compete? or On what ______ shall we compete?
- 2 ways: 1. ______, 2. ______

Back 8

- How, basis
- 1. overall-cost leadership, 2. broad market appeal or focused

Front 9

Answering the how question: {business-level}
- ______ (low-cost leader) or ______: basis of competitive advantage

Back 9

overall cost-leadership, differentiator

Front 10

When answering the how question {business-level}, what type of strategy is the basis of competitive advantage?

Back 10

overall cost-leadership (low-cost leader) or differentiator

Front 11

When answering the how question {business-level}, what type of strategy deals with competitive scope?

Back 11

Broad market appeal or focused (niche)

Front 12

The key questions of business level strategy formulation:
1. ______ are our customers?
2. ______ are their needs?
3. ______ can we use our capabilities to satisfy those needs?

Back 12

Who, What, How

Front 13

Creating and sustaining competitive advantage in individual, specific product market or business is the definition of ______ strategy.

Back 13

business-level

Front 14

Business-level strategy deals with setting the firm apart in specific ______ or ______

Back 14

product market, business

Front 15

Business level strategy looks at strategy as ______.

Back 15

positioning

Front 16

What is business-level strategy?
- Can be described using ______ business-level strategies:
- Well-rounded ______ strategies built around several strengths
- ______, ______, and ______

Back 16

- generic
- generalized
- overall cost leadership, differentiation, focus

Front 17

Types of generic business level strategies:
- ______: creating low-cost position relative to firm's peers
- ______: offering products and services that are unique and valued
- ______: targeting narrow product lines, buyer segments, or geographic markets (niche)

Back 17

- overall cost leadership
- differentiation
- focus

Front 18

A generic business level strategy where a firm is the lowest cost producer relative to competitors while maintaining product features that customers value

Back 18

overall cost leadership

Front 19

An firm pursuing an overall cost leadership {business-level} strategy typically produces a no-frills product or service to broad market using ______ to derive greatest benefits from economies of ______ and ______

Back 19

standardization, scale, learning

Front 20

With a(n) ______ {business-level} strategy, there is a continuous drive to lower costs through capital investment, control of production costs and overhead as well as costs of sales, service, and R&D.

Back 20

overall cost leadership

Front 21

There is a parity on ______ with overall cost leadership: including features acceptable to customers. {business-level}

Back 21

differentiation

Front 22

What is an example of an overall cost leader? {business-level}

Back 22

Walmart

Front 23

A source of low cost leadership {business-level}
- Reduction in variable costs due to firm's cumulative experience is known as a(n) ______ curve.

Back 23

experience

Front 24

A source of low cost leadership {business-level}:
- ______ - reduction in average (per unit) total cost from spreading total costs over larger number of units

Back 24

economies of scale

Front 25

Decline in unit costs resulting from learning is the definition of an ______ curve. {business-level}

Back 25

experience

Front 26

Production ______ fall under the experience curve {business-level}.

Back 26

innovations

Front 27

Increasing demand (if demand is price elastic) by cutting price ______ of the experience curve {business-level}

Back 27

ahead

Front 28

Concerning an experience curve, if first to market, may produce sustained ______. {business-level}

Back 28

competitive advantage

Front 29

Key differences between experience curve and economies of scale:
- Graphs show similar shape, but ______ driving that shape differ.
- Experience curve results from cumulative ______, whereas
- Economies of scale (size) result from high volume ______
{business-level}

Back 29

- relationships
- learning
- production

Front 30

Overall cost leadership may uniquely position a firm within its industry allowing some protection from the ______. {business-level}

Back 30

five forces

Front 31

Overall cost leadership and the five competitive forces:
- Rivalry with existing competitors:
* existing rivals hesitate to compete on ______
* may not survive a price ______
{business-level}

Back 31

price
war

Front 32

Overall cost leadership and the five competitive forces:
- Bargaining power of suppliers
* Can more easily absorb price increases from suppliers due to ______ structure
* May force suppliers to hold down prices due to ______ purchasing
{business-level}

Back 32

low-cost
volume

Front 33

Overall cost leadership and the five competitive forces:
- Bargaining power of buyers
* Forcing prices too ______ may force cost leader out of industry
- Increases power of next-most-efficient competitor, which has higher ______
- i.e., not in buyers' best interests to force prices too low eliminating firms' competitors and creating ______ conditions
{business-level}

Back 33

low
costs
monopolistic

Front 34

Overall cost leadership and the five competitive forces:
- Threat of substitutes
* Advantageous cost position may insulate from substitutes, which generally are also low ______ and lower ______

- Threat of new entrants
* ______ and established supply chain relationships can be effective entry barriers
{business-level}

Back 34

- cost, priced

- Economies of scale

Front 35

Competitive risks of overall cost leadership strategy:
- Vulnerable to intense ______ competition
- ______ of equipment, processes
- Over emphasis on ______ may result in overlooking customer needs
- Low price may cement customer ______ making subsequent price increases difficult
{business-level}

Back 35

- price
- Obsolescence
- costs
- expectations

Front 36

Continuous development of and investment in features that differentiate products in ways that customers value (without ignoring costs} is the definition of a ______ strategy.
[business-level}

Back 36

differentiation

Front 37

With a differentiation strategy, there are nearly infinite ways of ______ (unusual features, service, innovations, prestige, design, etc.).
{business-level}

Back 37

differentiating

Front 38

For a differentiation strategy to be successful, customers must:
1. ______ the differences and
2. be willing to ______ for them (perceive value in the differences)
* Customers who perceive value in these differences tend to be relatively price ______
{business-level}

Back 38

1. perceive
2. pay
*insensitive

Front 39

Examples of differentiators?
{business-level}

Back 39

- Lexus: "relentless pursuit of perfection"
- Louis Vuitton
- Polo Ralph Lauren

Front 40

Rivalry with existing competitors
- Relationship between brand ______ and price ______ insulates from competition
- ______ of differentiated products insulates from competition
{differentiation and competitive forces}
{business-level}

Back 40

- loyalty, insensitivity
- Uniqueness

Front 41

Bargaining power of buyers: buyers lack comparable ______ and are therefore ______ price sensitive
{differentiation and competitive forces}
{business-level}

Back 41

alternatives, less

Front 42

Bargaining power of suppliers:
- ______ margins insulate from ______ pressure of suppliers
- ______ costs may be passed on to buyers
{differentiation and competitive forces}
{business-level}

Back 42

- High, pricing
- Increased

Front 43

Threat of new entrants: customer ______ and product ______ present entry barriers (______ costs)
{differentiation and competitive forces}
{business-level}

Back 43

loyalty, uniqueness, switching

Front 44

Product substitutes: ______ and ______ features reduce attractiveness of substitutes
{differentiation and competitive forces}
{business-level}

Back 44

loyalty, unique

Front 45

Competitive risks of differentiation:
- Customers may consider ______ differential too high
- ______ of differentiation may wear off
- ______ by buyers can narrow perceptions of product ______
- ______: especially from foreign competition
{business-level}

Back 45

- price
- Value
- Learning, uniqueness
- Counterfeiting

Front 46

Competitive risks of differentiation:
- Too ______ differentiation (ex: Mercedes-Benz S-Class car: "functions nobody needed and nobody knew how to use")
- ______ of differentiation wears off (ex: Hard Rock Café, Krispy Kreme)
{business-level}

Back 46

- much
- Value

Front 47

A ______ strategy has a narrow competitive scope within industry; similar to "niche marketing"
{business-level}

Back 47

focus

Front 48

Two variants of a focus strategy:
- ______ focus: cost advantage in target market
- ______ focus: differentiation in target market
{business-level}

Back 48

- Cost
- Differentiation

Front 49

Examples of ______ focusers:
- Network Appliance
- Ikea (Ikea is moving toward broader market)
{business-level}

Back 49

Cost

Front 50

Examples of ______ focusers:
- Bessemer Trust
- New Balance
- Maserati
{business-level}

Back 50

Differentiation

Front 51

Focus and competitive forces:
- Potentially ______ rivalry and ______ bargaining power
- Established market presence ______ entry barriers
- Often the domain of ______ business which is often better equipped to serve focused markets
{business-level}

Back 51

- less, lower
- increases
- small

Front 52

Competitive risks of focus strategies:
- Erosion of cost ______ in target segment
- Vulnerable to ______ from competitors and to threat of ______ entrants
- ______ focus (too narrow a focus)
- Being ______ focused by a competitor (ex: Big Dog and Harley)
{business-level}

Back 52

- advantages
- imitation, new
- Over
- out

Front 53

Combining strategies: integrating overall cost leadership and differentiation:
- Providing ______ value ______
- Generally ______ difficult to imitate
- Successful combination of both strategies provides two sources of value:
* ______ attributes
* ______ prices
{business-level}

Back 53

- unique, efficiently
- more
* Differentiated
* Lower

Front 54

There are three approaches to combining overall cost leadership and differentiation:
- ______ and ______ manufacturing systems can lead to "mass customization"
- Exploiting ______ pool by offering ______ products
- Extending ______ along the supply chain (Ex: Wal-Mart's supplier links and in-house transportation system)
{business-level}

Back 54

- Automated, flexible
- profit, complementary
- value

Front 55

Competitive risks of combining overall cost leadership and differentiation
- Attaining ______ strategy and becoming instead "stuck in the ______"
- Challenges of coordinating ______-creating activities in the extended value chain
- Inaccurate assessment of sources of ______ and ______ pools in industry
{business-level}

Back 55

- neither, middle
- value
- revenues, profit

Front 56

Competing in specific, individual product markets is the definition of ______-level strategy.
{business-level}

Back 56

business

Front 57

What are the three business level strategies?
1.
2.
3.
*
*
{business-level}

Back 57

1. Overall cost leadership
2. Differentiation
3. Focus
* Cost focus
* Differentiation focus

Front 58

Industry life cycle:
- Industries ______ over time
- Four distinct phases: ______, ______, ______, ______
- ______ creating activities may vary with stage of life cycle
{business-level}

Back 58

- evolve
- introduction, growth, maturity, decline
- Value

Front 59

Characteristics of the introduction phase of the industry life cycle:
- ______ growth
- ______ prices
- ______ know-how in rare supply, source of temporary advantage
- May result from one firm's ______ (ex: Apple, Hoover, Xerox)
{business-level}

Back 59

- Slow
- High
- Technical
- innovation

Front 60

Growth stage of the industry life cycle:
- ______-time use expands rapidly
- ______ begin to fall
- Diffusion of ______ know-how increases threat of new entrants
- Rapid growth means ______ competitive pressure
{business-level}

Back 60

- First
- Prices
- technical
- low

Front 61

Maturity stage of the industry life cycle:
- Demand driven by ______ not first time adoption
- Competition for market shares drives ______ prices
- Firms strive to reduce ______, build brand ______
- Industry ______ (mergers & acquisitions)
{business-level}

Back 61

-replacements
- down
- costs, loyalty
- consolidation

Front 62

Decline phase of the industry life cycle:
- ______ growth (changes in technology, social tastes/preferences, demographics, international competition)
- Increased ______
- Excess ______, ______ barriers lead to ______ competition
{business-level}

Back 62

- Negative
- Increased
- capacity, exit, price

Front 63

In the introduction phase of the industry life cycle, ______ is the generic strategy used, the market growth rate is ______, the number of segments is very ______, the intensity of competition is ______, and the emphasis on product design is very ______.
{business-level}

Back 63

differentiation, low, few, low, high

Front 64

In the growth phase of the industry life cycle, ______ is the generic strategy used, the market growth rate is very ______, the number of segments is ______, the intensity of competition is ______, and the emphasis on product design is ______.
{business-level}

Back 64

differentiation, large, some, increasing, high

Front 65

In the maturity phase of the industry life cycle, ______/______ is the generic strategy used, the market growth rate is______ to ______, the number of segments is ______, the intensity of competition is very ______, and the emphasis on product design is ______ to ______.
{business-level}

Back 65

differentiation/overall cost leadership, low to moderate, many, intense, low to moderate

Front 66

In the maturity phase of the industry life cycle, ______/______ is the generic strategy used, the market growth rate is______, the number of segments is ______, the intensity of competition is ______, and the emphasis on product design is ______.
{business-level}

Back 66

overall cost leadership/focus, negative, few, changing, low

Front 67

In the introduction phase of the industry life cycle, the emphasis on process design is ______, the major functional area(s) of concern are ______ and ______, and the overall objective is to increase market ______ awareness.
{business-level}

Back 67

low, research and development, share

Front 68

In the introduction phase of the industry life cycle, the emphasis on process design is ______ to ______, the major functional area(s) of concern are ______ and ______, and the overall objective is to create consumer ______.
{business-level}

Back 68

low to moderate, sales and marketing, demand

Front 69

In the maturity phase of the industry life cycle, the emphasis on process design is ______ , the major functional area of concern is ______, and the overall objective is to defend market ______ and extend product ______ cycles.
{business-level}

Back 69

high, production, share, life

Front 70

In the decline phase of the industry life cycle, the emphasis on process design is ______ , the major functional area(s) of concern are ______ and ______, and the overall objective is to ______ , maintain, harvest, or ______ .
{business-level}

Back 70

low, general management and finance, consolidate, exit

Front 71

Innovation and sustaining competitive advantage-
Limitations of current discussion:
1. Suggests that competitive advantage is relatively ______ (It is not.)
2. Industry life cycle stages are neither ______ nor ______ and can ______ themselves.
{business-level}

Back 71

1. enduring
2. gradual, predictable, repeat

Front 72

Innovation and sustaining competitive advantage
- Innovations can lead to rapid ______ in stages
- sustaining innovations: usually by industry ______ that reinforce market position
- Destructive innovations:
* Typically come from ______ the industry
* Often appeal to customers not currently served by industry
{business-level}

Back 72

- changes
- incumbents
* outside

Front 73

Business-level strategy looks at competing in ______ markets and the use of ______ strategies.

Back 73

specific, generic

Front 74

______ life cycle impacts choice of strategies.
{business-level}

Back 74

Industry

Front 75

______ can rapidly destroy competitive positions. {business-level}

Back 75

Innovations

Front 76

Choosing and managing the mix of business is the definition of ______ -level strategy
{corporate-level}

Back 76

corporate

Front 77

Corporate-level strategy concerns two issues:
1. What mix of ______ should the firm compete in?
2. How should these businesses be managed so they create ______ ?
* ______ often fails.
{corporate-level}

Back 77

1. businesses
2. synergy
* Diversification

Front 78

Relationship between Diversification and Performance - which type of diversification provides the peak performance?
{corporate-level}

Back 78

related diversification

Front 79

There are two key alternative approaches to diversification: ______ and ______ .
{corporate-level}

Back 79

related, unrelated

Front 80

Related diversification may create value through:
- ______ activities
- Leveraging core ______
- Pooled ______ power
- ______ integration
{corporate-level}

Back 80

- Sharing
- competencies
- negotiating
- Vertical

Front 81

Unrelated diversification may create value through:
- ______
- Corporate ______
- ______ analysis
{corporate-level}

Back 81

- Restructuring
- parenting
- Portfolio

Front 82

Corporate-level strategy:Overview
- ______ means to achieving diversification
- Real ______ analysis
- Managerial behaviors related to diversification can ______ shareholder value: "growth for growth's sake," egotism, and antitakeover tactics

Back 82

- Multiple
- options
- erode

Front 83

Diversification often ______
- On average, diversification through ______ fails to add to shareholder value
* Average returns of acquisitions for acquiring firms are near ______
* Only 20% of acquisitions may be considered successful
{corporate-level}

Back 83

fails
- acquisition
- zero

Front 84

Making diversification work:
Proper justification for corporate diversification is: ______ .
{corporate-level}

Back 84

synergy

Front 85

The creation of value that is greater than the operation of separate units
{corporate-level}

Back 85

synergy

Front 86

The proper justification for corporate diversification is NOT simply to diversify ______ , which investors can do at less ______ .
{corporate-level}

Back 86

risk, cost

Front 87

Value of diversification should stem from ______ not from ______ diversification.

Back 87

synergies, portfolio

Front 88

______ portfolio diversification distinct from ______ portfolio diversification. Investors diversify risk by building portfolio of ______ . Management is responsible for productive utilization of ______ not strictly risk reduction.
{corporate-level}

Back 88

Corporate, stock, stocks, assets

Front 89

Related diversification deals with economies of ______ and ______ enhancement through: ______ activities and leveraging ______ competencies.
{corporate-level}

Back 89

scope, sharing, core

Front 90

Cost savings (efficiencies) resulting from variety of activities that complement each other (complementarity)
[related diversification]
{corporate-level}

Back 90

economies of scope

Front 91

Complementarities in revenue streams through diversification (ex: buyers may buy more if provided by one supplier)
[related diversification]
{corporate-level}

Back 91

revenue enhancement

Front 92

Leveraging core competencies:
- Using core competencies to enhance customer ______
- Operating in multiple businesses that are related to a firm's core competence: ______ economies
- To be a source of sustained competitive advantage, core competencies must be difficult to ______ or to ______ .
[related diversification]
{corporate-level}

Back 92

- value
- knowledge
- imitate, substitute

Front 93

Sharing tangible activities across business units is known as ______ .
[related diversification]
{corporate-level}

Back 93

sharing activities

Front 94

Firms may share activities through common ______ facilities, ______ systems, or ______ force.
[related diversification]
{corporate-level}

Back 94

manufacturing, distribution, sales

Front 95

The downsides to sharing activities include:
- Increased ______ of coordinating use of common activities by different business units
- Risk of ______ of brands (ex: Gap and Old Navy}
[related diversification]
{corporate-level}

Back 95

- costs
- cannibalization

Front 96

Capacity to operate at lower cost or charge higher price than most other players in an industry
[related diversification]
{corporate-level}

Back 96

market power

Front 97

Related diversification can lead to increased ______ power through: pooled ______ power and ______ integration.
{corporate-level}

Back 97

market, negotiating, vertical

Front 98

Strengthening a firm's position in relation to suppliers and buyers is known as pooled ______ power.
[related diversification]
{corporate-level}

Back 98

negotiating

Front 99

Expanding along firm's supply chain is known as ______ integration. ______ integration is toward the original source of raw materials. ______ integration is toward the ultimate end user, toward "the place where your customers buy your stuff."
[related diversification]
{corporate-level}

Back 99

vertical, Backward, Forward

Front 100

The benefits of vertical integration include:
- Secure supply of ______ or ______ channels
- Control over ______
- Access to new ______ and ______
- Simplified ______ chain support activities
[related diversification]
{corporate-level}

Back 100

- inputs, distribution
- assets
- opportunities, technologies
- value

Front 101

Risks of vertical integration:
- Increased ______ and ______ costs
- Reduced ______
- Unbalanced ______ or ______ along value chain
- Administrative ______ due to increased complexity
[related diversification]
{corporate level}

Back 101

- overhead, capital
- flexibility
- capacity, demand
- overhead

Front 102

Vertical integration: Four issues to consider
1. ______ of current supply chain partners (suppliers and distributors)
2. ______ activities as viable sources of future profits
3. Stability of ______ for firm's products
4. Need for additional ______
[related diversification]
{corporate-level}

Back 102

1. Quality
2. Outsourced
3. demand
4. capacity

Front 103

______ diversification results in financial synergies through parenting and restructuring and through portfolio management.
{corporate-level}

Back 103

Unrelated

Front 104

Corporate ______ and ______ : based on hierarchical relationship between business unit and corporate parent
[unrelated diversification]
{corporate-level}

Back 104

parenting, restructuring

Front 105

Creating value among business units through corporate relationship between parent and business units is known as ______ .
[unrelated diversification]
{corporate-level}

Back 105

corporate parenting

Front 106

Corporate parenting:
- Corporate parent provides:
* improved ______ and ______
* internal ______ market
- Centralized support functions:
* ______ and ______ relations
* ______ management systems
* General ______ functions
[unrelated diversification]
{corporate-level}

Back 106

* budgeting, planning
* capital

* Industry, government
* Human resource
* administrative

Front 107

Corporate parenting:
- Executive management skills at corporate level can provide support for major ______ decisions (ex: acquisitions, divestiture, internal development)
[unrelated diversification]
{corporate-level}

Back 107

strategic

Front 108

Purchasing, reorganizing, and divesting parts of businesses
[unrelated diversification]
{corporate-level}

Back 108

restructuring

Front 109

3 major types of restructuring:
- ______ restructuring: sale of unproductive assets or acquisitions that strengthen core
- ______ restructuring: change in debt-equity mix
- ______ restructuring: changes in composition of top management team, organizational structure, and/or reporting relationships
[unrelated diversification]
{corporate-level}

Back 109

Asset, Capital, Management

Front 110

Corporate portfolio management:
How do managers examine the relationships among business units held by a single firm?
{corporate-level}

Back 110

Several approaches, BCG matrix is one of these

Front 111

Boston Consulting Group (BCG) Matrix:
- y-axis: ______ growth rate
- x-axis: relative ______ share
- Each circle represents one of the firm's ______ units.
- Size of circle represents the relative size of the business unit in terms of ______ .
- High market share implies economies of ______ and ______ effects (cost efficiencies)
{corporate-level}

Back 111

- industry
- market
- business
- revenue
- scale, experience

Front 112

BCG Matrix:
- ______ : high growth potential & high market share
- ______ : low growth potential, but high market share
- ______ : low growth potential & low market share
- ______ : high growth potential, but low market share
{corporate-level}

Back 112

- Stars
- Cash cows
- Dogs
- Question marks

Front 113

BCG Matrix - There are four BCG options for strategic managers:
- ______ market share (invest) with stars and question marks
- ______ market share with cash cows
- ______ (milk) as much short-term cash as possible
- ______ dogs
{corporate-level}

Back 113

- Build
- Hold
- Harvest
- Divest

Front 114

Boston Consulting Group (BCG) Matrix:
- Model is ______ rather than ______
- Observe how business units move through the matrix
- Avoid:
* Over investing in cows while under investing in question marks, thereby trading future opportunities for present ones
* Under investing in stars, allowing others to gain market share
* Over milking the cash cows
{corporate-level}

Back 114

- dynamic, static

Front 115

Limitations of BCG Matrix:
- High ______ does not necessarily imply success.
- ______ often constrained from making such decisions (exit barriers, shareholders other stakeholders, dependence by other units)
{corporate-level}

Back 115

- performance
- Managers

Front 116

Managerial motives for diversification:
- ______ : tends to increase executive compensation
- ______ :
* ______ - irrational, overconfident belief in management abilities
* Maintenance and extension of ______ - control of firm assets
{corporate-level}

Back 116

- Growth
- Ego
* Hubris
* power

Front 117

Managerial motives and organizational control:
- Corporate ______
* Operation of market for corporate control
* Purchase of control by outsiders
- Potential effect of takeovers on existing management
* Loss of power, prestige, job loss
{corporate-level}

Back 117

takeovers

Front 118

Managerial motives for diversification:
- Measures by management to prevent takeovers (antitakeover tactics) or protect themselves from effects of takeovers
* ______
* ______ parachutes
* ______ pills
{corporate-level}

Back 118

- Greenmail
- Golden
- Poison

Front 119

______ thinking characterizes corporate-level strategy decisions.

Back 119

Options

Front 120

Managerial motives for diversification may ______ shareholder wealth while enhancing managerial power, prestige, and pay.
{corporate-level}

Back 120

decrease

Front 121

Selecting and managing the mix of businesses is known as ______-level strategy.

Back 121

corporate

Front 122

Ultimate justification for diversification is increasing value through ______.
{corporate-level}

Back 122

synergy

Front 123

Two types of diversification:
1.
2.
{corporate-level}

Back 123

1. Related
2. Unrelated

Front 124

Related diversification may create value through: leveraging core ______ , ______ activities, pooled ______ power, and ______ integration.
{corporate-level}

Back 124

competencies, sharing, negotiating, vertical

Front 125

Unrelated diversification may create value through:
- ______
- corporate ______
- ______ analysis
{corporate-level}

Back 125

- restructuring
- parenting
- portfolio

Front 126

Diversification is often driven by ______ behaviors rather than firm value considerations.
{corporate-level}

Back 126

managerial

Front 127

Treating diversification as real options affords opportunity to manage ______. {corporate-level}

Back 127

risks

Front 128

Creating value in global markets is the definition of ______ strategy.

Back 128

international

Front 129

International strategy looks at international ______ as strategy, as well as sources of national ______ advantage.

Back 129

diversification, industry

Front 130

International strategy:
- Two opposing strategic forces: ______ reduction and ______ adaptation

Back 130

cost, local

Front 131

International diversification presents opportunities for ______ enhancement:
- Trade across nations to exceed train within nations by 2015
- Markets often dispersed across the globe
- Investment in developing nations
(international strategy}

Back 131

performance

Front 132

Economic ______ across globe persist:
- Latin American incomes grew by 6% in two decades
- Average income declines in Eastern Europe and sub-Saharan Africa
- 1.3 billion people live on less than $1 per day
{international strategy}

Back 132

inequities

Front 133

Economic inequities present opportunities:
- Such populations also have unsatisfied ______
- 2007 Novel peace price awarded to Grameen Bank
* Offers micro loans as low as $20
* Supports investment in such capital expenditures as purchasing a cow
{international strategy}

Back 133

needs

Front 134

Four attributes affect a nation's competitiveness in a particular industry:
1. ______ conditions
2. ______ conditions
3. ______ and ______ industries
4. Firm ______ , ______ , and ______

Back 134

1. Factor
2. Demand
3. Related, supporting
4. strategy, structure, rivalry

Front 135

Factors of production that are industry and firm specific:
- ______
* Skill level, education
- ______
* Transportation systems
* Telecommunications systems
* Banking system
{international strategy}

Back 135

Labor, Infrastructure

Front 136

Demand conditions:
- Customer ______ set performance standards for local firms
- Higher local demand leads local firms to develop ______ advantage
- Strong, trend-setting local market helps local firms anticipate global ______
{international strategy}

Back 136

- expectation
- national
- trends

Front 137

Related and supporting industries:
- Supplying industries
* Enables efficient management of production ______
* Strong supplier base adds ______ efficiency

- Related industries
* Enables ______ within industry
* High probability of new ______ - forces existing firms to become more competitive
{international strategy}

Back 137

* inputs
* downstream

*coordination
* entrants

Front 138

Firm strategy, structure, and rivalry:
- Rivalry puts pressure on local firms to ______ and ______
- Local conditions affect firm ______
* German companies tend to be hierarchical
* Italian companies tend to be smaller and run more like extended families
* ______ and ______ help to determine in which types of industries a nation's firms will excel
{international strategy}

Back 138

- innovate, improve
- strategy
* Strategy, structure

Front 139

Factors affecting national competitiveness: Final word:
- Firms successful in global markets usually first succeed in intensely competitive ______ markets.
{international strategy}

Back 139

home

Front 140

International expansion - motivations:
- Increased market size enhances economies of ______
- Increased ______ and ______ base
- Extending ______ cycle of product when home market cycle in maturity
- Optimizing ______ location of value chain activities
{international strategy}

Back 140

- scale
- revenue, asset
- life
- physical

Front 141

International expansion (motivations):
- Optimizing physical location of value chain activities
* Performance enhancement through ______ resources
* ______ reductions through lower labor and operating costs (Downside: risks of exploitation_
* ______ reduction - management of currency fluctuations
{international strategy}

Back 141

* location
* Cost
*Risk

Front 142

"Farming out" value chain activities to other firms {international strategy}

Back 142

outsourcing

Front 143

Shifting value chain activity from domestic to foreign location {international strategy}

Back 143

offshoring

Front 144

Outsourcing and offshoring are both increasing due to several factors:
- Decrease in ______ and ______ costs
- ______ of customer needs
- Growth of ______ economies and decline of ______ economies
{international strategy}

Back 144

- transportation, coordination
- Homogenization
- market, command

Front 145

International expansion: risks:
- ______ risk:
* ______ (ex: 9/11, kidnappings of 1970s and 1980s)
* Unresolved ______ (ex: Israeli-Palestinian conflict, Kashmir, former Soviet republics, Yugoslavia, Latin American drug wars, war on terror, Syria, Pakistan, Afghanistan)
* Political ______ of divided nations (Germany, Koreas, Chinas)
{international strategy}

Back 145

- Political
* Terrorism
* conflicts
* integration

Front 146

International expansion: risks:
- ______ risks:
* National ______ and ______ systems
* ______ fluctuations
* Growth of ______ and trade blocs
* Trade ______
* ______ in Eastern Europe and China
{international strategy}

Back 146

-Economic
* fiscal, monetary
* Currency
* WTO
* barriers
* Privatization

Front 147

International expansions: risks:
- ______ and ______ risks:
* ______ costs
* ______
* Cultural ______ and other country differences
* ______ and product ______
{international strategy}

Back 147

- Organizational, management
* Coordination
* Logistics
* diversity
* Marketing, modifications

Front 148

International expansion: risks:
- ______ risks: variations in culture across the globe
{international strategy}

Back 148

- Cultural

Front 149

Opposing forces in international strategy:
- Pressure to lower ______
* Competitive pressures drive firms toward increased ______
- Pressure for local ______
* National and cultural differences drive firms to ______ products to local preferences
- Relative strength of opposing forces leads to four basic strategic choices

Back 149

- costs
* efficiency
- adaptation
* tailor

Front 150

What are the 4 international strategic choices?

Back 150

1. International
2. Multidomestic
3. Global level
4. Transnational

Front 151

When pursuing an international strategy:
- Pressures for cost reduction and local adaptation are ______
- ______ product extending into foreign markets
* Local adaptation very limited
- ______ of some value chain activities
* Ex: McDonald's and Kellog centralize R&D and product development but decentralize production and marketing

Back 151

- low
- Standardized
- Centralization

Front 152

International strategy: risks:
- ______ may fail to take full advantage of optimally distributed value chain
- Lack of local adaptation risks customer ______

Back 152

- Centralization
- alienation

Front 153

Global strategy:
- ______ emphasis on cost reduction and control and ______ on local adaptation
- Economies of ______
- Corporate office provides ______ coordination
{international strategy}

Back 153

- High, little
- scale
- central

Front 154

Global strategy: risks:
- Concentration of activities in one ______
* Output must be ______
* Isolated from ______ markets
* Makes rest of company ______ on one or few locations
- Mistakes multiplied across ______ operations
{international strategy}

Back 154

- location
* exported
* target
* dependent
- international

Front 155

Multidomestic strategy:
- ______ emphasis on local adaptation with ______ emphasis on cost efficiencies
- ______ subsidiaries operate independently from each other
- Adaptation may not be limited only to ______ but may extend to other ______ (personal practices)
{international strategy}

Back 155

- High, low
- Decentralized
- product, activities

Front 156

Multidomestic strategy: risks:
- Local adaptation
* ______
* Specific ______ often difficult to identify
* Increased ______ difficult to manage
{international strategy}

Back 156

* Cost
* needs
* complexity

Front 157

Modes of entry into international markets: [lowest to highest degree of ownership, lowest to highest extent of investment risk]
- Exporting
- Licensing
- Franchising
- Strategic alliance
- Joint venture
- Wholly owned subsidiary

Back 157

NOTE

Front 158

Exporting:
- ______ product extending into ______ markets
- ______ -based export department, ______ sales branch, ______ sales representative, ______ -based distributors or export agents
{international strategy}

Back 158

- Standardized, foreign
- Domestic, overseas, traveling, foreign

Front 159

An advantage of exporting:
- avoids expense of establishing operations in ______ country
{international strategy}

Back 159

host

Front 160

Disadvantages of exporting:
- High costs of ______ and possible ______
- ______ control over handling of products in foreign market
{international strategy}

Back 160

- transportation, tariffs
- Low

Front 161

______ - Firm sells rights to foreign firm to manufacture and market products in host country in exchange for royalty
{international strategy}

Back 161

Licensing

Front 162

An advantage of licensing:
- ______ assumes risk (fixed and variable costs of manufacturing, and marketing)
{international strategy}

Back 162

Licensee

Front 163

Disadvantages of licensing:
______ control, limited ______ , risk that ______ will learn how to develop product on its own
{international strategy}

Back 163

little, returns, licensee

Front 164

______ is a special case of licensing with a broader range of factors and longer term of license. It often involves complete business model (ex: fast food franchises).
{international strategy}

Back 164

Franchising

Front 165

Strategic alliances and joint ventures:
- Shares ______ and ______ with firm in ______ country
- ______ country firm knows the market
- Risk of ______ from partner incompatibility and conflict
- Often an intermediate step towards ______
{international strategy}

Back 165

- risk, resources, host
- Host
- failure
- wholly owned subsidiary

Front 166

Direct investments in other countries (Foreign direct investment - FDI/DFI) - where the home firm puts up 100% of equity is the definition of ______ .
{international strategy}

Back 166

wholly owned subsidiary

Front 167

With a wholly owned subsidiary, there is virtually complete control within ______ and ______ constraints. ______ subsidiaries operate independently from each other.
{international strategy}

Back 167

legal, regulatory, Decentralized

Front 168

International business is another form of ______.
{international strategy}

Back 168

diversification

Front 169

What are the four basic international strategies?

Back 169

1. International
2. Global
3. Multidomestic
4. Transnational

Front 170

What are the four basic modes of entry concerning international strategy?

Back 170

1. Exporting
2. Licensing and franchising
3. Strategic alliances and joint ventures
4. Wholly owned subsidiaries