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21 Cards in this Set
- Front
- Back
corporate level strategy used to identify
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businesses or industries
value creation activities methods to enter or leave businesses or industries |
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a multi business company must construct its business model at two levels
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business models and strategies
higher level multibusiness model justifies its entry into different businesses and industries |
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corporate level strategies are
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primarily directed toward improving a company's competitive advantage and profitability in its present business
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horizontal integration
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the process of acquiring or merging with industry competitors
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vertical integration
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expanding operations backward into an industry that produces inputs for the company or forward into and industry that distributes the company's products
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strategic outsourcing
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letting some value creation activities within a business be performed by an independent entity
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staying inside a single industry allows a company to
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focus resources
stick to the knitting - stay focused on what it does best |
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benefits of horizontal integration 5
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lowers the cost structure
increase product differentiation replicates the business model reduces industry rivalry increases bargaining power |
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problems with horizontal integration
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the majority of merges do not create value and that many actually destroy value
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implementing a horizontal integration is not easy
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different culture
management turnover creates hostility overestimate benefits underestimate problems |
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merger may be blocked
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create a dominant competitor
too much industry consolidation future abuse of market power |
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full integration
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company produces all of a particular input from its own operations
disposes of all of its completed products through its own outlets |
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taper integration
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in addition to company owned suppliers, the company will also use other suppliers for inputs or independent outlets in addition to company owned outlets
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increasing profitability through vertical integration
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facilitates investments in efficiency enhancing specialized assets
enhances or protects product quality results in improved scheduling |
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problems with vertical integration
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increased cost structure
fast changing technology unpredictable demand risk in investments |
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strategic alliances and long term contracting
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enables creation of a stable long term relationship
becomes a substitute for vertical integration avoids the problems of having to manage a company located in adjacent industry |
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building long term cooperative relationships
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hostage taking - mutual dependency
credible commitments - promise or pledge maintaining market discipline power to discipline |
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strategic outsourcing
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one or more of a company's value chain activities or functions to be performed by independent specialized companies that focus all their skills and knowledge on just one kind of activity
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virtual corporation
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describes companies that have pursued extensive strategic outsourcing
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benefits of outsourcing
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lower cost structure
enhanced differentiation focus on the core business |
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strategic outsourcing may be detrimental when there is
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holdup - company becomes too dependent
loss of information - company loses important customer contact or competitive information |