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BUS 690- Midterm
Martinez
70
Business
Undergraduate 4
03/12/2012

Additional Business Flashcards

 


 

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Term
Corporate level strategie
Definition
help companies select new strategic positions that are expected to increase the firm’s value; expected to help
Term
Market development
Definition
moving into different geographic markets
Term
product development
Definition
developing new products and/or significantly improving on existing products
Term
horizontal integration
Definition
acquisition of competitors; horizontal movement at the same point in the value chain
Term
vertical integration
Definition
becoming your own supplier or distributor through acquisition;
Term
corporate level strategy value
Definition
is ultimately determined by the degree to which “the businesses in the portfolio are worth more under the management of the company than they would be under any other ownership”
Term
diversification
Definition
growing into new business areas either related (similar to existing business) or unrelated (different from existing business); allows a firm to create value by productively using excess resources
Term
diversified firm operates
Definition
in several different and unique product markets and likely in several businesses; it forms two types of strategies: corporate-level (or company-wide) and business-level (or competitive)
Term
product diversification
Definition
a primary form of corporate-level strategies; concerns the scope of the markets and industries in which the firm competes
Term
The ideal portfolio of businesses balances diversification’s costs and benefits:
Definition
Reduction in profitability variability as earnings are generated from different businesses
Term
value creation; low – high levels of diversification
Definition
● The sharing of resources (the related constrained strategy)
● The transferring of core competencies across the firm’s different businesses (the related linked strategy)
● Managerial motives to diversify can
Term
A firm is related through its diversification when its businesses share links across:
Definition
■ PRODUCTS (goods or services)
■ TECHNOLOGIES
■ DISTRIBUTION CHANNELS
Term
low level single business strategy
Definition
Corporate-level strategy in which the firm generates 95% or more of its sales revenue from its core business area
Term
low level Dominant Business Diversification Strategy
Definition
Corporate-level strategy whereby firm generates 70-95% of total sales revenue within a single business area
Term
Moderate to High Levels
Related Constrained Diversification Strategy
Definition
Less than 70% of revenue comes from the dominant business
Direct links (i.e., share products, technology, and distribution linkages) between the firm's businesses
Term
Moderate to High Levels
Related Linked Diversification Strategy (mixed related and unrelated)
Definition
Less than 70% of revenue comes from the dominant business
Mixed: Linked firms sharing fewer resources and assets among their businesses (compared with related constrained), concentrating on the transfer of knowledge and competencies among the
Term
very high levels: unspecified
Definition
Less than 70% of revenue comes from dominant business
No relationships between businesses
Term
firm creates value
Definition
BY BUILDING UPON OR EXTENDING:
Resources
Capabilities
Term
VALUE-CREATING DIVERSIFICATION: RELATED CONSTRAINED AND RELATED LINKED DIVERSIFICATION purpose
Definition
gain market power relative to competitors
Term
VALUE-CREATING DIVERSIFICATION: RELATED CONSTRAINED AND RELATED LINKED DIVERSIFICATION advantage
Definition
ECONOMIES OF SCOPE
Term
ECONOMIES OF SCOPE
Definition
Cost savings that occur when a firm transfers capabilities and competencies developed in one of its businesses to
Term
The difference between sharing activities and transferring competencies
Definition
is based on how the resources are jointly used to create economies of scope
Term
CORPORATE RELATEDNESS: TRANSFERRING OF CORE COMPETENCIES
Definition
Complex sets of resources and capabilities linking different businesses through managerial and technological knowledge, experience, and expertise
Term
operational relatedness- sharing activities
Definition
Can gain economies of scope

■ Share primary or support activities (in value chain), e.g., a primary activity such as inventory delivery systems, or a support activity such as purchasing

■ Risky as ties create links between outcomes

■ Related constrained share activities in order to create value

■ Not easy, often synergies not realized as planned
Term
2 sources of value creation
Definition
Expense incurred in first business and knowledge transfer reduces resource allocation for second business
Term
CORPORATE RELATEDNESS: TRANSFERRING OF CORE COMPETENCIES
Definition
■ One way managers facilitate the transfer of corporate-level core competencies is by moving key people into new management positions
Term
market power
Definition
Exists when a firm is able to sell its products above the existing competitive level, to reduce costs of primary and support activities below the competitive level, or both
Term
Related diversification strategy may include:
Definition
● Vertical integration
Backward integration: a firm produces its own inputs
Forward integration: a firm operates its own distribution system for delivering its outputs
Term
multimarket competition
Definition
Exists when two or more diversified firms simultaneously compete in the same product or geographic markets
Term
disintegration
Definition
developing independent supplier networks - the focus of many manufacturing firms, such as Intel and Dell, and Ford and General Motors
Term
SIMULTANEOUS OPERATIONAL RELATEDNESS AND CORPORATE RELATEDNESS
Definition
The ability to simultaneously create economies of scope by sharing activities (operational relatedness) and transferring core competencies (corporate relatedness) is difficult for competitors to understand and learn
Term
SIMULTANEOUS OPERATIONAL RELATEDNESS AND CORPORATE RELATEDNESS- Involves managing two sources of knowledge simultaneously:
Definition
Operational forms of economies of scope
Corporate forms of economies of scope
Term
If the cost of realizing both types of relatedness is not offset by the benefits created
Definition
the result is DISECONOMIES because the cost of organization and incentive structure
Term
UNRELATED DIVERSIFICATION
Definition
Creates value through two types of FINANCIAL ECONOMIES
Term
Cost savings realized through improved allocations of financial resources based on investments inside or outside firm
Definition
Efficient internal capital market allocation
Term
Restructuring of acquired assets
Definition
Firm A buys firm B and restructures assets so it can operate more
Term
equity
Definition
investors take equity positions (ownership) with high expected future cash-flow values.
Term
debt
Definition
debt holders try to improve the value of their investments by taking stakes in businesses with high growth and profitability
Term
CONGLOMERATE DISCOUNT
Definition
This discount results from analysts not knowing how to value a vast array of large businesses with complex financial reports
■ Stock markets apply a “Conglomerate Discount” of 20% on unrelated diversified firms, which means that investors believe that the value of conglomerates is 20% less than the value of the sum of their parts
■ To overcome this discount, many unrelated diversifiers or conglomerates have sought to
Term
financial economies are more easily
Definition
duplicated by competitors than are gains from operational and corporate relatedness
Term
external incentives to diversify
Definition
■ Antitrust regulations
■ Tax laws
Term
internal incentives to diversify
Definition
■ Low performance
■ Uncertain future cash flows
■ Synergy and Firm Risk Reduction
Term
a firm must have both
Definition
Incentives to diversify
The resources required to create value through diversification—cash and tangible resources (e.g., plant and equipment)
Term
managerial motives to diversify
Definition
■ Managerial risk reduction
■ Desire for increased compensation
Term
a business level strategy
Definition
integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product market
Term
market segmentation
Definition
a process used to cluster people with similar needs into individual and identifiable groups
Term
cost leadership strategy
Definition
integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competition
Term
differentiation strategy
Definition
integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
Term
focus strategy
Definition
integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
Term
integrated cost leadership/differentiation strategy
Definition
involves engaging in primary and support activities that allow a firm to simultaneously pursue low cost and differentiation
Term
total quality management
Definition
a managerial innovation that emphasizes an organization's total commitment to the customer and to continuous improvement of every process through the use of data-driven, problem-solving approaches based on empowerment of employee groups and teams
Term
corporate level core competencies
Definition
are complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience and expertise
Term
financial economies
Definition
cost savings realized through improved allocations of financial resources based on investments inside or outside the firm
Term
synergy
Definition
exists when the value created by business units working together exceeds the value that those same units create working independently
Term
multi doestic strategy
Definition
international strategy in which strategic and operating decisions are decentralized to the strategic business unit in each country so as to allow that unit to tailor products to the local market
Term
global strategy
Definition
is an international strategy through which the firm offers standardized products across country markets, with competitive strategy being dictated by the home office
Term
transnational strategy
Definition
international strategy through which firm seeks to achieve both global efficiency and local responsiveness
Term
the establishment of a new wholly owned subsidiary is referred to as a
Definition
greenfield venture
Term
international diversification
Definition
strategy through which a firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets
Term
strategic alliance
Definition
cooperative strategy in which firms combine some of their resources and capabilities to create competitive advantage
Term
joint venture
Definition
strategic alliance in which 2 or more firms creat a legally independent company to share some of their resources and capabilities to develop a competitive advantage
Term
equity strategic alliance
Definition
alliance in which 2 or more firms own different %s of the company the have formed by combining some of their resources and capabilities to creat a competitive advantage
Term
nonequity strategic alliance
Definition
alliace in which 2 or more firms develop a contractual relationship to share some of their unique resources and capabilities to creat a competitive advantage
Term
business-level cooperative strategy
Definition
utilized by firsm to grow and improve its performance in individual product markets
Term
complimentary strategic alliances
Definition
business-level alliances in which firms share some of their resources and capabilities in complimentary ways to develop competitive advantage
Term
cop rate level cooperative strategy
Definition
utilized by a firm to help it diversify in terms of products offered or markets served, or both
Term
diversifying strategic alliances
Definition
corporate level cooperative strategy in which firms share some of their resources and capabilities to diversify into new product or market ares
Term
synergistic alliances
Definition
corporate-level cooperative strategy in which a firm (the franchisor) uses a franchise as a contractual relationship to describe and control the sharing of its resources and capabilities with partners (the franchisee)
Term
cross-border strategic alliances
Definition
international cooperative strategy in which firms with headquarters in different nations decide to combine some of their resources and capabilities to create a competitive advantage
Term
network cooperative strategy
Definition
cooperative strategy wherein several firms agree to form multiple partnerships to achieve shared objectives
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