Term
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Definition
Those in which the underlying scientific knowledge that company's in the industry use in advancing rapidly and so are the attributes of the product's adn services that result from its application
ex) computer industry telecommunications |
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Term
Technical Standards
Format Wars |
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Definition
Set of technical specifications that producers adhere to when making the product or a component of it (competitive advantage)
*source of product differenciation
*usually only one standard in the market
FORMAT WARS- battle to be the best standard
ex) Wintel standard, QWERTY keyboard/USB port, shipping dimensions |
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Term
| Benefits of Technical Standards (4) |
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Definition
1. helps guarantee compatibility between products and their compliments
2. Helps reduce confusion for customers
3. Reduce production costs (manufactures recieve economies of scale)
3. Reduce production costs (manufacturers recieve economies of scale)
4. Reduce risks associated with supplying complimentary products |
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Term
| 3 ways industry standards emerge |
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Definition
1. companies may lobby the government to mandate industry standards ex. DTV
2. Industry forum (ex. DVD forum)
(1+2) = public doman
3. Market demand (format wars) ex. Microsoft and Intel |
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Term
| Strategies for Winning Format Wars |
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Definition
*Finding ways to make network effects work in their favor and against their competitors
1. ensure a supply of complements (A-seed the market, B- Create incentives ex playstation)
2. Killer Applications-Palm pilot ex. AOL chatrooms and email
3. Razor-and Razorblade- pricing the product low and (Razor) make high profits on compliments (Razor Blade) ex. gillette, printers and ink
4. cooperate w/ competitors- ex SONY and Phillips in CD's
5. Licence the Format- VHS |
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Term
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Definition
Arise in industries where the size of the "network" of complementary products is a primary determinant of demand for an industry product
ex) car sales-> paved roads
ex) Telephones -> telephone lines
SONY vs. Matsushita- videotapes, allowed any manufacturer to make VHS players, demand went up, movies studios began releasing rentals on VHS
Positive feedback loop |
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Term
| Advantages of First Mover (5) |
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Definition
1. exploit network effects
2. brand loyalty
3. scale economies and learning effects
4. create switching costs
5. accumulate valuable knowledge |
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Term
| Disadvantages of First Mover (4) |
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Definition
1. pioneering costs
2. make mistakes
3. risk of building the wrong resources and capabilities (crossing the chasm)
4. invest in inferior or obsolete technology |
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Term
| Strategies for Exploiting First Mover Advantage (3) |
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Definition
1. Complementary assets
2. Barriers to imitation
3. Capable competitors- companies that can move quickly to imitate the pioneering company |
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Term
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Definition
| new technology that gets its start away from the mainstread of a market and then, as its functionality imporves over time, invades the amin makret. They revolutionize industry structure and competition (cause a technological paradigm shift) |
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Term
| Benefits of horizontal integration (5) |
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Definition
1. lowers the cost structure (creates economies of scale, reduce the duplication of resources)
2. increases product differentiation (product bundling, cross-selling- taking advantage of leveraging its established relationship with customers by acquiring additional product lines or categories that it can sell to them)
3. replicates the business model
4. reduces rivalry within the industry (eliminate excess capacity, tacit price coordination)
5. increases bargaining power over suppliers and buyers (market power) |
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Term
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Definition
| company buys from independent suppliers in addtion to company owned suppliers or dispose of its completed products through independent outlets in addtion to company owned outlets |
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Term
| Ways vertical integration increases profitability (3) |
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Definition
1. facilitate investments in efficiency-enhancing specialized assets
2. protects product quality
3. results in improved scheduling |
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Term
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Definition
| exit industries adjacent in the industry value chain (example of ford) |
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Term
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Definition
| enter into a long term contract with Two suppliers for the same part. gives the company a hedge against an uncooperative supplier because it knows that if it fails to comply with the agreement, the company can switch all its business to the other supplier |
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Term
| Advantages of strategic outsourcing (3) |
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Definition
1. lower company's cost structure
2. better differentiate its products in the market
3. focus on the distinctive competencies that are vital to its long-term competitive advantage and profitability |
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Term
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Definition
| refers to the risk that a company will become too dependent on the specialist provider of an outsourced activity and that the specialist will use this fact to raise prices beyond some previously agreed-on rate |
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Term
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Definition
| process of adding new businesses to the company that are distinct from its core industry |
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Term
| (6) justifications for pursuing a multibusiness model based on diversification |
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Definition
1. transfer competencies between business units in diferent industries
2. leverage competencies to create business units in new industries
3. share resources between business units to realize economies of scope
4. use product bundling
5. use diversification to reduce rivalry in one or more industries
6. utilize general organizational competencies that increase the performance of all the company's business units |
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Term
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Definition
| arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages becasue they can more effectively pool, share, and utilize expensive resources or capabilities, such as skilled people, equipment, manufactureing facilities, sistribution channels, advertising, and R&D laboratories |
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Term
| Types of diversification (2) |
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Definition
1. Related diversification (strategy of establishing a business unit in a new industry that is related to a company's existing business units by some form of linkage or commonality between one or more components of each business unit's value chain
2. unrelated diversification- aims to enhance profits by implanting general organizational competencies in new business units, and perhaps to capture the benefits of multipoint competition |
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Term
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Definition
| costs associated with solving the transaction difficulties that arise between a company's business units, and between business units and corporate headquarters, as the company attempts to obtain the benefits from transferring, sharing, and leveraging competencies |
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Term
| 3 strategies to implement multibusiness model |
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Definition
| internal new ventures, acquisitions, and join ventures |
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Term
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Definition
1. market entry on too small a scale
2. poor commercialization of the new venture product
3. poor corporate management of the venture process |
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Term
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Definition
Seen as less risky than internal new ventures
Attractive way to enter the industry that is protected by high barriers
Acquisitions are EXPENSIVE |
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Term
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Definition
process of divesting businesses and exiting industries to focus on care distinctive competencies, has become an increasingly popular strategy
ADVANTAGE- diversification discount (stock of highly diversified companies is valued lower, relative to their earnings, than the stock of lessdiversified enterprises) |
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Term
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Definition
| stockholders and employees |
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Term
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Definition
| capitol that stockholders provide to a company because there is no guarantee that stockholders will ever recoup their investment and or earn a decent return |
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Term
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Definition
| used to measure profitability of a company. A positive ROIC is covering all of its ongoing expenses and has money left over which is added to shareholders equity |
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Term
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Definition
| looks at the problems that can arise in a business relationship when one person delgates decision-making authority to aonther. originally ofrmulated to capture the relationship between management and stockholders. principle VS agent |
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Term
| 3 challenges for principals |
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Definition
1. shape the behavior of agents so that they act in accordance with the goals set by principals
2. reduce the information asymmetry between agents and principals
3. develop mechanisms for removing agents who do not act in accordance wtih the goals of principals and mislead them |
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Term
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Definition
mechanisms that principals put in place to align incentives between principals and agents and to monitor and control agents
1. Board of Directors
2. Stock-Based Compensation
3. Financial Statements and Auditors
4. The Takeover Constraint (risk of being acquired by another company) |
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Term
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Definition
| Efficiency, Quality, Innovation, Responsiveness |
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Term
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Definition
| accepted principles of right or wrong governing the conduct of business people |
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Term
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Definition
| The only social responsibility of business is to increase profits, so long as the company stays within the rules of the law |
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Term
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Definition
process of deciding how a company should create, use, and combine organizational structure, control system, and culture to pursue a business model successfully
1.structure
2. control system
3. culture |
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Term
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Definition
| refers to the number of subordinates who report directly to a manger |
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Term
| Centralized vs. decentralized chain of command |
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Definition
1. centralized when managers at the upper levels of a company's hierarchy retian the authoity to make the most important decisions
2. decentralized- delegated to divisions, functions, and employees at lower levels in the company |
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Term
| Steps in designing an effective control system |
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Definition
1. established standards and targets
2. create measurin and monitoring systems
3. compare actual performance against the established targets
4. evaluate result and take action if necessary |
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Term
| Types of strategic control systems |
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Definition
1. personal control- face-to-face interaction
2. output control- managers estimate or forecast appropriate performance goals for each division and measure performance relative to those goals
3. Behavior Control- control through the establishment of a comprehensive system or rules and procedures to direct the actions or behavior of divisions (operating budget, standardization- degree to which a company specifies how decisions are to be made so that employees behavior becomes predictable) |
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Term
| Benefit of a good company culture |
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Definition
| increases integration and improves coordination among organizational members |
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Term
| Successful companies are successful in corporate culture if: |
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Definition
| promote a bias for action and values stem from the nature of the organization's mission |
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Term
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Definition
| group people on the basis of their common expertise and experience or because they use the same resources |
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Term
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Definition
value-chain activities are grouped in two ways
1. activities are grouped vertically by function, so that there is a familiar differentiation of tasks into functions such as engineering, sales etc
2. Horizontal- grouped by product or project in which people and rsources are grouped to meet ongoing product development needs
MATRIX IS FLAT AND DECENTRALIZED (functional boss and a product/project boxx) |
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Term
| Restructuring a company involves two steps (downsizing) |
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Definition
1. streamlining the hierarchy of authority and reducing the number of levels in the hierarchy to a minimum
2. reducing the number of employees to lower operating costs |
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Term
| Advantages of multidivisional structure |
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Definition
1. enhanced corporate financial control
2. enhanced strategic control
3. growth
4. stronger pursuit of internal efficiency |
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Term
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Definition
| conflicts over establishing the fair or "competitive" price of a resource or skill developed in one division that is to be transfered and sold to other divisions that require it |
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