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Midterm 2
N/A
47
Management
Undergraduate 2
04/04/2012

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Cards

Term
Corporate-level Strategy
Definition
Specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.
Term
Single-business diversification strategy
Definition
Corporate-level strategy wherein the firm generates 95% or more of its sales revenue from its core business area. Low level of diversification.
Term
Dominant-business diversification strategy
Definition
The firm generates between 70% and 95% of its total revenue within a single business area. Low level of diversification.
Term
Related constrained diversification strategy
Definition
A firm generating less than 70% of its revenue outside a dominant business and whose businesses are related to each other in some manner. Moderate to high level of diversification.
Term
Related linked diversification strategy
Definition
Less than 70% of revenue comes from the dominant business, and there are only limited links between businesses. Moderate to High level of diversification.
Term
Unrelated diversification strategy
Definition
Less than 70% of revenue comes from the dominant business, and there are no common links between businesses. This is very high levels of diversification and these are called conglomerates.
Term
Economies of scope
Definition
Cost savings that the firm creates by successfully sharing some of its resources and capabilites or transferring one or more corporate-level core competencies that were developed in one of its businesses to another of its businesses.
Term
Corporate-level core competencies
Definition
Complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience, and expertise.
Term
Market power
Definition
Exists when a firm is able to sell its products above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level, or both.
Term
Multipoint competition
Definition
Exists when two or more diversified firms simultaneously compete in the same product areas or geographical markets.
Term
Vertical integration
Definition
Exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration).
Term
Financial economies
Definition
Cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.
Term
Merger
Definition
Strategy through which two firms agree to integrate their operations a relatively coequal basis.
Term
Acquisition
Definition
Strategy through which one firm buys a controlling, or 100%, interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio.
Term
Takeover
Definition
Special type of acquisition wherein the target firm does not solicit the acquiring firm's bid; thus, takeovers are unfriendly acquisitions.
Term
Restructuring
Definition
Strategy through which a firm changes its set of businesses or its financial structure.
Term
Cooperative strategy
Definition
Strategy in which firms work together to achieve a shared objective.
Term
Strategic alliance
Definition
Cooperative strategy in whihc firms combine some of their resources and capabilities to create a competitive advantage
Term
Joint venture
Definition
Strategic alliance in which two or more firms create 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 two or more firms own different percentages of the company they have formed by combining some of their resources and capabilities to create a competitive advantage.
Term
Non-equity strategic alliance
Definition
Alliance in which two or more firms develop a contractual relationship to share some of their unique resources and capabilities to create a competitive advantage.
Term
Business-level cooperative strategy
Definition
A firm uses this to grow and improve its performance in individual product markets
Term
Complementary strategic alliances
Definition
Business-level alliances in which firms share some of their resources and capabilities in complementary ways to develop competitive advantages.
Term
Greenfield venture
Definition
Establishment of a new wholly owned subsidiary
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 entrepreneurship
Definition
Taking entrepreneurial actions using a strategic perspective
Term
Corporate entrepreneurship
Definition
The use or application of entrepreneurship within an established firm.
Term
Entrepreneurship
Definition
The process by which individuals, teams, or organizations identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control.
Term
Entrepreneurial opportunities
Definition
Conditions in which new goods or services can satisfy a need in the market.
Term
Invention
Definition
The act of creating or developing a new product or process
Term
Innovation
Definition
The process of creating a commercial product from an invention
Term
Imitation
Definition
The adoption of a similar innovation by different firms.
Term
Entrepreneurs
Definition
Individuals acting independently or as a part of an organization, who perceive an entrepreneurial opportunity and then take risks to develop an innovation to exploit it
Term
Entrepreneurial mindset
Definition
Values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations.
Term
International entrepreneurship
Definition
A process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage.
Term
Autonomous strategic behavior
Definition
Bottom-up process in which product champions pursue new ideas, often through a political process, by means of which they develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace.
Term
Product champion
Definition
Organizational member with an entrepreneurial vision of a new good or service who seeks to create support for its commercialization.
Term
Induced strategic behavior
Definition
Top-down process whereby the firm's current strategy and structure foster innovations that are closely associated with that strategy and structure.
Term
Reasons for Diversification
Definition
Value-creating (economies of scope, market power, financial economies), value-neutral (Antitrust regulation, tax laws, low performance, uncertain future cash flows, risk reduction for firm, tangible and intangible resources), and value-reducing (diversifying managerial employment risk or increasing managerial compensation)
Term
Operational Relatedness
Definition
Share activities to create value
Term
Corporate relatedness
Definition
Transfer core competencies to create value
Term
Synergy
Definition
Exists when the value created by business units working together exceeds the value that those same units create working independently.
Term
Synergy
Definition
Exists when the value created by business units working together exceeds the value that those same units create working independently.
Term
Horizontal acquisition
Definition
Acquisition of a company competing in the same industry as the acquiring firm. These increase a firm's market power by exploiting cost-based and revenue-based synergies. These result in higher performance when the firms have similar characteristics such as strategy, managerial styles, and resource allocation patterns.
Term
Vertical acquisition
Definition
A firm acquiring a supplier or distributor of one or more of its goods or services.
Term
Cross-border acquisition
Definition
Acquisition made between companies with headquarter in different countries
Term
International Expansion
Definition
Exporting (high cost, low control), Licensing (Low cost, low risk, little control, low returns), Strategic alliances (Shared costs, shared resources, shared risks, problems of integration), Acquisition (Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations), New wholly owned subsidiary (Complex, often costly, time consuming, high risk, max control, potential above-average returns)
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