MGMT 485 Test #2

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only1ssbrown
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175344
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MGMT 485 Test #2
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2012-11-05 22:49:11
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mgmt 485
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Chapters 5-7, 10, 9
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  1. competitive action
    a strategic or tactical action the firm takes to build or defend its competitve advantages or improve its market position
  2. competitive response
    a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action
  3. strategic action/response
    a market-based move that involves a significant commitment of specific & distinctive organizational resources and is difficult to implement & reverse; often involves big amounts of money; ex. major acquisition
  4. tactical action/response
    a market-based move that is taken to fine-tune a strategy; it involves fewer resources & is relatively easy to implement & reverse; not a big deal; ex. price cut
  5. first mover
    a firm that takes initial competitive action in order to build or defend its competitive advantages or to improve its market position; allocate funds for product innovation & development, aggressive advertising, & advanced R&D
  6. second mover
    a firm that responds to the first mover's competitive action, typically through innovation; more cautious, studies customers' reactions to product innovations before moving; can avoid major investments required of the pioneers
  7. late mover
    a firm that responds to a competitive action a significant amount of time after the first mover's action and the second mover's response; considerably less success; success possible especially if others messed up and/or exhausted their resources
  8. corporate-level strategy
    specifies actions a firm takes to gain competitive advantage by selecting & managing a group of different businesses competing in different product markets; helps companies select new strategic positions that are expected to increase the firm's value
  9. single-business diversification strategy
    when a firm generates 95% or more of its sales revenue from its core business area; low level diversification
  10. dominant-business diversification strategy
    when a firm generates between 70-95% of its total revenue within a single business; low level diversification
  11. related constrained diversification strategy
    when a firm generates less than 70% of revenue from the dominant bus; all businesses share product, technological, & distribution linkages; directly share resources & activities between the businesses; moderate & high levels of diversification
  12. related linked diversification strategy
    when a firm generates less than 70% of revenue from the dominant bus; there are only limited links between businesses; share fewer resources & assets between the businesses; concentrates on transferring knowledge & core competencies between them; moderate & high levels of diversification
  13. unrelated diversification strategy
    when a firm generates less than 70% of revenue from the dominant bus; there are no common links (relationships) between businesses; high levels of diversification; challenging to manange; firms using this often called conglomerates
  14. economies of scope
    cost savings that the firm creates by successfully sharing some of its resources & capabilities or transferring 1 or more corporate-level core competencies that were developed in one of its businesses to another of its businesses
  15. corporate-level core competencies
    complex sets of resources & capabilities that link different businesses, primarily throught mangerial & technological knowledge, experience, & expertise; used in the related link diversification strategy
  16. market power
    exists when a firm is able to sell products above the existing competitive level or to reduce the costs of its primary & support activities below the competitive level, or both; used in related constrained & linked strategy
  17. multipoint competition
    exists when 2 or more diversified firms simultaneously compete in the same product areas or geographical markets; ex. UPS & FedEx in overnight delivery & ground shipping
  18. vertical integration
    exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration); firms can partially integrate as well; commonly uses in firm's core bus.
  19. financial economies
    cost savings realized through improved allocations of financial resources based on investments inside or outside the firm; used in unrelated diversification strategy; can be imitated more easily
  20. synergy
    exists when the value created by business units working together exceeds the value that those same units create working independently
  21. corporate governance
    the set of mechanisms used to manage relationships among stakeholders & to determine and control the strategic direction & performance of organizations; concerned w/ identifying ways to ensure decisions are made effectively & that they facilitate a firm's efforts to achieve strategic competitiveness
  22. agency relationship
    exists when 1 or more people (principals, firm's owners, risk bearing) hire another person (agents, top-level managers) as decision-making specialists to perform a service; responsibility to a second party for compensation; can be between managers & their employees
  23. managerial opportunism
    the seeking of self-interest with guile (cunning or deceit); an attitude & a set of behaviors
  24. agency costs
    the sum of incentive costs, monitoring costs, enforcement costs, & individual financial losses incurred by principals because governance mechanisms can't guarantee total compliance by the agent
  25. ownership concentration
    defined by the number of large-block shareholders and the total percentage of the firm's shares they own
  26. large-block shareholders
    typically own at least 5% of a company's issued shares
  27. institutional owners
    financial institutions such as mutual funds & pension funds that control large-block shareholder positions
  28. board of directors
    a group of elected individuals whose primary responsibility is to act in the owners' best interests by formally monitoring & controlling the firm's top-level managers
  29. executive compensation
    a governance mechanism that seeks to align the interests of managers & owners through salaries, bonuses, & long-term incentives such as stock awards & options
  30. market for corporate control
    an external governance mechanism that is active when a firm's internal governance mechanisms fail; individuals & firms that buy ownership positions in or purchase all of potentially undervalued companies or merge 2 previously separate firms
  31. merger
    a strategy through which 2 firms agree to integrate (combine) their operations on a relatively coequal basis
  32. acquisition
    a strategy through which 1 firm buys a controlling, or 100%, interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio; most common; use of competency/resource
  33. takeover
    a special type of acquisition wherein the target firm does not solicit the acquiring firm's bid; unfriendly acquisitions, can be hostile; coercion; leaders seek to reduce excess capacity; condition encourage
  34. horizontal acquisition
    buying a company in the same industry as the acquiring firm; increase a firm's market power by exploiting cost-based & revenue-based synergies; result in higher performance when the 2 firms have similar characteristics like strategy & managerial styles
  35. vertical acquisition
    when a firm acquires a supplier or distributor of 1 or more of its goods or services; increased market power by controlling additional parts of the value chain
  36. related acquisition
    acquiring a firm in a highly related industry; firms seeks to create value through the synergy that can be generated by integrating some of their resources & capabilities
  37. cross-border acquisition
    acquisitions made between companies with headquarters in different countries
  38. due diligence
    a process through which a potiential acquirer evaluates a target firm for acquisition; to examine the quality of the strategic fit & the ability of the acquiring firm to effectively integrate the target to realize the potential gains from the deal
  39. junk bonds
    a financing option through which risky acquisitions are financed with money (debt) that provides a large potential return to lenders (bondholders); increases debts; have high interest rates; unsecured
  40. synergy
    exists when the value created by units working together exceeds the value those units could create working independently; assets worth more when used together
  41. private synergy
    created when combining & integrating the acquiring & acquired firms' assets yield capabilities & core competencies that could not be developed by combining & integrating either firm's assets with another company; possible when firms' assets are complementary
  42. cooperative strategy
    a means by which firms collaborate for the purpose of working together to achieve a shared objective; to create value for a customer that it likely couldn't do by itself
  43. strategic alliance
    a cooperative strategy in which firms combine some of their resources & capabilities for the purpose of creating a competitive advantage; co-develop, sell, & service goods & services
  44. joint venture
    a strategic alliance in which 2 or more firms create a legally independent company to share some of their resources & capabilities for the purpose of developing a competitive advantage; when firms intend to enter highly uncertain markets; effective in establishing long-term relationships & transferring tacit knowledge
  45. equity strategic alliance
    when 2 or more firms own different percentages of the company they have formed by combining some of their resources & capabilities for the purpose of creating a competitive advantage; many FDI's completed this way
  46. nonequity strategic alliance
    2 or more firms develop a contractual relationship to share some of their resources & capabilities for the purpose of creating a competitive advantage; separate independent company NOT established; less formal & demand fewer partner committments; not for complex projects; ex. licensing & distribution agreeement, supply contracts
  47. business-level cooperative strategy
    through which firms combine some of their resource & capabilities for the purpose of creating a competitive advantage by competiting in 1 or more product markets
  48. vertical complementary alliance
    firms share some of their resources & capabilities from different stages of the value chain (supply-chain mgmt, operations, distribution, marketing, & follow-up services) for the purpose of creating a competitive advantage; often formed to adapt to environmental changes
  49. horizontal complementary alliance
    firms share some of their resources & capabilities from the same stage(s) of the value chain (supply-chain mgmt, operations, distribution, marketing, & follow-up services) for the purpose of creating a competitive advantage; often formed to adapt to environmental changes; difficult to maintain
  50. explicit collusion
    exists when 2 or more firms negotiate directly to jointly agree about the amount to produce as well as the prices for what is produced; illegal in U.S. & most developed economies
  51. tacit collusion
    exists when several firms in an industry indirectly coordinate their production & pricing decisions by observing each other's competitive actions & responses; results in production output that is below fully competitve levels & above fully competitive prices
  52. mutual forbearance
    a form of tacit collusion in which firms do not take competitive actions against rivals they meet in multiple markets; b/c it could be destructive competition
  53. corporate-level cooperative strategy
    through which a firm collaborates with 1 or more companies for the purpose of expanding its operations; require fewer resource committments & permet greater flexibility in terms of efforts to diversify partners' operations compared against mergers & acquisitions
  54. diversifying strategic alliance
    corporate-level cooperative strategy in which firms share some of their resources & capabilities to engage in product and/or geographic diversification
  55. synergistic strategic alliance
    corporate-level cooperative strategy in which firms share some of their resources & capabilities to create economies of scope between multiples functions or businesses between partner firms
  56. cross-border strategic alliance
    an international cooperative strategy in which firms with headquarters in different countries decide to combine some of their resources & capabilities for the purpose of creating a competitve advantage; less risky than M & A, can be complex & hard to manage; create value in locations outside home market

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