strat chapter4

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strat chapter4
2013-08-27 01:05:47
strat formulation

for midterm exam
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  1. the choice of direction of the firm as a whole and the management of its business or product portfolio and concerns
    corporate strategy
  2. corporate strategy
    •Directional strategy

    •Portfolio analysis

    •Parenting strategy
  3. the firm’s overall orientation toward growth, stability, or retrenchment
    directional strategy
  4. industries or markets in which the firm competes through its products and business unites
    Portfolio analysis
  5. the manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units
    Parenting strategy
  6. Growth Strategy
    • concentration
    • diversification
  7. a transaction involving two or more corporations in which stock is exchanged but in which only one corporation survives
  8. the purchase of a company that is completely absorbed by the subsidiary or division of the acquiring corporation
  9. concentration
    • vertical
    • horizontal
  10. diversification
    • concentric
    • conglomerate
  11. taking over the function previously provided by a supplier or by a distributor
    Vertical growth
  12. the degree to which a firm operates vertically in multiple locations on an industry’s value chain from extracting raw materials to manufacturing to retailing
    Vertical integration
  13. assuming a function previously provided by a supplier
    Backward integration
  14. assuming a function previously provided by a distributor
    Forward integration
  15. vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying on the open market become too great
    Transaction cost economies
  16. a firm internally makes 100% of its key suppliers and completely controls its distributors
    Full integration
  17. a firm internally produces less than half of its own requirements and buys the rest from outside suppliers
    Taper integration
  18. a company does not make any of its key supplies but purchases most of its requirements from outside suppliers that are under its partial control
  19. agreements between 2 firms to provide agreed-upon goods and services to each other for a specific period of time
    Long-term contracts
  20. expansion of operations into other geographic locations and/or increasing the range of products and services offered to current markets
    Horizontal growth
  21. Horizontal growth is achieved through:
    • Internal development
    • Acquisitions
    • Strategic alliances
  22. the degree to which a firm operates in multiple geographic locations at the same point on an industry’s value chain
    Horizontal integration
  23. International Entry Options for Horizontal Growth
    • Exporting
    • Licensing
    • Franchising
    • Joint Venture
    • Acquisitions
    • Green-Field Development
    • Production Sharing
    • Turn-key Operations
    • Management Contracts
  24. growth into a related industry when a firm has a strong competitive position but attractiveness is low
    Concentric (Related) Diversification
  25. when two businesses will generate more profits together than they could separately
  26. growth into an unrelated industry
    Conglomerate (Unrelated) Diversification
  27. Management realizes that the current industry is unattractive
    Conglomerate (Unrelated) Diversification
  28. Firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries
    Conglomerate (Unrelated) Diversification
  29. continuing activities without any significant change in direction
    Stability Strategies
  30. an opportunity to rest before continuing a growth or retrenchment strategy
    Pause/Proceed with caution strategy
  31. continuance of current operations and policies
    No change strategy
  32. to do nothing new in a worsening situation but instead to act as though the company’s problems are only temporary
    Profit Strategies
  33. used when the firm has a weak competitive position in some or all of its product lines from poor performance
    Retrenchment Strategies
  34. emphasizes the improvement of operational efficiency when the corporation’s problems are pervasive but not critical
    Turnaround strategy
  35. effort to quickly “stop the bleeding” across the board but in size and costs
  36. stabilization of the new leaner corporation
  37. company gives up independence in exchange for security
    Captive Company Strategy
  38. management can still obtain a good price for its shareholders and the employees can keep their jobs by selling the company to another firm
    Sell-out strategy
  39. sale of a division with low growth potential
  40. company gives up management of the firm to the courts in return for some settlement of the corporation’s obligations
  41. management terminates the firm
  42. management views its product lines and business units as a series of investments from which it expects a profitable return
    Portfolio analysis
  43. Popular portfolio analysis techniques include:
    • BCG Matrix
    • GE Business Screen
  44. new products with the potential for success but require a lot of cash for development
    Question marks
  45. market leaders at the peak of their product cycle and are able to generate enough cash to maintain their high market share and usually contribute to the company’s profits
  46. products that bring in far more money than is needed to maintain their market share
    Cash cows
  47. products with low market share and do not have the potential to bring in much cash
  48. BCG Matrix Limitation
    • Use of highs and lows to form categories is too simplistic
    • Link between market share and profitability is questionable
    • Growth rate is only one aspect of industry
    • attractiveness
    • Product lines or business units are considered only in relation to one competitor
    • Market share is only one aspect of overall competitive position
  49. GE Business Screen- Limitations
    • Complex and cumbersome
    • Numerical estimates of industry attractiveness and business strength/competitive position give the appearance of objective, but are actually subjective judgments that can vary from person to person
    • Cannot effectively depict the positions of new products and business units in developing industries
  50. Portfolio Analysis Advantages:
    • Encourages top management to evaluate each of the corporation’s businesses individually and to set objectives and allocate resources for each
    • Stimulates the use of externally oriented data to supplement management’s judgment
    • Raises the issue of cash flow availability to use in expansion and growth
  51. Portfolio Analysis Limitations:
    • Defining product/market segments is difficult
    • Suggest the use of standard strategies that can miss opportunities or be impractical
    • Provides an illusion of scientific rigor when in reality positions are based on objective judgments
    • Value-laden terms such as cash cow and dog can lead to self-fulfilling prophecies
    • Lack of clarity on what makes an industry attractive or where a product is in its life cycle
  52. Managing a Strategic Alliance Portfolio
    • Developing and implementing a portfolio strategy for each business unit and a corporate policy for managing all the alliances of the entire company
    • Monitoring the alliance portfolio in terms of implementing business units’ strategies and corporate strategy and policies
    • Coordinating the portfolio to obtain synergies and avoid conflicts among alliances
    • Establishing an alliance management system to support other tasks of multi-alliance management
  53. views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units
    Corporate parenting
  54. Generates corporate strategy by focusing on the core competencies of the parent corporation and the value created from the relationship between the parent and its businesses
    Corporate Parenting
  55. cuts across business unit boundaries to build synergy across business units and to improve competitive position in one of more business units
    Horizontal strategy
  56. large multi-business corporations compete against other large multi-business firms in a number of markets
    Multipoint competition
  57. Developing a Corporate Parenting Strategy
    • Examine each business unit in terms of its strategic factors
    • Examine each business unit in terms of areas in which performance can be improved
    • Analyze how well the parent corporation fits with the business unit