T/F Corporate governance invloves oversight in areas where owners, managers, and members of boards of directors may have conflicts of interest.
T/F Executive compensation, ownership concentration, and the matrix oganizational structure are all examples of governance mechanisms.
T/F Committed and involved board of directors, shareholder activism, and reward & compensation agreements are all examples of governance mechanisms,
T/F As a rule shareholders prefer more diversification than do managers.
T/F The primary role of the board of directors is to monitor and control top level executives to protect owners' interests.
T/F Stock options attempt to align managers' and owners' interests by typing managerial pay and firm performance together.
T/F To properly execute strategic controls in firms using related diversification, the executives must have a deep understanding of each unit's business level strategy
T/F Research has consistently shown that there is one best way to structure all organizations, regardless of competitive strategy.
Supose you are an analyst reviewing the Coors business in 1977. What is the biest risk to Coors' perfomance
dependence on insufficient total production capacity by all players in the west region.
because it had to expand to keep its inappropriately big plant operating at high capacity once there was additional offer from other competitors to cover previous excess demand in its core market
why did coors expand nationally
What is Coor's obvious focus during the period of the case?
Does Coors expend more money on advertising per barrel sold than its competitors in 1977?
No it does not need to because there is not enough offer in the region to cover demand at a competitive price
Does Coors expend more money on advertising per barrel sold than its competitors in 1985?
Yes becuase it needs to sell its beer in new regions were it has very little volume and therefore its advertising is more inefficient.
T/F The functional structure is most appropriate for larger firms impletmenting a strategy that includes high levels of diversification
T/F The finance and R&D functions are emphasized in the differentiation strategy's functional structure.
T/F Internal competition for corporate resources is effective for companies with an nrelated diversification strategy, but dysfunctional for companies with a related strategy.
A primary objective of ____________ _________is to ensure that the interests of top-level managers are alighned with the interests of shareholders.
The separation between a firm's owners and managers creates an ____ relationship
Firm size and executive compensation are
In contrast to managers, shareholders may prefer that free cash flows be:
returned to them as dividends
is a governance mechanism that seeks to align managers and owners' interests through all of the following: bonuses, long-term incentives such as stock options, salary.
T/F Coors' position as the most profitable brewer(per barrel) in 1977, was based primarily on its differentiation and mystique.
False, it really competed based on cost leadership; it charged lower prices but with much cheaper production costs.
Was Coors successful from 1977 - 1985
No its per barrel NI had deteriorated dramatically against that of other industry players.
T/F In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. This university is attempting to use its faculty to gain economies of scope.
T/F An unrelated diversification strategy can create value through two types of financial economies -- efficient internal capital allocations and purchasing other corporations and restructuring their assets.
T/F In order to acheive economies of scale, some manufacturing industries in nations(ie Korea) with small domestic markets must globalize
The ultimate test of the ______ is whether the businesses in the portfolio are worth more under the management of the company in question than they would be under any other ownership.
value of corp level strategy
enhancing the strategic competitiveness of the entire company, expanding the business portfolio in order to reduce managerial employment risk, gaining market power relative to competitors
reasons to implement a diversification strategy
inceasing low performance levels of a business unit
not a reason to implement a diversification strategy
when a company produces its own inputs
Smithfield foods produces hams and other meat products. It owns hog raising operations. This is an example of a ____ ____ business
Stock markets apply a conglomerate discount of 20% on unrelated diversified firms. This means that investors:
believe that the value of conglomerates is 20% less than the value of their sum parts
Often, firms plagued by poor performance will increase their level of
exists when the value created by business units working together exceeds the calue the units create when working independently.
Personal moties for managers to seek diversification include a desire to:
increase their compensation
Increasing the size of the firm's potential markets, gaining economies of scale, gaining a competitive advantage through location.
opportunities that are motivations for expanding into international markets
T/F To the extent that firms are able to standardize products across country borders and use the same or similar production facilities, coordinating critical resource functions, they are likely to achieve a more optimal economic scale
T/F A multidomestic strategy assumes that consumer needs, industry conditions, and social normas are homogenous in every country
T/F Multidomestic strategies allow fo the establishment of economies of scale
T/F A global strategy assumes that business units operating in each contry are interdependent
T/F As a general rule of thumb, if a company cannot make a profit in its home market, it cannot make a profit in the international market
focuses on competition within each country in which the firm is active
a multidomestic strategy
strategic and operating decisions are decentralized to the strategic business unit in each country
multidomestic corp level strategy
strategy that lacks responsiveness to local markets
in a ___ strategy competetive strategy is dictated by the home office- unlike in a multidomestic strategy
A global stategy emphasizes
economies of scale
GM requires that senior managers from its international partners' headquarters report directly to a top ranking GM regional executive. This gives GM's top management more control over what happens in each of the foreign car companies it owns while allowing the companies to be responsive to contry needs. This illustrates GM's _ strategy
High costs associated with acquiring foreign production facilities is a _____ associated with exporting
not a disadvantage
high transportation costs, loss of control over distribution activities, and tariffs imposed by local goverments are ____ associated with exporting
allows a foreign firm to purchase the rights to manufacture and sell a firm's products within a host contry
high costs of extablishing manufacturing facilities is
not a disadvantage of licensing
little control over the marketing of the products, licensees may develop a competitie product after the license expires, decreased potential returns
disadvantages of licensing
By studying the ____ firm identify what they might choose to do - forces that affect the industry
By studying the ____ firms determine what they can do - examine unique resources, capabilities, and competencies(sustainable competitive advantage)
Four criteria of Sustainable Advantages
Valuable, Rare, Costly to Imitate, nonsubstitutable
a firm's assets, including people and the value of its brand name - represent inputs into a firms production process
relatively easy to identify and include physical and financial assets used to create value for customers
cash accounts, capacity to raise equity, borrowing capacity
modern plant and facilities, favorable manufacturing locations, machinery and equipment
trade secrets, innovative production processes, patents, copyrights, trademarks
effective strategic planning processes, excellent evaluation and control systems
difficult for competitors to account for or imitate, typically embedded in unique routines and practices that have evolved over time
experience and capabilities of employess, trust, managerial skills, firm specific practices and procedures
technical and scientific skills, innovation capacities
innovation and creativity resources
are the firm's capacity to deploy resources that have been purposely integrated to achieve a desired end state
emerge over time through complex interactions among tangible and intangible resources
often are based on developing, carrying and exchanging information and knowledge through the firm's human capital
competiencies or skills taht a firm employs to transform inputs to outputs, and capacity to combine tangible and intangible resources to attain desired end
outstanding customer service, excellent product development capabilities, innovativeness of products and services, ability to hire motivate and retain human capital are examples of:
resources and capabilities that serve as a source of a firms competitive advantage: distinguish a company competitively and reflect its personality - emerge over time
A criteria of sustainable competitive advantagage: enable a firm to formulate and implement strategies that improve its efficiency or effectiveness
common strategies based on similar resources give no one firm an advantage, competitive advantages are gained only from uncommon resources that are rare to other competitors
difficulty in ____ resources is key to value creation because it constrains competitition
may take at least two forms - competitor may be able to substutue a simlar resource that enables it to develop and impletment the same strategy
very different firm resources can become strategic substitutes
shows how a product moves from rm stage to final customer
to be a source of ______ ______, a resource or capability must allow the firm: to perform an activityy in a manner that is superior to the way competitors perform it or to perform a value creating activity that competitors cannot complete
The purchase of a value creating activity from an external supplier - by forming and emphasizing fewer capabiliies a firm can concentrate on those areas in which it can create value
associated with recieving, storing and distributing inputs to the product
associated with transforming inputs into the final product form
associated with collecting, storing, and distributing the product or service to buyers
associated with purchases of products and services by end users and the inducements used to get them to make purchases
marketing and sales
associated with providing service to enhance or maintain the value of a product
typically supports the entire value chain and not individual activities
activities involved in the recruiting, hiring, training, development and compensation of all types of personnel
Related to a wide range of activities and those embodied in processes and equipment and the product itself
function of purchasing inputs used in the firms value chain
General and Admin, HR Management, Tech Development, Procurement
inbound logistics, operations, outbound logistics, marketing and sales, service
former core competencies tha now generate inertia and stifle innovation
determining what the firm can do through continuous and effective analyses of its___________ increases te likelihood of long term competitive success
each business unit in a diversified firm chooses a ________________ as a means of competing in individual product markets
business level strategy
specifies actions taken by the firm to gain a competitive advantage by selecting and managing a group of different businesses competing in several industries and product markets
corporate level strategy
the degree to which the buessniesses in the portfolio are worth more under the management of the company than they would be under other ownership
corporate level strategy's value
related diversification - sharing activities and transfering core competencies
economies of scope
related diversification - blocking competitors through multipoint competition - vertical integration
efficient internal capital allocation - business restructuring
Incentives and resources with ____ effects on strategic competitiveness: low performance, uncertain future cash flows, risk reduction for firm, tangible resources, intangible resources
firm creates value by building upon or extending its resources, capabilities, core competencies
cost savings that occur when a firm transfers capabilities and competencies developed in one of its businesses to another of its businesses
economies of scope
is created from economices of scope through - operational relatedness in sharing activities, corporate relatedness in transferring skills or corporate core competencies among units
created by sharing either a primary activity or a support activity - requires sharing strategic control over business units - may create risk because business unit ties create links between outcomes
operational relatedness - sharing activities
using complex sets of resources and capabilities to link different businesses through managerial and tech knowledge, experience and expertise
eliminates resource duplication in the need to allocate resources for a second unit to develop a cometepence that has already existed - provides intangible resources that are difficult for competitors to understand and imitate
copr relatedness creates value by:
are cost savings realized through improved allocations of financial resources - based on investments inside or outside the firm
create value through two types of __ ____- efficient internal capital allocations, purchasing other corporations and restructuring their assets
have a fairly short life cycle because financial economies are more easily duplicated by competitors than are gains from operational and corporate relatedness
a firm creates value by buying and selling other fimrs assets in the external market - restructuign creates:
a strategy through which the firm sells its goods or services outside its domestic market
international markets yield potential new opportunities, new market expansion extends product life cycle, needed resources can be secured, greater potential product demand
reasons for an internaltional strategy
increase market size, return on investment, economies of scale or learning, competitive advantage through location,
International strategy benefits
choice of international entry mode: high cost, low control
choice of international entry mode: low cost, low risk, little control, low returns
choice of international entry mode: shared costs, shared resources, shared risks, problems of integraiton
choice of international entry mode: quick access to new market, high costs, complex negotiations, problems of merging with domestic operations
choice of international entry mode: complex often costly, time consuming, high risk, max control, potential above avg returns
new wholly owned subsidiary
instability in national govt, war, potential nationalizaiton of a firm's resources
political risk - international
interdependent with political risks and include: differences and fluctuations in the value of different currencies, differences in prevailing wage rates, difficulties in enforcing property rights, unemployement
economic risk - international
cost if coordination across diverse geo business units, institutional and cultural barriers, understanding strategic intent of competitors, overal compleof competitionxity
management problems - international expansion
strategy and op decisions are decentralized - products are tailored to local markets - business units in one country are independent of each other - assumes markets differ by country or regions - focus on competition in each market - prominent strategy among european firms due to broad variety of cultures and markets in Europe
products standardized - decisions are centralized - interdependent sbu - economies of scale - lacks responsiveness to local markets - requires resource sharing across borders
seeks to achieve both global efficiency and local responsiveness
mutual adjustment, direct supervision, standardizaiton
basic coordination mechanisms
face to face communication in which coworkers exchange information about work procedures
direction and coordination of the work of a gorup by one person who issues direct orders to the groups members
planning and implementation of standards and procedures that regulate work performance
specification of sequences of task behaviors or work processes
establishment of goals or desired end results of task performance
specification of the abilities, knolwedge and skills required by a particular task
encouragement of attitudes and beliefs that lead to desired behaviors
several organizations attain the performance capacities of a single, much larger firm while retaining extreme flexibility and significant efficiency
local customer responsiveness focus
centralized at home R&D and marketing
value creation functions dispersed globally to optimal locations
local responsiveness and global integration
a relationship among stakeholders used to determine and control the strategic direction and performance of organizations, concerned with making stratic decisions more effectively, unded to establish order between a firm's owners and its top level managers whose interests may be in conflict
large block shareholders have a strong incentive to monitor management closely. Financial institutions are legally forbidden from directly holding board seats
shareholders can convene to discuss corporation's direction - if a consensus exists, shareholders can vote as a block to elect their candidates to the board
group of elected individuals that acts in the owners' interests to formally monitor and control the firm's top level executives
board of directors
direct the affairs of the org, punish and reward managers, protect owners from managerial opportunism
BOD had power to
Given its 1977 strategy (beginning of the case), it
would make sense for Coors beer business to have been organized as a:
functional organizational structure
Recent trends that might lead managers of
multinational corporations (MNCs) not to adopt a multi-domestic strategy
for their operations would include
flexible manufacturing trends have
allowed a decline in the minimum volume required to reach acceptable levels of production efficiency.
Competitiveness is usually enhanced by the good
implementation of diversification based on all of the following reasons except
Potential to overcome uncertainties
in the future cash flows of a mature product line with cash flows from a new product to protect value for shareholders
High pressure for local adaptation combined with high pressure for lower costs would suggest what type of international strategy?
Units coordinate their activities with headquarters
and with one another, units adapt to special circumstances only they face, and
the entire organization draws upon relevant global resources for enhanced
efficiencies. These are all attributes
of which type of strategy?
Excessive focus on reduced risk might occur if an executive has been
with the company for a long time and his/her pay package has been dominated by: