Chapter 1 Flashcards
(18 cards)
What is corporate restructuring?
It refers to changes that aim to improve a firm’s structure, operations, or strategy, including M&A, spin-offs, and divestitures.
Why is M&A considered important in macroeconomic terms?
Reallocates resources and drives industrial and economic change.
Name three lenses through which corporate restructuring can be viewed.
Strategic, legal, taxation, cultural, psychological, and practical.
Define a merger.
A merger is typically a friendly combination of two firms into one new entity, often referred to as a ‘merger of equals’.
What is a tender offer?
An offer made directly to a company’s shareholders to buy their shares, often used in hostile takeovers.
What is the difference between a merger and an acquisition?
The terms are often used interchangeably, but an acquisition generally implies one firm buying another, while a merger implies more mutual integration.
What is a horizontal merger?
A merger between firms in the same business activity, aiming for economies of scale or scope.
What is a vertical merger?
A merger between companies at different stages of the value chain, often to improve coordination and reduce costs.
What is a conglomerate merger?
A merger between firms in unrelated industries, often motivated by diversification.
Give one reason why vertical mergers are gaining popularity again.
To achieve better integration, reduce transaction costs, or respond to geopolitical risks (e.g., Apple, Tesla, IKEA).
Classic successful strategies by Porter for competitive advantage.
Low-cost leadership, differentiation, and focus/specialization.
What does it mean to be ‘stuck in the middle’ strategically?
When a company tries to pursue multiple strategies at once and fails to achieve any competitive advantage.
What are the three steps in corporate strategic planning?
- Define mission/vision, 2. Set strategic objectives, 3. Implement tactics.
What is a SWOT analysis used for?
To analyze a firm’s internal strengths and weaknesses, and external opportunities and threats.
Describe the BCG growth-share matrix’s four categories.
Stars, Cash Cows, Question Marks, and Dogs.
What are economies of scale?
Cost advantages due to increased production volume lowering average unit costs.
What are economies of scope?
Cost savings from producing a wider variety of related products using shared resources.
What are Porter’s five competitive forces?
- Barriers to entry, 2. Customer power, 3. Supplier power, 4. Threat of substitutes, 5. Industry rivalry.
