chapter 13

Question 1

what is a firms strategy

Answer 1

Actions managers take to attain the firm’s goals.

Question 2

to maximize the value of a firm, managers must what do what

Answer 2

increase the profability of the enterprise and its rate of profit growth over time

Question 3

what is profitability

Answer 3

A ratio or rate of return concept.

Question 4

what is profit growth

Answer 4

The percentage increase in net profits over time.

Question 5

higher profitability and higher rate of profit growth..

Answer 5

will increase the value of an enterprise and thus the returns garnered by its owners, the shareholders.

Question 6

how to increase the profitability of the firm

Answer 6

by pursuing strategies that lower costs or by pursuing strtagues that add value to the firms products, which enables the firm to raise prices and or maintain an existing customer base

Question 7

how do managers increase the rate at which the firms profits grow

Answer 7

by pursuing strategies to sell more products in existing markets pr by pursuing strategies to enter new markets

Question 8

what helps boost profitability and rate of profit growth

Answer 8

making a decision to expand International

Question 9

what is the amount of value a firm creates

Answer 9

generally measured by the difference between its cost of production and the quality that consumers perceive in its products

Question 10

why is the price that gets charged tend to be slightly less than the value placed on the product by many customers

Answer 10

• consumer surplus
• cant segment the market to a degree that the firm can charge each customer a price that reflects a specific customers assesment of the value of a product which is aka customers reservation price

Question 11

what is the firms value creation

Answer 11

Performing activities that increase the value of goods or services to consumers.

Question 12

what is a low cost statregy

Answer 12

a strategy that focuses primarily on lowering production costs

Question 13

what is a differentiation strategy

Answer 13

a strategy that instead focuses primarily on increasing the attractiveness of a product

Question 14

what did Michael porter argue

Answer 14

that low cost and differentiation are two basic statregies for creating value and attaining a compeotove advantage in an industry

Question 15

what does Michael porter say about superior profitability

Answer 15

goes to those firms that can create superior valuee and the way they create this is to drive down the cost structure of the business and to differentiate the product

Question 16

in order for a firm to maximize profitability, what should a firm do

Answer 16

1) pick a position on the efficiency frontier that is viable in the sense that there is enough demand to support that choice
2) configure its internal operations so that they support that position
3) make sure that the firm has the right org structure in place to execute its strategy

Question 17

what are operations

Answer 17

The various value creation activities a firm undertakes.

Question 18

how can firms change the basis of competition

Answer 18

by pursuing innovate strategies that offer more value to its customer set, at a lower cost than its rivals can attain

Question 19

the operations of a firm can be though of as what

Answer 19

a value chain composed of a series of distinct value creation activities

Question 20

what are primary activities

Answer 20

have to do with the design, creation and delivery of the product

Question 21

what are the four sections that primary activities are divided into

Answer 21

research and development, marketing and sales and customer service and production

Question 22

what is research and development

Answer 22

concerned with the design of products and production processes
many service companies can undertake r and d
create value

Question 23

what is production

Answer 23

creation of a good or service
for physical= manufacturing
for services= usually when a service is delivered to the customer
create value if you perform its activities efficiently so there are lower costs

Question 24

how do marketing and sales functions of a firm help create value

Answer 24

through brand positioning and advertising
creating a favourable impression means increasing prices
discovering consumer needs and communicating them back to the r and d function of the company which can ten design products that better match those needs

Question 25

what is the role of the enterprises service activity

Answer 25

ti provide after sale service and support helps create a perception of superior value in the minds of consumers by solving customer problems and sporting customers after they have purchased the product

Question 26

what do the support activities of the value chain do

Answer 26

allow the primary activities to happen in terms of getting a compete advantage, can be more important than primary activities

Question 27

how do info systems help create value in creation activities

Answer 27

can alter the efficiency and effectiveness with which a firm manages its other value creation activities

Question 28

what does the logistic function do (support activities )

Answer 28

controls the transmission of physics material through the value chain, fro, procurement through production and Into distribution more efficient = reduce costs= creating more value

Question 29

what is the human resource function (support activities )

Answer 29

company has the right mix of skilled people to perform its value creation ctibties effeincly people are adequaloty trained, motivated and compensated can boost the competitive position of the firm by hiring skilled managers

Question 30

what is company infratsrytuce (support activities )

Answer 30

includes the org structure, control systems and culture of the firm top management is also. a part of this because they have influence over the aspects stated above strong leadership from top management can shape the infrastructure of a firm and the value creation activities

Question 31

firms that operate internationally can

Answer 31

1. expand the size of the market for their domestic prodicts by selling those products in a global market place 2, realize location economies by dispersing value creations to those worldwide locations where they can be performed most efficiently and effectively 3. realize greater cost economies 4. earn a greater return on investment

Question 32

how can a company increase its growth rate

Answer 32

by taking goods and services developed at home and selling them internationally also about the core competencies that underline the selling of these goods

Question 33

what is core competence

Answer 33

Firm skills that competitors cannot easily match or imitate. create a compeotove advantage as they can lower the costs of value creation and create value

Question 34

what are location economies

Answer 34

Cost advantages from performing a value creation activity at the optimal location for that activity.

Question 35

locating a value creation activity in the optimal location for that activity can have which two effects

Answer 35

can lower the costs of value creation and help the firm achieve a low cost position or/ and it can enable a firm to differentiate its product offering from those compeotoors lowering c and increasing v

Question 36

what is a global web

Answer 36

When different stages of value chain are dispersed to those locations around the globe where value added is maximized or where costs of value creation are minimized. can better differentiate its product offering (rating v) and lower its costs however if countries start becoming more nationalistic and raising trade barriers may be an issue

Question 37

what complicates location economies

Answer 37

trassporation costs and trade barriers have to asesss the poloicitcal and economic risks (could have a totalitarian gvt, or bad economic policies )

Question 38

what is the experience curve

Answer 38

systematic production cost reductions that occur over the life of a product. As a company produces more units of a product, it tends to learn and improve its processes, leading to efficiency gains and cost reductions.

Question 39

what are the two things that affect the experience curve

Answer 39

learning effects and economies of scale

Question 40

what are learning effects

Answer 40

Cost savings from learning by doing. you become more productive over time as you learn how to do the task have to repeat the task learning effects are more significant when you repeat a complex task many times

Question 41

what are economies of scale

Answer 41

Cost advantages associated with large-scale production. when your price per unit decreases because you produce so much spreads fixed costs over a large volume serve a global market more bargaining power with suppliers

Question 42

what happens when a firm moves down the experience curve

Answer 42

a firm reduces its cost of creating about and increase its profitability

Question 43

how should a firm move down the experience curve

Answer 43

increase the volume produced by a single plant as rapidly as possible serve a global market from a single location firm may need to price and market aggressively so demand expands

Question 44

leveraging the skills created within subsidiaries and applying them to other operations within a firms global network may

Answer 44

create value

Question 45

how does leveraging subsidiary skills create challenges for managers

Answer 45

- managers must have the humility to recognize that valuable skills ghat lead to competencies can arise anywhere within the firms global network - must establish an incentive system that encourages local employees to acquire new skills and this may be difficult - managers must gave a process for identifying when valuable new skills have been created - managers must act as facilitators--> helping transfer valuable skills within the firm

Question 46

profitability and profit growth summary

Answer 46

- firms that expand globally can increase profit and growth where they enter new markets that lack similar skills, lowering costs through locatiob economies, exploitubg the experience curve, transferring valuable skills between subsidiaries - by doing two at once, could be getter - may lower prices to get greater economies of scale --> may increase profit because prices are lower

Question 47

firms that compete in the global marketplace face twi types of competitive pressure that affects their ability to realize location economies

Answer 47

- pressures of cost reductions - pressures to be locally repsnisve

Question 48

what are pressures of cost reductions

Answer 48

- requires a firm ti try and minimize its unit costs - lower the costs of value creation - may be hard when the cost is what separates the product (universe needs) - may be hard when your competitors are in low cost locations

Question 49

what are pressure to be locally responsive

Answer 49

- requires a firm to differente its product from country to country and acomdate the needs and wants of each specific country, raises the firms cost structure

Question 50

why have some argued that local customization is on the decline

Answer 50

- there are many standardized products that are becoming world widely accepted - more homogeneity in the global marketplace - young customers are becoming more homogeneous in their needs and wants - however this argument doesn't really hold

Question 51

pressures for local responsiveness arise from what

Answer 51

- differences in infrastructure or traditional practices among countries so you need to customize prodicts - also different traditional practices that need to be accommodated - may have to be responsive to differences in distribution channels - economic and political demands imposed by host country gvt --> regulations - rise of regionalism

Question 52

when there are pressures for local resposinsivness, what are the consequences

Answer 52

firms may not realize the full benefits from economies of scale, learning effects and location economies - may not be able to leverage skills

Question 53

what are the four main strategic postures

Answer 53

global standardization statrtegy, a localization strategy, a transnational statrtegy and an international statrtegy

Question 54

what is a global standardization strategy

Answer 54

A firm focuses on increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning effects, and location economies - dont customize so they can get economies of scale and learning effects - in many industrial goods industries where there are universal needs - evene though its seen as lower cost, may also raise costs --< but as long as the cost reductions outweigh the additional costs, its fine - need strong org culture

Question 55

what is a localization strategy

Answer 55

Increasing profitability by customizing the firm’s goods and services so that they provide a good match to tastes and preferences in different national markets. - increasing value in the local market - firms still have to be efficient and try to get economies of scale - cost pressures are low

Question 56

what is a trasnantioanl strategy

Answer 56

- cost pressures are high and local responsiveness is high Attempt to simultaneously achieve low costs through location economies, economies of scale, and learning effects while also differentiating product offerings across geographic markets to account for local differences and fostering multidirectional flows of skills between different subsidiaries in the firm’s global network of operations. - even though attractive, not easy

Question 57

what do Christopher Bartlett and usmnatra Ghoshal argue

Answer 57

- when its so competitive, firms have ti respond to pressures of cost reductions and local respnsivnes - have to get location economies and experience effect, transfer core compeoitnecies - make sure trasnantinal enterprises also focus on leveraging subsidiary skills

Question 58

what is the international strategy

Answer 58

Trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies. - minimal customize - centralize prodict development but will etsbakish manufacturing and marketing functions where they do business

Question 59

what is the con with the inetrantionak statrgey

Answer 59

- over time competitors will emerge and if mangagers dont take the proactive steps to reduce their firms cost structure, it will be rapidly outflanked by efficient global competitors - may not be viable in the long term and that firms may need to shift toward a global standardization or trasnantioanl srategt

Question 60

macro environment

Answer 60

- increase in trade barriers - war, climate change, disease could affect the investment and statregic choices of international business