Chapter 5 Flashcards
(40 cards)
1
Q
Acquisition
A
• Occurs when a large organization purchases (acquires) a smaller firm, or vice versa
2
Q
Backward integration
A
- Strategy of seeking ownership or increased control of a firm’s suppliers
- Strategy especially appropriate when a firm’s current suppliers are unreliable, too costly, or cannot meet the firms needs
3
Q
Balanced scorecard
A
- An effective balanced scorecard contains a good combo of strategic and financial objectives tailored to the business
- Good blend of financial and non-financial measures like product quality and customer service
4
Q
Bankruptcy
A
- Effective type of retrenchment strategy
- Can allow a firm to avoid major debt obligations and to void union contracts
- 5 types of bankruptcy: Chapter 7, 10, 11, 12, and 13
5
Q
Business-process outsourcing (BPO)
A
- Involves companies taking over the functional operations, such as HR, information systems, payroll, accounting, customer service, and even marketing for other firms
- BPO is a means for achieving strategies that are similar to partnering and joint venturing
6
Q
Combination strategy
A
- A combination of 2 or more strategies
* Risky if carried too far because no organization can afford to pursue every strategy due to limited resources
7
Q
Cooperative arrangements
A
• Research and development partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing agreements, and joint-bidding consortia
8
Q
Cost leadership
A
- Part 1 and 2 of porter’s 5 generic strategies
- Emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive
- Part 1- low cost- offers products or services to a wide range of customers at the lowest price available on the market
- Part 2- best value- offers products or services to a wide range of customers at the best price-value available on the market- lowest prices available compared to rivals
9
Q
De-integration
A
- Instead of owning their suppliers, companies negotiate with several outside suppliers
- Makes sense in industries that have global sources of supply
10
Q
Differentiation
A
- Part 3 of porter’s 5 generic strategies
- Strategy aimed at producing products and services considered unique industry wide and directed at consumers who are relatively price-insensitive
11
Q
Diversification strategies
A
- Related vs. unrelated diversification strategies
* Explained further on their own
12
Q
Divestiture
A
- Selling a division or part of an organization
- Often used to raise capital for further strategic acquisitions or investments
- Can be part of retrenchment strategy to rid unprofitable businesses within an organization
- Six guidelines for divestiture on page 148
13
Q
Financial objectives
A
• Include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, greater ROI, higher EPS, a rising stock price, improved cash flow, etc.
14
Q
Financial objectives
A
• Include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, greater ROI, higher EPS, a rising stock price, improved cash flow, etc.
15
Q
First mover advantages
A
- Refers to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms
- Benefits of being a first move on page 157
16
Q
Focus
A
- Parts 4 and 5 of porter’s generic strategies
- Producing products and services that fulfill the needs of small groups of consumers
- Part 4- low-cost focus- strategy that offers products or services to a small range (niche group) of customers at the lowest price available on the market
- Part 5- best value focus- strategy that offers products or services to a small range of customers at the best price-value focus strategy that aims to offer a niche group of customers products or services that meet their requirements better than rivals’ do
17
Q
Forward integration
A
• Involves gaining ownership or increased control over distributors or retailers
18
Q
Franchising
A
- Effective means of implementing forward integration
* Many businesses use franchises to distribute their products or services
19
Q
Friendly merger
A
• Term for when the merger or acquisition is desired by both firms
20
Q
Generic strategies
A
- Porter’s 5 strategies
* Cost leadership- low cost, cost leadership- best value, differentiation, focus-low cost, focus- best value
21
Q
Horizontal integration
A
- Refers to a strategy of seeking ownership of or increased control over a firm’s competitors
- Most significant trend of strategic management today is the used of horizontal integration as a growth strategy
- Ex: mergers, acquisitions, and takeovers allow for increased economies of scale and transfer of resources
22
Q
Hostile takeover
A
• Term for when a merger or acquisition is not desired by both parties
23
Q
Integration strategies
A
• Forward, backwards, and horizontal integration
24
Q
Intensive struggles
A
- Term for market penetration, market development, and product development
- All require intensive efforts if a firm’s competitive position with existing products is to improve
25
Joint venture
* Popular strategy that occurs when 2 or more companies from a temporary partnership or consortium for the purpose of capitalizing on some opportunity
* The 2-3 form a separate organization and have shared equity ownership in the new entity
* Guidelines and problems listed on page 155
26
Leveraged buyout (LBO)
• Occurs when a corporation’s shareholders are bought by the company’s management and other private investors using borrowed funds
27
Liquidation
* Selling all of a company’s assets, in parts, for their tangible worth
* Recognition of defeat and consequently can be an emotionally difficult strategy
* 3 guidelines for liquidation on page 148
28
Long-term objectives
* Represent the results expected from pursuing certain strategies
* Strategies represent the actions to be taken to accomplish long term objectives
* 2-5 year timeline
29
Market development
• Involves introducing present products or services into new geographic areas
30
Market penetration
* Seeks to increase market share for present products or services in present markets through greater marketing efforts
* Widely used alone and in combo with other strategies
* Includes increasing the number of salespersons, increasing advertising expenditures, offering extensive sales promotion items, or increasing publicity efforts
31
Merger
* Occurs when 2 organizations of about equal size unite to form one enterprise
* Reasons for failure and benefits listed on pages 156-157
32
Product development
* Strategy that seeks increased sales by improving or modifying present products or services
* Entails large research and development expenditures
33
Related diversification
* When their value chains possess competitively valuable cross-business strategic fits
* Look at guidelines on the bottom of page 144
34
Retrenchment
* Occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits
* Also called a turnaround or reorganizational strategy
* Designed to fortify an organization’s basic distinctive competence
* Can include selling off land or building to raise cash
35
Strategic objectives
• Include things like a larger market share, quicker on-time delivery than rivals, shorter design-to-market times than rivals, lower costs than rivals, higher product quality than rivals, wider geographic coverage than rivals, achieving technological leadership, consistently getting new or improved products to market ahead of rivals, etc.
36
Takeover
• Term for when a merger or acquisition is not desired by both parties
37
Turbulent, high-velocity markets
* Industries that change fast
* Like telecommunications, medical, biotechnology, pharmaceuticals, computer hardware, software, and virtually all internet-based industries
38
Unrelated diversification
* When their value chains are so dissimilar that no competitively valuable cross-business relationship exists
* Look at the guidelines on the bottom of page 145
39
Vertical integration
• Collective term for forward integration, backward integration, and horizontal integration
40
White knight
• Term that refers to a firm that agrees to acquire another firm when that other firm is facing a hostile takeover by some company
