Exam 1 Study Guide Material Flashcards
(33 cards)
Strategic Management Model
Strategic Management Model:
Mission Statements
defines firms purpose and spectrum of operations in terms of products and markets
Strategic Management Model:
Strategic Vision
presents management’s views and aspirations concerning the organization’s long term decisions and future scope of opertaions
addresses “where are we heading”
Strategic Management Model:
Policies
broad guideline for decision making that links the formulation of strategy with its implementation.
SWOT Matrix
Internal Strengths
Internal Weaknesses
External Opportunities
External Threats
Strategy Formulation Process
- Identify current corporate level strategy
- review external environment and conduct market analysis
- assessment of internal resources, organization structure, human resource skills and competences, and technological expertise
- evaluate strategic alternatives
- selection of a strategy
Hierarchy of strategy
- Corporate Level Strategy
- master strategy
- Line of Business Strategy
- how are we going to compete in the industry
- how are we going to allocate resources
- Functional Strategy
- marketing plan and 4 P’s
- Finance
- HR Plan
- Operations/production
- Research and Development
Harvest Strategy
- Between maintenance and abandonment
- business in declining market
- have small market share
- unattractive profits
- do not contribute to sales stability
- costs are cut
Michael Porter’s Generic/Business Strategies
- Cost leadership
- Differentiation Strategy
- product that is unique
- Focus Strategy
- specific geographic markets
- particular group of customers
- Focus- Low Cost
- products to niche group at low cost
- Focus- Differentiation
- concentration on narrow buyer segment
friendly takeover
merger or acquisition in which the target firm’s management supports and endorses the acquiring firms action
hostile takeover
merger or acquisition in which the target firm’s management opposes the acquiring firm’s action
shark or raider
the acquiring firm or individual in an unfriendly takeover
shark repellent
short term strategies that attempt to discourage sharks
tender offender
a public offer by a prospective acquiring firm to the shareholders of a target firm for them to sell their shares at a specific price and/or orther consideration
poison pill
long term strategies to discourage sharks
golden parachutes
employment contracts for top managers that provide for compensation in the event of their dismissal and/or resignation resulting from the firm’s acquisition
white knight
a friendly acquiring firm that comes to the rescue of a firm facing a hostile takeover
leveraged buy-out
the acquiring firm borrows a portion of the funds to purchase controlling interest in the target, usually pledging the assets of the target as collateral
target
a firm identified as a prospect to be acquired
bidding war
more than one prospective acquiring firm makes tender offers for a target firm. Usually the tender offers are for increasingly higher prices for the target’s shares
junk bonds
subordinated debt instruments usually specifying premium interest rates issued by an acquiring firm to finance a takeover
greenmail
a premium over the market price paid by a target firm to corporate raiders, holding a significant percentage of the firm’s stock. The objective is to remove the raiders as prospective acquirers of the target firm
Hostile takeover defense strategies
- “fair price” in corporate charter-requires that all shareholders recieve same price for their stock in the event of a takeover bid
- corporation buys back its voting stock
- stagger control of the board of directors
- pac-man defense- attempt to acquire the hostile company initiating the acquisition
- avoid having large amounts of cash on hand
- allow bondholders to cash in quickly in the event of a hostile takeover
- seek a white knight
- seek high levels of debt
- golden parachutes for executives
- all top and middle management will resign enmass
Functions of finance/accounting
- Investment decision
- aka capital budgeting
- allocation and reallocation of capital and resources to projects and divisions of an organization
- Financing decision
- determining the best capital structure for the firm and examining various methods by which the firm can raise capital
- must consider both short-term and long-term needs for working capital
- Dividend decisions
- issues such as percentage of earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock.
- determine amount of funds retained compared to amount paid to stockholders
