Exam 3 Flashcards
(36 cards)
Single business diversification
generates 95% + of the sale revenue
Dominant Business Diversification
Generates 70-90% of the sales revenue
Related contained diversification strategy
links between the diversified items are linked
Related linked diversification
only a few links between divirsified items
unrelated diversification
Highly diverse - no relevant relationsjip
MArket power blocking
multipoint competition
Value neutral diversification
Anti-trust regulations, tax laws, etc
Operational relatedness
provides opportunities to share resources among operational activities
Corporate relatedness
Provides opportunities for transferring competencies across the firm
Vertical intergration
when a company produces it’s own inputs
Financial economies
cost savings realized through improves allocations of financial resources
Forward integration
Moving the company to an adjacent line of business
backward integration
startes creating it’s own input
Sustainability
Good stewardship of natural resources
Normative ethics
creeps - How one ought to act
Corporate social responsibility
Concerned with the morale of SH and management
Triple bottom line
profit people planet
Negative externalities
production of good/service results in a net cost to third party
3 internal corp governance
ownership concentration, types of SH + #, board of directors
3 external corp governance
Market for corporate control, regulators, and creditors
Agency efficiency
achieving best ratio of cost/benefit within the relationship
Agency issues
Principal and agent have different goals
SH lack of direct control
Expensive to verify agent’s action
falls prey to managerial oppurtunism
Agency cost
Sum incentives cost, monitor cost, etc for max compliance
Large block SH
owns > 5%
