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Flashcards in Final Exam Deck (31)
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1

Two Business Strategies

1. Low cost --> economies of scale, standardization, functional
2. Differentiation --> customization, adaptation, decentralized

2

Four Organizational Structures

Simple
Functional
Divisional
Matrix

3

Pros/Cons of Functional Structure

+Efficiency
+consolidation, control
-difficult to establish uniform standards of performance

4

Pros/Cons of Divisional Structure

+Effectiveness
-Duplication of activities

5

Pros/Cons of Matrix Structure

+Efficient utilization of resources
+Improved communication, flexibility
-Confusion of leadership, conflicts of power

6

Cost-Adaption Framework: Low cost, Low Adaption

International Strategy

7

Cost-Adaption Framework: High cost, Low Adaption

Global Strategy

8

Cost-Adaption Framework: Low cost, High Adaption

Multi-domestic Strategy

9

Cost-Adaption Framework: High cost, High Adaption

Transnational

10

Four Reasons to Outsource

1. Reduce costs
2. Access supplier core competency
3. Focus on high value-add activities
4. Flexibility

11

Two ways to reduce costs when outsourcing

1. Lower cost structure (wages)
2. Supplier economies of scale

12

Focus on high value add activities (2)

1. Smile curve
2. Economic profit vs. accounting profit, opportunity cots

13

Four Transaction Costs

1. Search
2. Negotiation
3. Monitoring
4. Enforcement

14

Seven Administrative Costs

1. Differences in optimal scale
2. Developing distinct competencies
3. Managing Strategically different businesses
4. Incentive problem
5. Competitive affects of VI (HTC)
6. Compounding risk
7. Flexibility

15

Why Vertically Integrate? (6)

1. Transactions costs > Admin costs
2. Create market power, raise barriers to entry
3. Market failure
4. Counter market power
5. Develop a market (new, or there is exiting happening)
6. Strategy (Apply in retail)

16

Three Market Failures

1. Small number of buyers and sellers
2. Asset specificity (location, technical, human capital)
3. Frequent transactions

17

High Frequency, Low Asset Specificity

Structured Transaction

18

Low Frequency, Low Asset Specificity

Standardized Contracts

19

High Frequency, High Asset Specificity

Vertically Integrate

20

Low Frequency, High Asset Specificity

Unique Contract

21

BCG Matrix Limitations/Assumptions (5)

1. That there is a correlation between market share and profit (Livenation)
2. Growing industries are easy (HTC, Sony)
3. Ignores interdependencies between SBUs
4. Is subjective
5. Balanced portfolio of internal cash flows

22

Operational Economies of Scope (2)

1. Sharing activities
2. Transferring skills, part of competitive advantage

23

Two sharing activities

1. Reduce costs, economies of scale
2. Increased revenue: bundling, reputation spillover

24

Financial Economies of Scope (3)

1. Risk reduction
2. Tax advantages
3. Internal capital allocation

25

Anti-competitve Economies of Scope (2)

1. Multi-market competition, mutual forbearance
2. Market power, cross-subsidation, predatory pricing

26

Managerial Economy of Scope (1)

Firm size drives manager compensation, agency theory, primary reason for many mergers

27

Porter Three Tests for Diversification

1. Attractiveness, 5 forces analysis
2. Cost of Entry, must not capitalize future profits
3. Better Off, operational economies of scope?

28

Reasons for Mergers that usually lead to competitive advantage (4)

1. Revenue enhancements
2. Cost savings
3. Transferring skills/technology
4. Market Power

29

Reasons for Mergers that usually do NOT lead to competitive advantage (5)

1. Ensuring survival
2. Tax benefits
3. Defensive
4. Financial engineering
5. Managerial pay increase

30

Why do mergers often fail?

1. Overpay
2. Integration failure
3. Wrong motivation

31

Why did Coke want to buy its bottlers? (3)

1. Stop negotiating
2. faster introduction of new products, flexibility
3. Reconfigure distribution channel and reduce redundancies