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Flashcards in Mgt 4335-Chapter 6&8 Deck (13):
1

T-Why are corporations increasingly using information technology strategy?

To provide business units with competitive advantage. For example, FedEx and UPS by using their Web site to track their packages. Multinational corporations are finding that having a sophisticated intranet allows employees to practice follow-the-sun-management, in which project team members living in one country can pass their work team members in another country in which the work day is just beginning.

2

TT-What is Outsourcing meant?

Outsourcing is purchasing from someone else a product or service that had been previously provided internally. Outsourcing is becoming an increasingly important part of strategic decision making and an important way to increase efficiency and often quality. For example, Boeing used outsourcing as a way to reduce the cost of designing and manufacturing its new 787 Dreamliner. Up to 70% of the plane was outsourced.

3

TT-What is Offshoring meant?

Offshoring is the outsourcing of an activity or a function to a wholly owned company or an independent provider in another country. For example, IBM acquired Daksh eServices Ltd., one of India's biggest suppliers of remote business services.

4

T-What are seven major errors should firms avoid?

1. Outsourcing activities that should not be outsourced: Companies failed to keep core activities in-house.
2. Selecting the wrong vendor: Vendors were not trustworthy or lacked state-of-the-art processes.
3. Writing a poor contract: Companies failed to establish a balance of power in the relationship.
4. Overlooking personnel issues: Employees lost commitment to the firm.
5. Losing control over the outsourced activities: Qualified managers failed to manage the outsourced activity.
6. Overlooking the hidden costs of outsourcing: Transaction costs overwhelmed other savings.
7. Failing to plan an exit strategy: Companies failed to build reversibility clauses into the contract.

5

T-What should the strategist determine in functional strategy?

Identify the company's or business unit's core competencies.
Ensure that the competencies are continually being strengthened.
Manage the competencies in such a way that best preserves the competitive advantage they create.

6

T-What is Strategic alliance meant?

It is a long-term cooperative arrangement between 2 or more independent firms or business units that engage in business activities for mutual economic gain.

7

T-Why do companies or business units form a strategic alliance?

1. To obtain or learn new capabilities: Firms with strategic alliances had more modern manufacturing technologies than did firms without alliances. For example, GM and Chrysler formed an alliance to develop new fuel-saving hybrid engines for their automobiles.
2. To obtain access to specific markets: Their primary reason for engaging in alliances was the need for fast and low-cost expansion into new markets. For example, Budweiser to other brewers such as Modelo in Mexico and Kirin in Japan.
3. To reduce financial risk: Alliances take less financial resources than do acquisition or going it alone and are easier to exit if necessary.
4. To reduce political risk: Forming alliances with local partners is a good way to overcome deficiencies in resources and capabilities when expanding into international markets.

8

T-What are 3 types of alliances range?

From Mutual Service Consortia to Joint Venture/Licensing Arrangement to Value-Chain Partnerships.

9

T-What is Mutual Service Consortia meant?

It is a partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone. For example, IBM establish a research alliance with Sony Electronics and Toshiba to build its next generation of computer chips.

10

TT-What is Joint Venture meant?

It is a " cooperative business activity, formed by 2 or more separate organizations for strategic purposes, that creates an independent business entity and allocates ownership, operational responsibilities, and financial risks and rewards to each member, while preserving their separate identity/autonomy."

11

TT-Which type of alliance is the most popular form of strategic alliance?

Joint Venture because the companies involved don't want to or cannot legally merge permanently. For example, Proctor&Gamble formed a joint venture with Clorox to produce food-storage wraps.

12

T-What is Licensing Arrangement meant?

It is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product. For example, Yum! Brands successfully used franchising to establish its KFC, Pizza Hut, Taco Bell,...

13

T-What is Value-Chain Partnership meant?

It is a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage. For example, Folgers and Millstone coffee, worked with coffee alliance makers Mr. Coffee, Krups to use technology licensed from Black&Decker to market a pressurized, single-serve coffee-making system called Home Cafe.