strat_-_april_15_20240417215839 Flashcards

Question

What are the three categories of intangile resources?

Answer 1

Human resources: knowledge, trust, skills, collaboration Innovation: ideas, scientific capabilities, innovation capacity Reputational resources: brand name, perception of quality, reputation with suppliers and customers

Answer 2

Tangible: hard to leverage, difficult to derive additional business or value from tangible resources Intangible: Can be leveraged. Less visible, harder for competitors to understand, purchase, substitute, etc. More relied on for the foundation of a firm's capabilities

Answer 3

Capabilities that serve as a source of competitive advantage for a firm over its rivals. - Emerge through time by accumulating and learning how to deploy resources and capabilities. - How the firms adds unique value

Answer 4

Shows how a product moves from raw material stage to final customer Template that a firm uses to analyze costs and identify means that can be used to facilitate implementation of a strategy.

Answer 5

activities the firm completes in order to support the work being done to produce, sell, distribute and service the products the firm is producing. Can develop a capability/competency in any of the value chain activities

Answer 6

The resource or capability must allow the firm to perform an activity in a better way than its competition or create value that the competitors cannot complete

Answer 7

When firm cannot create value in a value chain activity or support activity, they use outsourcing. It is the purchase of a value-creating activity or a support activity from an exeternal supplier

Answer 8

Outsource when: they cannot create value or are at a substantial disadvantage compared to competitors. Creates value by: increasing flexibility, mitigating risks, reduce CAPEX

Answer 9

1. Helps business ofucs on broader business issues (Access world class abilities and higher efficiency) 2. Free resources for other purposes 3. Accelerate re-engineering benefits (use others who have already re-engineered to take over processes) 4. Share risk (reduce CAPEX, more flexible, easier to adapt)

Answer 10

If you dont already know this, you should drop out of desautels External: Opportunities/threats Internal: Strength/weakness

Answer 11

– Understanding key competitive forces that shape competition in an industry – Identify key success factors – Predict future industrial profitability – Find strategy

Answer 12

Mechanisms used to manage relationships among stakeholders and determine and control the strategic direction and performance of organizations. - eastablish harmony between firm owners and top-level managers

Answer 13

When one party delegates decision-making responsibility to a second party for compensation.

Answer 14

1. Principal and agent might have different interests/goals (e.g. owner and manager) 2. Agent makes decisions that result in pursuing goals that conflict with those of the principal

Answer 15

Seeking of self-interest with deceit. It prevents maximization of shareholder wealth Arrive due to divergent interests of agents and principals

Answer 16

Provides a broad overview of a firm's operations throughout the year to shareholders. Normally one per year Financial results, stock price, market position, plans

Answer 17

Sum of incentive costs, monitoring costs, enforcement costs, financial losses incurred by principals because of governance mechanisms. Larger in diversified firms

Answer 18

1. Ownership concentration: Amount of stock owned 2. Board of directors: individuals responsible for representing the firm's owners by monitoring top-level managers' strategic decisions 3. Executive compensation: Salary, bonuses, long-term incentives to align manager with shareholders' interest 4. Market for corporate control: Purchase of firm that is underperforming in order to improve strategic competitiveness

Answer 19

diffuse ownership (large nb owners) produces weak monitoring and control of managerial decisions High degrees of ownership concentration increases the probability that managers' decisions will be designed to maximize shareholder value. Institutional owners can significantly influence strategies as they can force managers/BoD to make decisions that are in the best interest of shareholders'

Answer 20

Elected individuals who are responsible for acting in the owners' best interest by formally monitoring and controlling the firm's top-level managersh

Answer 21

Insiders: CEO/top lvl managers Related outsiders: Individuals univolved in day-to-day operations but who have relationship (family memebers, banks, legal, ex CEO) Independent outsiders: Completely independent of the firm's day-to-day operations and other relationships

Answer 22

Governance mechanism that seeks to align interest of amangers and owners through salaries, bonus, long-term inventives

Answer 23

Corporate governance mechanisms used by ethically responsible leaders and companies increase the likelyhood the firm will be able to at least minimally satisfy all stakeholders' intereest

Answer 24

- Argues against social responsibility, primary goal should be to optimize profits - Only social responsibility of business is to use its resources to maximize profit

Answer 25

- Business has obligation to create value for range of stakeholders. not just shareholders. - Creates trade-offs in its returns to investors but can lead to a more sustainable business with fewer risks

Answer 26

1. Economic responsibility: profitable enough to reward creditors and shareholders 2. Legal responsibility: act legally 3. Ethical responsibility: Follow ethical principles held by society 4. Discretionary responsibilities: Voluntary obligations

Answer 27

1. Sustainability reporting (sustainability reports or ESG metrics) 2. CSD ratings and indexes (Morgan stanley's MSCI, WRDS, etc) 3. Impact assessments: S&P global trust carbon emission analysis

Answer 28

Shareholders and leders expect a firm to preserve and enhance their wealth. Risk-Return relationship

Answer 29

Customers, suppliers, host communities, union

Answer 30

Employees Leaders

Answer 31

Identify key stakeholders and influence them effectively using communication

Answer 32

Coordinating commitments and actions to build a competitive advantage

Answer 33

Something that every firm must have to create a difference between them and their competitors

Answer 34

Describes how the firm creates, delivers and captures value. Framework for how they will use processes. Path to gain competitive advantage

Answer 35

A firm licenses its trademark and the processes it follows to create and deliver a product to franchisees.

Answer 36

The firm provides a basic product to customers for free and earns revenues and profits by selling a premium version of the service.

Answer 37

For a fee, a firm provides advertisers with high-quality access to its target customers

Answer 38

A firm offers a product to customers on a regular basis such as once-per-month, once-per-year, or upon demand.

Answer 39

A business matches those wanting a particular service with those providing that service.

Answer 40

1. Basis for customer value: - achieve lower cost than rivals - Possess ability to differentiate or perform different/higher value activities 2. Competitive scope: - Broad scope: firm competes in many segments - Narrow scope: Selects a segment or group of segments and tailors their offering to them

Answer 41

SWOT of the environment and resources

Answer 42

Provide P/S at lowest cost relative to competitors. Standardized G/S, sometimes a little differentiation and industries that process innovation is possible.

Answer 43

Loss of competitive advantage due to newer competition Failure to detect changes in needs Imitating cost leader's competitive advantage

Answer 44

Integrated set of actions to produce products (at an acceptable cost) that customers perceive as being different in ways that are important to them. Non-standardized products, ppl value different features instead of only low cost

Answer 45

differentiated products are no longer worth a premium Unable to create enough differentiation for which ppl will pay additional price Counterfeiting competitiors creating similar features but at a lower cost

Answer 46

Process engineering, centralized staff, formalized procedures, very mechanical.

Answer 47

Marketing, R&D, decentralized functions, less formalized to foster change, less structured job roles

Answer 48

Serve needs of a specific segment. Can be focused cost leadership or focused differentiation.

Answer 49

Small niches, lack of resources, direct resources to build competitive advantage in value chain, serve smaller segment more effectively

Answer 50

Competitors serve an evern more narrow market segment and serve them better The industry decides it needs to focus more on this segment Reduction in differences between needs of narrow segment and industry wide market

Answer 51

Low cost and some product differentiation. By having two sources of competitive advantage, it is possible to increase primary value chain activites in which the firm becomes competent Must be flexible

Answer 52

1. Flexible manufacturing systems (FMS) 2. Information networks 3. Total quality management (TQM)

Answer 53

Computer controlled process used to produce variety of products in moderate, flexible quantities with limited manual intervention. allows low cost versus product variety tradeoff that happens in manufacturing

Answer 54

Helps the firm satisfy customer expectations in terms of product quality and delivery speed

Answer 55

effective TQM allows the firm to develop flexibility needed to identify opportunities to simultaneously increase differentiated features and reduce costs

Answer 56

Involves compromises, wont become lowest cost nor most differentiated. Stuck in the middle, you compete at a disadvantage are are unable to earn more than average returns.

Answer 57

Value chain activity Activities related to receiving, storing and distributing inputs to a product

Answer 58

Value Chain activity Activities necessary to convert inputs from inbound logistics to a finished good

Answer 59

Value Chain activity Activities involved in collecting, storing, and physically distributing the product to customers

Answer 60

Value Chain activity Activities completed to provide means to purchase products and induce them to purchase them

Answer 61

Value Chain activity Activities designed to enhance or maintain a products value

Answer 62

Support activity Activities related to purchasing inputs needed

Answer 63

Support activity Activities completed to improve a firm's product or manufacturing processes

Answer 64

Support activity recruiting, hiring, development, compensation

Answer 65

Support the work of the value chain. Legal, finance, government relations, general management, etc

Answer 66

The actions a firm must take in order to develop a competitve advantage by managing and selecting groups of businesses which compete in different product markets

Answer 67

1. Grow revenues/profits 2. diversification 3. Expected to help earn above-average returns by creating value

Answer 68

1. What product markets and businesses and firm should compete in 2. How headquarters should manage the businesses

Answer 69

All fimrs have one even if it is a single-line business, the decision to not operate in any other industries is still important. CEOs focus on corporate strategy (high level decisions) Bad corporate strategies (hedge funds, corporate raiders) Less well understood

Answer 70

Single business: 95%+ comes from single business Dominant business: 70-95% of revenue comes from a single busines

Answer 71

Related constrained: <70% from dominant business and all businesses share production, technological and distribution linkage related linked: <70% from dominant business and limited links between business

Answer 72

unrelated: <70% of revenues from dominant business and there are no common links

Answer 73

1. Scope of industries and market the firm competes in 2. How managers buy, create and sell different businesses to match skills and strengths with opportunities.

Answer 74

Expansion into multiple businesses that share inputs (tangible or intangible) (E.g. disney has animation, shops and theme parks all operating under DisneyCorp)

Answer 75

Expansion into businesses that make or use the output of other units (can occur in two directions) Pixal films <-- DisneyCorp --> Disney Stores

Answer 76

Backward/upstream integration: Manufacturing firm supplies its own raw materials Forward integration: Manufacturing firm moves into market/distribution function

Answer 77

Expand into multiple geographic markets to leverage investments

Answer 78

Firms can create operational relatedness by sharing primary or support activities. It can: - Costly to implement/coordinate - create unequal benefits for divisions - lead to fewer managerial risk-taking behaviors

Answer 79

Set of resources and capabilities that link different businesses. Normally through managerial/technology knowledge, experience and expertise.

Answer 80

1. Because the expense of developing a core competency has already been incurred so there is no need to allocate resources to develop it in a second business 2. Because intangible assets are difficult to understand/imitate, the unit receiving the corporate-level competence gains an immediate competitive advantage over rivals

Answer 81

Cost savings generating by sharing resources/capabilities or transferring one or more corporate-level competency that were developed in one business to another Reason to use related diversification strategy

Answer 82

Multipoint competition and vertical integration

Answer 83

When two+ diversified firms compete in the same product areas or geographical markets

Answer 84

1. Save on operations 2. Avoid sourcing/market costs 3. improve quality 4. protect technology from imitation by rivals 5. Exploit underlying capabilities in the marketplace

Answer 85

Cannot seek operational or corporate relatedness, therefore dont get the advantages which are harder to replicate. Works best in emerging economies

Answer 86

Cost savings from improved allocation of financial resources based on investments inside or outside of firm.

Answer 87

Efficient internal capital market allocation and asset restructuring

Answer 88

1. Antitrust laws (prevent mergers that increased market power, more of concern since early 2000s) 2. Used to be tax benefit by it has since been changed 3. Defensive strategy and reduces uncertainty of future cash flows (if product line is threatened, financial downtown, mature industries, etc) 4. Synergy 5. Managerial motives BUT Research shows low returns are related to greater levels of diversification

Answer 89

Synergy: When value created by business working together exceeds the value that the same units create working independently Creates interdependence --> risk averse or uninterested in pursuing new product lines Whether the product lines are pursued or not, it will lead to diversification either way. 1. Operate in environment that is more certain: related-diversification into industries lacking potential 2. Constrain level of activity sharing may produce additional, but unrelated diversification where the firm lacks expertise

Answer 90

Reason to diversify beyong value-creating or value-neutral levels are: desire for increased compensation or reducing managerial risk. Research shows diversification is correlated to firm size (firm grows --> more compensation and social status)

Answer 91

overdiversification and reduction in ability to create value. Managerial tendencies to overdiversify can be prevented with: governance mechanisms (BoD), monitoring by owners, executive compensation, market for corporate control. Evidence suggests that many top-level executives do not seek to diversify the firm in a way that destroys value

Answer 92

1. Market commonality 2. Resource Similarity They affect the drivers of competitive behavior (firm's awareness, motivation, ability to attack/respond) Direct competitors = high commonality and similarity

Answer 93

Number of markets with which a firm and a competitor are jointly involved and the level of importance these individual markets are to competitors

Answer 94

When competing firms compete in many markets

Answer 95

how comparable the competitors' tangible and intangible resources are to our own Similar types and amounts: similar strengths and weaknesses and use similar strategies Difficult to do if critical resources are intangible

Answer 96

Used in game theory. Reoresents games involving simultaneous moves with no communication. Single-period simultaneous game, the dominant strategy is one that is optimal regardless of what the rival does. Repeated games may influence current move due to threat of future retaliation.

Answer 97

Example of two people: Cooperate/cooperate (1,1) Cooperate/Defect (3,0) Defect/cooperate(0,3) Defect/defect (2,2) Chosen option is both defect and they are both worse off Happens withprice wards, real estate, shipping, anywhere with high entry/exit barriers

Answer 98

Firm that takes initial action to build/defend its competitive advantage or improve its market position Tend to be: aggressive, willing to experiment, take higher level of risks

Answer 99

Gain loyalty of customers, market share and proprietary technology (patents)

Answer 100

Invest a lot in R&D and rapidly and successfully product and market a stream of innovative products

Answer 101

Firm that responds to the first mover's action. Normally through imitation

Answer 102

- Study customers' reactions to product innovations - find mistakes first movers made - take time to develop processes and technology that are more efficient and create additional value Still need to respond quick enough to be successful second mover

Answer 103

Firm that responds to a competitive action a significant amount of time after the first/second mover's response.

Answer 104

- achieve less than 1st/2nd movers - require more time to understand how to create value - typically only earn average returns

Answer 105

1. slow-cycle markets 2. Fast-Cycle Markets

Answer 106

- Comp advantages are shielded from imitation for a long period of time - imitation costly - competitive advantages are sustainable - firms concentrate on competitive action and responses to protect, maintain, and extend proprietary competitve advantage

Answer 107

- comp advantage arent shielded for imitation - imitation happens quickly and somewhat expensively - comp advantages are not sustainable - non-proprietary technology is diffused rapidly

Answer 108

Research: - Shareholders of acquired firms earn above average returns from acquisition - Shareholders of acquiring firms earn returns close to - - acquiring firm stock price almost immediate falls Hard to know the worth of a target firm, which increases likelyhood of paying a premium. Value of target < premium = negative outcome

Answer 109

strategy where two firms agree to integrate their operations on a relatively coequal basis

Answer 110

Strategy where one firm buys controlling (or 100%) interest in another firm to make them a subsidiary busness. (most common)

Answer 111

Special type of acquisition where a firm does not solicit the acquiring firm's bid

Answer 112

company filings, press releases, news, consulting firm reports, M&A conference calls, etc

Answer 113

1. Difficult to integrate firms 2. Incorrectly evaluating value 3. Debt loads prevent long-term investment 4. Overestimating synergy 5. Too much diversification 6. Managers spend too much time/energy analyzing acquisition 7. Develop a firm that is too large which needs bureacratic rather than strategic controls

Answer 114

- considered to be strongest determinant of whether the M/A will be successfull - difficult and challenging - generates uncertainty and resistance due to culture clash and organizational politics.

Answer 115

need to: - meld 2+ unique cultures - Link financial and information controls - Build effective working relationships (especially when management styles differ) - determine leadership structure and those who will fill it for the integrated firm

Answer 116

Primary cooperative strategy where firms combine some of their resources and capabilities to create a mutual competitive advantage.

Answer 117

Major strategic alliance when two or more firms create a legally independent company to share some of their resources to create a competitive advantage. - partners own equal percentages and contribute equally to operations - formed to improve firm's ability to compete

Answer 118

- establish long-term relationships - transfer tacit knowledge (cant be codified, but it is critical to firms' effort in developing a competitive advantage)

Answer 119

One company purchases equity in another business (partial acquisition) or each business purchases equity in eachother (cross-equity transaction) They do this to ensure they have control over assets they commit to the alliance

Answer 120

Two or more firms develop a contractual relationship to share some resources to create a competitive advantage. - less formal - Fewer commitments from partners - doesnt foster intimate relationship - unsuitable for complex projects where success depends on the transfer of tacit knowledge - OUTSOURCING commonly occurs through non-equity strategic alliances

Answer 121

* Accessing Complementary Assets * Responding to Competitors’ Actions * Reducing Uncertainty and Competition

Answer 122

Leveraging partner strengths to enhance capabilities and access resources that are not available internaly to facilitate innovation and expansion

Answer 123

1. Vertical: firms share some resources from different stages of value chain 2. Horizontal: firms share some of their resource sfrom the same stage(s) of the value chain

Answer 124

Forming alliances to countermeasure competitors' moves, maintaining or improving market position

Answer 125

Collaborating to minimize industry uncertainties and competitive pressures. Stabalize market presence and foster cooperation

Answer 126

Used to reduce competition, differs from strategic alliances because they are an illegal cooperative strategy.

Answer 127

1. Explicit collusion: two+ firms negotiate directly about the amount to produce and for what price 2. Tacit collusion: two+ firms indirectly coordinate production and pricing by observing each other's competitive actions and responses

Answer 128

- inadequate contracts - Misrepresentation of competencies - opportunistic behavior (fail to commit resources and capabilities) - Must use risk management!

Answer 129

Used to hedge against risks created by uncertain competitive environments

Answer 130

Used to avoid excessive competition while the firm marshals its resources to improve its strategic competitiveness (collusion)

Answer 131

Strategy where the franchisor uses a franchise as a contractural relationship to describe the sharing of its resources with its partners. BRAND NAME is often more important competitive advantage for franchisee - alternative to pursuing growth the M&A - attractive for fragmented industries (hotel/retailing) where no one has dominant market share

Answer 132

- partners work closely together - franchisor develops programs that transfer knowledge and skills to the franchisee - franchisee provides feedback regarding how their unit could become more effective and efficient

Answer 133

1. Firm acts in a way its partner things is opportunistic (surfaces when formal contracts fail to prevent it and alliance is based on false trustworthiness) 2. Misrepresentation of resources brought to partnership (more common when based on intangibles) 3. Failed to make the resources commited to the cooperative strategy available to its partners (common in international cooperative strategy, language/culture can cause misrepresentation or trust expectations) 4. One firm makes investments that are specific to the alliance while the partner does not (firm making investmnet is at relative disadvantage in returns earned)

Answer 134

Creating multiple work units for particular tasks using different skills, tools and methods. - Likely high in complex and dynamic environment

Answer 135

The degree to which differentiated units share resources and capabilities, coordinate and are unified under a corporate parent

Answer 136

- Reporting relationships, procedures, controls, authority, decision making - The work to be done and how to do it given the firm's strategies

Answer 137

- reciprocal relationship - Structure flows from selection of strategy - once structure is in place, it can influence current strategy - effect of strategy on structure > effect structure on strategy

Answer 138

- Stability needed to use current competitive advantages - Flexibility needed to develop future advantages

Answer 139

organizational growth allows the firm to change its strategy to become even more successful Existing structure could lack the sophistication to support this strategy, therefore new organizational structure is neededW

Answer 140

1. Simple Structure 2. functional Structure 3. Multidivisional Structure (M-form) Across time, firms move from simplest to multidivisional No structure is inherently better, must choose the structure that best matches strategy

Answer 141

- Owner/manage make all major decisions and monitor activities - staff serve as extension of the manager's authority - Matched with focus strategy and business-level strategies. (single product lign in single geographic market) - Growth creates complexity and managerial and structural challenges

Answer 142

- CEO - Line managers in dominant organizational areas (production, marketing, engineering, accounting, etc) - Benefits: Economies of scale and scope, maintained performance standards, specialized training, clear decision making and communication

Answer 143

- Support use of business level strategies and some corporate level strategies (single or dominant business with low levels of diversification)

Answer 144

- hard to integrate - lack of common vision

Answer 145

- Strategic control: Operation divisions function and seperate businesses or profit centers - top corporate officers delegates responsibilities to division managers

Answer 146

Highly diversified firms

Answer 147

Benefits: 1. corporate officers can more accurately monitor performance of each business (simplifies control) 2. Facilities comparisons between divisions (improves resource allocation 3. Makes managers in poorly performing divisions find ways to improve performance Disadvantages: 1. Difficult to coordinate 2. Replication of resources 3. pressure to generalize, not specialize

Answer 148

Ability to anticipate, envision, maintain flexibility and empower others to create strategic change when necessary Multifunctional in nature: - managing through others - managing entire organization - coping with rapid and intense changes associated with global economy

Answer 149

Change resulting from selecting and implementing a firm's strategies

Answer 150

- Influence behaviors, throughts and feelings of those who the work with by example, word and ability to envision the future - Create and support the context or environment through which stakeholders can perform most efficiently - Implement strategies to make above-average returns

Answer 151

Attracting and managing human capital. Especially now where the intellectual capital that the firm possesses affects the strategic leader's success.

Answer 152

Individuals responsible for making the firm use the strategic management process, especially to select and implement strategies.W

Answer 153

Officers and BoD

Answer 154

most problems require a team of executives rather than a single individual they help CEO avoid overconfidence and make better decisions

Answer 155

- Team with different types of expertise and knowledge - different background, experience, education

Answer 156

- Decisions by heterogeneous top management team tend to have a positive relationship with innovation and strategic change - Different perspectives creates higher quality decisions and firm performance - Makes other team members think more creatively - Firms who could benefit from making strategic changes are more likely to make changes if they have a heterogeneous top management team

Answer 157

- If the team cannot manage itself effectively, it can stop effective decision-making processes - large and more heterogenous management teams make it more difficult to implement strategies

Answer 158

- Make decisions regarding strategies and implement them - Use their own discretion

Answer 159

1. External environment (industry, growth rates, number of competitors, legal constraints, differentiation amongst products) 2. characteristics of the organization (size, age, culture, resources, interactions among employees) 3. Characteristics of the manager (tolerance for ambiguity, commitment to firm and strategy, interpersonal skills, self confidence)

Answer 160

valuable, rare, costly to imitate and organized

Answer 161

Template a firm uses to analyze their costs and identify ways that can be used to facilitate implementation of a chosen strategy. Segmented into value chain activites and support functions

Answer 162

1. Agents hire manager to make decisions 2. Owners diversify by investing in multiple corporations 3. owners expect agents (top level firm managers) to make decisions that will maximize firm value

Answer 163

Weak mechanisms: managerial interest prevails, happens when amangers have a lot of autonomy Strong mechanisms: BOD controls managerial autonomy, strategies reflect shareholder interests

Answer 164

1. Diversity changes 2. Strengthening internal management and accounting control 3. Formal process to evaluate board emembers 4. Modifying compensation of BoD (eliminating stock options) 5. Lead director role who has strong powers in regard to agenda and non-board activites

Answer 165

BoD is an internal governance mechanism and holds top-level managers fully accountable for developing and supporting an organizational culture in which only ethical behaviors are permitted

Answer 166

Creates trade-offs but ultimately leads to a more sustainable business with fewer risks and more satisfied stakeholdersW

Answer 167

More complex than friedman doctrine because it wants optimization of several objectives that are hard to achieve in practice. Takes more time to validate some stakeholders whose claims are less known than others

Answer 168

1. Capital Market stakeholders: expect to preserve and enhance wealth 2. Product market stakeholders: unions (want workign conditions and securite jobs), host communities (want lowest price possible), suppliers (want ppl who are willing to pay highest price possible) 3. Organizational Stakeholders: Employees (want dynamic, rewarding work, develop skills) Leaders (use human capital to serve firm, understand competition)

Answer 169

1. Influences the implementations strategy especially when you have interdependent processes 2. increases likelyhood of company success

Answer 170

Business model: How firm will process, deliver and capture value Business Level Strategy: Path firm will follow to develop competitive advantage

Answer 171

1. Franchise model 2. Freemium 3. Peer-To-Peer 4. Subscription 5. Advertising model

Answer 172

They are all used to defend their strategic position against competitors 1. Cost leadership 2. Differentiation 3. Focused cost leadership 4. Focused differentiation 5. Integrated cost leadership/differentiation

Answer 173

1. Business level strategy (competitive) think business unit strategy: Drivers of industry profitability, how to create competitive advantage2 2. Corporate level strategy (company wide): actions to gain competitive advantage by selecting and managing businesses in different product markets

Answer 174

Expansion into multiple geographic markets to leverable investments (tangible and intangible)

Answer 175

Economies of scope and market power through multipoint competition and vertical integration

Answer 176

Make the firms risk averse and uninterested in pursuing new product lines that are not proven (More certainty leads to diversification that lack potential) OR restrict activity sharing. (constraining level of sharing might produce additional but unrelated diversification where the firm lacks expertise.) EITHER DECISION: Leads to further diversification.

Answer 177

market commonality and resource similarity

Answer 178

They are direct competitors

Answer 179

Tit for tat strategy (reciprocity) proves most effective

Answer 180

1. Joint venture 2. Equity Strategic Alliance 3. Nonequity strategic alliance

Answer 181

1. build (internal, organic growth): Profit option value, slow. uncertain 2. Buy (acquire), fast but acquisition premium thats difficult to internalize 3. Borrow (Joint venture, alliances), complementary resources, less control, loose know how advantage compared to partner 4. Licensing, fast and easy, milk rather than grow position

Answer 182

- Mostly cororate customers - Many companies, most were independent owners and no one had an extremely large share - Low entry barries except licensing requirements

Answer 183

- Set rates by regulating authorities - medallions hard to obtain and extremely expensive - Anonymity of cap service meant poor feedback and therefore complaints about safety, cleanliness, racial profiling - Extremely fragmented

Answer 184

- Zipcar, airbnb, uber, lyft - uber originally had on-demand blakc car services - In 2013, states begane recognizing a "transportation network company"

Answer 185

1. Extensive resources with cash and ability to move quick 2. Genre-defining product and vocal customers 3. Improving government relations 4. Little bottom-line impact of stakeholders 5. As public acceptance grows, regulatory resistance should decrease

Answer 186

1. Regulatory resistance becoming more of a challenge 2. Legal operations are costly 3. stakeholder relationships damages 4. difficult to pursue IPO 5. Driver classification of employee would ruin profitability

Answer 187

* Continue lobbying, relationship- building * Proactively engage with regulators to work around issues * Embrace common-sense safety rules

Answer 188

* Permanently damaged relationships will undermine success * Slowed growth with regulator coordination * Cost of compliance

Answer 189

Uber: low costs, limited liability and low HR requirements Drivers: flexible work schedule, independence from training requirements, higher earnings possible through surge pricing

Answer 190

Uber * Less control over end product than “full-stack” approach * Morale problems and transient drivers * Legal costs from classification challenges Drivers * No benefits, wage floors, or reimbursement * Poor job security * Costly commercial insurance requirements

Answer 191

Public support would overcome regulatory resistance and complaints would be deemed overblown. Since uber has already trnasformed the ride-for-hire industry, they cant change now but collaborative approaches could hurt growth and profits

Answer 192

- uber asked for a war and is getting one - poor public image erodes support - NEw entrants who take uber's business model - cost of collaboration is less than cost of being banned, partnership could make growth opportunities

Answer 193

- Ride sharing, food delivery, and freight. Advantage over mono-platform companies like lift - Large untapped customers in global markets and only small share of adults using uber - want to expand customer base by bringing down prices

Answer 194

1. Same-store sales rising at record low pace. Senior managers are pressured to increase growth. - Focus on devery day low prices vs upscale market 2. Behind amazon on e-commerce (walmart #2 but HUGE gap)

Answer 195

1. Management's competitve culture 2. Logistics 3. Store operations (Local monopolies and low rental costs) 4. HR (anti-union) 5. Merchandising and procurement (one-stop shop)

Answer 196

value stick - willingness to pay - price - cost - willingness to supply where the position of each element moves up or down, depending on pricing decisions and market pressures

Answer 197

1. Relative cost analysis: - Understand your cost structure - Identify cost drivers for each activity - Quantify the effect of cost drivers - Determine competitors' relative position 2. Isolate key sources of cost advantage - Tight control over them - Configure activities around them

Answer 198

- Decisions throughout all corners of the enterprise. - All of their processes and culture are aligned towards the goal of identifying cost drivers and wringing every penny of savings out of them

Answer 199

- use their logistical expertise to quickly assess if this strategy leads to growth. - an upscale strategy may be worth pursuing since international expansion has been an uncertain source of growth - alternative for bringing the company into this new niche - Urban areas offer growth to tap new customer segments

Answer 200

- risk of alienating current customers and confusing them - different type of customer service and marketing expense - Inefficient to veer from low cost strategy - Better alternatives such as other niches (pharmacies or automotive) or improving customer experience to make them come back more often

Answer 201

Stores struggle to keep up with demand Retail closures are accelerating the rise of Amazon

Answer 202

- What is the mix of industries we should be in? - How do we add value in each unit? - Horizontal, Vertical, International, Unrelated ? - Operational/Corporate relatedness ?

Answer 203

- Revitalizing sales growth, performance improvement - The pursuit of synergy - Reduction of risk for the firm (as a defensive strategy) - The desire for increased compensation

Answer 204

- Diversification as corporate strategy - Decentralized structure

Answer 205

- No evidence of relatedness as there is no evidence of tangible or intangible resources that could contribute to Alphabet's competitive advantage - Google has access to technological talents. - Youtube creates touchpoint to attract people to google's search engine - Diversification that is primarily demand related - Need to create and sustain demand for core business to justify investments in compelmentary areas

Answer 206

Prior success and/or resources should allow them to successfully diversify across a broad variety of sectors, regardless of their relationship with core Google; the company can provide unique tangible or intangible resources to its investments, regardless of their activity

Answer 207

1, Control, independence, speed: Decentralizing decision-making allows moonshots to remain focused and limit need to lobby for shared internal resources 2. Economies of scope: Opportunity to create tighter relationships between google and complementary and related assets such as youtube and android 3. Flexible resource allocation: diversifying actually increased relatedness within google

Answer 208

1. insulates profits of core business form less profitable and risky investments 2. enhances transparency and allows shareholders to see how internal resources are allocated 3. Makes it easier to trade assets and sell them if needed

Answer 209

- Loss of control from corporate center which leads to unproductive uses of internal resources - Reduce further the possibility of sharing resources - Doubtful that financial accountability can be effective in keeping Moonshots in line given the uncertain and risky nature of investments

Answer 210

use of demand-side externalities? a powerful force for diversification. - In that sense, the emergence of business opportunities with strong demand-externalities (such as Alphabet, Amazon, Facebook) can help explain the resurgence of the conglomerate model in the current digital economic landscape.

Answer 211

- Does not imply limitless diversification. Moonshots are hard to justify with this logic - Moonshots are problematic because its hard to know which tangible and intangible assets are being shared. - COntracts might have allowed profitability exchange instead of ownership

Answer 212

The best vertical combination is the one where the two partners in the value chain maximize their joint revenue Which combination brings the best set of assets together?

Answer 213

- Verticle integration through ownership is only appropriate when contracts along the value chain are difficult or impossible to write - Problems and costs of the market governance transactions

Answer 214

is a better strategic decision for repetitive operations - better off test - ownership test

Answer 215

Reasons to Approve: Revive Core Business: Pixar's success in animation revitalizes Disney's failing department and provides access to cutting-edge CGI technology (Pixar is a leader). Financial Strength: Pixar is financially sound (high assets, low debt) and a strong contributor (60% of Disney's movie profits). Strategic Advantage: Acquisition secures Pixar's talent and prevents them from working for competitors. Pixar's Leverage: Disney holds the upper hand in negotiations due to Pixar's limited options. Reasons to Consider: Pixar's Future Performance: Past success doesn't guarantee future hits. Execution Risk: Disney's management style might stifle Pixar's creativity. Financial Cost: The purchase price is high (over $7 billion) and may dilute existing shareholders.

Answer 216

Pros of Merging with Disney: Financials: High offer price, maximizes shareholder return. Distribution & Merchandising: Disney's expertise boosts reach and profits. Strong Existing Relationship: Easier transition, familiarity with each other. Cons of Merging with Disney: Loss of Creative Control: Disney culture might stifle Pixar's innovation. Employee Retention: Key talent might leave after the merger.

Answer 217

Pros of Merging with Disney: Financials: Excellent offer, capitalizes on current success. Cons of Merging with Disney: Loss of Competitive Advantage: Unique company culture could be compromised. Alternative Options: Renegotiate distribution deal or find better partners.

Answer 218

disney alternatives Fix Disney’s own animation unit – All internal attempts have been a failure – Fired a large number of animators when things started to go sour – The knowledge accumulated at Pixar is hard to replicate – Nobody like Katzenberg is available now – Doesn’t have the technology Hire talent away from Pixar – Pragmatically hard to do; Pixar employees extraordinary loyal to the company – Team-based capability not individual capability – They will either demand more money or leave for another firm (appropriability of the resource) New long-term contract

Answer 219

Build its own movie distribution networks, merchandising sales etc. – ex. Universal studios got into amusement parks. – Easy or difficult to imitate the Disney’s competitive advantage? The capabilities required to distribute and, more importantly, tomerchandise are very different from Pixar’s capabilities (creativity and technological capabilities). It would require massive investments (or alliances with existing players). Sign an exclusive distribution deal with a different movie company – Disney is the best partner who will add the most value – Very few alternative partners offer all the services in one. – Pixar already has built relational assets with Disney. New long-term contract

Answer 220

Contract Issues: Long-term contracts for complex revenue streams (DVDs, sequels, parks) are difficult to negotiate and enforce, leading to potential conflict. Creative Control: Pixar feared Disney wouldn't prioritize Pixar films or exploit their franchises for cheap profit. Dual Role Conflict: Disney being both competitor and distributor for Pixar films created a potential for unequal promotion.

Answer 221

Central Issue: If acquiring Pixar (difficult contract writing), how should Disney manage it? Options: Separation vs. Integration Separation: Pros: Retains Pixar's successful culture (compensation, autonomy). Cons: Misses cost-saving opportunities (synergies). Integration: Challenges:Leadership conflicts (Disney vs. Pixar managers).Morale impact on Disney animators.Branding: Keep "Pixar" name or not?

Answer 222

What has changed over time that Disney needs to buy Pixar now, when it did not before? Disney Animation Struggles: Traditional animation needed revival, and Pixar's success proved a new approach was key. Pixar's Power: Pixar's strength grew, making a simple contract less favorable for Disney. Shifting Dynamics: Negotiations became harder as Pixar gained leverage. Future Uncertainty: New technologies made long-term contracts risky. Reason for Acquisition: To secure a critical resource (Pixar) and its expertise for Disney's animation revival.

Answer 223

Ease of contracting: If the transaction concerns a physical product t he contract can specify all the relevant issues e.g., quality control. In contrast, if the transaction concerns a service, like movies, it is really hard.

Answer 224

- crucial strategic decision that is often made poorly, particularly by managers who believe that they should always integrate vertically in order to “capture the margin” upstream or downstream – Many failed attempts to vertically integrate content and distribution (e.g., UniversalVivendi, DisneyABC, etc.) – Both market contracting and the ownership have weaknesses --> why we see firms, but not one huge firm running the entire economy.

strat_-_april_15_20240417215839 Flashcards

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