Strategies In Action

Question 1

“Bonuses or merit pay for managers must be based to a greater extent on long-term objectives & strategies”

Answer 1

Arthur D. Little

Question 2

Characteristics of Objectives

Answer 2

Quantitative, measurable, realistic, challenging, obtainable, understandable, hierarchical, congruent across departments

Question 3

Benefits of Having Clear Objectives

Answer 3

synergy, direction, reduces conflicts, aids in allocation of resources, basis for evaluation, aids in job design, establishes priorities, reduces uncertainty, stimulates exertion

Question 4

Financial Objectives

Answer 4

growth in ROI, growth in revenues, higher profit margin, higher stock price, higher EPS, higher dividends, growth in earnings, improved cash flow

Question 5

Strategic Objectives

Answer 5

quicker on-time delivery than rivals, higher market share, lower costs, tech leadership, shorter design to market time, better product quality, wider geographical coverage, being ahead in new products than rivals

Question 6

“If you think education is expensive, try ignorance.”

Answer 6

Derek Bok

Question 7

Type of “not managing by objective”- “If it ain’t broke don’t fix it”

Answer 7

Managing by extrapolation

Question 8

Type of “not managing by objectives”- true measure of a good strategist is ability to solve problems

Answer 8

Management by Crisis

Question 9

Type of “not managing by objective”- Just do what you can to accomplish what you think should be done

Answer 9

Management by Subjectives

Question 10

Type of “not managing by objective”- decisions predicated on hope that they will succeed; luck and good fortune

Answer 10

Management by Hope

Question 11

strategic planning involves “choices that risk resources and tradeoffs that sacrifice opportunity”

Answer 11

Hansen and Smith

Question 12

establishing websites to sell on

Answer 12

forward integration

Question 13

franchising; food delivery/ own delivery system

Answer 13

forward integration

Question 14

Starbucks buying own coffee farm

Answer 14

backward integration

Question 15

negotiating with several outside suppliers

Answer 15

de-integration

Question 16

“The trend toward horizontal distribution seems to reflect strategists’ misgivings about their ability to operate many unrelated businesses… direct competitors are more likely to create efficiencies than…between unrelated businesses… eliminating duplicate facilities and … more likely to understand the business of the target.”

Answer 16

Kenneth Davidson

Question 17

GAP using same-sex couples in ads

Answer 17

market penetration

Question 18

“Management found it couldn’t nanage the beast”; till today diversification is not so common

Answer 18

Michael Porter

Question 19

“Companies are generally not very efficient diversifiers; investors usually can do a better job of that by purchasing stock in a variety of companies”

Answer 19

Barry Knap

Question 20

What makes diversification difficult?

Answer 20

Rapidly appearing new tech, new products, fast-shifting buyer preferences

Question 21

cost-cutting & asset reduction to reverse declining sales & profits; pruning product lines, laying people off; streamlining

Answer 21

retrenchment

Question 22

a corporation splits into 2 or more parts; Fiat Chrysler & Ferrari

Answer 22

divestiture

Question 23

Porter’s 5 Generic Strategies

Answer 23

COST LEADERSHIP
Type 1- low-cost
Type 2- best-value
DIFFERENTIATION
Type 3- for those relatively price insensitive
FOCUS- small niche
Type 4- low-cost
Type 5- best-value

Question 24

Cost leadership must be generally pursued along with _________

Answer 24

differentiation

Question 25

When isit best to use cost leadership strategies?

Answer 25

- market composed of price sensitive buyers - only few ways to achieve prod differentation - buyers are not brand picky/choosy - there are a large number of buyers w significant bargaining power

Question 26

Consequences of Cost Leadership

Answer 26

high efficiency, low overhead, limited perks, intolerance of waste, intensive screening of budget requests, rewards for cost containment

Question 27

Risks to Cost Leadership

Answer 27

competitors may imitate, tech nreakhroughs may make strategy ineffective, overall profits driven down, buyer interest swing to other differentiating features aside from price

Question 28

Benefit of Differentiation

Answer 28

can charge higher price & gain customer loyalty

Question 29

Risks to Differentiation

Answer 29

unique prod may not be as valued (thus go for cost leadership after), competitors may copy the innovation

Question 30

____________ and ______ firms can only effectively pursue focus strategies in conjunction with _______ or ________ strategies

Answer 30

Midsize and large; differentiation & cost leadership

Question 31

When are focus strategies most effective?

Answer 31

When consumers have distinctive preferences; when rival firms are not trying to specialize in same target segment

Question 32

"Within a decade, most companies will be members of teams that compete against each other."

Answer 32

Kathryn Harrigan

Question 33

Why are joint ventures not always successful?

Answer 33

- managers involved in daily ops are not involved in forming/shaping the venture - venture may benefit partner comps. but not the customers - venture may not be supported equally by both partners - venture may begin to compete more w one of the partners that the other

Question 34

Benefits of joint ventures

Answer 34

globalization of ops, improved comms and networking, minimization of risk

Question 35

"... Now the question is 'Which joint ventures and cooperative arrangements are most appropriate for our needs and expectations?... "How do we manage these ventures most effectively?"

Answer 35

Kathryn Harrigan

Question 36

outsourcing, info sharing, joint marketing & R&D

Answer 36

Other methods of strategic partnering

Question 37

3 Reasons for the Trend towards Mergers/Acquisitions

Answer 37

1. desire of diversified firms to spin off segments into sep companies then are acquired by other firms 2. desire of firms to acquire similar comps in countries w lower tax rates 3. desire of shareholders for firms to continually grow revs

Question 38

9 Reasons Why Many Mergers & Acquisitions Fail

Answer 38

- integration difficulties - inadequate eval of target - large debt - inability to achieve synergy - too much diversification - managers overly focused on acquisitions - too large an acquisition - diff to integrate diff org cultures - reduced employee morale due to layoffs & relocations

Question 39

when a corporation's shareholders are bought by the company's mgt and other private investirs using borrowed funds

Answer 39

leveraged buyout

Question 40

11 Potential Benefits of Mergers & Acquisitions

Answer 40

``` improved capacity utilization decrease tax obligations gain economies of scale reduce managerial staff make use if existing sales force smooth out seasonal trends in sales new tech gain market share enter global markets gain pricing power gain access to new distributors, suppliers, customers, prods, creditors ```

Question 41

PE to PE acquisitions

Answer 41

secondary buyouts

Question 42

when PEs borrow money to fund dividend payouts to themselves

Answer 42

dividend recapitalization

Question 43

3 Tactics to Facilitate Strategies

Answer 43

First mover advantages, outsourcing, reshoring

Question 44

moving some manufacturing back to country of origin (after outsourcing)

Answer 44

reshoring

Question 45

13 Potential Benefits of Outsourcing

Answer 45

``` cost savings reduce time to market tax benefit catalyst for change focus on core business cost restructuring- fixed costs move towards varcost; VC become more predictable improved quality knowledge contract- financial penalties & legal redress when partner doesnt do job access to talent operational expertise enhanced capacity for innovation risk management ```