a form of intellectual property that gives the inventor exclusive rights to benefit form commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea
as the industry moves into the next stage of the industry life cycle, the rate of growth declines
---only the strongest survive
customers entering the market in the declining stage of the industry life cycle. Will adopt a new product only if absolutely necessary, generally don’t want new technology, and are generally not a customer segment worth pursuing.
a firm’s embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making
1. Continue to innovate in order to stay ahead of the competition
2. Guard against disruptive innovation by protecting the low end of the market
3. Disrupt yourself, rather than wait for others to disrupt you
an innovation that was developed for emerging economies before being introduced in developed economies. Sometimes also called frugal innovation
1. Platforms scale more efficiently than pipelines by eliminating gatekeepers
2. Platforms unlock new sources of value creation and supply
3. Platforms benefit from community feedback
1. Vertical Integration: what stages of the industry value chain should the company participate?
2. Diversification: what range of products and services should the company offer?
3. Geographic Scope: where should the company compete geographically in terms of regional, national, or international markets?
increase profitability
lower costs
increase market power
reduce risk
motivate management
Advantages:
1. ability to make command-and-control decisions by flat along clear hierarchical lines of authority
2. coordination of highly complex tasks to allow for specialization
3. transaction-specific investments
4. creation of a community of knowledge
Disadvantages:
1. administrative costs because of necessary bureaucracy
2. low-powered incentives
3. principal-agent problem
Advantages:
1. high-powered incentives
2. increased flexibility
Disadvantages:
1. search costs
2. opportunism by other parties
3. incomplete contracting
4. enforcement of contracts
depiction of the transformation of raw materials into finished goods and services along distinct vertical stages, each of which typically represents a distinct industry in which a number of different firms are competing
lowering cots
improving quality
facilitating scheduling and planning
facilitating investments in specialized assets
securing critical supplies and distribution channels
Site Specificity
assets required to be co-located
increasing costs
reducing quality
reducing flexibility
increasing the potential for legal repercussions
1. exposes in-house suppliers and distributors to market competition so that performance comparisons are possible
2. enhances a firm's flexibility
3. firms can combine internal and external knowledge, possibly paving the path for innovation
percentage of revenue
relationship of the core competencies
1. Single Business: low level of diversification
2. Dominant Business: between 70%-90% of its revenues from a single business, but pursues at least one other business activity
3. Related Diversification
4. Unrelated Diversification (conglomerate)
a framework to guide corporate diversification strategy by analyzing possible combinations of existing/new core competencies and existing/new markets
1. leverage existing core competencies to improve current market position
2. build new core competencies to protect and extend current market position
3. redeploy and recombine existing core competencies to comepete in markets of the future
4. build new core competencies to create and compete in markets of the future
1. Relevancy: how relevant are the firm's existing internal resources to solving the resource gap?
2. Tradability: how tradable are the targeted resources that may be available externally?
3. Closeness: how close do you need to be to your external resource partner?
4. Integration: how well can you integrate the targeted firm, should you determine you need to acquire the resource partner?
strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries
strengthen competitive position
enter new markets
hedge against uncertainty
access critical complementary assets
learn new capabilities
approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time
non-equity alliances
equity alliances
joint ventures
partnership in which at least one partner takes partial ownership in the other
a firm's ability to effectively manage 3 alliance related tasks concurrently:
1. partner selection and alliance formation
2. alliance design and governance
3. post-formation alliance management
reduction in competitive intensity
lower costs
increased differentiation
access to new market and distribution channels
access to a new capability or competency
strategic preemption
acquiring firm removes a potential competitor
acquiring firm preempts existing competitors from buying the startup
principal-agent problems
the desire to overcome competitive disadvantage
superior acquisition and integration capability
part of a firm’s corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world
a firm’s investments in value chain activities abroad
1. 1900-1941: only sales and distribution operations took place overseas (essentially exporting goods to other markets)
2. 1945-2000: focus on growing industries to meet needs that went unfulfilled during the war years nut also to reconstruct the damage from the war
3. 21st century: World Trade Organization (WTO) helps companies conduct their business across borders based on multinational treaties that are negotiated and signed by its 164 member nations
Advantages:
1. access new markets
2. access lower-cost inputs
3. develop new competencies
Disadvantages:
1. liability of foreignness
2. loss of reputation
3. loss of intellectual property
benefits from locating value chain activities in the world’s optimal geographies for a specific activity, wherever that may be
a decision framework based on the relative distance between home and a foreign target country along four dimensions: Cultural distance
Administrative and Political distance
Geographic distance
Economic distance
the collective mental and emotional “programming of the mind” that differentiates human groups
1. power distance
2. individualism
3. masculinity-femininity
4. uncertainty avoidance
cultural disparity between an internationally expanding firm’s home country and its targeted host country
International
Multidomestic
Global-standardization
Transnational
-factor conditions
-demand conditions
-competitive intensity in focal industry
-related and supporting industries/complementors
fosters world-class competitors in downstream industries, availability of top-ntoch complementors further strengthen national competitive advantage
a firm’s resistance to change the status quo, which can set the stage for the firm’s subsequent failure
1. mastery of, and fit with, the current environment
2. success, usually measured by financial measurements
3. structures, measures, and systems to accommodate and manage size
4. a resulting organizational inertia that tends to minimize opportunities and accentuate challenges created by shifts in the internal and external environment
specialization
formalization
centralization
hierarchy
organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility
also called M-Form
a firm’s ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation with exploration
searching for new knowledge that may enhance a firm’s future performance
Single Business - functional structure
Dominant Business - functional structure
Related Diversification - cooperative multidivisional (m-form)
--centralized decision making
--high level of integration at corporate headquarters
--co-opetitions among SBUs
----competition for resources
----cooperation in competency
Unrelated Diversification - competitive multidivisional (m-form)
--decentralized decision making
--low level of integration at corporate headquarters
--competition among SBUs for resources
International - functional
Multidomestic - multidivisional
--geographic areas
--decentralized decision making
Global-Standardization - multidivisional
--product divisions
--centralized decision making
Transnational - global matrix
--balance of centralized and decentralized decision making
--additional layer of hierarchy to coordinate both
----geographic areas
----product divisions
1. increasing supply and mobility of skilled workers
2. exponential growth of venture capital
3. increasing availability to commercialize ideas that were previously shelved or insource promising ideas and inventions
4. increasing capability of external suppliers globally
the collectively shared values and norms of an organization’s members; a key building block of organizational design
unwritten rules that define appropriate employee attitudes and behaviors in employees’ day-to-day work and interactions
a process by which the founder defines and shapes an organization’s culture, which can persist for decades after his or her departure
1. limited liability for investors
2 transferability of investor ownership through trading of shares of stock on exchanges
3. legal personality
4. separation of legal ownership and management control
1. expand the customer base to bring in non-consumers
2. expand traditional internal firm value chains to include more nontraditional partners
3. focus on creating new
board members who are generally part of the company’s senior management team; appointed by shareholders to provide the board with necessary information pertaining to the company’s internal workings and performance
1. executive compensation
2. market for for corporate control
3. financial statement auditors, government regulators, and industry analysts
an incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company’s stock at a predetermined price sometime in the future
1. absolute size of the CEO pay package compared with the pay of the average employee
2. relationship between CEO pay and firm performance
a single investor or group of investors buys, with the help of borrowed money (leveraged against the company’s assets), the outstanding shares of a publicly traded company in order to take it private
7. BellRing Brands is a manufacturer of educational toys for children. Six months ago, the company's research and development division came up with an idea for a unique touchscreen device that can be used to introduce children to a number of foreign languages. Three months ago, the company produced a working prototype, and last month the company successfully launched its new device on the commercial market. What should BellRing Brands' managers prepare for next?
a. a prolonged period of uncontested success
b a sharp decline in demand for the product
c. a difficult struggle to move from invention to innovation
d. increased competition from imitators
7. The group of customers referred to as the ___ lead the wave of increased demand as the industry moved from the introduction stage to the growth stage.
a. early adopters
b. laggards
c. late majority
d. early majority
7. Lauren is the CEO of TimeEx Inc. and is competing in an industry that is shifting due to disruptive innovation. Which of the following strategies should she consider to most appropriately respond to this disruptive innovation?
a. Lauren should focus on procuring the "laggards" in the industry
b. Lauren should exist the industry before her firm files for bankruptcy
c. Lauren should stop allocating her firm's resources towards continually trying to innovate
d. Lauren should guard against the disruptive innovation by protecting the low end of the market
7. As a start-up company, Cambium Networks entered the low end of the highly competitive smartwatch industry with its low-cost smartwatches. Initially, the company was able to sell its inferior technology due to its law prices. Over the years, however, its rate of technology improvements increased above the industry standards. This helped the company to create a strong strategic position for its smartwatches in the high-end segment and claim a premium price. Which of the following types of innovation does this scenario best illustrate?
a. architectural innovation
b. disruptive innovation
c. incremental innovation
d. radical innovation
7. Which of the following scenarios would be characteristic of an entrepreneur?
a. Kevin imitated a new, more efficient method of producing pottery
b. John implemented a new and more efficient way to produce pottery
c. Hugo scaled back the production of pottery because it wasn't cost effective
d. Juliana used a proven marketing method to advertise her pottery
8. Golddex Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply components, Golddex should pursue ____
a. product diversification
b. forward integration
c. backward integration
d. geographic integration
8. Doncon Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?
a. pursue taper integration
b. invest in vertical integration despite the cost of production pickups
c. Abandon the idea of vertical integration entirely
d. introduce a budget line of guitars to diversify the firm's offerings
8. Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should ___
a. diversify its activities
b. continue to outsource production
c. vertically integrate
d. exit the laptop industry
8. Janet wants to restructure the portfolio of all her firm's strategic business units. Janet will more than likely employ the ___ tool.
a. diversification premium
b. Boston Consulting Group (BCG) matrix
c. VRIO
d. value chain analysis
8. Betasoloin Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Betasoloin is primarily ___
a. building new core competencies to protect and extend current market position
b. leveraging new core competencies to improve current market position
c. redeploying existing core competencies to compete in future markets
d. unlearning existing core competencies to create and compete in markets of the future.
9. How did the recent horizontal integration in the US airline industry provide benefit to the surviving carriers?
a. by increasing the threat of entry in the industry
b. by lowering competitive intensity in the industry overall
c. by preventing mergers from taking place
d. by facilitating excess capacity in the industry
9. How has Kraft Foods benefited from its hostile takeover of Cadbury PLC?
a. it has access to convenience stores and a new distribution channel
b. it gained a monopoly in the chocolate manufacturing industry
c. the main strategic focus is now on the domestic market
d. it has opened a market that is growing slowly but has high profit margins
9. It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because ___
a. the surviving firms will need protection against the relaxed entry barriers
b. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive
c. the surviving firms will need to be protected against the increasing bargaining power of the suppliers
d. the horizontal integration activity has the potential to reduce competitive intensity in an industry
9. Which of the following statements is true of explicit knowledge?
a. explicit knowledge is knowledge that cannot be codified
b. equity knowledge is acquired only through actively participating in a process
c. explicit knowledge is about knowing how to do a certain task
d. explicit knowledge is shared in nonequity alliance firms
9. Can't Believe It's Not Hair Inc. (CBNH) dominates the ladies' wig market and wants to expand into men's toupees. How can CBNH's managers determine whether the company should develop a toupee division internally, ally with a toupee maker, or acquire a toupee-making firm?
a. to protect themselves, CBNH's managers should choose the option that leads to the largest company with the most managerial positions
b. the managers must be determined whether wig making and toupee making require substantially different skills. If so, company should pursue internal development
c. unless the market for toupees is booming, CBNH should stick to what it knows and focus on creating the best ladies' wigs in the industry
d. the managers need to determine whether the skills needed to create wigs and toupees are similar and whether CBNH creates better hairpieces than its competitors do
12. Which of the following perspectives best supports the shared value creation framework?
a. externalities such as pollution, wasted energy, and costly accidents actually create internal costs
b. a firm's competitive advantage depends on pitting economic and societal needs in a trade off
c. failing to create value for society almost always reflects on the bottom line
d. markets are more often than not defined by societal needs rather than economic needs
12. According to Michael Porter, which of the following is a problem with many publicly traded companies?
a. shareholders of publicly traded companies do not have a legitimate claim on profits
b. there is no transferability of stock ownership in publicly traded companies
c. publicly traded companies have no legal standing and are not responsible for their debts
d. they have defined value creation too narrowly in terms of financial performace
12. The root causes of the principal agent problem between senior executives and lower-level employees can be explained by the ___
a. operational expertise of lower-level employees in the concentrated areas of a particular field
b. knowledge of employees regarding day-to-day tasks
c. high number of lower-level employees than senior executives
d. informational advantage of the lower-level employees
12. Which of the following is true of the board of directors in a public stock company?
a. the board of directors acts as a facilitator to convey interests of the stockholders to the management without any real authority
b. the functions of the board of directors are limited to ensuring the hiring and firing of CEOs
c. votes at shareholder meetings determine whose representatives are appointed to the board of directors
d. because shareholders generally have uniform interests, the composition of the board is generally a unanimous decision
12. All of the following are examples of external-governance mechanisms except___
a. industry analysts
b. government regulators
c. shareholders
d. auditors
10. Stratton Oakmont Inc., a well established and reputed multinational enterprise (MNE), is headquartered in a highly developed economy. It wants to start its operations in Old Hebrides, considered one of the less-developed nations in the world. How will this strategic move most likely affect Stratton Oakmont Inc.?
a. it will benefit from economic arbitrage
b. Stratton Oxford will use its competitive advantage from economies of standardization
c. Stratton Oakmont will replicate its existing business model easily
d.it will be able to easily sell products for which demand varies by income
10. Thomas works in a rare metals industry and wants to open a business in a foreign country that is rich with natural resources. He believes that natural resources are the one and only mechanism that can help him achieve an international competitive advantage. After all, countries like Afghanistan, Iran, and Venezuela are home to the world's richest natural resources, so, in theory they too should be able to leverage those resources in order to create a national competitive advantage. Which of the statements below best represents an appropriate response to Thomas and his theory?
a. natural resources almost always help countries achieve a national competitive advantage
b. natural resources are often not needed to generate world-leading companies because competitive advantage is often based on other factor endowments such as human capital and know-how
c. natural resources can help create world-leading companies but only if they pursue a differentiation strategy
d. having access to natural resources never help firms achieve a national competitive advantage
10. Which of the following is most likely an accurate statement?
a. the multinational enterprise Burns Industries benefited from advances in communications technology
b. the multinational enterprise Axe Capital was hindered by falling investment barriers
c. the multinational enterprise Rearden Steel benefited from rising trade barriers
d. the multinational enterprise Rainholm industries was hindered by reduced transportation costs
10. Cyber Systems Corp. manufactures cooking and baking equipment and has its base in the country of Handled. It has approximately 300 stores across the country and is already active in the 3 foreign countries. It attempts to establish itself in the country of Balalaika, and uses its low-cost strategy to do so. However, due to the additional costs associated with training, coordinating across geographic distances, and other costs associated with doing business in an unfamiliar cultural and economic environment, Cyber Systems Corp. incurs huge financial losses in Balalaika. In this scenario, Cyber Systems Corp's failure to establish itself successfully in Balalaika occurs most likely because ___
a. it overestimated its needs to project its intellectual property
b. it underestimated its liability of foreignness when entering the Balalaika market
c. it underestimated its dwindling reputation before it enters the Balalaika market
d. it overestimates the geographic and cultural distance between Handled and Balalaika
10. Bayside Inc., a reputed brand for fine art supplies, it implementing an international strategy. Cyber Corp., a maker of mini-computer tablets, is pursuing a global-standardization strategy. Which of the following statements most likely holds true in this scenario
a. while Bayside Inc's competitive advantage lies in its high local responsiveness Slalom Corp will lack such capabilities
b. Cyber Corp focuses more on cost-reductions when compared to Bayside Inc.
c. Cyber's business functions are highly centralized, whereas Bayside organizes its activities worldwide
d. Cyber is exposed to greater risks of exchange rate fluctuations
11. Which of the following best exemplifies the use of input controls?
a. Gm's use of the multidivisional strategy
b. McDonald's use of standard operating procedures
c. Zappo's use of monitoring free customer service calls
d. Southwest Airlines' use of employee friendlieness
11. A firm that uses a structure that is organized along different business functions such as HR, R&D, Sales, and Marketing and also along different countries of the world is most likely using a ___ structure.
a. functional
b. global matrix
c. multidivisional
d. simple
11. Why does strategy implementation often require changes within an organization?
a. strategy always follows structure
b. strategy implementation transforms strategy into actions and business models
c. strategy implementation is less important than strategy formulation
d. strategy implementation does not affect resource allocation and power distribution within an organization
11. Why is it difficult to imitate the organizational culture of firms like Southwest Airlines and Zappos?
a. the employees is the organization themselves are unaware of the factors contributing to their organizational culture
b. their culture reflects complex relationships with their employees, customers, and suppliers
c. they produce products that cannot be copied easily because of their complex designs
d. it is not commercially viable for other companies to implement the same culture
11. Jared works as a front-line employee for a nationwide retail store. He reports to a floor manager, who reports to a departmental manager, who reports to a regional supervisor, who reports to a vice president, who reports to the CEO. Which of the following best describes this retail store?
a. flat structure
b. decentralize structure
c. tall structure
d. centralized structure
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