MGMT 485 Test #2

a strategic or tactical action the firm takes to build or defend its competitve advantages or improve its market position

a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action

a market-based move that involves a significant commitment of specific & distinctive organizational resources and is difficult to implement & reverse; often involves big amounts of money; ex. major acquisition

a market-based move that is taken to fine-tune a strategy; it involves fewer resources & is relatively easy to implement & reverse; not a big deal; ex. price cut

a firm that takes initial competitive action in order to build or defend its competitive advantages or to improve its market position; allocate funds for product innovation & development, aggressive advertising, & advanced R&D

a firm that responds to the first mover's competitive action, typically through innovation; more cautious, studies customers' reactions to product innovations before moving; can avoid major investments required of the pioneers

a firm that responds to a competitive action a significant amount of time after the first mover's action and the second mover's response; considerably less success; success possible especially if others messed up and/or exhausted their resources

specifies actions a firm takes to gain competitive advantage by selecting & managing a group of different businesses competing in different product markets; helps companies select new strategic positions that are expected to increase the firm's value

when a firm generates 95% or more of its sales revenue from its core business area; low level diversification

when a firm generates between 70-95% of its total revenue within a single business; low level diversification

when a firm generates less than 70% of revenue from the dominant bus; all businesses share product, technological, & distribution linkages; directly share resources & activities between the businesses; moderate & high levels of diversification

when a firm generates less than 70% of revenue from the dominant bus; there are only limited links between businesses; share fewer resources & assets between the businesses; concentrates on transferring knowledge & core competencies between them; moderate & high levels of diversification

when a firm generates less than 70% of revenue from the dominant bus; there are no common links (relationships) between businesses; high levels of diversification; challenging to manange; firms using this often called conglomerates

cost savings that the firm creates by successfully sharing some of its resources & capabilities or transferring 1 or more corporate-level core competencies that were developed in one of its businesses to another of its businesses

complex sets of resources & capabilities that link different businesses, primarily throught mangerial & technological knowledge, experience, & expertise; used in the related link diversification strategy

exists when a firm is able to sell products above the existing competitive level or to reduce the costs of its primary & support activities below the competitive level, or both; used in related constrained & linked strategy

exists when 2 or more diversified firms simultaneously compete in the same product areas or geographical markets; ex. UPS & FedEx in overnight delivery & ground shipping

exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration); firms can partially integrate as well; commonly uses in firm's core bus.

cost savings realized through improved allocations of financial resources based on investments inside or outside the firm; used in unrelated diversification strategy; can be imitated more easily

exists when the value created by business units working together exceeds the value that those same units create working independently

the set of mechanisms used to manage relationships among stakeholders & to determine and control the strategic direction & performance of organizations; concerned w/ identifying ways to ensure decisions are made effectively & that they facilitate a firm's efforts to achieve strategic competitiveness

exists when 1 or more people (principals, firm's owners, risk bearing) hire another person (agents, top-level managers) as decision-making specialists to perform a service; responsibility to a second party for compensation; can be between managers & their employees

the seeking of self-interest with guile (cunning or deceit); an attitude & a set of behaviors

the sum of incentive costs, monitoring costs, enforcement costs, & individual financial losses incurred by principals because governance mechanisms can't guarantee total compliance by the agent

defined by the number of large-block shareholders and the total percentage of the firm's shares they own

typically own at least 5% of a company's issued shares

financial institutions such as mutual funds & pension funds that control large-block shareholder positions

a group of elected individuals whose primary responsibility is to act in the owners' best interests by formally monitoring & controlling the firm's top-level managers

a governance mechanism that seeks to align the interests of managers & owners through salaries, bonuses, & long-term incentives such as stock awards & options

an external governance mechanism that is active when a firm's internal governance mechanisms fail; individuals & firms that buy ownership positions in or purchase all of potentially undervalued companies or merge 2 previously separate firms

a strategy through which 2 firms agree to integrate (combine) their operations on a relatively coequal basis

a strategy through which 1 firm buys a controlling, or 100%, interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio; most common; use of competency/resource

a special type of acquisition wherein the target firm does not solicit the acquiring firm's bid; unfriendly acquisitions, can be hostile; coercion; leaders seek to reduce excess capacity; condition encourage

buying a company in the same industry as the acquiring firm; increase a firm's market power by exploiting cost-based & revenue-based synergies; result in higher performance when the 2 firms have similar characteristics like strategy & managerial styles

when a firm acquires a supplier or distributor of 1 or more of its goods or services; increased market power by controlling additional parts of the value chain

acquiring a firm in a highly related industry; firms seeks to create value through the synergy that can be generated by integrating some of their resources & capabilities

acquisitions made between companies with headquarters in different countries

a process through which a potiential acquirer evaluates a target firm for acquisition; to examine the quality of the strategic fit & the ability of the acquiring firm to effectively integrate the target to realize the potential gains from the deal

a financing option through which risky acquisitions are financed with money (debt) that provides a large potential return to lenders (bondholders); increases debts; have high interest rates; unsecured

exists when the value created by units working together exceeds the value those units could create working independently; assets worth more when used together

created when combining & integrating the acquiring & acquired firms' assets yield capabilities & core competencies that could not be developed by combining & integrating either firm's assets with another company; possible when firms' assets are complementary

a means by which firms collaborate for the purpose of working together to achieve a shared objective; to create value for a customer that it likely couldn't do by itself

a cooperative strategy in which firms combine some of their resources & capabilities for the purpose of creating a competitive advantage; co-develop, sell, & service goods & services

a strategic alliance in which 2 or more firms create a legally independent company to share some of their resources & capabilities for the purpose of developing a competitive advantage; when firms intend to enter highly uncertain markets; effective in establishing long-term relationships & transferring tacit knowledge

when 2 or more firms own different percentages of the company they have formed by combining some of their resources & capabilities for the purpose of creating a competitive advantage; many FDI's completed this way

2 or more firms develop a contractual relationship to share some of their resources & capabilities for the purpose of creating a competitive advantage; separate independent company NOT established; less formal & demand fewer partner committments; not for complex projects; ex. licensing & distribution agreeement, supply contracts

through which firms combine some of their resource & capabilities for the purpose of creating a competitive advantage by competiting in 1 or more product markets

firms share some of their resources & capabilities from different stages of the value chain (supply-chain mgmt, operations, distribution, marketing, & follow-up services) for the purpose of creating a competitive advantage; often formed to adapt to environmental changes

firms share some of their resources & capabilities from the same stage(s) of the value chain (supply-chain mgmt, operations, distribution, marketing, & follow-up services) for the purpose of creating a competitive advantage; often formed to adapt to environmental changes; difficult to maintain

exists when 2 or more firms negotiate directly to jointly agree about the amount to produce as well as the prices for what is produced; illegal in U.S. & most developed economies

exists when several firms in an industry indirectly coordinate their production & pricing decisions by observing each other's competitive actions & responses; results in production output that is below fully competitve levels & above fully competitive prices

a form of tacit collusion in which firms do not take competitive actions against rivals they meet in multiple markets; b/c it could be destructive competition

through which a firm collaborates with 1 or more companies for the purpose of expanding its operations; require fewer resource committments & permet greater flexibility in terms of efforts to diversify partners' operations compared against mergers & acquisitions

corporate-level cooperative strategy in which firms share some of their resources & capabilities to engage in product and/or geographic diversification

corporate-level cooperative strategy in which firms share some of their resources & capabilities to create economies of scope between multiples functions or businesses between partner firms

an international cooperative strategy in which firms with headquarters in different countries decide to combine some of their resources & capabilities for the purpose of creating a competitve advantage; less risky than M & A, can be complex & hard to manage; create value in locations outside home market