MGT 490 FINAL EXAM STUDY GUIDE
corporate-level strategy - Answers - a strategy that focuses on gaining long-term
revenue, profits, and market value through operations in multiple businesses
diversification - Answers - the process of firms expanding their operations by entering
new businesses
- single business
- product line expansion
- geographic expansion/vertical integration
- related/unrelated diversification
related diversification (horizontal relationships) - Answers - a firm entering a different
business in which it can benefit from leveraging competencies, sharing activities, or
building market power
- sharing tangible resources
- sharing intangible resources
core competencies - Answers - a firm's strategic resources that reflect the collective
learning in the organization
- how to coordinate diverse production skills
- how to integrate multiple streams of technologies
- how to market diverse products and services
sharing activities - Answers - corporations can also achieve synergy in a corporation by
sharing tangible and value-creating activities across their business units, which provides
two payoffs: cost savings and revenue enhancements
- common manufacturing facilities
- distribution channels
- sales forces
economies of scope - Answers - cost savings from leveraging core competencies or
sharing related activities among businesses in a corporation
market power - Answers - firms' ability to profit through restricting or controlling supply
to a market or coordinating with other firms to reduce investment
- pooled negotiating power
- vertical integration
pooled negotiating power - Answers - the improvement in bargaining position relative to
suppliers and customers
, What are the benefits of pooled negotiating power? - Answers - similar businesses
working together can have stronger bargaining position relative to suppliers, customers,
and competitors
e.g.: Netflix, Hulu
What are the risks of pooled negotiating power? - Answers - abuse of bargaining power
may affect relationships with customers, suppliers, and competitors
vertical integration - Answers - an expansion or extension of the firm by integrating
preceding or successive production processes
What are the benefits of vertical integration? - Answers - - a secure source of raw
materials or distribution channels
- protection of and control over valuable assets
- access to new business opportunities
- simplified procurement and administrative procedures
What are the risks of vertical integration? - Answers - - costs and expenses associated
with increased overhead and capital expenditures
- loss of flexibility resulting from large investments
- problems associated with unbalanced capacities along the value chain
- adding admin costs associated with managing a more complex set of activities
portfolio management - Answers - assessing the competitive position of a portfolio of
businesses within a corporation
- suggesting strategic alternatives for each business
- identifying priorities for the allocation of resources across the businesses
unrelated business diversification (hierarchical relationships) - Answers - a firm entering
a different business that has little horizontal interaction with other businesses of a firm
- value creation derives from corporate office
- leveraging support activities
transactional cost perspective - Answers - a perspective that the choice of a
transaction's governance structure, such as vertical integration or market transaction, is
influenced by market transaction costs associated with each choice:
- search
- negotiating
- contracting
- monitoring
- enforcement costs
every market transaction has transaction costs
parenting advantage - Answers - the positive contribution of the corporate office to a
new business as a result of expertise and support provided
corporate-level strategy - Answers - a strategy that focuses on gaining long-term
revenue, profits, and market value through operations in multiple businesses
diversification - Answers - the process of firms expanding their operations by entering
new businesses
- single business
- product line expansion
- geographic expansion/vertical integration
- related/unrelated diversification
related diversification (horizontal relationships) - Answers - a firm entering a different
business in which it can benefit from leveraging competencies, sharing activities, or
building market power
- sharing tangible resources
- sharing intangible resources
core competencies - Answers - a firm's strategic resources that reflect the collective
learning in the organization
- how to coordinate diverse production skills
- how to integrate multiple streams of technologies
- how to market diverse products and services
sharing activities - Answers - corporations can also achieve synergy in a corporation by
sharing tangible and value-creating activities across their business units, which provides
two payoffs: cost savings and revenue enhancements
- common manufacturing facilities
- distribution channels
- sales forces
economies of scope - Answers - cost savings from leveraging core competencies or
sharing related activities among businesses in a corporation
market power - Answers - firms' ability to profit through restricting or controlling supply
to a market or coordinating with other firms to reduce investment
- pooled negotiating power
- vertical integration
pooled negotiating power - Answers - the improvement in bargaining position relative to
suppliers and customers
, What are the benefits of pooled negotiating power? - Answers - similar businesses
working together can have stronger bargaining position relative to suppliers, customers,
and competitors
e.g.: Netflix, Hulu
What are the risks of pooled negotiating power? - Answers - abuse of bargaining power
may affect relationships with customers, suppliers, and competitors
vertical integration - Answers - an expansion or extension of the firm by integrating
preceding or successive production processes
What are the benefits of vertical integration? - Answers - - a secure source of raw
materials or distribution channels
- protection of and control over valuable assets
- access to new business opportunities
- simplified procurement and administrative procedures
What are the risks of vertical integration? - Answers - - costs and expenses associated
with increased overhead and capital expenditures
- loss of flexibility resulting from large investments
- problems associated with unbalanced capacities along the value chain
- adding admin costs associated with managing a more complex set of activities
portfolio management - Answers - assessing the competitive position of a portfolio of
businesses within a corporation
- suggesting strategic alternatives for each business
- identifying priorities for the allocation of resources across the businesses
unrelated business diversification (hierarchical relationships) - Answers - a firm entering
a different business that has little horizontal interaction with other businesses of a firm
- value creation derives from corporate office
- leveraging support activities
transactional cost perspective - Answers - a perspective that the choice of a
transaction's governance structure, such as vertical integration or market transaction, is
influenced by market transaction costs associated with each choice:
- search
- negotiating
- contracting
- monitoring
- enforcement costs
every market transaction has transaction costs
parenting advantage - Answers - the positive contribution of the corporate office to a
new business as a result of expertise and support provided
