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71 Cards in this Set
- Front
- Back
Define cooperative strategy
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When firms work together to achieve a common objective.
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Define Strategic alliance
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When firms combine resources in order to gain a competitive advantage.
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Define Joint Venture
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When firms create an independent company with equal stake.
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Equity strategic alliance
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When firms create an independent company and there is not an equal stake in ownership.
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Non-equity strategic alliance
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When an individual firm is not created as an alliance. Projects are usually less complex and commitment levels are low.
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Business level cooperative strategy
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a strategic alliance where firms attempt to improve performance in specific product markets
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Complimentary strategic alliance
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a type of business level cooperative strategy where firms share complimentary resources to develop a competitive advantage
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Vertical complimentary strategy
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a type of complimentary strategic alliance where different places in the value chain are shared
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Horizontal complimentary strategy
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a type of complimentary strategic alliance where the same places in the value chain are shared
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Competition response strategy
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a cooperative strategy used to respond to competitors attacks, usually used to take strategic and not tactical action
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Uncertainty reducing strategy
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cooperative strategy used to reduce risk and uncertainty.
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Competition reducing strategy
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when firms try to eliminate competition through some form of collusion
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Explicit collusion
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Illegal collusion; price setting
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Tacit collusion
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when firms impliedly collude by observing each other actions
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Corporate-level cooperative strategy
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A strategy used to diversify products or markets it competes in.
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Diversifying strategic alliance
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when firms cooperate in order to enter new markets
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Synergistic strategic alliance
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when firms cooperate to create new synergies
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Franchising
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A contractual agreement to do business with someone else's trade name
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Cross-border strategic alliance
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where firms across borders share resources to create a competitive advantage
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Network cooperative strategy
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where multiple firms create an alliance to shared objectives
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Reasons why firms participate in strategic alliances
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reduce competition, enhance firms competitive capabilities, allow firms to gain access to resources, allow a firm to take advantage of opportunities
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Define complimentary alliances
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sharing of firms resources to gain a competitive advantage
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Define competitive alliances
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Response to competitors strategic actions, usually not tactical
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Why are some alliances more stable than others?
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When one of the firm acts opportunistically, misrepresentation of competencies, resources not made available, firms do not invest same amounts in the relationship, lack of trust, sufficient contracts
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Why join a franchise?
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market is well fragmented, franchisor develops program/store, franchisees notify firm of ways to be more efficient
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Corporate governance objectives
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Make strategic decisions more effectively, creates order between managing owning parties, reflects/enforces firm values, aligns interests of execs and shareholders
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What are the internal mechanisms for corporate governance
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ownership concentration, board of directors, executive compensation
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What are the external mechanisms for corporate governance
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market for corporate control
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Define the market for corporate control
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Market where ownerships in the firm can be traded; often used as a last resort to maintain or gain control over the firm
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Agency relationship
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where one person hires an agent to make decisions
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Agency costs
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The costs associates with maintaining a principal/agent relationship
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Agency problems
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Problems that arise as a result of an agency relationship
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Why might a CEO want to diversify a corporation?
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Decrease job loss risk, Increase salary
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Why aren't dividends offered more often?
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Executives use excess cash to invest in personal projects
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What are the positive consequences of SOX?
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Regulations have been copied around the world, stock market confidence increases due to more stringent reporting standards
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What are the negative consequences of SOX?
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increased firm costs, less foreign firms on US stock exchange
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Define a large blockholder
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Someone who owns at least 5 percent of a corporations issues shares
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How do large blockholders impact firms?
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Higher monitoring of managers actions, lower levels of firm diversification
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Define Strategic controls
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verifications of a firms direction and use of appropriate methods/standards in conducting business
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Define Financial controls
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using quantified measures to measure firm performance such as ROI and ROA
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When are strategic/financial controls used?
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Strategic controls used in differentiated strategy; Financial controls used in a cost-leadership strategy or when the firm is highly diversified (diversification makes it hard to design strategic controls)
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What changes have boards of directors implemented since the scandals this decade?
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Compensation and nomination committies must be headed by outsiders; Boards must be headed by outsiders
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Positives/Negatives of stock options for top management?
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links pay to performance but makes CEOs richer and are often used in high risk situations
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What is organizational structure?
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The formal relationships, procedures, controls, authority, and decision making
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Structural stability
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allows the firm the manage work routines
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Structural flexability
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allows the firm to explore opportunities/competitive advantages
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Do top managers like to change an organizations structure?
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No, unless it is necessary
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What is a simple organizational structure, when is it used?
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Manager owner makes all decisions; best when used for a single product line and market
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What is the functional structure and how is it used?
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CEO and managers of different departments; used when business and some corporate level strategies used
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Describe how the functional structure is set up under a cost leadership strategy
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Centralized staff makes decisions and continually cuts costs; highly specialized tasks; highly formalized rules
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Describe how the functional structure is set up under a differentiation strategy
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Decision making is not centralized; Job structure is not specialized; and few formal rules
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What is the multi-divisional corporate structure?
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each division acts as a separate business and firm functions in different markets but with same or different products for each business
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What are the benefits of a multi-divisional corporate structure?
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Corporate officers can monitor firm performance, divisions can be easily compared, managers can easily motivate poorly performing divisions
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What is the cooperate form of multi-divisional corporate structure?
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used with related constrained assets split up by product division with a headquarters office containing managerial functions
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What are the benefits of the cooperate form of multi-divisional corporate structure?
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allows for cooperation between divisions, some functions centralized and available to entire organization, division managers make frequent contact, matrix organization
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What is a matrix organization?
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Where divisions have both function and produce specializations
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What is a strategic business unit?
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Used under the related linked strategy where physical assets are not shared; Each SBU is run as a separate business and often have nothing in common with each other
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What is the competitive form of multi-divisional corporate structure?
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Used under the unrelated diversification strategy; each unit competes with the other units; Firms are often more flexible
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What is entreprunership?
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pursuing market conditions that create a new need and not being constrained by currently controlled processes
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Strategic entrepreneurership
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Finding the best way to manage entreprenural efforts using a strategic perspective
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Corporate entreprenership
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Enteprenership within an established firm; linked to a firms survival and success
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Invention
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creating a new product/process
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Innovation
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turning a new product or process into a good in the market
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Imitation
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adopting an innovation
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What is the difference between invention and innovation
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Invention involves brining something into existence while innovation involves commercializing it
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What is the entreprunerial mindset?
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Looks for and values marketplace uncertainty and identifies opportunities for innovativeness
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Benefits/risks of international entreprunership
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improved firm performance; unstable foreign currencies; market efficiency problems; insufficient infrastructures; limitations on market size
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Bottom-up corporate venturing
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When a product champion brings an entreprunial vision to the top of an organization
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Top-down corporate venturing
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Internal innovations are induced through the firms current strategy
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What kinds of alliances are most likely in various industries?
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slow cycle: Joint venture; standard cycle: equity strategic alliance; fast cycle: Non-equity strategic alliance
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What is more important to an organization, strategy or structure?
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Both are very important, but strategy determines structure.
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