:::Case study exam::: Answer the given question based on the attached case study. Use the textbook content to show your supportive arguments. (Textbook attached) Use the analysis (such as PESTLE, SW
Chapter 3
VALUE-CHAIN ANALYSIS
value-chain analysis a strategic analysis of an organization that uses value-creating activities
primary activities sequential activities of the value chain that refer to the physical creation of the product or service, its sale and transfer to the buyer, and its service after sale, including inbound logistics, operations, outbound logistics, marketing and sales, and service.
support activities activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support activities, including procurement, technology development, human resource management, and general administration.
inbound logistics receiving, storing, and distributing inputs of a product.
operations all activities associated with transforming inputs into the final product form.
outbound logistics collecting, storing, and distributing the product or service to buyers
marketing and sales activities associated with purchases of products and services by end users and the inducements used to get them to make purchases.
service actions associated with providing service to enhance or maintain the value of the product.
procurement the function of purchasing inputs used in the firm’s value chain, including raw materials, supplies, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment, and buildings.
technology development activities associated with the development of new knowledge that is applied to the firm’s operations
human resource management activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel
general administration general management, planning, finance, accounting, legal and government affairs, quality management, and information systems; activities that support the entire value chain and not individual activities.
interrelationships collaborative and strategic exchange relationships between value-chain activities either (a) within firms or (b) between firms. Strategic exchange relationships involve exchange of resources such as information, people, technology, or money that contribute to the success of the firm.
Resource-based view (RBV) of the firm perspective that firms’ competitive advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute.
tangible resources organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources.
intangible resources organizational assets that are difficult to identify and account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation resources.
organizational capabilities the competencies and skills that a firm employs to transform inputs into outputs.
path dependency a characteristic of resources that is developed and/or accumulated through a unique series of events
causal ambiguity a characteristic of a firm’s resources that is costly to imitate because a competitor cannot determine what the resource is and/or how it can be re-created.
social complexity a characteristic of a firm’s resources that is costly to imitate because the social engineering required is beyond the capability of competitors, including interpersonal relations among managers, organizational culture, and reputation with suppliers and customers.
EVALUATING FIRM PERFORMANCE: TWO APPROACHES
financial ratio analysis a method of evaluating a company’s performance and financial wellbeing through ratios of accounting values, including short-term solvency, long-term solvency, asset utilization, profitability, and market value ratios
The value of the “balanced scorecard” in recognizing how the interests of a variety of stakeholders can be interrelated.
balanced scorecard a method of evaluating a firm’s performance using performance measures from the customer, internal, innovation and learning, and financial perspectives.
customer perspective measures of firm performance that indicate how well firms are satisfying customers’ expectations.
internal business perspective measures of firm performance that indicate how well firms’ internal processes, decisions, and actions are contributing to customer satisfaction.
innovation and learning perspective measures of firm performance that indicate how well firms are changing their product and service offerings to adapt to changes in the internal and external environments.
financial perspective measures of firms’ financial performance that indicate how well strategy, implementation, and execution are contributing to bottom-line improvement.
Chapter 6
MAKING DIVERSIFICATION WORK: AN OVERVIEW
Related diversification
corporate-level strategy a strategy that focuses on gaining long-term revenue, profits, and market value through managing operations in multiple businesses
Diversification the process of firms expanding their operations by entering new businesses.
Economies of scale
Economies of scope
Cost saving from Leveraging core competency
Creating value through related and unrelated diversification
Related diversification- Sharing activity between different departments, pooling resources and negotiation power, vertical integration,
Corporations can use related diversification to achieve synergistic benefits through economies of scope and market power
Economies of scope cost savings from leveraging core competencies or sharing related activities among businesses in a corporation.
Related diversification- Economies of Scope- Leveraging core competencies, Sharing activities
Related Diversification: Market Power Pooled negotiating power, Vertical integration
Unrelated Diversification: Parenting, Restructuring, and Financial Synergies- Corporate restructuring and parenting, Portfolio management
core competencies a firm’s strategic resources that reflect the collective learning in the organization
The core competence must enhance competitive advantage(s) by creating superior customer value.
Different businesses in the corporation must be similar in at least one important way related to the core competence.
The core competencies must be difficult for competitors to imitate or find substitutes for.
Sharing activities- having activities of two or more businesses’ value chains done by one of the businesses- Deriving Cost Savings
RELATED DIVERSIFICATION: MARKET POWER
pooled negotiating power- the improvement in bargaining position relative to suppliers and customers
Market power- firms’ abilities to profit through restricting or controlling supply to a market or coordinating with other firms to reduce investment.
vertical integration an expansion or extension of the firm by integrating preceding or successive production processes
transaction cost perspective a perspective that the choice of a transaction’s governance structure, such as vertical integration or market transaction, is influenced by transaction costs, including search, negotiating, contracting, monitoring, and enforcement costs, associated with each choice.
UNRELATED DIVERSIFICATION: FINANCIAL SYNERGIES AND PARENTING
unrelated diversification a firm entering a different business that has little horizontal interaction with other businesses of a firm
parenting advantage the positive contributions of the corporate office to a new business as a result of expertise and support provided and not as a result of substantial changes in assets, capital structure, or management
restructuring the intervention of the corporate office in a new business that substantially changes the assets, capital structure, and/or management, including selling off parts of the business, changing the management, reducing payroll and unnecessary sources of expenses, changing strategies, and infusing the new business with new technologies, processes, and reward systems.
portfolio management a method of (a) assessing the competitive position of a portfolio of businesses within a corporation, (b) suggesting strategic alternatives for each business, and (c) identifying priorities for the allocation of resources across the businesses.
THE MEANS TO ACHIEVE DIVERSIFICATION
acquisitions the incorporation of one firm into another through purchase.
mergers the combining of two or more firms into one new legal entity.
divestment the exit of a business from a firm’s portfolio.
strategic alliance a cooperative relationship between two or more firms.
joint ventures new entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entity.
internal development entering a new business through investment in new facilities, often called corporate entrepreneurship and new venture development.
HOW MANAGERIAL MOTIVES CAN ERODE VALUE CREATION
managerial motives managers acting in their own self-interest rather than to maximize long-term shareholder value.
growth for growth’s sake managers’ actions to grow the size of their firms not to increase long-term profitability but to serve managerial self-interest.
egotism managers’ actions to shape their firms’ strategies to serve their selfish interests rather than to maximize long-term shareholder value.
antitakeover tactics managers’ actions to avoid losing wealth or power as a result of a hostile takeover.
greenmail a payment by a firm to a hostile party for the firm’s stock at a premium, made when the firm’s management feels that the hostile party is about to make a tender offer.
golden parachute a prearranged contract with managers specifying that, in the event of a hostile takeover, the target firm’s managers will be paid a significant severance package.
poison pill used by a company to give shareholders certain rights in the event of takeover by another firm.
Chapter 12
Managing Innovation and Fostering Corporate Entrepreneurship
The importance of implementing strategies and practices that foster innovation.
Innovation the use of new knowledge to transform organizational processes or create commercially viable products and services
product innovation efforts to create product designs and applications of technology to develop new products for end users.
process innovation efforts to improve the efficiency of organizational processes, especially manufacturing systems and operations.
radical innovation an innovation that fundamentally changes existing practices.
incremental innovation an innovation that enhances existing practices or makes small improvements in products and processes.
The challenges and pitfalls of managing corporate innovation processes.
strategic envelope a firm-specific view of innovation that defines how a firm can create new knowledge and learn from an innovation initiative even if the project fails.
CORPORATE ENTREPRENEURSHIP
corporate entrepreneurship (CE) the creation of new value for a corporation through investments that create either new sources of competitive advantage or renewal of the value proposition.
How corporations use new venture teams, business incubators, and product champions to create an internal environment and culture that promote entrepreneurial development.
focused approaches to corporate entrepreneurship corporate entrepreneurship in which the venturing entity is separated from the other ongoing operations of the firm.
new venture group (NVG) a group of individuals, or a division within a corporation, that identifies, evaluates, and cultivates venture opportunities.
business incubator a corporate new venture group that supports and nurtures fledgling entrepreneurial ventures until they can thrive on their own as stand-alone businesses.
dispersed approaches to corporate entrepreneurship corporate entrepreneurship in which a dedication to the principles and policies of entrepreneurship is spread throughout the organization.
Entrepreneurial culture corporate culture in which change, and renewal are a constant focus of attention.
product champion an individual working within a corporation who brings entrepreneurial ideas forward, identifies what kind of market exists for the product or service, finds resources to support the venture, and promotes the venture concept to upper management.
How corporate entrepreneurship achieves both financial goals and strategic goals.
exit champion an individual working within a corporation who is willing to question the viability of a venture project by demanding hard evidence of venture success and challenging the belief system that carries a venture forward
The benefits and potential drawbacks of real options analysis in making resource deployment decisions in corporate entrepreneurship contexts.
real options analysis (ROA) an investment analysis tool that looks at an investment or activity as a series of sequential steps, and for each step the investor has the option of (a) investing additional funds to grow or accelerate, (b) delaying, (c) shrinking the scale of, or (d) abandoning the activity.
back-solver dilemma problem with investment decisions in which managers scheme to have a project meet investment approval criteria, even though the investment may not enhance firm value.
managerial conceit biases, blind spots, and other human frailties that lead to poor managerial decisions.
Escalation of commitment the tendency for managers to irrationally stick with an investment, even one that is broken down into a sequential series of decisions, when investment criteria are not being met.
ENTREPRENEURIAL ORIENTATION
entrepreneurial orientation the practices that businesses use in identifying and launching corporate ventures.
autonomy independent action by an individual or a team aimed at bringing forth a business concept or vision and carrying it through to completion.
innovativeness a willingness to introduce novelty through experimentation and creative processes aimed at developing new products and services as well as new processes.
proactiveness a forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities in anticipation of future demand
competitive aggressiveness an intense effort to outperform industry rivals; characterized by a combative posture or an aggressive response aimed at improving position or overcoming a threat in a competitive marketplace
risk taking making decisions and acting without certain knowledge of probable outcomes. Some undertakings may also involve making substantial resource commitments in the process of venturing forward.
Chapter 1
Strategic management the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.
Strategy: the ideas, decisions, and actions that enable a firm to succeed.
Competitive advantage: a firm’s resources and capabilities that enable it to overcome the competitive forces in its industry(ies).
Operational effectiveness: performing similar activities better than rivals.
Stakeholders: individuals, groups, and organizations that have a stake in the success of the organization. These include owners (shareholders in a publicly held corporation), employees, customers, suppliers, and the community at large.
Effectiveness: tailoring actions to the needs of an organization rather than wasting effort, or “doing the right thing.”
Efficiency: performing actions at a low cost relative to a benchmark, or “doing things right.”
Ambidexterity: the challenge managers face of both aligning resources to take advantage of existing product markets and proactively exploring new opportunities.
Strategic management process: strategy analysis, strategy formulation, and strategy implementation.
Intended strategy: strategy in which organizational decisions are determined only by analysis.
Realized strategy: strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences.
Strategy analysis: study of firms’ external and internal environments, and their fit with organizational vision and goals.
Strategy formulation: decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.
Strategy Implementation: actions made by firms that carry out the formulated strategy, including strategic controls, organizational design, and leadership.
Corporate governance: the relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management (led by the chief executive officer), and (3) the board of directors.
Stakeholder Management: a firm’s strategy for recognizing and responding to the interests of all its salient stakeholders.
Social responsibility: the expectation that businesses or individuals will strive to improve the overall welfare of society.
Hierarchy of goals: organizational goals ranging from, at the top, those that are less specific yet able to evoke powerful and compelling mental images, to, at the bottom, those that are more specific and measurable.
Vision: organizational goal(s) that evoke(s) powerful and compelling mental images.
Mission statement: a set of organizational goals that identifies the purpose of the organization, its basis of competition, and competitive advantage.
Strategic objectives: a set of organizational goals that are used to put into practice the mission statement and that are specific and cover a well-defined time frame.
Chapter 7
Globalization a term that has two meanings: (1) the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information; (2) the growing similarity of laws, rules, norms, values, and ideas across countries.
Diamond of national advantage: a framework for explaining why countries foster successful multinational corporations; consists of four factors—factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry.
Factor endowments (national advantage): a nation’s position in factors of production.
Demand conditions (national advantage): the nature of home-market demand for the industry’s product or service.
Related and supporting industries (national advantage): the presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain.
Firm strategy, structure, and rivalry (national advantage): the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.
Multinational firms: firms that manage operations in more than one country.
Arbitrage opportunities: an opportunity to profit by buying and selling the same good in different markets.
Reverse innovation: new products developed by developed-country multinational firms for emerging markets that have adequate functionality at a low cost.
Political risk: potential threat to a firm’s operations in a country due to ineffectiveness of the domestic political system.
Rule of law: a characteristic of legal systems whereby behavior is governed by rules that are uniformly enforced.
Economic risk: potential threat to a firm’s operations in a country due to economic policies and conditions, including property rights laws and enforcement of those laws.
Counterfeiting: selling of trademarked goods without the consent of the trademark holder.
Currency risk: potential threat to a firm’s operations in a country due to fluctuations in the local currency’s exchange rate.
Management risk: potential threat to a firm’s operations in a country due to the problems that managers have making decisions in the context of foreign markets.
Outsourcing: using other firms to perform value-creating activities that were previously performed in-house.
Offshoring: shifting a value-creating activity from a domestic location to a foreign location.
International strategy: a strategy based on firms’ diffusion and adaptation of the parent companies’ knowledge and expertise to foreign markets; used in industries where the pressures for both local adaptation and lowering costs are low.
Global strategy: a strategy based on firms’ centralization and control by the corporate office, with the primary emphasis on controlling costs; used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high.
Multi-domestic Strategy: a strategy based on firms’ differentiating their products and services to adapt to local markets; used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low.
Transnational Strategy: a strategy based on firms’ optimizing the trade-offs associated with efficiency, local adaptation, and learning; used in industries where the pressures for both local adaptation and lowering costs are high.
Regionalization: increasing international exchange of goods, services, money, people, ideas, and information; and the increasing similarity of culture, laws, rules, and norms within a region such as Europe, North America, or Asia.
Licensing: a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual property.
Franchising: contractual arrangement in which a company receives a royalty or feeing exchange for the righto use its intellectual property; franchising usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising
