CHAPTER 6- Corporate-LevelStrategy

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.

related diversification-a firm entering a different business in which it can benefit from
leveraging core competencies,sharing activities, or building market power.

economies of scope-cost savings from leveraging core competencies or sharing

related activities among businesses in a corporation.

core competencies-a firm’s strategic resources that reflect the collective learning in the
Organization.

sharing activities- having activities of two or more businesses’ value chains done by
one of the businesses.

market power- firms’ abilities to profit through restricting or controlling supply to a

market or coordinating with other firms to reduce investment.

pooled negotiating power- the improvement in bargaining position relative to suppliers

and customers.

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- 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 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.

acquisitions-the incorporation of onefirm 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.

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 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 7- International Strategy

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
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

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

their 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 form local adaptation is low and the pressure for lowering costs is high.

Multidomestic 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.

location (a global strategy) or disperse them across many locations to enhance

adaptation

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.

trading blocs-groups of countries agreeing to increase trade between them by lowering

trade barriers.

exporting-producing goods in one country to sell to residents of another country.

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-a contractual arrangement in which a company receives a royalty or fee in

exchange for the right to 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.

wholly owned subsidiary- a business in which a multinational company owns 100

percent of th
CHAPTER 8 - Entrepreneurial Strategy and Competitive Dynamics

Entrepreneurship- the creation of new value by an existing organization or new

venture that involves the assumption of risk.

opportunity recognition -the process of discovering and evaluating changes in

the business environment,such as a new technology,sociocultural trends,or shifts in
consumer demand, that can be exploited.

angel investors- private individuals who provide equity investments for seed capital
during the early stages of a new venture.

venture capitalists- companies organized to place their investors’ funds in lucrative

business opportunities.

crowdfunding-funding a venture by pooling small investments from a large number of

investors; often raised on the Internet.

Human Capital- Bankers, venture capitalists, and angel investors agree that the most
important asset an entrepreneurial firm can have is strong and skilled management.

Social Capital- New ventures founded by entrepreneurs who have extensive social
contacts are more likely to succeed than ventures started without the support of a social
network.

Government Resources- In the United States, the federal government provides

support for
entrepreneurial firms in two key arenas financing and government contracting. The
Small
Business Administration (SBA) has several loan guarantee programs designed to
support
the growth and development of entrepreneurial firms.

Entrepreneurial leadership- leadership appropriate for new ventures that requires

courage, belief in one’s convictions, and the energy to work hard even in difficult
circumstances; and that embodies vision, dedication and drive, and commitment to
excellence.
entrepreneurial strategy- a strategy that enables a skilled and dedicated entrepreneur,
with a viable opportunity and access to sufficient resources, to successfully launch a
new venture.

pioneering new entry-a firm’s entry into an industry with a radical new product or
highly
innovative service that changes the way business is conducted.

imitative new entry- a firm’s entry into an industry with products or services that
capitalize on
proven market successes and that usually have a strong marketing orientation.

adaptive new entry-a firm’s entry into an industry by offering a product or service that
is somewhat new and sufficiently different to create value for customers by capitalizing
on current
market trends.

competitive dynamics- intense rivalry, involving actions and responses, among similar
competitors vying for the same customers in a marketplace

new competitive action- acts that might provoke competitors to react, such as new
market entry,price cutting, imitating successful products, and expanding production
capacity.

threat analysis-a firm’s awareness of its closest competitors and the kinds of
competitive actions they might be planning.

market commonality-the extent to which competitors are vying for the same customers
in the
same markets. resource similarity the extent to which rivals draw from the same types
of strategic resources.

strategic actions-major commitments of distinctive and specific resources to strategic

initiatives.

tactical actions-refinements or extensions of strategies usually involving minor

resource
commitments.
market dependence- degree of concentration of a firm’s business in a particular
industry.

Forbearance- a firm’s choice of not reacting to a rival’s new competitive action.

co-opetition- a firm’s strategy of both cooperating and competing with rival firms.

CHAPTER 9- Strategic Control and Corporate Governance

traditional approach to strategic control- a sequential method of organizational

control
in which (1) strategies are formulated and top management sets goals, (2)
strategies are
implemented, and (3) performance is measured against the predetermined goal
set.

informational controL- a method of organizational control in which a firm gathers and

analyzes
information from the internal and external environment in order to obtain the best fit
between
the organization’s goals and strategies and the strategic environment.

behavioral control-a method of organizational control in which a firm influences the

actions of employees through culture, rewards, and boundaries.
Organizational culture- a system of shared values and beliefs that shape a company’s
people,
organizational structures, and control systems to produce behavioral norms.

reward system-policies that specify who gets rewarded and why.

boundaries and constraints- rules that specify behaviors that are acceptable and
unacceptable.

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, and (3) the board of directors.

corporation-a mechanism created to allow different parties to contribute capital,

expertise, and labor for the maximum benefit of each party.

agency theory- a theory of the relationship between principals and their

agents, with emphasis on two problems: (1)the conflicting goals of principals and
agents, along with the difficulty of principals to monitor the agents, and (2) the
different attitudes and preferences toward risk of principals and agents.

board of directors- a group that has a fiduciary duty to ensure that the company is run
consistently with the long-term interests of the owners, or shareholders, of a corporation
and that acts as an intermediary between the shareholders and management.

shareholder activism-actions by large shareholders to protect their interests when they

feel that managerial actions of a corporation diverge from shareholder value
maximization.

external governance control mechanisms- methods that ensure that managerial

actions lead
to shareholder value maximization and do not harm other stakeholder groups that are
outside the control of the corporate governance system
market for corporate control- an external control mechanism in which shareholders
dissatisfied with a firm’s management sell their shares.
takeover constraint- the risk to management of the firm being acquired by a hostile
raider.

Principal–principal conflicts- conflicts between two classes of principals—controlling

shareholders and minority shareholders—within the context of a corporate

expropriation of minority shareholders- activities that enrich the controlling

shareholders at the expense of the minority shareholders.

business group- a set of firms that, though legally independent, are bound together by
a constellation of formal and informal ties and are accustomed to taking coordinated
action.

Please study about this:

Q1)benefits through corporate restructuring,parenting and portfolio analysis
- In corporate parenting the chances to create value improve when there is a
good connection between the business skills and resources, the needs and
opportunities of the business unit while portfolio analysis view multiple
business lines and units as transaction that should be profitable to the firm.
- Under this style the role of the corporate parent is to enhance synergies across
the business units. This may be achieved through: envisioning to build a
common purpose, facilitating cooperation across businesses and providing
central services and resources. Strategic control
-

Q2)Business practices/Foreign country/Business opportunities

- The term international business refers to any business that operates
across international borders. At its most basic, it includes the sale of goods
and services between countries.Yet, other forms of international business
do exist. For example, a business that produces components or products
overseas but sells them domestically can be considered an international
business, as can an organization that outsources services, such as
customer service, to locations where labor expenses are cheaper.
- For most organizations, decisions around building, producing, and selling
products or services are informed by many factors. Cost is an important
one because businesses that primarily operate in developed markets, like
the United States and Europe, can often source cheaper labor abroad.
-
.