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Strategic Mgmt 8
| Question | Answer |
|---|---|
| What are the differences between corporate level and business level strategy? | Business strategy involves coming up with a plan for competing successfully in only a single industry environment. Corporate level involves improving the performance of the company's overall business lineup and making a rational whole out all biz. |
| What is corporate level strategy? | Corporate level involves improving the performance of the company's overall business lineup and making a rational whole out all biz. |
| What is diversification? | Diversification is a corporate strategy to enter into a new market or industry which the business is not currently in, whilst also creating a new product for that new market. |
| What are the four distinct facets of corporate level strategy? | 1.pick new ind. to enter &decide means of entry.2.pursue opp. to leverage cross-business val. chain reltnshps&strat.fit into comp. adv.3.est. investment priorities &steer corp. res. into most attractive biz units.4.boost the comb. perf. of corp. biz's |
| When should a firm diversify? | when a single-business company encounters diminishing market opportunities and stagnating sales in its principal business |
| Discuss and explain why building shareholder value is the ultimate justification for diversifying? | because it adds long-term economic value for shareholders |
| Explain the significance of the three tests for judging a diversification move. | 1.industry attractiveness test 2.cost-of-entry test 3. better-off test: new business must help existing biz perform better |
| Describe in some detail the three basic strategies that organizations can use to enter new businesses. | acquisition, internal startup, or joint venture |
| Explain in some detail what related diversification is. | where the business that the company wants to diversify into possesses competitively valuable cross-business value chain and resource matchups |
| Why do firms pursue related diversification? | to boost each business' chance for competitive success |
| How can related diversification build shareholder value? | by leveraging cross-business relationships into competitive advantages, thus allowing the company as a whole to perform better than just the sum of its individual businesses, |
| What are strategic fits? | whenever one or more activities constituting the value chains of different businesses are sufficiently similar as to present opportunities for cross-business sharing or transferring of the resources and capabilities that enable these activities |
| In what areas can strategic fits be captured? | anywhere along the value chain |
| How can strategic fits and economies of scope lead to a competitive advantage? | the greater the cross-business economies associated with resource sharing and transfer, the greater the potential for a related diversification strategy to give a multibusiness enterprise a cost advantage over rivals |
| What is unrelated diversification? | it focuses squarely on entering and operating businesses in industries that allow the company as a whole to increase its earnings. |
| Why do firms pursue unrelated diversification? | they are willing to diversify into any industry where there is an opportunity to realize consistently good financial results |
| What are the pros and cons or what is the appeal of unrelated diversification? | the appeal is that the company can diversify into many different industries |
| How can unrelated diversification build shareholder value? | by being a corporate parent, they can bring their reputation, credit, access to financial markets, governance mechanisms, ethics, central data and communications, administrative resources, and more to various diverse companies |
| Explain the 2 major drawbacks of pursuing unrelated diversification. | very demanding managerial requirements and limited competitive advantage potential |
| Identify and briefly describe the six steps associated with evaluating the strategy of a diversified company. | page 242 |
| Identify and briefly describe the strategic options for companies that are already diversified (i.e., broadening business base, retrenchment and divestiture, restructuring and turnaround, and multinational diversification strategies). | page 255-258 |
| What are the distinguishing characteristics of a multinational diversification strategy? | entering more businesses or entering more country markets |
| What are economies of scope? | cost reductions that flow from operating in multiple businesses, whereas economies of scale accrue from a larger-size operation |
| What are synergies and why are they important in the pursuit of related diversification? | the whole is greater than the sum of its parts. |
| Why are synergies, strategic fits, and economies of scope important in the pursuit of related diversification? | 1.transferring skills/knowledge 2.combining related value chain activities 3.leveraging the use of a well-respected brand name 4. using cross-business collaboration and knowledge sharing to create new resources/drive innovation |
| What is broadening business base | add businesses that will complement and strengthen the market position and competitive capabilities of business in industries where the company already has a stake |
| What is retrenchment and divestiture | divest or spin off busniness that are competitively weak, that are in unattractive industries, or that lack adequate strategic and resource fit |
| what is restructuring and turnaround | divest and/or acquire businesses to put a whole new faace on the company's business lineup |
| what are multinational diversification strategies | offers two major avenues for sustained growth - entering more businesses or entering more country markets |
Created by:
bp1189