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MGMT 405 Ch7011 test
| Question | Answer |
|---|---|
| Globalization | 1- is the increase in international exchange, including trade in goods and exchange of money, ideas, and information. 2- the growing similarity of laws, rules, norms, values internationally “bottom of the pyramid” - big firm targeting poor consumers |
| Michael Porter’s diamond of national advantage | 1. factor endowments; 2 demand conditions; 3 related and supporting industries; 4 and firm strategy, structure, and rivalry |
| . Factor endowments | = a nation’s position in factors of production |
| Demand conditions | = the nature of home-market demand for the industry’s product or service |
| Related and supporting industries | the presence, absence, and quality in the nation of supplier industries and other related industries |
| Firm strategy, structure, and rivalry | the conditions in the nation governing how companies are created, organized, and managed, |
| Factor endowments | involve factors of production: Land Capital Labor |
| Factors of production must be industry & firm specific | Must be rare, valuable, difficult to imitate, and rapidly & efficiently deployed |
| Demand conditions | refer to the demands that consumers place on an industry (Denmark,India) |
| Related and supporting industries _______________ | enable firms to manage inputs more effectively: (The Italian footwear industry is given as an example) |
| Firm strategy, structure, & rivalry | Firms that succeed in global markets have first succeeded in intensely competitive home markets (Indian software industry) |
| Multinational firms | firms that manage operations in more than one country. (Need increased market for their products). |
| Arbitrage opportunities | an opportunity to profit by buying and selling the same good in different markets- involves buying something from where it is cheap and selling it somewhere where it commands a higher price |
| A company decides to become a multinational firm in order to | 1. increase market size 2. take advantage of arbitrage opportunities 3. enhance product growth potential (reinvigorate mature products) 4. optimize value chain 5. explore reverse innovation (localization) |
| Multinational firms also encounter risks: | -Political risk due to social unrest, military turmoil, demonstrations, terrorism, absence of the rule of law. -Economic risk (Piracy, Counterfeiting) -Currency riskv (affects profit) -Management risk |
| How to manage political risk | Market diversification Developing stakeholder coalitions Wooing key influencers Putting key stakeholders on their boards |
| Managing economic risk through global dispersion of value chains | Outsourcing Offshoring |
| Offshoring | shifting a value-creating activity from a domestic location to a foreign location. Value-creating activities should be performed in the location where the cost is lowest or where the quality is the best. |
| Common savings from offshoring include | Lower wages, benefits, energy costs, regulatory costs, taxes |
| Hidden costs from offshoring include | Higher total wage & indirect costs Increased coordination costs Increased inventory due to longer lead time Reduced market responsiveness Cost of protecting intellectual property |
| Firms face two opposing forces when they expand into global markets | cost reduction and adaptation to local markets |
| Theodore Levitt's suggestion that firms should standardize all of their products and services for all of their worldwide markets approach rested on three key assumptions: | 1. Homogenous customer needs & interests 2. People prefer lower prices at high quality 3. Global markets produce economies of scale |
| Theodore Levitt’s assumptions may be incorrect: | -Product markets DO vary widely between nations – local adaptations work. -growing interest in multiple product features, product quality, & service. -Technology permits flexible production- a firm’s strategy should not be solely product driven. |
| International strategy | a strategy based on a firm’s diffusion and adaptation of the parent company’s knowledge and expertise to foreign markets, used in industries where the pressures for both local adaptation and lowering costs are low |
| International Strategy strengths & weaknesses | Strenghts: Leverage parent firm's knowledge, lower costs from less need to tailor products Weaknesses: Limited ability to adapt to local markets, inability to take advantage of new ideas in local markets |
| Global strategy | a strategy based on firms’ centralization and control by the corporate office, with the primary emphasis on controlling costs, and used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high. . Many indust |
| Global Strategy strength's & weaknesses | Strengths: strong integration, higher economies of scale, uniform standards Weakness: limited adaptation, concentrated dependencies on single facility, single locations= higher transportation costs |
| Multidomestic strategy | 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 | strengths: economies of scale, adapt to local markets, put activities in optimal locations, increase knowledge flows weaknesses: challenge in optimal locations of activities, managerial challenges in transferring knowledge |
| Multidomestic strategy strenghts& weaknesses | Decisions are decentralized Products & services are tailored to local use Consider language, culture, income levels, customer preferences, distribution systems Markets can expand rapidly Prices are differentiated by market |
| Regionalization may be better instead of full-scale globalization | -Distance still matters -Commonalities of language, culture, economics, legal & political systems, and infrastructure all make a difference -Trading blocs and free trade zones ease trade restrictions, taxes, & tariffs |
| Trading blocs | groups of countries agreeing to increase trade between them by lowering trade barriers (EU, NAFTA, ASEAN, MERCOSUR) |
| Options for international market expansion include: | Exporting Licensing or Franchising Strategic Alliance or Joint Venture Wholly-Owned Subsidiary |
| Many firms start small and increase their level of investment & risk as they gain more experience internationally | . The various types of entry form a continuum ranging from exporting (low investment and risk, low control) to a wholly owned subsidiary (high investment and risk, high control). |
| Entrepreneurship | the creation of new value by an existing organization or new venture that involves the assumption of risk. Even though entrepreneurial activity is usually associated with startup companies, new value can be created in many different contexts. |
| Start-up venture ideas can come from | Current or past work experiences Hobbies or suggestions by friends or family |
| For established firms, opportunities can come from | Existing customers Suggestions by suppliers Technological developments |
| Three ingredients are critical in order for an entrepreneurial startup to be successful. What are they? | A viable opportunity, available resources, and a qualified and motivated founding team. |
| Opportunity recognition | the process of discovering and evaluating changes in the business environment, 2 phases: Discovery phase (becoming aware) & Evaluation (analyzing the opportunity) |
| Viable opportunities | They are attractive They are achievable They are durable They are value-creating |
| Resources are essential for entrepreneurial success. These include: | Financial resources Human capital Social capital Government resources |
| The types of financial resources that may be needed depend on two factors: | the stage of venture development and the scale of the venture. ex: Initial, start up financing--> Family, friends, crowdfunding, Early stage financing--> banking, angel investors Later stage financing--> commercial banks, venture capitalists |
| the most important asset an entrepreneurial firm can have is______ | strong and skilled management |
| 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 embodies vision, dedication and drive, and commitment to excellence |
| Why is vision such an important element of entrepreneurial leadership? | Because the entrepreneur has to envision realities do not yet exist. |
| Vision is an entrepreneur’s most important asset | Requires transformational leadership Ability to envision realities that do not yet exist Ability to share this vision with others |
| Entrepreneurship leaders need Drive & dedication | Involves internal motivation Intellectual commitment Patience Stamina, willingness to work long hours Enthusiasm that attracts others |
| Excellence requires entrepreneurs to commit to _________ | Commit to knowing the customer Providing quality goods and services Paying attention to details Continuously learning Connecting the dots Hiring people smarter than themselves |
| Entrepreneurial strategy = | strategy that enables the skilled and dedicated entrepreneur, with a viable opportunity and access to sufficient resources, to successfully launch a new venture (ex: 5 forces analysis) |
| 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. (new ways to solve old proflems |
| Imitative new entry | a firm’s entry into an industry with products or services that capitalize on proven market successes and that usually has 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. |
| Generic Strategies for New Ventures | Overall cost leadership, Differentiation, Focus |
| When an industry is mature, a _________ strategy may be considered to be an effective approach for a new entrant. | Focus Strategy |
| Combination Strategies for New Ventures | Pursuing combination strategies Combine the best features of low-cost, differentiation, and focused strategies Hold down expenses by having a simple structure Create high-value products & services by being flexible & innovative |
| Competitive dynamics helps explain why strategies evolve and how to respond: | New competitive action Threat analysis Motivation and capability to respond Types of competitive action Likelihood of competitive reaction |
| 5 “hardball” strategies for competitive dynamics (boston consulting group) | Devastating rivals’ profit sanctuaries Plagiarizing with pride Deceiving the competition Unleashing massive & overwhelming force Raising competitors’ costs |
| . 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 Entering new markets New product introductions Changing production capacity Mergers/alliances |
| Tactical actions | refinements or extensions of strategies usually involving minor resource commitments Price cutting (or increases) Product/service enhancements Increased marketing efforts New distribution channels |
| 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. |
| Which of the following might best describe the motivations and actions of small firms as they respond to competitive attacks? | Small firms are more nimble and can respond quickly to competitive attacks |
| Strategic control | the process of monitoring and correcting a firm’s strategy and performance using systems: Informational control systems Behavioral control systems 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. |
| Strategic Control: Traditional Approach | Control = feedback loop from performance measurement to strategy formulation Involves lengthy time lags, “single-loop” learning |
| Traditional approach Strategic Control is most appropriate when | Environment is stable and relatively simple Objectives can be measured with certainty Little need for complex measures of performance |
| Strategic Control: Contemporary Approach | utilizes two different types of strategic control: informational control and behavioral control. |
| Strategic Control: Contemporary Approach | Informational control = concerned with whether or not the organization is “doing the right things” Behavioral control = concerned with whether or not the organization is “doing things right” in the implementation of its strategy |
| Top managers at ABC Company meet every Friday to review daily operational reports and year-to-date data. This is an example of | informational control. |
| Informational control | = ongoing process of organizational learning Focus on constantly changing information - continuous monitoring, testing, review Time lags are shortened Changes are detected earlier Speed & flexibility of response is enhanced |
| Which of the following is not one of the characteristics of a contemporary control system? | It circumvents the need for face-to-face meetings among superiors, subordinates, and peers. |
| Behavioral control | focused on implementation – “doing things right” (culture, rewards, boundaries) |
| Organizational culture | = a system of shared values and beliefs that shape the company’s people, organizational structures, and control systems to produce behavioral norms. |
| Organizational culture sets implicit boundaries regarding: | Dress Ethical matters The way an organization conducts its business |
| A Strong culture ________ | Leads to greater employee engagement Provides a common purpose and identity Reduces monitoring costs |
| Effective Organizational cultures must be_________ | Cultivated Encouraged Fertilized |
| Organizational cultures can be maintained by | Storytelling Rallies or pep talks by top executives |
| Reward systems & incentive program | Powerful means of influencing an organization’s culture Focus efforts on high-priority tasks Motivate individual & collective task performance Can be an effective motivator & control mechanism |
| Reward Systems Potential downsides… | employees are rewarded for the wrong things Different business units have differing rewards systems Reward systems may lead to information hoarding |
| Rewards work when | -objectives are clear -rewards are clearly linked to peformance -feedback is prompt -compensation system is perceived as fair |
| Boundaries and constraints | rules that specify behaviors that are acceptable and unacceptable. -Improve efficiency and effectiveness through rule-based controls, appropriate when -Minimize improper and unethical conduct via |
| Rules and regulations, rather than culture or rewards, would probably be used for strategic control at what type of company? | Manufacturer of mass-produced products |
| Rules and regulations, rather than culture or rewards, would probably be used for strategic control at what type of company? | Manufacturer of mass-produced products |
| Corporate governance controls focus on relationships between__________ | The shareholders The management (led by the Chief Executive Officer - CEO) The Board of Directors |
| Shareholders (investors) have _______& can participate in the profits without taking __________ for operations | limited liability , direct responsibility |
| Management can run the company without _________any funds | personally providing |
| The Board of Directors are elected by _______& have a fiduciary obligation to protect ____________ | shareholders, shareholder interests |
| ___________ deals with the relationship between principals & agents | Agency theory |
| Agency theory has emphasis on 2 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 the corporation and that acts as an intermediary between the shareholders and management. |
| According to the Business Roundtable, the most important quality is a Board of Directors who are ______, _______ _______ in determining a company’s strategies. | active, critical participants |
| Individual shareholders have rights… | To sell stock, vote the proxy, bring suit for damages, get information, receive residual rights following the company’s liquidation |
| Collectively, shareholders have power… | To direct the course of corporations, file shareholder action suits, demand key issues be brought up for proxy votes |
| Institutional investors can be aggressive… | By reviewing performance, requesting changes in the firm’s governance structure, filing court action, becoming major shareholders |
| Boards are responsible for managerial rewards and incentives | Boards can require that CEOs become substantial owners of company stock Salaries, bonuses, and stock option can provide rewards/penalties Dismissal for poor performance should be a realistic threat |
| Unity of Command: (in favor of) _______ | Duality. Provides clear focus Eliminates confusion and conflict Enhances a firm’s responsiveness Enables quick decisions based on first-hand knowledge |
| Agency Theory: (in favor of) ________ | Separation Safeguards against corruption or incompetence Removes conflict of interest, especially regarding CEO succession Improves perceptions of legitimacy |
| External governance control mechanisms | methods that ensure that management actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system |
| Expropriation of minority shareholders | activities that enrich the controlling shareholders at the expense of the minority shareholders |
| Principal – principal conflicts | conflicts between two classes of principals – controlling shareholders and minority shareholders – within the context of the corporate governance system. |
| . Business groups | 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 (Japanese keiretsus, Korean chaebols ) |
| three conditions must be met for principal to principal conflicts to occur. | (1) the existence of a dominant owner or group of owners who have interests that are distinct from minority shareholders; (2) motivation for the controlling shareholders to exercise their dominant positions to their advantage; (3) few formal (such as legi |
| __________ refers to formalized patterns of interactions linking… Tasks Technologies People | Organizational Structure |
| Generally speaking, discussions of the relationship between strategy and structure strongly imply that | structure follows strategy. |
| an organizational form in which the owner–manager makes most of the decisions and controls activities, and the staff serves as an extension of the top executive. | Simple organizational structure |
| Simple structure advantages | Highly informal Coordination of tasks by direct supervision Centralized decision-making Little specialization Few rules & regulations; informal reward systems |
| Simple structure disadvantages | Employees may not understand their responsibilities Employees may take advantage of lack of regulations Limited opportunities for upward mobility |
| Functional organizational structure | an organizational form in which the major functions of the firm, such as production, marketing, R&D, and accounting, are grouped internally (small orgs). Specialists work in functional areas |
| Functional structure advantages | Enhanced coordination & control Centralized decision-making Enhanced organizational-level perspective More efficient use of managerial & technical talent Facilitated career paths in specialized areas |
| Functional structure disadvantages | Impeded communication & coordination due differences in values & orientations – “silos” May lead to short-term thinking Difficult to establish uniform performance standards |
| Divisional organizational structure | where products, projects, or product markets are grouped internally…multidivisional structure or M-form. The operating divisions are relatively independent and consist of products and services that are different from those of other divisions. |
| Divisonal org structure advantages | Separation of strategic & operating control Quicker response to changes in the market environment Minimal problems sharing resources Development of general management talent is enhanced |
| Divisional org structure disadvantages | Can be very expensive Can lead to dysfunctional competition among divisions Differences in image & quality may occur across divisions Can focus on short-term performance |
| The_____________________ structure is where similar products or markets are grouped into units to achieve synergy | Strategic Business Unit (SBU) - , divisions with similar products, markets and/or technologies are grouped into homogenous units to achieve synergies, |
| SBU Structure Advantages | Planning & control done by the corporate office Decentralization of authority Quicker response to changes in the market environment Synergies through sharing core competencies, infrastructures, & market power |
| SBU Structure Disadvantages | Can be difficult to achieve synergies Increased personnel & overhead expenses Corporate office further removed from the divisions Corporate unaware of key changes in market conditions |
| Holding Company Structure | where businesses in a corporation’s portfolio are the result of unrelated diversification…is appropriate when the businesses in a corporation’s portfolio do not have much in common. |
| Holding Co. Structure Advantages | Cost savings due to fewer personnel and lower overhead Divisional autonomy increases motivation level of divisional executives Quicker response to changes in the market environment |
| Holding Co. Structure Disadvantages | Potential for synergies is very limited Corporate office has little control Difficult to replace key divisional executives if they leave Turnaround may be difficult due to limited corporate staff support |
| The ______________________ is where functional departments are combined with product groups on a project basis… | Matrix Organizational Structure--- multiple lines of authority and some individuals report to at least two managers. |
| Matrix Structure Advantages | Increases market responsiveness, collaboration & synergies Allows more efficient utilization of resources Improves flexibility, coordination & communication Increases professional development |
| Matrix Structure Disadvantages | Dual reporting relationships lead to uncertainty regarding accountability Can lead to power struggles & conflict Human resources are duplicated Decision-making takes longer |
| The three major contingencies that influence the chosen strategy | are (1) the type of strategy that is driving the firm’s foreign operations, (2) product diversity, and 3) the extent to which a firm is dependent on foreign sales |
| Multi-domestic Strategies use… | International division structure Geographic-area division structure Worldwide matrix structure |
| Global Strategies use.... | Worldwide functional structure Worldwide product division structure Worldwide holding company structure |
| Global start-up | seeks to derive significant advantage from the use of resources and the sale of outputs in multiple countries (. A boundaryless organizational design is particularly suitable for global start-ups because of its flexibility and low cost) |
| A Boundary-less Organizational Design makes these boundaries more permeable: | Vertical boundaries between organizational levels Horizontal boundaries between functional areas *** Boundary-less Designs include barrier-free, modular, & virtual organizations |
| A __________ has permeable internal & external boundaries and requires: | Barrier-Free Organization; Higher level of trust and shared interests Shift in philosophy from executive development to organizational development Greater use of teams Flexible, porous organizational boundaries |
| Boundaryless designs pros & cons | Pros: leverage talents of employees, enhancesd cooperation cons" difficult to overcome political & authority boundaries within org, lacks high levels of trust |
| What advantages does outsourcing provide an organization? | Access to the best-in-class goods and services. The ability to expand rapidly with a relatively low capital investment. The opportunity to focus scarce resources on existing core competencies. (All of the above). |
| A Modular Organization requires seamless relationships with external organizations | nonvital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control |
| Virtual organization | continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets |
| horizontal organizational structures | group similar business units together to help to create a sense of common purpose. |
| Ambidextrous Organizational Designs address two contradictory challenges: | How to maintain adaptability How to achieve alignment |
| According to a study by O’Reilly and Tushman, effective ambidextrous structures had all of the following attributes except… | managerial efforts that were highly focused on revenue enhancement. |
| Ambidextrous organizational designs… | and coordinate existing operations, Establish project teams, Pay attention to each unit’s processes, structures, & cultures |
| Successful leaders recognize three interdependent activities that must be continually reassessed for organizations to succeed. | are (1) setting a direction, (2) designing the organization, and (3) nurturing a culture dedicated to excellence and ethical behavior |
| Setting a direction | scan the environment for knowledge about… All stakeholders Salient environmental trends & events |
| Designing the organization | strategic leadership activity of building structures, teams, systems, and organizational processes that facilitate the implementation of the leader’s vision and strategies |
| Excellent and ethical organizational culture | an organizational culture focused on core competencies and high ethical standards |
| Overcome Barriers to Change | Vested interests in the status quo Systemic barriers Behavioral barriers Political barriers Personal time constraints |
| Sources of power… | Organizational bases of power Legitimate, reward, coercive, information or...Personal bases of power Referent, expert |
| Power | a leader’s ability to get things done in a way he or she wants them to be done |
| Organizational bases of power | a formal management position that is the basis of the leaders power |
| Personal bases of power | charisma, personality |
| _________ power is derived from organizationally conferred decision-making authority and is exercised by virtue of a manager’s position in the organization. | Legitimate power |
| _________ depends on the ability of the leader or manager to confer rewards for positive behaviors or outcomes | Reward power |
| ______________ ______ is the power a manager exercises over employees using fear of punishment for errors of omission or commission | Coercive power |
| Information power | arises from a manager’s access, control, and distribution of information that is not freely available to everyone in an organization. |
| referent power | a subordinate’s identification with the leader (Charisma) |
| . Emotional intelligence | an individual’s capacity for recognizing his or her own emotions and those of others, including the five components of self-awareness, self-regulation, motivation, empathy, and social skills. |
| Complete the following sentence. “Inspiring and motivating people with a mission or purpose is a ____________ for developing an organization that can learn and adapt.” | necessary, but not a sufficient condition |
| Learning organiza | organizations that create a proactive, creative approach to the unknown |
| Successful Learning Organizations empower employees at all levels | The leaders/managers roles involve… Becoming coaches, information providers, teachers, decision-makers, facilitators, supporters, or listeners Soliciting individuals’ input, valuing others’ ideas & initiatives Providing for trust, cultural contro |
| _________ ________ promote an operating culture & determine acceptable behavior | Organizational Ethics |
| Ethical orientation | practices that firms use to promote an ethical business culture, including ethical role models, corporate credos and codes of conduct, ethically-based reward and evaluation systems, and consistently enforced ethical policies and procedures. |
| compliance-based ethics program | Prevents, detects, & punishes legal violations |
| integrity-based ethics program | Enables ethical conduct Examines organizational members’ core guiding values, thoughts, & actions Defines responsibility & aspirations for ethical conduct |
| Proactive measures to prevent organizational ethics problems include all of the following except… | instituting a reward system which considers outcomes as its primary criterion. |
| Elements of a Highly Ethical Organization include | Ethical role models Corporate credos & codes of conduct Ethically-based reward & evaluation systems Consistently enforced ethical policies & procedures |
| Corporate Credos & Codes of Conduct | Provide a statement & guidelines for norms, beliefs & decision-making |
Created by:
Camwalt