MGT 460 : Final Exam
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This 6 page Study Guide was uploaded by Winn on Monday April 25, 2016. The Study Guide belongs to MGT 460 at Marshall University taught by Dr. Uyi Lawani in Spring 2016. Since its upload, it has received 19 views.
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Date Created: 04/25/16
MGT 460 : Final Exam Review Explaining Important More Important Porter's Five Forces Framework : Bargaining power of suppliers, bargaining power of buyers, competitive rivalry, threat of product substitutes, threat of new entrants Monopsony: One customer many sellers (low switching costs) How hotels don't follow 5 forces: Agglomeration economies (cluster effect), opportunities for helping each other, strong network externalities exist, compete by addning more amenities raer an price Players (game theory case): Able to lower bargaining power of suppliers by having Nutrasweet and HSC lower prices; manage bargaining power of buyer (Bellsouth bought Lin Broadcasting (to drive up prices), McCaw paid Bellsouth to leave negotiations. Lin didn't want McCaw to win so asked Bellsouth to buy (raised prices forMcCaw) everyone profited Added Value (game theory case) Supply restrictions can affect added value (nintendo); adding value reduces rivalry (TWA's leg room lead to coopetition) Coopetition Adding value to your firm adds value to competitors as well (win-win) TWA case Game theory PARTS : Players, added value, rules, tactics or strategies, scope (product variety: diversification) Rules (game theory case) : Change the rules of the game to reduce rivalry: MCC (meet the competition clause), small companies (price undercutting, targeting niches) Scope (game theory case) : Product variety (diversification): boundaries of space and time (if can't change game today, change in future; if can't change game hearer, change it there Strategic mission : Defining values (purpose of existence): more specific and serves as a road map to achievement of vision statement Strategic vision : What you want the company to become (forward looking): goals of where it wants to go Business definition : Who are we? What is our business? (who/what satisfied?) Organizational values: How they're going to achieve their goals: generates corporate culture Moral universalism : People all over the world have the same basic perception of what is right/wrong. Moral relativism : Adopt local values of host market Ethnocentrism : Always apply moral codes from home country FCPA: foreign corrupt practices actProhibits gifts, bribes, and contributions to political campaigns (if other countries can do it, why can't we?). Both are liable List of resources (5) : Financial, physical, human-based, knowledge based, organizational (brand name, reputation) Core competencies (4 rules) : Valuable/marketable, unique/rare, non- substitutable, costly to imitate What makes a core competency costly to imitate? : Unique historical, causal ambiguity (don't know how to use competency for competitive advantage), social complexity (I.e. Interpersonal relationships) Firm value chain : Divides process into distinct parts (helps a firm to figure out what/where core competencies) 4 business level strategies : Cost leadership, product differentiation, best value (high value to customer for low price CL+PD), focus (targeting narrow market segments ie different geographic markets Cost leadership (when to use strategy and what drives efficiency) : Use when (relatively standardized product, customers are price sensitive, high quantity), what drives efficiency (economies of scale, technology, outsourcing, learning by experience) Cost leadership major risks : Dramatic technology change, competitor may learn how to imitate value chain, focus on efficiency may overlook change in customer preference Differentiation (when to use this strategy, risks) : When to use (customers value unique features more than price, customers don't see obvious substitute in market, customers value firm), risks (cost of uniqueness is too large, competitors may learn how to imitate vaoue chain, uniqueness may no longer be valued by customers) Corporate level strategies (4) : Single-business/concentration (>95% of revenues), dominant-business (between 70-95%), related diversified (<75%), unrelated diversified (business activities not closely related) Resources (motivations for diversification) : Resources usually add firm value and increase strategic competitiveness (Econ of scope, expand market power, financial economies) Incentives (motivations for diversification) : Incentives often have neutral effects on firm value and strategic competitiveness (external: antitrust regulations, favorable tax laws; internal: low performance, uncertain future cash flows and desire to reduce firm risk) Managerial motives (motivations for diversification) : Managerial motives usually lowers firm value and strategic competitiveness (desire to increase personal power and reduce own employment risk) How to become diversified : Firm internal growth, vertical integration, mergers and acquisitions, strategical alliances, strategic restructuring/transformation Vertical integration(how to become diversified): buy supplier (backward) or customer (forward). Used to resolve hold-up issues and get control. LEADS TO CONCENTRATION OR RELATED DIVERSIFICATION Strategic restructuring/transformation : Like Gucci (reduce degree of diversification and narrows company's business definition): move from UNRELATED to RELATED diversification. Often prompted by unsatisfied stakeholders Related diversification strategies : Sharing activities/capabilities (should either reduce costs or help company differentiate; must involve activities crucial to competitive advantage), leveraging/transferring core competencies into other similar businesses (activities involved in e businesses are similar enough so that sharing expertise is meaningful; transfer of skills involves activities which are important to competitive advantage) Sharing activities/capabilities : (Related diversification strategy); sharing activities should either reduce costs or help to differentiate; must involve activities yh at are crucial to firm's competitive advantage Leveraging/transferring core competencies (rule)(related diversification strategy); activities involved in the businesses are similar enough so that sharing expertise is meaningful; transfer of skills involves activities which are important to competitive advantage Unrelated diversification strategies (2) : Efficient internal capital market allocation, buying + restructuring other firms Efficient internal capital market allocation (corporate level strategy) (unrelated diversification strategy) : Corporate office distributes capital into different business divisions to create value for company overall (do when managers have more detailed knowledge of firm versus outside investors; firm can reduce risk by allocating resources among diversified businesses) Buying and restructuring other firms(unrelated diversification strategy): create financial economies (value); resource allocation decisions may become complex, so success often requires that a firm focuses in (mature low technology business, tangible business, avoid client orientation) 7 Cs of diversificationCargo + customers, competitors + complementers, culture: corporate and national, channels of distribution and promotion, commercial codes, communications and collaboration, currency and cash flow issues Benefits from going global : Larger market size, higher return on large investment, economies of scale and scope, location economies (outsourcing versus offshoring), transfer of core competency globally, transfer of subsidiary skills Global profitability is constrained by: Product customization (increase costs, so if don't have benefits, then no good), Imperative of localization (desire to benefit from going global: I.e. Econ of scale) Disadvantages of going global : Less understanding of local culture, less political strength than local monopolies, less integrated into country business networks, different institutional infrastructure and government regulations, countries have different political and economic risk Reasons why not to go global : Attrition (because everyone else is doing it), only enter foreign market if competence and associated strategy remain valuable (7 Cs framework) International strategy (exporting) : Final product from home country. Use cost leadership business strategy. Fast, low cost, low risk: doesn't apply to hotels (production and consumption are at same place). Retain tight control within headquarters Porter's Diamond : What creates country's/firm's competitive Advantage and helps firm to build different core competencies Multidomestic StrategyTreat : Every market as Home (unable to benefit from economies of scale or experience/learning effects). Give each subsidiary maximum independence (no standardization)Global StrategyAchieve LOW COST, efficient, standardized products: concentrate each production activity in most favorable location around the world to benefit from location economies or achieve experience curve effects Transnational Strategy : Try to adjust to local market but also standardize (high need for global efficiency and local responsiveness). Design products with interchangeable components but assemble products based on local needs. Four questions a firm needs to answer when planning to expand internationally : Which country to enter? How to enter? When to Enter? (First vs Late Mover Advantage), How much to invest? (based on chosen mode of entry and risk: Potential gain and opportunity cost of investment) First Mover Advantage : brand recognition, earn loyalty, chances of capturing high market share, economies of scale (large market share: split costs of operations: can charge lower price) Late Mover Advantage : Better for small businesses, free ride on first mover Modes of entry : Export + Countertrade (exchange goods for goods), Contractual Entry Modes, Investment Entry Modes Contratual Entry Modes: Licensing, Franchising, Management Contracts, Turnkey Projects(Mode of entry): Licensing (similar to franchising: don't care how its run or used. No standards or supervision: selling tech or know how), Franchising (more strict Guidelines), Management Contracts (manage Hotel), Turnkey Projects (ask contractor to build the building and gives you the key: like a gov't contract) Investment Entry Modes: International Strategic Alliances, FDIInternational Strategic Alliances (i.e. Joint Ventures, Temporary Partners: Sony-Erricson, Airlines), FDI (foreign direct investment): a certain level of control (ownership of 10% or more assets in a foreign country) Forms of FDI: Mergers and/or Acquisitions Mergers and Acquisitions (form of FDI) : Mergers (two companies use functions together: restructured and one company dissolves); Acquisition (Acquire part or all of company and one company disappears (buy assets of one company). Reinvestment of profits in a foreign country (instead of sending profits home and paying dividends) Vivendi: Corporate Level Strategies (Two under Dejounay, one under Messier)Dominant Business Strategy, Unrelated Diversified; Related Diversified Cadbury Schweppes Corporate Level Strategy : Multidomestic Strategy Adam's Corporate Level Strategy : Transnational Strategy
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