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MGT 449 Exam 3
Terms in this set (52)
Conceptual model that aids firms in deciding whether to pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy).
conditions for build-borrow-or-buy
voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services
relational view of competitive advantage
strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries
Why do firms enter strategic alliances?
-strengthen competitive position
-enter new markets
-hedge against uncertainty
-access critical complementary assets
-learn new capabilities
approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time
cooperation by competitors to achieve a strategic objective
situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary
knowledge that can be codified; concerns knowing about a process or product
partnership in which at least one partner takes partial ownership in the other
knowledge that cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task
corporate venture capital
equity investments by established firms in entrepreneurial ventures; CVC falls under the broader rubric of equity alliances
alliance management capability
A firm's ability to effectively manage three alliance-related tasks concurrently: (1) partner selection and alliance formation, (2) alliance design and governance, and (3) post-formation alliance management.
the joining of two independent companies to form a combined entity
the purchase or takeover of one company by another; can be friendly or unfriendly
acquisition in which the target company does not wish to be acquired
the process of merging with competitors, leading to industry consolidation
Why do firms acquire other firms?
- to gain access to new markets and distribution channels
- to gain access to a new capability or competency
- to preempt rivals
a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary
The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.
Multinational Enterprise (MNE)
a company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries
part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world
foreign direct investment
a firm's investments in value chain activities abroad
benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be
liability of foreignness
additional costs of doing business in an unfamiliar cultural and economic environment, and of coordinating across geographic distances
CAGE distance framework
a decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance
the collective mental and emotional "programming of the mind" that differentiates human groups
cultural disparity between an internationally expanding firm's home country and its targeted host country
assumption that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous
the need to tailor product and service offerings to fit local consumer preferences and host-country requirements
strategy framework that juxtaposes the pressures an MNE faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally
strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets
strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies
global standardization strategy
strategy attempting to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost
strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable)
assumption that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally
national competitive advantage
world leadership in specific industries
Shareholders—the providers of the necessary risk capital and the legal owners of public companies—have the most legitimate claim on profits.
shared value creation framework
a model proposing that managers have a dual focus on shareholder value creation and value creation for society
3 things to focus on in the shared value creation framework
1. expand the consumer base to bring in nonconsumers
2. expand traditional internal firm value chains to include more nontraditional
3. focus on creating new regional clusters
a system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally
a theory that views the firm as a nexus of legal contracts
a situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives
A situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party.
board of directors
the centerpiece of corporate governance, composed of inside and outside directors who are elected by the shareholders
Board members who are generally part of the company's senior management team; appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.
board members who are not employees of the firm, but who are frequently senior executives from other firms or full-time professionals
situation where the CEO of a publicly traded company is also the chairperson of the board of directors
An incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company's stock at a predetermined price sometime in the future.
Leveraged Buyout (LBO)
A single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private.
defensive provisions to deter hostile takeovers by making the target firm less attractive
An agreed-upon code of conduct in business, based on societal norms.
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