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Strategic Management 4842 Exam 2
Terms in this set (27)
what is diversification?
a company is diversified when it has two or more lines of business that operate in diverse market environments
why do companies diversify?
- if it's faced with diminishing future growth
- if it can expand into industries with tech that could benefit their current business
- reduce costs by expanding into related businesses
- leverage existing companies and businesses
3 tests of determining whether you should diversify:
1. industry attractiveness test- long term growth expected?
2. cost of entry test- too expensive? will it spoil profits?
3. better off test- will we perform better together than we would separately?
which "diversification test" does NOT apply to unrelated diversification?
the better off test
which form of diversification involves "strategic fits"?
what is ethical universalism?
human nature is basically the same everywhere, so ethical standards should be applied universally.
what is ethical relativism?
you apply ethical standards according to the society to which you are acting.
what are economies of scope?
arises when costs can be cut by operating two or more businesses under same corporate umbrella
what is unrelated diversification? disadvantages?
diversifying into businesses that don't compete in your current industry.
1. huge learning curve for primary business
2. no increase in company's competitive advantage
where can cross-business strategic fits exist?
anywhere along the value chain
what is an intentionally amoral manager?
a manager that believes that you any business action that remains within the confines of the law is ethical
drivers of unethical business behavior?
1. companies that put profitability over ethical behavior
2. short-termism pressure to meet or beat short-term performance targets
3. faulty internal oversight allows it to happen
what is corporate social responsibility?
a company's duty to operate in an honorable manner, encourage diversity, protect the environment, and actively strive to improve their communities
What is the business case for companies to act in a socially responsible manner?
what is business process reengineering?
a one-time quantum leap forward in changing a business's organizational structure, function, or strategy
what are Total Quality Management (TQM) programs?
an ongoing or continuous form of process improvement where little changes are made over time to result in bigger changes later on
what is a company's corporate culture?
refers to the shared values, ingrained attitudes, core beliefs and company traditions that determine norms of behavior, accepted work practices, and styles of operating.
three steps to building an organization capable of good strategy execution:
1. Staffing- strong management team with competent employees
2. Developing- renew, upgrade, revise resources to fit chosen strategy
3. Structuring- create strategy supportive organization
what is the purpose of having a company code of ethics and core values?
1. all personnel will share same values about how business should be conducted
2. provides guidance for people on how they should do their jobs and do the right thing
what is benchmarking?
the process of identifying the "best practice" for performing an activity
what is a best practice?
a method of performing an activity that consistently delivers superior results compared to other approaches
characteristics of best practices?
1. must be repeatable
2. demonstrate success over time
3. delivers quantifiable and positive results
ways to perpetuate culture:
1. screening new employees
2. systematic indoctrination of new employees
3. vocal support by senior managers
4. telling and retelling the firm's legends
5. ceremonies honoring employees
6. rewarding those who display cultural norms
good resource fit in relation to a diversified company portfolio?
a good resource fit exists when a business adds to a firm's resource strengths, or a firm has resources to adequately support requirements of its businesses as a group
what is the best type of culture?
a strongly implanted adaptive culture
what is a strong-culture firm?
deeply rooted values, behavioral norms. insists that its values be reflected in the decisions and actions taken by all company personnel.
lacks values and principles that are consistently preached or widely shared. has few or no traditions, beliefs, values, common bonds, or behavioral norms.
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