54 Questions
Which method of development involves the company cooperating with other firms?
Cooperation
In which type of industry does competition in each country operate independently of competition in other countries?
Multidomestic industry
Which international strategy emphasizes cost reduction and economies of scale, with limited ability to adapt to local markets?
Global strategy
What type of international entry mode involves sourcing products from the home country and selling them in foreign countries?
Exporting
In which entry mode does the owner of intellectual property grant another firm the right to use that property for a specified period of time in exchange for royalties or other compensation?
Licensing
What type of contract allows a firm to use an entire business system in exchange for fees, royalties, or other forms of compensation?
Franchising
Which entry mode involves shared investment between firms?
Joint ventures
Which type of industry has the firm's competitive position closely related across different countries?
Global industry
Which type of diversification involves entering new product and market activities with no direct link to current ones?
Unrelated diversification
Vertical integration is a strategy where a firm owns vertically related activities, extending ownership over ________.
Successive stages of the value chain
Cooperation is a method of development through agreements between firms to share resources and capabilities, without a subordinate relationship. What are the advantages of cooperation?
Obtaining required resources, limit some risks, learning from partners
What are the reasons for vertical integration based on competitive position?
Access to inputs, affect prices, market power, barrier to entry
What are the risks of unrelated diversification?
Absence of synergies, difficulty obtaining specific skills, managerial problems
What is the main internal reasons for a firm to engage in internationalization?
Cost reduction, search for resources, reduce risk, exploit R&C's
Cooperation is a method of development through agreements between 2+ firms to share resources and capabilities. What are the basic characteristics of this?
No subordinate, coordination, certain loss of organisational autonomy, common goal
Which of the following risks is associated with related diversification?
Coordination costs, absence of synergies, and inflexibility
Which of the following best describes vertical integration?
A strategy where a firm owns vertically related activities, extending ownership over successive stages of the value chain
What is the primary reasons for unrelated diversification?
To reduce risk, achieve greater earnings, and better allocate financial resources, managers objectives
What are the primary advantages of cooperation?
obtain resources, greater balance between efficiency and flexibility, limits on risks, and learning from partners
What are the risks associated with vertical integration?
Increased firm risk, higher exit barriers, and less flexibility and less ability to develop autonomous integrations
What is the primary reasons for diversification?
Risk reduction, saturation of traditional markets, excess resources, investment opportunities, and synergies
What does a global strategy emphasize in terms of competitive strategy and products?
Cost reduction and standardized products
What is the main characteristic of wholly-owned subsidiaries as an international entry mode?
Total control by the firm
What are the characteristics of a transnational strategy in terms of authority, emphasis, and product adaptation?
balance between efficiency and local adaptation, dispersed assets, greater knowledge and learning
What are the pressures associated with high transnational strategy?
High cost reduction emphasis and high local adaptation ability
What are the two sub-branches of corporate strategies
defining the scope of the firm and development strategies
What do development strategies refer to?
changing the scope of the firm
name the directions of development
consolidation, expansion, diversification, vertical integration and restructuring
Name the methods of development
- Internal
- External - mergers, acquisitions, coorporation/alliances
What direction of development does market penetration, product development and market development fall under?
expansion
Match the directions of development with their characteristics
Consolidation = current markets, current products, no growth market penetration = current markets, current products, growth product development = new products, exisiting markets market development = existing products, new markets
Match the directions of development with their characteristics
diversification = new products, new markets vertical integration = activities related to the whole production cycle restructuring = withdrawal (divestment) from present activties NA = NA
Diversification is a strategy that takes an organisation away from both its existing markets and existing products
True
What can hold regarding diversification?
new products + new markets = change in scope
What factors determine diversification?
General environment, specific environment and firm characteristics
What does related diversification refer to?
Potentially sharing/transferring R&C's and has some degree of relationship with current activities
What are some main reasons why firms vertically integrate? In terms of cost advantage.
EOS, simplification of processes, cost reduction
What are some disadvantages of methods of development: cooperation/alliances
Loss of autonomy, costs, divergent interests, lack of trust
Match the correct pairs
contractual agreement = long-term contract contractual agreement = consortia shareholer agreement = joint venture shareholder agreement = share swap
Match the correct pairs
contractual agreement = franchise contractual agreement = license contractual agreement = subcontracting shareholder agreement = minority stakeholder
Contractual agreements involve ownership, exchange of shares, or capital investment in a new business
False
shareholder agreements involve the acquisition of shares
True
Interorganisational agreements are a plurality of cooperation agreements between firms, multiple partners, complex relationships
True
Reasons for firm internationalisation (expanding its business operations/activities beyond its domestic borders to engage in activities across multiple countries or markets)
External = Industry life cycle External = external demand Internal = search for rescources Internal = reduce risk
Reasons for firm internationalisation (expanding its business operations/activities beyond its domestic borders to engage in activities across multiple countries or markets)
Internal = exploit r&c in different countries Internal = cost reduction External = follow the customer External = industry globalisation
Match the following characteristics to the different patterns of international competition: multi-domestic and global
multi-domestic = competition is independent multi-domestic = compete autonomously - CA's are country specific global = competition is closely related global = linked industries - worldwide basis
Match the following characteristics to the different patterns of international competition: multi-domestic and global
multi-domestic = portfolios of domestic startegies multi-domestic = wine industry global = global CA global = commerical aircraft
Name the three international strategies:
global, multi-domestic and transnational
Match the following with the international strategies:
multi-domestic = cost reduction and EOS multi-domestic = centralised, limited abiltiy to adapt global = limited ability to reduce costs, customised producrs transnational = balances efficiency (cost reduction) and local adoption, dispersed assets, greater knowledge, "think global act global"
International entry modes
exporting = products are sourced from the home country and sold in foreign contractual agreements = licensing: IP grants for compensation, franchise: rights to business for compensation foreign direct investment = A firm invests directly in facilties to produce and/or market a product in a foreign country. Joint ventures (shared), wholly-owned subsidiaries (total control) NA = NA
An acquisition is foreign direct investment into a firm that already exits
True
A new subsidiary is a foreign direct investment into a new firm
True
Advantages of the international entry modes
exporting = ability to realise location and scale based economies contractual agreements = low development costs and risks FDI (joint venture) = access to partner knowledge, shared costs and risks, political dependency FDI (wholly owned subsidaries) = protection of tech,ability to realise location and scale based economies, global strategy coordination
Match the disadvantages to the international entry modes
exporting = high transport costs and trade barriers contractual agreements = inability to realise location and scale based economies, lack of control of tech/quality, inability to engage in global strategy coordination FDI (joint venture) = inability to engage in global strategy coordination, inability to realise location and scale based economies, lack of control over tech FDI (wholly owned subsidiaries) = high costs and risk
Study Notes
-
Diversification is a strategy for expanding a business into new markets and products, moving away from current ones (Johnson, 2008)
-
Reasons for diversification include risk reduction, saturation of traditional markets, excess resources, investment opportunities, and synergies (Johnson, 2008)
-
Related diversification involves related activities with potential for sharing resources and capabilities, resulting in competitive advantage (Johnson, 2008)
-
Risks of related diversification include coordination costs, lack of synergies, and inflexibility (Johnson, 2008)
-
An example of related diversification is "Paradores," which expanded into catering, local stores, and spa services, related to their hospitality business (text)
-
Unrelated diversification involves entering new product and market activities with no direct link to current ones, to reduce risk, achieve greater earnings, and better allocate financial resources (Johnson, 2008)
-
Risks of unrelated diversification include absence of synergies, difficulty obtaining specific skills, managerial problems, and overcoming barriers to entry in new industries (Johnson, 2008)
-
An example of unrelated diversification is "El Pozo," which expanded into construction, hotels, medical oils, natural parks, telecommunications, and construction again (text)
-
Vertical integration is a strategy where a firm owns vertically related activities, extending ownership over successive stages of the value chain (Grant, 2010)
-
Reasons for vertical integration include cost advantages, access to inputs, simplification of production/distribution, cost reduction, elimination of transaction costs, and creation of barriers to entry (Grant, 2010)
-
Risks of vertical integration include increased firm risk, higher exit barriers, less ability to develop autonomous innovations, and organizational complexity (Grant, 2010)
-
Development strategies include consolidation, expansion, diversification, and vertical integration (text)
-
Cooperation is a method of development through agreements between firms to share resources and capabilities, without a subordinate relationship (text)
-
Advantages of cooperation include obtaining required resources, greater balance between efficiency and flexibility, limits on risks, and learning from partners (text)
-
Disadvantages of cooperation include undercutting a firm's competitive position, loss of autonomy, and costs (time, organizational complexity) (text)
-
Diversification is a strategy for expanding a business into new markets and products, moving away from current ones (Johnson, 2008)
-
Reasons for diversification include risk reduction, saturation of traditional markets, excess resources, investment opportunities, and synergies (Johnson, 2008)
-
Related diversification involves related activities with potential for sharing resources and capabilities, resulting in competitive advantage (Johnson, 2008)
-
Risks of related diversification include coordination costs, lack of synergies, and inflexibility (Johnson, 2008)
-
An example of related diversification is "Paradores," which expanded into catering, local stores, and spa services, related to their hospitality business (text)
-
Unrelated diversification involves entering new product and market activities with no direct link to current ones, to reduce risk, achieve greater earnings, and better allocate financial resources (Johnson, 2008)
-
Risks of unrelated diversification include absence of synergies, difficulty obtaining specific skills, managerial problems, and overcoming barriers to entry in new industries (Johnson, 2008)
-
An example of unrelated diversification is "El Pozo," which expanded into construction, hotels, medical oils, natural parks, telecommunications, and construction again (text)
-
Vertical integration is a strategy where a firm owns vertically related activities, extending ownership over successive stages of the value chain (Grant, 2010)
-
Reasons for vertical integration include cost advantages, access to inputs, simplification of production/distribution, cost reduction, elimination of transaction costs, and creation of barriers to entry (Grant, 2010)
-
Risks of vertical integration include increased firm risk, higher exit barriers, less ability to develop autonomous innovations, and organizational complexity (Grant, 2010)
-
Development strategies include consolidation, expansion, diversification, and vertical integration (text)
-
Cooperation is a method of development through agreements between firms to share resources and capabilities, without a subordinate relationship (text)
-
Advantages of cooperation include obtaining required resources, greater balance between efficiency and flexibility, limits on risks, and learning from partners (text)
-
Disadvantages of cooperation include undercutting a firm's competitive position, loss of autonomy, and costs (time, organizational complexity) (text)
Test your knowledge of corporate strategy development, including diversification, vertical integration, consolidation, expansion, and restructuring.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
