Chapter 5 strat
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Questions and Answers

Which method of development involves the company cooperating with other firms?

  • Market penetration
  • Product development
  • Expansion
  • Cooperation (correct)

    • In which type of industry does competition in each country operate independently of competition in other countries?

  • Global industry
  • Worldwide industry
  • Multidomestic industry (correct)
  • Linked industry

    • Which international strategy emphasizes cost reduction and economies of scale, with limited ability to adapt to local markets?

  • Local adaptation strategy
  • Transnational strategy
  • Global strategy (correct)
  • Multidomestic strategy

    • What type of international entry mode involves sourcing products from the home country and selling them in foreign countries?

    <p>Exporting</p> Signup and view all the answers

    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?

    <p>Licensing</p> Signup and view all the answers

    What type of contract allows a firm to use an entire business system in exchange for fees, royalties, or other forms of compensation?

    <p>Franchising</p> Signup and view all the answers

    Which entry mode involves shared investment between firms?

    <p>Joint ventures</p> Signup and view all the answers

    Which type of industry has the firm's competitive position closely related across different countries?

    <p>Global industry</p> Signup and view all the answers

    Which type of diversification involves entering new product and market activities with no direct link to current ones?

    <p>Unrelated diversification</p> Signup and view all the answers

    Vertical integration is a strategy where a firm owns vertically related activities, extending ownership over ________.

    <p>Successive stages of the value chain</p> Signup and view all the answers

    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?

    <p>Obtaining required resources, limit some risks, learning from partners</p> Signup and view all the answers

    What are the reasons for vertical integration based on competitive position?

    <p>Access to inputs, affect prices, market power, barrier to entry</p> Signup and view all the answers

    What are the risks of unrelated diversification?

    <p>Absence of synergies, difficulty obtaining specific skills, managerial problems</p> Signup and view all the answers

    What is the main internal reasons for a firm to engage in internationalization?

    <p>Cost reduction, search for resources, reduce risk, exploit R&amp;C's</p> Signup and view all the answers

    Cooperation is a method of development through agreements between 2+ firms to share resources and capabilities. What are the basic characteristics of this?

    <p>No subordinate, coordination, certain loss of organisational autonomy, common goal</p> Signup and view all the answers

    Which of the following risks is associated with related diversification?

    <p>Coordination costs, absence of synergies, and inflexibility</p> Signup and view all the answers

    Which of the following best describes vertical integration?

    <p>A strategy where a firm owns vertically related activities, extending ownership over successive stages of the value chain</p> Signup and view all the answers

    What is the primary reasons for unrelated diversification?

    <p>To reduce risk, achieve greater earnings, and better allocate financial resources, managers objectives</p> Signup and view all the answers

    What are the primary advantages of cooperation?

    <p>obtain resources, greater balance between efficiency and flexibility, limits on risks, and learning from partners</p> Signup and view all the answers

    What are the risks associated with vertical integration?

    <p>Increased firm risk, higher exit barriers, and less flexibility and less ability to develop autonomous integrations</p> Signup and view all the answers

    What is the primary reasons for diversification?

    <p>Risk reduction, saturation of traditional markets, excess resources, investment opportunities, and synergies</p> Signup and view all the answers

    What does a global strategy emphasize in terms of competitive strategy and products?

    <p>Cost reduction and standardized products</p> Signup and view all the answers

    What is the main characteristic of wholly-owned subsidiaries as an international entry mode?

    <p>Total control by the firm</p> Signup and view all the answers

    What are the characteristics of a transnational strategy in terms of authority, emphasis, and product adaptation?

    <p>balance between efficiency and local adaptation, dispersed assets, greater knowledge and learning</p> Signup and view all the answers

    What are the pressures associated with high transnational strategy?

    <p>High cost reduction emphasis and high local adaptation ability</p> Signup and view all the answers

    What are the two sub-branches of corporate strategies

    <p>defining the scope of the firm and development strategies</p> Signup and view all the answers

    What do development strategies refer to?

    <p>changing the scope of the firm</p> Signup and view all the answers

    name the directions of development

    <p>consolidation, expansion, diversification, vertical integration and restructuring</p> Signup and view all the answers

    Name the methods of development

    <ol> <li>Internal</li> <li>External - mergers, acquisitions, coorporation/alliances</li> </ol> Signup and view all the answers

    What direction of development does market penetration, product development and market development fall under?

    <p>expansion</p> Signup and view all the answers

    Match the directions of development with their characteristics

    <p>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</p> Signup and view all the answers

    Match the directions of development with their characteristics

    <p>diversification = new products, new markets vertical integration = activities related to the whole production cycle restructuring = withdrawal (divestment) from present activties NA = NA</p> Signup and view all the answers

    Diversification is a strategy that takes an organisation away from both its existing markets and existing products

    <p>True</p> Signup and view all the answers

    What can hold regarding diversification?

    <p>new products + new markets = change in scope</p> Signup and view all the answers

    What factors determine diversification?

    <p>General environment, specific environment and firm characteristics</p> Signup and view all the answers

    What does related diversification refer to?

    <p>Potentially sharing/transferring R&amp;C's and has some degree of relationship with current activities</p> Signup and view all the answers

    What are some main reasons why firms vertically integrate? In terms of cost advantage.

    <p>EOS, simplification of processes, cost reduction</p> Signup and view all the answers

    What are some disadvantages of methods of development: cooperation/alliances

    <p>Loss of autonomy, costs, divergent interests, lack of trust</p> Signup and view all the answers

    Match the correct pairs

    <p>contractual agreement = long-term contract contractual agreement = consortia shareholer agreement = joint venture shareholder agreement = share swap</p> Signup and view all the answers

    Match the correct pairs

    <p>contractual agreement = franchise contractual agreement = license contractual agreement = subcontracting shareholder agreement = minority stakeholder</p> Signup and view all the answers

    Contractual agreements involve ownership, exchange of shares, or capital investment in a new business

    <p>False</p> Signup and view all the answers

    shareholder agreements involve the acquisition of shares

    <p>True</p> Signup and view all the answers

    Interorganisational agreements are a plurality of cooperation agreements between firms, multiple partners, complex relationships

    <p>True</p> Signup and view all the answers

    Reasons for firm internationalisation (expanding its business operations/activities beyond its domestic borders to engage in activities across multiple countries or markets)

    <p>External = Industry life cycle External = external demand Internal = search for rescources Internal = reduce risk</p> Signup and view all the answers

    Reasons for firm internationalisation (expanding its business operations/activities beyond its domestic borders to engage in activities across multiple countries or markets)

    <p>Internal = exploit r&amp;c in different countries Internal = cost reduction External = follow the customer External = industry globalisation</p> Signup and view all the answers

    Match the following characteristics to the different patterns of international competition: multi-domestic and global

    <p>multi-domestic = competition is independent multi-domestic = compete autonomously - CA's are country specific global = competition is closely related global = linked industries - worldwide basis</p> Signup and view all the answers

    Match the following characteristics to the different patterns of international competition: multi-domestic and global

    <p>multi-domestic = portfolios of domestic startegies multi-domestic = wine industry global = global CA global = commerical aircraft</p> Signup and view all the answers

    Name the three international strategies:

    <p>global, multi-domestic and transnational</p> Signup and view all the answers

    Match the following with the international strategies:

    <p>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, &quot;think global act global&quot;</p> Signup and view all the answers

    International entry modes

    <p>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</p> Signup and view all the answers

    An acquisition is foreign direct investment into a firm that already exits

    <p>True</p> Signup and view all the answers

    A new subsidiary is a foreign direct investment into a new firm

    <p>True</p> Signup and view all the answers

    Advantages of the international entry modes

    <p>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</p> Signup and view all the answers

    Match the disadvantages to the international entry modes

    <p>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</p> Signup and view all the answers

    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)

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