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What is the primary focus of corporate strategy?
What is the primary focus of corporate strategy?
Increasing the organizational complexity is a benefit of firm growth.
Increasing the organizational complexity is a benefit of firm growth.
False
Name one incentive for firms to grow.
Name one incentive for firms to grow.
Increase profitability
One of the disadvantages of corporate growth is the potential for conflicting ______.
One of the disadvantages of corporate growth is the potential for conflicting ______.
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Match the following incentives for growth with their descriptions:
Match the following incentives for growth with their descriptions:
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Which of the following is a disadvantage of internationalization?
Which of the following is a disadvantage of internationalization?
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Companies that adopt a corporate strategy should avoid product diversification.
Companies that adopt a corporate strategy should avoid product diversification.
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What must top management decide regarding vertical integration?
What must top management decide regarding vertical integration?
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What is the first relevant dimension of business growth?
What is the first relevant dimension of business growth?
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Outsourcing refers to carrying out activities within the company rather than going to the market.
Outsourcing refers to carrying out activities within the company rather than going to the market.
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What are the two types of transaction costs that must be compared to decide on integration or outsourcing?
What are the two types of transaction costs that must be compared to decide on integration or outsourcing?
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The degree of vertical integration indicates the number of stages of the industry value chain it covers, affecting ___________ and outsourcing decisions.
The degree of vertical integration indicates the number of stages of the industry value chain it covers, affecting ___________ and outsourcing decisions.
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Match the activities with their types of transaction costs:
Match the activities with their types of transaction costs:
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Which of the following is a consequence of organizing an economic exchange within the company?
Which of the following is a consequence of organizing an economic exchange within the company?
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Strategic alliances are one way a company can choose to compete in geographical markets.
Strategic alliances are one way a company can choose to compete in geographical markets.
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In what scenario would a company prefer to integrate rather than outsource?
In what scenario would a company prefer to integrate rather than outsource?
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What does strategic implementation primarily focus on?
What does strategic implementation primarily focus on?
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Strategic proposals that are not implemented can still be considered genuine strategies.
Strategic proposals that are not implemented can still be considered genuine strategies.
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What does the SMART criteria stand for?
What does the SMART criteria stand for?
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To successfully execute a strategy, organizations frequently use _____ to compare actual results with expected outcomes.
To successfully execute a strategy, organizations frequently use _____ to compare actual results with expected outcomes.
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Match the following terms related to strategy implementation with their definitions:
Match the following terms related to strategy implementation with their definitions:
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What is often referred to as the 'graveyard of strategy'?
What is often referred to as the 'graveyard of strategy'?
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Proper control is less important than the analysis or formulation of a strategy.
Proper control is less important than the analysis or formulation of a strategy.
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What must top management prioritize for competitive advantage?
What must top management prioritize for competitive advantage?
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A necessary but not sufficient condition for obtaining competitive advantage is a good _______ strategy.
A necessary but not sufficient condition for obtaining competitive advantage is a good _______ strategy.
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Match the following concepts related to corporate strategy:
Match the following concepts related to corporate strategy:
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Which of the following best describes strategic control?
Which of the following best describes strategic control?
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Good strategy implementation is less critical than formulating an effective strategy.
Good strategy implementation is less critical than formulating an effective strategy.
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What do some academics refer to as more important than analysis or formulation in strategy?
What do some academics refer to as more important than analysis or formulation in strategy?
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What is a primary characteristic of a functional structure with a cost leadership strategy?
What is a primary characteristic of a functional structure with a cost leadership strategy?
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In a differentiation strategy, production is considered the most important activity.
In a differentiation strategy, production is considered the most important activity.
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What is the main disadvantage of a functional structure?
What is the main disadvantage of a functional structure?
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A cost leadership strategy promotes __________ to reduce production costs.
A cost leadership strategy promotes __________ to reduce production costs.
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Match the strategic focus with its corresponding activities:
Match the strategic focus with its corresponding activities:
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Which of the following describes the decision-making style in a differentiation strategy?
Which of the following describes the decision-making style in a differentiation strategy?
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In a functional structure with a cost leadership strategy, emphasis is placed on reducing costs through innovative marketing strategies.
In a functional structure with a cost leadership strategy, emphasis is placed on reducing costs through innovative marketing strategies.
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What is the purpose of decentralizing decision-making in a differentiation strategy?
What is the purpose of decentralizing decision-making in a differentiation strategy?
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Which aspect is NOT typically defined by an organizational structure?
Which aspect is NOT typically defined by an organizational structure?
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The organizational structure remains static regardless of the company's growth.
The organizational structure remains static regardless of the company's growth.
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What is essential for obtaining and maintaining a competitive advantage?
What is essential for obtaining and maintaining a competitive advantage?
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Companies often grow in their home markets through market penetration and/or product ___________.
Companies often grow in their home markets through market penetration and/or product ___________.
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Match the following terms with their descriptions:
Match the following terms with their descriptions:
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Which of the following statements about organizational structure is true?
Which of the following statements about organizational structure is true?
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Companies that diversify their product offerings typically remain unchanged in their organizational structure.
Companies that diversify their product offerings typically remain unchanged in their organizational structure.
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What must companies do to maintain alignment with competitive strategies?
What must companies do to maintain alignment with competitive strategies?
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What is the primary characteristic of a functional structure?
What is the primary characteristic of a functional structure?
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A functional structure is recommended for companies with high product diversification.
A functional structure is recommended for companies with high product diversification.
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Who centrally coordinates the work of the different functional areas?
Who centrally coordinates the work of the different functional areas?
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The functional structure corresponds to the various stages of the company's ______ chain.
The functional structure corresponds to the various stages of the company's ______ chain.
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Match the following functional areas with their roles:
Match the following functional areas with their roles:
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Which of the following is a potential downside of having a functional structure as product and market complexity increases?
Which of the following is a potential downside of having a functional structure as product and market complexity increases?
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A functional structure can support both cost leadership and differentiation strategies.
A functional structure can support both cost leadership and differentiation strategies.
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What is a characteristic that a functional structure must adapt to?
What is a characteristic that a functional structure must adapt to?
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Which organizational structure is primarily used by smaller companies with low organizational complexity?
Which organizational structure is primarily used by smaller companies with low organizational complexity?
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A company using a functional structure typically has a flat organizational hierarchy.
A company using a functional structure typically has a flat organizational hierarchy.
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Who typically makes the important strategic decisions in a simple organizational structure?
Who typically makes the important strategic decisions in a simple organizational structure?
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As a company grows, it often faces an overload for the __________.
As a company grows, it often faces an overload for the __________.
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Match the following organizational structures with their characteristics:
Match the following organizational structures with their characteristics:
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What is a characteristic of the simple structure?
What is a characteristic of the simple structure?
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The functional structure is utilized when companies have stable sales figures.
The functional structure is utilized when companies have stable sales figures.
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Name one example of a company that operated with a simple structure in its early days.
Name one example of a company that operated with a simple structure in its early days.
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Study Notes
Corporate Strategy Introduction
- Strategy is a set of actions a company takes to outperform competitors.
- Competitive strategies focus on how to succeed in a specific market.
- Corporate strategies determine where a company should compete.
- Successful companies adapt their product/service portfolio and geographic markets over time.
Corporate Strategies
- Corporate strategies include:
- Vertical integration (backward or forward)
- Diversification (related or unrelated)
- Restructuring
- Growth is motivated by:
- Increased profitability and reduced costs
- Increased bargaining power, better market influence, and reduced risk
- Motivating skilled employees and reducing dependencies
Growth Disadvantages
- Increased complexity
- Increased costs
- Increased conflict of interest among various agents
- Increased public scrutiny
- Difficulty innovating
- Exposure to international risks ('liability of foreignness')
Dimensions of Growth
- Vertical integration: determining which parts of the value chain a company should control versus outsource.
- Product diversification: deciding on product and service variety.
- Geographic scope: identification of target geographic markets.
Corporate Diversification Types
- Single business: 95% or more of revenue comes from a single business unit.
- Dominant business: 70-95% of revenue comes from a dominant business unit, with additional related businesses.
- Related diversification: multiple business units that share resources, skills, and activities. (limited or linked)
- Unrelated diversification (conglomerate): few links between business units and their resources/skills.
Vertical Integration
- Vertical integration is the degree to which a company controls various stages of the value chain (from raw materials to final products).
- It can be backward (closer to raw materials) or forward (closer to end consumers).
- Making or buying decisions to manage activities.
- Internal transaction costs vs. external transaction costs.
External Growth Methods
- Internal growth: expanding operations organically.
- Strategic alliances: cooperation agreements with other companies, e.g. joint ventures, licenses/franchises.
- Mergers & acquisitions: combining two or more companies, can be friendly or hostile. Examples include Daimler and Chrysler, or Disney's acquisition of Pixar.
Internationalization Strategy
- International Strategy determines where a company should compete in different geographic markets.
- Globalization is a process of integration and exchange between countries (caused by factors such as trade and investment barriers, advances in technology, and lower transport costs).
- Multinational companies expand operations in multiple countries.
- CAGE framework (Cultural, Administrative and Political, Geographic, and Economic distance) helps analyse the attractiveness of a destination country. This framework considers factors like language, regulatory environment, physical proximity and economic differences.
- Various entry modes into new markets include exporting, licensing/franchising, joint ventures, subsidiaries or acquisitions. The best choice depends on cost/benefit trade-offs and risk tolerance.
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Description
This quiz covers the fundamentals of corporate strategy, including competitive strategies and the various dimensions of growth within organizations. It discusses the advantages and disadvantages of corporate strategies such as vertical integration and diversification, and how successful companies adapt over time. Test your knowledge on key concepts and applications of corporate strategy.
