Podcast
Questions and Answers
What is the primary focus of corporate strategy?
What is the primary focus of corporate strategy?
- How to engage in product differentiation
- How to reduce costs
- How to compete in a given market
- Which markets to enter (correct)
Which of the following is NOT a reason firms have incentives to grow?
Which of the following is NOT a reason firms have incentives to grow?
- Increase market share
- Reduce dependencies
- Motivate managers and qualified workers
- Enhance employee satisfaction (correct)
What disadvantage might arise from a company's growth?
What disadvantage might arise from a company's growth?
- Better risk management
- Improved innovation capabilities
- Increased organizational complexity (correct)
- Greater market influence
What is indicated by the degree of vertical integration within a company?
What is indicated by the degree of vertical integration within a company?
What do internal transaction costs NOT include?
What do internal transaction costs NOT include?
Which dimension of growth concerns the range of goods and services a firm should offer?
Which dimension of growth concerns the range of goods and services a firm should offer?
What does vertical integration primarily assess?
What does vertical integration primarily assess?
When should a company consider integration over outsourcing?
When should a company consider integration over outsourcing?
Which of the following is NOT an alternative to going to the market for activity execution?
Which of the following is NOT an alternative to going to the market for activity execution?
In terms of corporate strategy, which of the following options best describes the 'liability of foreignness'?
In terms of corporate strategy, which of the following options best describes the 'liability of foreignness'?
What potential conflict can arise from increased organizational complexity due to growth?
What potential conflict can arise from increased organizational complexity due to growth?
What factors can limit the boundaries of a company?
What factors can limit the boundaries of a company?
Which method is used to determine whether to make or buy an activity?
Which method is used to determine whether to make or buy an activity?
How does reducing dependencies benefit a firm?
How does reducing dependencies benefit a firm?
What is a short-term contract characterized by?
What is a short-term contract characterized by?
Which of the following is a consequence of integrating activities within a company?
Which of the following is a consequence of integrating activities within a company?
Flashcards
Vertical Integration
Vertical Integration
The degree of vertical integration reflects how many stages of the industry value chain a company actively participates in. It indicates how much a company controls and owns within its operations.
Make or Buy Decision
Make or Buy Decision
The decision of whether to perform a specific business activity internally (integration) or to outsource it to the market. It involves weighing internal and external transaction costs.
Internal Transaction Costs
Internal Transaction Costs
Costs associated with organizing and performing a business activity within a company. They include administrative costs, opportunity costs, and resource expenses.
External Transaction Costs
External Transaction Costs
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Integration (Company)
Integration (Company)
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Outsourcing (Market)
Outsourcing (Market)
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Short-term Contracts
Short-term Contracts
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Long-term Contracts
Long-term Contracts
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What is Corporate Strategy?
What is Corporate Strategy?
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What are Competitive Strategies?
What are Competitive Strategies?
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Where does Corporate Strategy play a role?
Where does Corporate Strategy play a role?
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Why do companies grow?
Why do companies grow?
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What are the risks of growth?
What are the risks of growth?
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What is Vertical Integration?
What is Vertical Integration?
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What is Product Diversification?
What is Product Diversification?
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What is Geographical Scope?
What is Geographical Scope?
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Study Notes
Introduction to Corporate Strategy
- Strategy is a set of actions a firm takes to achieve and maintain superior performance compared to competitors.
- It includes decisions on how and where to compete.
- Competitive strategies focus on how to compete in a given market.
- Companies may seek competitive advantage via product differentiation or cost leadership.
What is Corporate Strategy?
- Corporate strategies determine a company's actions to gain a competitive edge across different business units and geographic markets.
- These strategies influence the product/service portfolio and the geographic markets a company operates in over time.
- Successful companies adapt their strategies to grow over time.
Corporate Strategies: Incentives to Grow
- Firms grow for various reasons, including:
- Increasing profitability
- Reducing costs
- Increasing bargaining power
- Influencing market conditions
- Reducing risk
- Motivating management and skilled workers
- Avoiding falling behind competitors
Disadvantages/Risks of Growth
- Increased organizational complexity
- Increased costs
- Conflicts of interest among stakeholders
- Increased public scrutiny
- Reduced innovation potential ("fat-cat syndrome")
- Increased vulnerability to unexpected events
- Increased difficulty in internationalization ('liability of foreignness')
Dimensions of Growth/Decrease
- Vertical integration (increasing/decreasing the degree of involvement in stages of the value chain).
- Product diversification (increasing/decreasing the range of products).
- Geographical expansion (increasing/decreasing the scope of operations in geographic markets).
Vertical Integration
- Internal or External
- Decisions about making products in-house or outsourcing.
- Weigh advantages (reduced costs, quality control, etc.) against disadvantages (increased costs, loss of flexibility, etc.).
Advantages of Vertical Integration
- Reduced Costs
- Improved Quality
- Streamlined Operations
- Strategic Planning
- Access to Specific Resources
- Opportunities for Innovation
Risks of Vertical Integration
- Increased costs
- Reduced flexibility
- Reduced adaptability
- Increased risk of legal repercussions (uncompetitive mergers).
Alternatives to Vertical Integration
- Mixed integration: Company participates in some value chain activities and outsources others.
- Strategic outsourcing: Moving value chain activities outside the company.
Diversification
- Differentiating a product or product line from another line of existing products for existing markets.
- Product diversification: The number of product lines and its services
- Geographic diversification: Number of geographic markets in which the product line is available
Types of Diversification
- Single business: A company with 95% or more of its revenue coming from a single business.
- Dominant business: A company with more than 70% of revenue from a single business but sells related or different products and/or services.
- Related diversification: The company is not dependent on one single business.
- Unrelated diversification: A company sells vastly different products, often in different markets.
Internationalization Strategies
- Global, multinational, and transnational
- Factors influencing the choice of strategy (cost reduction, adaptation to local tastes, etc.)
- The CAGE framework for evaluating international expansion opportunities (Cultural distance, Administrative and political distance, Geographic distance, Economic distance.)
Entry Modes for International Expansion
- Exporting, Licensing/Franchising, Joint Venture, Greenfield investment, Acquisition, Subsidaries.
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Description
Explore the fundamentals of corporate strategy, including how firms achieve superior performance and gain competitive advantage. This quiz covers key concepts like competitive strategies, actions for growth, and the importance of adapting strategies over time. Test your understanding of how businesses position themselves in the market.
