BPOL Exam 2 Study Guide PDF

BPOL Exam 2 Study Guide Week 7: 1. What is Entrepreneurial Orientation? Definition: Entrepreneurial Orientation (EO) refers to a firm's strategic posture that involves taking proactive steps to innovate, take risks, and compete aggressively. Key Dimensions: ○ Innovativene...

BPOL Exam 2 Study Guide Week 7: 1. What is Entrepreneurial Orientation? Definition: Entrepreneurial Orientation (EO) refers to a firm's strategic posture that involves taking proactive steps to innovate, take risks, and compete aggressively. Key Dimensions: ○ Innovativeness: Willingness to support new ideas, experimentation, and creativity. ○ Risk-Taking: Readiness to commit resources to uncertain ventures. ○ Proactiveness: Anticipating and acting on future needs and changes in the market. ○ Competitive Aggressiveness: Tendency to challenge competitors directly. ○ Autonomy: Freedom for individuals or teams to make decisions independently. 2. Why Should Companies Innovate? Competitive Advantage: Innovation can help firms differentiate themselves from competitors. Market Adaptation: Staying relevant as customer needs and technologies change. Profitability: Introducing new products or processes can open up revenue streams and reduce costs. Growth Opportunities: Innovating allows companies to enter new markets or expand in current ones. Responding to Threats: Innovation helps companies defend against disruptors or shifts in the industry. 3. What are the Four Types of Innovation? Incremental Innovation: Small improvements to existing products or processes. Example: Software updates. Example: Radical Innovation: Fundamental changes that disrupt an industry. Example: The internet's impact on communication. Architectural Innovation: Reconfiguring existing components in new ways for new markets. Example: Personal computers combining established tech in a new format. Disruptive Innovation: Innovations that start in low-end or new markets and eventually displace established products. Example: Streaming services disrupting cable TV. Page 1 4. What are the Four Stages of the Product Life Cycle and Crossing the Chasm? Introduction: Product is launched; low awareness and high development costs. Growth: Rapid market acceptance, increasing sales, and often, profitability. Maturity: Sales growth slows; product has established market presence. Decline: Demand falls as alternatives or new technologies emerge. Crossing the Chasm (specific to technology adoption): ○ The gap between early adopters and the early majority; companies often struggle here as they need to appeal to a broader market. 5. What Are the Ways Firms Might Cooperate with Their Competitors? Strategic Alliances: Partnerships to achieve shared goals, like joint R&D. Joint Ventures: Firms create a new entity together to explore new markets. Co-Marketing: Collaborating on marketing campaigns or product distribution. Technology Licensing: Sharing technology with each other to advance industry standards. Resource Sharing: Pooling resources like data, infrastructure, or supply chains to reduce costs. Week 8: 1. What is Corporate-Level Strategy and How Does it Differ from Business-Level Strategy? Corporate-Level Strategy: Focuses on overall company scope and direction, determining which industries or markets the company should operate in. Business-Level Strategy: Centers on how a business unit competes within its specific market, addressing competitive positioning, pricing, and customer targeting. Key Differences: Page 2  ○ Corporate-level strategy is broader, impacting all company divisions, while business-level strategy is narrower, impacting individual units. ○ Corporate strategy might involve decisions on diversification or expansion into new markets, whereas business-level strategy focuses on competitive advantages within a given market. 2. What is Vertical Integration and What Benefits Can it Provide? Vertical Integration: When a company expands its operations within its own supply chain, either backward (controlling suppliers) or forward (controlling distribution channels). Benefits: ○ Cost Control: Reducing dependency on suppliers or distributors can lower costs. ○ Quality Control: Greater control over production standards. ○ Market Power: Reduces competition by controlling more of the supply chain. ○ Efficiency: Improves operational efficiencies by streamlining processes. 3. What are the Three Types of Diversification and When Should They be Used? Related Diversification: Expanding into industries or markets with similarities to the company’s existing business (e.g., shared technologies or customers). Useful when synergies can be leveraged to increase efficiency. Unrelated Diversification: Expanding into industries with no significant connection to the current business. Often used to reduce risk or achieve higher growth potential. Geographic Diversification: Expanding into new regions or countries to access new markets and diversify risk. Useful for global growth or entering emerging markets. 4. What are Four Methods That a Firm Can Use to Implement Its Corporate Strategy? Internal Development: Building capabilities or assets organically through internal resources. Mergers and Acquisitions (M&A): Purchasing or merging with other companies to quickly gain market share or access new capabilities. Joint Ventures: Partnering with another company to pursue a shared objective without full ownership. Strategic Alliances: Forming partnerships or agreements to leverage resources or capabilities of each firm without forming a new entity. 5. Why and How Might a Firm Retrench or Restructure? Reasons: ○ To reduce costs during financial distress. ○ To focus on core activities if certain business areas are unprofitable or non-essential. Methods: ○ Divestiture: Selling off parts of the business. ○ Downsizing: Reducing workforce or closing non-profitable locations. ○ Reorganization: Reworking internal structures to improve efficiency or reduce redundancy. Page 3 6. What is Portfolio Planning and Why is it Useful? Definition: Portfolio planning is the strategic process of managing a company’s range of investments or business units to ensure a balanced and profitable overall portfolio. Benefits: ○ Resource Allocation: Helps determine where to invest, hold, or divest. ○ Risk Management: Balances high- and low-risk assets or units. ○ Performance Analysis: Assesses the strengths and weaknesses of different business units, guiding strategic priorities. Cash Cows: High market share units within slow-growing industries are called cash cows. Because their industries have bleak prospects, profits from cash cows should not be invested back into cash cows but rather diverted to more promising businesses. Dogs: Low market share units within slow-growing industries are called dogs. These units are good candidates for divestment. Stars: High market share units within fast-growing industries are called stars. These units have bright prospects and thus are good candidates for growth. Question Marks: Finally, low-market-share units within fast-growing industries are called question marks. Executives must decide whether to build these units into stars, hold them, or to divest them. Week 9: 1. What Are the Main Benefits and Risks of Competing in International Markets? Benefits: ○ Market Expansion: Access to larger customer bases and growth opportunities. Page 4  ○ Diversification: Reduces reliance on a single market, spreading risk across different regions. ○ Economies of Scale: Increased production for larger markets can reduce costs. ○ Competitive Advantage: Gaining access to unique resources, talents, or technologies available in specific regions. Risks: ○ Cultural Differences: Misunderstanding local preferences can hurt customer relationships. ○ Political and Economic Instability: Changes in government policies or economic downturns can impact profitability. ○ Currency Fluctuations: Exchange rate changes can affect financial performance. ○ Intellectual Property Risks: Higher risk of IP theft or inadequate protection in some markets. 2. What is the “Diamond Model,” and How Does It Help Explain Why Some Firms Compete Better in International Markets Than Others? The Diamond Model: Developed by Michael Porter, this model outlines four factors that influence national competitive advantage: Factor Conditions: Country’s resources, like skilled labor or natural resources, which support industries. Demand Conditions: Sophisticated domestic customers drive firms to innovate and improve. Related and Supporting Industries: Presence of suppliers and related industries that provide competitive advantages. Firm Strategy, Structure, and Rivalry: Domestic competition encourages efficiency and innovation. ○ Application: The model suggests that nations with favorable conditions in these areas support firms that are more competitive globally. 3. How Does the CAGE Framework Help a Firm Predict Its Degree of Success in Doing Business in Another Country? The CAGE Framework (Cultural, Administrative, Geographic, and Economic): Cultural Distance: Differences in language, values, and norms can impact consumer behavior and management. Administrative Distance: Legal and regulatory differences that affect ease of business operations. Geographic Distance: Physical distance and infrastructure challenges impacting transportation and logistics. Economic Distance: Differences in economic development, affecting product demand and pricing. Application: The CAGE framework helps firms evaluate the “distance” between home and foreign markets, predicting challenges and guiding market entry decisions. Page 5 4. What Are the Four Global Strategies That Firms Can Adopt, and What Are the Two Pressures That Define These Strategies? Two Key Pressures: ○ Pressure for Global Integration: Need for consistency, efficiency, and cost-effectiveness across global markets. ○ Pressure for Local Responsiveness: Need to tailor products/services to meet local tastes and regulations. Four Global Strategies: ○ Global Strategy: High global integration, low local responsiveness. Offers standardized products across markets. Suitable for cost-saving and consistency. ○ Transnational Strategy: High global integration, high local responsiveness. Balances global efficiency with local adaptation. ○ International Strategy: Low global integration, low local responsiveness. Minimal changes for local markets, typically exporting core products. ○ Multidomestic Strategy: Low global integration, high local responsiveness. Customizes products extensively for each market. 5. What Methods of Entry Are Available to Firms That Seek to Compete in International Markets? Exporting: Selling products in foreign markets without a physical presence there. Simple and low-cost but limited market control. Licensing/Franchising: Allowing foreign firms to use intellectual property in exchange for royalties. Offers local knowledge but limited control. Joint Ventures: Partnering with a local firm to share resources and expertise. Balances control with local insight. Strategic Alliances: Cooperating with foreign firms without creating a new entity, useful for sharing knowledge or resources. Wholly Owned Subsidiaries: Full ownership of operations in the foreign market, offering maximum control but higher costs and risks. Week 10: 1. Why is a Firm’s Organizational Structure Important? Significance: Organizational structure defines the hierarchy, roles, and communication channels within a firm, impacting decision-making, efficiency, accountability, and adaptability. Strategic Impact: A well-designed structure aligns resources with company goals, facilitates workflow, and enables responsive adaptation to market changes, while a poorly designed structure can lead to inefficiencies and miscommunication. 2. What Are the Basic Building Blocks of Organizational Structure? Division of Labor: Defines how tasks are divided among employees. Page 6  Departmentalization: Grouping employees into departments based on function, product, geography, or customer type. Hierarchy: Establishes levels of authority, creating a chain of command. Span of Control: Refers to the number of employees reporting to a manager. Centralization/Decentralization: Determines if decision-making authority is held by top management or distributed to lower levels. 3. What Are Strategic Advantages and Disadvantages of Each Organizational Structure Type? Functional Structure: ○ Advantages: Specialization, efficiency, and clear roles. ○ Disadvantages: Silo mentality, limited cross-department communication. Divisional Structure: ○ Advantages: Focus on product lines or regions, adaptable to market needs. ○ Disadvantages: Redundancy of resources, higher costs. Matrix Structure: ○ Advantages: Cross-functional collaboration, resource sharing. ○ Disadvantages: Complex reporting lines, potential for role conflicts. Flat Structure: ○ Advantages: Fast decision-making, high flexibility, and employee empowerment. ○ Disadvantages: Lack of clear hierarchy, potential for role ambiguity. 4. What Are the Different Forms of Control and When Should They Be Used? Output Control: Focuses on measurable results (e.g., sales targets). Best for performance-driven environments. Behavioral Control: Emphasizes monitoring and enforcing procedures and behaviors. Useful for roles requiring specific standards. Clan Control: Relies on shared values, norms, and culture. Effective in creative or team-oriented environments where trust and collaboration are key. 5. What Are the Key Legal Forms of Business, and What Implications Does the Choice of a Business Form Have for Organizational Structure? Sole Proprietorship: Owned by one person. Simple structure, full control, but limited resources and personal liability. Partnership: Owned by two or more people. Shared control, pooled resources, but potential conflicts and shared liabilities. Corporation: Separate legal entity with shareholders. Complex structure, greater resources, limited liability, but regulatory demands. Limited Liability Company (LLC): Hybrid with benefits of both partnership and corporation, flexible structure, and limited liability. Implications: The business form affects decision-making authority, liability, tax obligations, and regulatory requirements, shaping the structure’s complexity and reporting requirements. Page 7 6. What is the Role of the Firm’s Board of Directors as it Relates to Ethical Behavior of the Firm? Oversight: The board monitors management and ensures alignment with ethical standards and shareholder interests. Governance: Establishes policies and guidelines on ethical behavior, risk management, and corporate governance. Accountability: Holds leadership accountable for ethical breaches, ensuring transparency and integrity in business operations. 7. What is Corporate Social Responsibility (CSR) and Its Strategic Role for a Firm? Definition: CSR is a company’s commitment to sustainable practices, ethical behavior, and contributing positively to society. Strategic Role: ○ Enhances brand reputation and customer loyalty. ○ Attracts talent who value ethical practices. ○ Mitigates risks and preempts regulatory challenges. ○ Builds competitive advantage by aligning with socially conscious consumers. 8. What Are the Implications of the Contemporary Ethical Questions and Issues Facing Companies? Consumer Trust: Companies are increasingly held accountable for transparency, privacy, and social impact. Failures can erode trust and loyalty. Employee Morale: Ethical breaches can affect employee engagement and retention. Investor Expectations: Growing emphasis on Environmental, Social, and Governance (ESG) criteria means investors favor ethical companies. Regulatory Scrutiny: Companies face stricter regulations and penalties if they fail to adhere to ethical practices, making ethical vigilance a strategic necessity. Page 8