MGT 455 Exam 2

Intangible resources

resources do not have physical attributes and are invisible

Examples of intangible resources

culture, knowledge, brand equity, reputation, intellectual property

Porter’s value chain

factor and demand conditions, intensity of focal industry, related and supporting industries

Resource heterogeneity

a firm is a unique bundle of resources, capabilities, and competencies, which differ across firms

Resource immobility

resources are “sticky” and do not move easily from firm to firm, difficult to replicate and longlasting

Isolating mechanisms

Casual ambiguity, social complexity, path dependence

Casual ambiguity

cause and effect are vague

Social complexity

social and business systems interact

Path dependence

past decisions limit current ones

Dynamic capabilities

modify and leverage resource base

gain and sustain CA

respond to a changing environment

VRIO

a resource must be valuable, rare, costly to imitate, organized to capture value of resource

Forward vertical integration

owning activities closer to the customer

Backward vertical integration

owning inputs of the value chain

Taper integration

backward or forward integrated, reliance on outside firms such as suppliers or distributors

Single business

lowest diversification

Dominant business

main business

Related-constrained

all businesses share competencies

Unrelated

no businesses share competencies

BCG growth matrix

a helpful restructuring tool that guides portfolio planning and each category has a different strategy

Question mark

earnings are low,  increase market share or harvest/divest

Star

earnings are high, stable, growing, hold or invest for growth

Dog

earnings are low and unstable, harvest/divest

Cash cow

earnings are high and stable, hold

External transaction cost

searching for contractors and negotiating, monitoring, and enforcing contracts (SNME)

Internal transaction costs

·recruiting and keeping employees, setting up a shop floor

Advantages of vertical integration

lower costs, improving quality, facilitating scheduling, planning, investments, secure supplies and channels

Disadvantages of vertical integration

Increasing costs, reducing quality and flexibility

Advantages of the market

high incentive, flexibility

Disadvantages of the market

search costs, opportunism, incomplete contracting, enforcement of contracts

CAGE

cultural, administrative and political, geographic, economic

What does CAGE do?

Guide multinational enterprise decisions on which countries to enter

International economies give access to

communities of learning and location economies

International

a company sells the same products or services in both domestic and foreign markets

Multidomestic

low-cost reductions/ high-local responsiveness

Global standardization

high-cost reductions/ low-local responsiveness

Transnational

high-cost reductions/ high-local responsiveness

Cost reductions

key competitive weapon

Local responsiveness

tailoring to specific preferences

Liabilities of foreignness

 unfamiliar culture and economic environment, hard to plan stuff

A theory for competitive advantage

resource based view assumptions

Resources that lead to CA are usually…

intangible

isolating mechanisms do what?

keep other firms from imitating products

big topic for dynamic capabilities

the ability to change, upgrade, or modify

what describes a valuable resource?

if it cuts costs

a resource is valuable if

it creates value for the company

taper integration is..

vertically integrated, but outsourcing at the same time

backward vertical integration is more about…

raw materials

Single business

>95%, Coca-cola

Dominant business

70%-95%, UPS

Related-constrained

<70%, Nike

Related-linked

<70%, Disney

Unrelated

<70%, Berkshire

Diversification discount

the actual value would be worth more if broken up

A firm is good at..

coordinating, holding knowledge, and transaction investments

A firm is not good at…

low-powered incentives

Location economies

being near what you need

Greenfield operations

starting from scratch

Liabilities of foreignness is the cost of

operating abroad

porter’s is used for…

national competitive adantage

competitive intensity

you need to have competitors

components of organizational design

structure, control, and culture

Simple

Used by small firms with low organizational complexity

Fuctional

employees are in groups

Multidivisional

used as a firm diversifies products and geography

Matrix

you have two lines of who you report to

Input control

direct behavior with rules, operations, and budgets

output controls

define results, but leave it to the people

Culture

shared values and norms of an organizations members

Simple structures have a low degree of

formalization and specialization

board of directors

look after owners and make sure agents are doing what they are supposed to do

What is the centerpiece of corporate governance

board of directors

inside directors

work for the CEO, decrease information of symmetry

Outside directors

make sure people do not act immorally

external governance mechanisms

acquisitions, industry analysis, auditors, government regulators (AIAG)

Adverse selection

you may select the wrong person

Moral hazard

after hiring, the person is trying to max their own benefits

what helps address the agency problem

corporate governance