Chapter 6: Corporate-Level Strategy: Creating Value through Diversification

These flashcards cover key concepts and terminology related to corporate-level strategy and diversification strategies discussed in Chapter 6.

Diversification

The process of a corporation expanding its operations into different business areas, allowing for risk reduction and synergies.

Related Diversification

A growth strategy where a firm expands its operations into areas that are related to its existing business activities.

Unrelated Diversification

A growth strategy where a firm expands its operations into areas that are not related to its current business activities.

Economies of Scope

Cost advantages that occur when a firm produces multiple products using the same operations or resources.

Market Power

The ability of a firm to influence the price of its products or the terms of trade in its favor.

Mergers and Acquisitions

Corporate strategies that involve the consolidation of companies or assets through various types of financial transactions.

Synergy

The concept that combined entities can achieve greater benefits than if they were operating separately.

Strategic Alliances

Cooperative agreements between firms to pursue shared objectives while remaining independent organizations.

Divestment

The process of selling off subsidiary business interests or investments.

Corporate Restructuring

The process of reorganizing a company’s ownership, operational, or structural model to improve efficiency or profitability.

Transaction Costs

Costs incurred in making an economic exchange, often factored into decisions about mergers, acquisitions, or other deals.

Core Competencies

The unique capabilities or advantages that a firm possesses that can lead to competitive advantage.

Pooled Negotiating Power

The enhanced bargaining power gained by a company when it is able to leverage its collective buying or selling power across multiple units.

Vertical Integration

A strategy that involves a firm expanding its operations into different stages of production within the same industry.

Boston Consulting Group (BCG) Matrix

A strategic planning tool used to evaluate the relative position of a company’s business units based on market growth and market share.

Managerial Motives

Incentives for managers that may lead them to make decisions that prioritize personal gain over the best interests of the company or its stakeholders.

Greenmail

An anti-takeover tactic where a target company buys back its shares at a premium to avoid a hostile takeover.