Strategic CH 9 & 11

horizontal integration

the process of acquiring or merging with industry competitors to achieve the competitive advantages that arise from a large size and scope of operations

acquisition

when a company uses its capital resources to purchase another compnay

merger

an agreement between two companies to pool their resources and operations and join together to better compete in a business or industry

product bundling

offering customers the opportunity to purchase a range of products at a single, combined price; this increases the value of a company’s product line because customers often obtain a price discount when purchasing a set of products at one time, and customers become used to dealing with only one company and its representatives

cross-selling

when a company takes advantage of or leverages its established relationship with customers by way of acquiring additional produce lines or categories that it can sell to them. In this way, a company increases differentiation because it can provide a “total soultion” and satisfy all of a customer’s specific needs

vertical integration

when a company expands its operations either backward into an industry that produces inputs for the company’s products (backward vertical integration) or forward into an industry that uses, distributes, or sells the company’s products (forward vertical integration)hol

holdup

when a company is taken advantage of by another company it does business with after it has made an investment in expensive specialized assets to better meet the needs of the other company

tapered integration

when a firm uses a mix of vertical integration and market transactions for a given input. Doing so helps prevent supplier holdup (because the firm can credibly commit to not buying from external suppliers) and increases its ability to judge the quality and cost of purchased supplies. v

vertical disintegration

when a company decides to exit industries, either forward or backward in the industry value chain, to its core industry to increase profitability

transfer pricing

the price that one division of a company charges another division for its products, which are the inputs the other division requires to manufacture its own products

quasi integration

the use of long-term relationships, or investment in some activities normally performed by suppliers or buyers, in place of full ownership of operations that are backward or forward in the supply chain

strategic alliance

long-term agreements between two or more companies to jointly develop new products or processes that benefit all companies that are a part of the agreement

hostage taking

a means of exchanging valuable resources to guarantee that each partner to an agreement will keep its side of the bargain

credible commitment

a believable promise or pledge to support the development of a long-term relationship between companies

parallel sourcing policy

a policy in which a company enters into a long-term contract with at least two suppliers for the same component to prevent any incidents of opportunism

strategic outsourcing

the decision to allow one or more of a company’s value-chain activities to be performed by independent, specialist companies that focus all their skills and knowledge on just one kind of activity to increase performance

virtual corporation

when companies pursued extensive strategic outsourcing to the extent that they only perform the central value creation functions that lead to competitive advantage

stakeholders

individuals or groups with an interest, claim, or stake in the company - in what it does and in how well it performs

internal stakeholders

stockholders and employees, including executive officers, other managers, and board memebrs

external stakeholders

all other individuals and groups that have some claim on the company

risk capital

capital that cannot be recovered if a company fails and goes bankrupt

information asymmetry

a situation where an agent has more information about the resources he or she is managing than the principle

on-the-job consumption

a term used by economists to describe the behavior of senior management’s use of company funds to acquire perks (lavish offices, jets, and the like) that will enhance their status, instead of investing the funds to increase stockholder returns

inside directors

senior employees of the company, such as the CEO

outside directors

directors who are not full-time employees of the company, needed to provide objectivity to the monitoring and evaluation process

stock options

the right o purchase company stock at a predetermined price at some point in the future, usually within 10 years of the grant date

takeover constraint

the risk of being acquired by another company

greenmail

a source of gaining wealth whereby corporate raiders either push companies to change their corporate strategy to one that will benefit stockholders, or charge a premium for stock whent eh company want sot buy it back

ethics

accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization

business ethics

accepted principles of right or wrong governing the conduct of businesspeople

ethical dilemmas

situations where there is no agreement over exactly what the accepted principles of right and wrong are, or where none of the available alternatives seems ethically acceptable

self-dealing

mangers using company funds for their own personal consumption

information manipulation

when managers use their control over corporate data to distort or hide information in order to enhance their own financial situation or the competitive position of the firm

anticompetitive behavior

a range of actions aimed at harming actual or potential competitors, most often by using monopoly power, and thereby enhancing the long-run prospects of the firm

opportunistic exploitation

unethical behavior sometimes used by managers to unilaterally rewrite the terms of a contract with suppliers, buyers, or complement providers in a way that favors them

substandard working conditions

arise when managers underinvest in working conditions, or pay employees below-market rates, in order to reduce their production costs

environmental degradation

occurs when a company's actions directly or indirectly result in pollution or other forms of environmental harm

corruption

can arise in a business context when managers pay bribes to gain access to lucrative business contracts per

personal ethics

generally accepted principles of right and wrong governing the conduct of individuals

code of ethics

formal statement of the ethical priorities to which a business adheres

moral awareness

recognizing the moral content of a decision, recognizing a decision is an ethical decision

moral disengagement

rationalizing away the unethical nature of behavior to feel better about our own morality

moral justification

reframing unethical behavior to suggest that it serves a higher purpose (and therefore is not unethical or is worth the risks / consequences)

euphemistic labeling

labeling unethical behavior with terms that sound innocuous (e.g. “creative accounting”) to shroud the moral problemad

advantageous comparision

diminishing the problematic nature of a behavior by comparing it with an even worse behavior, which is more obviously unethical

displacement of responsibility

attributing the responsibility for a bad behavior to an authority figure, instead of the action him/herself did

diffusion of responsibility

attributing the responsibility to a group, instead of an individual

distortion of consequences

belittling the potential ill effects of an unethical behavior to make it seem more acceptabled

dehumanization

characterizing potential victims as being inconsequential and/or not worthy of consideration. This can include labeling potential victims as out groups.

attribution blame

blaming the victim for the unethical behavior, and/or suggesting that they deserve whatever ill effects befall themo

organizational culture

shared perceptions of values, norms, beliefs, and assumptions that form the social fabric of an organization