MNGT 475 Exam Flashcards!

studied byStudied by 0 people
0.0(0)
Get a hint
Hint

What is vertical integration?

1 / 91

encourage image

There's no tags or description

Looks like no one added any tags here yet for you.

92 Terms

1

What is vertical integration?

a strategy where a company controls more than one stage of its supply chain.

New cards
2

What is backwards integration?

When a company acquires or develops its suppliers to gain control over inputs.

New cards
3

A car manufacturer acquiring a steel plant to ensure raw material availability is an example of what?

backwards integration

New cards
4

Forward Integration

When a company takes control of distribution or sales channels.

New cards
5

A bakery opening its own retail stores to sell directly to customers is an example of

forward integration

New cards
6

How do you decide to vertically integrate?

Transaction Cost Economics (TCE)

New cards
7

What is transaction cost economics (TCE)?

Evaluate costs of outsourcing versus in-house production.

New cards
8

True/False: According to TCE, High transaction costs favor vertical integration.

true

New cards
9

If negotiating contracts with suppliers is costly and inefficient, integrating backward may save money is an example of

Utilizing the TCE framework

New cards
10

What are the benefits of vertical integration?

  • Better control over supply chain and quality.

  • Potential cost savings from eliminating intermediaries.

  • Improved coordination across stages.

New cards
11

What are the risks of vertical integration?

  • Large capital investment.

  • Reduced flexibility to adapt to market changes.

New cards
12

What are some alternatives to vertical integration?

  • Franchises

  • Long-term contracts

New cards
13

Franchises

Granting rights to operate under a brand (e.g., McDonald’s)

New cards
14

Long-term contracts

Ensuring steady supplies without ownership (e.g., Apple contracting Foxconn for production).

New cards
15

International Strategy

Expanding a company’s operations beyond its domestic market.

New cards
16

What are the benefits of International Expansion

  • Access to new markets and customer bases.

  • Economies of scale by spreading fixed costs over a larger volume.

  • Leveraging international resources like cheap labor.

New cards
17

What are some risks of international expansion?

  • Political instability, tariffs, and trade barriers.

  • Cultural misalignment leading to customer rejection.

New cards
18

What are some ways to expand internationally?

  1. exporting

  2. licensing/franchising

  3. joint ventures

  4. subsidiaries

New cards
19

Exporting

Selling domestically produced goods abroad

New cards
20

A U.S. winery transporting wine to Europe is an example of?

Exporting

New cards
21

Licensing/Franchising

Allowing foreign partners to use your brand and process

New cards
22

Starbucks licensing its brand in some markets is an example of

Licensing/Franchising

New cards
23

Joint Ventures

Partnering with a local firm to share costs and risks

New cards
24

Sony and Ericsson’s partnership to produce phones is an example of

Joint Ventures

New cards
25

Subsidiaries

Establishing full control by owning operations abroad

New cards
26

Toyota setting up factories in the U.S is an example of

Subsidiaries

New cards
27

What are the frameworks connected to international expansion?

  1. CAGE Framework

  2. Diamond Framework

  3. Integration Response Framework

New cards
28

CAGE framework

Measures Cultural, Administrative, Geographic, and Economic differences to assess market attractiveness.

→ Measures the “distance” between the current market and the proposed market

New cards
29

Diamond Framework

Explains a nation’s competitive advantage based on factors like demand conditions, firm strategy, and supporting industries.

  • Other factors include: Governmental role, and chance events

New cards
30

Integration Response Framework

Balances global standardization (efficiency) with local customization (responsiveness).

New cards
31

What are the positions found in the IR framework?

  1. Global Strategy (High Integration, Low Responsiveness)

  2. Transnational Strategy (High Integration, High Responsiveness)

  3. Multi-domestic Strategy (Low Integration, High Responsiveness

  4. International Strategy (Low Integration, Low Responsiveness)

New cards
32

Global Strategy

Standardized products with centralized control.

  • High Integration, Low Responsiveness

New cards
33

Boeing’s global operations produce aircraft to the same specifications worldwide is an example of which strategy?

Global Strategy

New cards
34

Transnational Strategy

Combines global efficiency with local adaptation

  • High Integration, High Responsiveness

New cards
35

Unilever standardizes production but tailors marketing campaigns regionally is an example of which strategy?

Transnational Strategy

New cards
36

Multi-domestic Strategy

Localized strategies with decentralized decision-making

  • Low Integration, High Responsiveness

New cards
37

Nestlé adapts food products to suit regional tastes is an example of which strategy?

Multi-domestic

New cards
38

International Strategy

Focuses on exporting with minimal local adaptation.

  • Low Integration, Low Responsiveness

New cards
39

Luxury fashion brands like Chanel maintain consistency across markets is an example of which strategy?

International Strategy

New cards
40

Diversification

Expanding into new industries or markets.

New cards
41

What are the types of diversification?

  • Related Diversification

  • Unrelated Diversification

New cards
42

Related Diversification

Entering industries with synergies to the core business

New cards
43

Apple moving from computers to smartphones is an example of which type of diversification?

Related Diversification

New cards
44

Unrelated Diversification

Entering entirely different industries

New cards
45

GE operating in healthcare, aviation, and financial services is an example of what type of diversification?

unrelated diversification

New cards
46

What are the motives of diversification?

  • Economies of Scope

  • Internalizing Transactions

New cards
47

Economies of Scope

Sharing resources like R&D or marketing

New cards
48

Disney using its characters in films, theme parks, and merchandise is an example of what?

Economies of Scope

New cards
49

Internalizing transactions

Avoiding costs of external contracts

New cards
50

What are the 3 tests of diversification?

  1. Attractiveness: Is the Industry appealing?

  2. Cost of Entry: Can we afford entry without eroding profits?

  3. Better off test: Does diversification improve competitive advantage?

New cards
51

What are some challenges of diversification?

Conglomerate Discounts

New cards
52

Conglomerate Discount

Investors may undervalue highly diversified firms

New cards
53

Strategic Leadership

The role of executives in guiding a company’s strategy and structure.

New cards
54

Upper Echelons Theory

Leaders’ experiences and values shape strategic choices

New cards
55

Roles of Executives:

  • Corporate Portfolio Management

  • Business Linkage Management

  • Business-level Management

New cards
56

Corporate Portfolio Management

Allocating resources across businesses.

New cards
57

Business Linkage Management

Ensuring synergy between units.

New cards
58

Business-level Management

Guiding individual units to succeed.

New cards
59

What are the categories of the BCG Matrix?

  • stars

  • cash cows

  • question marks

  • cows

New cards
60

What are stars in the BCG Matrix?

High growth, high market share (e.g., Tesla EVs)

New cards
61

What are Cash Cows in BCG Matrix?

Low growth, high market share (e.g., Coca-Cola)

New cards
62

What are Question Marks in BCG Matrix?

High growth, low market share (e.g., startups)

New cards
63

What are Dogs in BCG Matrix?

Low growth, low market share (e.g., outdated tech)

New cards
64

Corporate Governance

Mechanisms to ensure accountability and control in organizations.

New cards
65

Principal-Agent Problem

Managers (agents) may prioritize personal goals over shareholder interests.

New cards
66

What are some governance mechanisms?

  • Board of Directors

  • Executive Compensation

  • Market

New cards
67
New cards
68

What if the CEO is also on the board of directors?

there’s potential conflict when there is duality

New cards
69

Executive Compensation

Stock options to align manager incentives with performance.

New cards
70

Market for corporate control

Risk of takeover pressures management to perform.

New cards
71

Ethics

  • Balance between what is legal and ethical.

  • Code of conduct to guide decisions.

New cards
72

what is Google’s “Don’t be evil” principle an example of?

Ethics

New cards
73

Mergers & Acquisitions

Combining firms to create value.

New cards
74

Why do mergers and acquisitions occur?

  • Gain market share

  • access new capabilities

  • achieve synergies.

New cards
75

What are the risks of mergers and acquisitions?

  • Cultural integration issues.

  • Overpayment for the acquired company.

New cards
76

What are performance implications of mergers and acquisitions?

Many fail to meet expected financial benefits.

New cards
77

What is the build-borrow-buy framework?

Decide whether to grow organically (build), partner (borrow), or acquire (buy).

New cards
78

What are the types of alliances?

Equity, non-equity, joint ventures.

New cards
79

What is the 4 C’s framework for?

Choosing partners in an alliance

New cards
80

4 C’s Framework

  • Compatibility: Shared values

  • Complementarily: Skill alignment

  • Commitment: Dedication to the alliance

  • Capacity: Ability to execute

New cards
81
New cards
82

When should companies utilize the Build component of the build-borrow-buy framework?

  • The company has sufficient internal expertise and resources.

  • The required capability aligns closely with the firm's existing strengths.

  • There is sufficient time to develop the resource.

New cards
83

What component of the build-borrow-buy framework is this an example of: Tesla developed its battery technology and manufacturing capabilities to maintain control and innovate in-house

Build

New cards
84

When should companies utilize the borrow component of the build-borrow-buy framework?

  • The firm lacks the time or resources to develop in-house.

  • The capability needed is not critical for sustained competitive advantage.

  • The firm seeks to share risks and costs.

New cards
85

What component of the build-borrow-buy framework is this an example of: Starbucks entered the Chinese market through a joint venture with local partners before fully owning its operations.

Borrow

New cards
86

When should Companies use the buy component of the build-borrow-buy framework?

  • The resource is critical for the firm’s success and cannot be easily developed or borrowed.

  • Speed is essential, such as in fast-moving industries.

  • The firm seeks full control over the resource.

New cards
87

What component of the build-borrow-buy framework is this an example of: Facebook (now Meta) bought Instagram to gain expertise in photo-sharing social media and consolidate its market position.

Buy

New cards
88

What are the decision factors that should be considered when utilizing the build, borrow, buy framework

  1. relevance

  2. tradability

  3. closeness

  4. integration

New cards
89

What does the relevance decision factor consider in the build-borrow-buy framework?

How relevant is the resource to the firm's current strategy?

  • If high relevance, consider building

New cards
90

What does the tradability decision factor consider in the build-borrow-buy framework?

Can the resource be easily accessed through a contract or partnership?

  • if yes, borrowing is viable

New cards
91

What is the closeness decision factor considered in the build-borrow-buy framework?

Does the firm need to work closely with the partner to achieve goals?

  • If yes, a joint venture may be better than simple licensing

New cards
92

What is the integration decision factor considered in the build-borrow-buy framework?

Is full control required for success?

  • If yes, then buying is the best option

New cards

Explore top notes

note Note
studied byStudied by 101 people
... ago
4.0(1)
note Note
studied byStudied by 27 people
... ago
5.0(1)
note Note
studied byStudied by 1211 people
... ago
4.9(15)
note Note
studied byStudied by 14 people
... ago
5.0(1)
note Note
studied byStudied by 27 people
... ago
4.5(2)
note Note
studied byStudied by 35 people
... ago
5.0(1)
note Note
studied byStudied by 122 people
... ago
5.0(3)
note Note
studied byStudied by 18 people
... ago
5.0(3)

Explore top flashcards

flashcards Flashcard (100)
studied byStudied by 9 people
... ago
5.0(1)
flashcards Flashcard (202)
studied byStudied by 4 people
... ago
5.0(1)
flashcards Flashcard (63)
studied byStudied by 10 people
... ago
5.0(1)
flashcards Flashcard (60)
studied byStudied by 35 people
... ago
5.0(2)
flashcards Flashcard (36)
studied byStudied by 16 people
... ago
5.0(2)
flashcards Flashcard (97)
studied byStudied by 18 people
... ago
5.0(1)
flashcards Flashcard (55)
studied byStudied by 41 people
... ago
5.0(2)
flashcards Flashcard (26)
studied byStudied by 5 people
... ago
5.0(1)
robot