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MGMT 4813 Ch 6

Corporate level strategy addresses two related issues:
what businesses to compete in; how these businesses can achieve synergy
Individual investors are dependent upon the corporation’s managers to:
add value to their investments in a way that the stockholders could not accomplish on their own
McKesson, a large distribution company, sells many product lines such as pharmaceuticals and liquor through its super warehouses. This is an example of:
achieving economies of scope through related diversification
Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller’s market share. This justification for diversification is best described as:
capitalizing on core competencies
The corporate office of Cooper Industries adds value to its acquired businesses by performing such activities as auditing their manufacturing operations, improving their accounting activities, and centralizing union negotiations. This is an example of:
attaining the benefits of parenting through unrelated diversification.
reflects the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services
core competencies
For a core competence to be a viable basis for the corporation strengthening a new business unit there are 3 requirements:
must help the business gain strength relative to its competition, new business must be similar to existing business to benefit, collection of competencies should be unique so that they cannot be easily imitated
Sharing core competencies is one of the primary potential advantages of diversification. in order for diversification to be most successful, it is important that:
the similarity required for sharing core competencies must be in the value chain, not in the product.
when management uses common production facilities or purchasing procedures to distribute different but related products, they are:
sharing activities
Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input into its manufacturing process. This is an example of:
vertical integration
The risks of vertical integration include:
costs and expenses associated with increased overhead and capital expenditures, problems associated with unbalanced capacities along the value chain, additional admin costs associated with managing a more complex set of activities
Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with:
Vertical Integration
a firm should consider vertical integration when:
the firm’s suppliers of raw materials are often unable to maintain quality standards
it may be advantageous to vertically integrate when:
lower transaction costs and improved coordination are vital and achievable through vertical integration
transaction costs include all of the following:
search costs, negotiating costs, monitoring costs
vertical integration is attractive when:
transaction costs are higher than internal admin costs
when a firm’s corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures
parenting
when a firm tries to find and acquire either poorly performing firms with
unrealized potential or firms in industries on the threshold of significant, positive change
restructuring
according to the text, corporate restructuring includes:
capital restructuring, asset restructuring, and management restructuring
portfolio management matrices are applied to what level of strategy?
corporate level
when using a BCG matrix, a business that currently holds a large market
share in a rapidly growing market and that has minimal or negative cash flow would be known as:
star
in the BCG matrix, a business that has a low market share in an industry characterized by a high market growth is termed a:
question mark
portfolio management frameworks share what characteristics?
grid dimensions are based on external environments and internal capabilities/market positions
a cash cow referred to in the BCG, refers to a business that has
low market growth and relatively high market share
In managing a firm’s portfolio, the BCG matrix would suggest that:
question marks can represent future stars if their market share increased
In the BCG matrix, the suggested strategy for stars is to:
maintain position and after the market growth slows use the business to provide cash flow
limitations of the BCG
every business cannot be accurately measured and compared on 2 dimensions, views each business as a stand alone entity and ignores the potential for synergies, can lead to some troublesome and overly prescriptions
the 3 primary means by which a firm can diversify are:
mergers and acquisitions, joint ventures and strategic alliances, internal development
according to michael porter: there’s a tremendous allure to ____. its the
big play, the dramatic gesture. with one stroke of the pen you can add billions to size, get a front page store, and create excitement in markets.
mergers and acquisitions
an antitakeover called _____ is when a firm offers to buy shares of their
stock from a company planning to acquire their firm at a higher price than the unfriendly company paid for it
greenmail

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