MBA 705 MINSUN KIM EXAM 3 FULL REVISION
NOTES WITH CORPORATE LEVEL STRATEGY
AND CASE CONCEPTS
◉ Horizontal (related) integration.
Answer: When a firm acquires other companies in the same line of
business. Doing so allows a firm operating in a single industry to
grow rapidly without moving into other industries
◉ Horizontal (Related) Diversification.
Answer: When a firm acquires a business outside its present scope
of operation, but with similar or related core competencies, the
firm's key capabilities and collective learning skills that are
fundamental to its strategy, performance, and long-term
profitability.
e.g. McDonald's diversified their menu selection, diversified in areas
that are related on some basic variable. The 3 menu items share
common resources and common customer segments
◉ Why does a company pursue the horizontal (related)
diversification?.
Answer: It is because it can create synergy using the same supplies
and resources, the same marketing and distribution channels, and
advertising multiple services simultaneously
,◉ Conglomerate (unrelated) diversification.
Answer: When a corporation acquires a business in an unrelated
industry to reduce cyclical fluctuations in cash flows or revenues
-it can increase complexity and requires managers to understand
each of the core technologies and special requirements of the
individual units. This often reduces the effectiveness of management
◉ Vertical Integration.
Answer: merging various stages of activities in the distribution
channel. Includes:
Forward integration
Backward integration
◉ Backward Integration.
Answer: when a firm acquires its suppliers (i.e., expanding
"upstream")
◉ Forward Integration.
Answer: when a firm acquires its buyers (i.e., expanding
"downstream")
◉ Strategic Alliances (Partnerships).
, Answer: occur when two or more firms agree to share the costs,
risks, and benefits associated with pursuing new business
opportunities
◉ Advantage of a Strategic Alliance.
Answer: - it minimizes increases in the organizational bureaucracy
-It allows a firm to share in the benefits of the alliance without
bearing all of the costs
◉ Stability Strategy.
Answer: attempts to maintain the present size and scope of
operations
◉ Stability strategy may be more attractive than growth strategy
when:.
Answer: 1. Industry growth is slow or non-existent
2. Costs associated with growth exceed its benefits
3. Growth may place great constraints on quality, marketing efforts,
and customer service
4. There is an increased competitive pressure associated with
growth
◉ Retrenchment Strategy.
Answer: a firm deliberately reduces its size.
NOTES WITH CORPORATE LEVEL STRATEGY
AND CASE CONCEPTS
◉ Horizontal (related) integration.
Answer: When a firm acquires other companies in the same line of
business. Doing so allows a firm operating in a single industry to
grow rapidly without moving into other industries
◉ Horizontal (Related) Diversification.
Answer: When a firm acquires a business outside its present scope
of operation, but with similar or related core competencies, the
firm's key capabilities and collective learning skills that are
fundamental to its strategy, performance, and long-term
profitability.
e.g. McDonald's diversified their menu selection, diversified in areas
that are related on some basic variable. The 3 menu items share
common resources and common customer segments
◉ Why does a company pursue the horizontal (related)
diversification?.
Answer: It is because it can create synergy using the same supplies
and resources, the same marketing and distribution channels, and
advertising multiple services simultaneously
,◉ Conglomerate (unrelated) diversification.
Answer: When a corporation acquires a business in an unrelated
industry to reduce cyclical fluctuations in cash flows or revenues
-it can increase complexity and requires managers to understand
each of the core technologies and special requirements of the
individual units. This often reduces the effectiveness of management
◉ Vertical Integration.
Answer: merging various stages of activities in the distribution
channel. Includes:
Forward integration
Backward integration
◉ Backward Integration.
Answer: when a firm acquires its suppliers (i.e., expanding
"upstream")
◉ Forward Integration.
Answer: when a firm acquires its buyers (i.e., expanding
"downstream")
◉ Strategic Alliances (Partnerships).
, Answer: occur when two or more firms agree to share the costs,
risks, and benefits associated with pursuing new business
opportunities
◉ Advantage of a Strategic Alliance.
Answer: - it minimizes increases in the organizational bureaucracy
-It allows a firm to share in the benefits of the alliance without
bearing all of the costs
◉ Stability Strategy.
Answer: attempts to maintain the present size and scope of
operations
◉ Stability strategy may be more attractive than growth strategy
when:.
Answer: 1. Industry growth is slow or non-existent
2. Costs associated with growth exceed its benefits
3. Growth may place great constraints on quality, marketing efforts,
and customer service
4. There is an increased competitive pressure associated with
growth
◉ Retrenchment Strategy.
Answer: a firm deliberately reduces its size.
