Corporate Strategy Study Set with Questions and Answers

Corporate Strategy Study Set with Questions and Answers Corporate strategy is said to deal with what question? ✅- "What business (or businesses) will we be in?" - This question considers whether to extend the core business, the direction to extend the business, and how to accomplish that. - Value creation is still at the heart of corporate strategy. Arenas ✅the element of strategy that defines where the firm will be active. Three basic choices of arenas at Corporate Level ✅1. Concentration on a single industry. 2. Vertical Integration. 3. Diversification. Concentration on a single industry ✅staying in a single core business Vertical Integration ✅moving backward or forward in the industry supply chain. Diversification ✅extending the core business into one or more distinctly different industries. The 2 categories of concentration strategy ✅1. Single Business. 2. Dominant Business. What does a diversification strategy entail? ✅When less than 70% of revenue comes from a single business Single Business concentration strategy ✅More than 95% of revenue comes from a single business. Dominant Business concentration strategy ✅70% to 95% of revenue comes from a single business. What is the biggest advantage to following a concentration strategy? ✅The organization is able to focus all its resources and attention on being successful in that particular business. What did Management researchers Peters and Waterman argue about most successful businesses? ✅They tend to "stick to their knitting." What are some risks associated with a concentration approach strategy? ✅- "Having all their eggs in one basket." - Missing out on opportunities to create more value in related industries. What is an example of backward or upstream vertical integration? ✅If Starbucks purchased their own coffee bean plantation What is an example of forward or downward vertical integration? ✅If Disney bought a chain of movie theaters When is a company said to be fully vertically integrated? ✅- When it is active in all elements of the supply chain. - Oil Industry example What is the name for companies that are less than fully vertically integrated? ✅Partially Integrated tapered vertical integration ✅Level of vertical integration that occurs when a company buys some components from independent suppliers and some from company suppliers or sells some of its output to company outlets and some to independent outlets. Do organizations have to acquire an organization or have full ownership to engage in vertical integration? ✅No, many of the benefits associated with moving backward of forward in the industry supply chain can be achieved through strategic alliances, partnerships, and even long term contracts. What are the 4 most important ways that vertical integration can help create value for an organization? ✅1. Building Barriers to trade. 2. Facilitating investments in specialized assets. 3. Protecting product quality. 4. Reducing transaction costs. Building barriers to trade through vertical integration ✅- Depending on the directionality of integration, limits to competition in the company's industry are put in place, thereby enabling the company to charge more and make more. - Backward Vertical integration yields more control over critical inputs. - Forward Vertical integration yields more control over distribution channels. Specialized Asset ✅- A value creation tool that is designed to perform a specific set of activities and whose value creation potential is significantly lower in its next -best use. -Examples, machine, computer, factory. etc. Why would facilitating investments in specialized assets through vertical integration help an organization create value? ✅- Companies invest in specialized assets because