Global Strategy (Ch. 8)
What is globalization?
The process by which businesses develop international influence or operate globally
Define a merger.
Two companies combine resources/operations to form a single firm.
Name one method to enter a new industry.
Internal new ventures, acquisitions, joint ventures.
Who are the principals in agency theory?
Owners/shareholders.
What is a functional structure?
Employees grouped by job functions (marketing, finance, HR, etc.).
What are global economies of scale?
Cost advantages from spreading fixed costs over large international volumes.
What is an acquisition?
One company purchases another using capital.
What is product bundling?
Offering multiple products/services together at combined value or lower price.
Who are the agents in agency theory?
Managers.
What is a multidivisional structure?
Firm divided into semi-autonomous divisions by product lines, units, or regions.
List two determinants of national competitive advantage.
Factor endowments, local demand conditions, supporting industries, firm strategy/rivalry
What are bureaucratic costs?
Costs that rise as business units increase and coordination becomes complex.
What does leveraging mean?
Using distinctive competency from one business to gain advantage in another.
What problem does agency theory explain?
Managers may act in their own interests instead of owners’ interests.
What is a matrix structure?
Combines functional departments with project teams; dual reporting lines.
What is a multi-business model?
Model used by companies operating in two or more national markets.
Define diversification.
Expanding products, services, or operations into new areas.
What is an internal new venture?
Creating a new business unit within the firm to enter a new industry.
Why might managers act in their own interests?
Information asymmetry, misaligned incentives, personal gain.
What is organizational culture?
Shared norms, beliefs, and values among employees.
Explain how local demand conditions affect national competitive advantage.
Strong local demand pushes firms to innovate and improve, strengthening global competitiveness.
What is outsourcing?
Obtaining goods/services from external suppliers instead of producing internally.
What is the basis of a multi-business model?
Leveraging shared organizational competencies across units for competitive advantage.
How does corporate governance reduce agency problems?
By aligning incentives, monitoring managers, and enforcing accountability.
What are incentives and how do they align behavior?
Rewards/mechanisms to encourage desirable behavior, aligning actions with organizational goals.