Vertical Integration
Diversification
Alliances / M&A
Internationalization Strategy
Non-Market Strategies
In this case...
100
Name the two types of transaction costs and give an example of each
External transaction costs:
•Searching for contractors.
•Negotiating, monitoring, and enforcing contracts.
Internal transaction costs:
•Recruiting and retaining employees.
•Setting up a shop floor.
100
List and define the three types of diversification using the case of Disney
Product Diversification:
•Increase in variety of products / services.
•Active in several product markets.
Geographic Diversification:
•Increase in variety of markets / geographic regions.
•Regional, national, or international markets.
Product-Market Diversification:
•Product and geographic diversification.
100
DAILY DOUBLE
What is the main reason that acquisitions fail?
Post-acquisition integration (lack of cultural fit)
100
This is my favorite fast-food chain. Give the name of the chain and cite one example of local adaptation viewed in class.
McDonalds - germany (mc brezel), brazil (pao de queijo/mc cafe/guarana), thailand (temples, eggs), japan (shrimp burger)
100
What is the role of a firm from a sustainable development/sustainability perspective?
They are fundamental actors within a community and have direct and indirect impact in many sustainability indicators
100
Why did Disney engage with the political arena in the 'Don't say Gay bill' if it is was so risky?
Engage in political activities, within legal and regulatory limits, in order to
•have a voice in public matters ,
•maintain or promote the economic interests of companies and their shareholders by helping elect candidates for office,
•and promote policy initiatives to support strategic business intents.
alignment with corporate values, pressure from consumers
200
A vertical market failure happens
when transactions in the market are too risky or costly.
200
Amazon.com has decided to enter the college bookstore market. The goal of “Amazon Campus” is to offer co-branded university-specific web sites that offer textbooks and paraphernalia, such as logo sweaters and baseball hats. This development shows Amazon’s relentless pursuit of this corporate strategy
Product diversification
200
NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a
Hostile Takeover
200
Name and define the elements of the framework we use in IB to assess the similarities and differences between home and host countries
Distance is the main cost and risk of expansion.
CAGE is an acronym for different types of distance:
•Cultural.
•Administrative and political.
•Geographic.
•Economic.
Guides multinational enterprise decisions on which countries to enter.
200
Describe Warby Parker's CSR tactics and define what tactic this is according to the ones discussed in class.
*Create product/service markets to match community needs
*Investment in markets that are otherwise underserved
*Innovation of products/services that have both monetary and social value
*Talent attraction/retention/motivation
200
What are examples of diversification strategies implemented by Amazon?
Ecommerce, streaming, cloud etc
300
Jill is the CEO of Note’s Etc, a stationary manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling to retailers. In order to do this, Jill will need to engage in ________, which is a corporate level, strategy.
Forward vertical integration
300
Explain the relationship between diversification and performance
300
List four of the five reasons we discussed in class why firms enter into strategic alliances/M&AS
Strengthen competitive position.
Change industry structure, influence standards. (Lyft partners with GM and Waymo)
Enter new markets.
New products, service, or geographic market (e.g. McDonald’s and Den Fujita to enter Japan)
Hedge against uncertainty.
Real options perspective (staggered investment) (Starbucks and Café Retiro)
Access critical complementary assets.
Marketing, manufacturing, after-sale service. (AgriCapital and Juan Valdez)
Learn new capabilities.
Co-opetition & learning races (Toyota and Tesla)
FOR M&AS FROM READING:
Market Power
Transferring skills
Cost savings
Maintain competitive parity
Revenue enhancement
300
Explain what is the Global Standardization Strategy and give at least two examples of companies that implement this strategy.
Pursuing lower costs and economies of scale
Duracell, Caterpillar, Microsoft
300
List the three types of CPA tactics
Financial; informational; constituency
300
DAILY DOUBLE
How does Warby Parker create systematic change in the world (i.e., beyond selling products and services)? And how does that benefit the company?
TBD
400
List two risks and two benefits of vertical integration (must be specific)
Benefits:
Lowering costs.
Improving quality.
Facilitating scheduling and planning.
Facilitating investments in specialized assets:
•Co-located assets, unique equipment, human capital.
Securing critical supplies and distribution channels.
Risks
Increasing costs.
Reducing quality.
Reducing flexibility.
Increasing the potential for legal repercussions.
400
The managers at Acme Corporation decided that their firm needed to pursue a different strategy because of overall falling sales and lower performance in a given sector. How can a diversification strategy help this firm?
it can compensate for the declining performance in this sector by having higher performance in another sector
400
When Aviato Inc. wanted to sell its cars in the country of Yugoslakia, it lacked access to distribution channels and marketing expertise in the country. What could be a solution for the company?
Accessing critical complementary assets.
Aviato Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner’s well-established distribution channels.
400
Name the mode of entry that (1) requires the least investment and yields the least control and (2) requires the most investment and yields the most control for the headquarters
400
Define "independent expenditures" and list two issues associated with this tactic
Independent expenditures are a CPA functional tactic that are less overt and less traceable, with no disclosure required. Money is given to a third party for campaign donations.
400
This company controls many stages of the eyewear industry
LUXOTTICA
500
Explain why the automotive chip shortage could NOT be considered an example of a vertical market failure.
•HIGH ASSET SPECIFICITY
–manufacturing a chip is an extremely complex process with high capital costs.
•HIGH TRADING FREQUENCY
Automakers need semiconductor chips to make various pieces of a car function
•SMALL GROUP OF BUYERS AND SUPPLIERS
500
List and define Porter's three tests to determine if diversification creates shareholder value
1)Attractiveness Test: diversification must be directed towards attractive industries (or have the potential to become attractive)
5 forces analysis of new industry
2)Cost of Entry Test: the cost of entry must not capitalize all future profits
3)Better-Off Test: either the new unit must gain competitive advantage from its link with the company, or vice-versa. (i.e. some form of “synergy” must be present).
500
Explain using the three tests (attractiveness, cost of entry and better off test) why Body Armor's acquisition by Coca-Cola can be deemed successful?
Coca-Cola acquired BodyArmor in 2021 for $5.6 billion to diversify its beverage portfolio, gain market share in the sports drink category, and tap into the growing demand for healthier beverages. It passes the better off test, because both companies benefited from the acquisition. The cost was significant, but it did provide advantages for Coca-Cola in regards to market power. As per the attractiveness test, the industry is showing significant growth and drawign consumers focused on healthier drinks.
The acquisition also allows Coca-Cola to diversify its beverage portfolio and tap into the growing demand for functional and healthier beverages. BodyArmor's products are often perceived as having fewer artificial ingredients, which resonates with consumers seeking healthier options.
Coca-Cola first invested in BodyArmor in 2018, which gave BodyArmor access to the Coca-Cola system, which enabled BodyArmor to accelerate its growth to meet consumer demand for premium sports and hydration beverages. BodyArmor is currently the second-best sports drink in the category in measured retail channels.
500
DAILY DOUBLE
List and define the two facets or dimensions of globalization
•The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace
•The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor, energy, land, and capital)
500
What is the name of the sustainability agenda of the United Nations for 2030?
Sustainable Development Goals
500
List and explain two elements of the PESTEL framework that you think are the biggest threats for Tesla
Environmental - batteries / energy generation
Legal - Tesla faces a number of ongoing class action lawsuits related to racial discrimination, monopolizing repairs, privacy violations, and the safety of its driving assistance systems.
Political - The Elon Paradox generates political headwinds for Tesla sales. A November 2022 Morning Consult survey revealed that Tesla's net favorability among Democrats had declined by 20 percentage points. The December Quinnipiac poll showed only 7% of Democrats holding a favorable opinion of Mr. Musk.
Socio-demographic - people's perception of the company associated with batteries and lithium extraction issues
Tech - no destination for batteries - tech is limited; self-driving tech os not refined
Economic - cars too expensive