As noted in the Chapter 7 Strategic Focus, the current Chinese cross-border strategy is
to focus on buying global brands, sales networks, and goodwill in in branded products.
a. True
b. False
Panera Bread has innovated to improve the quality of its distribution system, to improve
the quality of its bread dough, and to introduce new menu items. These are examples of
a. incremental innovation.
b. invention.
c. imitation.
d. the use of social capital.
Although a(n) ______ firm, GE (discussed in the Chapter 6 Opening Case) has done an
exceptional job of _______ its four major strategic business units.
a. related linked; allocating capital across
b. related constrained; restructuring
c. unrelated; sharing activities across
d. unrelated; transferring core competencies across
TheLG Company has units operating in significantly different industries and uses
financial controls to manage its portfolio. LG is most likely using the _______
structure.
a. combination-matrix
b. cooperative form of the multidivisional
c. competitive form of the multidivisional
d. strategic business unit multidivisional
Entrepreneurship is the economic engine driving national economic growth in many
nations.
a. True
b. False
Research suggests that is needed to encourage entrepreneurial behavior.
a. individualism rather than collectivism
b. a balance between individualism and cooperative behavior
c. collectivism rather than individualism
d. limited autonomy and incentives
Xanadu, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same
industry in Ireland. It plans to transfer one of its key managers from its plant in St.
Louis to Ireland. What is the major threat to Xanadu’s plan to transfer competencies
from itself to the Irish firm?
a. The St. Louis manager may quit Xanadu in order to remain in St. Louis.
b. American pharmaceutical manufacturing techniques may not transfer to Ireland.
c. Irish managers will refuse to take direction from a foreign executive.
d. The cost of transferring U.S. managers overseas is usually not cost-effective.
If the businesses in the corporate portfolio are not worth more under the management of
the corporation than they would be under any other ownership, then the corporate-level
strategy has failed.
a. True
b. False
Successful product diversification is expected to increase the variability in the firm’s
profitability since the earnings are generated from several different business units.
a. True
b. False
______innovation is a term used to describe how rapidly and consistently new,
information-intensive technologies replace older ones.
a. Perpetual
b. Disruptive
c. Global
d. Diffusion
Above-average returns are
a. higher profits than the firm earned the previous year.
b. higher profits than the industry averaged over the last 10 years.
c. profits in excess of what an investor expects to earn from a historical pattern of
performance of the firm.
d. returns in excess of what an investor expects to earn from other investments with a
similar level of risk.
Most acquisitions that are designed to achieve greater market power entail buying a
competitor, a supplier, a distributor, or a business in a highly related industry.
a. True
b. False
CaseScenario2:JewellCompany.
Jewell Company (JC) is a $2 billion diversified manufacturer and marketer of simple
household items, cookware, and hardware. In the early 1950s, JC’s business consisted
solely of manufactured curtain rods that were sold through hardware stores and retailers
like Sears. Since the 1960s however, the company has diversified extensively through
acquisition into such businesses as paintbrushes, writing pens, pots and pans, and
hairbrushes. Over 90 percent of its growth can be attributed to these many small
acquisitions, whose performance it improved tremendously through aggressive
restructuring and its corporate emphasis on cost-cutting and cost controls. While JC’s
sixteen different lines of business may appear quite different, they all share the common
characteristics of being staple manufactured items and sold primarily through volume
retail channels like Walmart, Target, and Kmart. Because JC operates each line of
business autonomously (separate manufacturing, R&D, and selling responsibilities for
each line), it is perhaps best described as pursuing a related linked diversification
strategy. The common linkages are both internal (accounting systems, product
merchandising skills, and acquisition competency) and external (distribution channel of
volume retailers). JC is presently contemplating the acquisition of Plastico, a $3 billion
U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and
freezable food containers, and a broad range of other plastic storage containers designed
for home and office use. While Plastico has been highly innovative (over 80 percent of
its growth has come from internal new product development), it has had difficulty
controlling costs and is losing ground against powerful customers like Walmart. JC
believes that the market power it wields with retailers like Walmart will help it turn
Plastico’s prospects around.How might JC’s related diversification strategy result in
economies of scope and market power?
CaseScenario1:FeaNot.
Wim Vijkland was trained as an engineer in the Netherlands and, after college, worked
several years in the Chinese operations of Philips Electronics and then Unilever.
Between employers he returned home for several years to complete an MBA from
Tiburg University in the southern Netherlands. His work gave him hands-on experience
with overseas production, and rich sets of contacts in Mainland China and distribution
channels in Europe and the United States. Wim has noted that many small and
mid-sized European and U.S. manufacturers are interested in and would benefit from
the low-cost Chinese production environment. Contrary to external stereotypes, he also
believes that a Chinese factory can produce products that meet the most demanding
technical and quality specifications met by manufacturers in more developed
economies. At the same time, Vijkland understands that “foreigners” are generally
reluctant to manufacture precision products in China for fear that the underlying
proprietary technologies will be bootlegged and sold to competitors or outright copied.
In an attempt to capitalize on this opportunity, Wim quit his job with Unilever and
entered into a partnership with Sulin “Cathy” Liu, a local Beijing entrepreneur with
whom Wim has worked extensively in the past. Cathy has a Ph.D. in physics from
CalTech in California and an MBA from Hong Kong University of Science and
Technology. They have dubbed their partnership FearNot, and organized it as a limited
liability corporation (LLC). Their plan is to set up duty-free manufacturing zones in
which they develop mini-factories that operate under their ownership and production
guidance, while at the same time creating a firewall between the clients’ proprietary
production processes and the open Chinese market. It is the partners’ hope that this
combination of intellectual property protection and low-cost overseas production will
provide U.S. and European firms an incentive to enlist FearNot’s services.
What resources do Wim and Cathy bring to their venture?
Discuss the organizational structures used to implement the different business-level
strategies.
CaseScenario1:HeartsongLLC.
Heartsong LLC is a designer and manufacturer of replacement heart valves based in
Peoria, Illinois. While a relatively small company in the medical devices field, it has
established a worldwide reputation as the provider of choice high-quality, leading-edge
artificial heart valves. Most of its products are sold to large regional hospital systems
and research hospitals. Specialty heart centers are another emerging, but fast-growing,
market for its valves. While Heartsong would like to grow quickly, its growth is
constrained by the need to finance larger production runs and then carry this additional
inventory. For products like those of Heartsong, vendors typically do not collect
payment until the unit is actually used in surgery. Moreover, heart valves are usually
required on short notice, which means that they must be either onsite, or inventoried at
a nearby location. If nearby, then transport of the unit to a hospital or heart center
occurs within a matter of hours, and sometimes minutes. For this reason, accelerated
growth would require Heartsong to both finance increased production of its heart valves
and carry increased levels of inventory that are in fact sitting on its customers’ shelves.
In fact, inventory-carrying cost is its single largest cost outside of research and
development. While profitable growth is necessary if Heartsong is to continue
extending its competitive advantage through increasingly greater investments in basic
heart valve R&D, it is not clear that the company can internally support all these
increased financial commitments (R&D, manufacturing, and inventory). Doc Watson,
the CEO of Heartsong, is considering an outside contractor, EdFex, to handle the
inventorying, warehousing, and delivery of its valves. EdFex has secure, high-tech
warehouses in most major population centers around the country, and can ensure
delivery of a product to these markets from its warehouses in less than one hour.
What are the implications of an EdFex outsourcing arrangement for the capabilities
underlying Heartsong’s competitive advantage?
CaseScenario1:FeaNot.
Wim Vijkland was trained as an engineer in the Netherlands and, after college, worked
several years in the Chinese operations of Philips Electronics and then Unilever.
Between employers he returned home for several years to complete an MBA from
Tiburg University in the southern Netherlands. His work gave him hands-on experience
with overseas production, and rich sets of contacts in Mainland China and distribution
channels in Europe and the United States. Wim has noted that many small and
mid-sized European and U.S. manufacturers are interested in and would benefit from
the low-cost Chinese production environment. Contrary to external stereotypes, he also
believes that a Chinese factory can produce products that meet the most demanding
technical and quality specifications met by manufacturers in more developed
economies. At the same time, Vijkland understands that “foreigners” are generally
reluctant to manufacture precision products in China for fear that the underlying
proprietary technologies will be bootlegged and sold to competitors or outright copied.
In an attempt to capitalize on this opportunity, Wim quit his job with Unilever and
entered into a partnership with Sulin “Cathy” Liu, a local Beijing entrepreneur with
whom Wim has worked extensively in the past. Cathy has a Ph.D. in physics from
CalTech in California and an MBA from Hong Kong University of Science and
Technology. They have dubbed their partnership FearNot, and organized it as a limited
liability corporation (LLC). Their plan is to set up duty-free manufacturing zones in
which they develop mini-factories that operate under their ownership and production
guidance, while at the same time creating a firewall between the clients’ proprietary
production processes and the open Chinese market. It is the partners’ hope that this
combination of intellectual property protection and low-cost overseas production will
provide U.S. and European firms an incentive to enlist FearNot’s services.
What resources appear to be missing?
Define strategy and business-level strategy. What is the difference between these two
concepts?