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Global Marketing
Chapter 8
33
Marketing
Undergraduate 4
11/20/2013

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Term
Business Strategy
Definition
Strategy for competing against rivals within a particular industry or industry segment
Term
Corporate Strategy
Definition
Strategy for guiding a firm's entry and exit from different businesses, for deterring how a parent company adds value to and manages its portfolio of business, and for creating value through diversification
Term
Concentration Strategies
Definition
Actions that firms use to try to compete successfully only within a single industry

Examples) McDonald's, Starbucks, Subway
Term
3 Types of Concentration Strategies
Definition
Market Penetration
Market Development
Product Development
Term
Market Penetration
Definition
an attempt to gain additional share of existing markets using existing products (advertising campaigns)
Term
Market Development
Definition
Trying to sell existing products within new markets (Starbucks coffee in grocery stores)
Term
Product Development
Definition
Creating new products to serve existing markets
(McDonald's expanding healthy menu)
Term
Horizontal Integration
Definition
Pursuing a concentration strategy by acquiring or merging with a rival
Term
Acquisition
Definition
when one company purchases another company
Term
Merger
Definition
the joining of two similarly sized companies into one company
Term
Why is horizontal integration often a good idea?
Definition
Economies of scale
reduce rivalry
access to distribution channels
Term
What could go wrong with horizontal integration?
Definition
60% of M&A are bad for shareholder wealth
30-45% are undone
Culture clash
Term
Vertical Integration
Definition
When a firm gets involved in new portions of the value chain
Term
What would Porter say about vertical integration?
Definition
Reduce buyer or supplier power
Increase profit potential in an industry
Term
What risks do you run not being vertical integrated?
Definition
Loss of price control
No control over lead time
Term
What risks do you run being vertically integrated?
Definition
You have to compete in a new industry
could be more expensive
You might not be that good in the industry
Term
Backward Vertical Integration
Definition
A strategy that involves a buyer entering the industry that it purchases goods or services from
(Ford creating subsidiaries that provide key inputs to vehicles such as rubber, glass, and metal)
Term
Forward Vertical Integration
Definition
A strategy that involves a supplier entering the industry that it supplies inputs to
(Disney operating retail stores that sell merchandise based on disney's characters and movies)
Term
Diversification Strategy
Definition
involve a firm entering entirely new industries
Term
Why Diversify?
Definition
Synergy
Term
Synergy
Definition
Condition under which the combined benefits of activities in two or more arenas (Industries) are greater than the simple sum of those benefits
Term
Three Tests for Diversification
Definition
How attractive is the industry the firm is considering entering?
How much will it cost to enter the industry?
Will the new unit and the firm be better off?
Term
Related Diversification
Definition
When a firm moves into a new industry that has important similarities with the firm's existing industry or industries
(Disney purchased ABC)
Term
Purpose of Related Diversification
Definition
To develop and exploit core competencies (Skill set that is difficult for competitors to imitate and can be leveraged in different business)
Term
Unrelated Diversification
Definition
When a firm enters an industry that lacks any important similarities with the firm's existing industry or industries
Term
Portfolio Planning Purpose
Definition
To guide resource allocation across business unit; to help make decisions

Key assumption: resources are constrained (you only have so much $ to work with)
Term
Portfolio Planning is based on
Definition
Market share
Lifecycle
Term
The Boston Consulting Group (BCG) matrix
Definition
Best-known approach to portfolio planning

Using the matrix requires a firm's businesses to be categorized as high or low along two dimensions
1. It's share of the market
2.The growth rate of its industry
Term
Retrenchment
Definition
reducing the size of part of a firm's operations, ofter through laying off employees
Term
Divestment
Definition
Selling off part of a firm's operations
Term
Spin Off
Definition
creating a new company whose stock is owned by investors out of a piece of a bigger company
Term
Diversification discount
Definition
the tendency of investors to undervalue the shares of a diversified firm
Term
Liquidation
Definition
shutting down portions of a firm's operations, often at a tremendous financial loss
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