Capstone BSAD 290

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Valuable Resources

(1) part of VRIO framework. A resource is valuable if it helps firms exploit and external opportunity or offset an external threat

rare resource

(2) part of VRIO framework. A resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition.

cost to imitate resource

(3) part VRIO Framework. A resource is costly to imitate if firm that doesn't possess the resource are unable to develop or buy the resource at a comparable cost

organized to capture value

(4)part of VRIO framework. The characteristic of having in place an effective organizational structure, processes, and systems to fully exploit the competitive potential of the firm's resources, capabilities, and competencies.

producer surplus

(profit) the P-C

Role of Strategic Leaders

-enable org to achieve comp adv -use formal and informal power

Build borrow or buy elements

1) 2) 3) 4)

Three usual frameworks to assess profitability

1) Accounting 2)Shareholder value 3) Economic value

strategic alliance types

1) Contract 2)License 3)Equity Alliance 4) Joint Venture

4 terms used to categorize industry?

1) Monopoly 2)Oligopoly 3)Perfect Competition 4)Monopolistic Competition

build-borrow-or-buy elements

1) Relevant 2) Tradeable 3) Closeness 4) Integration

Strategy Plan

1)Ploy 2)Positon 3)Perspective 4)Purpose 5)Pattern

conglomerate

A company that combines two or more SBU's units under one overarching corporation follows an unrelated diversification strategy

Upper-echelons Theory

A conceptual framework that views org outcomes strategic choice and performance levels as reflections of the values of the members of the top management team

Markets and technology framework

A conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions.

BSG Growth -Share Matrix

A corporate planning tool in which the corporation is viewed as portfolio of business units which are represented graphically along relative market share (horizontal axis) and speed of market growth (vertical axis) SBU are plotted into 4 categories

CAGE distance framework

A decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance.

Stakeholders

A decision tool with helps managers recognize, prioritize and address the need of stakeholders enabling the firm to achieve comp adv while not being a dick

Market Capitalization (Market Value MV)

A firm performance metric that captures the total dollar market value of a company's total outstanding shares at any given point in time. (share price* Outstanding shares)

alliance management capability

A firm's ability to effectively manage three alliance-related tasks concurrently: (1) partner selection and alliance formation, (2) alliance design and governance, and (3) post-formation alliance management.

AFI strategy framework

A model that links three interdependent strategic management tasks—analyze, formulate, and implement—that, together, help managers plan and implement a strategy that can improve performance and result in competitive advantage.

Top-down strategic planning

A rational, data-driven strategy process through which top management attempts to program future success.

VRIO Framework

A theoretical framework that explains and predicts firm-level competitive advantage. Value, Rarity, Imitable, Organizational

Hostile takeover

Acquisition in which the target company does not wish to be acquired

Liabilities of forgiveness

Additional costs of doing business in an unfamiliar cultural and economic environment and of coordinating across geographic distances

Radical Innovation

An innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of the existing knowledge bases with a new stream of knowledge. (New market/new Tech)

reverse innovation

An innovation that was developed for emerging economies before being introduced in developed economies (Frugal Innovation)

Blue Ocean Strategy

Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs. (trader joes

Backward vertical integration

Changes in an industry value cahin that involves moving ownership of activities upstream to the origination (inputs) point of the value chain

Forward vertical integration

Changes in an industry value chain that involves moving ownership of activities closer to the end (customer) point of the value chain

scope of competition

Choices between a cost or value position. Such choices are necessary because higher creation tends to generate higher cost

strategic trade-offs

Choices between a cost or value position. Such choices are necessary because higher value creation tends to generate higher cost.

build-borrow-or-buy framework

Conceptual model that aids firms in deciding whether to pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy).

cross the chasm framework

Conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group

Functional Strategy

Concerns the questions of how to implement a chosen business strategy. Different corporate and business strategies will require diff activities across the various functions

Related Diversification Strategy

Corporate strategy in which a firm derives less than 70 percent of its revenues from a single business activity and obtains revenues from other lines of business that are linked to the primary business activity.

unrelated diversification strategy

Corporate strategy in which a firm derives less than 70 percent of its revenues from a single business and there are few, if any, linkages among its businesses.

economic value created

Difference between value (V) and cost (C), or (V - C).

Sustainable Advantage

ESG triple bottom line(people profit plant)

competitive industry structure

Elements and features common to all industries, including the number and competitors size, pricing power, the type of product or service, and the height of entry barriers.

strategic canvas

Graphical depiction of a company's relative performance vis versa its competitors across the industry's key success factors

Business Strategy

How to compete Three generic business strategies are available cost leadership, differentiation, or value innovation

Mission Statement

How we accomplish these goals day to day

winner-take-all system

Markets where the market leader capture almost all of the market share and is able to extract a significant amount of the value created

equity alliance

Partnership in which at least one partner takes partial ownership in the other corporate venture capital: CVC

SWOT analysis

SW internal OT external

Diversification Discount

Situation in which the stock price of highly diversified firms are valued at less than the sum of their individual business units

Diversification Premium

Situation in which the stock price of related diversification firms are valued at greater than the sum of their individual business units

Learning Races

Situations in which both partners in a strategic alliance are motivated to form an alliance for learning but the rate at which the firms learn may vary

Strategic Business Unit (SBU)

Standalone divisions of a larger conglomerate each with their own profit/loss responsibility

Corporate strategy

The decision that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously

consumer surplus

The difference between the value a consumer attaches to a good or service and what he or she paid for it (P) or (V-P)

Industry Life Cycle

The five diff stages that occur in the evolution of an industry over time intro growth shakeout maturity decline exit harvest maintain consolidate

Entrepreneurship

The process by which people undertake econ risk to innovate to create new products processes and sometimes new organizations

Globalization

The process of closer integration and exchange between different countries and peoples worldwide, made possible by less trade barriers less investment barriers, advances in telecommunications reductions in transportation costs.

Invention

The transformation of an idea into a new product or process or th modification and recombination of existing ones

specialized assets

Unique assets with high opportunity cost: more value in their intended use than in their next best use. They come in three types: -site specificity, -physical asset specificity -human-asset specificity.

Scenario Planning

What-if scenario

National Competitive Advantage

World leader in specific industries

dynamic capabilities

a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage

innovation ecosystem

a firm's embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making

Foreign Direct Investment (FDI

a firm's investment in value chain activities in the form of a controlling ownership in a business in one country by an entity based in another country.

strategic position

a firm's strategic profile based on the difference between value creation and cost (V-C)

Licensing

a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property

managerial hubris

a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary

core rigidity

a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed

core competence-market matrix

a framework to guide corporate diversification strategy by analyzing possible combinations of existing/new core competencies and existing/new markets

Related Constrained diversification strategy

a kind of related diversification strategy in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business

related constrained diversification strategy

a kind of related diversification strategy in which executives pursue only businesses where they can apply the resources and core competencies already available in the primary business

credible commitment

a long term strategic decisions that is both difficult and costly to reverse

Franchising

a long-term contract in which a franchisor grants a franchisee the right to use the franchisor's trademark and business processes to offer goods and services that carry the franchisor's brand name

dynamic capabilities perspective

a model that emphasizes a firm's ability to modify and leverage its resource in a way that enables it to gain and competitive advantage in a constantly changing environment

Resource-based view

a model that sees certain types of resources as key to superior firm performance 2 assumptions: heterogeneity & immobility Example real estate markets (all properties are unique and can't be moved)

Architectural Innovation

a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets

social complexity

a situation in which different social and business systems interact with one another

casual ambiguity

a situation in which the cause and effect of a phenomenon are not readily apparent

joint venture

a standalone organization created and jointly owned by two or more parent companies

strategic alliance

a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services

tacit knowledge

acquired only through active participation in that task

transaction costs

all internal and external costs associated with an economic exchange, whether within a firm or in markets

Platform business

an enterprise that creates value by matching external producers and consumers in a way that creates value for all participants and that depends on the infrastructure or framework or platform that the enterprise manages

Diversification

an increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes

disruptive innovation

an innovation that leverages new technologies to attack existing markets from the bottom up

incremental innovation

an innovation that squarely builds on an established knowledge base and steadily improves an existing product or service

Emergent Strategy

any unplanned strategic initiative bubbling up from the bottom of the organization

resource immobility

assumption in the resource-based view that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm

resource heterogeneity

assumption in the resource-based view that a firm is a bundle of resources and capabilities that differ across firms

globalization hypothesis

assumption that consumer needs and preferences throughout the world are converging and thus becoming increasingly homogenous

death-of-distance hypothesis

assumption that geographic location alone should not lead to firm-level competitive advantage because firms are now, more than ever, able to source inputs globally

taper integration

backwardly integrated and forwardly integrated but also relies on outside market firms for some of its distribution and supplies

Isolating Mechanisms

barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy

Location Economies

benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be

Real Options Perspective

breaks down a larger investment into smaller decisions that are staged sequentially over time

cost leadership strategy

business strategy that creates the same or similar value for customers at a lower cost

First Movers Advantage

competitive benefits that accrue to successful innovator

Co-operation

cooperation by competitors to achieve a strategic objective

product diverification strategy

corporate strategy in which a firm is active in several diff prod market

external transaction costs

costs of searching for a firm or an individual with whom to contract, and then negotiating, monitoring, and enforcing the contract

internal transaction costs

costs pertaining to organizing an economic exchange within a hierarchy (administrative costs)

cultural distance

cultural disparity between an internationally expanding firm's home country and its targeted host country

Activities

distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services

corporate venture capital (CVC)

equity investments by established firms in entrepreneurial ventures equity alliances

related linked diversification strategy

executives pursue various businesses opportunities that share a limited linkages

transaction cost economics Framework

explain and predict the boundaries of the firm, which is central to formulating a corporate strategy that is more likely to lead to competitive advantage

Vision Statement

expresses what the organization should ultimately become, where it wants to go strategically (LONG TERM)

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

primary activities

firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain

support activities

firm activities that add value indirectly, but are necessary to sustain primary activities

Firm Effects

firm performance attributed to the actions managers take

strategic commitments

firms actions that are costly, long-term oriented, and difficult to reverse

differentiation strategy

generic business strategy that seeks to create higher value for customers than the value that competitors create

value curve

horizontal connection of the points of each value on the strategy canvas that helps strategists diagnose and determine courses of action

mobility barriers

industry-specific factors that separate one strategic group from another

explicit knowledge

knowledge that is organized: concerns knowing about process or product

strategic outsourcing

moving one or more internal value chain activities outside the firm's boundaries to other firms in the industry value chain

Product Innovation

new or recombined knowledge embodied in new products

process innovation

new ways to produce existing products or deliver existing services

path dependence

options in the current situation are limited by past decisions

Capabilities

organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically

minimum efficient scale

output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest-cost position that is achievable through economies of scale

Global Strategy

part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world

non-equity alliance

partnership based on contracts between firms

Value Innovation

pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy

Return to shareholders

return on risk capital that includes stock price appreciation plus div received over specific period

focused cost leadership strategy

same as the cost-leadership strategy except with a narrow focus on a niche market

focused differentiation strategy

same as the differentiation strategy except with a narrow focus on a niche market

Economies of Scope

savings that come from producing two (or more) outputs at less cost than producing each output individually, despite using the same resources and technology think admin costs, is efficient?

PESTEL model

set of external factors that might affect a firm. These can be both opportunities and threats. (political, economic, sociocultural, technological, ecological, legal)

principal-agent problem

situation in which an agent performing activities on behalf of a principal pursues his or her own interests

business model

stipulates how the firm conducts its business with its buyers, suppliers and partners in order to make money

autonomous actions

strategic initiatives undertaken by lower-level employees on their own volition and often in response to unexpected situations

relational view of competitive advantage

strategic management framework proposes critical resources and capabilities f in strategic alliances that span firm boundaries

global standardization strategy

strategy attempting to reap significant economies of scale and location economies by pursuing a global division of labor based on wherever best-of-class capabilities reside at the lowest cost

integration-responsiveness framework

strategy framework that juxtaposes the pressures an Multi-National Enterprise faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally

Balanced Scorecard

strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals

planned emergence

strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management

multidomestic strategy

strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies

Transnational strategy

strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable)

International Strategy

strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets

Entrepreneur

the agents that introduce changes into the competitive system

national culture

the collective mental and emotional "programming of the mind" that differentiates human groups

innovation

the commercialization of any new product or process, or the modification and recombination of existing ones

strategic activity system

the conceptualization of a firm as a network of interconnected activities

resource stocks

the firm's current level of intangible resources

resource flows

the firm's level of investments to maintain or build a resource

Vertical Integration

the firm's ownership of its production of needed inputs or of the channels by which it distributes its outputs

business level strategy

the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market

Value Chain

the internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value

Platform Ecosystem

the market environment in which all the players participate relative to the platform

Reservation Price

the maximum price a consumer is willing to pay for a product or service based on the total perceived consumer benefits

risk capital

the money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt

local responsiveness

the need to tailor product and service offerings to fit local consumer preferences and host-country requirements

Intended Strategy

the outcome of a rational and structured top-down strategic plan

Horizontal Integration

the process of merging with competitors leading to industry consolidation

diseconomies of scale

the property whereby long-run average total cost rises as the quantity of output increases

Strategic Group

the set of companies that pursue a similar strategy within a specific industry (ex fast food in the restaurant industry)

network effects

the value of a product or service for an individual user increases with the number of total users (ex: Social media wouldn't have value if not users)

Industry Value Chain

transformation of raw materials into finished goods and services along distinct vertical stages, each of which typically represents a distinct industry in which a number of different firms are competing

core competencies

unique strengths, embedded deep within a firm

Strategic Alliances

voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services

oppportunity cost

what you give up when you make a choice, the BEST alternative given up in making a decision

Vertical Market Failure

when the markets along the industry value chain are too risky, and alternatives too costly in time or money

Corporate Strategy

where to compete concerns questions relating to where to compete in terms of industry, markets, and geography


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