MSM 6650 Final
Level-5 leadership pyramid
5. Executive 4. Effective leader 3. Competent manager 2. Contributing team member 1. Highly capable individual
Firm effects explain what percentage of overall performance?
55%
Threat of entry depresses industry profit potential in what two ways?
Firms may have to lower prices to make entry appear less attractive Increased spending among incumbent firms to satisfy existing customers
PESTLE factors are found where?
In the general environment
To assess competitive advantage we compare a firm's performance to what?
A benchmark - performance of other firms or the industry average
Representativeness
A cognitive bias in which conclusions are based on small samples, or even from one memorable case or anecdote
Conglomerate
A company that combines two or more strategic business units under one overarching corporation; follows an unrelated diversification strategy
Multinational Enterprise (MNE)
A company that deploys resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries
Market-and-Technology Framework
A conceptual model to categorize innovations along the market (existing/new) and technology (existing/new) dimensions
Boston Consulting Group (BCG) growth-share matrix
A corporate planning tool in which the corporation is viewed as a portfolio of business units, which are represented graphically along relative market share (horizontal axis) and speed of market growth (vertical axis).
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.
Stakeholder Impact Analysis
A decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders, enabling the firm to achieve competitive advantage while acting as a good corporate citizen
Geoffrey Moore argues that each stage of the industry life cycle is dominated by what?
A different customer group
Behavioral Economics
A field of study that blends research findings from psychology with economics to provide valuable insights showing when and why individuals do not act like rational decision makers, as assumed in neoclassical economics
Resource immobility
A firm has resources that tend to be "sticky" and that do not move easily from firm to firm.
Resource Heterogeneity
A firm is a bundle of resources and capabilities that differ across firms.
Dynamic Capabilities
A firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage
Absorptive Capacity
A firm's ability to understand external technology developments, evaluate them, and integrate them into current products or create new ones.
Innovation Ecosystem
A firm's embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making
Inertia
A firm's resistance to change the status quo, which can set the stage for the firm's subsequent failure
Strategic Position
A firm's strategic profile based on the difference between value creation and cost (V − C).
Managerial Dubris
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.
Five Forces Model
A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy
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-Linked Diversification Strategy
A kind of related diversification strategy in which executives pursue various businesses opportunities that share only a limited number of linkages
Oligopoly
A market structure in which a few large firms dominate a market
Monopolistic Competition
A market structure in which many companies sell products with unique features
Industry Analysis
A method to (1) identify an industry's profit potential and (2) derive implications for a firm's strategic position within an industry
shared value creation framework
A model proposing that managers have a dual focus on shareholder value creation and value creation for society
Resource Based View
A model that sees certain types of resources as key to superior firm performance.
ambidextrous organization
An organization able to balance and harness different activities in trade-off situations
Strategic Initiative
Any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.
Resources
Any asset such as cash, buildings, machinery, or intellectual property that a firm can draw on when executing a strategy
Serendipity
Any random events, pleasant surprises, and accidental happenstances that can have a profound impact on a firm's strategic initiatives
Emergent Strategy
Any unplanned strategic initiative bubbling up from the bottom of the organization
Exploitaion
Applying current knowledge to enhance firm performance in the short term.
Moral Hazard
Arises when people behave recklessly because they know they will be saved if things go wrong
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
"Time compression diseconomies" refers to the concept that ______.
Attempting to get a good outcome in less time tends to be ineffective
Game theory
Attempts to predict strategic behaviors by assuming the moves of competitors can be anticipated
Strategic Initiatives can bubble up deep within a firm through:
Autonomous actions Serendipity Resource Allocation Process (RAP)
The chasm framework operates on what type of curve?
Bell Shaped Cure
Economies of scale
Cost advantage of firms with larger output because they can spread fixed costs over more units, employ technology more efficiently, and demand better terms from suppliers
3 generic business level strategies
Cost leadership Differentiation Value innovation
What are the most important cost drivers?
Cost of input factors Economies of scale Learning curve effects Experience Curve effects
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; also called administrative costs
Total Invested Capital
Debt + Equity
Business strategy formulation focuses on what?
Deciding HOW the firm should compete
Poison Pill
Defensive provisions to deter hostile takeovers by making the target firm less attractive
What is the first step in the strategic management process?
Define an organization's Mission, Vision, and Values
Product-Oriented Vision Statements
Defines a business in terms of a good or service provided Tends to force managers to take a more myopic view of the competitive landscape
What two techniques have proven effective at improving strategic decision making?
Devil's advocacy and dialectic inquiry
Foreign Direct Investment (FDI)
Direct investment in business operations in a foreign country
Activities
Distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services
Level 3: Competent Manager
Does things right by organizing resources necessary to accomplish organizational goals
What two customer groups form the Lion's Share?
Early majority and Late majority
Which of the four corporate social responsibilities is considered first and foremost for business enterprises
Economic
Society requires ________ and _________ responsibility
Economic and legal
The greater the difference between value creation and cost, then the greater the ___________
Economic contribution
Competitive Industry Structure
Elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers
Artifacts
Elements that allow corporate culture to be expressed, such as via the design and layout of physical space, symbols, vocabulary, what stories are told, what events are celebrated and highlighted, and how they are celebrated
Task Environment
Environments that leaders do have some influence over, such as the composition of their strategic groups (rivals) or structure of their industry
Corporate Venture Capital (CVC)
Equity investments by established firms in entrepreneurial ventures
Society expects ________ and _______ responisbilty
Ethical and philanthropical
Organizational Core Values
Ethical standards and norms that govern the behavior of individuals within a firm or organization
Strategic Leadership
Executives' use of power and influence to direct assets in the pursuit of an organization's goals
Intensity of rivalry depends on:
Exit barriers Strategic commitments Industry growth Competitive industry structure
Total return to shareholders is a _________ and _______ performance metric
External & forward looking
CEOs spend most of their day doing what?
Face to face meetings
Companies that define themselves based on product-oriented vision statements are more likely to what?
Fail
ROIC (return on invested capital) is a good proxy for what?
Firm Profitability
Firm Effects
Firm performance attributed to the actions strategic leaders take
Industry Effects
Firm performance attributed to the structure of the industry in which the firm competes
Black Swan Events
Incidents that describe highly improbable but high-impact events
What are the 4 types of innovation?
Incremental Radical Architectural Disruptive
Firm performance is determined primarily by what two factors?
Industry and firm effects
Cognitive limitation is also called what?
Information overload
Upper-echelons theory favors the idea that effective strategic leadership is the result of what?
Innate abilities and learning
What is the commercialization of an invention called?
Innovation
Capabilities are ________ in nature
Intangible
Competitive advantage is more likely to come from what type of resources?
Intangible Resources
Intra-Group rivalry exceeds what?
Inter-group rivalry
Organizations and the natural environment coexist in what kind of relationship?
Interdependent relationship
Industry and firm effects are
Interdependent. Both determine a firm's performance
What is often needed for autonomous actions to be successful?
Internal champions
Strategic control-and-reward systems
Internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees).
Those pursuing corporate entrepreneurship are called:
Intrapreneurs
Who was the pioneer of the VRIO framework?
Jay Barney
Level-5 leadership pyramid was developed by who?
Jim Collins
Example of innovation in process technology:
Lean manufacturing
Which level of strategic leader presents a convincing vision and mission that helps groups improve their performance?
Level 4 - Effective leader
According to the Level-5 pyramid, which level of leadership has the fewest members?
Level 5 - Executives
What are two forms of long term contratcs?
Licensing and franchising
What tends to result from strong competitive rivalry
Limits to industry profit potential
The stronger the five forces the _______ the industry's profit potential
Lower
What are the rewards of superior value creation?
Market share and profitability
winner-take-all system
Markets where the market leader captures almost all of the market share
Strategic Management Process
Method put in place by strategic leaders to formulate and implement a strategy, which can lay the foundation for a sustainable competitive advantage.
Top down strategic planning is derived from what?
Military strategy
The computer hardware industry is an example of what type of competition?
Monopolistic
Energy providers are known as what type of monopoly?
Natural Monopoly
Stakeholder impact analysis focuses on what 3 stakeholder attributes?
Power Legitimacy Urgency
In perfect competition, consumers make buying choices based on what?
Price
What are the 3 most salient value drivers?
Product features Customer Service Complements
During the introductory stage of the industry life cycle, innovators will likely devote most of their time, money, and effort to ______.
R&D
What is often needed to create superior product features?
R&D
A firm generate value when _____ is greater than ______.
ROIC is greater than TIC (total invested capital)
Price stability is very ________
Rare
A firm that successfully executes a strategy benefits society how?
Reinvesting profits and increasing employment Creating value
Which type of diversification is most likely to lead to superior performance?
Related Diversification
Competitive advantage is always ________, not absolute.
Relative
What 2 assumptions are critical to the resource based view?
Resource heterogeneity Resource immobility
To achieve superior performance, companies compete for what?
Resources
Backwards Integration
Retailer performs some distribution and manufacturing activities Ex: Walmart's Equate and Great Value brands
Total Return to Shareholders
Return on risk capital that includes stock price appreciation plus dividends received over a specific period.
Economic Arbitrage
Rich firms buying where costs are low and selling where prices are high
The development of most industries follows a _______ curve
S Shaped
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
Stakeholder strategy argues that focusing only on the needs of ______ places the firm at risk of failure.
Shareholders
Shareholder Capitalism
Shareholders—the providers of the necessary risk capital and the legal owners of public companies—have the most legitimate claim on profits
Principal-Agent Problem
Situation in which an agent performing activities on behalf of a principal pursues his or her own interests
Information Asymmetry
Situation in which one party is more informed than another because of the possession of private information
Diversification Discount
Situation in which the stock price of highly diversified firms is valued at less than the sum of their individual business units.
Diversification Premium
Situation in which the stock price of related-diversification firms is valued at greater than the sum of their individual business units
What are the 4 key building blocks of organizational structure?
Specialization Formalization Centralization Hierarchy
Core Values Statement
Statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, often used as a touchpoint for employees to understand the company culture
However noble the mission statement, to achieve competitive advantage a company must make what?
Strategic commitments
Autonomous Actions
Strategic initiatives undertaken by lower-level employees on their own volition and often in response to unexpected situations
Power defined
Strategic leader's ability to influence other organizational members to do things, including things they wouldn't do otherwise
Nonmarket Strategy
Strategic leaders' activities outside market exchanges where firms sell products or provide services to influence a firm's general environment through, for example, lobbying, public relations, contributions, and litigation in ways that are favorable to the firm
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
What is the premise of Henry Mintzberg's position regarding strategic planning
Strategy can be planned or emerge from the bottom-up.
integration-responsiveness framework
Strategy framework that juxtaposes the pressures an MNE faces for cost reductions and local responsiveness to derive four different strategies to gain and sustain competitive advantage when competing globally
Scenario Planning
Strategy planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses
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
Which three key levers can managers use when shaping their organization into a firm with the highest level of competitive advantage?
Structure Culture Control
In a nutshell, strategy is the art and science of _________
Success and failure
Customer switching costs
Sunk costs incurred by moving from one supplier to another
Apple iPhones are an example of what?
Sustainable competitive advantage
Behavioral economics suggests that decision making is governed by what two systems?
System 1 and System 2
Horizontal axis of M&T framework:
Technologies
Opportunism
The act of seeking self-interest with guile.
Geoffrey Moore calls the fall of a company between life cycle stages what?
The chasm
The difference between two points on a learning curve is what?
The cumulative output
Corporate Strategy
The decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously
Value
The dollar amount (V) a consumer attaches to a good or service
Resource Stocks
The firm's current level of intangible resources
Resource Flows
The firm's level of investments to maintain or build a resource
Dialectic Inquiry
The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action.
Business Level Strategy
The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
Corporate Citizenship
The idea that firms should voluntarily give back to society when they are able to do so
The Value Chain
The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value
Reservation Price
The maximum price a consumer is willing to pay for a product or service based on the total perceived consumer benefits
Parent Subsidiary Relationship
The most-integrated alternative to performing an activity within one's own corporate family. The corporate parent owns the subsidiary and can direct it via command and control.
Intended Strategy
The outcome of a rational and structured top-down strategic plan.
Network effects are:
The positive effect (externality) that one user of a product or service has on the value of that product for other users
Horizontal Integration
The process of merging with competitors, leading to industry consolidation
Strategic Entrepreneurship
The pursuit of innovation using tools and concepts from strategic management Ex: Apple constantly developing new technology
Social Entrepreneurship
The pursuit of social goals while creating a profitable business
Strategic Group
The set of companies that pursue a similar strategy within a specific industry
Early majority enters in what stage?
The shakeout stage
Value Innovation
The simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers
Scope of Competition
The size—narrow or broad—of the market in which a firm chooses to compete
Dominant Strategic Plan
The strategic option that top managers decide most closely matches the current reality and which is then executed
Network Effects
The value of a product or service for an individual user increases with the number of total users
Inflation occurs when ________.
There is too much money in the economy
Porter's 5 Forces
Threat of entry Power of buyers Power of suppliers Threat of substitutes Rivalry among existing firms
Objective of corporate level strategy:
To increase overall corporate value so that it is higher than the sum of the individual business units
Strategic positioning requires what?
Trade offs
Equity investments are also known as _______.
Try before you buy
Specialized Assets
Unique assets with high opportunity cost: They have significantly more value in their intended use than in their next-best use
Planned Emergence
Unplanned, bottom-up strategic initiative that emerges and can be evaluated by top management
In order for a product or service to be considered patentable, it must be ______.
Useful Novel Non Obvious
For a resource to be the basis of a competitive advantage, it must be
VRIO: Valuable Rare costly to Imitate and the firm must be Organized to capture the value of the resources
According to the VRIO framework, in order for a firm to gain a temporary competitive advantage, a resource must be at least both ______.
Valuable and Rare
Corporate strategy determines the boundaries of a firm along what 3 dimensions?
Vertical Integration Diversification Geographic Scope
Industry Value Chains are also called what?
Vertical Value Chains
Values ask:
What commitments do we make and what safeguards do we put in place to act both legally and ethically?
Vision asks:
What do we want to accomplish ultimately?
A well devised strategy is based on what two things?
What to do What not to do
Theory of bounded rationality
When individuals face decisions, their rationality is confined by cognitive limitations and the time available to make a decision. Thus, individuals tend to "satisfice" rather than to optimize.
When does a stakeholder have power over a company?
When it can get the company to do something that it would not otherwise do
Growth Rate
a measure of the change in the amount of goods and services produced by a nation's economy
SBU (strategic business unit)
a standalone division of a larger conglomerate, with its own profit-and-loss responsibility
polycentric innovation strategy
a strategy in which MNEs now draw on multiple, equally important innovation hubs throughout the world characteristic of Globalization 3.0
Illusion of control
a tendency by people to overestimate their ability to control events
Confirmation Bias
a tendency to search for information that confirms one's preconceptions
Agency Theory
a theory that views the firm as a nexus of legal contracts
Stakeholder Strategy
an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage
Strategic Management
an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage
Isolating mechanisms
barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy
Matrix Structure
combines functional and multi divisional structures
Corporate strategy
concerns questions relating to where to compete in terms of industry, markets, and geography
Strategy implementation
concerns the organization, coordination, and integration of how work gets done
When identifying stakeholders, a firm should focus on those stakeholders that _________.
currently have, or could potentially have, a material effect on the firm
External Stakeholders
customers, suppliers, alliance partners, creditors, unions, communities, governments, media
Single Business Firm
derives 95% or more of its revenues from one business
Dominant Business Firm
derives between 70 and 95 percent of its revenues from a single business, but pursues at least one other business activity
Internal stakeholders
employees, stockholders, board members
Incremental Innovation
existing market, existing technology
Architectural Innovation
existing technology, new market
The 4 I's:
idea, invention, innovation, imitation
COGS/Revenue
indicates how efficiently a company can produce a good
SG&A/Revenue
indicates how much of each dollar that the firm earns in sales is invested in sales, general, and administrative (SG&A) expenses. Generally, this ratio is an indicator of the firm's focus on marketing and sales to promote its products and services.
Industry Life Cycle Stages
introduction, growth, shakeout, maturity, decline
Ecological factors
involve broad environmental issues such as the natural environment, global warming, and sustainable economic growth
Explicit Knowledge
knowledge that can be codified; concerns knowing about a process or product
Tacit Knowledge
knowledge that cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task
Global Strategy Formulation
managers examine where and how the firm should compete around the world
Radical Innovation
new market, new technology
Disruptive Innovation
new technology, existing market
upper-echelons theory
organizational outcomes reflect the values of the top management team
sustainable competitive advantage
outperforming competitors or the industry average over a prolonged period of time
Competitive Parity
performance of two or more firms at the same level
Capital Requirements
price of the entry ticket into a new industry
Core competencies of a business are generated by the interaction of ______.
resources and capabilities
System 2 Decision Making
slow, deliberate, analytical, and consciously effortful mode of reasoning
What is the goal of organizational design?
to enable managers to translate their chosen strategy into a realized one
Competitive Disadvantage
underperformance relative to other competitors in the same industry or the industry average
When does a stakeholder have a legitimate claim?
when it is perceived to be legally valid or otherwise appropriate
When does a stakeholder have an urgent claim?
when it requires a company's immediate attention and response
Shortcomings of Top-Down Strategic Planning
1. Information flows one way; top down 2. Formulation of strategy is separate from implementation 3. Simply cannot know the future
3 types of specialized assets
1. Site specificity 2. Physical-asset specificity 3. Human-asset specificity
The five forces model provides what kind of snapshot?
A point in time snapshot of a moving target
Founder Imprinting
A process by which the founder defines and shapes an organization's culture, which can persist for decades after his or her departure
Top Down Strategic Planning
A rational, data-driven strategy process through which top management attempts to program future success.
Leveraged Buyout (LBO)
A single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private
Causal Ambiguity
A situation in which the cause and effect of a phenomenon are not readily apparent
Path Dependence
A situation in which the options one faces in the current situation are limited by decisions made in the past.
Adverse Selection
A situation that occurs when information asymmetry increases the likelihood of selecting inferior alternatives
Sociocultural Factors
A society's culture, norms, and values
transaction cost economics
A strategic framework that helps strategic leaders decide what activities to do in house and what services to obtain from the external environment
Sustainable Strategies
A strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet
Strategic Intent
A stretch goal that pervades the organization with a sense of winning, which it aims to achieve by building the necessary resources and capabilities through continuous learning
Corporate Governance
A system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally
Cognitive Bias
A systematic error in thinking that affects the decisions and judgments that people make
Taper Integration
A way of orchestrating value activities in which a firm is backwardly integrated but also relies on outside-market firms for some of its supplies and/or is forwardly integrated but also relies on outside-market firms for some of its distribution
What are the 3 traditional frameworks used to measure firm performance?
Accounting profitability Shareholder value creation Economic value creation
Hostile Takeover
Acquisition in which the target company does not wish to be acquired
Strategic Commitments
Actions that are costly, long-term oriented, and difficult to reverse
A firm's external environment consists of what?
All factors outside of the firm that can affect its potential to gain and sustain a competitive advantage
Efficient Market Hypothesis
All information regarding a firm's past, current, and future performance is embedded in the market price of a firms stock
Customer-oriented vision statements
Allow companies to adapt to changing environments Focus employees on problem solving for the customer
Platform Business Model
An enterprise that creates value by matching external producers and consumers in a way that creates value for all participants
Effective stakeholder management helps a firm do what?
Build a strong public reputation
A disruptive innovation is more likely to be successful if it ______.
Captures the low end of a market first
Experience Curve
Change in technology while cumulative output remains constant
Triple Bottom Line
Combination of economic, social, and ecological concerns—or profits, people, and planet—that can lead to a sustainable strategy.
Realized Strategy
Combination of intended and emergent strategy
A good strategy is based on what 3 elements?
Competitive advantage Guiding policy Coherent actions
A resource that is valuable but not rare leads to what?
Competitive parity
A horizontal integration strategy leads to industry ____________.
Consolidation
Cognitive Limitations
Constraints such as time or the brain's inability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter.
What are the costs associated with related-diversification strategies?
Coordination and Influence Costs
3 areas of strategy formulation and implementation
Corporate Business Functional
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.
Perfect Competition
Fragmented with many small firms,, a commodity product, ease of entry, and little ability for each firm to raise its prices
Capital is a _______ resource, that can be relatively easy to acquire in the face of attractive returns
Fungible
Oligopolies are analyzed using what theory?
Game theory
Establishing a solid strategic position that competitors cannot easily imitate is the key objective of a company in the ______ stage.
Growth
Employment levels are directly effected by what?
Growth rate
What 5 macroeconomic factors can affect a firm's strategy?
Growth rates Employment levels Interest rates Price stability Currency exchange rates
Early adopters enter in what stage?
Growth stage
Who developed the Theory of Bounded Rationality?
Herbert Simon
Mission asks:
How do we accomplish our goals?
ROR ( Return on Revenue)
How much of the firm's sales is converted into profits
Business strategy
How to compete
Functional Strategy
How to implement a chosen business strategy
5 steps of stakeholder impact analysis
Identify stakeholders Identify stakeholder's interests Identify opportunities and threats Identify social responsibilities Address stakeholder concerns
When is a resource valuable?
If it helps a firm exploit an external opportunity or offset an external threat
Threat of potential entry is reduced when _____________
Network effects are present
The preferred method of competition in an oligopoly is what?
Non Price Competition
Market Capitalization
Number of outstanding shares x share price
Entry Barriers
Obstacles that determine how easily a firm can enter an industry
Strategic positioning
Obtaining a unique position within an industry while providing value to customers and controlling costs
FedEx and UPS are examples of what type of competition?
Oligopoly
Capabilities
Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically
Managers would examine how the firm should be structured in order to implement the desired strategy in what step of the strategy implementation phase?
Organizational design
multidivisional structure (M-form)
Organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility
System 1 Decision Making
Our intuitive decision-making system, which is typically fast, automatic, effortless, implicit, and emotional.
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
National Competitive Advantage
World leadership in specific industries
Positive externality
a benefit that is enjoyed by a third-party as a result of an economic transaction
Escalating Commitment Bias
a cognitive bias that occurs when decision makers, having already committed significant resources to a project, commit even more resources after receiving feedback that the project is failing
Deflation
a decrease in the general level of prices
Organizational Inertia
a firm's resistance to changes in the status quo
Two parts of the strategy process:
strategy formulation and strategy implementation
Strategy formulation
the choice of strategy in terms of where and how to compete
Price Stability
the lack of change in price levels of goods and services
The steeper the learning curve, the ______
the more learning has occurred
Churn rate
the rate at which customers leave a product or service
Strategy defined
the set of goal-directed actions a firm takes to achieve a competitive advantage
Economic value creation is calculated as ______.
the sum of consumer and producer surplus
Reason by analogy
the tendency to use simple analogies to make sense out of complex problems
Cube-Square Rule
the volume of a body such as a pipe or a tank increases disproportionately more than its surface