Strategic Management (CH 10-13)

Operating Budget

A blueprint that states how mangers intend to use organizational resources to most efficiently achieve organizationl goals

Diversified Company

A company that makes and sells products in two or more different or distinct industries

Multidivisional Structure

A complex organizational design that allows a company to grow and diversify while also reducing coordination and control problems because it uses self-contained divisions and has a separate corporate headquarters staff

Unrelated Diversification

A corporate-level strategy based on a multibusiness model that uses general organizational competencies to increase the performance of all the company's business units

Related Diversification

A corporate-level strategy that is based on the goal of establishing a business unit in a new industry that is related to a company's existing business units by some form of commonality or linkage between their value-chain functions

Internal Capital Market

A corportate-level strategy whereby the firm's headquarters assesses the performance of businss units and allocates money across them.

Adaptive Culture

A culture that is innovative and encourages and rewards middle and lower level managers for taking the initiative to achieve organizational goals

International Division

A division created by companies that expand abroad and group all of their international activites into one division

Anticompetitive Behavior

A range of actions aimed at harming actual or potential competitors, most often by using monopoly power, and thereby enhancing the long-run prospects of the firm

New-Venture Division

A separate and independent division established to give its managers the autonomy to develop a new product

Information Asymmetry

A situation where an agent has more information about resources he or she is managing than the principal has

Greenmail

A source of gaining wealth by corporate raiders who benefit by pushing companies to either change their corporate strategy to one that will benefit stockholders, or by charging a premium for these stocks when the company wants to buy them back

Worldwide Product Divisional Structure

A structure in which each division is a self-contained, largely autonomous entity with full reponsibility for its own value creation activities with headquarters retaining responsibility for the overall strategic development and financial control of the firm

Global Matrix Structure

A structure in which horizontal differentiation proceeds along two dimensions; product division and geographic area

Worldwide Area Structure

A structure in which the world is divided into geographic areas

Management By Objectives

A system in which employees are encouraged to help set their own goals so that managers manage by exception, intervening only when something is not going right

On-The-Job Consumption

A term used by economists to describe the behavior of senior management's use of company funds to acquire perks that will enhance their status, instead of investing it to increase stockholder returns

Product-Team Structure

A way of grouping employees by product or project line but employees focus on the development of only one particular type of product

Matrix Structure

A way of grouping employees in two ways simulataneously, by function and by product or project, to maximize the rate at which different kinds of products can be developed

Geographic Structure

A way of grouping employees into different geographic regions to best satisfy the needs of customers within different regions of a state or country

Market Structure

A way of grouping employees into separate customer groups so that each group can focus on satisfying the needs of a particular customer group in the most effecive way

Product Structure

A way of grouping employees into separate product groups or units so that each product group can focus on the best ways to increase the effectiveness of the product

Business Ethics

Accepted principles of right or wrong governing the conduct of businesspeople

Ethics

Accepted principles of right or wrong that govern the conduct of a person, the members of a profession or the actions of an organization

External Stakeholders

All other individuals and groups that have some claim on the company

Self-Contained Division

An independent business unit or division that contains all the value-chain functions it needs to pursue its business model successfully

Substandard Working Conditions

Arise when managers underinvest in working conditions, or pay employees below-market rates, in order to reduce their production costs

Corruption

Can arise in a busines context when managers pay bribes to gain access to lucrative business contracts

Risk Capital

Capital that cannot be recovered if a company fails and goes bankrupt

General Organizational Competencies

Competencies that result from the skills of a company's top managers that help every business unit within a company perform at a higher level than it could if it operated as a separate or independent company

Behavior Control

Control achieved through the establishment of a comprehensive system of rules and procedures that specify the appropriate behavior of divisions, functions and people

Outside Directors

Directors who are not full-time employees of the company, needed to provide objectively to the monitoring and evaluation of processes

Two-Boss Employees

Employees who report both to a project boss and a functional boss

Code of Ethics

Formal statement of the ethical priorities to which a business adheres

Team

Formation of a group that represents each division or department facing a common problem, with the goal of finding a solution to the problem

Personal Ethics

Generally accepted principles of right and wrong governing the conduct of individuals

Functional Structure

Grouping of employees on the basis of their common expertise or because they use the same resources

Stakeholders

Individuals or groups with an interest, claim or stake in the company; in what it does and in how well it performs

Self-Dealing

Managers using company funds for their own personal consumption, as done by Enron, for example, in previous years

Intrapreneurs

Managers who pioneer and lead new-venture projects or divisions and act as inside or internal entrepreneurs

Integrating Roles

Managers who work in full-time positions established specifically to improve communication between divisions

Environmental Degradation

Occurs when a company's actions directly or indirectly result in pollution of other forms of environmental harm

Control System

Provides managers with incentives for employees as well as feedback on how the company performs

Inside Directors

Senior employees of the company, such as the CEO

Ethical Dilemmas

Situations where there is no agreemet over exactly what the accepted principles of right and wrong are or where none of the available alternatives seems ethically acceptable

Commonality

Some kind of skill or competency that when shared by two or more business units allows thems to operate more effectively and create more value for customers

Internal Stakeholders

Stockholders and employees, including executive officers, other managers and board members

Organizational Design Skills

The ability of the managers of a company to create a structure, culture, and control systems that motivate and coordinate employees to perform at a high level

Hierarchy of Authority

The clear and unambiguous chain of command that defines each manager's relative authority from the CEO down through the top, middle, to first-line managers

Output Control

The control system managers use to establish appropriate performance goals for each division, department, and employee and then measure actual performance relative to these goals

Bureaucratic Costs

The costs associated with solving the transaction difficulties between business units and corporate headquarters as a company obtains the benefits from transferring, sharing and leveraging competencies

Standardization

The degree to which a company specifies how decisions are to be made so that employees' behavior becomes measurable and predictable

Information Distortion

The manipulation of facts supplied to corporate managers to hide declining divisional performance

Organizational Structure

The means through which a company assigns employees to specific tasks and roles and specifies how these tasks and roles are to be linked together to increase efficiency, quality, innovation and responsiveness to customers

Strategic Control Systems

The mechanism that allows managers to monitor and evaluate whether their business model is working as intended and how it could improved

Span of Control

The number of subordinates reporting directly to a particular manager

Principle of the Minimum Chain of Command

The principle that a company should design its hierarchy with the fewest levels of authority necessary to use organizational resources effectively

Transfer Pricing

The problem of establishing the fair or "competitive" price of a resource or skill developed in one division that is to be transferred and sold to another divsion

Organizational Design

The process of deciding how a company should create, use, and combine organizational structure, control systems, and culture to pursue a business model successfully

Reengineering

The process of redesigning business processes to achieve dramatic improvements in performance, such as cost, quality, service and speed

Restructuring

The process of reorganizing and divesting business units and exiting industries to refocus upon a company's core business and rebuild its distinctive competencies

Transferring Competencies

The process of taking a distinctive competency developed by a business unit in one industry and implanting it in a business unit operating in another industry

Leveraging Competencies

The process of taking a distinctive competency developed by a business unit in one industry and using it to create a new business unit in a different industry

Internal New Venturing

The process of transferring resources to and creating a new business unit or division in a new industry to innovate new kinds of products

Diversification

The proess of entering new industries, distinct from a company's core or original industry, to make new kinds of products for customers in new markets

Stock Options

The right to purchase company stock at a predetermined price at some point in the future usually within 10 years of the grant date

Takeover Constraint

The risk of being acquired by another company

Organizational Culture

The specific collection of values, norms, beliefs and attitudes that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization

Economies of Scope

The synergies that arise when one or more of a diversified company's business units are able to lower costs or increase differentiation because they can effectively pool, share and utilize expensive resources or capabilities

Corporate Headquarters Staff

The team of top executives, as well as their support staff, who are responsible for overseeing a company's long-term multibusiness model and providing guidance to increase the value created by the company's self-contained divisions

Organizational Slack

The unproductive use of functional resources by divisional managers that can go undetected unless corporate managers monitor their activities

Personal Control

The way one manager shapes and influences the behavior of another in a face-to-face interaction in the pursuit of a company's goals

Opportunistic Exploitation

Unethical behavior sometimes used by managers to unilaterally rewrite the terms of contract with suppliers, buyers, or complement providers in a way that is more favorable to the firm

Integrating Mechanisms

Ways to increase communication and coordination among functions and divisions

Profit Center

When each self-contained division is treated as a separate financial unit and financial controls are used to establish performance goals for each division and measure profitability

Turnaround Strategy

When managers of a diversified company identify inefficient and poorly managed companies in other industries and then acquire and restructure them to improve their performance and thus the profitability of the total corporation

Information Manipulation

When managers use their control over corporate data to distort or hide information in order to enhance their own financial situation or the competitive position of the firm