BUS 498 Chapter 1-6

complementor

A company that provides a good or service that leads customers to value your firm's offering more when the two are combined.

Level-5 leadership pyramid

A conceptual framework of leadership progression with five distinct, sequential levels.

upper-echelons theory

A conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team.

intellectual property (IP) protection

A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage.

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 advantagewhile acting as a good corporate citizen.

market capitalization

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

dynamic capabilities

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

business model

A firm's plan that details how it intends to make money.

strategic position

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

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.

SWOT analysis

A framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T) to derive strategic implications

strategic group model

A framework that explains differences in firm performance within the same industry.

corporate social responsibility (CSR)

A framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time.

five forces model

A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy.

industry

A group of incumbent companies that face more or less the same set of suppliers and buyers.

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.

dynamic capabilities perspective

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

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

resource-based view

A model that sees certain types of resources as key to superior firm performance.

industry convergence

A process whereby formerly unrelated industries begin to satisfy the same customer need.

complement

A product, service, or competency that adds value to the original product offering when the two are used in tandem.

top-down strategic planning

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

social complexity

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

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.

strategic business unit (SBU)

A standalone division of a larger conglomerate, with its own profit-and-loss responsibility.

vision

A statement about what an organization ultimately wants to accomplish; it captures the company's aspiration.

sustainable strategy

A strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet.

illusion of control

A tendency by people to overestimate their ability to control events.

VRIO framework

A theoretical framework that explains and predicts firm-level competitive advantage. includes any assets as well as any capabilities and competencies

strategic commitments

Actions to achieve the mission that are costly, long-term oriented, and difficult to reverse.

producer surplus

Another term for profit, the difference between price charged (P ) and the cost to produce (C ), or (P - C); also called profit

strategic initiative

Any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures.

resources

Any assets that a firm can draw on when formulating and implementing 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.

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.

isolating mechanisms

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

strategic trade-offs

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

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.

co-opetition

Cooperation by competitors to achieve a strategic objective

mission

Description of what an organization actually does—the products and services it plans to provide, and the markets in which it will compete.

profit

Difference between price charged (P ) and the cost to produce (C ), or (P - C); also called producer surplus.

consumer surplus

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

economic value created

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

activities

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

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.

strategic leadership

Executives' use of power and influence to direct the activities of others when pursuing an organization's goals.

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.

industry effects

Firm performance attributed to the structure of the industry in which the firm competes.

differentiation strategy

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

black swan events

Incidents that describe highly improbable but high-impact events

shareholders

Individuals or organizations that own one or more shares of stock in a public company.

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.

entry barriers

Obstacles that determine how easily a firm can enter an industry and often significantly predict industry profit potential.

exit barriers

Obstacles that determine how easily a firm can leave an industry.

costly-to-imitate resource

One of the four key criteria in the VRIO framework. A resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost.

rare resource

One of the four key criteria in the 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.

valuable resource

One of the four key criteria in the VRIO framework. A resource is valuable if it helps a firm exploit an external opportunity or offset an external threat.

organized to capture value

One of the four key criteria in the 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.

capabilities

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

stakeholders

Organizations, groups, and individuals that can affect or are affected by a firm's actions.

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.

intangible resources

Resources that do not have physical attributes and thus are invisible.

tangible resources

Resources that have physical attributes and thus are visible.

total return to shareholders

Return on risk capital that includes stock price appreciation plus dividends received over a specific period.

core values statement

Statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, for both internal conduct and external interactions; it often includes explicit ethical considerations.

autonomous actions

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

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

scenario planning

Strategy-planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses

competitive advantage.

Superior performance relative to other competitors in the same industry or the industry average.

value

The dollar amount (V ) a consumer attaches to a good or service; the consumer's maximum willingness to pay; also called reservation price.

resource stocks

The firm's current level of intangible resources.

resource flows

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

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.

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.

intended strategy

The outcome of a rational and structured top-down strategic plan.

strategy formulation

The part of the strategic management process that concerns the choice of strategy in terms of where and how to compete.

strategy implementation

The part of the strategic management process that concerns the organization, coordination, and integration of how work gets done, or strategy execution.

threat of entry

The risk that potential competitors will enter an industry.

strategic group

The set of companies that pursue a similar strategy within a specific industry.

Strategy

The set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

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.

opportunity costs

The value of the best forgone alternative use of the resources employed.

resource-allocation process (RAP)

The way a firm allocates its resources based on a predetermined policies, which can be critical in shaping its realized strategy.

competitive disadvantage

Underperformance relative to other competitors in the same industry or the industry average.

core competencies

Unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage

Stakeholder strategy

an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage.

PESTEL model

framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These factors can create both opportunities and threats for the firm.

Organizational core values

the ethical standards and norms that govern the behavior of individuals within a firm or organization.

strategic management

the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.