Capstone BSAD 290
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