BUS 498 ch. 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, who interpret situations through the lens of their unique perspectives.

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.

Market Capitalization

A firm performance metric that captures the total dollar market value of all of a company's outstanding shares at any given point in time (Market cap = Number of outstanding shares x share price).

Dynamic Capabilities

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

Strategic Position

A firm's strategic profile based on value creation and cost. The goal is to generate as large a gap as possible between the value the firm's product or service creates and the cost required to produce it (V-C).

Five Force Model

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

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).

PESTEL Model

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

Strategic Group Model

A framework that explains differences in a firm performance within the same industry by clustering different firms into groups based on a few key strategic dimensions.

Corporate Social Responsibility

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.

Industry

A group of (incumbent) companies that face more or less the same set of suppliers and buyers; these firms tend to offer similar products or services to meet specific customer needs.

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 advantage.

Resource-based View

A model that sees certain types of resources as key to superior firm performance. If a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain a competitive advantage.

Crowdsourcing

A process in which a group of people voluntarily performs tasks that were traditionally completed by a firm's employees.

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, top-down process through which management can program future success; typically concentrates strategic intelligence and decision-making responsibilities in the office of the CEO.

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.

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.

VRIO Framework

A theoretical framework that explains and predicts firm-level competitive advantage. A firm can gain a competitive advantage if it has resources that are valuable, rare, and costly to imitate. The firm also must organize to capture the value of the resources.

Strategic Commitments

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

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

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

Emergent Strategy

Any unplanned strategic initiative undertaken by mid-level employees of their own volition.

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.

Monopolistic Competition

Closer to Perfect Competition. Many sellers and buyers. Some obstacles to entry.

Triple Bottom Line

Combination of economic, social, and ecological concerns that can lead to a sustainable strategy.

Realized Strategy

Combination of intended and emergent strategy.

Co-opetition

Cooperation by competitors to achieve strategic objective.

Economies of Scale

Decreases in cost per unit as output increases.

Product-Oriented Mission

Defines the firm in terms of products or services

Customer-Oriented Mission

Defines the firm in terms of solutions for customers, enhanced strategic flexibility.

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 (or producer surplus)

Difference between price charged (P) and the cost to produce (C), or (P-C).

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); sometimes also called economic contribution.

Activities

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

Competitive Industry Structure

Elements and features common to all industries, including the number and size of competitors in an industry, whether the firms possess some degree of pricing power, and the type of product or service the industry offers.

Organizational Values

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

Oligopoly

Few sellers and many buyers. Closer to Monopoly.

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 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, by delivering products or services with unique features while keeping the firm's cost structure at the same or similar levels.

Cost-leadership Strategy

Generic business strategy that seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers.

Values

How a firm will accomplish its goals

Industry Attractiveness

If profit prospects are above average it is attractive and if they are below average it is unattractive.

Black Swan Events

Incidents that describe highly improbable but high-impact events.

Diseconomies of Scale

Increases in cost per unit when output increases.

Shareholders

Individuals or organizations that own one or more shares of stock in a public company. They are the legal owners of public companies.

Mobility Barriers

Industry-specific factors that separate one strategic group from another.

Perfect Competition

Many buyers and sellers. Identical products. Perfect Information. Free entry and exit.

Strategic Management Process

Method put in place by strategic leaders to conceive 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. Entry barriers are often one of the most significant predictors of 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 increase the perceived value of its product or service, either by adding attractive features or lowering costs.

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.

Monopoly

One seller and many buyers. Unique Product. Restrictions on Entry.

Capabilities

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

Business Model

Organizational plan that details the firm's competitive tactics and initiatives; in short, how the firm intends to make money.

Stakeholder

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.

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 managers envision different what-if scenarios to anticipate plausible futures.

Competitive Advantage

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

Strategic Leadership

The behaviors and styles of executives that influence others to achieve the organization's vision and mission.

Value

The dollar amount (V) a consumer would attach to a good or service; the consumer's maximum willingness to pay; sometimes 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. Primary activities directly add value; support activities add value indirectly.

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.

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.

Opportunity Costs

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

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 allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.