Strategic Management Terms PDF

CHAPTER 4: directly affect the corporation and, in turn, ENVIRONMENTAL UNCERTAINTY are affected by it. -​ It is the degree of complexity plus -​ These are governments, local the degree of change that exists in commun...

CHAPTER 4: directly affect the corporation and, in turn, ENVIRONMENTAL UNCERTAINTY are affected by it. -​ It is the degree of complexity plus -​ These are governments, local the degree of change that exists in communities, suppliers, an organization’s external competitors, customers, creditors, environment. employees/labor unions, ENVIRONMENTAL SCANNING special-interest groups, and trade -​ Is monitoring, evaluating and associations. dissemination of information from -​ A corporation’s task environment is external and internal environments typically the industry within which to key people within the the firm operates. corporation. INDUSTRY ANALYSIS -​ A corporation uses this tool to -​ refers to an in-depth examination avoid strategic surprise and to of key factors within a corporation’s ensure its long-term health. task environment. NATURAL ENVIRONMENT -​ The natural, societal, and task -​ includes physical resources, environment must be monitored to wildlife, and climate that are an detect the strategic factors that are inherent part of existence on Earth. likely in the future to have a strong These factors form an ecological impact on corporate success or system of interrelated life. failure. SOCIETAL ENVIRONMENT STEEP ANALYSIS -​ is mankind’s social system that large corporations categorize the societal includes general forces that do not environment in any one geographic region directly touch on the short-run into four areas and focus their scanning in activities of the organization that each area on trends that have can, and often do, influence its corporatewide relevance. By including long-run decisions. These factors trends from the natural environment, this affect multiple industries and are scanning can be called STEEP Analysis. as follows: -​ the scanning of Sociocultural, ❖​ Economic Forces- that Technological, Economic, regulate the exchange of Ecological, and Political-legal materials, money, energy, environmental forces. and information. -​ It may be also called PESTEL ❖​ Technological Forces- that Analysis- Political, Economic, generate problem-solving Sociocultural, Technological, inventions. Ecological, and Legal Forces. ❖​ Political–Legal Forces- that MULTINATIONAL CORPORATION allocate power and provide (MNC) constraining and protecting industry in which companies tailor their laws and regulations. products to the specific needs of ❖​ Sociocultural Forces- that consumers in a particular country. regulate the values, mores, -​ a company with significant assets and customs of society and activities in multiple countries, TASK ENVIRONMENT conducts its marketing, financial, The part of the business environment that manufacturing, and other includes the elements or groups that functional activities. ISSUES PRIORITY MATRIX  -​ A chart that ranks the probability of FRAGMENTED INDUSTRY occurrence versus the probable -​ An industry in which no firm has impact on the corporation of large market share and each firm developments in the external serves only a small piece of the environment. total market. INDUSTRY CONSOLIDATED INDUSTRY is a group of firms that produces a similar An industry in which a few large product or service, such as soft drinks or companies dominate. financial services. -​ dominated by a few large firms, -​ An examination of the important each of which struggles to stakeholder groups, such as differentiate its products from those suppliers and customers, in a of the competition particular corporation’s task GLOBAL INDUSTRY environment is a part of industry which a company manufactures and sells analysis. the same products, with only minor NEW ENTRANTS adjustments for individual countries -​ typically bring to it new capacity, a around the world. desire to gain market share, and -​ operate worldwide, with MNCs substantial resources. They are, making only small adjustments for therefore, threats to an established country-specific circumstances. corporation. The threat of entry REGIONAL INDUSTRIES depends on the presence of entry An industry in which multinational barriers and the reaction that can corporations primarily coordinate their be expected from existing activities within specific geographic areas competitors. of the world. ENTRY BARRIER -​ in which MNCs primarily -​ is an obstruction that makes it coordinate their activities within difficult for a company to enter an regions. industry. STRATEGIC GROUP ​ Economies of scale -​ is a set of business units or firms ​ Product differentiation that “pursue similar strategies with ​ Capital Requirements similar resources.” ​ Switching Costs STRATEGIC TYPE ​ Access to distribution -​ a category of firms based on a channels common strategic orientation and a ​ Cost disadvantages combination of structure, culture, independent of size and processes consistent with that ​ Government Policy strategy. SUBSTITUTE PRODUCT ➔​ DEFENDERS -​ is a product that appears to be -​ are companies with a different but can satisfy the same limited product line that need as another product focus on improving the COMPLEMENTOR efficiency of their existing -​ A company or an industry whose operations. This cost product(s) works well with another orientation makes them industry’s or firm’s product and unlikely to innovate in new without which that product would areas. lose much of its value. ➔​ PROSPECTORS  -​ are companies with fairly COMPETITIVE INTELLIGENCE broad product lines that is a formal program of gathering focus on product innovation information on a company’s competitors. and market opportunities. -​ Often called business intelligence, This sales orientation it is one of the fastest growing makes them somewhat fields within strategic management. inefficient. They tend to COMPETITORS emphasize creativity over The companies that offer the same efficiency. products or services as the subject ➔​ ANALYZERS company. -​ are corporations that -​ organizations that offer same, operate in at least two similar, or substitutable products or different product-market services in the business area in areas, one stable and one which a particular company variable. In the stable operates. areas, efficiency is EFAS( External Factors Analysis emphasized. In the variable Summary) TABLE areas, innovation is A table that organizes external factors into emphasized. opportunities and threats and how well ➔​ REACTORS management is responding to these -​ are corporations that lack a specific factors. consistent ENTRY BARRIER strategy-structure-culture -​ is an obstruction that makes it relationship. Their (often difficult for a company to enter an ineffective) responses to industry. environmental pressures EXIT BARRIER tend to be piecemeal -​ keep a company from leaving an strategic changes. industry HYPERCOMPETITION FORECASTING TECHNIQUES -​ An industry situation in which the ​ EXTRAPOLATION- the extension frequency, boldness, and of present trends into the future. aggressiveness of dynamic ​ BRAINSTORMING- a non movement by the players quantitative approach that requires accelerates to create a condition of simply the presence of the people constant disequilibrium and with some knowledge of the change. situation to be predicated. KEY SUCCESS FACTOR ​ EXPERT OPINION- non -​ are variables that can significantly quantitative technique in which affect the overall competitive experts in a particular area attempt positions of companies within any to forecast likely developments. particular industry. They typically ​ DELPHI TECHNIQUE- which vary from industry to industry and separated experts independently are crucial to determining a assess the likelihoods of specified company’s ability to succeed within events. that industry. ​ STATISTICAL MODELING- INDUSTRY MATRIX quantitative technique that -​ summarizes the key success attempts to discover casual or at factors within a particular industry.  least explanatory factors that link two or more time series together. ​ PREDICTION MARKETS- a recent forecasting technique enabled by easy access to the internet. ​ SCENARIO WRITING- the most widely used forecasting technique after trend extrapolation. INDUSTRY SCENARIO -​ is a forecasted description of a particular industry’s likely future. -​ Such a scenario is developed by analyzing the probable impact of future societal forces on key MULTI DOMESTIC INDUSTRY -​ are specific to each country or group of countries. -​ This type of international industry is a collection of essentially domestic industries, such as retailing and insurance. CHAPTER 5: 1. Value: Does it provide customer value ORGANIZATIONAL ANALYSIS and competitive advantage? -​ Internal scanning concerned with 2. Rareness: Do no other competitors identifying an organization’s possess it? strengths and weaknesses. 3. Imitability: Is it costly for others to RESOURCES imitate? -​ an organization’s assets and are 4. Organization: Is the firm organized to thus the basic building blocks of exploit the resource? the organization. -​ They include tangible assets, such DURABILITY as its plant, equipment, finances, -​ is the rate at which a firm’s and location, human assets, in underlying resources, capabilities, terms of the number of employees, or core competencies depreciate their skills, and motivation, and or become obsolete. intangible assets such as its IMITABILITY technology (patents and -​ is the rate at which a firm’s copyrights), culture, and underlying resources, capabilities, reputation. or core competencies can be CAPABILITIES duplicated by others. -​ refer to a corporation’s ability to ❖​ TRANSFERABILITY - is the ability exploit its resources. They consist of competitors to gather the of business processes and resources and capabilities routines that manage the necessary to support a competitive interaction among resources to challenge. turn inputs into outputs. ❖​ TRANSPARENCY - is the speed COMPETENCY with which other firms can -​ a cross-functional integration and understand the relationship of coordination of capabilities. resources and capabilities CORE COMPETENCIES supporting a successful firm’s -​ a collection of competencies that strategy. crosses divisional boundaries, is ❖​ REPLICABILITY - is the ability of widespread within the corporation, competitors to use duplicated and is something that the resources and capabilities to corporation can do exceedingly imitate the other firm’s success. well. EXPLICIT KNOWLEDGE -​ DISTINCTIVE -​ knowledge that can be easily COMPETENCIES articulated and communicated. -​ A firm’s This is the type of knowledge that competencies that competitive intelligence activities can are superior to quickly identify and communicate. those of TACIT KNOWLEDGE competitors. -​ knowledge that is not easily VRIO FRAMEWORK communicated because it is deeply -​ Barney’s proposed analysis to rooted in employee experience or evaluate a firm’s key resources in in a corporation’s culture. terms of value, rareness, imitability, Tacit knowledge is more valuable and and organization. more likely to lead to a sustainable competitive advantage than is explicit knowledge because it is much harder for enters the market with a low-priced, competitors to imitate low-margin product that appeals to the CONTINUUM OF SUSTAINABILITY mass market. -​ A representation that indicates how ​ BLOCKBUSTER MODEL durable and imitable an The focus is on high investment in a few organization’s resources and products with high potential capabilities are. payoffs—especially if they can be BUSINESS MODEL protected by patents. -​ a company’s method for making ​ PROFIT MULTIPLIER MODEL money in the current business The idea of this model is to develop a environment. It includes the key concept that may or may not make money structural and operational on its own but, through synergy, can spin characteristics of a firm—how it off many profitable products. earns revenue and makes a profit. ​ ENTREPRENEURIAL MODEL ​ CUSTOMER SOLUTIONS MODEL in this model, a company offers IBM uses this model to make money not specialized products/services to market by selling IBM products, but by selling its niches that are too small to be worthwhile expertise to improve its customers’ to large competitors but have the potential operations. This is a consulting model. to grow quickly. ​ PROFIT PYRAMID MODEL ​ DE FACTO INDUSTRY The key is to get customers to buy in at STANDARD MODEL the low-priced, low-margin entry point and In this model, a company offers products move them up to high-priced, high-margin free or at a very low price in order to products where the company makes its saturate the market and become the money. industry standard. Once users are locked ​ MULTI-COMPONENT in, the company offers higher-margin SYSTEM/INSTALLED BASE products using this standard. MODEL The product is thus a system, not just one VALUE CHAIN product, with one component providing -​ a linked set of value-creating most of the profits. activities that begin with basic raw ​ ADVERTISING MODEL materials coming from suppliers, Similar to the multi-component moving on to a series of system/installed base model, this model value-added activities involved in offers its basic product free in order to producing and marketing a product make money on advertising. or service, and ending with ​ SWITCHBOARD MODEL distributors getting the final goods in this model a firm acts as an into the hands of the ultimate intermediary to connect multiple sellers to consumer multiple buyers. -​ RAW MATERIALS - PRIMARY ​ TIME MODEL MANUFACTURING - Product R&D and speed are the keys to FABRICATION - DISTRIBUTOR - success in the time model. Being the first RETAILER to market with a new innovation allows a ORGANIZATIONAL STRUCTURES pioneer to earn high margins. The formal setup of a business ​ EFFICIENCY MODEL corporation’s value chain components in in this model a company waits until a terms of work flow, communication product becomes standardized and then channels, and hierarchy.  ➔​ SIMPLE STRUCTURE culture content associated structure that has no functional or product with the unit. categories and is appropriate for a small, ​ CULTURAL entrepreneur-dominated company with INTEGRATION - the extent one or two product lines that operates in a to which units throughout reasonably small, easily identifiable an organization share a market niche. common culture. ➔​ FUNCTIONAL STRUCTURE MARKETING MIX structure that is appropriate for a -​ refers to the particular combination medium-sized firm with several product of key variables under a lines in one industry. corporation’s control that can be ➔​ DIVISIONAL STRUCTURE used to affect demand and to gain Divisional structure is appropriate for a competitive advantage. large corporation with many product lines MARKET SEGMENTATION in several related industries. -​ The division of a market into ➔​ STRATEGIC BUSINESS UNITS segments to identify available (SBUs) niches. are a modification of the divisional MARKET POSITIONING structure. -​ Refers to the selection of specific Strategic business units are divisions or areas for marketing concentration groups of divisions composed of and can be expressed in terms of independent product market segments market, product, and geographical that are given primary responsibility and locations. authority for the management of their own PRODUCT LIFE CYCLE functional areas -​ A graph showing time plotted -​ An SBU may be of any size or against sales of a product as it level, but it must have (1) a unique moves from introduction through mission, (2) identifiable growth and maturity to decline. competitors, (3) an external market -​ INTRODUCTION, GROWTH, focus, and (4) control of its MATURITY, DECLINE business functions BRAND ➔​ CONGLOMERATE STRUCTURE -​ a name given to a company’s Conglomerate structure is appropriate for product which identifies that item in a large corporation with many product the mind of the consumer. lines in several unrelated industries CORPORATE REPUTATION -​ A widely held perception of a CORPORATE CULTURE company by the general public. -​ the collection of beliefs, expectations, and values learned STRATEGIC FINANCIAL ISSUES and shared by a corporation’s FINANCIAL LEVERAGE members and transmitted from one -​ The ratio of total debt to total generation of employees to assets. another. CAPITAL BUDGETING ​ CULTURAL INTENSITY- -​ analyzing and ranking of possible the degree to which investments in fixed assets such members of a unit accept as land, buildings, and equipment the norms, values or other in terms of the additional outlays  and additional receipts that will -​ Virtual teams are groups of result from each investment geographically and/or R&D INTENSITY organizationally dispersed -​ A company’s spending on research coworkers that are assembled and development as a percentage using a combination of of sales revenue. telecommunications and ​ TECHNOLOGICAL information technologies to COMPETENCE accomplish an organizational task A corporation’s proficiency in managing SUPPLY CHAIN MANAGEMENT research personnel and integrating their -​ The formation of networks for innovations into its day-to-day operations. sourcing raw materials, ​ TECHNOLOGY manufacturing products or creating TRANSFER services, storing and distributing The process of taking a new technology goods, and delivering goods or from the laboratory to the marketplace. services to customers and R&D MIX consumers. -​ The balance of basic, product, and IFAS (Internal Factor Analysis Summary) process research and TABLE development. -​ A table that organizes internal TECHNOLOGICAL DISCONTINUITY factors into strengths and -​ The displacement of one weaknesses and how well technology by another. management is responding to these specific factors. STRATEGIC OPERATIONS ISSUES OPERATING LEVERAGE -​ The impact of a specific change in sales volume on net operating income. EXPERIENCE CURVE -​ A conceptual framework that states that unit production costs decline by some fixed percentage each time the total accumulated volume of production in units doubles. ECONOMIES OF SCALE -​ A process in which unit costs are reduced by making large numbers of the same product. CAD- Computer Assisted Design or CAM Computer Assisted Manufacturing ECONOMIES OF SCOPE -​ A process in which unit costs are reduced when the value chains of two separate products or services share activities, such as the same marketing channels or manufacturing facilities. VIRTUAL TEAMS CHAPTER 6: ➔​ ST STRATEGIES- consider a STRATEGY FORMULATION company’s or unit’s strengths as a -​ often referred to as strategic way to avoid threats. planning or long-range planning ➔​ WO STRATEGIES- attempt to -​ is concerned with developing a take advantage of opportunities by corporation’s mission, objectives, overcoming weaknesses. strategies, and policies. ➔​ WT STRATEGIES- are basically SWOT defensive and primarily act to -​ SWOT is an acronym used to minimize weaknesses and avoid describe the particular Strengths, threats Weaknesses, Opportunities, and BUSINESS STRATEGY Threats that are strategic factors -​ focuses on improving the for a specific company. competitive position of a SFAS (Strategic Factors Analysis company’s or business unit’s Summary) MATRIX products or services within the -​ summarizes an organization’s specific industry or market strategic factors by combining the segment that the company or external factors from the EFAS business unit serves. Table with SWOT is an acronym COMPETITIVE STRATEGY used to describe the internal -​ A strategy that states how a factors from the IFAS Table. company or a business unit will PROPITIOUS NICHE compete in an industry. -​ an extremely favorable niche ​ LOWER COST -​ A portion of a market that is so well STRATEGY suited to a firm’s internal and the ability of a company or a business unit external environment that other to design, produce, and market a corporations are not likely to comparable product more efficiently than challenge or dislodge it. its competitors. COMMON THREAD ​ DIFFERENTIATION -​ a unifying theme for a corporation’s STRATEGY businesses, managers may be the ability of a company to provide unique unclear about where the company and superior value to the buyer in terms of is heading. product quality, special features, or TOWS MATRIX after-sale service. -​ TOWS is just another way of COST LEADERSHIP saying SWOT -​ A low-cost competitive strategy -​ illustrates how the external that aims at the broad mass opportunities and threats facing a market. particular corporation can be DIFFERENTIATION matched with that company’s is aimed at the broad mass market and internal strengths and weaknesses involves the creation of a product or to result in four sets of possible service that is perceived throughout its strategic alternatives. industry as unique. ➔​ SO STRATEGIES- are generated COST FOCUS by thinking of ways in which a -​ is a low-cost competitive strategy company or business unit could that focuses on a particular buyer use its strengths to take advantage group or geographic market and of opportunities.  attempts to serve only this niche, -​ Lower the inducement for attack to the exclusion of others. DIFFERENTIATION FOCUS COOPERATIVE STRATEGY -​ like cost focus, concentrates on a -​ Strategies that involve working with particular buyer group, product line other firms to gain competitive segment, or geographic market. advantage within an industry. COMPETITIVE SCOPE COLLUSION -​ The breadth of a company’s or a -​ the active cooperation of firms business unit’s target market. within an industry to reduce output FRAGMENTED INDUSTRY and raise prices in order to get -​ An industry in which no firm has around the normal economic law of large market share and each firm supply and demand. serves only a small piece of the JOINT VENTURE total market. -​ is a “cooperative business activity, CONSOLIDATED INDUSTRY formed by two or more separate -​ An industry in which a few large organizations for strategic companies dominate. purposes, that creates an TACTIC independent business entity and -​ A short-term operating plan allocates ownership, operational detailing how a strategy is to be responsibilities, and financial risks implemented. and rewards to each member, TIMING TACTIC while preserving their separate -​ Deals with when a company identity/autonomy implements a strategy. LICENSING ARRANGEMENT ❖​ FIRST MOVER -​ is an agreement in which the The first company to manufacture and sell licensing firm grants rights to a new product or service is called the first another firm in another country or mover (or pioneer). market to produce and/or sell a ❖​ LATE MOVER product Companies that enter a new market only MUTUAL SERVICE CONSORTIUM after other companies have done so -​ is a partnership of similar MARKET LOCATION TACTICS companies in similar industries that -​ deals with where a company pool their resources to gain a implements a strategy. benefit that is too expensive to ❖​ OFFENSIVE TACTICS develop alone, such as access to A tactic that calls for competing in an advanced technology established competitor’s current market STRATEGIC ALLIANCE location. -​ a long-term cooperative -​ Frontal Assault arrangement between two or more -​ Flanking Maneuver independent firms or business -​ Bypass attack units that engage in business -​ Encirclement activities for mutual economic gain -​ Guerilla Warfare -​ strategic factors for a specific ❖​ DEFENSIVE TACTICS company. A tactic in which a company defends its VALUE-CHAIN PARTNERSHIP current market. -​ value-chain partnership is a strong -​ Raise structural barriers and close alliance in which one -​ Increase expected retaliation company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage.