Strategic Management

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Base of the Pyramid

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The vast majority of humanity, about four billion people, who make less than $2,000 a year.

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BRIC

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Brazil, Russia, India and China.

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Emergent Strategy

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A strategy based on the outcome of a stream of smaller decisions from the ‘bottom up.”

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Emerging Economies/Emerging Markets

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A label that describes fast-growing developing economies since the 1990s.

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Foreign Direct Investment (FDI)

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A firm’s direct investment in production and/or service activities abroad.

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Global Strategy

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a. Strategy of firms around the globe.
b. A particular form of international strategy, characterized by the production and distribution of standardized product and services on a worldwide basis.

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Globalization

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The close integration of countries and peoples of the world.

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Intended Strategy

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A strategy that is deliberately planned for.

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Multinational Enterprise (MNE)

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– A firm that engages in foreign direct investment by directly controlling and managing value-adding activities in other countries.

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Nongovernmental Organization (NGO)

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Organization advocating causes such as the environment, human rights, and consumer rights that are not affiliated with government.

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Replication

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Repeated testing of theory under a variety of conditions to establish its applicable boundaries.

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Semiglobalization

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A perspective that suggests that barriers to market integration at borders are high but not high enough to completely insulate countries from each other.

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Strategic Management

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A way of managing the firm from a strategic, “big picture” perspective

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Strategy

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a Firm’s theory about how to compete successfully.

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Strategy as Action

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A perspective that suggests that strategy is most fundamentally reflected by firms’ pattern of action.

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Strategy as Integration

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A perspective that suggests that strategy is neither solely about plan nor action and that strategy integrates elements of both schools of thought.

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Strategy as Plan

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– A perspective that suggests that strategy is most fundamentally embodied in explicit rigorous formal planning as in the military.

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Strategy Formulation

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The crafting of a firm’s strategy.

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Strategy Implementation

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The actions undertaken to carry out a firm’s strategy.

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Strategy Tripod

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A framework that suggests that strategy as a discipline has three “legs” or key perspectives: Industry-. Resource-, and institution-based views.

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SWOT Analysis

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A strategic analysis of a firm’s strengths (S) and weaknesses (W) and the opportunities (O) and threats (T) in the environment.

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Triad

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Three primary regions of developed economies: North America, Europe and Japan

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1. Backward Integration –

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Acquiring and owning upstream assets.

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2. Bargaining Power of Suppliers –

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The ability of suppliers to raise prices and/or reduce the quality of goods and service.

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3. Complementor –

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A firm that sells products that add value to the products of a focal industry.

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4. Conduct –

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Firm actions such as product differentiation

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5. Cost Leadership –

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A competitive strategy that centers on competing on low cost and prices

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6. Differentiation –

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A strategy that focuses on how to deliver products that customers perceive as valuable and different.

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7. Dominance –

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A situation whereby the market leader has a very large market share.

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8. Duopoly –

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A special case of oligopoly that only has two players

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Economies of Scale

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Reduction in per unit costs by increasing the scale of production.

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Entry Barrier

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The industry structures that increase the costs of entry

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Excess Capacity

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Additional production capacity currently underutilized or not utilized.

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Five Forces of Framework

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A framework governing the competitiveness of an industry proposed by Michael porter. The five forces are:
a. The intensity of rivalry among competitors,
b. The threat of potential entry,
c. The bargaining power of suppliers,
d. The bargaining power of buyers, and
e. The threat of substitutes

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Flexible Manufacturing

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Modern manufacturing technology that enable firms to produce differentiated products at low costs (usually on a smaller batch basis than the large batch typically produced by cost leaders).

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Focus

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A strategy that serves the needs of a particular segment or niche of an industry.

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Forward Integration

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Acquiring and owning downstream assets.

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Generic Strategies

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Strategies intended to strengthen the focal firm’s position relative to the five competitive forces, including
a. Cost leadership
b. Differentiation, and
c. focus

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Incumbent

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Current member of an industry that compete against each other.

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Industry

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A group of firms producing products (goods and/or services) that are similar to each other.

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Industrial Organization (IO) Economies

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A branch of economics that seeks to better understand how firms in an industry compete and then how to regulate them.

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28. Performance –

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The result of firm conduct.

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Industry Positioning

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Ways to position a firm within an industry in order to minimize the threats presented by the five forces.

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Mass Customization

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Mass produced but customized products.

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Mobility Barrier

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Within-industry difference that inhibits the movement between strategic groups.

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Monopoly –

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A situation whereby only one firm provides the goods and/or services for an industry

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Network Externalities

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The value a user derives from a product increases with the numer (or the network) of other users of the same product.

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25. Non-Scale-Based Advantages –

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Low-cost advantages that are not derived from the economies of scale.

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26. Oligopoly –

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A situation whereby a few firms control an industry.

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27. Perfect Competition –

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A competitive situation in which price is set by the “market,” all firms are price takers, and entries and exits are relatively easy.

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29. Product Differentiation –

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The uniqueness of products that customers value.

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30. Product Proliferation –

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Efforts to fill product space in a manner that leaves little “unmet demand” for potential entrants

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31. Scale-Based Advantages

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– Advantage derived from economies of scale (the more a firm produces some products, the lower the unit costs become).

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32. Strategic Group –

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Groups of firms within a broad industry.

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33. Structure –

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Structural attributes of an industry such as the costs of entry/exit.

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Structure-Conduct-

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Performance (SCP) Model – An industrial organization economics model that suggests industry structure determines firm conduct (strategy) which in turn determines firm performance

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35. Substitutes –

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Products of different industries that satisfy customer needs currently met by the focal industry

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1. Benchmarking –

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Examination as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.

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2. Capability –

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The tangible and intangible assets a firm uses to choose and implement its strategies.

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3. Captive Sourcing –

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Setting up subsidiaries to perform in-house work in a foreign location. Conceptually identical to foreign direct investment (FDI).

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4. Casual Ambiguity –

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The difficulty of identifying the causal determinants of successful firm performance.

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5. Commoditization –

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A process of market competition through which unique products that command high prices and high margins generally lose their ability to do so- these products thus become “commodities.”

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6. Complementary Assets –

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Numerous noncore assets that complement and support the value-adding activities of core assets.

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7. Hypercompetition –

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A way of competition centered on dynamic maneuvering intended to unleash a series of small, unpredictable but powerful, actions to erode the rival’s competitive advantage.

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8. Inshoring –

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Domestic outsourcing

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9. Intangible Resources and Capabilities –

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Hard-to-observe and difficult-to-codify resources and capabilities.

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10. Offshoring –

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International/foreign outsourcing.

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11. Outsourcing –

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Turning over all or part of an activity to an outside supplier to improve the performance of the focal firm

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12. Resource –

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The tangible and intangible assets a firm uses to choose and implement its strategies.

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13. Resource-Based View –

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A leading perspective of strategy of which suggests that differences in firm performance are most fundamentally driven by differences in firm resources and capabilities.

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14. Social Complexity –

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The socially complex ways of organizing typical of many firms.

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15. Tangible Resources and Capabilities –

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Assets that are observable and more easily quantified.

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16. Value Chain –

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Goods and services produced through a chain of vertical activities that add value.

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17. VRIO Framework –

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A resource-based framework that focuses on the value (V), rarity (R), imitability (I), and organizational (O) aspects of resource and capabilities.

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1. Arm’s-Length Transactions –

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Transactions in which parties keep a distance (See also Formal, rule-based, impersonal exchange).

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2. Code of Conduct/Code of Ethics –

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Written policies and standards for corporate conduct and ethics.

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3. Cognitive Pillar –

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The internalized, taken-for-granted values and beliefs that guide individual and firm behavior.

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Collectivism –

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The perspective that the identity of an individual is most fundamentally based on the identity of his or her collective group (such as family, village, or company)

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5. Corruption –

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The abuse of public power for private benefit usually in the form of bribery.

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6. Cultural Distance –

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The difference between two cultures along some identifiable dimensions.

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7. Culture –

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The collective programming of the mind that distinguishes the members of one group or category of people from another.

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8. Domestic Demand –

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Demand for products and services within a domestic economy.

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9. Ethical Imperialism –

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The imperialistic thinking that one’s own ethical standards should be universally around the world.

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10. Ethical Relativism –

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The relative thinking that ethical standards vary significantly around the world and that there are no universally agreed upon ethical and unethical behaviors.

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11. Ethics –

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The norms, principles, and standards of conduct governing individual and firm behavior.

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12. Factor Endowments –

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The endowments of production factors as land, water, and people in one country.

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13. Femininity –

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A relatively weak form of societal-level sex role differentiation whereby more women occupy positions that reward assertiveness and more men work in caring professions.

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14. Firm Strategy, Structure and Rivalry –

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How industry structure and firm strategy interact to affect interim rivalry.

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15. Formal Institutions –

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Institutions represented by laws, regulations and rules.

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16. Formal, rule-based, Impersonal Exchange –

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A way of economic exchange based on formal transactions in which parties keep a distance (See also Arm’s-Length Transactions)

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17. Individualism –

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The perspective that the identity of an individual is most fundamentally based on his of her own individual attributes (rather than the attributes of a group).

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18. Informal Institutions –

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Institutions represented by norms, cultures, and ethics.

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19. Informal, Relationship-Based, Personalized Exchange –

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A way of economic exchange based on informal relationships among transaction parties. Also known as relational contracting.

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20. In-Group –

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Individual and firms regarded as part of “us.”

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21. Institution –

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Humanly Devised constraints that structure human interaction- informally known as the ‘rules of the game.”

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22. Institutional Distance –

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The extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries.

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23. Institutional Framework –

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A framework of formal and informal institutions governing individual and firm behavior.

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24. Institutional Transitions –

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Fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organization as players.

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25. Institution-Based View –

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A leading perspective of strategy that argues that in addition to industry-and firm-level conditions, firms also need to take into account wider influences from sources such as the state and society when crafting strategy.

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26. Long-Term Orientation –

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A perspective that emphasizes perseverance and savings for future betterment.

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27. Masculinity –

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A relatively strong form of societal-level sex role differentiation whereby men tend to have occupations that reward assertiveness and women tend to work in caring professions.

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28. Norm –

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The prevailing practice of relevant players that affect the focal individuals and firms.

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29. Normative Pillar –

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How the values, belief and norms of other relevant players influence the behavior of individuals and firms.

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30. Out-Group –

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Individuals and firms not regarded as part of “us.”

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31. Opportunism –

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Self-interest seeking with guile.

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32. Power Distance –

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The degree of social inequality.

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33. Regulatory Pillar –

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How formal rules, laws and regulations influence the behavior of individuals and firms.

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34. Related and Supporting Industries –

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Industries that are related to and/or support the focal industry.

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35. Relational Contracting –

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Contracting based on informal relationships (See also informal-relationship-based, personalized exchange).

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36. Transaction Costs –

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Costs associated with economic transaction, or more broadly, costs of doing business.

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37. Uncertainty Avoidance –

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The extent to which members in different cultures accept ambiguous situations and tolerate uncertainty.

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1. Born Global –

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Start-up companies that attempt to do business abroad from inception.

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2. Entrepreneur –

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Individuals who identify and explore previously unexplored opportunities.

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3. Entrepreneurship –

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The identification and exploitation of previously unexplored opportunities.

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4. Initial Public Offering (IPO) –

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The first round of public trading of company stock.

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5. International Entrepreneurship –

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A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.

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6. Liability of Newness –

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The inherent disadvantage that entrepreneurial firms experience as new entrants.

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7. Serial Entrepreneur –

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People who start, grow, and sell several businesses throughout their careers.

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8. Small and Medium-Sized Enterprise (SME) –

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Firms with less than 500 employees

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9. Stage Model –

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Models which suggest firms internationalize by going through predictable stages from simple steps to complex operations.

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10. Strong Ties –

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More durable, reliable, and trustworthy relationships cultivated over a long period of time.

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11. Weak Ties –

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Relationships that are characterized by infrequent interaction and low intimacy.