Strategic Management | Definitions

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Global mindset

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Ability to analyze, understand and manage (if in a managerial position) an internal organization in ways that are not dependent on the assumptions of a single country, culture or context.

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Value

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Value is measured by a product’s performance characteristics and by its attributes for which customers are willing to pay.

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Judgement

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The capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete.

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Tangible resources

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Assets that can be observed and quantified

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Intangible resources

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Assets deeply rooted in firm's history, accumulating over time, and relatively difficult for competitors to analyze and imitate

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Valuable capabilities

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Allow the firm to exploit opportunities or neutralize threats in its external environment

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Rare capabilities

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Capabilities that few, if any, competitors possess

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Costly-to-imitate capabilities

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Capabilities that other firms cannot easily develop

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Non-substitutable capabilities

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Capabilities that do not have strategic equivalents

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Primary activities

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Activities involved with a product's physical creation, its scale and distribution to buyers, and its service after the sale

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Support activities

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Activities that provide the assistance necessary for primary activities to take place.

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Outsourcing

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Purchase of a value-creating activity from an external supplier

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Competitors

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Firms operating in the same market, offering similar products, and targeting similar customers

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Competitive rivalry

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Ongoing set of competitive actions and responses that occur among firms as they maneuver for an advantageous position in the market

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Competitive behavior

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Set of competitive actions and responses the firm takes to build or defend its competitive advantages and to improve its market position

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Multimarket competition

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Occurs when firms compete against each other in several product of geographical markets

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Competitive dynamics

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Refer to all competitive behaviors of all firms competing within a market

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Market commonality

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Concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each

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Resource similarity

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Extent to which the firm's tangible and intangible assets are comparable to a competitor's both in terms of type and amount

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Motivation

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Concerns the firm's incentive to take action or to respond to a competitor's attack; relates to perceived gains and losses

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Ability

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Each firm's resources and the flexibility they provide in choosing to attack a competitor or responding to an attack

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Competitive action

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Strategical or tactical action taken by the firm to build or defend its competitive advantages or to improve its market position

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Competitive response

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Strategical or tactical action taken by the firm to counter the effects of a competitor's competitive action

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Strategic actions and responses

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Market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse

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Tactical actions and responses

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Market-based move that is taken to fine-tune a strategy; involves fewer resources and is relatively easy to implement and reverse

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First mover

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A firm that takes an initial competitive action in order to build or defend its competitive advantages or improve its market position

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Second mover

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A firm that responds to the first mover's competitive action, typically through imitation

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Late mover

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A firm that respond's to a competitive action a significant amount of time after the first mover's action and the second mover's response

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Quality

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Exists when the firm's goods and services meet or exceed customers' expectations

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Slow-cycle markets

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Those in which the firm's competitive advantages are shielded from imitation commonly for long periods of time and where imitation is costly (e.g. railways)

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Fast-cycle markets

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Those in which the firm's capabilities that contribute to competitive advantages aren't shielded from imitation, and where imitation is often rapid and inexpensive

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Standard-cycle markets

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Those in which the firm's competitive advantages are moderately shielded from imitation, and where imitation is moderately costly

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Cooperative strategy

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A strategy in which firms work together to achieve a shared objective

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Strategic alliance

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A cooperative strategy in which firms combine some of their resources and capabilities to create a competitive advantage.

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Joint venture

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Strategic alliance in which two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage

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Equity strategic alliance

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Alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources and capabilities to create a competitive advantage

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Non-equity strategic alliance

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Alliance in which two or more firms develop a contractual relationship to share some of their unique resources and capabilities to create a competitive advantage

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Business-level cooperative strategy

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A strategy firms use to grow and improve their performance in individual product markets

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Complementary strategic alliances

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Business-level alliances in which firms share some of their resources and capabilities in complementary ways to develop competitive advantages (horizontal + vertical)

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Vertical complementary strategic alliance

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Firms share their resources and capabilities from different stagesof the value chain to create a competitive advantage

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Horizontal complementary strategic alliance

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Firms share their resources and capabilities from the same stage of the value chain

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Explicit collusion

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When two or more firms directly negotiate with the intention of jointly agreeing about the amount to produce and the price of the products that are produced

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Tacit collusion

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When several firms in an industry indirectly coordinate their production and pricing decisions by observing each other's competitive actions and responses

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Corporate-level cooperative strategy

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Firms use it to help themselves diversify in terms of products offered or markets served, or both.

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Diversifying strategic alliance

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Corporate-level cooperative strategy where firms share some of their resources and capabilities to diversify into new products or market areas

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Synergistic strategic alliance

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Corporate-level cooperative strategy where firms share some of their resources and capabilities to create economies of scope

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Franchising

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Corporate-level cooperative strategy where firms (franchisors) use franchises as a contractual relationship to describe and control the sharing of their resources and capabilities with partners (franchisees)

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Cross-border strategic alliance

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International cooperativestrategy in which firmswith headquarters indifferent nations decideto combine some of theirresources and capabilities to create acompetitive advantage

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Network cooperative strategy

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Cooperativestrategy wherein severalfirms agree to formmultiple partnershipsto achieve sharedobjectives

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Stable alliance network

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Formed in mature industries where demand is relatively constant and predictable

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Dynamic alliance networks

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Used in industries characterized by frequent product innovations and short product life cycle

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Strategic competitiveness

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Achieved when a company successfully formulates and implements a value-creating strategy

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Strategy

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Set of coordinated and integrated commitments and actions designed to exploit core competencies and gain a competitive advantage

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Competitive advantage

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A firm has one when it implements a strategy competitors are unable to duplicate or find it too costly to try to imitate

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Above-average returns

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Returns in excess of what an investor expects to earn from other investments with a similar amount of risk

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Risk

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An investor's uncertainty about the economic gains or losses that will result from a particular investment

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Average returns

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Returns equal to those an investor expects to earn from investments with a similar amount of risk

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Strategic management process

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Full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns

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Global economy

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An economy in which goods, services, people, skills and ideas move freely across geographic borders

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Globalization

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The increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital and knowledge across country borders

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Technology diffusion

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The rate at which new technologies become available and are used

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Perpetual innovation

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How rapidly and consistently new information-intensive technologies replace older ones

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Disruptive technologies

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Technologies that can destroy the value of existing technologies and create new markets

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Knowledge

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Information, intelligence and expertise gained through experience, observation and inference

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Strategic flexibility

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Set of capacities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment

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Resources

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Inputs into a firm's production process, such as capital equipment, the skills of individual employees, patents, finances and talented managers

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Capability

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The capacity for a set of resources to perform a task or an activity in an integrative manner

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Core competencies

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Capabilities that serve as a source of competitive advantage for a firm over its rivals

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Vision

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A picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve

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Mission

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Specifies the business or businesses in which the firm intends to compete and the customers it intends to serve

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Stakeholders

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The individuals and groups who can affect the firm's vision and mission, are affected by the strategic outcomes the firm achieves through its operations, and who have enforceable claims on the firm's performance

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Strategic leaders

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People located in different parts of the firm using the strategic management process to help the firm reach its vision and mission

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Organizational culture

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Refers to the complex set of ideologies, symbols and core values that are shared throughout the firm and that influence how the firm conducts business

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Profit pool

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The total profits earned in an industry at all points along the value chain

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Path dependence

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The (constraining) influence of past stages in organizational development on future decisions and actions

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Exploitation

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The refinement, choice, production, efficiency, selection, implementation and execution using existing knowledge

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Exploration

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The search, variation, risk-taking, experimentation, play, flexibility, discovery and innovation using new learning

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Strategic renewal

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The adaptive choices and actions a firm undertakes to alter its path dependence and maintain a dynamic strategic fit with changing environments over time

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Dynamic strategic fit

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Firm-specific fit over time between environment factors and organizational contingencies

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Inertia

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Persistent resistance to changing organizational features

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Fitness

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Organizational capacity to learn and change behavioural characteristics or capabilities to fit to new circumstances in organizational environments

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Relative inertia

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The notion that organizations' internal rate of change is too slow to respond to the rate of change in the external environment

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Hypercompetition

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An environmental condition characterized by rapidly escalating competition, high uncertainty, heterogeneity of players and constant disequilibrium and change

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Routines

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The regular and predictable behavior patterns of firms with which day-to-day operations get done

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Isomorphism

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Similarity in strategy and behavioral characteristics between firms

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Dynamic capabilities

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The firm's processes to integrate, reconfigure, gain and release resources to match and even create market change

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Absorptive capacity

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Firm's ability to value, assimilate and utilize new external knowledge

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Exploratory learning

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Adds new attributes to the organization's current portfolio of activities and competencies

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Exploitative learning

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Encompasses those actions that lie in line with the organization's current activities and competencies in existing domains

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Competence trap

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An overexploitation of existing competencies and specialized resources that is threatening firm's survival when environments change

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Steady-state flexibility

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Static procedures to optimize the firm's performance when the level of throughput and the nature of throughput remain relatively stable over time

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Operational flexibility

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Routine capabilities based on present structures and goals of the organization, providing the firm with a capacity to respond to dynamic changes in the environment

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Structural flexibility

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Managerial capabilities for adapting the organization structure and its decision and communication processes, providing the firm with a capacity to respond to complex changes in the environment

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Strategix flexibility

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Dynamic capabilities for adapting the goals of the organization, providing the firm with a capacity to respond to unpredictable changes in the environment

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Organizational technology

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The hardware and the software used in the transformation of inputs into outputs, as well as the configuration of the hardware and software

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Organizational structure

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The action distribution of responsibilities and authority among the organization's personnel (basic organizational form), the planning and control systems as well as the process regulations of decision-making, coordination and execution

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Organizational culture

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The set of beliefs and assumptions held relatively commonly throughout the organization and taken for granted by its members

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Strategic drift

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A process towards rigidity due to the fact that consciously managed incremental changes in the organization do not keep pace with more radical environmental changes

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Strategic neglect

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A process towards chaos and reduction of decision-making capacity due to the deliberate tendency of management not to pay attention to a shared strategic orientation or a stable structure

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Natural trajectory or routinization

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A process of accumulation of specialized routines and fine-tuning of organizational conditions when firms age and competition decreases

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Trajectories of revitalization

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A process of developing dynamic capabilities and transforming organizational conditions to cope with increasing levels of competition

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Ambidexterity

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Ability to achieve high levels of exploration and exploitation

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Contextual ambidexterity

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Simultaneous pursuit of exploitation and exploration within an organizational unit by creating an organizational context that stimulates individuals to do both

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Structural ambidexterity

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Simultaneous pursuit of exploration and exploitation across organizational units that each specialize in either

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Cyclical ambidexterity

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Sequential pursuit of exploitation and exploration within an organizational unit over time

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Reciprocal ambidexterity

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Sequential pursuit of exploitation and exploration across domains, functions and hierarchical levels