Strategic Management Exam 1

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Strategic management

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the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives.

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Strategy

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large-scale, future oriented plans for interacting with the competitive environment to achieve company objectives

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Formality

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the degree to which participation, responsibility, authority, and discretion in decision-making are specified in strategic management.

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Entrepreneurial mode

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the informal, intuitive, and limited approach to strategic management associated with owner-managers of smaller firms

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Planning mode

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the strategic formality associated with large firms that operate under a comprehensive, formal planning system.

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Adaptive mode

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the strategic formality associated with medium-sized firms that emphasize the incremental modification of existing competitive approaches

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Company mission

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the unique purpose that sets a company apart from others of its type and identifies the scope of its operations

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Long-term objectives

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the results that an organization seeks to achieve over a multiyear period.

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Generic strategies

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fundamental philosophical options for the design of strategies

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Grand strategies

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the means by which objectives are achieved

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Short-term objectives

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desired results that provide specific guidance for action during a period of one year or less.

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Functional tactics

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short-term, narrow scoped plan that detail the means or activities that a company will use to achieve short-term objectives

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Strategic control

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tracking a strategy as it is being implemented, detecting problems or changes in it underlying premises, and making necessary adjustment.

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Continuous improvement

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a form of strategic control in which mangers are encourage to be proactive in improving all operations of the firm

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Process

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the flow of information through interrelated stages of analysis toward

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Stakeholders

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influential people who are vitally interested in the actions of the business

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Feedback

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the analysis of post implementation results that can be use to enhance future decision making

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Dynamic

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the term that characterizes the constantly changing conditions that affect interrelated and interdependent strategic

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Policies

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predetermined decisions that substitute for managerial desertion in repetitive decision-making

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Company mission

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the unique purpose that sets a company apart from others of its type and identifies the scope of its operations in product, market, and technology terms.

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Company Creed

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a company’s statement of its philosophy

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Vision Statement

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A statement that presents a firms strategic intent designed to focus the energies and resources of the company on achieving a desirable future

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Board of directors

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the group of stockholder representatives and strategic managers responsible for over-seeing the creation and accomplishment of the company

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Agency theory

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a set of ideas on organizational control based on the belief that the separation of the ownership from management creates the potential for the wishes of owners to be ignored.

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Agency costs

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the cot of agency problems and the cost of actions taken to minimize them

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Moral hazard problem

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an agency problem that occurs because owners have limited access to company information, making executives free to pursue their own interests.

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Adverse selection

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an agency problem caused by the limited ability of stockholders precisely determines the competencies and priorities of executives at the time they are hired.

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Economic responsibilities

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the duty of mangers, as agents of the company owners, to maximize stockholders wealth.
Legal responsibilities – the firms obligations to comply with the laws that regulate business activities.

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Legal Responsibilities

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the firm's obligations to comply with the laws that regulate business activities

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Ethical responsibilities

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the strategic mangers notion of right and proper business behavior.

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Discretionary Responsibilities

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responsibilities voluntarily assumed by a business, such as public relations, good citizenship, good citizenship, and full corporate responsibility.

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Corporate social Responsibility (CSR)

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the idea that business has a duty to serve society in general as well as the financial interest of stockholders

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Sarbanes-Oxley Act of 2002

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law that revised and strengthened auditing and accounting standards

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Social Audit

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An attempt to measure a companys actual social performance against its social objectives

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Ethics

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the moral principles that reflect society’s belief about the actions of an individual or group that are right and wrong.

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Utilitarian Approach

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Judging the appropriateness of a particular action based on a goal to provide the greatest good for the greatest number of people

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Moral Rights approach

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judging the appropriateness of a particular action based on a goal to maintain the fundamental rights and privileges of individuals and groups.

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Social justice approach

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Judging the appropriateness of a particular action based on equity, fairness, and impartiality in the distribution of rewards and costs among individuals and groups.

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External environment

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the factors beyond the control of the firm that influences its choice of direction and action, organizational structure, and internal processes.

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Remote Environment

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economic, social, political, technological, and ecological factors that originate beyond, and usually irrespective of, any single firm’s operating situation.

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Technological forecasting

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the quasi-science of anticipating environmental and competitive changes and estimating their importance to an organization.

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Ecology

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the relationships among human beings and other living things and the air, soil, and water supports them.

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Pollution

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threats to life-supporting ecology caused principally by human activities in an industrial society

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Eco-efficiency

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Company actions that produce more useful goods and services while continuously reducing resource consumption and pollution.

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Industry Environment

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The general conditions for competition that influence all businesses that provide similar products and services.

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Barriers to entry

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the conditions that a firm must satisfy to enter an industry.

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Economies of scale

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the savings that companies achieve because of increased volume.

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Product differentiation

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the extent to which customers perceive differences among products and services.

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Industry

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A group of companies that provide similar products and services.

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Operating environment

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Factors in the immediate competitive situation that affect a firms success in acquiring needed resources.

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Globalization

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the strategy of pursuing opportunities anywhere in the world that enable a firm to optimize its business functions in the countries in which it operates.

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Ethnocentric orientation

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When the values and priorities of the parent organization guide the strategic decision making of all its international operations

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Polycentric orientation

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when the culture of the country in which the strategy is to be implemented is allowed to dominate a company’s international decision making process.

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Regiocentric Orientation

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When a parent company blends its own predisposition with those of its international units to develop Region-sensitive strategies.

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Geocentric Orientation

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when an international firm adopts a systems approach to strategic decision making that emphasizes global integration.

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Stakeholder activism

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Demands placed on a global firm by the stakeholders in the environment in which it operates.

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Multidomestic industy

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An industry in which competition is segmented from country to country

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Global industry

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An industry in which competition crosses national boarders on a worldwide basis

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SWOT analysis

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acronym for the internal strengths and weaknesses of a firm, and the environmental Opportunities and Threats facing that firm. SWOT analysis is a technique through which managers create a quick overview of a company’s strategic situation.

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Opportunity

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a major favorable situation in a firms environment

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Threats

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a major unfavorable situation in a firms environment

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Strength

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a resource advantage relative to competitors and the needs of the markets a firm serves or expects to serves or expects to serve

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Weakness

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a limitation or deficiency in one or more resources or competencies relative to competitors that impedes a firms effective performance

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Value chain

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a perspective in which business is seen as a chain of activities that transforms inputs into outputs that customers value.

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Value chain analysis

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an analysis that attempts to understand how a business creates customer value by examining the contribution of different activities within the business to that value.

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Primary activities

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the activities in a firm of those involved in the physical creation of the product, marketing and transfer to the buyer, and after-sale support.

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Support activities

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the activities in a firm that assist the firm as a whole by providing infrastructure or inputs that allow the primary activities to take place on an ongoing basis.

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Three circles analysis

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an internal analysis technique wherein strategists examine customers needs, company offerings, and competitors offerings to more clearly articulate what their company’s competitive advantage is and how it differs from those of competitors.

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Resource-based view

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a method of analyzing and identifying a firms strategic advantages based on examining its distinct combination of assets, skills, capabilities, and intangibles as an organization.

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Core Competence

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a capability or skill that a firm emphasizes and excels in doing while in pursuit of its overall mission.

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Tangible assets

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the most easily identified assets, often found on a firms balance sheet. They include production facilities, raw materials, financial resources, real estate, and computers.

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Intangible assets

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a firms assets that you cannot touch or see but they are very often critical in creating competitive advantage: brand names, company reputation, organizational morale, technical knowledge, patents and trademarks, and accumulated experience within an organization.

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Organizational capabilities

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skills(the ability and ways of combining assets, people, and processes) that a company uses to transform inputs into outputs.

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Isolating mechanisms

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characteristics that make resources difficult to imitate. In the RBV context these are physically unique resources, path-dependent resources, casual ambiguity

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Benchmarking

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Evaluating the sustainability of advantages against key competitors. Comparing the way a company performs a specific activity with a competitor or other company doing the same thing.

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Product life cycle

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a concept that describes a product’s sales, profitability, and competencies that are key drivers of the success of that product as it moves through a sequence of stages from development, introduction to growth, maturity, decline, and eventual removal from a market.

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Balance scorecard

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a set of four measures directly linked to a company’s strategy: financial performance, customer knowledge, internal business processes, and learning and growth.

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Generic Strategy

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a core idea about how a firm can best compete in the market place.

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Grand Strategy

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a master long-term plan that provides basic direction for major actions for achieving long-term business objectives.

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Concentrated growth

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a grand strategy with which a firm directs its resources to the profitable growth of a single product, in a single market, with a single dominant technology.

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Market development

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a grand strategy of marketing present products, often with only cosmetic modification, to customers in related Marketing areas.
Product Development- a grand strategy that involves the substantial modification of existing products that can be marketed to current customers.

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Product Development

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a grand strategy that involves the substantial modification of existing products that can be marketed to current customers

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Innovation

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a grand strategy that seeks to reap the premium margins associated with creation and customer acceptance of a new product or service.

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Horizontal acquisition

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a grand strategy based on growth through the acquisition of similar firms operation at the same operation at the same stage of production-marketing chain.

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Vertical acquisition

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a grand strategy based on the acquisition of firms that supply the acquiring firm with inputs or new customers for its outputs.

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Concentric diversification

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a grand strategy that involves the operation of a second business that benefits from access to the first firm’s core competencies.

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Conglomerate diversification

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a grand strategy that involves the acquisition of a business because its presents the most promising investment opportunity available.

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Turnaround

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a grand strategy of cost reduction and asset reduction by a company to survive and recover from declining profits.

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Divestiture strategy

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a grand strategy that involves the sale of a firm or a major unit of a firm as a going concern.

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Liquidation

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a grand strategy that involves the sale of the assets of the business for their salvage value.

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Bankruptcy

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when a company is unable to pay its debts as they become due.

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Joint Venture

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a Grand strategy in which companies create a co-owned business that operates for their mutual benefits.

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Strategic alliances

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contractual partnerships because the companies involved do not take an equity position in one another

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Consortia

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large interlocking relationships between businesses of an industry

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Keiretsu

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a Japanese consortia of business that is coordinated by a large trading company to gain a strategic advantage.

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Chaebol

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a Korean consortia financed through government banking groups to gain a strategic advantage.

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Business model

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a clear understanding of how the firm will generate profits and the strategic actions it must take to succeed over the long term