Strategy Terms 2

Front 1

economic rents

Back 1

returns in excess of what an investor expects to earn from other investments of similar risk (also called above-average returns)

Front 2

economies of scale

Back 2

unit costs decline as output increase

Front 3

economies of scope

Back 3

costs of production of two lines of business run together are less than the sum of each run separately

Front 4

efficient markets principle

Back 4

"when markets are efficient, good situations do not last"

Front 5

elasticity of demand

Back 5

The percent change in demand in response to a one percent change in the price of that good

Front 6

entrepreneurship

Back 6

The development of new products and processes, i.e. innovation

Front 7

escalation of commitment

Back 7

Sticking to a course of action beyond a level that a rational model would prescribe

Front 8

excess capacity

Back 8

the capacity to produce additional units without substantial incremental costs or additions to fixed capacity

Front 9

exit cost

Back 9

costs incurred when a firm exits a business (e.g., early payments of contractual obligations such as salaries or environmental cleanup costs)

Front 10

first-mover advantage

Back 10

advantages held by a firm by virtue of being the first to introduce a product or service

Front 11

forward integration

Back 11

when output outlets are moved into the organization

Front 12

free riding

Back 12

Not paying for a nonexclusive good in the expectation that others will

Front 13

Friendly takeover

Back 13

An acquisition where a target firm welcomes offer from acquire

Front 14

game theory

Back 14

the formal analysis of conflict and cooperation among intelligent and
rational decision makers based on the actions available to them and the associated future payoffs

Front 15

governance

Back 15

The structure of inter and intra firm relationships

Front 16

hierarchy

Back 16

The organization of authority and decision making within a firm

Front 17

hold-up problem

Back 17

the problem that one who makes a relationship-specific investment is
vulnerable to a threat by other parties to terminate that relationship so as to obtain better terms than were initially agreed

Front 18

hostile takeover

Back 18

An acquisition where target firm resists the acquisition

Front 19

industrial organization view

Back 19

perspective that above-average returns derive primarily from industry characteristics that reduce competitive pressures within industries

Front 20

industry life-cycles

Back 20

The periodic evolution of markets spurred by innovation and technological change

Front 21

information asymmetries

Back 21

When one party knows more than another

Front 22

international strategy

Back 22

the logic behind production or sales of products in markets outside the firm's domestic market

Front 23

joint venture

Back 23

independent firm created by joining the assets from two or more companies

Front 24

learning curves

Back 24

reductions in the unit costs associated with cumulative, life-time experience in an activity