Strategy Terms 3

Front 1

licensing

Back 1

when a firm authorizes another firm to manufacture or sell its products (in return for a royalty typically)

Front 2

market leader

Back 2

a firm with significant market share who may set prices for the rest of an industry

Front 3

mergers

Back 3

an arrangement in which the assets and liabilities of two or more firms are integrated into one firm

Front 4

minimum efficient scale

Back 4

The smallest output for which unit costs are minimize

Front 5

minority equity investment

Back 5

purchase by one firm of a non controlling, minority stake in another firm

Front 6

monopoly

Back 6

a market with only one seller

Front 7

monopsony

Back 7

a market with only one buyer

Front 8

multipoint competition

Back 8

when firms compete with one another across multiple markets

Front 9

mutual dependence

Back 9

when two firms have relatively similar amounts to gain from an alliance

Front 10

network externalities

Back 10

when the value to a customer of a product increases as the number of compatible users increases

Front 11

niche

Back 11

a specialized part of the market, often small

Front 12

non-equity alliance

Back 12

contract between two or more firms that does not involve equity sharing

Front 13

opportunism

Back 13

when an individual takes advantage of an information advantage so as to pursue his or her own self-interest

Front 14

opportunity cost

Back 14

the value of the next best opportunity which must be sacrificed in order to engage in a particular activity

Front 15

real options

Back 15

Investments that enable (but do not require) future strategic actions

Front 16

related diversification

Back 16

a move by a firm into related, yet distinct, lines of business

Front 17

relationship-specific asset

Back 17

assets that have value only in a very narrow use, typically specific to a given business relationship

Front 18

rent-producing asset

Back 18

Resources and capabilities that confer above-average return

Front 19

resource-based view

Back 19

perspective that above-average returns derive primarily from within the firm via valuable and rare resources and capabilities that are hard to imitate or substitute for

Front 20

resource

Back 20

Inputs into a firm's production process -- may be tangible (those that can be seen and quantified) or intangible (e.g. reputation, knowledge

Front 21

strategic alliances

Back 21

partnerships between firms in which their resources or capabilities are combined to pursue mutual interests

Front 22

strategic group

Back 22

Clusters of firms within an industry that share certain critical asset configurations and follow common strategies

Front 23

strategic mission

Back 23

a statement of a firm’s unique purpose and the scope of its operations in product and market term

Front 24

switching costs

Back 24

one-time costs customers incur when buying from a different supplier

Front 25

synergy

Back 25

the excess value created by businesses working together over the value those same units create when working independently

Front 26

tacit collusion

Back 26

when firms take actions so as to gain market power overconsumers
without explicit agreements

Front 27

tightly-held asset

Back 27

assets that are both rare (not widely possessed) and are hard to imitate or substitute for

Front 28

transaction cost

Back 28

cost of carrying out a transaction or the opportunity costs incurred when an efficiency-enhancing transaction is not realized

Front 29

vertical foreclosure

Back 29

vertical integration that cuts off a competitor's access to the supply chain

Front 30

vertical integration

Back 30

the process in which either one of the input sources or output buyers of the firm are moved inside the firm

Front 31

winner's curse

Back 31

the winner of an auction is the player who has the highest valuation of the asset and thus likely overvalues the asset