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MGMT 425
EXAM 1
| Term | Definition |
|---|---|
| Strategic Management | the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage |
| Strategy | is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors |
| Good Strategy | enables a firm to achieve superior performance and sustainable competitive advantage relative to its competitors |
| Competitive advantage | a firm that achieves superior performance relative to other competitors in the same industry or the industry average. |
| Sustainable competitive advantage | A firm that is able to outperform its competitors or the industry average over a prolonged period |
| Competitive Disadvantage | A firm underperforming against its rivals or the industry average |
| Competitive Parity | Performance of two or more firms at the same level |
| Value Creation | companies with a good strategy are able to provide products or services to consumers at a price point that they can afford while keeping their costs in check, thus making a profit at the same time |
| Stakeholders | organizations, groups, and individuals that can affect or are affected by a firm's actions |
| Stakeholder Strategy | an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage |
| Stakeholder Impact Analysis | provides a decision tool with which strategic leaders can recognize, prioritize, and address the needs of different stakeholders |
| AFI Strategy Framework | A model that links three interdependent strategic management tasks-analyze, formulate, and implement that helps managers plan and implement a strategy that can improve performance and result in competitive advantage |
| Strategic Leadership | executives' use of power and influence to direct the activities of others when pursuing organization's goals |
| Strategy formulation | the part of the strategic management process that concerns the choice of strategy in terms of where and how to compete |
| Strategy Implementation | the part of strategic management process that concerns the organization, coordination, and integration of how work gets done, or strategy execution |
| Strategic Business Units | standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility |
| Vision | A statement about what an organization ultimately wants to accomplish; it captures the company's aspiration identifies the primary long-term objective of the organization |
| Strategic Intent | A stretch goal that pervades the organization with a sense of winning, which it aims to achieve by building the necessary resources and capabilities through continuous learning |
| Customer-Oriented Vision Statements | allows companies to adapt to changing environments |
| Product-Oriented Vision Statements | focus employees on improving existing products and services without consideration of underlying customer problems to be solved |
| Mission | description of what an organization actually does-the products and services it plans to provide, and the markets in which it will compete |
| Core Values Statement | statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, for both internal conduct and external interactions; it often includes explicit ethical considerations |
| Organizational Core Values | ethical standards and norms that govern the behavior of individuals within a firm or organization |
| Top-Down Strategic Planning | A rational, data-driven strategy process through which top management attempts to program future success |
| Scenario Planning | Strategy planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses |
| Black Swan Events | Incidents that describe highly improbably but high-impact events |
| Dominant Strategic Plan | The strategic option that top managers decide most closely matches the current reality and which is then executed |
| Intended Strategy | The outcome of a rational and structured top-down strategic plan |
| Realized Strategy | combination of intended and emergent strategy |
| Emergent Strategy | Any unplanned strategic initiative bubbling up from the bottom of the organization |
| Strategic Initiative | Any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures |
| Autonomous Actions | Strategic initiatives undertaken by lower-level employees on their own volition and often in response to unexpected situations |
| Serendipity | Any random events, pleasant surprises, and accidental happenstances that can have a profound impact on a firm's strategic initiatives |
| Resource-Allocation Process | The way a firm allocates its resources based on predetermined policies, which can be critical in shaping its realized strategy |
| Planned Emergence | Strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management |
| Theory of Bounded Rationality | Where individuals face decisions, their rationality is confined by cognitive limitations and the time available to make a decision. Thus, individuals tend to "satisfice" rather than to optimize |
| Cognitive Limitations | Constraints such as time or the brain's inability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter |
| Behavioral Economics | A field of study that blends research findings from psychology with economics to provide valuable insights showing when and why individuals do not act like rational decision makers, as assumed in neoclassical economics |
| System 1 | It is our default mode because it is automatic, fast, and efficient, requiring little energy or attention. System 1 is prone to cognitive biases that can lead to systematic errors in our decision making |
| System 2 | One of two distinct modes of thinking used in decision making that applies rationality and relies on analytical and logical reasoning. Thus, it is an effortful, slow, and deliberate way of thinking |
| Cognitive Biases | Obstacles in thinking that lead to systematic errors in our decision making and interfere with our rational thinking |
| Illusion of Control | A cognitive bias that highlights people's tendency to overestimate their ability to control events. |
| Escalating Commitment | A cognitive bias in which an individual or a group faces increasingly negative feedback regarding the likely outcome from a decision, but nevertheless continues to invest resources and time in that decision |
| Confirmation Bias | A cognitive bias in which individuals tend to search for and interpret information in a way that supports their prior beliefs. Regardless of facts and data presented, individuals will stick with their prior hypothesis |
| Reason by Analogy Bias | A cognitive bias in which individuals use simple analogies to make sense out of complex problems |
| Representativeness Bias | A cognitive bias in which conclusions are based on small samples, or even from one memorable case or anecdote |
| Groupthink | A situation in which opinions coalesce around a leader without individuals critically evaluating and challenging that leader's opinions and assumptions. |
| Devil's Advocacy | a key element is that of a separate team or individual carefully scrutinizing a proposed course of action by questioning and critiquing underlying assumptions and highlighting potential downsides |
| Dialectic Inquiry | key element is that two teams each generate a detailed but alternate plan of actions (thesis and anti-thesis). The goal, if feasible, is to achieve a synthesis between the two plans |
| PESTEL MODEL | A framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These factors can create both opportunities and threats for the firm |
| Nonmarket Strategy | Strategic leaders' activities outside market exchanges where firms sell products or provide services to influence a firm's general environment through, lobbying, public relations, contributions, and litigation in ways that are favorable to the firm |
| Industry Effects | firm performance attributed to the structure of the industry in which the firm competes |
| Firm Effects | Firm performance attributed to the actions strategic leaders take. |
| Industry | A group of incumbent companies that face more or less the same set of suppliers and buyers |
| Industry Analysis | A method to (1) identify an industry's profit potential and (2) derive implications for a firm's strategic position within an industry |
| Strategic Position | A firm's strategic profile based on the difference between value creation and cost |
| Porter's Five Forces Model | A framework that identifies five forces that determine the profit potential of an industry and shape a firm's competitive strategy |
| Threat of Entry | The risk that potential competitors will enter an industry |
| Entry Barriers | Obstacles that determine how easily a firm can center an industry and often significantly predict industry profit potential |
| Network Effects | The value of a product or service for an individual user increase with the number of total users |
| Competitive Industry Structure | Elements and features common to all industries, including the number and size of competitors, the firms' degree of pricing power, the type of product or service offered, and the height of entry barriers |
| Strategic Commitments | Firm actions that are costly, long-term oriented, and difficult to reverse |
| Exit Barriers | Obstacles that determine how easily a firm can leave an industry. |
| Complement | A product, service, or competency that adds value to the original product offering when the two are used in tandem |
| Complementor | A company that provides a good or service that leads customers to value your firm's offering more when the two are combined |
| Co-opetition | Cooperation by competitors to achieve a strategic objective |
| Industry Convergence | A process whereby formerly unrelated industries begin to satisfy the same customer need |
| Strategic Group | The set of companies that pursue a similar strategy within a specific industry |
| Strategic Group Model | A framework that explains differences in firm performance within the same industry |
| Mobility Barriers | Industry-specific factors that separate one strategic group from another |
| Core Competencies | Unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage |
| Resources | Any assets that a firm can draw on when formulating and implementing a strategy. (tangible or Intangible) |
| Capabilities | Organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically (Intangible) |
| Activities | Distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services |
| Resource-Based View | A model that sees certain types of resources as key to superior firm performance |
| Intangible Resources | Resources that do not have physical attributes and thus are invisible |
| Tangible Resources | Resources that have physical attributes and thus are visible |
| Resource | In the resources-based view of the firm, a resource includes any assets as well as any capabilities and competencies that a firm can draw upon when formulating and implementing strategy |
| Resource Heterogeneity | Assumption in the resource-based view that a firm is a bundle of resources and capabilities that differ across firms |
| Resource Immobility | Assumption in the resource-based view that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm |
| VRIO Framework | A theoretical framework that explains and predicts firm-level competitive advantage |
| Rare Resource | If the number of firms that possess it less than the number of firms it would require to reach a state of perfect competition |
| Valuable Resource | A resource that helps a firm exploit an external opportunity or offset an external threat. |
| Costly-to-Imitate Resource | if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost |
| Organized To Capture Value | The characteristic of having in place an effective organizational structure, processes, and systems to fully exploit the competitive potential of the firm's resources, capabilities, and competencies |
| Isolating Mechanisms | Barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy |
| Path Dependence | A situation in which the options one faces in the current situation are limited by decisions made in the past |
| Casual Ambiguity | A situation in which the cause and effect of a phenomenon are not readily apparent |
| Social Complexity | A situation in which different social and business systems interact with one another |
| Intellectual Property Protection | A critical intangible resource that can provide a strong isolating mechanism, and thus help to sustain a competitive advantage |
| Core Rigidity | A former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed |
| Dynamic Capabilities | A firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage |
| Dynamic Capabilities Perspective | A model that emphasizes a firm's ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment |
| Resource Stocks | the firm's current level of intangible resources |
| Resource Flows | The firm's level of investments to maintain or build a resource |
| Value Chain | The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value |
| Primary Activities | Firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain |
| Support Activities | Firm activities that add value indirectly, but are necessary to sustain primary activities |
| Strategic Activity System | The conceptualization of a firm as a network of interconnected activities |
| SWOT Analysis | A framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses with those from an analysis of external opportunities and threats to derive strategic implications |
| Shareholders | Individuals or organizations that own one or more shares of stock in a public company |
| Risk Capital | the money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt |
| Total Return to Shareholders | Return on risk capital that includes stock price appreciation plus dividends received over a specific period |
| Market Capitalization | A firm performance metric that captures the total dollar market value of a company's total outstanding shares at any given point in time |
| Economic Value Created | Difference between value and cost |
| Reservation Price | The maximum price a consumer is willing to pay for a product or service based on the total perceived consumer benefits |
| Value | The dollar amount a consumer attaches to a good or service; the consumer's maximum willingness to pay |
| Producer Surplus | the difference between price charged and the cost to produce |
| Consumer Surplus | Difference between the value a consumer attaches to a good or service and what he or she paid for it |
| Opportunity Cost | The value of the best forgone alternative use of the resources employed |
| Balanced Scorecard | Strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals |
| Triple Bottom Line | Combination of economic, social, and ecological concerns-or profits, people, and planet-that can lead to a sustainable strategy |
| Sustainable Strategy | A strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or planet |
| Business Model | Stipulates how the firm conducts its business with its buyers, suppliers, and partners in order to make money |
Created by:
eunsolochos