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Strategic Management
| Term | Definition |
|---|---|
| Accounting Performance | Financial data and rations from publicly traded available data. Focuses on the balance sheet and income statement. |
| Shareholder Value Creation | Focuses on risk capital (i.e., the dollar the shareholder provides in return for an equity share; the money shareholder does not recover if the firm goes bankrupt), total return to shareholders |
| Efficient Market Hypothesis | States that the stock market has all past, future, and current information. |
| Economic Value Creation | Focuses on the difference between value and cost. This is the consumers’ willingness to pay for a product or service and the firm’s total cost to produce it. |
| Reservation Price | Maximum price a consumer is willing to pay for a pro |
| Strategic Management | Integrative management field that combines analysis, formulation, and implementation in the quest for a competitive advantage |
| Strategy | set of goal directed actions a firm takes to gain and sustain superior performance relative to competitors |
| Competitive Advantage | Superior performance relative to other competitors in the same industry or industry average |
| Sustainable Competitive Advantage | Outperform competitors or industry average over a prolonged period of time. |
| Competitive Disadvantages | Underperformance relative to other competitors in the same industry/ the industry average |
| Competitive Parity | Performance of two or more forms at the same level |
| Strategic position | A firm's unique position within an industry that allows the firm to provide value to customers, while controlling costs |
| Internal stakeholders | Stockholders, employees, board members. |
| External Stakeholders | Customers, suppliers, alliance partners, creditors, unions, communities, government, media, etc. |
| Stakeholder Impact Analysis | A decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders. |
| Corporate Social Responsibility | A framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations of society has of the business enterprise at a given point in time. |
| Vision | What a firm wants to ultimately accomplish |
| Mission | Firm's plan to accomplish long-term goal |
| Value | Firm's commitments that guide their strategic decisions |
| 5-level Pyramid | Leadership progression with five distinct levels. The 5-Level Pyramid goes from highly capable individual, contributing team member, competent leader, effective leader, and then executive. |
| Strategic Formulation | Choice of strategy in terms of where and how to compete |
| Strategic Implementation | How the organization coordinates, integrates of how work gets done |
| Strategic Planning- Top - Down Planning | A rational driven strategy process through which top – management attempts to program future success. |
| Scenario Planning | Develops different strategic plans to address possible future scenarios. |
| Cognitive Bias | Obstacles in thinking that lead to systematic errors in our decision making and interfere with our rational thinking. |
| System 1 | Default thinking mode that is automatic, fast, and efficient. Prone to cognitive biases that can lead to systematic errors. |
| System 2 | Thinking mode that applies rationality and relies on analytic and logical reasoning. |
| 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 of individuals face increasingly negative feedback regarding the likely outcome from a decision, but continues to invest resources and time in that decision, often exceeding the earlier commitments. |
| Autonomous Action | Strategic initiative undertaken by lower- level employees on their own volition and often in response to unexpected situations |
| Serendipity | Random events, pleasant surprises, and accidental happenstances. |
| Groupthink | A situation in which opinions coalesce around a leader without individuals critically evaluating and challenging that leader’s opinions and assumptions. |
| Representativeness | A cognitive bias in which conclusions are based on small samples, or even from one memorable case or anecdote. |
| Reason by Analogy | A cognitive bias in which individuals use simple analogies to make sense out of complex problems |
| Confirmation Bias | A cognitive bias in which individuals ten to search for interpret information in a way that supports their prior beliefs. Regardless of facts and data presented, individuals stick with their prior hypothesis |
| External Environmental | Industry in which the firm operates and competitive forces that surround the firm from outside |
| PESTAL | A framework that categorizes and analyzes an important set of external factors that may impinge upon a firm. |
| Industry | A group of incumbent companies that face more / less the same set of suppliers and buyers |
| Porter's 5 Forces | A framework that identifies five forces that determine the profit potential of an industry and shape a firm’s competitive strategy |
| Threat of New Entrants | Risk that potential competitors will enter an industry |
| The Power of Suppliers | The pressure that industry suppliers can exert on an industry profit potential |
| Power of Buyers | The pressure that industry buyers can exert on an industry profit potential |
| Threat of Substitutes | A product that meets the same basic needs as the same industry’s products but in different ways. |
| Rivalry among Competitors | Intensity with which companies within the same industry jockey for market share and profit. |
| Role of Complements | Product, services, and/or complements that adds value to the original product offering when the two are used in tandem |
| Strategic Groups | A set of firms within the same industry that pursue a similar strategy |
| Core Competency | Unique strengths embedded deep within a firm that are critical to gaining and sustaining a competitive advantage |
| Resource | Any asset such as cash, buildings, machinery, or intellectual properties, which a firm can draw on when crafting executing a strategy |
| Capability | Organizational and managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically |
| Activity | Distinct and fine-grained business processes such as order taking, the physical delivery of products or invoicing customers. The process of transferring inputs to outputs. |
| Resource Based View | A model that sees certain types of resources as key to superior firm performance |
| Tangible Resource | An asset which is visible, physical, attributes, labor, capital, land, buildings, plant, equipment, etc |
| Intangible Resource | Invisible, no physical attribute, culture, knowledge, brand equity, reputation, intellectual property (patent, design, copyright, trademark, trade secrets, location, etc.) |
| Resource Heterogeneity | Assumption in RBV that a firm is a bundle of resources and capabilities that differ across firms. |
| Resource Immobility | Assumptions in RBV that a firm has resources that tend to be “sticky” and that do not easily move from firm to firm. |
| Valuable Resource | A resource that helps a firm exploit an external opportunity or offset an external threat. |
| Rare Resource | If the number of firms that possess a resource is less than the number of firms it would require to reach a state of perfect competition |
| Costly to Imitate | It is hard for other firms to directly imitate or substitute a resource. |
| Organized to Capture Value | Characteristics of having in place an effective organizational structure, process, and system to fully exploit the competitive potential of the firm’s resources, capabilities, and competencies |
| Core Ridgity | A former core competency that turned into a liability because the firm did not hone, refine, and upgrade the competency as the environment. |
| Dynamic Capability | A firm’s ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for a competitive advantage. |
| Dynamic Capability 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 a competitive advantage in a constantly changing environment |
| Value Chain | Internal activities a firm engages in when transforming inputs into outputs, each activity adds incremental value. |
| Primary Activities | Those activities which add value directly as the firm transforms inputs into outputs (i.e., from raw materials through production phases to sales and marketing and finally customer services). These activities include Supply Chain Management, Operation |
| Secondary Activities | Firm activities that add value indirectly, but are necessary to sustain primary activities (necessary, but insufficient activates). These activities include Research and Development, Information Systems, Human Resource Management, Accounting and Finan |
| S.W.O.T. | A framework that allows managers to synthesize insights obtained from internal analysis of firms strengths and weaknesses and external opportunities and threats to derive strategic implementation |
| Accounting Performance | Financial data and rations from publicly traded available data. Focuses on the balance sheet and income statement. |
| Shareholder Value Creation | Focuses on risk capital (i.e., the dollar the shareholder provides in return for an equity share; the money shareholder does not recover if the firm goes bankrupt), total return to shareholders (i.e., return on risk capital or the stock price appreciation |
| Efficient Markey Hypothesis | States that the stock market has all past, future, and current information |
| Economic Value Creation | Focuses on the difference between value and cost. This is the consumers’ willingness to pay for a product or service and the firm’s total cost to produce it |
| Reservation Price | The maximum price a consumer is willing to pay for a product / service based on the total perceived consumer benefit |
| Balanced Scorecard | A strategic implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals. There are four keys questions: 1. How doe customers view us, 2. How do we create value,3. What core compe |
| Opportunity Cost | The value of the best foregone alternative use of the resources employed (i.e., forgone wages and/or cost of capital invested) |
| Triple Bottom Line | Combination of economic, social and ecological concerns (i.e., profit, people, and planet) that can lead to a sustainable strategy. |
| Razor- Razorblade model | A business model where the firm’s initial product is sold at a lower price to drive up demands for complementary goods (i.e., HP and Printers and Ink) |
| Subscription | A business model where users pay for access to products/services whether the user uses the product/service within a specified payment period or not (i.e., Netflix) |
| Pay- as you go | A business model where users pay for only the services they consume (i.e., Zipcar) |
| Freemium | A business model where uses are exposed to free basic services and then pay for premium / advanced serviced (i.e., Pandora). |
| Wholesale | A business model where a firm sells to a retailer for a fixed price and then retailers can set which price they wish to see the product/service at |
| Agency | A business model where a producer relies on agent / Retailer to sell products for a percentage of compensation |
| Bundling | A business model which sells products and/or services which demand is negatively correlated at a discount (i.e., different Microsoft products) |
| Business Model | A firm’s plan that details how it intends to make money. |
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