J370 Midterm
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Created by:
NeilKelty Plus on September 28, 2010
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109 terms
Terms | Definitions |
|---|---|
 Strategy | A firm's theory about how to gain competitive advantage |
| Strategic Management Process | a sequential set of analyses that can increase the likelihood of a firm's choosing a strategy that generates competitive advantage |
| mission | a firm's long-term purpose should communicate: -The purpose of the business -What the business does -What values guide firm behavior |
| Competitive Advantage | the ability to create more economic value than competitors |
| Competitive Parity | a firm creates the same economic value as rival firms |
| Temporary Competitive Advantage | a competitive advantage that lasts for a short period of time |
| Sustained Competitive Advantage | a competitive advantage that lasts for a long period of time; an advantage that is not competed away through strategic initiation |
| Competitive Disadvantage | a firm generates less economic value than rival firms |
| visionary firms | firms whose mission is central to all they do |
| objectives | specific, measurable targets a firm can use to evaluate the extent to which it is realizing its mission |
| external analysis | identification and examination of the critical threats and opportunities in a firm's competitive environment |
| internal analysis | identification of a firm's organizational strengths and weaknesses and of the resources and capabilities that are likely to be sources of competitive advantage |
| business-level strategies | actions firms take to gain competitive advantages in a single business or industry |
| corporate level strategies | actions firms take to gain competitive advantage by operating in several businesses simultaneously |
| strategy implementation | a firm adopting organizational policies and practices that are consistent with its strategy |
| emergent strategies | theories of how to gain competitive advantage in an industry that emerge over time or have been radically reshaped once they are initially implemented |
| general environment | broad trends in the context within which a firm operates that can have impact on a firms strategic choices |
| technological change | how to use technology to create new products & services |
| demographics | distribution of individuals in terms of a. Age b. Sex c. Marital status d. Income e. Ethnicity f. Other physical attributes |
| culture | values, beliefs and norms that guide behavior in a society. |
| economic climate | health of economic systems within which a firm operates |
| recession | low economic activity |
| depression | years of a recession |
| business cycle | the altering pattern of prosperity followed by recession followed by prosperity |
| legal and political conditions | dimensions of an organization's general environment are laws and legal systems impact on business, together with the general nature of the relationship between government and business |
| specific international events | events such as war, coups, terrorism and famines, all of which can have enormous impact on the ability of a firm's strategies to generate competitive advantage |
| structure-conduct-performance model | theory suggesting that industry structure determines a firm's conduct, which in turn determines its performance |
| Industry structure | -number of competing firms -homogeneity of products -cost of entry and exit |
| firm conduct | strategies firms pursue to gain competitive advantage |
| performance | firm level: competitive disadvantage, parity, temporary or sustained competitive advantage society: productive and allocative efficiency, level of employment, progress |
| five forces framework | identifies the five most common threats faced by firms in their local competitive environments and the conditions under which these threats are more or less likely to be present; these forces are the threat of entry, or rivalry, of substitutes, of buyers and of suppliers |
| environmental threat | any outside force (individual, groups, organization) that seeks to reduce the level of that firms performance |
| new entrants | recent firms that have either recently started operating in an industry or that threaten to begin operations in an industry soon |
| barriers to entry | into an industry (make the industry more attractive) inside: entry is costly and that limits competition outside: if cost can be avoided the industry is attractive |
| economies of scale | costs go down the more you produce. Quantity of output costs less than making the previous unit. |
| diseconomies of scale | There is a point of diseconomies because you will eventually have to add resources |
| proprietary technology | secret of patented technology that gives incumbent firms important advantages over potential entrants |
| managerial know-how | the often taken-for-granted knowledge and information that are needed to compete in an industry on a day-to-day basis |
| rivalry | the intensity of competition among a firm's direct competitors |
| substitutes | meet approximately the same customer needs, but do so in different ways. |
| suppliers | make a wide variety of raw materials, labor, and other critical assets available to firms |
| forward vertical integration | a firm incorporates more stages of the value chain within its boundaries and those stages bring it closer to interacting directly with final customers |
| buyers | purchase a firm's products or services |
| backward vertical integration | a firm incorporates more stages of the value chain within its boundaries and those stages bring it closer to gaining access to raw materials |
| competitor | any firm, group or individual trying to reduce a firm's competitive advantage |
| complementor | are found outside the focal firm's industry and increase the value of the focal firm's product |
| fragmented industries | are industries in which has a large number of small or medium-sized firms operate and no small set of firms has dominant market share or creates dominant technologies. |
| consolidation strategy | consolidate the industry into a smaller number of firms |
| first-mover advantage | advantages that come to firms that make important strategic and technological decisions early in the development of an industry |
| technological leadership strategy | - firms that make early investments in particular technologies in an industry and implement them |
| strategically valuable assets | resources required to successfully compete in an industry |
| customer-switching costs | exist when customers make investments in order to use a firm's particular products or services |
| mature industries | Characteristics of mature industries 1. Slowing growth in total industry demand 2. The development of experienced repeat customers 3. A slowdown in increases in production capacity 4. A slowdown in the introduction of new products or services 5. An increase in the amount of international competition 6. An overall reduction in the profitability of firms in the industry |
| process innovation | a firm's effort to refine and improve its current processes |
| market leader | firm with the largest market share in the industry |
| niche strategy | focuses on a narrow segment of the declining industry |
| harvest strategy | do not expect to remain in the industry over the long term. They engage in a long, systematic, phased withdrawal, extracting as much as possible during the withdrawal period |
| divestment | a firm sells a business in which it had been operating |
| resource-based view | model of firm performance that focuses on the resources and capabilities controlled by a firm as sources of competitive advantage |
| resources | tangible and intangible assets that a firm controls that it can use to conceive and implement its strategies. |
| capabilities | tangible and intangible assets that enable a firm to take full advantage if the other resources it controls. |
| financial resources | all money that firms use to conceive and implement strategies Example: cash, retained earnings |
| retained earnings | profit made earlier in its history and invests in itself |
| physical resources | physical technology used in a firm Example: plant and equipment, geographic location |
| human resources | training, experience, judgment, intelligence, relationships, and insight of individual managers and workers in a firm Example: skill & abilities of individuals |
| organizational resources | attribute of groups of individuals Example: reporting structures, relationships |
| resource heterogeneity | implies that some firms may be more skilled in accomplishing this activity than other firms |
| resource immobility | some of these resource and capability differences among firms may be long lasting, because it may be very costly for firms without certain resources and capabilities to develop or acquire them. Some resources may not spread from firm to firm easily |
| VRIO framework | stands for the four questions one must as about a resource of capability to determine its competitive potential: |
| Question of Value | Does a resource enable a firm to exploit an environmental opportunity and/or neutralize an environmental threat? |
| value chain | the set of business activities in which it engages to develop, produce, and market its products or services |
| Question of Rarity | Is a resource currently controlled by only a small number of competing firms? |
| imperfectly imitable | valuable and rare organizational resources can be a source of sustained competitive advantage only if firms that do not process them face a cost disadvantage in obtaining or developing them |
| Question of Imitability | Do firms without a resource face a cost disadvantage in obtaining or developing it? |
| sustained competitive advantage | an advantage that is not competed away through strategic imitation |
| direct duplication or substitution | the attempt to imitate other firms by developing resources that have the same strategic effects as the resources controlled by those other firms |
| path dependence | events early in the evolution of a process have significant effects on subsequent events |
| causally ambiguous | When competitors cannot tell, for sure, what enables a firm to gain an advantage, that advantage may be costly to imitate. Sources of casual ambiguity include when competitive advantages are based on "taken-for-granted" resources and capabilities, when multiple non-testable hypotheses exist about why a firm has a competitive advantage, and when a firm's advantages are based on complex sets of interrelated capabilities |
| socially complex | When the resources and capabilities a firm uses to gain a competitive advantage involve interpersonal relationships, trust, culture, and other social resources that are costly to imitate in the short term. |
| Question of Organization | Are a firm's other policies and procedures organized to support the exploitation of its valuable, rare, and costly-to-imitate resources? |
| formal reporting structure | a description of who in the organization reports to whom |
| organizational chart | a depiction of the formal reporting structure within a firm |
| management control systems | a range of formal and informal mechanisms to ensure that managers are behaving in ways consistent with a firm's strategies |
| formal management controls | a firm's budgeting and reporting activities that keep people higher up in a firm's organizational chart informed about the actions taken by people lower down in the organizational chart |
| informal management controls | include a firm's culture and the willingness of employees to monitor each others' behavior |
| compensation policies | the way the firm pays the employees |
| complementary resources and capabilities | resources and capabilities that have limited ability to generate competitive advantage in isolation but in combination with other resources can enable a firm to realize its full potential for competitive advantage |
| distinctive competence | a valuable and rare resource or capability |
| sustainable distinctive competencies | valuable, rare and costly to imitate resources or capabilities |
| competitive dynamics | The strategic decisions and actions of firms in response to the strategic decisions and actions of other firms |
| tacit cooperation | actions a firm takes that have the effect of reducing the level of rivalry in an industry and that do not require firms in an industry to directly communicate or negotiate with each other |
| tacit collusion | firms coordinate their production and pricing decisions not by directly communicating with each other, but by exchanging signals with other firms about their intent to cooperate; special case of tacit cooperation |
| cost leadership business strategy | focuses on gaining advantages by reducing costs below those of competitors |
| process manufacturing | when manufacturing is accomplished in continuous system; examples include manufacturing in chemical, oil refining, and paper and pulp industries |
| learning curve | a concept that formalizes the relationship between cumulative volumes of production and falling per unit costs |
| productive inputs | any supplies used by a firm in conducting its business activities, such as labor, capital, land and raw materials |
| technological hardware | the machines and other hardware used by firms |
| technological software | the quality of labor-management relations, an organization's culture, and the quality of managerial controls in a firm |
| policy choices | the choices firms make about the kinds of products or services they will sell- choices that have an impact on relative cost and product differentiation position |
| escalation of commitment | an increased commitment by managers to an incorrect course of action, even as its limitations become manifest |
| functional organizational structure | the structure a firm uses to implement business-level strategies it might pursue where each function in the firm reports to the CEO |
| functional manager | a manager who leads a particular function within a firm, such as manufacturing, marketing, finance, accounting or sales |
| chief executive officer | person to whom all functional managers report in a U-form organization |
| U-form structure | organization where different functional heads report directly to the CEO; used to implement business-level strategies |
| matrix structure | one employee reports to two or more people |
| product differentiation | a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms' products or services |
| reputation | beliefs a customer hold about a firm |
| "skunk works" | temporary teams whose creative efforts are intensive and focused |
| policy of experimentation | exists when firms are committed to engage in several related product differentiation efforts simultaneously |
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