Term
| Governance & governing Body |
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Definition
Depends on the success/failure of any organization
-Stockholders, management, BOD |
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Term
| Effective Corporate Governance |
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Definition
| Balances the interests of managers and owners |
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Definition
| Process, customs, policies, and procedures of a firm as well as the governing body that is responsible for its direction, management and control |
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Definition
| Vision, Mission, Strategy |
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Term
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Definition
What a firm wants to be
Inspiring, highlights a firm's aspirations & values
Uplifting, positive emotions |
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Definition
What the firm does
Where the firm will focus its attention and highlights its core values/beliefs
Emphasizes how and why the firm plans to compete with a range of products & services |
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Definition
"How to" plan for fulfilling the mission and accomplishing goals
Map for moving the company toward strategic competitiveness |
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Term
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Definition
Detailed document outlining specific courses of action each with precision and an exact timeline
Emphasize Performance Objectives |
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Term
| TMT's guide firms to achieve Performance Objectives by: |
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Definition
Motivating employees
Energizing and leveraging value-producing resources
Developing basic, core & distinctive competencies
Planning & deploying an effective combination of offensive and defensive strategies |
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Term
| Performance Objective Ladder |
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Definition
1) Strategic Competitiveness
2) Sustainable Competitive Advantage
3) Recurrent Above Average Returns (AAR) |
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Term
| Strategic Competitiveness |
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Definition
Development of unique business competencies that, on s/t basis, enable the firm to perform activities more effective and efficient than rivals
-First rung
-Firm is able to earn disproportionally higher profits than its direct competitors
-Competitive advantage over rival firms |
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Term
| Sustainable Competitive Advantage |
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Definition
Firm has discovered a method for continuously performing its value generating activities more effective and efficient than its rivals
-Second rung
-Commercial staying power |
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Term
| Recurrent Above Average Returns (AAR) |
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Definition
Earned by firms that have Achieved and Sustained a competitive advantage for an extended period of time
Sustainable = recurrent potential
Sustained = Recurrent achievements
Firm is a better than average investment
Exceed what investors would normally expect to achieve on similar risk investments
-Third Rung |
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Term
| Competitive Advantage & AAR at the Business Level |
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Definition
| Indicates the firm has successfully focused its energies and resources on satisfying customers while producing a high rate of return |
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Term
| Competitive Advantage & AAR at the Conglomerate Strategic Level |
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Definition
| Indicates the firm has successfully focused its energies and resources on building a portfolio of successful business subsidiary businesses. These subs. Businesses have or are expected to achieve competitive advantage & provide synergistic benefits to other businesses in portfolio |
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Term
| Resource Based View (Performance Theoretical Models) |
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Definition
Assumes management competency combined with firms resources 7 capabilities will be chief determinant in the ability to provide AAR to investors
Physical, financial, intangible, intellectual, leadership will determine degree of success
Internal Environment
Not the industry that dictates the firm's ability to produce AAR, as it is the ability to compete within that industry |
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Term
| Industrial/Organizational View (Performance Theoretical View) |
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Definition
Assumes the industry in which a firm competes is the primary determinant in the ability to grow & provide AAR to investors
Industry in which it competes that will determine degree of success
External environment |
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Term
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Definition
(Both R/B Model and I/O Model agree Strategic Management is linked to competence to TMT's
Knowledge
Skills
Abilities |
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Term
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Definition
Literacy
Highly refined knowledge of managing people and strategies
Knowledge of Corporate finance and accounting |
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Term
| 8 Spheres of Business Literacy |
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Definition
Human Resources
Corporate Cultures
Industry specific customs
Accounting & finance
Techniques for effective utlization of corporate resources
Systems for assessing progress
Analysis methods
Tactical and strategic process |
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Term
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Definition
Administer
Technical know-how of communication, implementing and managing strategies
Must be able to apply what they know |
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Term
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Definition
Critical Thinking (apply concepts with great expertise)
Think quickly and critically
Can objectively contemplate, deliberate, and evaluate situations |
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Term
| TMT Responsibilities-5 Strategic Management Activities |
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Definition
1)Swot
2)Strategic Intent
3)Strategy Formulation
4)Strategy Implementation
5)Strategy Management |
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Term
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Definition
Continuously analyzing the business environments (internal & external) to assess SWOT
-Scanning
-Monitoring
-Competitve Intelligence |
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Term
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Definition
General surveillance activity,early warning system to alert TMT of threats and opportunities
Both internal & external should be observed |
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Term
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Definition
More direct & focused
Thoroughly analyzing the sequence of events and streams of activities that led to changes in order to better understand
Prepare for ultimate consequences of changes
Provide firm with opportunity to attempt to alter situations and conditions |
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Term
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Definition
Identifying and assessing strengths and weaknesses of competitors
Collect as much info as possible to avoid being caught offguard (should be legal and ethical)
Offensive & defensive strategy
Not spying
Not just info, it is info that has been analyzed to the extent it can be integrated into the decision making process |
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Term
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Definition
Reestablish short and long term performance goals/objectives
Should be in harmony with vision & mission |
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Term
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Definition
Translate updated goals and objectives into tactical strategic action plans
Strategic intent provides foundation for strategy formulation, however during the process of formulating strategies issues may be discovered
Careful consideration of capabilities and its limitations
Two core Operating Models with different competitive strategies: First lebel business and Second Level Business |
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Term
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Definition
(Business Level Model)
Employ a specific operating model that guides decisions about how value will be created and under what conditions products and services will be delivered to customers
Distinctive products- so customer will purchase your products rather than those from the competitor
-Low cost leadership
-Differentiation
-Narrow market catering niche |
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Term
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Definition
Conglomerate level model
Utilizes an operating model that guides value creation through the selection of subsidiary companies that cover leverage potential to other components in the corporate portfolio
-Strategic planners indirectly concerned with achievement of competitive advantage
-Direct concern is transferred to each of the operating companies
-Provide AAR by creating portfolio of business that have achieved competitive advantage and offer potential
Joint ventures, corporate partnering |
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Term
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Definition
Communicate & activate the tactical and strategic plans
Living, changing process
Directing resources toward achievement of overall organizational goals & objectives |
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Term
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Definition
Refers to the process of directing, controlling & supervising of the strategies and tactics that have been initated
Personnel involved with managing the strategic plan need to be well informed about desired outcomes
Assess interim success & failures and adjust course as conditions needed |
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Term
| External Business Environment |
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Definition
| Encompasses all issues, occurrences, trends, etc. that are peripheral to the corporation and beyond the control of TMT |
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Term
| Internal Business Environment |
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Definition
| Relates to all aspects within the confines of the organization and are within control of TMT |
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Term
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Definition
| Tools that can aid in the rapid adaptation to environmental changes. Help TMT's prepare for wide range of possible future conditions from highly likely to highly unlikely |
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Term
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Definition
| Alternative Strategic plans to match the conditions highlighted in scenario models |
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Term
| 5 Factors of the General Environment |
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Definition
1) Sociocultural
2) Demographic
3) Economic
4) Technological
5) Political/Legal |
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Term
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Definition
Relate to a country's dominant religions, populations desire for leisure time, attitudes toward consumerism, environmentalism, and role of gender
-Lifestyles, values, belief systems
-Important to identify current status of factors AND determine whether they are changing |
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Term
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Definition
| Pertain to changes in the population size of a country, geographic distribution of people, ethnic mix, income distribution, average age, number of people in the family |
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Term
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Definition
Relate to a country's inflation or deflation rates, interest rates, tariffs, balance of trade issues, growth of national economies, exchange rates, unemployment rates, labor availability, gross domestic products, savings rates
-Differ between underdeveloped and developed countries AND vary within nations |
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Term
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Definition
| Pertain to a country's reception to innovation. Some national cultures discourage change, while others support it |
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Term
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Definition
| Center on political stability of a country, legal system, and its general attitude toward business |
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Term
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Definition
1) Customers
2) Suppliers
3) Unions
4) Associations
5) New Entrants
6) Interest Groups
7) Substitutes
8) Competitors
9) Creditors |
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Term
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Definition
| Ultimate factor, usually not primary consideration in strategy |
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Term
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Definition
| Need a strong working relationship |
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Term
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Definition
| Not the enemy, organized labor can enhance well managed corporations |
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Term
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Definition
| Proclamations and publications from associations, promote technologies |
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Term
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Definition
| Threat. Consume market share, introduce new ideas and innovate. Should be monitored |
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Term
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Definition
| Crucial lifeline to most corporations and when their leverage is too great they are capable of demanding behavior concessions from businesses that may be counterproductive to corporate strategies |
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Term
| Factors that amplify the intensity with which firms ocmpete |
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Definition
| High fixed costs, high storage costs, lack of differentiation, low switching costs, high exist barriers |
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Term
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Definition
1) Rivalry among competing firms
2) Bargaining power of buyers (is high)
3) Bargaining power of suppliers
4) Threat of substitutes
5) Threat of New entrants |
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Term
| Rivalry among competing firms |
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Definition
Increases when the size of the market shrinks or does not grow
Prices decrease, favorable shipping terms may be offered
Lower net revenues from reduced prices and increased expenses associated with the additional services offered |
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Term
| Bargaining power of buyers (is high) |
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Definition
Intense rivalry between suppliers, few buyers for products or services
Buyer is primary customer of supplier or extremely large
Low switching costs
Buyer is capable of backward integration (may enter sellers industry and supply its own needs) |
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Term
| Bargaining power of suppliers |
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Definition
Few suppliers, greater demand than availability
Few or no substitutes
Products or services are crucial to business
Buyers are small purchasers of suppliers products
Suppliers has a lot of customers
High switching costs,risk of forward integration (supplier enters industry of buyer) |
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Term
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Definition
Customers have low switching costs
Price of substitute is lower
Quantity of substitute is comparable or better |
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Term
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Definition
Low entry barriers, lack of differentiation, lack of brand loyalty, low switching costs, low government intervention
Easy access to distribution
Favorable supplier welcome or no participants in the industry |
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Term
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Definition
Clusters of firms that share similar customers distribution systems, vertical integration, depth of product lines or services, pricing, quality, geographic territories, and strategies
-Price wars may occur
-Not unusual for companies to enter, leave, reenter |
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Term
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Definition
Competing companies occasionally join forces
-Unique opportunities to prosper through collaboration rather competition
-Formation relationship between 2 or ore corporations with mutual set of goals |
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Term
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Definition
Short term contracts, maintain greatest individuality
Parties do not combine management team, value chains, etc.
Cross marketing agreements, sharing outsourcing |
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Term
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Definition
Sharing technologies, processes
More confidence and trust
Designate the financial and technical commitment each party will contribute |
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Term
| Cross-holding arrangements that include equity stakes |
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Definition
Near merger like
Complex and require the most care
Partners take a significant equity-stake holdings in the other |
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Term
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Definition
Nations are becoming more interdependent as the asymmetries of individual countries rapidly disappear
-Quick and easy movement of people, knowledge, ideas from country to country
-New and more complex commercial threats to every business
-Cannot compete in the 21st century with 20th century ideas
-TMT's must be flexible and creative |
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Term
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Definition
Pertains to those individuals who have the responsibility to craft significant strategic plans and the authority to implement, direct, control, and modify those plans
Art of motivating a group of people to act as a team striving to achieve a common goal
Quality is measured by achievements and methodology |
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Term
| 3 Levels of Strategic Competencies |
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Definition
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Term
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Definition
What a firm can do
-What a firm has demonstrated that it can do profitably |
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Term
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Definition
What a firm can do really well
-What a firm can do extremely well while enhancing profitability |
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Term
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Definition
What a firm can do really well AND distinguish from competitors
-What the company can do extremely well but also what distinguishes the firm and its output from its competitors |
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Term
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Definition
Enable a firm to move closer to a prime objective of achieving and sustaining AAR
-Valuable (Revenue > Costs)
-Rare (not possessed by many competitors)
-Difficult to substitute (Cannot easily be copied)
-Growth Potential |
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Term
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Definition
| Process of producing or providing a product, service or condition that is reward to BOTH the value producer and members of the satisfaction chain |
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Term
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Definition
Consists of a group of individuals who have vested interest in the decisions, actions and successes of an organization
-Customers: want desirable, dependable products & services at fair prices
-Employers: want good working environments, satisfying work, and fair wages
-Investors: want investment risks minimized. Shareholders want investment returns maximized and creditors want debt obligations liquidated as scheduled |
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Term
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Definition
Risk: Dependency on health and life-cycle of single industry
Benefit: Singularity of focus contributes to depth of industry knowledge |
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Term
| Conglomerate Level Structure |
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Definition
Risk: inadequate understanding of the intricacies of multiple industries
Benefit: Lack of dependency on health and life cycle of a single industry
Acquisitions can be contiguous, related or unrelated |
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Term
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Definition
1) Introduction
2) Growth
3) Maturity
4) Decline |
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Term
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Definition
Awkward, customers are completely familiar with the product or service and features are not completely defined
Competition is limited due to newness
Producers/providers of the product or service must work hard to educate the consumer as to what the product or service will do for them
Price is usually high |
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Term
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Definition
Exciting and comfortable
Advertising should make the company brand standout as unique
Customer understands the product
Price is still high |
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Term
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Definition
Test patience of TMTs because demand slows
Multiple suppliers and fewer new users so competition is aggressive and advertising expenditures increase
Profit stage
Try to maintain marker share, weaker competitors are likely to exit the industry
Price decreases, volume discounts expanded |
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Term
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Definition
Industry sales fall, profits are compromised, and strategies don't work
Market is saturated and product may be obsolete
Price is extremely lower |
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Term
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Definition
Management will make self serving decisions that do not consider the effect of other stakeholders
-Shareholders depend on corporate boards as a governance mechanism to minimize the frequency and magnitude of these lapses
Corporate boards have become important component of governance structure with legal authority to dismiss any poorly performing TMT
Separating of positions of CEO and board chair |
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Term
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Definition
Some believe TMT of organizations are the most qualified and willing to fulfill their fiduciary responsibility in an honorary and appropriate fashion
-TMTs can be trusted as capable and honest stewards of a firm's resources
-No one understands or cares more about the company than those who mange it
-Fewer stewardship theorists |
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Term
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Definition
Peer Pressure- by other board members to conform to new norms
Lawsuits-by shareholders or creditors are likely to motivate directors to become more knowledgeable about TMT decisions
Dismal Firm performance: in comparison to competitors
Government regulations: new laws or enforcement: SOX 2002 |
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Term
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Definition
Women-ratio of women v. men on the board changes, more women is positive
Professional expertise- more bankers and financial experts on board are associated with stabilizing stock returns
Average age- younger boards outperform older boards
Committee membership changes: power of board can shift from inside to outside directors
Inside/Outside director ratio: more inside directors, the influence management has over the board decreases
Board Interlocks: 2 or more corporate boards of directors have one or more common members
Board size- larger boards less effective
CEO tenure- as tenure increases, CEO has more influence
Duality: when CEO is also board chair the TMT has a lot of influence |
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Term
| Greatest Transformational Motivator |
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Definition
Sarbanes Oxley
-June 30, 2002 in response to corporate scandals
-Section 404 assessment of internal control
-Section 802 criminal penalties for violations
-Boards are legally bound to be fully informed
-Audit committees must be independent directors |
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Term
| Sherman Act followed by Flayton Antitrust act of 1914 |
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Definition
Illegal for an individual to sit on the board of two or more competing companies
Could be unfair, self serving exchange of non-public information
Person on many boards will divide his or her attention
May become addicted to the perks of multiple corporate boards |
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Term
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Definition
| Question the actions and decisions of management and are not afraid to insist that changes be made |
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Term
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Definition
| Frequently head bobbers, nodding in agreement with all proposals because they do not want to rock the boat |
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