Term
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Definition
| a set of related actions that managers take to increase their company's performance |
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| capital that cannot be recovered if a company fails and goes bankrupt |
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Definition
returns that shareholders earn from purchasing shares in company
Sources
a. capital appreciation
b. dividends |
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Term
| determinants of shareholder value |
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Definition
-effectiveness of strategies
-profitability (ROIC)
-shareholder value
-profit growth |
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Definition
| when a company has profitability greater than avg profitability and profit growth of other comps |
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| managers conception of how the set of strategies their company pursues mesh together into a congruent whole |
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Term
| levels of strategic management |
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Definition
- Corporate: CEO, board of directors, corp staff
- Business: Divisional managers and staff [Finance, Mktg, Production]
- Functional - functional managers [HR in Finance]
Ex. GE |
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Term
| Strategic Planning Process |
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Definition
1. Select corp mission and goals
2. Analyze external environment - Opps & Threats
3. Analyze internal environment - Strengths & Weaknesses
4. Select strategies
5. Implement strategies |
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Term
| criticisms of formal planning model |
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Definition
1. unpredictability of real world
2. role lower-level managers can play
3. success often a result of serendipity (stumbling across good thinks unexpectedly), not rational strategizing |
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Term
| Henry Mintzberg model of strategy development |
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Definition
Deliberate - planned; formal top-down
Emergent - unplanned responses to unforseen circumstances; autonomous action by individual managers deep within org |
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Term
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Definition
- prior hypothesis bias: strong prior beliefs about relationship between two variables
- escalating commitment: committed significant resources
- reasoning by analogy: simple analogies to solve complex problem
- representativeness: tendency to generalize
- illusion of control: overestimating one's ability to control events |
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Term
| techniques to improve decision making |
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Definition
- devil's advocacy
- dialectic inquiry: generation of a plan (thesis) and a counterplan (antithesis); debate
- outside view: view past strategic initiatives |
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- accounting measures - ROI
- firm's NPV
- well-being of the stakeholders |
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Term
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Definition
ROIC = NOPLAT / IC
NOPLAT = revenue - COGS - operating ex - depreciation - adj taxes
IC = shareholder's equity + debt |
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Term
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Definition
(1) Monopoly - when the company has the whole market to itself
(2) Ricardian - when the company has unique and valuable resources and capabilities that others don't
(3) Schumpeterian - when the company comes up with an innovation, and has a patent or exclusive rights |
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