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Strategy Mid-term
Chapters 2-8
169
Business
Undergraduate 3
10/13/2013

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Term
Assets used to create and support offerings to customers or clients
Definition
Resources
Term
Have a physical reality – examples are buildings, machinery, and supplies
Definition
Tangible Resources
Term
Are not directly visible – examples are knowledge and reputation
Definition
Intangible Resources
Term
Combinations of resources that create values
Definition
Capabilities
Term
Systematize the knowledge required to create and replicate capabilities needed by the organization
Definition
Routines
Term
The organization’s unique resources, capabilities, and routines; more important for understanding profitability
Definition
Distinctive Competencies
Term
Activity that follows patterns observed in the behavior of others; is often strategic
Definition
Mimetic Behavior
Term
Arise from the interaction of individuals and other resources; they are difficult to understand, but result in more than the apparent sum of their parts
Definition
Socially Complex Activities
Term
Support current activity; include the company’s investments in employee rewards; determine whether an advantage will be sustained or whether a new competitive advantage can be developed
Definition
Resource Flows
Term
Accumulate from investments over time to support competitive advantage; underlies current competitive advantage
Definition
Resource Stocks
Term
(formal and informal) results in newcomers understanding “how we do things here.”
Definition
Socialization
Term
An estimate of the uncertainty about outcomes associated with every activity
Definition
Strategic Risk
Term
Refers to the lack of readily apparent connection between a firm’s activities and its competitive success
Definition
Causal Ambiguity
Term
In the environment reduces or extinguishes the value of past asset stocks
Definition
Competence-Destroying Change
Term
In the environment increase the value of resource stocks
Definition
Competence-Enhancing Change
Term
Resources are competitive resources because they have the following characteristics:
Definition
Rare
Nontradable
Non substitutable
Inimitable
Flexible
Nonappropriable
Term
6 Key aspects of creating sustainable advantage
Definition
Branding
Supporting Activities
Investment
Position
Accumulation
Socialization
Term
Four contributing factors of risk
Definition
Uncertain capacity to accumulate assets
Causal ambiguity
Over Commitment
External Attribution
Term
How is resource accumulation and development strategically managed? (7 steps)
Definition
1. Attend to Necessary Resources
2. Determine Competitive Advantage
3. Define Distinctive Competencies
4. Decompose Distinctive Competencies to Focus Investment
5. Look for Opportunities to Leverage Resources
6. Plans for the Ongoing Renewal of Resources
7. Watch of for Competence-Destroying Change and Capitalize on Competence-Enhancing Change
Term
Allows for a large number of customers to personalize product characteristics
Definition
Mass Customization
Term
Focuses on identifying and servicing customer needs and desires
Definition
Customer-Based Strategy
Term
A measure of the amount of user involvement in planning, executing, and delivering a good or service
Definition
Customer Contact
Term
Summarizes the knowledge, skills, and capabilities used by an organization to produce goods and services
Definition
Intellectual Capital
Term
Support the process of consuming an organization’s offerings
Definition
Experience-Oriented Strategies
Term
Directly involves customers in the creation of the goods, services, or experiences they consume
Definition
Coproduction
Term
Strategies allocate costs between members of an alliance, including alliances between customers and producers
Definition
Cost-Sharing
Term
Assume that most people are intrinsically well-meaning in their interactions with others
Definition
Positive Models of Human Behavior
Term
What do successful customer-centered strategists do?
Definition
o Respect customers as capable of identifying and making decisions about their needs
o Assume that the needs and interests of the customer will change and require adaptation by the organization
o Adopt a partnership perspective in responding to customer needs
Term
Support and reinforce satisfying customers
Definition
Service Climates
Term
Enables one resource to increase the impact of others
Definition
Synergy
Term
Summarizes contact with a product or service from a customer’s perspective
Definition
Customer Experience Map
Term
Indicate market distinctions made by a significant number of customers or potential customers
Definition
Customer Perception Map
Term
Sets of firms offering interconnected products, services, or experiences
Definition
Competitive environment
Term
Competitive settings where firms provide the same or similar sets of products
Definition
Industries
Term
4 descriptions of competitive environments
Definition
Monopoly
Oligopoly
Hypercompetition
Pure Competition
Term
Occurs when a limited number of producers compete for buyers in relatively predictable ways
Definition
Oligopoly
Term
Exists when a significant number of rivals complete intensely and less predictable for competitive advantage
Definition
Hypercompetition
Term
The 2 questions Michael Porter set out to answer in his books on strategy
Definition
1. What makes a competitive environment attractive to new entrants or to existing competitors? (Which types of settings earn high profits?)
- Corporate Strategy
2. How does a firm compete? (What is the basis for high-than-average returns?)
- Business Strategy
Term
Porter's 6 Forces affecting Profitability
Definition
1. Power of rivals
2. Power of Buyers
3. Power of Suppliers
4. Power of Substitutes
5. Power of New Entrants
6. Power of Complements
Term
Conditions that increase the cost of leaving a competitive environment
Definition
Barriers to Exit
Term
Costs incurred when changing suppliers
Definition
Switching Costs
Term
Exists when actors coordinate their activities to their mutual advantage
- Often limited by laws
Definition
Collusion
Term
Coordination to mutual advantage without direct communication
Definition
Tacit Collusion
Term
Conditions that increase the cost of competition for potential entrants
Definition
Barriers to entry
Term
A willingness of current industry participants to use their resources to respond aggressively to competitive moves, including entry
Definition
Retaliation
Term
Provides strategists and other stakeholders with an assessment of a specific competitive environment
Definition
Industry Analysis
Term
Subsets of firms in a competitive setting that follow similar strategies
Definition
Strategic Groups
Term
Looking at things from a sociocultural, technological, economic, and politic perspective
Definition
STEP Analysis
Term
Differences among firms that explain difference in probability
Definition
Assymetries
Term
Provide value to customers at lower cost than competitors
Definition
Cost Leadership
Term
One or more unique attributes that buyers are willing to pay a price premium to receive (Mercedes)
Definition
Differentiation
Term
Concentrate on achieving cost or differentiation advantages with a unique segment of the overall market. The trade off is a smaller market. (Orange County Choppers)
Definition
Focus
Term
Strategies that try to simultaneously implement more than one generic strategy
Definition
Stuck-in-the-middle
Term
Drop currently profitable offering in favor of replacements that typically precede market demand.
Definition
Cannibalization
Term
Strategies that involve legally working with others suppliers, buyers, complements, competitors) to achieve mutually valued objectives.
Definition
Collaboration
Term
2 areas where firms are finding collaboration helpful within the same industry:
Definition
1. Just in Time Manufacturing
2. Research and Development
Term
2 examples of cross-industry collaboration
Definition
1. Community contributions (response to Katrina)
2. Interest Group Participation (organizations banding together to influence policy)
Term
Summarize how strategic decision are expected to make a profit
Definition
Business Model
Term
A formal and complete overview of company activities, followed by detailed financial analysis
Definition
Business Plan
Term
Customers pay a periodic fee for access to a specified good, service, or experience (ex: Netflix)
Definition
Subscription Model
Term
Customers buy a game console and anticipated profits come primarily from premium games sold by the manufacturer (ex: printer and ink cartridges)
Definition
Razor-And-Blades Model
Term
Brokers are market makers who bring buyers and sellers and facilitate exchanges (ex: ebay.com)
Definition
Brokerage Model
Term
An extension of the classic media model that provides free content mingled with advertising (ex: google.com, yahoo.com)
Definition
Advertising Model
Term
Provides a valuable product or service in exchange for detailed buying information (nytimes.com)
Definition
Infomediary Model
Term
Classic wholesalers and retailers (ex: amazon.com) "e-tailer"
Definition
Merchant Model
Term
Reap the benefits of early entry into an emerging market
Definition
First Mover Advantage
Term
The relationship between cost and units produced (costs fall exponentially as cumulative output increases)
Definition
Experience Curve
Term
The set of attributes that customers expect in a given market
Definition
Product Standards
Term
Identify the primary and supporting activities used by an organization to create value for customers
Definition
Value Chains
Term
5 Primary Activities that are necessary in most business models according to Michael Porter
Definition
1. Inbound Logistics (receipt and storage of Raw materials)
2. Operations (creation of product/service)
3. Outbound Logistics (Getting product/service to final customer)
4. Marketing and Sales (promotion of product or service)
5. Service
Term
4 main supporting activities that affect all primary activities
Definition
1. Firm infrastructure
2. HR management
3. Technology Development
4. Procurement (acquiring raw materials)
Term
What are the most successful types of business models?
Definition
Models that link the seller’s value chain to the user’s value chain of activities
Term
Help identify critical aspects of a problematic situation (ex: Porter’s five forces, generic strategies, life cycle models)
Definition
Frame Theories
Term
Outlines a generalized progression of growth and decline
Definition
The Life Cycle
Term
4 stages of the business life cycle at the industry level
Definition
1. Birth of new offering
2. Systems
3. Solutions
4. Relationships
Term
Occurs when every product or service is produced to specified requirements and occurs at the end of this stage
Definition
Standardization
Term
Cost savings enjoyed through more efficient production of larger volumes of a product or service
Definition
Economies of Scale
Term
Packages of the goods or services that meet an end user’s needs – the product, service, or experience package is no longer viewed as isolated components
Definition
Systems
Term
Make or alter a product, services, experience combination to meet individual or personal specifications
Definition
Customized Offerings
Term
The practice of grouping a set of offerings together as a package
Definition
Bundling
Term
Helps firms collect and analyze data about customers
Definition
Relationship Technolgy
Term
Franchisor provides a proven formula for success, training, and trademark supported by a much larger advertising budget than individual franchisees could afford
Definition
Franchise Model
Term
Describes a procedure that has been particularly successful for a firm
Definition
Best Practice
Term
Refers to the practice of comparing a unit’s performance, usually on specific evaluative criteria, to the best performance of similar units in other companies
Definition
Benchmarking
Term
A pool of ideas from other firms that strategists can adapt to their own unique situation
Definition
Promising Practices
Term
The practice of drawing innovative ideas from multiple sources outside formal R&D departments
Definition
Open Innovation
Term
Determines the industries where the corporation will operate and what activities will be undertaken by firms within the corporation
Definition
Corporate Strategy
Term
Acquisition
Definition
A strategy in which one firm buys a controlling or 100% interest in another firm
Term
A strategy in which two or more firms form a relationship in order to pursue mutual interests that have implications for the long-term
Definition
Strategic Alliance
Term
The range of activities within a single firm or corporation
Definition
Scope
Term
Refers to the overall size of a business, usually measured by annual revenues, unit volumes, or total assets
Definition
Scale
Term
An external growth strategy in which the firm expands its scope to include business competing in different markets
Definition
Diversification
Term
3 ways expansion can enhance the performance of firms:
Definition
o Financial Growth: Increasing the overall stream of revenues flowing into the business
o Financial Stability: Leveling out or smoothing the revenues, profits, and cash flow of the business
o Shared Costs: Spreading the costs of rent, employee salaries, advertising, accounting services, and other business activities across higher unit sales volume
Term
When firms find a desired product or service in the market, and come together for an exchange
Definition
Pure Market
Term
When a company will use the corporation’s hierarchical control mechanisms to organize their economic relationship
Definition
Pure Hierarchy
Term
When currencies are exchanged for a product or service and the transaction is immediate
Definition
Spot Market Exchange
Term
Formal relationships between companies that detail the provision of the quantities, prices, specifications, and delivery of products or services over time
Definition
Long-Term Contracts
Term
Frequent but informal relationships between parties based on trust and reputation
Definition
Alliances
Term
Alliances between multiple companies that focus on a particular set of activities that are linked by common agenda
Definition
Networks
Term
A formal relationship between two or more firms to create a new business or carry out some kind of mutually beneficial activity
Definition
Equity Joint Venture
Term
2 types of analysis used to determine how to structure an economic relationship
Definition
o One focusing on the costs of the transaction
o Focusing on leveraging and developing core competencies
Term
Examines the efficiency of creating and monitoring economic relationships
Definition
Transaction Cost Analysis
Term
One party taking advantage of another by neglecting or shrinking their obligation (a common assumption of TCA)
Definition
Opportunism
Term
Defines the logic for external growth and corporate-level resource allocation across multiple business units
Definition
Diversification Strategy
Term
4 types of diversification strategy
Definition
Dominant Businesses
Related-Constrained Diversifiers
Related-Linked Diversifiers
Unrelated Diversifiers
Term
Companies in which most or all of the firm’s revenues come from 1 industry
Definition
Dominant Business
Term
Corporations that compete in a set of industries in which a common pool of competencies enhances economic performance
Definition
Related-Constrained Diversifiers
Term
Corporations that compete in industries are linked to one another in some way, often along the chain of production (RM – Manufacturing – Distribution)
Definition
Related-Linked Diversifiers
Term
Corporations in which most of the businesses in the company’s portfolio are in unrelated industries, not linked along a value chain and not related by a common set of competencies
Definition
Unrelated Diversifiers (Conglomerates)
Term
Represents the skills or knowledge used by a corporation to add value across multiple business units
Definition
Core Competence
Term
A strategic choice to contract corporate boundaries
Definition
Divestment
Term
What type of analysis focuses on the direct costs of producing a good or service (efficiency or effectiveness of competing)
Definition
Core Competence Analysis
Term
Corporate Parent Metaphor
Definition
o Good corporate parents add value to the businesses that they own
o Bad corporate parents impose systems that cause business units to perform below what they would if they were on their own
Term
Different situations that create parenting opportunities
Definition
Size and Age
Management
Business Definition
Predictable errors:
Linkages
Common Capabilities
Special Expertise
External Relations
Major Boundary Decisions
Strategic Changes
Term
2 major barriers to acquiring valuable knowledge in an alliance
Definition
concerns about knowledge spillovers and the tacitness of the knowledge shared
Term
The risk that the knowledge of one firm will inadvertently transfer to others
Definition
Knowledge Spillover
Term
Know-how that is difficult to codify and transfer
Definition
Tacit Knowledge
Term
3 principles that are important to more effective learning in strategic alliances
Definition
o The relationship must have a sufficient number of connections between the partners
o The knowledge goals of the relationship should be related to what an organization already knows
o The organizational cultures of potential partners must be aligned
Term
Ability to learn from external sources
Definition
Absorptive Capacity
Term
See and understand customer needs, find and combine resources, develop innovative solutions, take risks and strive to make a profit
Definition
Entrepreneurs
Term
Group of individuals who bring their collective and often complementary skills and resources to a new venture
Definition
Entrepreneurial Teams
Term
A new idea that is brought to market
Definition
Innovation
Term
One who starts a number of entrepreneurial efforts over time
Definition
Serial Entrepreneur
Term
Significant Departure from currently available product or service offerings
Definition
Radical innovation
Term
Contribute to the improvement of existing product or service offerings
Definition
Incremental innovations
Term
Describes an organization's ability to promote autonomy, innovativeness, proactiveness, competitive aggressiveness, and risk taking
Definition
Entrepreneurial Orientation
Term
Discovering an idea and forming it into a business concept
Definition
Opportunity recognition
Term
The time-sensitive match between the entrepreneur's recognition of opportunity and occurrence of market need
Definition
Synchronicity
Term
Evaluates the human and financial resources available for launching a new venture
Definition
Feasibility analysis
Term
Resource that is required to produce a good or service
Definition
Utilitarian Resource
Term
Not directly required to produce a good or service, but are helpful for acquiring needed resources
Definition
Instrumental Resources
Term
The resource pool available from relationships with others
Definition
Social Capital
Term
Changes in the product or service offered to an existing or new market
Definition
Product Innovations
Term
Do not change the offering itself, but change the way in which the organization operates
Definition
Process Innovation
Term
Makes existing product or service obsolete
Definition
Competence-Destroying Innovations
Term
The first few percent of a new offering’s users who try product or service because of its innovative qualities
Definition
Innovators
Term
The larger group of users who are drawn to an offering’s innovative qualities but tend to be more evaluative than innovators
Definition
Early Adopters
Term
Compared to innovators, tend to be less responsive to technological or innovative content and more responsive to practical features and credibility
Definition
Early Majority Users
Term
The large, conservative group in a community slower than all except the laggards
Definition
Late Majority Users
Term
The users in a community who are slowest to adopt a new product
Definition
Laggards
Term
Similar to majority of innovation’s users and are willing to help the producers improve their product, service or experience
Definition
Lead Users
Term
Recognizes that vulnerability that comes from lack of experience, industry recognition and customer familiarity
Definition
Liability of newness
Term
The financial requirement for initiating a new venture
Definition
Start-up capital
Term
The use of an entrepreneurial individual’s personal resources to finance a new venture
Definition
Bootstrapping
Term
Private individuals who provide seed capital to early-stage ventures
Definition
Angel Investors
Term
Sell stock in a new venture to individual and institutional investors
Definition
Initial Public Offering
Term
The opportunity to obtain exclusive rights to a brand and business model in a specific locality in return for a royalty
Definition
Franchising
Term
Investors who search for and provide capital to entrepreneurs
Definition
Venture Capitalists
Term
An effort by enterprises with large, established businesses to discover new opportunities
Definition
Corporate Entrepreneurship
Term
The tendency to continue in a current state
Definition
Inertia
Term
Sources of current success that make new venture development difficult
Definition
Core rigidities
Term
The independent units of larger organizations that are temporarily given autonomy to develop new ideas
Definition
skunkworks
Term
People who argue for innovation’s support in an organizational setting, stimulating allocation of capital and required cooperation
Definition
Champions
Term
Attempts to optimize current performance while simultaneously preparing for strategic changes that are expected to be necessary in the future
Definition
Dual Strategy
Term
Manage the inconsistent demands of supporting current businesses while developing new entrepreneurial opportunities
Definition
Ambidextrous Organizations
Term
The trend toward a more integrated and interdependent world economy
Definition
Globalization
Term
Unit cost reductions achieved by producing products at the most efficient volume
Definition
Economies of Scale
Term
Result from spreading activities across multiple products or businesses
Definition
Economies of Scope
Term
Resources that firms can draw on in a given country to produce goods and services
Definition
Factor Endowments
Term
4 important issues related to factor endowments
Definition
1. Factor conditions: basic (e.g. natural resources) and advanced (e.g. communication, transportation infrastructure, skilled labor force)
2. Firm strategy, structure, rivalry (competitive environment in a particular location)
3. Demand conditions (size, structure, needs of company’s home market)
4. Related and supporting industries (e.g. suppliers, distributors, complements)
Term
Strategies that utilize domestic resources and capabilities to expand sales and operations across more than one country boundary
Definition
International Strategies
Term
Develop products, services, and experiences that respond to national differences
Definition
Multi-domestic Strategies
Term
Emphasizes responsiveness to local needs and global efficiency simultaneously
Definition
Transnational Strategy
Term
Integrates international operations to achieve low cost and differentiation advantages in multiple economies
Definition
Global Strategy
Term
Attends to differences in local markets but also caries out some activities on a global basis
Definition
Glocal Strategy
Term
5 Alternative entry modes into international markets
Definition
Export (The Right Stuff)
License
Franchise
Joint Venture (Starbucks)
Wholly owned subsidiary
Term
New operations created "from the ground up" as a wholly owned subsidiary
Definition
Greenfield Ventures
Term
Firms and activities that are interlinked and exist in the same local and regional setting (based on economic, social, institutional factors)
Also called networks, centers of excellence, and industrial districts
Definition
Cluster
Term
How do clusters form?
Definition
Concentration in geographic areas
Communication possibly through highly social face-to-face interaction over a long period of time
Increases in learning and innovation
Trust increases too- facilitating contracting and exchange
Common business culture reduces uncertainty
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