Contemporary Strategy Analysis Glossary Flashcards
Activity System
A conceptualisation of the firm as a set of interrelated activities.
Agency Problem
An agency relationship exists when one party (the principal) contracts with another party (the agent) to act on behalf of the principal. The agency problem is the difficulty of ensuring that the agent acts in the principal’s interest.
Ambidextrous Organization
An organization that can simultaneously exploit existing competences while exploring new opportunities for future development.
Balanced Scorecard
A tool for linking strategic goals to performance indicators. These performance indicators combine performance indicators relating to financial performance, consumer satisfaction, internal efficiency, and learning and innovation.
Benchmarking
A systematic process for comparing the practices, processes, resources and capabilities of other organizations with one’s own.
Blue-ocean Strategy
The discovery or creation of uncontested market space.
Business Ecosystem
The network of organizations with which a business enterprise interacts.
Business Model
The overall logic of a business and the basis on which it generates revenue and profits.
Business Strategy (aka Competitive Strategy)
This refers to how a firm competes within a particular industry or market.
Causal Ambiguity
The difficulty facing any observer of diagnosing the sources of the competitive advantage of a firm with superior performance. It means that potential rivals face the problem of uncertain imitability.
Comparative Advantage
A country’s ability to produce a particular product at a lower relative cost than other countries.
Competency Trap
The barrier to change that results from an organization developing high levels of capability in particular activities.
Competitive Advantage
A firm possesses a competitive advantage over its direct competitors when it earns (or has the potential to earn) a persistently higher rate of profit.
Consumer Surplus
The value that a consumer receives from a good or service minus the price that he or she paid.
Contingency Theory
Postulates that there is no single best way to design and manage an organization. The optimal structure and management systems for any organization are contingent upon its context - in particular, the features of its business environment and the technologies it utilizes.
Corporate Governance
The system by which companies are directed and controlled.
Corporate Planning
A systematic approach to resource allocation and strategic decisions within a company over the medium to long-term (typically 4-10 years).
Corporate Restructuring
Radical strategic and organizational change designed to improve performance through cost reduction, employment reduction, divestment of assets, and internal reorganization.
Corporate Strategy
A firm’s decision and intentions with regard to the scope of its activities (its choices in relation to the industries, national markets, and vertical activities within which it participates) and the resource allocation among these.
Dominant Design
A product architecture that defines the look, functionality and production method for the product and becomes accepted by the industry as a whole.
Dynamic Capabilities
Organizational capabilities that allow an organization to reconfigure its resources and modify its operating capabilities in order to adapt and change.
Economic Profit
Pure profit: it is the surplus of revenues over all the costs of producing that revenue inputs (including the costs of capital).
Economic Value Added (EVA)
A measure of economic profit. It is the excess of net operating profit after tax over the cost of the capital used in the business.
Economics of Scale
These exist when increases in the scale of a firm or plant result in reductions in costs per unit of output.
Economics of Scope
These exist when using a resource across multiple products or multiple markets uses less of that resource than when the activities are carried out independently.
Emergent Strategy
The strategy that results from the actions and decisions of different organizational members as they deal with the forces that impinge upon the organization.
Experience Curve
The relationship between unit costs and accumulated production. Typically unit costs decline by 15-30% every time cumulative output doubles.
Functional Structure
Organization around specialized business functions such as accounting, finance, marketing, operations and so on.
Game Theory
A body of theory that analyzes and predicts the outcome of competitive (and cooperative) situations where each player’s choice of action depends on the choices made by the other players in the game. Game theory has applications to business, economics, politics, international relations, biology, and social relations.
Global Strategy
A strategy that treats the world as a single, if segmented, market.
Hypercompetition
Competition that is characterized by rapid and intensive competitive moves where competitive advantage is quickly eroded and firms are continually seeking new sources of competitive advantage.
Institutional Isomorphism
The tendency for organizations that are subject to common social norms and pressures for legitimacy to develop similar organizational characteristics.
Isolating Mechanisms
Barriers that protect the competitive advantage of firms from imitative competition.
Matrix Structures
Hierarchies that comprise multiple dimensions; these typically include product (or business) units, geographical units, and functions.
Multidivisional Structure
A company structure comprising separate business units, each with significant operational independence, coordinated by a corporate head office that exerts strategic and financial control.
Open innovation
An approach to innovation where a firm seeks solutions from organizations and individuals outside the firm and shares its technologies with other organizations.
Organizational Culture
An organization’s values, traditions, behavioral norms, symbols, and social characteristics.
Organizational Ecology
This studies the organizational population of industries and the processes of founding and selection that determine entry and exit.
Organizational Routines
Patterns of coordinated activity through which an organization is able to perform tasks regularly and predictable.
Path Dependency
The simple fact that history matters; more specifically, it implies that an organization’s strategy and structure and management’s options for the future are determined by it’s past decisions and actions.
Prisoner’s Dilemma
A simple game theory model that shows how lack of cooperation results in an outcome that is inferior to that which could have been achieved with cooperation.
Profit
The surplus of revenues over costs available for distribution to the owners of the firm.
Real Option Analysis
This identifies and values possibilities for investment in uncertain opportunities. The two major types of real option are investments in flexibility and investment in growth opportunities.
Realized Strategy
The actual strategy that the organization pursues; it is the outcome of the interaction of intended strategy with emergent strategy.
Regime of Appropriability
The conditions that determine the extent to which a firm is able to capture profits from its innovations.
Self-Organization
The tendency for complex systems, both natural and biological, to spontaneously achieve order and adaption though decentralized interactions without any centralized direction or control.
Seller Concentration
This measures the extent to which a market is dominated by a small number of firms. The concentration ratio measures the market share of the largest firms; for example the four-firm concentration ratio (CR4) is the combined market share of the four biggest firms.
Stakeholder Value Maximization
This proposes that the firm should maximize the value created by all its stakeholders (owners, employees, customers, suppliers, and society). Top management has the task of balancing and integrating these different interests.
Strategic Fit
The consistency of a firm’s strategy with its external environment and with its internal environment, especially with its goals and values, resources, and capabilities, and structure and systems.
Strategic Intent
The goal of an organization in terms of a desired future strategic position.
Value
Within management terminology, value is used to refer to two very different concepts. In its plural form, values typically refer to ethical precepts and principles. In its singular form it typically refers to economic value: the monetary worth of a product or asset.
Value Added
Sales revenue minus the cost of bought-in goods and services; it is equal to all the firm's payments to factors of production (i.e., wages and salaries \+ interest \+ rent \+ royalties and license fees \+ taxes \+ dividens \+ retained profit)
Value Chain
A sequence of vertically relatied activities undertaken by a single firm or by a number of vertically related firms in order to produce a product or service.
Vertical Integration
A firm’s ownership of adjacent vertical activities.
