Final - Strategic Flashcards
Long-tail
A business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices.
Competition
A process driven by the perennial gale of creative destruction
Invention
The transformation of an idea into a new product or process or the modification and recombination of existing ones
patent
a form of intellectual property that gives the inventor exclusive rights for a period of time
double edge sword
refers to the idea that patents give you a monopoly for a period of time, but you have to give competitors your entire underlying technology which could lead to imitation
Trade secret
valuable proprietary information that is not in the public domain where the firm makes every effort to maintain its secrecy
innovation
the commercialization of any new product or process or the modification of existing ones
first mover advantage
This says there are competitive benefits to being the first innovator in the market as you can lock in key suppliers and have complete market advantage. But there are more costs associated with spending on R&D, needing to educate consumers, and the second mover can copy but do it better
imitation
if and when an innovation is successful competitors will imitate it
The fourth industrial revolution
we are currently in the fourth Industrial Revolution that is characterized by AI and automation advancements
Entrepreneurship
the process by which change agents under take economic risk to innovate
social entrepreneurship
innovating for the purposes of social goals
strategic entrepreneurship
the pursuit of innovation using strategic techniques
Industry life cycle
Cycle that explains the stages of an industry from introduction, growth, shakeout, maturity to decline
Introduction
the first stake of the industry life cycle that is characterized by high R&D costs, few individuals in the market the invention has just become an innovation. Need to educate consumers and find distribution channels.
growth
Second phase of the industry life cycle characterized by market expansion. Here economies of scale is accessed and fits are finding new ways to accelerate growth
Shakeout
the third stage of the industry life cycle in which growth declines, and firms begin to compete. Here the firms that maintain are the ones that achieve a cost leadership or differentiated strategy
Maturity
this is the 4th stage of the industry life cycle and the industry is now an oligopoly with only large firms. the market has reached its max size and industry growth is zero
decline
this is the last stage of the industry growth cycle where changes in the external environment move industries demand to fall
crossing the chasm framework
this framework shows how each stage of the industry life cycle applies to a different customer group
tech enthusiasts
a customer group that adopts new technologies during the introduction stage of the industry life cycle.
early adopters
customers entering during the growth stage of the life cycle because they are eager to buy the newest technologies
early majority
these are consumers entering during the shakeout stage of the life cycle. they buy technology that has a practical purpose in their life
Late majority
consumers that come in at the maturity stage and they are often afraid of having to learn new technology
Laggards
consumers coming in at the decline stage and will only get new tech when it is necessary
Incremental innovation
innovation that steadily builds on existing products and services
radical innovation
innovation that draws on novel methods from an entirely different knowledge base or draws from existing ones
architectural
a new product in which known components based on existing technologies are reconfigured
disruptive innovation
innovation that leverages new technology to attack existing markets
platform business
business’ that scale more efficiently because they eliminate gatekeepers and leverage technology
corporate strategy
the decisions that management makes to gain and sustain competitive advantage
vertical integration
The firms ownership of the inputs needed for production or of the channels through which is distributes its outputs
horizontal differentiation
which products and services they should offer
geographic scope
where they should operate
Transaction Costs
all internal and external costs associated with an economic exchange whether within the firm or external
external transaction costs
costs of searching for a firm or individual with whom to contract with
internal transaction costs
costs pertaining to organizing an economic exchange within the organization
Determining whether to make or buy
in some cases the costs of using the market (external transaction costs) may be higher than the costs of integrating the activity within a firm (internal transaction costs) when these costs of pursuing in house is less then the firm should vertically integrate
advantages for making in firm
command and control over decisions, coordination, transaction specific investments
disadvantages for making in the firm
administrative costs, low powered incentives, principal agent problems
advantages for markets
high powered incentives and flexibility
disadvantage for markets
search costs and incompetence contracting
Short term contracts
A frim sends out requests for proposals to several companies initiating competitive bidding for contracts with the shortest duration
strategic alliance
voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities
licensing
a form of long term contract in the manufacturing sector that enables firms to commercialize intellectual property
franchising
a long term contract in which a franchisor grants franchisee the right to use the franchisors trademark
equity alliance
a partnership in which at least one partner takes partial ownership of other partner
credible commitment
a long term strategic decision that is both difficult and costly to reverse
join venture
a stand alone organization created and jointly owned by two or more parent companies. Company A and Company B came together to create company c
Parent subsidiary relationship
the corporate parent owns the subsidiary and can direct it via command and control
Industry value chain
description of the transformation of raw materials into finished goods and services along distinct vertical stages
backward vertical integration
changes in an industry value chain that involve moving ownership of activities upstream to the originating point o the value chain. Moving toward the buying supplier and away from customer
forward integration
changes in an industry value chain that involve moving ownership of activities closer to the customer
Taper integration
a way of orchestrating value activities in which a firm is backwardly integrating but also relies on outside market firms for some of its spies
strategic outsourcing
moving one or more internal value chain activities outside the firms boundaries to other firms
diversification
an increase in the variety of products and services a firm offers or markets and the regions that it competes
Product diversification
Corporate strategy in which a firm is active in several different product markets
Geographic diversification
corporate strategy in which a firm is active in several different countries
product market diversification
corporate strategy in which a firm is activity in several different products in several different markets
Related diversification
corporate strategy in which a firm derives less than 70% of its revenues from a single business activity
related constrained diversification
a kind of related diversification strategy in which executives pursue only businesses where they can apply the reduces they already have
related linked diversification
a kind of related diversification in which less than 70% of a firms revenues come from a single business but activities share linkages to the main business
unrelated diversification
less than 70% of a firms revues come forma a single business strategy and there are few if any linkages among businesses
Conglomerate
a company that combines two or more strategic business unites under one overarching corporation follows an unrelated diversification
Boston consulting groups growth share matrix
a corporate planning tool which the corporation is viewed as a portfolio of business units which are represented graphically along relative market share and speed of market growth
Dogs
underperforming businesses that have small market share and low growth market, they have low and unstable earnings. Should be harvested
Cash Cows
compete in low growth markets but hold high market share. invest in these
star
high market share in a high growth market. earnings are high you should invest
question mark
low market share in a high growth market. unclear whether they will become stars or dogs. earnings are low and unstable but growth market is high
Build borrow buy framework
conceptual model that aids firms in deciding whether to pursue internal development, enter contracts or build alliances, or acquire a new resource, capabilities and competencies
resources
include capabilities and competencies. These are valuable when they are rare and difficult to imitate
relevancy
ig the resource is relevant to the firms internal resources they should build
tradability
a traceable resource is one that the firm is able to source externally through a contract that allows for the transfer or ownership. if it is highly tradable they should borrow
closeness
only if there is extreme closeness to the source partner would you buy
integration
how well can you integrate the targeted firm as a resource partner. Should only integrate if there is low relevance and traceability, but high closeness
Complementary assets
assets such as marketing, manufacturing and after sales service that are needed to commercialize a new product or service successfully
Co-optition
cooperation by competitors to achieve a strategic objective
learning races
situations in which both partners in a strategic alliance are motivated to form an alliance for learning but the rate at which the firms may vary
Non-equity alliance
partnership based on contracts between firms
explicit knowledge
knowledge that can be codified, concerns knowing about a process or product
tactic knowledge
knowledge that cannot be copied, concerns knowing how to do a certain task and can be acquired through activite participation (equity alliances)
venture capital
equity investments by established firms in entrepreneurial ventures
alliance management capability
a firms ability to effectively mange three alliance related tasks concurrently
partner capability
cultural fit between firms when forming alliances
partner commitment
concerns the willingness to make the necessary resources available and to accept short term sacrifices to ensure longterm rewards
Merger
the joining of two independent companies to form a combined entitiy
acquisition
the purchase or takeover of one company by another
hostile takeover
acquisition in which the target company does not wish to be acquired
horizontal integration
the process of merging with competitors leading to industry consolidation
Managerial hubris
a form of self-delusion in which mangers convince themselves of their superior skills in the face of clear evidence to the contrary
Why do firms acquire others
to access new markets, to overcome entry Barries, to access a new capability
Globalization
the process of closer integration and exchange between different countries and people worldwide
Multinational Enterprise
a company that deployed resources and capabilities in the procurement, production, and distribution of goods and services in at least two countries
global strategy
part of a firms corporate strategy to gain competitive advantage when competing against other foreign and domestic companies around the world
Globalization 1
all important business functions were in the home country, only sales and distribution took place over seas
Globalization 2
MNEs began to create smaller self-contained copies of themselves with business functions in tact
Globalization 3
world trade organization came
globalization 3.1
many black swan events have buffeted the world economic contributing to the rise of nationalism
Advantages to globalization
gain access to larger markets, gain access to low-cost input factors, develop new competencies
location economies
benefit from locating value chain activities in the worlds optimal geographies for specific activity
Disadvantages of globalization
Liability of foreignness, loss of reputation loss of intellectual property
liability of foreignness
additional costs of doing business in an unfamiliar cultural and economic environment and of coordinating across geographic regions
CAGE distance framework
a decision framework based on the relative distance between home and a foreign target country along cultural distance, administrative distance, geographic distance, and economic distance
Cultural distance
C in the cage framework that says cultural disparity between an internationally expanding firms home country and its targeted host country.
Administrative and political distance
the A in the CAGE framework that says the distance can increate with political hostilities, weak legal institutions and the absence of a shared currency
Geographic distance
G in CAGE framework that says the distance increases with a lack of common border, physical remoteness and time zone differences
Economic distance
E in CAGE framework that says distance increases with different consumer incomes, costs, and information
Globalization Hypothesis
assumptions act consumer needs and preferences throughout the world are converging and thus becoming homogenous
local responsiveness
the need to tailor product and service offerings to fit local consumer preferences and host country requirements
cost responsiveness framework
strategy framework that juxtaposes the pressures of multinational companys face for cost reductions and local responsiveness derive four different strategies
International
strategy involved leveraging home based core competencies by selling the same product in both markets
multi domestic
strategy pursued by MNEs that attempt to maximize local responsiveness with the intent that local consumers will perceive them to be domestic companies
Global standardization
strategy attempts to reap significant economies of scale and location economies by pursuing a global diversion of labor based on wherever best of class capabilities are at the lowest cost
transnational
strategy that attempts to combine the benefits of a localization strategy with those of a globalization standardization strategy
Death of distance hypothesis
assumption that geographic location alone should not led to firm level competitive advantage because firms are now more than ever able to source inputs globally
porters diamond framework
explains national competitive advantage through factor conditions, demand conditions, competitive intensity in a focal industry and related industries or complementary
Strategy should proceed structure
strategy helps you identify where your core competencies are and where you will be most effective them you can build your structure around
organizational design
the process of creating, implementing, monitoring, and modifying the structure processes and procedures of an organization
inertia
a firms resistance to changing the status quo, which can set the stage for the firms subsequent failure
Organizational structure
a key determining how the work efforts of individuals and teams are orchestrated and how resources are distributed
specialization
an organizational element that describes the degree to which a task is divided into separate jobs
formalization
an organizational element that captures the extent to which employee behavior is steered by explicit and codified rules and procedures
centralization
an organizational element that refers to the degree in which decision making is concentrated at the top of the organization
hierarchy
an organizational element that determines the formal position based reporting lines
mechanistic organizations
characterized by high degree of specialization and formalization and by a tall hierarchy that relies on centralized decision making
organic organization
characterized by a low degree of specialization and formalization a flat organizational structure and decentralized decision making
simple structure
organizational structure in which the founders tend to make all the important strategic decisions
functional structure
organizational structure that groups employees into distinct functional areas based on domain expertise
ambidextrous organization
an organization able to balance and harness different activities in trade off situations
ambidexterity
a firms ability to address trade offs over time
exploitation
applying current knowledge to enhance firm performance in the short term
exploration
searching for new knowledge that may enhance a firms future performance
Disadvantages to the functional strategy
although it facilities rich communication between members of the same department it lacks communication between members in other departments and cannot address higher level of diversification
multidivisional structure
organizational structure that consists of several distinct strategic business units each with its own profit and loss responsibility. SBUs operate independently and report to the corporate office
matrix structure
organizational structure that combines the functional structure with multidivisional. the matrix organizational structure is where functional structure is combined with product groups
open innovation
a framework for R&D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas but from externals as well
absorptive capacity
a fries ability to understand external technology developments evaluate them and integrate them into current products or create new ones
organizational culture
the collectively shared values and Norms of an organizations members
norms
unwritten rules that define appropriate employee attitudes and behaviors in employees day to day interactions
values
define what is considered important
artifacts
elements that allow corporate culture to be expressed such as via the design and layout of physical space,etc.
strategic control and reward system
internal governance mechanisms put in place to align the incentives of principals and agents
objectives and key results
a strategic reward and control system that helps a team and its individual members monitor objectives and outcomes
input controls
mechanisms in a strategic control and reward system that seeks to direct employee behavior
output controls
mechanisms that seek to guide employee savior by defining expected results
star model
all is connected to create employee behaviors that leads to behaviors ultimately creating culture and performance
corporate governance
a system of mechanisms to direct and control an enterprise in order to ensure that it pursues its strategic goals successfully and legally
agency theory
a theory that views the firm as a nexus of legal contracts
adverse selection
a situation that occurs when information asymmetry increases the likelihood of selecting the wrong agents
moral hazard
a situation in which information asymmetry increases the incentive of one party to shirk other responsibilities because the costs incurred to the other party
board of directors
the centerpiece of corporate governance composed of inside and outside directors who are elected by shareholders
role of the board of directors
make annual budget, set company rules, responsible for organizational performance, elect CEO and organize compensation for C-Suite
major challenges a board may face
shareholder interests may not be uniform
inside directors
board members who are generally party of the companies senior management team, appointed by shareholders to provide internal information
CEO duality
Situation where CEO of company is also on the board
Outside directors
board members who are not employees of the firm but who are executives of other companies
stock options
an incentive mechanism to align the interests of shareholders and managers by giving them the recipient the right to buy company stocks
leveraged buyout
a single investor or group buys with the help of borrowed money the outstanding shares of a publicly traded company to make it private
poison pill
a defensive mechanism to deter hostile takeovers by making the target firm less attractive
winners curse
in a hostile take over the buyer generally overpays for the transaction
business ethics
an agreed upon code of conduct in business based on societal norms
codes of conduct
go beyond the minimum acceptable standard codified by law to detail how the firm expects employees to behave and represent them in business dealings
business models
how business intends to make money
strategy
a set of goal directed actions a firm takes to gain and sustain superior performance relative to competitors
razor blade model
initial product is sold at a loss to drive up demand for complementary good
subscription
user pays for access to a product or service regardless of if or how much they use it
pay as you go
user pays for what they consume
freemium
the basic feature is free but for premium service it is more expensive
ultra low cost
a model in which basic service is provided at a low cost and items are sold at a premium
wholesaler
the traditional model for retail in which something is sold to the retailer at a fixed price and retailers set their own price
agency
producer relies on an agent to sell the product
bundling
sells products for which demand is negatively correlated with a discount
platform
creating a platform for consumers and producers to meet
business model innovation
a firms competitive advantage based on product innovation
long tail
business model innovating in which companies can obtain. large part of their revenues by selling a small number of units from unlimited choices
