Vocab Flashcards
A corporate action in which a company buys most, if not all of the target company’s ownership stakes in order to assume control of the target firm. They are often made as part of a company’s growth strategy whereby it is most beneficial to take over an existing firm’s operations and niche compared to expanding on its own.
Acquisition
A sequence of steps that must be taken, or activities that must be successfully performed for a strategy to succeed. It has three major elements
- specific tasks : what will be done and by whom
- time horizon : when will it be done
- ressource allocation : what specific funds are available for specific activities
Action plan
Final decisions and predictions are unduly influenced by initial information that is given more weight in the decision process
Anchoring
Information that is taken for fact without inspection
Assumption
Discrete processes required to create, produce, sell and deliver products including but not limited to R&D, inbound logistics, sales, assembling final products, and training employees
Activities
The process of gaining a better understanding of a complex topic by breaking it into smaller parts
Analysis
When input sources are moved into the firm’s primary activity
Backward intergration
When a firm focuses ressources on one key area, usually a smaller market segment or production category, and winning that market first to use it as a platform to break into the market category
Beach-head strategy
What needs to be overcome by new entrants if they are to compete successfully. Factors created by incumbent firms to deter competition
Barriers to entry
The value that an asset can be carried for on the balance sheet
Book value
Describes the rationate of how an organization creates, delivers and captures value
Business model
How an individual business competes in its particular marketplace. Its focus is orchestrating activities in the pursuit of competitive advantage.
Business-level strategy
The orchestration and use of firm ressources
Capability
Any feature of the business environment, either internal or external, which necessitates the intelligent application of ressources and capabilities to surmount
Challenge
A number of things growing, fastened, or occuring close together as in a group or a bunch
Cluster
The activity that causes commercial firms to develop new products, services, markets and technologies, which would give customers great selection and better products
Competition
How a business is able to orchestrate its activities to offer its customers great value, eather by means of lower prices, or by providing greater benefits and services that justifies a higher price.
Competitive advantage
A product that is used in conjunction with another product. Usually it has little to no value when consumed alone, but when combined with another product, it adds to the overall value of the offering.
Also, the product tends to have more value when paired with its thing than it does by itself.
Complement
A SBU with a high market share in a low growth market
Cash Cow (BCG Matrix)
Insights / ideas deducted from findings
Conclusion
The degree to which a small number of firms provide a major portion of the insustry’s total production
Concentrated Industry
A limitation or restriction
Contraint
When a firm can orchestrate its activities to sell its products either at average industry prices to earn a profit higher than its rivals, or below average industry prices to gain additional market share
Cost leadership
The primary activity that defines the firm’s main emphasis.
Core business
Is concerned with the overall scope of the organization and how value is added to the constituent business of the organization as a whole
Corporate-level strategy
When a corporation uses funds not generated from profitable business to build and maintain operations of unprofitable businesses until they become profitable
Cross subsidize
The collective learning in the organization, especially how to co-ordinate diverse capabilities and integrate multiple ressources.
Core competence
The few necessary factors, activities or conditions required for ensuring the success of a projet or firm
Critical Sucess Factors - CSF
Key Success Factors - KSF
FCS
The problem solving process of identifying patterns from a reasonably complete set of data
Deduction
Involves uniqueness in some dimension that is sufficiently valued by customers to allow a price premium.
- good R&D, innovation
- high quality products
- effective sales and marketing
- high level of customer service
Differentiation
Expected performance outcomes of a strategic action in terms of return, risk and stakeholder expectations
Acceptability
The process by which something (ie innovation, products, information) spreads among a population
Diffusion
Creates substancial growth by offering a new performance trajectory that, even if initially inferior to the performance of existing products, has the potential to become markedly superior and will undermine an industry’s status quo business model
Disruptive innovation
When a firm enters an industry different from its existing businesses. Reasons include :
- reducing risk of relying on only one or few income sources
- avoiding cyclical or seasonal fluctuations by producing goods or services with different demand cycles
- achieving a higher growth rate
- countering a competitor by invading the competitor’s core industry or market. In contrast to vertical integration, it does not increase a firm’s market or monopolistic power
Diversification
Factors making it more difficult for a firm to get out of a particular business than it would otherwise have been. They include things like the cost of laying off staff, and long term contractual obligations with suppliers including rent, and other critical materials.
Exit barriers
The act of making a process, good or service easy to obtain by making it as uniform, plentiful and affordable as possible.
Something becomes like that when one offering is nearly indistinguishable from another. The more a good is this way, the more difficult it is for firms to achieve a price premium
Commoditization
The sale of a part of the firm (usually SBU) to a third party for cash or other financial considerations
Divestiture
SBUs with low market share in static or declining markets
Dog (BCG Matrix)
When the per-unit cost of production drops as the volume of output rises. This can occur because of technological reasons or because of higher bargaining power (lower input supply sources)
Economies of scale
Efficiency gains made through applying the organization’s existing ressources or capabilities to new markets or services
For ex, many universities have large ressources in terms of student residences (accomodation), which they need for their students, but which are under-utilized when semesters are over. These residences are more efficiently used if the universities expand their scope of activities into holding conferences.
Economies of scope
When output activities are moved into the firm’s owned activities
Forward integration
Answers if a firm has the necessary components to achieve a result and if that result is attractive in terms of return and risk
Feasability
Factual and verifiable statements
Findings
When an organization is better off than its competitors because it was the first to market with a product or service
First-mover advantage
Expresses the degree to which an organization matching its ressources and capabilities with the challenges and opportunities of the external environment
Fit
A cost that does not change with an increase or decrease in the amounts of goods or services produced. It has to be paid by a company, independant of any business activity
Fixed costs
An industry that contains many small or relatively small competitors and no, or few leaders in each relevant geographic and / or product market
Fragmented industry
Erroneously believing that the onset of a random event is less or more likely to happen following an event or a series of events.
For example, consider a series of 20 coin flips that have all landed with the “heads” side up. Under the gambler’s fallacy, a person might predict that the next coin flip is more likely to land with the “tails” up
Gambler’s fallacy
Relates to how effectively standardized products or services can be introduced into international markets versus the need to adapt them to local markets
Global-local dilemma
The general direction that determines the focus of the organization
Goal
Results when one company acquires another.
In an acquisition, the amount paid for the company over book value usually accounts for the target firm’s intangible assets that arise from synergies
Goodwill
When a company acquires or merges with another company in the same industry.
For example Disney acquiring Pixar. A firm may also extend its existing ressources and capabilities into an unrelated business as with Starbucks extending its expertise in the coffee retail experience acquiring Teavana, a chain of tea houses
Horizontal integration
A slight change
Incremental
The problem solving technique whereby general inferences are made from particular instances
Induction
A group of firms producing similar products from similar supplies and selling to similar customers. A subset of a sector
Industry
Unevaluated data
Information
The process of gathering, integrating, analyzing and interpreting information so that it can be used to make a business decision
Intelligence
The problem solving technique whereby data are inserted into an incomplete data series (ex : missing letter or crossword)
Interpolation
Involves deliberate application of information, imagination and initiative in deriving greater or different values from ressources.
New ideas are generated and converted into useful products or to make existing products more profitable.
Innovation
A contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise
Joint venture
The time and other ressources that must be consumed to develop necessary capabilities to compete
Learning curve
When one firm authorises another company to manufacture or sell its products
Licensing
When a firm holds prices lower that what is profit-maximizing in the short term to create barrier entries
Limit pricing
The difference between a product’s selling price and the fixed and variable production costs
Margin
Offering existing products to new markets, either segments or geographies
Market development
A measure of the amount of sales or adoption of a product compared to the total theorical market for that product.
It implies increasing the firm’s share of the market with its current product range
Market penetration
Risk that arises from circumpstances beyond the control of the company
Market risk
A group of customers who have similar needs that are different from customer needs in other parts of the market
Market segment
An arrangement in which the assets of two or more firms are integrated into one firm
Merger
Aims to provide the employees and the stakeholders with clarity about the overriding purpose of the organization
Mission statement
Systems for organizing information that informs which actions maybe and eventually should be employed
Models and frameworks
A situation in which a single company owns all or nearly all of the market for a given type of produt or service
Monopoly
When two events cant occur at the same time. Either option A or B but not both
Mutually exclusive
The value added to businesses by corporate-level activities
Parenting advantage
A market structure in which the following five criteria are met :
- all firms sell an identical product
- all firms are price takers
- all firms have a relatively small market share
- buyers have complete info about the product : transparency
- freedom of exit and entry
Perfect competition
A collection of businesses owned by a single entity
Ex : P&G
Portfolio
The amount over the average a product can be sold for
Price premium
Specific and quantifiable outcomes that when achieved propel the firm towards its goals.
May be the expression of target sales, profit levels, rates of growth, dividend levels, share valuations, market share, customer service satisfaction, etc
Objective
Where there are at least two firms with similar market clout that together control the market
Oligopoly
It refers to any number of practices that allow a company to better utilize its inputs by, for example, creating more efficient processes.
Recently, McDonalds introduced touch screen, now KFC has the same
Operational Efficiency (OE)
SBU in a growing market, but without substancial market share
Question Mark (BCG Matrix)
The latest events dominate those in the less recent past, which are discounted or ignored
Recently bias
Clear and concise proposal of what should be done and why
Recommendation
Slashing prices in response to market entry to establish a reputation for being a fierce competitor
Reputation pricing
Inputs into a firm’s production process
- tangible
- untangible
- unique
Ressources
The profitability of an unfavorable outcome for entities who have something to lose
Risk
Detailed and plausible views of how a firm’s business environment might develop based on identified factors, likely generated from PESTEL analysis
Scenarios
When the firm can use the same raw and semi-finished materials and intermediate production processes to make a variety of different products
Scope
An area of the economy in which businesses share the same or a related product or service
Sector
When an SBU becomes an independant business from the corporation
Spin-Off
Individuals or groups who can affect or be affected by the actions of a firm. These include but are not limited to shareholders, suppliers, employees, customers, partners
Stakeholders
An SBU that has a high market share in a growing market
Star (BCG Matrix)
An arrangement between two companies that have declined to share ressources to undertake a specific, mutually beneficial project.
It is less involved and less permanent than a joint venture
Strategic Alliance
The assessment of a firm’s current competitive position and the identification of future valuable competitive positions and how to achieve them
Strategic analysis
A distinct business within a corporation that has its own customers, competition, and draws upon its own ressources and capabilities
SBU
Strategic Business Unit
The basic scheme for how the organization will achieve its vision
Strategic Direction
The tendency for strategies to develop incrementally on the basis of historical and cultural influences, but fail to keep pace with a changing environment
Strategic Drift
A market opportunity that is either not recognized or fully exploited by competitors
Strategic gap
Organizations within an industry with similar characteristics that are following similar strategies and compete for similar customers
Strategic groups
The direction and scope of an organization over the long term, which aims to achieve advantage in a changing environment by configuring ressources and capabilities to satisfy stakeholder expectations
Strategy
When a supplier “locks in” its customers by creating a higher barrier to switching to a competitor
Strategic lock-in
A superior ressource and / or capability that a firm can leverage to outperform competition and / or meet challenges in an environment
Strength
Relates to how a business is organized in terms of businesses, and management
Structure (Corporate)
Alternative products or services that produce similar benefits sought by the customer. Creates a constraint on what can be charged for the product
Substitutes
Concerned with if a recommendation fits with key issues relating to the firm’s environment, capabilities, ressources and is appropriate to stakeholder expectations
Suitability
Investments that cannot be recovered once invested. Including but not limited to R&D, transaction costs, marketing in terms of research, product development, launch and advertising
Sunk Cost
Costs incurree when a customer changes suppliers. May relate to training, integration, downtime
Switching costs
The concept that the value and performance of two businesses combined will have greater value than if they were separate.
That, or the potential financial benefit achieved through the combining of companies, is often a driving force behind a merger or acquisition
Synergy
The “doing” aspect that follows the planning
Tactics
Necessary to be able to compete, but not a source of competitive advantage. However, the lack of it is likely to be a weakness
Threshold weakness / capability
An implement used in the practice of a vocation to get a predetermined result. In terms of strategy, they are frameworks, language, matrices, and other techniques used to make decisions
Tool
Forced choice where only ONE option is possible
Trade-off
Expense of carrying out a purchase or sale. The opportunity costs incurred when a proposed transaction is not realized. May include consumer search, transport and time.
These include legal proceedings, vetting, filings, and time cannot be recovered if a deal does not materialize
Transaction cost
Risk generated from factors originating from inside a firm that are independant of the outside environment
Unique risk
A framework that is used to organize the activities a business must perform to create, make, distribute, sell and service a product. Used to understand which activities add the most of it to building a competitive advantage, which activities may be downsized or abandonned, or which activities may be outsourced.
Value chain
The guiding principles of the firm. The building blocks of a firm’s culture. Creates a procedure for HOW a firm will fullfill its mission and achieve its vision
Values (Corporate)
Set of inter-industry firms performing discrete activities necessary to create, sell and service an industry’s product.
Value network
Costs that vary depending on a company’s production volume; they rise as production increases and fall as it decreases.
Variable costs
When a company expands its business into areas that are at different points on the same production path, such as when a manufacturer owns its supplier and / or distributor
It can help companies reduce costs and improve efficiency by decreasing transportation expenses and reducing turnaround time among other advantages
Vertical integration
Vertical integration that cuts off a competitor’s access to important inputs
Vertical foreclosure
Concerned with what the firm aspires to be. Its purpose is to set out a clear view of the future to motivate, gain commitment and stretch performance.
Basically what will the company be in the future
Vision statement
An inferior or absent ressource and / or capability that competition may exploit to gain advantage. May also inhibit a firm into successfully navigating environmental challenges
Weakness
When the winner in of an auction is the bidder who has the highest valuation of the asset and thus likely overvalues it
Winner’s curse
