ts pmo

business-level strategy

a strategy designed for a firm or a division of a firm that competes within a single business.

generic strategies

basic types of business-level strategies based on breadth of target market (industrywide versus narrow market segment) and type of competitive advantage (low cost versus uniqueness).

overall cost leadership

a firm’s generic strategy based on appeal to the industrywide market using a competitive advantage based on low cost.

experience curve

the decline in unit costs of production as cumulative output increases.

competitive parity

a firm’s achievement of similarity, or being “on par,” with competitors with respect to low cost, differentiation, or other strategic product characteristic.

differentiation strategy

a firm’s generic strategy based on creating differences in the firm’s product or service offering by creating something that is perceived industrywide as unique and valued by customers.

focus strategy

a firm’s generic strategy based on appeal to a narrow market segment within an industry.

combination strategies

firms’ integrations of various strategies to provide multiple types of value to customers.

industry life cycle

the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry.

introduction stage

the first stage of the industry life cycle, characterized by (1) new products that are not known to customers, (2) poorly defined market segments, (3) unspecified product features, (4) low sales growth, (5) rapid technological change, (6) operating losses, and (7) a need for financial support.

growth stage

the second stage of the product life cycle, characterized by (1) strong increases in sales; (2) growing competition; (3) developing brand recognition; and (4) a need for financing complementary value-chain activities such as marketing, sales, customer service, and research and development.

maturity stage

the third stage of the product life cycle, characterized by (1) slowing demand growth, (2) saturated markets, (3) direct competition, (4) price competition, and (5) strategic emphasis on efficient operations.

decline stage

the fourth stage of the product life cycle, characterized by (1) falling sales and profits, (2) increasing price competition, and (3) industry consolidation.

diversification

the process of firms expanding their operations by entering new businesses.

related diversification

a firm entering a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power.

economies of scope

cost savings from leveraging core competencies or sharing related activities among businesses in a corporation.

core competencies

a firm’s strategic resources that reflect the collective learning in the organization.

sharing activities

having activities of two or more businesses’ value chains done by one of the businesses.

market power

firms’ abilities to profit through restricting or controlling supply to a market or coordinating with other firms to reduce investment.

pooled negotiating power

the improvement in bargaining position relative to suppliers and customers.

vertical integration

an expansion or extension of the firm by integrating preceding or successive production processes.

unrelated diversification

a firm entering a different business that has little horizontal interaction with other businesses of a firm.

parenting advantage

the positive contributions of the corporate office to a new business as a result of expertise and support provided and not as a result of substantial changes in assets, capital structure, or management

restructuring

the intervention of the corporate office in a new business that substantially changes the assets, capital structure, and/or management, including selling off parts of the business, changing the management, reducing payroll and unnecessary sources of expenses, changing strategies, and infusing the new business with new technologies, processes, and reward systems.

portfolio management

a method of (a) assessing the competitive position of a portfolio of businesses within a corporation, (b) suggesting strategic alternatives for each business, and (c) identifying priorities for the allocation of resources across the businesses.

acquisitions

the incorporation of one firm into another through purchase.

mergers

the combining of two or more firms into one new legal entity.

divestment

the exit of a business from a firm’s portfolio.

strategic alliance

a cooperative relationship between two or more firms.

joint ventures

new entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entity.

internal development

entering a new business through investment in new facilities, often called corporate enterpreneurship and new venture development.

managerial motives

managers acting in their own self-interest rather than to maximize long-term shareholder value.

globalization

a term that has two meanings: (1) the increase in international exchange, including trade in goods and services as well as exchange of money, ideas, and information; (2) the growing similarity of laws, rules, norms, values, and ideas across countries.

diamond of national advantage

a framework for explaining why countries foster successful multinational corporations; consists of four factors—factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry.

factor endowments (national advantage)

a nation’s position in factors of production.

demand conditions (national advantage)

the nature of home-market demand for the industry’s product or service.

related and supporting industries (national advantage)

the presence, absence, and quality in the nation of supplier industries and other related industries that supply services, support, or technology to firms in the industry value chain. 

firm strategy, structure, and rivalry (national advantage)

the conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.

multinational firms

firms that manage operations in more than one country.

arbitrage opportunities

an opportunity to profit by buying and selling the same good in different markets.

reverse innovation

new products developed by developed-country multinational firms for emerging markets that have adequate functionality at a low cost.

political risk

potential threat to a firm’s operations in a country due to ineffectiveness of the domestic political system

economic risk

potential threat to a firm’s operations in a country due to economic policies and conditions, including property rights laws and enforcement of those laws.

counterfeiting

selling of trademarked goods without the consent of the trademark holder.

currency risk

potential threat to a firm’s operations in a country due to fluctuations in the local currency’s exchange rate.

management risk

potential threat to a firm’s operations in a country due to the problems that managers have making decisions in the context of foreign markets.

outsourcing

using other firms to perform value-creating activities that were previously performed in-house.

offshoring

shifting a value-creating activity from a domestic location to a foreign location.

international strategy

a strategy based on firms’ diffusion and adaptation of the parent companies’ knowledge and expertise to foreign markets; used in industries where the pressures for both local adaptation and lowering costs are low.

global strategy

a strategy based on firms’ centralization and control by the corporate office, with the primary emphasis on controlling costs; used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high.

multidomestic strategy

a strategy based on firms’ differentiating their products and services to adapt to local markets; used in industries where the pressure for local adaptation is high and the pressure for lowering costs is low.

transnational strategy

a strategy based on firms’ optimizing the trade-offs associated with efficiency, local adaptation, and learning; used in industries where the pressures for both local adaptation and lowering costs are high.

exporting

producing goods in one country to sell to residents of another country.

licensing

a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its trademark, patent, trade secret, or other valuable intellectual property.

franchising

a contractual arrangement in which a company receives a royalty or fee in exchange for the right to use its intellectual property; franchising usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising.

wholly owned subsidiary

a business in which a multinational company owns 100 percent of the stock.

entrepreneurship

the creation of new value by an existing organization or new venture that involves the assumption of risk.

opportunity recognition

the process of discovering and evaluating changes in the business environment, such as a new technology, sociocultural trends, or shifts in consumer demand, that can be exploited.

angel investors

private individuals who provide equity investments for seed capital during the early stages of a new venture.

venture capitalists

companies organized to place their investors’ funds in lucrative business opportunities.

crowdfunding

funding a venture by pooling small investments from a large number of investors; often raised on the internet.

entrepreneurial leadership

leadership appropriate for new ventures that requires courage, belief in one’s convictions, and the energy to work hard even in difficult circumstances; and that embodies vision, dedication and drive, and commitment to excellence.

entrepreneurial strategy

a strategy that enables a skilled and dedicated entrepreneur, with a viable opportunity and access to sufficient resources, to successfully launch a new venture.

pioneering new entry

a firm’s entry into an industry with a radical new product or highly innovative service that changes the way business is conducted.

imitative new entry

a firm’s entry into an industry with products or services that capitalize on proven market successes and that usually have a strong marketing orientation.

adaptive new entry

a firm’s entry into an industry by offering a product or service that is somewhat new and sufficiently different to create value for customers by capitalizing on current market trends.

competitive dynamics

intense rivalry, involving actions and responses, among similar competitors vying for the same customers in a marketplace.

new competitive action

acts that might provoke competitors to react, such as new market entry, price cutting, imitating successful products, and expanding production capacity.

threat analysis

a firm’s awareness of its closest competitors and the kinds of competitive actions they might be planning.

market commonality

the extent to which competitors are vying for the same customers in the same markets.

resource similarity

the extent to which rivals draw from the same types of strategic resources.

strategic actions

major commitments of distinctive and specific resources to strategic initiatives.

tactical actions

refinements or extensions of strategies usually involving minor resource commitments.

market dependence

degree of concentration of a firm’s business in a particular industry.

forbearance

a firm’s choice of not reacting to a rival’s new competitive action.

co-opetition

a firm’s strategy of both cooperating and competing with rival firms.