MGMT 478 Stevenson - Final Exam

Entrepreneurship

The process by which people undertake economic risk to innovate—to create new products, processes, and sometimes new organizations.

Industry Life Cycle

The five different stages—introduction, growth, shakeout, maturity, and decline—that occur in the evolution of an industry over time.

Disruptive Innovation

An innovation that leverages new technologies to attack existing markets from the bottom up.

Innovation

The commercialization of any new product or process, or the modification and recombination of existing ones.

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 to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.

Platform ecosystem

The market environment in which all players participate relative to the platform.

Process Innovation

New ways to produce existing products or deliver existing services.

Reverse Innovation

An innovation that was developed for emerging economies before being introduced in developed economies. Sometimes also called frugal innovation.

Social Entrepreneurship

The pursuit of social goals while creating a profitable business.

Standard

An agreed-upon solution about a common set of engineering features and design choices.

Trade Secret

Valuable proprietary information that is not in the public domain and where the firm makes every effort to maintain its secrecy.

Conglomerate

A company that combines two or more strategic business units under one overarching corporation; follows an unrelated diversification strategy.

Corporate Strategy

The decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage in several industries and markets simultaneously.

Diversification

An increase in the variety of products and services a firm offers or markets and the geographic regions in which it competes.

Franchising

A long-term contract in which a franchisor grants a franchisee the right to use the franchisor's trademark and business processes to offer goods and services that carry the franchisor's brand name.

Geographic Diversification

Corporate strategy in which a firm is active in several different countries.

Industry Value Chain

Depiction of the transformation of raw materials into finished goods and services along distinct vertical stages, each of which typically represents a distinct industry in which a number of different firms are competing.

Licensing

A form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.

Joint Venture

A standalone organization created and jointly owned by two or more parent companies.

Product Diversification Strategy

Corporate strategy in which a firm is active in several different product markets.

Restructuring

The process of reorganizing and divesting business units and activities to refocus a company to leverage its core competencies more fully.

Strategic Alliances

Voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.

Vertical Integration

The firm's ownership of the inputs needed for production or of the channels through which it distributes its outputs.

Acquisition

The purchase or takeover of one company by another; can be friendly or unfriendly.

Corporate Venture Capital

Equity investments by established firms in entrepreneurial ventures; CVC falls under the broader rubric of equity alliances.

Horizontal Integration

The process of merging with competitors, leading to industry consolidation.

Merger

The joining of two independent companies to form a combined entity.

Non-Equity Alliance

Partnership based on contracts between firms.

Real Options

Choices that afford managers the right but not the obligation to make further investments.

Hostile Takeover

Acquisition in which the target company does not wish to be acquired.

Build-Borrow-Buy Framework

Conceptual model that aids firms in deciding whether to pursue internal development (build), enter a contractual arrangement or strategic alliance (borrow), or acquire new resources, capabilities, and competencies (buy).

Complementary Assets

Assets such as marketing, manufacturing, and after-sales service that are needed to commercialize a new product or service successfully. They can be found upstream or downstream in the firm-level value chain.

Equity Alliance

Partnership in which at least one partner takes partial ownership in the other.

Managerial Hubris

A form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary.

Cultural Distance

Cultural disparity between an internationally expanding firm's home country and its targeted host country.

Foreign Direct Investment

A firm's investments in value chain activities abroad.

Global Strategy

Part of a firm's corporate strategy to gain and sustain a competitive advantage when competing against other foreign and domestic companies around the world.

International Strategy

Strategy that involves leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets.

Local Responsiveness

The need to tailor product and service offerings to fit local consumer preferences and host-country requirements.

Location Economies

Benefits from locating value chain activities in the world's optimal geographies for a specific activity, wherever that may be.

Multidomestic Strategy

Strategy pursued by MNEs that attempts to maximize local responsiveness, with the intent that local consumers will perceive them to be domestic companies.

National Competitive Advantage

World leadership in specific industries.

CAGE Distance Framework

A decision framework based on the relative distance between home and a foreign target country along four dimensions: cultural distance, administrative and political distance, geographic distance, and economic distance.

National Culture

The collective mental and emotional "programming of the mind" that differentiates human groups.

Globalization

The process of closer integration and exchange between different countries and peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications, and reductions in transportation costs.

Transactional Strategy

Strategy that attempts to combine the benefits of a localization strategy (high local responsiveness) with those of a global-standardization strategy (lowest-cost position attainable).

Ambidextrous Organization

An organization able to balance and harness different activities in trade-off situations.

Ambidexterity

A firm's ability to address trade-offs not only at one point but also over time. It encourages managers to balance exploitation with exploration.

Formalization

An organizational element that captures the extent to which employee behavior is steered by explicit and codified rules and procedures.

Functional Structure

Organizational structure that groups employees into distinct functional areas based on domain expertise.

Matrix Structure

Organizational structure that combines the functional structure with the M-form.

Multidivisional Structure

Organizational structure that consists of several distinct strategic business units (SBUs), each with its own profit-and-loss (P&L) responsibility.

Open Innovation

A framework for R&D that proposes permeable firm boundaries to allow a firm to benefit not only from internal ideas and inventions, but also from external ones. The sharing goes both ways: Some external ideas and inventions are insourced while others are spun out.

Organizational Design

The process of creating, implementing, monitoring, and modifying the structure, processes, and procedures of an organization.

Organic Organization

Characterized by a low degree of specialization and formalization, a flat organizational structure, and decentralized decision making.

Output Controls

Mechanisms in a strategic control-and-reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs.

Simple Structure

Organizational structure in which the founders tend to make all the important strategic decisions as well as run the day-to-day operations.

Specialization

An organizational element that describes the degree to which a task is divided into separate jobs (i.e., the division of labor).

Agency Theory

A theory that views the firm as a nexus of legal contracts.

Board of Directors

The centerpiece of corporate governance, composed of inside and outside directors who are elected by the shareholders.

Business Ethics

An agreed-upon code of conduct in business, based on societal norms.

Business Model

Translates strategy into action by detailing the firm's competitive tactics and initiatives to deliver value to its customers and make money. It identifies the firm's target market, customer needs, and how the firm's products or services will meet those needs.

CEO/Chairperson Duality

Situation where the CEO of a publicly traded company is also the chairperson of the board of directors.

Inside Directors

Board members who are generally part of the company's senior management team; appointed by shareholders to provide the board with necessary information pertaining to the company's internal workings and performance.

Leveraged Buyout

A single investor or group of investors buys, with the help of borrowed money (leveraged against the company's assets), the outstanding shares of a publicly traded company in order to take it private.

Outside Directors

Board members who are not employees of the firm, but who are frequently senior executives from other firms or full-time professionals.

Poison Pill

Defensive provisions to deter hostile takeovers by making the target firm less attractive.

Stock Options

An incentive mechanism to align the interests of shareholders and managers, by giving the recipient the right (but not the obligation) to buy a company's stock at a predetermined price sometime in the future.

Moral Hazard

A situation in which information asymmetry increases the incentive of one party to take undue risks or shirk other responsibilities because the costs incur to the other party.

Thin Markets

Markets in the physical world in which transactions are unlikely to take place because there are only a few buyers and a few sellers who have difficulty finding each other in time and space.