Business Strategy and Competitive Dynamics Lecture

Vocabulary flashcards covering key terms from the lecture on business-level strategy, competitive dynamics, and corporate diversification

Digital strategy

Application of information and technology to raise human performance

Business-level strategy

Choices a firm makes about how it intends to compete in individual product markets; the one strategy every firm must develop and implement

Market segmentation

Process of dividing customers into groups based on their needs

Identifiable characteristic

Trait a firm uses to subdivide a market into segments that differ from one another

Strategy (direction)

Path providing direction for leaders’ actions to help the firm achieve success

Business model

What a firm does to create, deliver, and capture value for stakeholders

Framework (value creation)

Tool used to describe how the firm will create, deliver, and capture value

Freemium / Advertising / Peer-to-peer model

Examples of business models that support generic business-level strategies

Cost leadership strategy

Integrated actions to produce products with acceptable features at the lowest cost relative to competitors

Organizational size (low-cost enabler)

Attribute allowing firms like Walmart to pursue a low-cost strategy successfully

Strategic equivalence

No one business-level strategy is inherently superior to the others

Differentiation strategy

Integrated actions to produce products customers perceive as different in important ways, at an acceptable cost

Trust (outsourcing foundation)

Basis for integrating an outsourcing firm into the value chain to reduce costs

Low profit margins

Reason cost leaders must sell large volumes to earn above-average returns

Competitive risks of cost leadership

Obsolete processes, excessive cost focus, and imitation

Premium pricing

Ability of differentiators to charge higher prices because products satisfy unique needs

Total Quality Management (TQM) systems

Programs used to increase customer satisfaction, cut costs, and speed innovation

Competitive dynamics

Total of all individual rivalries occurring within a market

Competitor analysis

First step in predicting the extent and nature of rivalry with each competitor

Market commonality

Number of markets in which firms compete against each other

Multimarket competition

Situation where firms compete against one another in several markets simultaneously

Resource similarity

Extent to which a firm’s tangible and intangible resources compare favorably to a competitor’s

Awareness

Prerequisite to any competitive action or response

High awareness condition

Occurs when firms have highly similar resources

Motivation (competitive context)

Firm’s incentive to act or respond, tied to perceived gains and losses

Ability (competitive context)

Resources and flexibility a firm possesses to act or respond

Resource dissimilarity

Greater difference between resources owned by the acting firm and those of its rivals

Competitive action

Strategic or tactical move to build or defend advantages or improve market position

Competitive response

Strategic or tactical move to counter a competitor’s competitive action

Strategic–tactical balance

Recognition and balance of strategic vs. tactical moves when engaging rivals

First mover

Firm taking the initial competitive action to build or defend advantages

First-mover myth

First movers do not always outperform later entrants

Second mover

Firm that responds to the first mover’s action, often through imitation

Quality

Condition when a firm’s products meet or exceed customers’ expectations

Service quality dimensions

Timeliness, courtesy, consistency, and convenience

Actor (competitive rivalry)

Firm taking an action or response

Corporate-level strategy

Actions a firm takes to gain advantage by selecting and managing a group of different businesses

Product diversification

Primary form of corporate-level strategy involving multiple products or markets

Related diversification

Diversification where businesses share several links

Single business diversification

Strategy in which 95% or more of revenue comes from one business area

Dominant business diversification

Strategy generating 70–95% of revenue from a single business area

Unrelated diversification strategy

Diversification where a firm’s businesses have no relationships

Conglomerate

Firm using an unrelated diversification strategy

Economies of scope

Cost savings from sharing resources or transferring core competencies across businesses

Operational relatedness

Created by sharing activities among businesses

Corporate-level core competencies

Complex resources and capabilities linking businesses through managerial or technological expertise

Managerial talent transfer

Moving key people into management positions to transfer core competencies

Market power

Ability to sell above the competitive level or reduce costs below it

Vertical integration

Ownership of input supply (backward) or distribution outlets (forward)

Horizontal integration

Expansion or acquisition in the firm’s core business to gain market power over rivals

Financial economies

Cost savings from improved allocation of financial resources inside or outside the firm

Antitrust laws

Regulations that prohibit mergers creating increased market power

Free cash flows

Liquid assets available when investments in current businesses are no longer economically viable

Diversification (defensive use)

Strategy employed when a firm’s product line is threatened

Synergy

Value created when business units working together exceed the value they create independently