Strategic Management Lecture Review

Comprehensive vocabulary flashcards covering strategic management concepts, competitive positioning, Five Forces analysis, resource-based view, and first-mover dynamics.

Operational Effectiveness

Performing specific activities better than rivals ('doing specific things right'), which is insufficient on its own for competitive advantage due to rapid knowledge diffusion.

Diffusion

The rapid spread of operational knowledge across firms through employee mobility, agglomeration, consultants, and shared pools of suppliers.

Strategy

A guiding framework resting on a unique combination of activities and trade-offs that allows a firm to perform different sets of activities from rivals to deliver a unique value proposition.

Competitive Advantage

Achieved when a firm creates and captures more value than competitors, creating a wider wedge between willingness-to-pay ($\text{WTP}$) and cost than rivals.

Value Creation

The additional benefit brought to a customer by a product or service, calculated as customer willingness-to-pay minus the cost incurred to deliver it ($\text{WTP} - \text{Cost}$).

Value Captured

The utilization of benefit from value creation; the specific portion of the created value 'pie' that a firm or individual participant retains for itself.

Stuck in the Middle

Porter's term describing a scenario where a firm raises or lowers both willingness-to-pay and cost by the same amount, resulting in no net value creation.

Vertical Integration

The combination of firms operating at different stages of the value chain, such as concert promoters merging with distribution platforms like Spotify.

Horizontal Integration

The consolidation of competing firms that operate at the same stage of the industry value chain.

Organic Vertical Integration

When a distribution platform organically expands into production activities, such as web-based streaming platforms transforming into music labels by targeting younger, less established artists.

Industry

A business sector defined by identifying participants that sell similar products and share common suppliers and buyers.

Suppliers

Organizations or individuals paid by industry firms for inputs, located closer to raw materials in the value chain.

Buyers

Organizations or individuals that pay firms for the industry's products or services, located closer to end customers in the value chain.

Industry Concentration

The number and size distribution of firms actively competing in an industry, where fewer firms generally results in less fierce rivalry.

Substitutes

Alternative products and services outside the industry boundary that fulfill similar customer needs, constraining industry pricing and forcing firms to raise quality.

Economies of Scale

A barrier to entry where average cost per unit falls as total output rises, giving larger established firms an advantage over new entrants.

Cost Leadership

A competitive positioning strategy targeting a broad market scope by minimizing operational costs relative to competitors.

Differentiation

A competitive positioning strategy targeting a broad market scope by increasing customer willingness-to-pay without an equivalent increase in supplier opportunity cost.

Focused Cost Leadership

A competitive positioning strategy serving a narrow market segment while offering products at lower costs than competitors.

Focused Differentiation

A competitive positioning strategy serving a narrow market segment by charging higher prices driven by uniquely high willingness-to-pay.

Relative Cost Analysis

A five-step framework used to examine a firm's activity-based cost structure, evaluate captured value, and compare costs against rivals or internal alternatives.

Causal Ambiguity

A knowledge-based barrier to imitation where an intricate mix of activities prevents competitors from deciphering which specific practices cause a firm's success.

Tacit Knowledge

Intangible, unquantifiable knowledge embedded within activities that is difficult to codify or transfer, often possessed without explicit awareness by the firm.

Time-Compression Diseconomies

A timing-based barrier to imitation stating that certain capabilities or processes take a fixed duration to develop and cannot simply be accelerated through increased spending.

Input Preemption

An access-based barrier to imitation where an early mover locks up critical upstream raw materials or downstream distribution channels before rivals can reach them.

Institutional Protection

Formal legal mechanisms, such as patents, that legally prevent competitors from imitating or manufacturing a firm's proprietary products.

Resource

Any tangible asset (such as physical facilities or equipment) or intangible asset (such as brand, reputation, or human capital) owned by or accessible to a firm.

Capabilities

The specific activities and processes a firm is equipped to carry out using the resources it possesses.

Core Competencies

Unique strengths embedded deep within an organization representing capabilities the firm excels at relative to competitors, driving higher willingness-to-pay or lower costs.

VRIO Framework

A strategic evaluation tool used to determine if a firm's resource grants a sustainable competitive advantage based on whether it is Valuable, Rare, Inimitable, and Organized to capture value.

Pioneer Costs

A first-mover disadvantage involving high research, development, and commercialization expenses incurred when establishing an unproven technology or market.

Incumbent Inertia

A first-mover disadvantage characterized by an established firm's reluctance or inability to alter its strategies and operational routines in response to market shifts.

Scope Economy

A cost advantage derived from firm scale wherein producing multiple products or performing multiple integrated activities together lowers overall production costs.

Learning Effects

Cost and efficiency improvements that accumulate over time as a firm gains experience and refines its operational activities.