Competitive Strategy & Corporate Diversification Lecture

Sixty vocabulary flashcards summarizing key terms from the lecture on competitive rivalry, corporate diversification, business-level strategy, and strategic management concepts.

Competitor Analysis

The first step a firm takes to predict the extent and nature of its rivalry with each competitor, assessing local and foreign rivals before entering a market.

Market Commonality

The number of markets in which two firms compete against each other.

Multimarket Competition

Rivalry between firms that compete against one another in several markets simultaneously.

Resource Similarity

The degree to which a firm’s tangible and intangible resources are comparable to a competitor’s in type and amount.

Awareness (Competitive Context)

A prerequisite to any competitive action or response; the extent to which a firm understands its rivals and the competitive environment.

Motivation (Competitive Response)

A firm’s incentive to act or respond, based on perceived gains and losses from competitive moves.

Ability (Competitive Context)

The resources and flexibility a firm possesses to act or respond to competitors’ actions.

Resource Dissimilarity

Significant differences in resources that hinder a competitor’s ability to respond quickly or effectively to another firm’s actions.

Competitive Action

A strategic or tactical move that a firm undertakes to build or defend its competitive advantages or improve its market position.

Competitive Response

A strategic or tactical move made to counter the effects of a competitor’s competitive action.

Strategic Action

A large-scale, resource-intensive competitive move that is difficult to reverse (e.g., major acquisition, new market entry).

Tactical Action

A smaller-scale, easier-to-reverse competitive move (e.g., price change, marketing promotion).

First Mover

A firm that undertakes the initial competitive action to build or defend its advantages, often emphasizing R&D and willing to take reasonable risks.

Second Mover

A firm that responds to the first mover, usually through imitation or process improvement after observing customer reactions.

Quality

The degree to which a product meets or exceeds customers’ expectations.

Service Quality

Customer-oriented aspects such as timeliness, courtesy, consistency, and convenience.

Actor (Competitive Rivalry)

The firm that initiates an action or response within competitive rivalry.

Competitive Dynamics

The total set of ongoing competitive actions and responses among all firms in a market.

Corporate-Level Strategy

A strategy specifying actions a firm takes to gain advantage by managing a portfolio of different businesses.

Product Diversification

A primary form of corporate-level strategy involving expansion into different product markets.

Related Diversification

Diversification in which businesses share links through resources, activities, or competencies.

Related Constrained Diversification Strategy

A related diversification approach where businesses share many resources and activities.

Related Linked Diversification Strategy

A related diversification approach where only a few resources or competencies are shared among businesses.

Single-Business Diversification Strategy

Corporate strategy in which 95% or more of revenue comes from one core business area.

Dominant-Business Diversification Strategy

Corporate strategy in which 70–95% of revenue is derived from one business area.

Unrelated Diversification Strategy

Strategy where a highly diversified firm owns businesses with no meaningful relationships among them.

Conglomerate

A company implementing an unrelated diversification strategy, operating in distinct, unconnected industries.

Economies of Scope

Cost savings achieved by sharing resources, capabilities, or core competencies across business units.

Digital Strategy

Applying information and technology to enhance human performance and competitive advantage.

Business-Level Strategy

The set of commitments and actions a firm uses to compete in a specific product market.

Market Segmentation

The process of dividing customers into groups based on different needs or characteristics.

Business Model

Describes how a firm creates, delivers, and captures value for stakeholders.

Freemium Model

A business model offering basic services free while charging for premium features.

Advertising Model

A business model that generates revenue by selling advertising space or access to user audiences.

Peer-to-Peer Model

A business model enabling direct interactions and transactions between individual participants, often via a digital platform.

Cost Leadership Strategy

Producing products with acceptable features at the lowest cost relative to competitors.

Differentiation Strategy

Producing products perceived as unique by customers, allowing the firm to charge premium prices.

Total Quality Management (TQM)

An approach used to increase customer satisfaction, cut costs, and speed product innovation through continuous quality improvement.

Five Business-Level Strategies

Cost leadership, differentiation, focused cost leadership, focused differentiation, and integrated cost leadership/differentiation.

Outsourcing

Integrating an external firm into the value chain to perform activities more cost-effectively.

Trust (in Outsourcing)

The relational foundation enabling firms to work closely with outsourcing partners to further reduce costs.

Low Profit Margin (Cost Leadership)

Characteristic that requires cost leaders to sell high volumes to achieve above-average returns.

Competitive Risks of Cost Leadership

Obsolescence, over-focus on cost, and imitation that can erode a cost leader’s advantage.

Five Forces of Competition

Threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and rivalry among competitors.

I/O Model (Industrial Organization Model)

Suggests that industry structure determines a firm’s strategy and potential to earn above-average returns.

Resource-Based Model

Argues that valuable, rare, costly-to-imitate, non-substitutable resources drive competitive advantage and returns.

Vision Statement

A concise, aspirational picture of what a firm wants to achieve in the future.

Mission Statement

Specifies the businesses in which a firm competes and the customers it intends to serve, flowing from the vision.

Stakeholders

Individuals or groups who can affect or are affected by a firm’s actions and performance.

Capital Market Stakeholders

Shareholders and suppliers of capital who expect wealth maximization from the firm.

Product Market Stakeholders

Customers, suppliers, host communities, and unions that interact in the firm’s product markets.

Organizational Stakeholders

Employees and managers whose efforts enable strategy implementation and performance outcomes.

Strategic Leaders

Individuals at various levels who use the strategic management process to help the firm reach its vision and mission.

Strategic Management Process

The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and above-average returns.

Strategic Group

A set of firms within an industry that use similar strategies and compete along similar dimensions.

Competitor Intelligence

Data and insights gathered to understand, predict, and respond to rivals’ actions and strategies.

Organizational Structure

The formal reporting relationships, procedures, and decision-making processes within a firm.

Organizational Controls

Mechanisms that guide the use of strategy by comparing actual results with expected outcomes and prompting corrective action.

Strategic Controls

Subjective criteria focusing on the fit between opportunities and a firm’s capabilities, used for evaluating strategic choices.

Financial Controls

Objective, quantitative measures (e.g., ROI, EVA) assessing performance against established standards, often emphasized in cost leadership and unrelated diversification.