Strategic Management: Internal Assessment, Strategies in Action, and Strategy Analysis and Choice

Vocabulary practice flashcards covering internal assessments, business strategies in action, and strategy analysis and choice based on strategic management lecture slides.

Internal Audit

A process that requires gathering, assimilating, and prioritizing information about the firm's management, marketing, finance, accounting, production/operations, research and development (R&D), and management information systems operations to understand how parts fit into the whole firm.

Resource-Based View (RBV)

An approach contending that internal resources (grouped into tangible and intangible) are more important for a firm than external factors in achieving and sustaining competitive advantage.

Empirical Indicators

Three characteristics of a valuable resource—being rare, hard to imitate, and not easily substitutable—that enable a firm to implement strategies that improve efficiency and effectiveness and achieve sustainable competitive advantage.

Distinctive Competencies

A firm's strengths that cannot be easily matched or imitated by competitors, which are leveraged in the progression from weaknesses to strengths to build sustained competitive advantage.

Synergy

An organizational state created through effective planning where everyone pulls together as a team that knows what it wants to achieve; conceptually represented as $2 + 2 = 5$.

Controlling

A management function consisting of four basic steps: (1) establishing performance standards, (2) measuring individual and organizational performance, (3) comparing actual performance to planned performance standards, and (4) taking corrective actions.

Production/Operations

The organizational function that consists of all activities that transform inputs into goods and services across five basic decision areas: process, capacity, inventory, workforce, and quality.

Organizational Culture

A pattern of behavior developed by an organization as it learns to cope with its problem of external adaptation and internal integration, considered valid and taught to new members as the correct way to perceive, think, and feel.

Marketing

The process of defining, anticipating, creating, and fulfilling customers' needs and wants, consisting of marketing research/target market analysis, product planning, pricing, promotion, and distribution.

Target Market Analysis

The examination and evaluation of consumer needs and wants conducted as part of the initial activities in marketing.

Channels of Distribution

Intermediaries—such as wholesalers, retailers, brokers, facilitators, agents, or vendors—that take a product from a producer to an end consumer.

Investment Decision (Capital Budgeting)

The finance/accounting decision focused on the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.

Financing Decision

The finance/accounting decision that determines the best capital structure for the firm and examines various methods by which the firm can raise capital.

Dividend Decisions

Finance/accounting decisions concerning the percentage of earnings paid to stockholders, the stability of dividends paid over time, the repurchase or issuance of stock, and the proportion of funds retained versus paid out.

Current Ratio

A liquidity ratio calculated as $\frac{\text{Current assets}}{\text{Current liabilities}}$ that measures the extent to which a firm can meet its short-term obligations.

Quick Ratio

A liquidity ratio calculated as $\frac{\text{Current assets} - \text{inventory}}{\text{Current liabilities}}$ that measures a firm's ability to meet short-term obligations without relying on the sale of its inventories.

Times-Interest-Earned Ratio

A leverage ratio calculated as $\frac{\text{Profits before interest and taxes}}{\text{Total interest charges}}$ that measures the extent to which earnings can decline without the firm becoming unable to meet annual interest costs.

Business Analytics

A business technique—also called predictive analytics, machine learning, or data mining—that involves using software to mine huge volumes of data to help executives make strategic decisions.

Internal Factor Evaluation (IFE) Matrix

A strategy-formulation tool that lists key internal factors, assigns weights from $0.0$ to $1.0$, assigns ratings from $1$ to $4$, and sums weighted scores to evaluate an organization's internal strengths and weaknesses.

AQCD Test

A test requiring that internal factors prioritized for strategic planning are Actionable, Quantitative, Comparative, and Divisional.

Long-Term Objectives

The specific results expected from pursuing certain strategies over a $2$\text{ to }$5$ year time frame, providing direction and preventing a firm from drifting aimlessly.

Managing by CHEM

Four undesirable management styles to avoid: Managing by Crisis, Managing by Hope, Managing by Extrapolation ('if it ain't broke, don't fix it'), and Managing by Mystery.

Balanced Scorecard

A strategic management framework that balances traditional financial measures with nonfinancial measures such as product quality and customer service.

Forward Integration

An integration strategy that involves gaining ownership or increased control over distributors or retailers (e.g., Amazon adding $500$ new distribution centers).

Backward Integration

An integration strategy of seeking ownership or increased control over a firm's suppliers (e.g., Ford partnering with GlobalFoundries, Inc. to produce semiconductors).

Horizontal Integration

An integration strategy of seeking ownership of or increased control over a firm's competitors (e.g., Skillsoft Corp. acquiring Codecademy).

Market Penetration

An intensive strategy seeking increased market share for present products in present markets through greater marketing efforts (e.g., Crypto.com running a Super Bowl commercial in $2022$).

Market Development

An intensive strategy involving introducing present products or services into new geographic areas (e.g., Costco adding $20$ new stores annually; Lidl building $50$ new stores).

Product Development

An intensive strategy that seeks increased sales by improving or modifying present products or services (e.g., Dollar Tree expanding offerings of fresh produce).

Related Diversification

Adding new but related products when value chains possess competitively valuable cross-business strategic fits (e.g., Fenway Sports Group acquiring the Pittsburgh Penguins hockey team).

Unrelated Diversification

Adding new, unrelated products where value chains are so dissimilar that no competitively valuable cross-business relationships exist (e.g., ADT acquiring Sunpro Solar for $\$825\text{ million}$).

Retrenchment

A defensive strategy where an organization regroups through cost and asset reduction to reverse declining sales and profits, also called a turnaround or reorganizational strategy (e.g., General Mills laying off $1{,}400$ employees in $2021$).

Divestiture

A defensive strategy involving selling a division or part of an organization, often used to raise capital for further strategic acquisitions or investments (e.g., AT&T divesting Xandr to Microsoft).

Liquidation

Selling all of a company's assets, in parts, for their tangible worth when an organization has failed at retrenchment and divestiture and seeks to minimize loss or avoid bankruptcy.

Value Chain Analysis

The process whereby a firm determines the value (price minus cost) of each and all activities that went into producing and marketing a product, from purchasing raw materials to manufacturing, distributing, and marketing.

Benchmarking

The examination of value chain activities across an industry to determine 'best practices' among competing firms, enabling a company to duplicate or improve upon them.

Transforming Value Chain Activities into Sustained Competitive Advantages

The sequential process through which value chain activities are identified and assessed, leading to core competencies that evolve into distinctive competencies, which ultimately yield sustained competitive advantages.

Michael Porter's Generic Strategies

A framework categorizing competitive approaches into cost leadership (broad low-cost Type 1 or focused low-cost Type 2) and differentiation (broad differentiation Type 3 or focused differentiation Type 4).

Blue Ocean Strategy

A growth-from-within ('BUILD') strategy aimed at creating an uncontested target market where there is no competition yet.

Strategy-Formulation Analytical Framework

A three-stage framework comprising Stage 1: The Input Stage (EFE, CPM, IFE), Stage 2: The Matching Stage (SWOT, SPACE, BCG, IE, Grand Strategy), and Stage 3: The Decision Stage (QSPM).

SWOT Matrix

A matching tool that aligns internal strengths and weaknesses with external opportunities and threats to formulate four strategy sets: SO, WO, ST, and WT strategies.

Strategic Position and Action Evaluation (SPACE) Matrix

A four-quadrant matching framework based on two internal dimensions (financial position [FP] and competitive position [CP]) and two external dimensions (stability position [SP] and industry position [IP]) to determine aggressive, conservative, defensive, or competitive postures.

Boston Consulting Group (BCG) Matrix

A portfolio matrix that portrays differences among divisions based on relative market share position (horizontal axis) and industry sales growth rate (vertical axis), dividing business units into Question Marks, Stars, Cash Cows, and Dogs.

Question Marks (BCG Matrix)

Quadrant I business units that possess a low relative market share in a high-growth industry, requiring decisions to either strengthen them via intensive strategies or divest them.

Stars (BCG Matrix)

Quadrant II business units characterized by high relative market share and high industry growth, representing the organization's best long-run opportunities for growth and profitability.

Cash Cows (BCG Matrix)

Quadrant III business units that have high relative market share in a low-growth industry and generate cash in excess of their needs.

Dogs (BCG Matrix)

Quadrant IV business units with low relative market share competing in a slow- or no-growth industry, typically candidates for retrenchment, divestiture, or liquidation.

Internal-External (IE) Matrix

A portfolio matrix positioning divisions on nine cells based on IFE total weighted scores on the x-axis and EFE total weighted scores on the y-axis, divided into three major regions: grow and build, hold and maintain, and harvest or divest.

Grand Strategy Matrix

A strategy matching matrix based on two evaluative dimensions—competitive position (weak vs. strong) and market growth (rapid vs. slow)—divided into four quadrants to indicate appropriate alternative strategies.

Quantitative Strategic Planning Matrix (QSPM)

The Stage 3 decision tool that uses input information from Stage 1 and matching results from Stage 2 to compute attractiveness scores (AS) and objectively evaluate feasible alternative strategies.

Recommendation (Strategic Planning)

Any alternative strategy that is selected for implementation based on the QSPM analysis and expert judgment.