Business Strategy and Entrepreneurship Midterm Review

Vocabulary practice flashcards covering Porter's industry structure, Blue Ocean Strategy, Treacy & Wiersema's value disciplines, and Sarasvathy's effectuation vs. causation principles.

Causation

A goal-oriented management logic (causal logic) that starts with a fixed goal, relies on market research to predict, and analyzes the best way to achieve the goal in stable, predictable environments.

Causation Operating Principle

The core premise stating: 'we can predict the future, we can control it.'

Conditions for Causation

Used when the environment is predictable, there is a lot of data, and there is a good understanding of the market itself (competition, customers, etc.).

Effectuation

A disciplined entrepreneurial logic that starts with available possibilities and resources you already have, creating new ends as it goes and developing new opportunities evolving through partnership without predictive data.

Effectuation Operating Principle

The core premise stating: 'we can control the future, we do not need to predict it.'

Conditions for Effectuation

Used when operating under high or extreme uncertainty, data is unreliable or non-existent, and there is no established arena of buyers and sellers.

Bird in hand

An effectuation principle of starting with who you are, what you know, and who you know rather than waiting for missing resources.

Affordable loss

An effectuation principle of committing only what you can afford to lose (such as money or time, etc.).

Crazy Quilt

An effectuation principle of bringing people together to figure it out through partnerships, pooling time, expertise, and knowledge.

Lemonade Principle

An effectuation principle of treating unexpected surprises as creative opportunities, viewing setbacks as lemons and turning them into lemonade (making something nice).

Pilot-in-plane

An effectuation principle of focusing on actions within your control, rather than trying to predict the future.

Treacherous & wiersemas value disciplines

A strategic business framework based on the central idea that a company cannot be everything to everyone; to dominate or excel, a business must excel in one area and remain good in the other two.

Strategic Failure (Value Disciplines)

The negative outcome that results from attempting to chase all three value disciplines at once instead of excelling in one and being good enough in the other two.

Operational Excellence

A value discipline that delivers reliable products or services at the lowest cost, emphasizing max convenience, reliability, and efficient delivery (e.g., Walmart, IKEA, McDonalds, etc.).

Product leadership

A value discipline that offers the most cutting-edge performing products on the market, characterized by creativity and risk-taking (e.g., Apple, tesla, nike, etc.).

Customer intimacy

A value discipline focused on providing tailored solutions, deep relationships, personal service, and fostering customer loyalty (e.g., Nordstrom).

Blue ocean strategy Core Concept

Instead of battling rivals for a share of a crowded market (Red), make the competition irrelevant by creating a new market space.

Red Ocean

An overcrowded market where competitors fight for shares of limited customers.

Blue Ocean

An uncontested market space created by a business where there are no competitors by recombining what already exists through differentiation and low cost.

Value innovation

The simultaneous pursuit of differentiation and low cost by recombining what already exists to create uncontested market space, addressed via the four key questions of the ERRC Grid.

ERRC Grid

A framework consisting of four key questions for value innovation: Eliminate, Reduce, Raise, and Create.

Eliminate (ERRC Grid)

A value innovation question asking: what factors should be eliminated?

Reduce (ERRC Grid)

A value innovation question asking: what should be reduced below industry standard?

Raise (ERRC Grid)

A value innovation question asking: what should be raised above industry standard?

Create (ERRC Grid)

A value innovation question asking: which factors should be created that the industry has to offer?

Sun Tzu (Eastern strategy)

An Eastern strategic approach centered on winning without fighting, utilizing deep insight, adaptability, and deception.

Clausewitz (Western strategy)

A Western strategic approach centered on winning by confronting the rival head on.

Operational Effectiveness

Performing the same everyday business activities better, faster, or cheaper than competitors; characterized as a race where everyone eventually ties.

Strategic Positioning

Choosing a unique set of services to deliver a mix of value; a choice only you have made that sets your company apart from others and is hard for rivals to copy.

Trade offs

Choosing what not to do (an activity); requires sacrifice and creates incompatibility that blocks imitation.

Active fit

An interlocking system of activities (reinforcing system) that is stronger, stable, and more efficient; when business strategies combine to reinforce each other, making it hard for competitors to copy the whole chain.

Sustainable Strategic System

The synthesis where trade offs make the system coherent and active fit makes it inimitable, together making the strategy sustainable.

Porters 5 forces

A strategic framework analyzing industry structure through five forces: Supplier Power, Buyer power, Threat of substitutes, Threat of new entrants, and Competitive Rivalry.

Supplier Power

A competitive force where one or a few suppliers set the price and bargain because a business needs their item and is beholden to them.

Buyer power

The ability of buyers to set the price because switching costs are low and buyers can go anywhere else.

Threat of substitutes

A competitive force measuring how easily customers can replace an entire type of product.

Threat of new entrants

A competitive force measuring how easy it is for competitors to get into the market or industry.

Competitive Rivalry

A competitive force measuring how intense the direct competition is among existing businesses.

Rival

Direct competitors that sell the same thing in a different font (e.g., Pepsi vs. cola).

Substitutes

Completely different alternative products that satisfy the same need (e.g., water vs soda).