Chapter 2 Terms

Barriers to Entry

Obstacles that make it difficult for new competitors to enter a market, such as high startup costs, regulatory requirements, or strong brand loyalty.

Business Process

A business process is a series of structured steps that an organization follows to complete a task or achieve a goal.

Capital intensity

Capital intensity refers to how much money a business needs to invest in physical assets—like equipment, buildings, or technology—to produce its goods or services.

Competitive advantage

The attributes or conditions that allow a company to produce goods or services more efficiently or at a lower cost than its competitors, leading to greater market share.

Economies of scale

The cost advantages that a business can achieve by increasing its level of production, resulting in a lower cost per unit.

Procurement

The process of acquiring goods and services necessary for the operation of a business, including sourcing, purchasing, and managing supplier relationships.

Regulation

Regulation refers to the rules, laws, and standards set by governments or industry groups that businesses must follow.

Commodity

A basic good that can be interchanged with nearly identical offerings by others—think milk, coal, orange juice, or, to a lesser extent, Windows PCs and Android phones. The more commoditized an offering, the greater the likelihood that competition will be based on price.

Fast follower problem

Exists when savvy rivals watch a pioneer’s efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate.

Operational effectiveness

Performing the same tasks better than rivals perform them.

Strategic Positioning

Performing different tasks than rivals, or the same tasks in a different way.

Price transparency

The degree to which complete information is available.

Brand

The symbolic embodiment of all the information connected with a product or service.

Distribution channels

The path through which products or services get to customers.

Network effects

When the value of a product or service increases as its number of users expands.

Switching costs

The cost a consumer incurs when moving from one product to another. It can involve actual money spent (e.g., buying a new product) as well as investments in time, any data loss, and so forth.

Value chain

The set of activities through which a product or service is created and delivered to customers.

Differentiation

A strategy where a company offers unique products or services that stand out from competitors, allowing it to charge higher prices.

Human Resource Management (HRM)

The strategic approach to managing an organization's most valuable asset—its people. HRM encompasses recruitment, training, performance management, and employee relations.

Inbound logistics

The activities related to receiving, storing, and distributing raw materials or components for production. Inbound logistics is crucial for ensuring that production processes operate efficiently.

Incumbent

Current holder of a position, office, or the dominant firm in a market. They possess long-term advantages in efficiency, resources, and market position over new, incoming competitors

Operations

The processes involved in the production of goods and services, including planning, execution, and oversight of production activities.

Outbound logistics

The activities related to delivering finished products to customers, including warehousing, transportation, and order fulfillment.

Substitute

A product or service that can replace another due to its similar characteristics or functions, often used in competitive markets to fulfill customer needs.