Strategic Management by David and David (15th edition)

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The Strategic Management by David and David (15th edition) is the fifteenth edition of the Strategic Management: Concepts and Cases textbook that has been authored by Fred R. David and Forest R. David, as well as published by Pearson.

  • Acquisition. When a large organization purchases (acquires) a smaller firm; a merger.
  • Actionable factors. Meaningful in terms of having strategic implications; reveal potential strategies to capitalize or compensate.
  • Activity ratios. Inventory turnover and average collection period measure how effectively a firm is using its resources.
  • Advantage. A way to evaluate strategies, i.e. to determine if a particular strategy creates or extends a firm's competitive superiority in a selected area of activity.
  • Aggressive quadrant. In a SPACE Matrix analysis, when the firm's directional vector points in the upper right quadrant, the firm should pursue aggressive strategies.
  • Annual objectives. Desired targets to achieve; used to focus/direct/channel efforts and activities of organization members. They (1) represent the basis for allocating resources; (2) are a primary mechanism for evaluating managers; (3) are the major instrument for monitoring progress toward achieving long-term objectives; and (4) establish organizational, divisional, and departmental priorities.
  • Annual objectives. Short-term milestones, usually one year, that organizations must achieve to reach long-term targets/goals.
  • Attractiveness scores (AS). In a QSPM, the numerical value (rating) that indicates the relative attractiveness of each strategy given a single internal or external factor.
  • Auditing. The accounting process that firms undertake to have their financial statements reviewed for accuracy in order to assure compliance with the law and IRS code.
  • Avoidance. A method for reducing conflict through such actions as ignoring the problem in hopes that the conflict will resolve itself or physically separating the conflicting individuals (or groups).
  • Backward integration. A strategy seeking ownership or increased control of a firm's suppliers, such as a manufacturer acquiring its raw material source firms.
  • Balanced scorecard. A framework of desired objectives; derives its name from the need of firms to "balance" quantitative (such as financial ratios and percentages) with qualitative (such as for employee morale and business ethics) objectives that are oftentimes used in strategy evaluation.
  • Balanced Scorecard. A strategy evaluation tool utilized to establish, monitor, and evaluate both qualitative and quantitative (hence the word balanced) objectives in order to improve organizational effectiveness and performance.
  • Bankruptcy. A legal document that allows a firm to avoid major debt obligations and void union contracts in order to survive and regroup as a firm. There are five major types: chapter 2, chapter 10, and chapter 11.
  • Benchmarking. A management technique associated with value chain analysis, whereby a firm compares itself on a wide variety of performance-related criteria against the best firms in the industry, thus establishing standards of excellence.
  • Benchmarking. An analytical tool used to determine how a firm's value chain activities compare to rival firms in order to better gain and sustain competitive advantages.
  • Board of directors. A group of individuals above the CEO, who have oversight and guidance over management and who care for shareholders' interests.
  • Bonus system. A form of incentive compensation whereby employees and/or managers receive a year-end or period-end reward, usually cash, based on some organizational performance criteria such as sales, profit, production efficiency, quality, and safety; used to motivate individuals to support strategy-implementation efforts.
  • Book value. Number of shares outstanding times stock price.
  • Boston Consulting Group Matrix (BCG Matrix). A four quadrant, strategic planning analytical tool that places an organization's various divisions as circles in a display (similar to the ie Matrix) based on two key dimensions: 1) relative market share position and 2) industry growth rate. The diagram's four quadrants (Stars, Question Marks, Cash Cows, Dogs) each have different strategy implications.
  • Breakeven point (BE point). The quantity of units that a firm must sell in order for its total revenues (TR) to equal its total costs (TC).
  • Bribe. A gift bestowed to influence a recipient's conduct.
  • Bribery. Offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in discharge of a public or legal duty.
  • Business analytics. An MIS technique designed to analyze huge volumes of data to help executives make decisions; sometimes called predictive analytics or data mining.
  • Business ethics. Principles of behavior/conduct a firm may institute to minimize wrongdoing among employees/ managers.
  • Business portfolio. Autonomous divisions (or profit centers or segments) of an organization as represented by circles in a BCG and IE matrices.
  • Business-Process Outsourcing (BPO). When a firm contracts with an outside firm(s) to take over some of their functional operations, such as human resources, information systems, payroll, accounting, or customer service.
  • Capacity utilization. The extent to which a manufacturing plant's output reaches its potential output; the higher the capacity utilization the better, because otherwise equipment may sit idle.
  • Capital budgeting. A basic function of finance; the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.
  • Cash budget. The most common type of financial budget; developed to forecast future receipts and disbursements of cash in operations, investments, and financing.
  • Cash cows. A quadrant in the BCG Matrix for divisions that have a high relative market share position but compete in a low-growth industry; they generate cash in excess of their needs, they are often milked, this is the lower left quadrant.
  • Champions. Individuals most strongly identified with a firm's new idea/product/service, and whose futures are linked to its success.
  • Chief Information Officer (CIO). Is more an external manager compared to a CTO; focuses on the firm's technical, information gathering, and social media relationship with diverse external stakeholders.
  • Chief Technology Officer (CTO). Is more of an internal manager than the CIO; focuses on technical issues such as data acquisition, data processing, decision-support systems, and software and hardware acquisition.
  • Code of business ethics. A written document specifying expected employee/manager behavior/conduct in an organization.
  • Combination strategy. The pursuit of a combination of two or more strategies simultaneously.
  • Communication. Perhaps the most important word in strategic management, because gathering, assimilating, and evaluating information in an interactive, effective manner can lead to enhanced understanding and commitment so vital in strategic planning.
  • Competitive advantage. Anything a firm does especially well, compared to rival firms. For example, when a firm can do something that rival firms cannot do, or owns something that rival firms desire, that can represent a competitive advantage.
  • Competitive analysis. The process of gathering and analyzing data about competitors and disseminating the data (intelligence) on a timely basis to who needs to know in order to gain and sustain a firm's competitive advantages.
  • Competitive Intelligence (CI). A systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business's own goals (SCIP website, scip.org).
  • Competitive Position (CP). One of four dimensions/axes of the SPACE Matrix; determines an organization's competitiveness, using such factors as market share, product quality, product life cycle, customer loyalty, capacity utilization, technological know-how and control over suppliers and distributors.
  • Competitive Profile Matrix (CPM). A widely used strategic planning analytical tool designed to identify a firm's major competitors and its particular strengths and weaknesses in relation to a sample firm's strategic position.
  • Competitive quadrant. In a SPACE Matrix analysis, when the firm's directional vector points in the lower right quadrant it suggests that the firm should pursue competitive strategies such as horizontal integration.
  • Concern for employees. A component of the mission statement; are employees a valuable asset to the firm?
  • Concern for public image. A component of the mission statement; is the firm responsive to social, community, and environmental concerns?
  • Concern for survival, growth, and profitability. A component of the mission statement; does the firm strive to survive, grow, and (if for-profit) be profitable?
  • Conflict. A disagreement between two or more parties on one or more issues.
  • Confrontation. A method for reducing conflict exemplified by exchanging members of conflicting parties so that each can gain an appreciation of the other's point of view, or holding a meeting at which conflicting parties present their views and work through their differences.
  • Conservative quadrant. In a SPACE Matrix analysis, when the firm's directional vector points in the upper left quadrant it suggests that the firm should pursue conservative strategies such as market penetration.
  • Consistency. A way to evaluate strategies, i.e. to determine if a particular strategy is supportive of overall strategies/objectives/policies of the firm.
  • Consonance. Refers to the need for strategists to examine sets of trends, as well as individual trends, in evaluating strategies.
  • Contingency plans. Alternative plans that can be put into effect if certain key events do not occur as expected.
  • Controlling. A basic function of management; includes all of those activities undertaken to ensure that actual operations conform to planned operations.
  • Cooperative arrangements. Includes joint ventures, research and development partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing agreements, and joint-bidding consortia.
  • Core competence. A value chain activity that a firm performs especially well.
  • Cost leadership. One of Michael Porter's strategy dimensions that involves a firm producing standardized products at a very low per-unit cost for consumers who are price-sensitive.
  • Cost/benefit analysis. An activity that involves assessing the costs, benefits, and risks associated with marketing decisions. three steps are required to perform this: (1) compute the total costs associated with a decision, (2) estimate the total benefits from the decision, and (3) compare the total costs with the total benefits.
  • Creed statement. Another name for mission statement; a declaration of an organization's "reason for being." it answers the pivotal question, "What is our business?"
  • Cultural products. Include values, beliefs, rites, rituals, ceremonies, myths, stories, legends, sagas, language, metaphors, symbols, heroes, and heroines. These products are levers that strategists can use to influence and direct strategy formulation, implementation, and evaluation activities.
  • Culture. The set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm. Strategists should strive to preserve, emphasize, and build upon these aspects.
  • Customer analysis. Examination and evaluation of consumer needs, desires, and wants; involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies.
  • Customers. A component of the mission statement; individuals who purchase a firm's products/services.
  • Data mining. Analyzing huge volumes of information in order to determine trends and garner information to make decision making more effective.
  • Data. Raw facts and figures; "data" becomes "information" only when they are evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.
  • De-integration. Reducing the pursuit of backward integration; instead of owning suppliers, companies negotiate with several outside suppliers.
  • Decentralized structure. Also called a divisional structure, this type of organizational design is based on having various profit centers or segments by geographic area, by product or service, by customer, or by process. With a divisional structure, functional activities are performed both centrally and in each separate division.
  • Decision stage. Stage 3 of the strategy formulation analytical framework that involves development of the Quantitative Strategic Planning Matrix (QSPM). A QSPM uses input information from Stage 1 to objectively evaluate feasible alternative strategies identified in Stage 2. a QSPM reveals the relative attractiveness of alternative strategies and thus provides objective basis for selecting specific strategies.
  • Defensive quadrant. In a SPACE Matrix analysis, when the firm's directional vector into the lower left quadrant it suggests that the firm should pursue defensive strategies such as retrenchment.
  • Defusion. A method for reducing conflict includes playing down differences between conflicting parties while accentuating similarities and common interests, or compromising so that there is neither a clear winner nor loser, or resorting to majority rule, or appealing to a higher authority, or redesigning present positions.
  • Delayering. Reducing the number of divisions or units or hierarchical levels in a firm's organizational structure.
  • Demand void. Areas in a perceptual map where there is not a cluster of ideal points indicating an unattractive group of potential customers.
  • Differentiation. One of Michael Porter's strategy dimensions that involves a firm producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive.
  • Directional vector. In a SPACE Matrix analysis, this line begins at the origin and goes into one of four quadrants, revealing the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative.
  • Director of competitive analysis. The person who gathers and analyzes data about competitors, and disseminates data (intelligence) on a timely basis to who needs to know in order to gain and sustain a firm's competitive advantages.
  • Discount. If an acquiring firm pays less for another firm than the firm's stock price times its # of shares of stock outstanding (book value or market value), then that # less the actual purchase price is called a discount.
  • Distinctive competencies. A firm's strengths that cannot be easily matched or imitated by competitors.
  • Distribution. The process of getting goods and services to market; includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing.
  • Diversification strategies. When a firm enters a new business/industry, either related and unrelated to their existing business/industry. Related diversification is when the old vs. new business value chains possesses competitively valuable cross-business strategic fits; unrelated diversification is when the old vs. new business value chains are so dissimilar that no competitively valuable cross-business relationships exist.
  • Divestiture. Selling a division or part of an organization.
  • Dividend decision. A basic function of finance; concerns issues such as the percentage of earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock.
  • Dividend recapitalizations. When private-equity firms especially, but other firms also, borrow money to fund dividend payouts to themselves.
  • Divisional structure. This type of organizational design is based on having various profit centers or segments by geographic area, by product or service, by customer, or by process. With a divisional structure, functional activities are performed both centrally and in each separate division.
  • Dogs. A quadrant in the BCG Matrix for divisions that have a low relative market share position and compete in a low-growth industry, this is the lower right quadrant.
  • Downsizing. Reducing the number of employees, number of divisions or units, and/or number of hierarchical levels in the firm's organizational structure.
  • Educative change strategy. A management technique to facilitate a firm adapting to new strategies/policies/situations by presenting to employees/managers information that reveals why the firm needs to do what is to be done; this approach can be slow but oftentimes yields high commitment.
  • Empirical indicators. Refers to three characteristics of resources (rare, hard to imitate, not easily substitutable) that enable a firm to gain and sustain competitive advantage.
  • Employee Stock Ownership Plans (ESOP). A tax-qualified, defined-contribution, employee-benefit plan whereby employees purchase stock of the company through borrowed money or cash contributions.
  • Empowerment. The act of strengthening employees' sense of shared ownership by encouraging them to participate in decision making and rewarding them for doing so.
  • Environment. The surroundings in which an organization operates, including air, water, land, natural resources, flora, fauna, humans, and their interrelation.
  • Environmental Management System (EMS). When a firm or municipality operates utilizing "green" policies/practices/ procedures as outlined by ISO 14001.
  • Environmental scanning. Another term for external audit; conducting research to gather and assimilate external information.
  • Environmental scanning. Process of conducting research and gathering and assimilating external information.
  • EPS/EBIT analysis. A financial technique to determine whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies.
  • Establishing annual objectives. The managerial activity that determines appropriate/desired targets to achieve by region/ product/service.
  • External audit. Process of identifying and evaluating trends and events beyond the control of a single firm, in areas such as social, cultural, demographic technology, economic, political, and competition; reveals key opportunities and threats confronting an organization, so managers can better formulate strategies.
  • External Factor Evaluation Matrix (EFE Matrix). A widely used strategic planning analytical tool designed to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.
  • External forces. (1) economic forces; (2) social, cultural, demographic, and natural environment forces; (3) political, governmental, and legal forces; (4) technological forces; and (5) competitive forces.
  • External opportunities. Economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends/events/facts that could significantly benefit an organization in the future.
  • External threats. Economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends/events/facts that could significantly harm an organization in the future.
  • Feasibility. A way to evaluate strategies, i.e. to determine if a strategy is capable of being carried out within the physical, human, and financial resources of the firm.
  • Feng shui. In China, this term refers to the practice of harnessing natural forces, which can impact how you arrange office furniture.
  • Financial budget. A financial document that details/reveals how funds will be obtained and spent for a specified period of time in the future.
  • Financial objectives. Include desired results growth in revenues, growth in earnings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and so on.
  • Financial Position (FP). One of four dimensions/axes of the SPACE Matrix that determines an organization's financial strength, considering such factors as return on investment, leverage, liquidity, working capital, and cash flow.
  • Financial ratio analysis. Quantitative calculations that reveal the financial condition of a firm and exemplify the complexity of relationships among the functional areas of business. For example, a declining return on investment or profit margin ratio could be the result of ineffective marketing, poor management policies, research and development errors, or a weak management information system. Ratios are usually compared to industry averages, or to prior time periods, or to rival firms.
  • Financing decision. A basic function of finance; determines the best capital structure for the firm and includes examining various methods by which the firm can raise capital (for example, by issuing stock, increasing debt, selling assets, or using a combination of these approaches).
  • First mover advantages. The benefits a firm may achieve by entering a new market or developing a new product or service before rival firms.
  • Fixed Costs (FC). A key variable in breakeven analysis; includes costs such as plant, equipment, stores, advertising, and land.
  • Focus. One of Michael Porter's strategy dimensions that involves a firm producing products and services that fulfill the needs of small groups of consumers.
  • Force change strategy. A management technique to facilitate a firm adapting to new strategies/policies/situations by simply giving orders and enforcing those orders; this approach has the advantage of being fast, but it is plagued by low commitment.
  • Forward integration. A strategy that involves gaining ownership or increased control over distributors or retailers, such as a manufacturer opening its own chain of stores.
  • Franchising. An effective means of implementing forward integration whereby a franchisee purchases the right to own one or more stores/restaurants of a chain firm.
  • Friendly merger. If the merger/acquisition is desired by both firms.
  • Functional structure. A type of organizational design that groups tasks and activities by business function, such as production/operations, marketing, finance/accounting, research and development, and management information systems.
  • Functions of finance/accounting. The basic activities performed by finance managers; consists of three decisions: the investment decision, the financing decision, and the dividend decision.
  • Functions of management. Consist of five basic activities: planning, organizing, motivating, staffing, and controlling.
  • Functions of marketing. The basic activities performed by marketing managers, including (1) customer analysis, (2) selling products/services, (3) product and service planning, (4) pricing, (5) distribution, (6) marketing research, and (7) opportunity analysis.
  • Furloughs. Temporary layoffs.
  • Future shock. High anxiety that results when the nature, types, and speed of changes overpower an individual's or organization's ability and capacity to adapt.
  • GAAS, GAAP, and IFRS. Generally accepted auditing standards, generally accepted accounting principles, and international financial reporting standards.
  • Gain sharing. A form of incentive compensation whereby employees and/or managers receive bonuses when actual results exceed some predetermined performance targets.
  • Generic strategies. Michael Porter's strategy breakdown; consists of three strategies: cost leadership, differentiation, and focus.
  • Glass ceiling. A term used to refer to the artificial barrier that women and minorities face in moving into upper levels of management.
  • Global strategy. Designing, producing, and marketing products with global needs in mind, instead of solely considering individual countries.
  • Globalization. A process of doing business worldwide, so strategic decisions are made based on global profitability of the firm rather than just domestic considerations.
  • Goodwill. If a firm acquires another firm and pays more than the book value (market value), then the additional amount paid is called a premium, and becomes goodwill, which is a line item on the assets portion of a balance sheet.
  • Governance. The act of oversight and direction, especially in association with the duties of a board of directors.
  • Grand Strategy Matrix. A four-quadrant, two axis tool for formulating alternative strategies. All organizations can be positioned in one of this matrix's four strategy quadrants, based on their position on two evaluative dimensions: competitive position and market (industry) growth. Strategy suggestions ensue depending on which quadrant the firm is located.
  • Growth ratios. Measures such as the percent increase/decrease in revenue or profit from one period to the next are important comparisons.
  • Guanxi. In China, business behavior is based on "personal relations".
  • Halo error. The human tendency to put too much weight on a single factor.
  • Horizontal consistency of objectives. Objectives need to be compatible across functions; for example if marketing wants to sell 10% more than production must produce 10% more.
  • Horizontal integration. Acquiring a rival firm.
  • Hostile takeover. If the merger/acquisition is not desired by both firms.
  • Human resource management. Also called personnel management; a basic function of management; includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations.
  • Industrial Organization (I/O). An approach to competitive advantage that advocates that external (industry) factors are more important than internal factors for a firm in striving to achieve competitive advantage.
  • Industry analysis. Another term for external audit; conducting research to gather and assimilate external information.
  • Industry Position (IP). One of four dimensions/axes of the SPACE Matrix that determines how strong/weak a firm's industry is, considering such factors as growth potential, profit potential, financial stability, extent leveraged, resource utilization, ease of entry into market, productivity and capacity utilization.
  • Information Technology (IT). The development, maintenance, and use of computer systems, software, and networks for the processing and distribution of data.
  • Information. Data that has been evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.
  • Inhwa. A South Korean term for activities that involve concern for harmony based on respect of hierarchical relationships, including obedience to authority.
  • Initial public offering. When a private firm goes public by selling its shares of stock to the public in order to raise capital.
  • Input stage. Stage 1 of the strategy-formulation analytical framework that summarizes the basic input information needed to formulate strategies; consists of an EFEM, CPM, and IFEM.
  • Integration strategies. Includes forward integration, backward integration, and horizontal integration (sometimes collectively referred to as vertical integration strategies).
  • Intensive strategies. Includes market development, market penetration, and product development.
  • [[Internal audit the process of gathering and assimilating information about the firm's management, marketing, finance/ accounting, production/operations, R&D, and MIS operations. the purpose is to identify/evaluate/prioritize a firm's strengths and weaknesses.]].
  • Internal Factor Evaluation Matrix (IFE Matrix). A strategy-formulation tool that summarizes and evaluates a firm's major strengths and weaknesses in the functional areas of a business, and provides a basis for identifying and evaluating relationships among those areas.
  • Internal strengths. An organization's controllable activities that are performed especially well, such as in areas that include finance, marketing, management, accounting, MIS, across a firm's products/regions/stores/facilities.
  • Internal weaknesses. An organization's controllable activities that are performed especially poorly, such as in areas that include finance, marketing, management, accounting, MIS, across a firm's products/regions/stores/facilities.
  • Internal-External Matrix (IE Matrix). A nine quadrant, strategic planning analytical tool that places an organization's various divisions as circles in a display (similar to the BCG Matrix) based on two key dimensions: 1) the segment's IFE total weighted scores on the x-axis and 2) the segment's EFE total weighted scores on the y-axis. The diagram is divided into three major regions that have different strategy implications: 1) grow and build or 2) hold and maintain, or 3) harvest or divest.
  • International firms. Firms that conduct business outside their own country.
  • Internet. A global system of interconnected computers that serve billions of users worldwide; provides a vast range of information resources and services; enables billions of businesses and individuals globally to communicate instantly with each other by email, tweets, etc.
  • Intuition. Using one's cognition without evident rational thought or analysis; based on past experience, judgment, and feelings; essential to making good strategic decisions but must not relied upon heavily in lieu of objective analysis.
  • Investment decision. Also called capital budgeting; a basic function of finance; the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.
  • ISO 14000. A series of voluntary standards in the environmental field whereby a firm minimizes harmful effects on the environment caused by its activities and continually monitors and improves its own environmental performance.
  • ISO 14001. A set of standards adopted by thousands of firms worldwide to certify to their constituencies that they are conducting business in an environmentally friendly manner. These standards offer a universal technical standard for environmental compliance that more and more firms are requiring not only of themselves but also of their suppliers and distributors.
  • Joint venture. A strategy that occurs when two or more companies form a temporary partnership/consortium/business for the purpose of capitalizing on some opportunity.
  • Just-In-Time (JIT). A production approach in which parts and materials are delivered to a production site just as they are needed, rather than being stockpiled as a hedge against late deliveries.
  • Leverage ratios. The debt-to-equity ratio and debt-to-total assets ratio measure the extent to which a firm has been financed by debt.
  • Leveraged Buyout (LBO). When the outstanding shares of a corporation are bought by the company's management and other private investors using borrowed funds.
  • Linear regression. A quantitative statistical technique often used for forecasting, but based on the assumption that the future will be just like the past. to the extent that historical relationships are unstable, linear regression is less accurate.
  • Liquidation. Selling all of a company's assets, in parts, for their tangible worth.
  • Liquidity ratios. The current ratio and quick ratio measure a firm's ability to meet short-term cash obligations.
  • Long-range planning. Deciding upon future actions/objectives/policies with the aim to optimize for tomorrow the trends of today; less effective and comprehensive than strategic planning.
  • Long-term objectives. Specific results that an organization seeks to achieve (in more than one year) in pursuing its basic vision/mission/strategy.
  • Long-term objectives. The specific results expected from pursuing various strategies.
  • Management by wandering around. A part of strategy evaluation whereby managers simply walk around facilities and operations in order to observe and talk with employees, thus garnering information useful in evaluating strategies.
  • Management Information System (MIS). A system that gathers, assimilates, and evaluates external and internal information to facilitate decision-making.
  • Management information system. A computer-based process for obtaining and utilizing external and internal facts/figures/trends to support managerial decision-making. Includes gathering and utilizing data about marketing, finance, production, and personnel matters internally, and social, cultural, demographic, environmental, economic, political, governmental, legal, technological, and competitive factors externally.
  • Market capitalization. Number of shares outstanding times stock price.
  • Market commonality. The number and significance of markets that a firm competes in with rivals.
  • Market development. Introducing present products or services into new geographic areas.
  • Market penetration. Increasing market share for present products or services in present markets through greater marketing efforts.
  • Market segment. Areas in a perceptual map where there is a cluster of ideal points indicating an attractive group of potential customers to target.
  • Market segmentation. The marketing technique of subdividing consumers into distinct subsets according to needs and buying habits in order to more effectively and economically direct marketing efforts.
  • Market value. Number of shares outstanding times stock price.
  • Marketing research. The systematic gathering, recording, and analyzing of data about problems/practices/issues related to the marketing of goods and services.
  • Markets. A component of the mission statement; geographic locations where a firm competes.
  • Marketing mix variables. Product, place, promotion, and price.
  • Matching stage. Stage 2 of the strategy-formulation framework that focuses upon generating feasible alternative strategies by aligning internal with external factors by utilizing five matrices: BCG, IE, SWOT, Grand, SPACE.
  • Matching. When an organization matches its internal strengths and weaknesses with its external opportunities and threats using, for example, the SWOT, SPACE, BCG, IE, or Grand Matrices.
  • Matrix structure. This type of organizational design places functional activities along the top row and divisional projects/units along the left side to create a rubric where managers have two bosses – both a functional boss and a project boss, thus creating the need for extensive vertical and horizontal flows of authority and communication.
  • Measuring organizational performance. Activity # 2 in the strategy evaluation process; includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance, and examining progress being made toward meeting stated objectives.
  • Merger. When two organizations of about equal size unite to form one enterprise; an acquisition.
  • mission statement components. 1) customers, 2) products and services, 3) markets, 4) technology, 5) concern for survival, growth, and profitability, 6) philosophy, 7) self-concept, 8) concern for public image, 9) concern for employees.
  • mission statement. A declaration of an organization's "reason for being." It answers the pivotal question, "What is our business?" is essential for effectively establishing objectives and formulating strategies; consists of nine components.
  • mission statement. An enduring statement of purpose that distinguish one business from other similar firms; several sentence statement that identifies the scope of a firm's operations in product and market terms and addresses the question "What is our business?"
  • Motivating. A basic function of management; the process of influencing and leading people to accomplish specific objectives.
  • Multidimensional scaling. The same as product positioning (perceptual mapping), except encompasses three or more evaluative criteria simultaneously.
  • Multinational corporations. Firms that conduct business outside their own country.
  • Nemaswashio. U.S. managers in Japan have to be careful about this phenomenon, whereby Japanese workers expect supervisors to alert them privately of changes rather than informing them in a meeting.
  • Organizational culture. A pattern of behavior developed by an organization over time as it learns to cope with its problem of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel in the firm.
  • Organizing. A basic function of management; the process of arranging duties and responsibilities in a coherent manner in order to determine who does what and who reports to whom.
  • Outstanding shares method. A method for determining the cash worth of a firm by multiplying the number of shares outstanding by the market price per share; also called book value, market value, or market capitalization.
  • Perceptual map. Also called product-positioning map; a two-dimensional, four quadrant marketing tool designed to position a firm vs. its rival firms in a schematic diagram in order to better determine effective marketing strategies.
  • Personnel management. Also called human resource management; a basic function of management; includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations.
  • Philosophy. A component of the mission statement; the basic beliefs, values, aspirations, and ethical priorities of the firm.
  • Planning. A basic function of management; the process of deciding ahead of time strategies to be pursued and actions to be taken in the future.
  • Policies. The means by which annual objectives will be achieved. Policies include guidelines, rules, and procedures established to support efforts to achieve stated objectives. Policies are guides to decision making and address repetitive or recurring situations.
  • Policy. Specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals.
  • Porter's Five-Forces Model. A theoretical model devised by Michael Porter, who suggests that the nature of competitiveness in a given industry can be viewed as a composite of five forces: 1) rivalry among competing firms, 2) Potential entry of new competitors, 3) Potential development of substitute products, 4) Bargaining power of suppliers, and 5) Bargaining power of consumers.
  • Premium. If an acquiring firm pays more for another firm than that firm's stock price times its # of shares of stock outstanding (book value or market value), then the overage is called a premium.
  • Price-earnings ratio method. This method involves dividing the market price of the firm's common stock by the annual earnings per share and multiplying this number by the firm's average net income for the past five years.
  • Pricing. A basic function of marketing; determining the appropriate value for products and services to be charged to customers, given associated costs and competitor's prices.
  • Product and service planning. A basic function of marketing; includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products; and providing for customer service.
  • Product development. Increased sales by improving or modifying present products or services.
  • Product positioning. Also called perceptual mapping; a two-dimensional, four quadrant marketing tool designed to position a firm vs. its rival firms in a schematic diagram in order to better determine effective marketing strategies.
  • Production/operations function. Consists of all those activities that transform inputs into goods and services; including issues such as inventory control and capacity utilization.
  • Products or services. A component of the mission statement; commodities or benefits provided by a firm.
  • Profit sharing. A form of incentive compensation whereby some of a firm's earnings are distributed to employees/ managers based on some predetermined formula; used to motivate individuals to support strategy-implementation efforts.
  • Profitability ratios. The profit margin ratio and return on investment ratio measure the profitability of a firm's operations.
  • Projected financial statement analysis. A financial technique that enables a firm to forecast the expected financial results of various strategies and approaches; involves developing income statements and balance sheets for future periods of time.
  • Protectionism. When countries impose tariffs, taxes, and regulations on firms outside the country to favor their own companies and people.
  • Quantitative Strategic Planning Matrix (QSPM). An analytical technique designed to determine the relative attractiveness of feasible alternative actions. this technique comprises Stage 3 of the strategy-formulation analytical framework; it objectively indicates which alternative strategies are best.
  • Question marks. A quadrant in the BCG Matrix for divisions that have a low relative market share position but compete in a high-growth industry; this is the upper right quadrant; firm's generally must decide whether to strengthen such divisions or sell them (hence a question is at hand).
  • Rational change strategy. A management technique to facilitate a firm adapting to new strategies/policies/situations, whereby employees/managers are given incentives to be supportive while at the same time are educated as to the need to change.
  • Reconciliatory. In regard to mission statements, the need for the statement to be sufficiently broad to "reconcile" differences effectively among diverse stakeholders, ie appeal to a firm's customers, employees, shareholders, creditors – rather than alienate any group.
  • Reengineering. Reconfiguring or redesigning work, jobs, and processes in a firm, for the purpose of improving cost, quality, service, and speed.
  • Related diversification. When a firm acquires a new business whose value chain possesses competitively valuable crossbusiness strategic fits.
  • Relative market share position. It is the horizontal axis in a BCG Matrix, which is the firm's particular segment's market share (or revenues or #stores) divided by the industry leader's analogous number
  • Research and Development (R&D). Spending money to develop new and improved products and services.
  • Research and development. Monies spent by firms to enhance existing products/services and/or create new and improved ones.
  • Reshoring. Refers to American companies planning to move some of their manufacturing back to the USA.
  • Resistance to change. A natural human tendency to be wary of new policies/strategies due to potential negative consequences; if not managed then this could result in sabotaging production machines, absenteeism, filing unfounded grievances, and an unwillingness to cooperate.
  • Resource allocation. A central strategy implementation activity that entails distributing financial, physical, human, and technological assets to allow for strategy execution.
  • Resource similarity. The extent to which the type and amount of a firm's internal resources are comparable to a rival.
  • Resource-Based View (RBV). An approach that suggests internal resources to be more important for a firm than external factors in achieving and sustaining competitive advantage.
  • Restructuring. Modifying the firm's chain of command and reporting channels to improve efficiency and effectiveness.
  • Retreats. Formal meetings commonly held off-premises to discuss and update a firm's strategic plan; done away from the work site to encourage more creativity and candor from participants.
  • Retrenchment. When an organization regroups through cost and asset reduction to reverse declining sales and profits.
  • Reviewing the underlying bases of an organization's strategy. Activity #1 in the strategy evaluation process; entails a firm developing a revised EFE Matrix and IFE Matrix to determine if corrective actions are needed.
  • Revised EFE Matrix. Part of activity #1 in the strategy evaluation process whereby a firm reassesses its previously determined external opportunities and threats.
  • Revised IFE Matrix. Part of activity #1 in the strategy evaluation process whereby a firm reassesses its previously determined internal strengths and weaknesses.
  • Rightsizing. Reducing the number of employees, number of divisions or units, and/or number of hierarchical levels in the firm's organizational structure; also called downsizing.
  • Secondary buyouts. When private-equity firms buying companies from other private-equity firms.
  • Self-concept. A component of the mission statement; the firm's distinctive competence or major competitive advantage.
  • Self-interest change strategy. A management technique to facilitate a firm adapting to new strategies/policies/situations by attempts to convince individuals that the change is to their personal advantage. When this appeal is successful, strategy implementation can be relatively easy. However, implementation changes are seldom to everyone's advantage.
  • Selling. A basic function of marketing; includes activities such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations.
  • Sexual harassment (and discrimination). Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature; this activity is illegal, unethical, and detrimental to any organization, and can result in expensive lawsuits, lower morale, and reduced productivity.
  • Six Sigma. A quality-boosting process improvement technique that entails training several key persons in techniques to monitor, measure, and improve processes and eliminate defects in a firm; trained persons can earn black belts.
  • SO strategies. Strategies that result from matching a firm's internal strengths with its external opportunities.
  • Social policy. Guidelines and practices a firm may institute to guide its behavior towards employees, consumers, environmentalists, minorities, communities, shareholders, and other groups.
  • Social responsibility. Refers to actions an organization takes beyond what is legally required to protect or enhance the well-being of living things
  • ST strategies. Strategies that result from matching a firm's internal strengths with its external threats.
  • Stability position (SP). One of four dimensions/axes of the SPACE Matrix that determines how stable/unstable a firm's industry is, considering such factors as technological changes, rate of inflation, demand of variability, price range of competing products, barriers to entry into market, competitive pressure, ease of exit from market, price elasticity of demand and risk involved in business.
  • Staffing. Includes activities such a recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees.
  • Stakeholders. The individuals and groups of individuals who have a special stake or claim on the company, such as a firm's customers, employees, shareholders, and creditors.
  • Stars. A quadrant in the BCG Matrix for divisions that have a high relative market share position and compete in a high-growth industry; this is the upper left quadrant.
  • Strategic Business Unit Structure (SBU Structure). This type of organizational design groups similar divisions together into units; widely used when a firm has many divisions/segments in order to reduce span of control reporting to a COO.
  • Strategic management. The art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.
  • Strategic objectives. Desired results such as a larger market share, quicker on-time delivery than rivals, shorter design-to-market times than rivals, lower costs than rivals, higher product quality than rivals, wider geographic coverage than rivals, achieving technological leadership, consistently getting new or improved products to market ahead of rivals.
  • Strategic planning. The process of formulating an organization's game plan; in a corporate setting, this term may refer to the whole strategic-management process.
  • Strategic Position and Action Evaluation Matrix (SPACE Matrix). Indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization. the axes of this matrix represent two internal dimensions (financial position [FP] and competitive position [CP] ) and two external dimensions (stability position [SP] and industry position [IP]). These four factors are perhaps the most important determinants of an organization's overall strategic position.
  • Strategic-management model. A framework or illustration of the strategic-management process; a clear and practical approach for formulating, implementing, and evaluating strategies.
  • Strategic-management process. The process of formulating, implementing, and evaluating strategies as revealed in the comprehensive model, that begins with vision/mission development and ends with strategy evaluation and feedback.
  • Strategies. The means by which long-term objectives will be achieved. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures.
  • Strategists. The person(s) responsible for formulating and implementing a firm's strategic plan, including the CEO, President, Owner of a Business, Head coach, governor, chancellor, and/or the top management team in a firm.
  • Strategy evaluation. Stage 3 in the strategic-management process. the three fundamental strategy-evaluation activities are (1) review external and internal factors that are the bases for current strategies, (2) measure performance, and (3) take corrective actions; strategies need to be evaluated regularly because external and internal factors constantly change.
  • Strategy formulation. Stage 1 in the strategic-management process; includes developing a vision/mission, identifying an organization's external opportunities/threats, determining internal strengths/weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue.
  • Strategy implementation. Stage 2 of the strategic-management process. activities include establish annual objectives, devise policies, motivate employees, allocating resources, developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance.
  • Strategy-formulation analytical framework. A three stage, nine matrix, array of tools widely used for strategic planning as a guide: (stage 1: input stage; stage 2: matching stage; stage 3: decision stage).
  • Strengths-Weaknesses Opportunities-Threats Matrix (SWOT Matrix). The most widely used of all strategic planning matrices; matches a firm's internal strengths/weaknesses with its external opportunities/threats to generate four types of strategies: SO (strengths-opportunities) Strategies, WO (weaknesses-opportunities) Strategies, St (strengths-threats) Strategies, and Wt (weaknesses-threats) Strategies.
  • Sum Total Attractiveness Scores (STAS). In a QSPM, this is the sum of the total attractiveness scores in each strategy column; value reveals which strategy is most attractive in each set of alternatives.
  • Sustainability. The extent that an organization's operations and actions protect, mend, and preserve, rather than harm or destroy, the natural environment.
  • Sustained competitive advantage. Maintaining what a firm does especially well, compared to rival firms – by (1) continually adapting to changes in external trends and events and internal capabilities, competencies, and resources; and (2) effectively formulating, implementing, and evaluating strategies that capitalize upon those factors.
  • Synergy. The 1 + 1 = 3 effect; when everyone pulls together as a team, the results can exceed individuals working separately.
  • Takeover. If the merger/acquisition is not desired by both firms.
  • Taking corrective actions. Activity # three in the strategy evaluation process; involves a firm making changes to competitively reposition a firm for the future.
  • Technology. A component of the mission statement; the firm technologically current?
  • Test marketing. An activity to determine ahead of time whether a certain product or service or selling approach will be cost effective; also used to forecast future sales of new products.
  • Total Attractiveness Scores (TAS). In a QSPM, the product of multiplying the weights by the attractiveness Scores in each row. The values indicate the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor.
  • Treasury stock. An item in the equity portion of a balance sheet that reveals the dollar amount of the firm's common stock owned by the company itself.
  • Turbulent, high-velocity markets. Industries that are changing very fast, such as telecommunications, medical, biotechnology, pharmaceuticals, computer hardware, software, and virtually all internet-based industries).
  • Tweet. Posted messages of 140 characters or less on twitter.com.
  • Unrelated diversification. When a firm acquires a new business whose value chains are so dissimilar that no competitively valuable cross-business relationships exist.
  • Vacant niche. In product/market positioning (perceptual map), this is an area in the perceptual map that reveals a customer segment not being served by the firm or rival firms.
  • Value Chain Analysis (VCA). The process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products, and compares these costs to rival firms using benchmarking.
  • Value chain. The business of a firm, where total revenues minus total costs of all activities undertaken to develop, produce, and market a product or service yields value.
  • Variable Costs (VC). A key variable in breakeven analysis; includes costs such as labor and materials.
  • Vertical consistency of objectives. Compatibility of objectives from the CEO (corporate level) down to the Presidents (divisional level) on down to the Managers (functional level).
  • Vertical integration. A combination of three strategies: backward, forward, and horizontal integration, allowing a firm to gain control over distributors, suppliers, and/or competitors respectively.
  • Vision statement. A one sentence statement that answers the question, "What do we want to become?"
  • Vision statement. Answers the question, "What do we want to become?"
  • Wa. In Japan, this stresses group harmony and social cohesion.
  • Whistle-blowing. The act of telling authorities about some unethical or illegal activities occurring within an organization of which you are aware.
  • White knight. When a firm agrees to acquire another firm at a point in time when that other firm is facing a hostile takeover by some company.
  • Wikis. Websites that allows users to add, delete, and edit content regarding frequently asked questions and information across the firm's whole value chain of activities.
  • WO strategies. Strategies that result from matching a firm's internal weaknesses with its external opportunities.
  • Workplace romance. An intimate relationship between two truly consenting employees, as opposed to sexual harassment, which the EEOC defines broadly as unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature. WT strategies Strategies that result from matching a firm's internal weaknesses with its external threats.
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