Strategic Management by Parnell (4th edition)

The Strategic Management by Parnell (4th edition) is the fourth edition of the textbook, Strategic Management. Theory and Practice, that has been authored by John A. Parnell and published by Sage Publications in 2013.

• Acquisition. A form of a merger whereby one firm purchases another, often with a combination of cash and stock.
• Adaptive Culture. A culture whereby members of an organization are willing and eager to embrace any change that is consistent with the core values.
• Adverse Selection. The inability of shareholders to identify the precise competencies and personal attributes of top managers when they are hired.
• Agency Problem. A situation in which a firms' top managers (i.e., the "agents" of the firms' owners) do not act in the best interests of the shareholders.
• Anthropogenic Climate Change. The notion that human activity (e.g., heavy manufacturing) has a substantial effect on global weather patterns.
• Backward Integration. A firm's acquisition of its suppliers.
• Balanced Scorecard. An approach to measuring performance based on an array of quantitative and qualitative factors, such as ROA, market share, customer loyalty and satisfaction, speed, and innovation.
• Barriers to Entry. Obstacles to entering an industry, including economies of scale, brand identity and product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of size, and government policy.
• BCG Growth-Share Matrix. A corporate portfolio framework developed by the Boston Consulting Group that categorizes a firm's business units by the market share that they hold and the growth rate of their respective markets.
• Best Practices. Processes or activities that have been successful in other firms.
• Blockholders. Large shareholders who monitor firm strategies to ensure effective management.
• Blue Ocean Strategy. A growth strategy contingent on inventing or discovering a new industry or industry segment that creates new demand.
• Brand Manager. The project manager in P&G's version of the matrix structure.
• Business Model. The economic mechanism by which a business hopes to sell its goods or services and generate a profit.
• Business Process Reengineering. The application of technology and creativity in an effort to eliminate unnecessary operations or drastically improve those that are not performing well.
• Business Strategy. A strategy delineating how a business unit competes with its rivals; also called competitive strategy.
• Business Unit. An organizational entity with its own unique mission, set of competitors, and industry.
• Business-to-Business (B2B). The segment of electronic commerce whereby businesses utilize the Internet to solicit transactions from each other.
• Business-to-Consumer (B2C). The segment of electronic commerce whereby businesses utilize the Internet to solicit transactions from consumers, also known as e-tailing.
• Business-to-Government (B2G). The segment of electronic commerce whereby businesses utilize the Internet to solicit transactions from government entities.
• Capabilities. A firm's skills at coordinating and leveraging resources to create value (often called strategic capabilities or dynamic capabilities).
• Capital-Labor Substitution. An organization's ability to substitute labor for capital or vice versa as production increases.
• Centralization. An organizational decision-making approach with most strategic and operating decisions made by managers at the top of the organization structure (at corporate headquarters).
• CEO Duality. A situation in which the CEO also serves as the chair of the board.
• Clicks and Bricks. The simultaneous application of both electronic ("clicks") and traditional ("bricks") forms of commerce.
• Commoditization. A process whereby firms are having a more difficult time distinguishing their products and services from those of their rivals.
• Comparative Advantage. The idea that certain products may be produced more cheaply or at a higher quality in particular countries due to advantages in labor costs or technology.
• Competitive Advantage. A state whereby a business unit's successful strategies cannot be easily duplicated by its competitors.
• Competitive Benchmarking. The process of measuring a firm's performance against that of the top performers—usually in the same industry.
• Conglomerate Diversification (Unrelated Diversification). A form of diversification in which a firm acquires a business to reduce cyclical fluctuations in cash flows or revenues.
• Consumer-to-Business (C2B). The segment of electronic commerce whereby consumers utilize the Internet to solicit transactions from businesses.
• Consumer-to-Consumer (C2C). The segment of electronic commerce whereby consumers utilize the Internet to solicit transactions from each other.
• Contingency Theory. A view that states the most profitable firms are likely to be the ones that develop the best fit with their environment.
• Core Competencies. The firm's key capabilities and collective learning skills that are fundamental to its strategy, performance, and long-term profitability.
• Corporate Governance. The board of directors, institutional investors, and blockholders who monitor firm strategies to ensure managerial responsiveness.
• Corporate Profile. Identification of the industry or industries in which a firm operates.
• Corporate Restructuring. A change in the organization's structure to improve efficiency and firm performance, including such activities as realigning divisions in the firm, reducing
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• Corporate-Level Strategy. The strategy that top management formulates for the overall company.
• Creative Destruction. A process whereby managers consciously and constantly destroy the old by recombining its elements into new forms.
• Crisis. Any substantial disruption in operations that physically affects an organization, its basic assumptions, or its core activities.
• Crisis Management. The process of planning for and implementing the response to a wide range of negative events that could severely affect an organization.
• Crisis Management Team. A cross-functional group of individuals within the organization who have been designated to develop and plan for worst-case scenarios and define standard operating procedures that should be implemented prior to any crisis event.
• Critical Success Factors (CSFs). Elements of the strategy that are essential for success among most or all competitors within a given industry.
• Culture. A society's generally accepted values, traditions, and patterns of behavior.
• Decentralization. An organizational decision-making approach with most strategic and operating decisions made by managers at the business unit level.
• Differentiation Strategy. A generic business unit strategy in which a larger business produces and markets to the entire industry products or services that can be readily distinguished from those of its competitors.
• Distinctive Competence. Unique resources, skills, and capabilities that enable a firm to distinguish itself from its competitors and create competitive advantage.
• Diversification. The process of acquiring companies to increase a firm's size.
• Diversity. The extent to which individuals within an organization are different; what constitutes "different" is often debated, however.
• Divestment. A corporate-level retrenchment strategy in which a firm sells one or more of its business units.
• Downsizing. A means of organizational restructuring that eliminates part or all of one or more hierarchical levels from the organization and pushes decision-making downward in the organization.
• Ecology. Relationships between humans and their surrounding environment, including other living creatures, plants, air, and water.
• Economies of Scale. The decline in unit costs of a product or service that occurs as the absolute volume of production increases.
• Economies of Scale. The reduction in per-unit costs as volume increases.
• Emotional Intelligence. One's collection of psychological attributes, such as motivation, empathy, self-awareness, and social skills.
• Employee Stock Ownership Plans (ESOPs). Formal programs that transfer shares of stock to a company's employees.
• Environmental Scanning. The systematic collection and analysis of information about relevant macroenvironmental trends.
• E-tailing. Another term for B2C.
• Ethical Relativism. The idea that ethics is based on accepted norms in a culture, meaning that what is ethical in one nation or culture might be unethical in another.
• Exit Barriers. Economic, strategic, or emotional obstacles to leaving an industry.
• Experience Curve. The reduction in per-unit costs that occur as an organization gains experience producing a product or service.
• External Growth. A corporate-level growth strategy whereby a firm acquires other companies.
• First-Mover Advantages. Benefits derived from being the first firm to offer a new or modified product or service.
• Flat Organization. An organization characterized by relatively few hierarchical levels and a wide span of control.
• Focus-Differentiation Strategy. A generic business unit strategy in which a smaller business produces highly differentiated products or services for the specialized needs of a market niche.
• Focus–Low-Cost Strategy. A generic business unit strategy in which a smaller business keeps overall costs low while producing no-frills products or services for a market niche with elastic demand.
• Focus–Low-Cost–Differentiation Strategy. A generic business unit strategy in which a smaller business produces highly differentiated products or services for the specialized needs of a select group of customers while keeping its costs low.
• Formal Organization. The official structure of relationships and procedures used to manage organizational activity.
• Forward Integration. A firm's acquisition of one or more of its buyers.
• Functional Strategies. The strategies pursued by each functional area of a business unit, such as marketing, finance, or production.
• Functional Structure. A form of organizational structure whereby each subunit of the organization engages in firm-wide activities related to a particular function, such as marketing, HR, finance, or production.
• Gap Analysis. Identifying the distance between a firm's current position and its desired position with regard to an internal weakness. All things equal, it is desirable to take action to close the gap, especially when the gap leaves a firm vulnerable to external threats in its environment.
• Generic Strategies. Strategies that can be adopted by business units to guide their organizations.
• Geographic Divisional Structure. A form of organizational structure in which jobs and activities are grouped on the basis of geographic location—for example, northeast region, Midwest region, and far west region.
• Goals. Desired general ends toward which efforts are directed.
• Gross Domestic Product (GDP). The value of a nation's annual total production of goods and services.
• Growth Strategy. A corporate-level strategy designed to increase revenues, and ultimately profits and/or market share.
• Hedge Fund. An investment fund open to only a small number of investors but permitted by regulators to undertake riskier and more speculative investments.
• Herfindahl-Hirschman Index (HHI). A sophisticated measure of market concentration calculated by summing the squares of the market shares for each firm competing in an industry.
• Horizontal Growth. An increase in the breadth of an organization's structure.
• Horizontal Integration. A form of acquisition in which a firm expands by acquiring other companies in its same line of business.
• Horizontal Related Diversification. A form of diversification in which a firm acquires a business outside its present scope of operation but with similar or related core competencies.
• Horizontal Structure. An organizational structure with fewer hierarchies designed to improve efficiency by reducing layers in the bureaucracy.
• Human Capital. The sum of the capabilities of individuals in an organization.
• Human Resources (HR). The experience, capabilities, knowledge, skills, and judgment of the firm's employees.
• Hypercompetition. The notion that industries emerge, develop, and evolve so rapidly that identifying the current life cycle stage may be neither possible or worthwhile.
• Industrial Organization (IO). A view based in microeconomic theory that states firm profitability is most closely associated with industry structure.
• Industry. A group of competitors that produces similar products or services.
• Industry Life Cycle. The stages (introduction, growth, shakeout, maturity, and decline) through which industries are believed to pass.
• Inert cultures. Conservative cultures that encourage maintenance of existing resources.
• Informal Organization. Interpersonal norms, behaviors, and expectations that evolve when individuals and groups come into contact with one another.
• Information Asymmetry. When one party has information that another does not.
• Information Symmetry. When all parties to a transaction share the same information concerning that transaction.
• Innovation. Developing something new.
• Integrative Social Contracts View of Ethics. Perspective suggesting that decisions should be based on existing norms of behavior, including cultural, community, or industry factors.
• Intended Strategy. The original strategy top management plans and intends to implement.
• Internal Growth. A corporate-level growth strategy in which a firm expands by internally increasing its size and sales rather than by acquiring other companies.
• International Franchising. A form of licensing in which a local franchisee pays a franchiser in another country for the right to use the franchiser's brand names, promotions, materials, and procedures.
• International Licensing. An arrangement whereby a foreign licensee purchases the rights to produce a company's products and/or use its technology in the licensee's country for a negotiated fee structure.
• Intrapreneurship. The creation of new business ventures within an existing firm.
• Justice View of Ethics. Perspective suggesting that all decisions will be made in accordance with established rules or guidelines.
• Just-In-Time Inventory System (JIT inventory system). An inventory system, popularized by the Japanese, in which suppliers deliver parts just at the time they are needed by the buying organization to use in its production process.
• Knowledge Management. People and their skills and abilities (i.e., knowledge capital) represent the only resource that cannot readily be reproduced by a firm's competitors. Knowledge capital must be effectively leveraged if high-performing firms are to remain as such over the long term.
• Leadership. The capacity to secure the cooperation of others in accomplishing organizational goals.
• Leadership Style. The consistent pattern of behavior that a leader exhibits in the process of governing and making decisions.
• Learning. The increased efficiency that occurs when an employee performs a task repeatedly.
• Leveraged Buyout (LBO). A takeover in which the acquiring party borrows funds to purchase a firm.
• Liquidation. A corporate-level retrenchment strategy in which a firm terminates one or more of its business units by the sale of their assets.
• Low-Cost Strategy. A generic business unit strategy in which a larger business produces, at the lowest cost possible, no-frills products and services industry-wide for a large market with a relatively elastic demand.
• Low-Cost–Differentiation Strategy. A generic business unit strategy in which a larger business unit maintains low costs while producing distinct products or services industrywide for a large market with a relatively inelastic demand.
• Macroenvironment. The general environment that affects all business firms in an industry, which includes political-legal, economic, social, and technological forces.
• Managerial Ethics. An individual's responsibility to make business decisions that are legal, honest, moral, and fair.
• Market Share. The percentage of total market sales attributed to one competitor (i.e., firm sales divided by total market sales).
• Mass Customization. The ability to individualize product and service offerings to meet specific buyer needs.
• Matrix Structure. A form of organizational structure that combines the functional and product divisional structures.
• Merger. A corporate-level growth strategy in which a firm combines with another firm through an exchange of stock.
• Micro-localization. Customizing products and services to suit the taste and needs of diverse consumers across a nation or region.
• Mission. The reason for an organization's existence. The mission statement is a broadly defined but enduring statement of purpose that identifies the scope of an organization's operations and its offerings to affected groups (i.e., stakeholders, as defined later in the book).
• Mobile Commerce (M-Commerce). Transactions conducted in an entirely wireless environment, such as using a smartphone to both purchase and download an airline ticket or piece of music.
• Moral Hazard. When parties in an arrangement do not share equally in the risks and benefits.
• Multidivisional Structure. A structural form with two or more divisions based on products (a product divisional structure) or geography (a geographic divisional structure); also called an M-form.
• Multiple Strategies. A strategic alternative for a larger business unit in which the organization simultaneously employs more than one of the generic business strategies.
• Objectives. Specific, verifiable, and often quantified versions of a goal.
• Objectivism. A philosophical perspective, espoused by Ayn Rand, that emphasizes an objective reality understood by logic and reason and focuses on individual freedom and property rights.
• Offshoring. Relocating some or all of a firm's manufacturing or other business processes to another country typically to reduce costs.
• Organizational Culture. The shared values and patterns of belief and behavior that are accepted and practiced by the members of a particular organization.
• Organizational Resources. The firm's systems and processes, including its strategies at various levels, structure, and culture.
• Organizational Structure. The formal means by which work is coordinated in an organization.
• Outsourcing. Contracting out a firm's noncore, non-revenue-producing activities to other organizations primarily to reduce costs.
• Outsourcing. Contracting out a firm's noncore, non-revenue-producing activities to other organizations primarily (but not always) to reduce costs.
• Partnerships. Contractual relationships with enterprises outside the organization.
• PEST. An acronym referring to the analysis of the four macroenvironmental forces: (1) political-legal, (2) economic, (3) social, and (4) technological.
• Physical Resources. An organization's plant and equipment, geographic locations, access to raw materials, distribution network, and technology.
• PIMS Program (Profit Impact of Market Strategy Program). A database that contains quantitative and qualitative information on the performance of more than 5,000 business units.
• Process Innovations. A business unit's activities that increase the efficiency of operations and distribution.
• Process R & D. R & D activities that seek to reduce the costs of operations and make them more efficient.
• Product Divisional Structure. A form of organizational structure whereby the organization's activities are divided into self-contained entities, each responsible for producing, distributing, and selling its own products.
• Product Innovations. A business unit's activities that enhance the differentiation of its products or services.
• Product/Service R & D. R & D activities directed toward improvements or innovations in the quality or uniqueness of a company's outputs.
• Profit Center. A well-defined organizational unit headed by a manager accountable for its revenues and expenditures.
• Quality. The features and characteristics of a product or service that allow it to satisfy stated or implied needs.
• Realized Strategy. The strategy top management actually implements.
• Recession. A decline in a nation's GDP for two or more consecutive quarters.
• Relative Market Share. A firm's share of industry sales when only the firm and its key competitors are considered (i.e., firm sales divided by sales of the key firms in the industry).
• Religious View of Ethics. Perspective that evaluates organizational decisions on the basis of personal or religious convictions.
• Resource-Based Theory. The perspective that views performance primarily as a function of a firm's ability to utilize its resources.
• Retrenchment Strategy. A corporate-level strategy designed to reduce the size of the firm.
• Rights View of Ethics. Perspective that evaluates organizational decisions on the extent to which they protect individual rights.
• Sarbanes-Oxley Act. Legislation passed in 2002 that created more detailed reporting requirements for boards and executives in public U.S. companies and accounting firms.
• Self-Interest View of Ethics. Perspective suggesting the benefits of the decision maker should be the primary consideration when weighing a decision.
• Self-Reference Criterion. The unconscious reference to one's own cultural values as a standard of judgment.
• Simple Structure. An organizational form whereby each employee often performs multiple tasks, and the owner/manager is involved in all aspects of the business.
• Social Responsibility. The expectation that business firms should serve both society and the financial interests of shareholders.
• Societal Values. Concepts and beliefs that members of a society tend to hold in high esteem.
• Span of Control. The number of employees reporting directly to a given manager.
• Stability Strategy. A corporate-level strategy intended to maintain a firm's present size and current lines of business.
• Stakeholders. Individuals or groups who are affected by or can influence an organization's operations.
• Strategic Alliances. A corporate-level growth strategy in which two or more firms agree to share the costs, risks, and benefits associated with pursuing new business opportunities. Strategic alliances are often referred to as partnerships.
• Strategic Control. The process of determining the extent to which an organization's strategies are successful in attaining its goals and objectives.
• Strategic Group. A select group of direct competitors who have similar strategic profiles.
• Strategic Leadership. Creating the vision and mission for the firm, developing strategies, and empowering individuals throughout the organization to put those strategies into action.
• Strategic Management. The continuous process of determining the mission and goals of an organization within the context of its external environment and its internal strengths and weaknesses, formulating and implementing strategies, and exerting strategic control to ensure that the organization's strategies are successful in attaining its goals.
• Strategy. Top management's plans to attain outcomes consistent with the organization's mission and goals.
• Strategy Level-Strategy Complexity Matrix (SLSC Matrix). A tool for evaluating strategic alternatives that considers the organizational level of the alternative and the degree of strategic complexity.
• Strong Culture. A culture characterized by deeply rooted values and ways of thinking that regulate firm behavior.
• Structural Innovations. Modifying the structure of the organization and/or the business model to improve competitiveness.
• Subcultures. Culture within broader cultures.
• Substitute Products. Alternative offerings produced by firms in another industry that satisfy similar consumer needs.
• Sustainable Strategic Management (SSM). The strategies and related processes that promote superior performance from both market and environmental perspectives.
• Sustained Competitive Advantage. A firm's ability to enjoy strategic benefits over an extended period of time.
• Switching Costs. One-time costs that buyers of an industry's outputs incur as they switch from one company's products or services to another's.
• SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats Analysis). An analysis intended to match the firm's strengths and weaknesses (the S and W in the acronym) with the opportunities and threats (the O and T) posed by the environment.
• SW/OT Matrix. A tool for generating alternative courses of action by identifying relevant combinations of internal characteristics (i.e., strengths and weaknesses) and external forces (i.e., opportunities and threats).
• Synergy. When the combination of two firms results in higher efficiency and effectiveness that would otherwise be achieved by the two firms separately.
• Takeover. The purchase of a controlling quantity of shares in a firm by an individual, a group of investors, or another organization. Takeovers may be friendly or unfriendly.
• Tall Organization. An organization characterized by many hierarchical levels and a narrow span of control.
• Top Management Team. A team of top-level executives—headed by the CEO—all of whom play instrumental roles in the strategic management process.
• Total Quality Management (TQM). A broad-based program designed to improve product and service quality and to increase customer satisfaction by incorporating a holistic commitment to quality as seen through the eyes of the customer.
• Transactional Leadership. The capacity to motivate followers by exchanging rewards for performance.
• Transformational Leadership. The capacity to motivate followers by inspiring involvement and participation in a mission.
• Triple Bottom Line. The notion that firms must maintain and improve social and ecological performance in addition to economic performance.
• Turnaround. A corporate-level retrenchment strategy intended to transform the firm into a leaner and more effective business by reducing costs and rethinking the firm's product lines and target markets.
• Utilitarian View of Ethics. Perspective suggesting that anticipated outcomes and consequences should be the only considerations when evaluating an ethical dilemma.
• Value Chain. A useful tool for analyzing a firm's strengths and weaknesses and understanding how they might translate into competitive advantage or disadvantage. The value chain describes the activities that comprise the economic performance and capabilities of the firm.
• Value Innovations. Modifying products, services, and activities in order to maximize the value delivered to customers.
• Vertical Growth. An increase in the length of the organization's hierarchical chain of command.
• Vertical Integration. A form of integration in which a firm expands by acquiring a company in the distribution channel.
• Vision. A view of the future when the mission is achieved in the present.
• VRIO Framework (Valuable, Rare, Inimitable, and Organization Framework). A tool for assessing the competitive quality of a firm's resources by examining value, rarity, imitability, and organization.
• Weak Culture. A culture that lacks values and ways of thinking that are widely accepted by members of the organization.