Strategic Management 7e by Lynch

Strategic Management 7e by Lynch is the 7th edition of the Strategic Management textbook authored by Richard Lynch and published by Pearson Education Limited, Harlow, United Kingdom in 2015.

The copyright belongs to Richard Lynch.

• Added value. The difference between the market value of the output and the cost of the inputs to the organisation.
• Agency theory. Concerned with the added value that derives from one party – the principal – delegating the responsibility for one or more management decisions to another party – an agent acting on behalf of the principal – on the assumption that the agent is better placed better informed to make the optimal decision.
• Architecture. The network of relationships and contracts both within and around the organisation.
• Attractiveness to stakeholders. Strategy evaluation criterion associated with the strategy being sufficiently appealing to those people that the company needs to satisfy.
• Backward integration. The process whereby an organisation acquires the activities of its inputs (e.g. manufacturer into raw material supplier).
• Balanced scorecard. This uses strategic and financial measures to assess the outcome of a chosen strategy. It acknowledges the different expectations of the various stakeholders and attempts to use a 'scorecard' based on four prime areas of business activity to measure the results of the selected strategy.
• Benchmarking. The comparison of practice in other organisations in order to identify areas for improvement. Note that the comparison does not have to be with another organisation within the same industry, simply one whose practices are better at a particular aspect of the task or function.
• Blue ocean strategy. A strategy that focuses on untapped market space, demand creation and the opportunity for highly profitable growth.
• Bounded rationality. The principle that managers reduce tasks, including implementation, to a series of small steps, even though this may grossly over-simplify the situation and may not be the optimal way to proceed.
• Brainstorming. The rapid generation of ideas by a group, often from a wide variety of backgrounds, without any evaluation of those ideas.
• Branding. The additional reassurance provided to the customer by the brand name and reputation beyond the intrinsic value of the assets purchased by the customer. A specific name or symbol used to distinguish a seller's product or services.
• Break-even. The point at which the total costs of undertaking a new strategy are equal to the total revenue from the strategy.
• Bretton Woods Agreement. System of largely fixed currency exchange rates between the leading industrialised nations of the world. In operation from 1944 to 1973.
• Business ethics. See Ethics.
• Business model. A formula that summarises the essential elements of strategy that will deliver the company's profits in a particular strategic context.
• Business process re-engineering. The replacement of people in administrative tasks by technology, often accompanied by delayering and other organisational change. See also Delayering.
• Capabilities. The capabilities of an organisation are those management skills, routines and leadership that deploy, share and generate value from the resources of the organisation.
• Capacity utilisation. The level of plant operation at any time, usually expressed as a percentage of total production capacity of that plant.
• Cash cows. Products with high relative market shares in low-growth markets. See also Portfolio matrix.
• Change options matrix. This links the areas of human resource activity with the three main areas of strategic change: work, cultural and political change.
• Changeability of the environment. The degree to which the environment is likely to change.
• Channel strategy. See Distribution strategy.
• Close-related diversification. Different companies within a group may have different products or services but have some form of close affinity such as common customers, common suppliers or common overheads.
• Collusive alliances. Co-operative strategies in which firms seek to share information in order to reduce competition or raise prices. They are illegal in many countries.
• Comparative advantage of nations. This consists of the resources possessed by a country that give it a competitive advantage over other nations. See also Diamond theory.
• Competitive advantage. The significant advantages that an organisation has over its competitors. Such advantages allow the organisation to add more value than its competitors in the same market.
• Competitor profiling. Explores one or two leading competitors by analysing their resources, past performance, current products and strategies.
• Complementors. The companies whose products add more value to the products of the base organisation than they would derive from their own products by themselves – for example, Microsoft software adds significantly to the value of a Hewlett-Packard Personal Computer.
• Complete competitive formula. The business formula that offers both value for money to customers and competitive advantage against competitors.
• Concentration ratio. The degree to which value added or turnover is concentrated in the hands of a few firms in an industry. Measures the dominance of firms in an industry.
• Consistency. Strategy evaluation criterion associated with the strategy being in agreement with the objectives of the organisation.
• Contend. The constructive conflict that some strategists argue is needed by every organisation.
• Content of strategic management. The main actions of the proposed strategy.
• Context of strategic management. The circumstances surrounding and influencing the way that a strategy develops and operates.
• Contingency theory of leadership. Argues that leaders should be promoted or recruited according to the needs of the organisation at a particular point in time. See also Style theory and Trait theory.
• Controls. Employed to ensure that strategic objectives are achieved and financial, human resource and other guidelines are not breached during the implementation process or the ongoing phase of strategic activity. The process of monitoring the proposed plans as they are implemented and adjusting for any variances where necessary.
• Co-operation. The links that bring organisations together, thereby enhancing their ability to compete in the market place. See also Complementors.
• Co-operative game. Has positive payoff for all participants.
• Co-operative strategy. A strategy in which at least two companies work together with rivals or other related companies to achieve an agreed objective or to their mutual benefit.
• Core areas of strategic management. Strategic analysis, strategy development and strategy implementation from a prescriptive perspective only. For emergent strategists, the core areas will include knowledge, innovation, technology, strategy dynamics and related topics.
• Core competencies. The distinctive group of skills and technologies that enable an organisation to provide particular benefits to customers and deliver competitive advantage. Together, they form key resources of the organisation that assist it in being distinct from its competitors.
• Core resources and capabilities. The important strategic resources of the organisation, usually summarised as tangible and intangible resources of the organisation coupled with the organisational capabilities that deploy and share these resources.
• Corporate governance. The influence and power of the stakeholders to control the strategic direction of the organisation in general and, more specifically, the chief executive and other senior officers of the organisation.
• Corporate-level strategy. This has two meanings in the literature. First, corporate-level strategy means the strategic decisions that lead companies to diversify from one business into other business areas, either related or unrelated. Second, corporate-level strategy means the role of the corporate headquarters in directing and influencing strategy across a multi-product group of companies.
• Corporate purpose. The purpose and contribution of the central headquarters of a diversified group of companies.
• Corporate social responsibility. The standards and the conduct that an organisation sets itself in its dealings within an organisation and outside with its environment. See also Ethics.
• Cost/benefit analysis. Evaluates strategic projects, especially in the public sector, where an element of unquantified public service beyond commercial profit may be involved. It attempts to quantify the broader social benefits to be derived from particular strategic initiatives.
• Cost of capital. The cost of the capital employed in an organisation, often measured by the cost of investing in a riskfree bond outside the organisation coupled with some element for the extra risks, if any, of investing in the organisation itself.
• Cost-plus pricing. Sets the price of goods and services primarily by totalling the costs and adding a percentage profit margin. See also Target pricing.
• Creative destruction theory. Based on the concept that innovative opportunities arise through competition and technology destroying previous market offerings.
• Creative theory. Based on the hypothesis that new opportunities can be developed by entrepreneurs experimenting and creating a new market demand that did not previously exist.
• Cultural web. The factors that can be used to characterise some aspects of the culture of an organisation. Usually summarised as stories, symbols, power structures, organisational structure, control systems, routines and rituals.
• Culture. See Organisational culture and International culture. It is important to distinguish between these two quite distinct areas of the subject.
• Customer-driven strategy. The strategy of an organisation where every function is directed towards customer satisfaction. It goes beyond those functions, such as sales and marketing, that have traditionally had direct contact with the customer.
• Customer profiling. Describes the main characteristics of the customer and how customers make their purchase decisions.
• Cyclicality. The periodic rise and fall of a mature market.
• Delayering. The removal of layers of management and administration in an organisation's structure.
• Demerger. The split of an organisation into its constituent parts, with some parts possibly being sold to outside investors.
• Derived demand. Demand for goods and services that is derived from the economic performance of the customers. See also Primary demand.
• Diamond theory of international competitive advantage. Identifies a 'diamond' of four interrelated areas within a nation which assist that country to be more competitive in international markets – the four areas being factor conditions, competing firms within the country, support industries of the country and home demand. See also Comparative advantage of nations.
• Differentiation. The development of unique benefits or attributes in a product or service that positions it to appeal especially to a part (segment) of the total market. The products of the organisation meet the needs of some customers in the market place better than others and allow higher prices to be charged. See Generic strategies.
• Dirigiste policy. Describes the policies of a government relying on an approach of centrally directed government actions to manage the economy. See also Laissez-faire policy.
• Discontinuity. Radical, sudden and largely unpredicted change in the environment.
• Discounted cash flow (DCF). The sum of the projected cash flows from a future strategy, after revaluing each individual element of the cash flow in terms of its pre sent worth using the cost of capital of the organisation.
• Discovery theory. Based on the premise that new opportunities already exist in the market place and are waiting to be discovered by entrepreneurs.
• Disruptive innovation. This takes an existing market and identifies existing technologies that will offer simpler, less expensive products or services than have been offered previously. See also Innovation.
• Distant-related diversification. Although the different companies in the group will have quite different products or services, possibly using wholly different technologies, they will share the same underpinning core competencies or some other area of technology or service that would benefit from co-ordination by a central headquarters.
• Distribution or channel strategy. The strategies involved in delivering the product or service to the customer.
• Diversification strategy. This occurs when an organisation moves away from a single product or dominant business area into other business areas, which may or may not be related to the original business.
• Diversified portfolio of products. Companies that have a range of products serving many customers in different markets.
• Division. A separate part of a multi-product company with profit responsibility for its range of products. Each division usually has a complete range of the main business functions, such as finance, operations and marketing.
• Dogs. Products with low relative market shares in low-growth markets. See also Portfolio matrix.
• Dominant logic. The way in which managers conceptualise the business and make critical resource allocation decisions.
• Double-loop learning. Consists of a first loop of learning that checks performance against expected norms and adjusts where necessary, coupled with a second loop that reappraises whether the expected norms were appropriate in the first place. See also Learning-based strategic route forward.
• Economic rent. Any excess that a factor earns over the minimum amount needed to keep that factor in its present use.
• Economies of scale. The extra cost savings that occur when higher-volume production allows unit costs to be reduced. For example, a new, larger production plant produces products with the same quality but using fewer operatives, thus reducing unit costs. See also Economies of scope.
• Economies of scope. The cost savings developed by a group when it shares activities or transfers capabilities and competencies from one part of the group to another – for example, two products sharing the same sales team. See also Economies of scale.
• Emergent change. The whole process of developing a strategy whose outcome only emerges as the strategy proceeds. There is no defined list of implementation actions in advance of the strategy emerging. See also Prescriptive change.
• Emergent strategic management. A strategy whose final objective is unclear and whose elements are developed during the course of its life, as it proceeds. See also Prescriptive strategic management.
• Empowerment. The devolution of power and decision-making responsibility to those lower in the organisation.
• Entrepreneurship. A way of thinking, reasoning and acting that focuses on the identification and exploitation of business opportunities from a broad general perspective typically driven by the leadership of individuals or small groups.
• Environment. Everything and everyone outside the organisation: competitors, customers, government, etc. Note that 'green' environmental issues are only one part of this broader definition. See also Changeability of the environment and Predictability of the environment.
• Ethics. The principles that encompass the standards and conduct that an organisation sets itself in its dealings within the organisation and with its external environment. See also Corporate social responsibility.
• Expansion method matrix. Explores in a structured way the methods by which the market opportunities associated with strategy options might be achieved.
• Experience curve. The relationship between the unit costs of a product and the total units ever produced of that product, plotted in graphical form, with the units being cumulative from the first day of production.
• Experiential learning circle. This has four elements: 1. concrete experience or knowledge; 2. observation and reflection; 3. formation of abstract concepts from the observation; 4. testing of such concepts in new situations.
• Explicit knowledge. Knowledge that is codified and transmittable in formal, systematic language – often, but not necessarily, written down.
• Feasibility. Strategy evaluation criterion associated with the strategy being capable of being implemented.
• Fit. The consistencies, coherence and congruence of the organisation.
• Floating and fixed exchange rates. Currency exchange rates, such as the rate of exchange between the US dollar and the Yen, are said to float when market forces determine the rate, depending on market demand. They are fixed when national governments (or their associated national banks) fix the rates by international agreement and intervene in international markets to hold those rates.
• Focus group. A research discussion of around five to eight people, selected for their relevance to the subject.
• Focus strategy. Occurs when the organisation focuses on a specific niche (or segment) of the market place and develops competitive advantage by offering products especially developed for that niche (or segment). See also Generic strategies.
• Foreign direct investment (FDI). The long-term investment by a company in technology, management skills, brands and physical assets of a subsidiary in another country.
• Foreign trade. The exporting and importing activities of countries and companies around the world.
• Formal organisation structures. Those structures formally defined by the organisation in terms of reporting relationships, responsibilities and tasks. See also Informal organisation structures.
• Forward integration. The process whereby an organisation acquires the activities of its outputs (e.g. manufacturer into distribution and transport).
• Franchise. A form of co-operative strategy in which a firm (the franchisor) develops a business concept and then offers this to others (the franchisees) in the form of a contractual relationship to use the business concept. Typically, the franchisee obtains a tried-and-tested business formula in return for paying a percentage of its sales and agreeing to tight controls from the franchisor over the product range, pricing, etc.
• Functional organisation structure. Structure based around the main activities that have to be undertaken by the organisation such as production, marketing, human resources, research and development, finance and accounting.
• Game-based theories of strategy. These focus on the decisions of the organisation and its competitors as strategy is developed – the game – and the interactions between the two as strategic decisions are taken.
• Game theory. Structured methods of bargaining with and between customers, suppliers and others, both inside and outside the organisation. Such structuring usually involves the quantification of possible outcomes at each stage of the strategy decision-making process.
• Gearing ratio. The ratio of debt finance to the total shareholders' funds.
• General. Agreement on Tariffs and Trade (GATT) International agreement between various countries around the world, designed to deal with trade disputes and support world trade.
• Generic industry environment. The study of those strategies that are particularly likely to cope with a particular market or competitive environment.
• Generic strategies. The three basic strategies of cost leadership, differentiation and focus (sometimes called niche) which are open to any business.
• Global and national responsiveness matrix. This links together the extent of the need for global activity with the need for an organisation to be responsive to national and regional variations. These two areas are not mutually exclusive.
• Global product company. This will often involve the global integration of manufacturing and one common global brand. There is only limited national variation. See also Transnational product company.
• Global strategy. When a company treats the whole world as one market and one source of supply. See also International strategy and Multinational strategy.
• Green strategy. Concerns those activities of the organisation that are focused on both sustaining the earth's environment and developing the business opportunities that will arise from such additional activities.
• Green strategy value chain. Seeks out ways of reducing energy, lowering carbon content and adopting recycling policies, not only within the organisation but also with suppliers and customers. In addition, the green strategy value chain will involve every element and function, including those that perhaps do not always feature highly in many value chain analyses.
• Growth-share matrix. See Portfolio matrix.
• Heuristics. Informal rules-of-thumb that provide simple decision rules to capture and summarise what has been learnt by one part of the organisation and then communicate this to other parts of the organisation.
• Hierarchy of resources. The four levels of resource that are the full resources of the organisation. The distinguishing feature of the higher levels is an increased likelihood of sustainable competitive advantage.
• Historical strategy perspective. According to this approach, the purpose of an organisation and its outcomes must, at least in part, be seen as being influenced by the organisation's present resources, its past history and its evolution over time. An organisation's previous history is a key determinant of its future development.
• Holding company organisation structure (sometimes shortened to H-Form structure). Used for organisations with very diverse product ranges and share relationships where a central (holding) company owns various businesses and acts as an investment company with shareholdings in each of the individual enterprises. The headquarters acts only as a banker, with strategy largely decided by the individual companies.
• Horizontal integration. When an organisation moves to acquire its competitors or make some other form of close association.
• Human resource audit. An examination of the organisation's leadership, its people and their skills, backgrounds and relationships with each other.
• Human resource-based theories of strategy. These emphasise the importance of the people element in strategy development. See also Emergent strategic management, Negotiation-based and Learning-based strategic route forward.
• Human resources. The skills, talents and knowledge of every member of the organisation.
• Industry- and environment-based theories of strategy. Argue that profits are delivered by selecting the most attractive industry and then competing better than other companies in that industry.
• Implementation. The process by which the organisation's chosen strategies are put into operation.
• Informal organisation structures. Those structures, often unwritten, that have been developed by the history, culture and individuals in an organisation to facilitate the flow of information and allocate power within the structure. See also Formal organisation structures.
• Innovation. The generation and exploitation of new ideas. The process moves products and services, human and capital resources, markets and production processes beyond their current boundaries and capabilities. See also Disruptive innovation.
• Innovation- and knowledge-based theories of strategy. Privilege the generation of new ideas and the sharing of those ideas as being the most important aspects of strategy development.
• Innovation organisation structure. Characterised by creativity, lack of formal reporting relationships and informality.
• Innovative capability. The special talent possessed by some organisations for developing and exploiting innovative ideas.
• Intangible resources. The organisation's resources that have no physical presence but represent real benefit to the organisation, like reputation and technical knowledge. See also Tangible resources and Organisational capability.
• Intellectual capital of an organisation. The future earnings capacity that derives from a deeper, broader and more human perspective than that described in the organisation's financial reports.
• Intellectual property. Any product of human intellect that is intangible but has value in the market place – often has a legal meaning for companies.
• International culture. Collective programming of the mind that distinguishes one human group from another. Distinguished from Organisational culture.
• International Monetary Fund (IMF). International body designed to lend funds to countries in international difficulty and to promote trade stability through co-operation and discussion.
• International strategy. When a significant proportion of an organisation's activities are outside the home country and are managed as a separate area. See also Multinational strategy and Global strategy.
• Intrapreneurship. Focuses on the identification and exploitation of creative and innovative opportunities within larger companies or organisations.
• Joint ventures. Co-operative strategies where two or more organisations set up a separate jointly owned subsidiary to develop the co-operation.
• Just-in-time. System that ensures that stock is delivered from suppliers only when it is required, with none being held in reserve.
• Kaizen. The process of continuous improvement in production and every aspect of value added (Japanese).
• Kanban. Control system on the factory floor to keep production moving (Japanese).
• Key factors for success (sometimes called critical success factors). Those resources, skills and attributes of the organisations in an industry that are essential to deliver success in the market place. Note that the emphasis is on all the companies in an industry. (Key factors for success are not about those factors that apply to an individual company.)
• Knowledge. A fluid mix of framed experience, values, contextual information and expert insight. It accumulates over time and shapes the organisation's ability to survive and compete in markets. Note that knowledge is not 'data' or 'information'.
• Knowledge creation. The development and circulation of new knowledge within the organisation.
• Knowledge management. The retention, exploitation and sharing of knowledge in an organisation that will deliver sustainable competitive advantage.
• Laissez-faire policy. Describes the policies of a government relying on an approach of non-interference and free-market forces to manage the economy of a country. See also Dirigiste policy.
• Leadership. The art or process of influencing people so that they will strive willingly and enthusiastically towards the achievement of the group's mission and purpose.
• Learning. The strategic process of developing strategy by crafting, experimentation and feedback. Note that learning in this context does not mean rote or memory learning.
• Learning-based strategic route forward. Emphasises learning and crafting as aspects of the development of successful corporate strategy. It places particular emphasis on trial and feedback mechanisms. See also Human resource-based theories of strategy and Double-loop learning.
• Leasing. A form of debt where the organisation hires an asset for a period, possibly with the option of buying it at the end of the period.
• Leveraging. The exploitation by an organisation of its existing resources to their fullest extent.
• Life cycle. Plots the evolution of industry annual sales over time. Often divided into distinct phases – introduction, growth, maturity and decline – with specific strategies for each phase.
• Limited state intervention. The theory of limited state intervention suggests that companies gained from national government investment in the early years in such areas as telecommunications and roads, but that as nations become more wealthy the state should withdraw its support and allow free market pressures to operate.
• Logical incrementalism. The process of developing a strategy by small, incremental and logical steps. The term was first used by Professor J B Quinn.
• Logistics. The science of stockholding, delivery and customer service.
• Long-term debt. A loan repaid over a period longer than a year. See also Short-term debt.
• Loose–tight principle. The concept of the need for tight central control by headquarters, while allowing individuals or operating subsidiaries loose autonomy and initiative within defined managerial limits.
• Low-cost leader in an industry. Has built and maintains plant, equipment, labour costs and working practices that deliver the lowest costs in that industry. See Generic strategies.
• Macroeconomic conditions. Economic activity at the general level of the national or international economy.
• Market equilibrium. The state that allows competitors a viable and stable market share accompanied by adequate profits.
• Market mechanism. The means by which the state uses market pricing and quasi-market mechanisms to determine the supply and demand of goods that were previously state monopolies in public sector strategy.
• Market options matrix. Identifies the product and the market options available to the organisation, including the possibility of withdrawal and movement into unrelated markets.
• Market positioning. The choice of differential advantage possessed by an organisation that allows it to compete and survive in a market place. Often associated with competition and survival in a segment of a market. See also Market segmentation.
• Market segmentation. The identification of specific groups (or segments) of customers who respond to competitive strategies differently from other groups. See also Market positioning.
• Mass marketing. One product is sold to all types of customer.
• Matrix organisation structure. Instead of the product-based multidivisional structure, some organisations have chosen to operate with two overlapping structures. One structure might typically be product-based, with another parallel structure being based on some other element, such as geographic region. The two elements form a matrix of responsibilities. Strategy needs to be agreed by both parts of the matrix. See also Multidivisional organisation structure.
• Milestones. Interim indicators of progress during the implementation phase of strategy.
• Minimum intervention. The principle that managers implementing strategy should only make changes where they are absolutely necessary.
• Mission. Outlines the broad general directions that the organisation should and will follow and briefly summarises the reasoning and values that lie behind it. See also Objectives.
• Mission statement. Defines the business that the organisation is in or should be in against the values and expectations of the stakeholders.
• Monopoly rents. Economic rent deriving from the markets in which the organisation operates. Such rents are associated with a company's unique position in the market place enabling it to influence market prices in its favour. See also Economic rent.
• Multidivisional organisation structure. As the product range of the organisation becomes larger and more diverse, similar parts of the product range are grouped together into divisions, each having its own functional management team. Each division has some degree of profit responsibility and reports to the headquarters, which usually retains a significant role in the development of business strategy. Sometimes this is shortened to M-Form structure. See also Matrix organisation structure.
• Multinational enterprise (MNE). One of the global companies that operate in many countries around the world (e.g. Ford, McDonald's and Unilever).
• Multinational strategy. When a company operates in many countries, though it may still have a home base. See also International strategy and Global strategy.
• Negative-sum game. Actions of each party undermine both themselves and their opponents.
• Negotiation-based strategic route forward. Has both human resource and game theory elements. Human resource aspects emphasise the importance of negotiating with colleagues in order to establish the optimal strategy. Game theory aspects explore the consequences of the balance of power in the negotiation situation.
• Net cash flow. Approximately, the sum of pre-tax profits plus depreciation, less the periodic investment in working capital that is required to undertake the project.
• Network-based strategy. Explores the links and degree of co-operation present in related organisations and industries. It places a value upon that degree of co-operation.
• Network co-operation. Refers to the value-adding relationships that organisations develop inside their own organisation and outside it with other organisations.
• Network externalities. Refer to the development of an overall standard for a network that allows those belonging to the network to benefit increasingly as others join the network.
• New public management model. Consists of a model of public sector decision making where the professional civil service operates with more market competition and former state monopolies are divided and compete against each other for business from citizens. See also Public sector administration model.
• Niche marketing. Concentration on a small market segment with the objective of achieving dominance of that segment.
• Objectives or goals. Take the generalities of the mission and turn them into more specific commitments. They state more precisely than a mission statement what is to be achieved and when the results are to be accomplished. They may be quantified. See also Mission.
• Oligopoly. A market dominated by a small number of firms.
• Organisational capability. The skills, routines, management and leadership of its organisation. See also Tangible resources and Intangible resources.
• Organisational culture. The set of beliefs, values and learned ways of managing in an individual organisation. Note that it is important to distinguish this from national cultures.
• Outsourcing. The decision by an organisation to buy in products or services from outside, rather than make them inside the organisation.
• Paradigm. The recipe or model that links the elements of a theory together and shows, where possible, the nature of the relationships.
• Parenting. The special relationships and strategies pursued at the headquarters of a diversified group of companies.
• Payback. The time that it takes to recover the initial capital investment, usually measured in years.
• Payoffs. The results of particular game-plays. See also Game theory, Zero-sum game, Co-operative game, Negative-sum game.
• PESTEL analysis. Checklist of the political, economic, sociocultural, technological, environmental and legal aspects of the environment.
• Plans or programmes. The specific actions that follow from the strategies. Often a step-by-step sequence and timetable.
• Politics. Concerned with the exercise of authority, leadership and management in organisations.
• Portfolio matrix. Analyses the range of products possessed by an organisation (its portfolio) against two criteria: relative market share and market growth. It is sometimes called the growth-share matrix.
• Power. This aspect of strategic leadership is concerned with the exercise of authority, leadership and management in organisations.
• Predictability of the environment. The degree to which changes in the environment can be predicted.
• Prescriptive change. The implementation actions that result from the selected strategy option. A defined list of actions is identified once the strategy has been chosen. See also Emergent change.
• Prescriptive strategic management. A prescriptive strategy is one whose objective is defined in advance and whose main elements have been developed before the strategy commences. See also Emergent strategic management, where such elements are crafted during the development of the strategy and not defined in advance.
• Pressure points for influence. The groups or individuals that significantly influence the direction of the organisation, especially in the context of strategic change. Note that they may have no formal power or responsibility.
• Primary demand. Demand from customers for themselves or their families. See also Derived demand.
• Problem children. Products with low relative market shares in high-growth markets. See also Portfolio matrix.
• Process of strategic management. How the actions of strategic management are linked together or interact with each other as strategy unfolds.
• Profit-maximising theories of strategy. Emphasise the importance of the market place and the generation of profit. See also Prescriptive strategic management.
• Profitability. The ratio of profits from a strategy divided by the capital employed in that strategy. It is important to define clearly the elements in the equation, for example, whether the profits are calculated before or after tax and before or after interest payments. This is often called the return on capital employed, shortened to ROCE.
• Public interest. Concerns about the objectives of the institutions that make and implement public decisions in public sector strategy.
• Public power. The resource possessed by nation states and consisting of the collective decision making that derives from the nation state.
• Public resources. Public resources need to be analysed for their ability to deliver the maximum benefit for the least cost. 'Benefit' here has a broader social definition than simply delivering shareholder profitability in the private sector.
• Public sector administration model. Consists of a professional civil service bureaucracy that enacts government legislation and administers the activities of the state on behalf of the government, coupled with state monopolies that supply services to citizens. See also New public management model.
• Public sector resource analysis. Needs to assess whether sufficient and appropriate resources are available to deliver the purpose and objectives set by the state.
• Public value. Refers to the benefits to the whole of the nation from owning and controlling certain products and services in public sector strategy.
• Quota. A maximum number placed by a nation state on the goods that can be imported into the country in any one period. The quota is defined for a particular product category.
• Reputation. The strategic standing of the organisation in the eyes of its customers and other stakeholders. It is the sum of customer knowledge developed about an organisation over time, including its brands among many other factors.
• Resource allocation. The process of allocating the resources of the organisation selectively between competing strategies according to their merit.
• Resource-based strategy. Stresses the importance of an organisation possessing some resources that deliver its competitive advantage over its rivals in the market place.
• Resource-based view. Stresses the importance of resources in delivering the competitive advantage of the organisation. It is often shortened to RBV. See also Prescriptive strategic management.
• Resources. The resources of an organisation are those assets that deliver value added in the organisation.
• Retained profits. The profits that are retained in an organisation rather than distributed as dividends to shareholders. These can be used to fund new strategies.
• Return on capital employed. Defined as the ratio of profits to be earned divided by the capital invested in the new strategy.
• Reward. The result of successful strategy, adding value to the organisation and the individual.
• Reward systems. The structured benefits paid to individuals and groups who have delivered strategies that add value to the organisation consistent with its agreed purpose.
• Ricardian rents. Economic rent deriving from the resources of the organisation. They are derived from resources that possess some real competitive advantage and allow the company to earn exceptional returns. See also Economic rent.
• Risk. Strategy evaluation criterion associated with a strategy that does not expose the organisation to unnecessary hazards or to an unreasonable degree of danger. Risk involves measurable inputs and outputs that are associated with known probability distributions of the outcomes of business actions. Nothing may be certain but the odds of a specific outcome are known. See also Uncertainty.
• ROCE. See Profitability.
• Scenario. Model of a possible future environment for the organisation, whose strategic implications can then be investigated.
• Schumpeterian rents. Economic rent deriving from new and innovatory products and services that allow the organisation to charge significantly above the costs of production. See also Economic rent.
• Seven S Framework. The seven elements are: superordinate goals, strategy, structure, systems, skills, style and staff. In some later versions, the first item was replaced by shared values.
• Share issues. New shares in an organisation can be issued to current or new shareholders to raise finance for new strategy initiatives. The word 'equity' is sometimes used in place of shares and the process is then called 'equity financing'.
• Shareholder value added. The difference between the return on capital and the cost of capital multiplied by the investment made by the shareholders in the business.
• Short-term debt. A loan repaid in less than one year. See also Long-term debt.
• Small organisation structure. Consists of the owner/proprietor and the immediate small team surrounding that person.
• Socio-cultural theories of strategy. Focus on the social and cultural dimensions of the organisation in developing corporate strategy. See also Prescriptive strategic management.
• Split. The variety of techniques that can be employed to develop and sustain the autonomy and diversity of large organisations.
• Stakeholders. The individuals and groups who have an interest in the organisation and, therefore, may wish to influence aspects of its mission, objectives and strategies.
• Stars. Products with high relative market shares operating in high-growth markets. See also Portfolio matrix.
• Strategic alliances. Co-operative strategies where organisations combine or share some of their resources without involving an exchange of shares or other forms of joint ownership.
• Strategic business alliance. A strategic business alliance (SBA) is some form of contractual relationship designed to secure an international venture without involving a shareholding.
• Strategic business unit (SBU). The level of a multi-business unit at which the strategy needs to be developed. The unit has the responsibility for determining the strategy of that unit. An SBU is not necessarily the same as a division of the company: there may be more than one SBU within a division and SBUs may combine elements from more than one division.
• Strategic change. The proactive management of change in organisations in order to achieve clearly defined strategic objectives or to allow the company to experiment in areas where it is not possible to define strategic objectives precisely. See also Prescriptive change and Emergent change.
• Strategic environment. Everything and everyone outside the organisation: competitors, government, etc.
• Strategic fit. The matching process between strategy and organisational structure.
• Strategic groups. Groups of firms within an industry that follow the same strategies or ones that have similar dimensions and which compete closely.
• Strategic intent. A phrase that focuses on only the essence of the purpose of the organisation. It is sometimes phrased in competitive context.
• Strategic leadership. This is the ability to shape the organisation's decisions and deliver high value over time, not only personally but also by inspiring and managing others in the organisation.
• Strategic management. This has at least three definitions. First, the identification of the purpose of the organisation and the plans and actions to achieve that purpose. Second, the identification of market opportunities, coupled with experimenting and developing competitive advantage over time. Third, the pattern of major objectives, purposes or goals and the essential policies or plans for achieving those goals.
• Strategic planning. A formal planning system for the development and implementation of the strategies related to the mission and objectives of the organisation. It is no substitute for strategic thinking.
• Strategic space. The identification of gaps in an industry representing strategic marketing opportunities.
• Strategies. The principles that show how an organisation's major objectives or goals are to be achieved over a defined time period. Usually confined only to the general logic for achieving the objectives.
• Strategy as history. The view that strategy must, at least in part, be seen as a result of the organisation's present resources, its past history and its evolution over time.
• Strategy content. The actual strategy that is finally selected to meet the objectives of the organisation.
• Strategy context. The circumstances surrounding the influencing the way that a strategy develops and operates.
• Strategy process. The process of communication and discussion amongst those contributing to and implementing the strategy.
• Style theory of leadership. Suggests that individuals can be identified who possess a general style of leadership that is appropriate to the organisation. See also Contingency theory of leadership and Trait theory of leadership.
• Suitability. Strategy evaluation criterion associated with the strategy being appropriate for the internal and external context of the organisation.
• Survival-based theories of strategy. These regard the survival of the fittest in the market place as being the prime determinant of corporate strategy. See also Emergent strategic management.
• Sustainable competitive advantage. An advantage over competitors that cannot be easily imitated. Such advantages will generate more value than competitors have.
• SWOT analysis. An analysis of the strengths and weaknesses present internally in the organisation, coupled with the opportunities and threats that the organisation faces externally.
• Synergy. The combination of parts of a business such that the sum is worth more than the individual parts – often remembered as '2 + 2 = 5'.
• Tacit knowledge. Knowledge that is personal, context specific and much harder to formalise and communicate – often, but not necessarily, hidden and not formally recorded.
• Tangible resources. The physical resources of the organisation such as plant and equipment. See also Intangible resources and Organisational capability.
• Target pricing. Sets the price of goods and services primarily on the basis of the competitive position of the organisation, the profit margin required and, therefore, the target costs that need to be achieved. See also Cost-plus pricing.
• Targeted marketing. See Market segmentation.
• Tariffs. Taxes on imported goods imposed by a nation state. They do not stop imports into the country but make them more expensive.
• Taylorism. Named after F W Taylor (1856–1915). The division of work into measurable parts, such that new standards of work performance could be defined, coupled with a willingness by management and workers to achieve these. It fell into disrepute when it was used to exploit workers in the early twentieth century. Taylor always denied that this had been his intention.
• Three 'S' Framework for Dynamic. Strategy has three main elements: 1. sensing the changes, 2. seizing the opportunities, 3. surveying the outcomes and responses.
• Tiger economies. Countries of South-East Asia exhibiting exceptionally strong economic growth over the past 30 years, including Singapore, Malaysia, Hong Kong, Thailand and Korea.
• Total quality management (TQM). Emphasises the need for the whole company to manage quality at every level of the company.
• Trade barriers. The barriers set up by governments to protect industries in their own countries.
• Trade block. Agreement between a group (or block) of countries designed to encourage trade between those countries and keep out other countries.
• Trait theory of leadership. Argues that individuals with certain characteristics (traits) can be identified who will provide leadership in virtually any situation. See also Contingency theory of leadership and Style theory of leadership.
• Transaction Cost Economics (TCE). Focuses on minimising the costs of production and the costs of transactions related to the operation and management of organisations.
• Transactions continuum. Based on the principle of the level of ownership by a diversified group, the transactions continuum represents the range of options that are available for ownership and control by the group: they begin at one end with an acquisition with 100 per cent ownership with divestment at the other end with zero per cent ownership.
• Transcend. Given the inevitable complexities of corporate strategy, some strategists argue that every organisation needs an approach to management that transcends these problems and copes with such difficulties.
• Transfer price. The price for which one part of an organisation will sell its goods to another part in a multidivisional organisation.
• Transnational product company. This usually involves some global integration of manufacturing coupled with significant national responsiveness to national or regional variations in customer demand. See also Global product company.
• Uncertainty. May involve specific inputs but the outcomes are not fully defined in advance and perhaps not even clear after the event. See also Risk.
• Uncertainty-based theories of strategy. These regard prediction of the environment as being of limited use because the outcomes of any strategy are essentially complex and unpredictable, implying that long-term planning has little value. See also Emergent corporate strategy.
• United Nations Conference on Trade and Development (UNCTAD). A trade body set up to highlight the trading concerns of the developing nations of the world and promote their interests.
• Unrelated diversification. The different companies in a corporate group have little in common with regard to products, customers or technologies. However, they benefit from the resources of the headquarters with regard to the availability of lower-cost finance, quality of management direction and other related matters.
• Validity. Strategy evaluation criterion associated with the strategy and its related calculations and other assumptions being well-grounded and meaningful.
• Value chain. This identifies where the value is added in an organisation and links the process with the main functional parts of the organisation. It is used for developing competitive advantage because such chains tend to be unique to an organisation.
• Value system. The wider routes in an industry that add value to incoming supplies and outgoing distributors and customers. It links the industry value chain to that of other industries. It is used for developing competitive advantage.
• Vertical integration. This occurs when a company produces its own inputs (backward integration) or when a company owns the outlets through which it sells its products (forward integration).
• Vision. A challenging and imaginative picture of the future role and objectives of an organisation, significantly going beyond its current environment and competitive position. It is often associated with an outstanding leader of the organisation.
• Weighted average cost of capital. The combination of the costs of debt and equity capital in proportion to the capital structure of the organisation. See also Cost of capital.
• Zero-sum game. Has no payoff because the gains of one player are negated by the losses of another.