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action-response cycles : the way outcomes of competitive battles are determined not by
the moves of any single company but by the actions and responses of many companies
that interact with each other and alter their strategies in response to moves their
competitors make.
agency theory: a theory holding that the obligation of the company is to put shareholders
first as they are the ones risking the most.
barriers to entry: barriers within an attractive industry that deter new companies from
entering and secure the place of existing companies.
best-value strategy: how some companies combine the benefits of low cost and
differentiation and create best value through such means as team based product
development, closely integrated supply chains, and reliance on total quality management
(TQM) principles in order to
business plan: a plan consisting of: a description of the business, an external analysis, an
internal analysis, an implementation schedule, an end-game strategy which indicates
when the business will be viable, financial projections, and an analysis of risk.
business strategy: how a firm competes in a given business; whether it should it be low-
cost, differentiated, or some combination of the two such as best value.
capabilities: the sets of skills and routines that determine how employees in a company
relate both internally and externally and that allow the company to exploit its resources in
ways that are valuable and difficult for other firms to imitate; includes coordination and
control systems, the company’s culture, its production knowledge, its experience and long
standing relations with a variety of stakeholders such as government, and knowledge of
customers; may be compared to software, while the resources are the company’s hardware.
community model (of capitalism): common in Japan and some European countries in
this form of capitalism managers are considered senior members in the company and
shareholders are one of many stakeholder groups that have to be satisfied; managers are
freer from short-term pressures imposed by stock market prices and quarterly profits.
comparative advantage: what a company does absolutely best in comparison to all other
firms.
competencies: link key resources and capabilities and combine, transform, and channel
them in a few very specific ways to satisfy customer needs; they provide access to new
markets, give customers benefits, and are very hard for competitors to imitate.
co-opetition: ways in which companies are able to compete and cooperate at the same
time in order to broaden markets and create new value and thereby escape zero-sum
games where one company benefits at another’s expense.
corporate strategy: focuses on the scope of the company; what business or businesses it
should be in.
culture : the key values, beliefs, and assumptions about how an organization should
conduct its business; treat its employees, customers, suppliers, and others; and foster
innovativeness and flexibility.
cross-impact matrix: used in the creation of scenarios to illustrate how one trend may
intersect with another.
decline: a stage within industry evolution that sees falling customer bases, prices, and
margins; companies exit or are squeezed out during this stage.
Delphi method: developed by Rand Corporation as way to elicit expert opinion about
important trends in society, technology, and government it combines the beliefs of
different experts to sharpen the predictions made about developments in these areas.
differentiated position: a way a firm can distinguish itself through low-volume sales of
high-margin items.
eco-efficiency: the process of reducing the ecological impact that a company has while
maintaining the delivery of competitively priced goods and services.
economies of scope: the potential cost savings from joining together in the same
company the production of even disparate products provided that they rely on the same
management structure, administration systems, marketing departments, R&D, and so on;
this concept is often used as a justification for the cost saving that are supposed to result
from mergers and acquisitions
economic growth: A positive change in the level of production of goods and services by
a country over a certain period of time.
economic value added (EVA): Arguably, the most important way to judge over time
whether a company is winning competitive battles since it compares what the company is
earning for shareholders in relation to the cost of capital.
embryonic stage: the beginning stage in industry evolution when prices are high,
margins low, and profits still not certain ; products are of lesser reliability; competition
has yet to take hold, and there is not much export activity.
GDP per capita: gross domestic product per capita is the total output of goods and
services for final use produced by an economy per person; it indicates how wealthy the
individuals in a country are at a given moment in comparison to individuals in other
countries.
growth stage: a stage during industry evolution when prices go down, and profits raise;
product reliability increases as does the competition and exports also begin to rise.
human relations approach to management theory: rather than being hierarchical and
based on command and control structures this approach emphasizes employee
development, motivation, and learning company values, informal coordination, two-way
communication, performance, and not following orders
industrial organization (IO) economics: a branch within the field of economics that
focuses on the formation of monopolies and near-monopolies.
internal analysis: the processes that a company uses to examine its strengths and
weaknesses in order to better compete with other companies.
invention: the creation of a new idea and/or its demonstration in prototype form.
leading-edge industries: industries that depend upon newly emerging technologies that
provide the impetus for economic growth.
legalistic model (of capitalism): a model of capitalism that emphasizes the obligations
that managers as employees of the owners (the shareholders) owe their employers.
licensing: rather than directly produce and sell its products abroad a company can
establish a legal arrangement with a foreign firm that can produce and sell the company’s
products for a fee.
low-cost position: distinguishing oneself through the high-volume sale of low-margin
items.
maturity: a stage within industry evolution profits are lower as more companies are
competing for market share; innovation is rare and overcapacity begins; exports blossom
since there are few new consumers at home.
micro segmenting: dividing customers into finer and finer segments in order to serve
smaller and smaller categories of customers and to provide them with more precisely
what they need.
mission: typically represents what the company has been good at in the past, what it has
accomplished, where its employees take pride in their achievements.
outliers: companies that are able to break the natural parity that prevails in their
industries and sustain competitive advantage (or on the other side companies that realize
competitive disadvantage) for long periods such as a decade or more;
Porter’s five forces: The forces that need to be examined in order to determine industry
attractiveness: (1) competition among existing rivals, (2) new entrants, (3) substitutes, (4)
customers, and (5) suppliers; see industry analysis above.
portfolio planning: a corporate strategy that helps large, complex organizations manage
their separate business units by focusing on the direction, coordination, control, and
profitability of the different business units.
prisoner’s dilemma: a situation in game theory where it is rational for each player –
not knowing how the other player will act -- to act in a way that will make both players
worse off.
process technologies: enable firms to improve their ability to make goods and services.
realized strategies: outcomes are not determined by what any single company intends
but by the moves and countermoves of competitors responding to changing conditions
over time.
resource-based view (RBV): a view that helps to explain why some firms within
industries consistently outperform others; rather than market power (the industrial
organization view) it emphasizes the ability of firms to reap higher returns from
resources through the way they configure their capabilities and competencies
response uncertainty: uncertainty about what a firm should do based on its knowledge
of conditions in the macroenvironment.
risk: odds of success are known with certainty; to be contrasted with uncertainty (see
below).
scenario: a depiction of a possible future based on the intersection of various trends over
time.
seven-S analysis: the seven characteristics that Peters and Waterman used to describe
excellent firms: (1) Strategy (2) Structure (3) Systems (4) Style (5) Staffing (6) Skill (7)
Shared values.
shared values: unity of purpose – a part of management that Peters and Waterman
found was often slighted by U.S. managers in comparison to their Japanese counterparts.
skill: the capabilities to compete and generate new business -- a part of management that
Peters and Waterman found was often slighted by U.S. managers in comparison to their
Japanese counterparts
smart (business) designs: better ways of meeting customer needs through the use of
detailed and systematic information about customers; this information allows firms to
satisfy customer needs for integrated solutions rather than for separate products and
services; better designs often breakdown barriers between a business and its customers
by eliminating redundant supply channels; they take advantage of special niches firms
occupy in the value chain and they tend to provide small segments of customers with
customized products and services that meet their unique needs.
staffing: matching jobs with the people available to hold them in an organization -- a
part of management that Peters and Waterman found was often slighted by U.S.
managers in comparison to their Japanese counterparts
stakeholders: those who affect and are directly affected by a company’s actions and
results.
state uncertainty: uncertainty about conditions in the macroenvironment of the firm; for
instance where the economy is headed, what the next government will be, how will
technology change, and so on.
strategy: the extent to which an organization has a logical sense of the actions it has to
take to gain sustainable competitive advantage over the competition, improve its position
in relation to customers, and allocate resources to high-return activities – an aspect of
management that Peters and Waterman found was often overemphasized by U.S.
managers in comparison to their Japanese counterparts
strategic groups: groups of companies with similar positions competing in the same
industry space competing for very similar groups of customers; these companies must
find finer and finer points of distinction between them in order to stand out.
style: extent of actual alignment between management and employees and the
organization’s real strategic needs as opposed to lip service -- -- an aspect of management
that Peters and Waterman found was often slighted by U.S. managers in comparison to
their Japanese counterparts
technology: knowledge of how to convert the factors of production into goods and
services.
timing dilemmas : the dilemma that a company faces about whether to go first and be a
pioneer with a new strategy or to be a fast follower and allow another firm to take these
risks; often the issue is deciding whether to continue with an old product or utilize a new
product, business model, or practice.
total quality management (TQM): management method established by such gurus as
Edward Deming TQM is designed to achieved enhanced productivity and greater quality
at the same time; it therefore breaks with Porter’s generic strategies which assume that a
firm has to choose between low cost or high quality. Under TQM, a firm has a few
trusted suppliers rather than having power over many suppliers in accord with Porter’s
framework.
uncertainty: odds of success are unknown; to be contrasted with risk (see above).
value chain: the primary and support activities which a firm undertakes to deliver
products and services to customers; each can be broken down to determine how
profitable it is (what are its margins).
value net: rather than being stuck in zero-sum game in which one company prevails at
other companies’ expense, companies can work together with other companies and with
their suppliers and customers to create greater value for all of them.
vision: typically based on an understanding that the senior leaders of a company have of
a company’s future possibilities and where it should be moving next. What should the
company be aiming for so that it can excel in the future? A vision typically provides
employees with a sense of direction. It tells them where the company should be heading.
All companies are caught between what they have been good at in the past (their mission)
and what they would like to be good at in the future (their vision).