Strategic Management

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Chris Jeffs

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  • Glossary

    • Acceptability of strategy an evaluation of the stakeholder's likely approval of the strategic proposal.
    • Acquisition or takeover, is the outright purchase of one organisation by another.
    • Asset specificity the inability to use a resource for a task other than it was designed for. Asset specificity within a negotiated transaction can lead to an artificially high price as a result of opportunistic behavior on the part of the seller.
    • Audit a process to check the validity and reliability of information. Typically, audits are applied to financial, environmental and other resources.
    • Barrier to entry represents the difficulty in entering a market or sector.
    • Benchmarking a comparison of performance with those best in class, with a view to identifying competitive advantages.
    • Bounded rationality limitations on decision making due to previous experience, limited knowledge and high complexity.
    • Break-even analysis a form of sensitivity analysis that is used to determine when the total expenditure equals generated profit.
    • Bureaucracy the structure and processes created to ensure standardisation and control in an organisation.
    • Business-level strategy the level of strategy predominantly concerned with the building of competitive advantage through product development in specific markets.
    • Business strategy the management of the organisation's resources and competences in order to match the aims of the organisation and the threats and opportunities in the environment.
    • Change agents typically, employees or consultants who are charged with supporting the implementation of the strategy and identifying potential implementation problems.
    • Competition Commission an independent UK public body that investigates mergers, acquisitions and regulates major industries. Formerly known as the Monopolies and Mergers Commission.
    • Competitive advantage an advantage over competitors which is achieved by offering the customer greater benefit through a lower price or added value.
    • Competitive rivalry are organisations that compete in the same sector (product or service) and for the same potential customers.
    • Concurrent control a form of control where problems are solved in real time.
    • Conglomerate a large company that consists of multiple business units commonly providing unrelated products or services.
    • Congruence factors coming together in an integrated way, for example, environment, values and resources (E–V–R congruence).
    • Consolidation a reduction in size or a simplification of the business model. Consolidation may involve merger or acquisition.
    • Consortiasee Joint venture
    • Core competence is a complex mix of skills and resources that provide a distinct competitive advantage. They can be successfully applied to multiple areas within the business and are difficult for competitors to imitate.
    • Corporate governance country-specific laws and regulations concerning honesty, fiscal openness, independence and legal responsibility.
    • Corporate-level strategy is concerned with the growth and development of multiple business units and includes the overseeing of governance procedures, resource management and acquisitions.
    • Corporate social responsibility (CSR) is concerned with the standards and manner in which an organisation under takes its moral responsibilities to the wider society. It is the level of corporate citizenship demonstrated above the minimal requirements of governance and law.
    • Cost leadership a focus on efficiencies, typically through improved design and economies of scale.
    • Customer segmentation a group of consumers categorised, for example, on the basis of demographics, lifestyle and values.
    • Differentiation adding value by providing enhanced performance, service, design or image; commonly linked to a higher price.
    • Dirigiste an economic model that is founded on state ownership and financial support.
    • Discounted cash-flow (DCF) the value of assets or finance over time. Future assets are given a present value based on risk.
    • Distinctive capability are the unique resources and competences of an organisation that enable it to achieve competitive advantage.
    • Diversification a movement into new markets with new products.
    • Downstream functions in a value chain or value network that include distribution, marketing, service and support.
    • Economies of scale an increase in scale reduces the cost per unit, typically by reducing manufacturing, marketing and distribution costs.
    • Economies of scope increasing the range of products or services reduces the cost per unit, typically by reducing the demand-side costs of marketing and distribution.
    • Environmental scanning the process of evaluating the external environment at the macro and micro level in order to identify organisational threats and opportunities.
    • Exit barrier describes the difficulty in withdrawing from a market or sector.
    • Explicit knowledge knowledge that can be shared, stored and copied.
    • Exporting the supply of goods or services to another country or region.
    • External development organisational growth by external means, such as franchising, joint ventures or acquisition.
    • Far environmentsee Macro environment
    • Feasibility of strategy an assessment of the likely success of the strategy, in particular with regards to the availability of resources, skills and finance.
    • Federal Trade Commission (FTC) a government body that regulates competitive practice in the USA.
    • Feed-back control a form of control that identifies actions after the event.
    • Feed-forward control a form of control that anticipates problems.
    • First-mover advantage an early entrant to a market, which enables the setting of market expectations and competitive advantage.
    • Fixed costs those costs that do not change in relation to the level of business.
    • Foreign direct investment (FDI) a long-term overseas investment where control is maintained by the parent organisation.
    • Franchising a form of licensing agreement where the parent company provides the franchisee with a package of resources, including technical help and marketing assistance, in return for a share in the profits.
    • Globalisation the process of unification of business, societies and cultures around the world, resulting in global influence on local activities.
    • Hierarchy a series of levels in an organisation where each level is subordinate to a higher level.
    • Horizontal integration an organisational alliance, merger or acquisition in the same industry in order to increase market share.
    • Hybrid strategy a combination of differentiation with cost leadership or price-based strategies.
    • Industry a group of companies that provide similar products or services.
    • Information and communication technologies (ICT) computer-based communication systems.
    • Innovation the process by which a creative idea is turned into a product or process and which may then be used to generate a competitive advantage.
    • Intangible resource non-monetary assets that cannot be easily quantified (e.g. employee skills, partnerships, patents and competences).
    • Internal development growth by the use of the organisation's own resources and capabilities when developing products and services.
    • Joint venture a strategic alliance or consortium that results in the formation of a new company jointly owned by the parent companies.
    • Just-in-time (JIT) an inventory technique which reduces the need for storage of ‘in-process’ inventory, thereby reducing costs.
    • Knowledge management the active management of the intellectual capabilities of an organisation.
    • Laissez-faire an economic model based on profit and which broadly encourages free market competition with little political involvement.
    • Leverage a term coined by Hamel and Prahalad (1993) relating to the use of specific skills or resources from one part of the organisation to another.
    • Licensing a product or service is manufactured or used by another organisation in return for the payment of royalties.
    • Logical incrementalism a shorter-term experimental approach to strategic development where strategies tend to be introduced on an unstructured or emergent basis.
    • Macro environment far environment characterised by the influences that will affect every firm in the same industry (or sectors) and often other industries, but is unlikely to be influenced by the industry.
    • Managing shareholder value (MSV) the combined strategies that are undertaken by a firm to optimise the share price.
    • Market is defined by consumer or customer requirements, which in turn may be segmented by demographics, values, behaviours, etc.
    • Market pull a reactive development resulting from customer requirements.
    • Market segment is defined by consumer or customer requirements and by demographics, values, behaviours, etc.
    • Merger is the mutually agreed joining of two similarly sized companies to form a new company. Shares in the new company are distributed to all the previous shareholders.
    • Micro environment near environment characterised by the competitive dynamics and markets within the industry or sector. The industry is likely to be able to influence micro environmental factors.
    • Mission statement guidelines from which objectives can be set and which in turn will lead to the creation of strategies.
    • Monopolies and Mergers Commission (MMC)see Competition Commission
    • Multinational corporation (MNC) an organisation that owns businesses in more than one country.
    • Near environmentsee Micro environment
    • Non-executive director (NED) an unpaid executive who is responsible for the governance of the organisation while independently evaluating the strategies and performance of the organisation.
    • Non-governmental organisation (NGO) a non-profit-making organisation that commonly supports humanitarian, social, environmental or development issues.
    • Not-for-profit organisation (NFP) an organisation that exists solely to support charitable, civil or social purposes.
    • Off-shoring the outsourcing of a business process from one country to another, commonly to take advantage of lower costs or to gain access to skills and resources.
    • Operational strategy functional strategies to deliver corporate and business strategies with a particular emphasis on quality and efficiency.
    • Organisational culture a set of beliefs, behavioural norms and values unconsciously formed by the organisation's workforce.
    • Organisational knowledge the product of both learning and experience, it is shared between employees and accumulated through processes and systems.
    • Outsourcing subcontracting a process to a third-party organisation, typically to reduce costs or to improve focus on the core business.
    • Paradigm (cultural) the summative pattern of beliefs, behaviours, structures and processes.
    • Planned developmentsee Prescriptive development
    • Prescriptive development the long-term planned or rational process of analysing the organisation and the environment in order to determine where the organisation is and where it wants to be. Strategic decisions are commonly made in a sequential and rational manner.
    • Procedural rationality choices and decisions made on the basis of tools and theories.
    • Procurement purchasing or acquisition of goods or services for the benefit of the organisation.
    • Product life cycle (PLC) the stages that a product goes through from design to withdrawal.
    • Product portfolio a range of products provided by the same company for different market segments.
    • Public Private Partnership (PPP) a business venture between a government and a private organisation. Commonly, the private organisation runs the business on behalf of the government.
    • Resource-based view (RBV) a consideration of the resources and capabilities of the organisation and value chain, with a view to exploiting them as a competitive advantage.
    • Resources the total means and assets available to an organisation in order for it to survive, including equipment, labour and skills.
    • Retrenchment the cutting back or reduction of business activities and expenses in order to focus on the core business.
    • Return on capital employed (ROCE) a ratio measure of the returns being achieved from assets or invested capital.
    • Risk management the assessment of risk with a view to managing the consequences.
    • Satisfice the term coined by Herbert Simon (1955) to describe sub-optimal decision-making and compromise due to previous experience and external and internal pressures.
    • Small-to-medium enterprise (SME) an organisation whose head count falls between certain limits. In the EU these are defined as between 50 and 250 employees.
    • Stakeholders the individuals and groups that are affected by or impact upon the performance of the organisation.
    • Strategic alliance a partnership agreement between two or more companies to form a liaison that aims to reduce risk and achieve a mutually desired outcome.
    • Strategic analysis the use of tools to determine the relative strengths and weaknesses of an organisation and the threats and opportunities that may impact upon it from the external environment.
    • Strategic business unit the part of an organisation that can be related to a specific range of products or services or market.
    • Strategic capability the resources and competences of an organisation that enable it to successfully compete.
    • Strategic control corporate control which aims to manage the behaviour, performance and efficiencies of a diverse range of business interests.
    • Strategic drift occurs when organisations do not adequately address the long-term strategic position of the organisation in relation to the environment, which results in under-performance.
    • Strategic group a group of companies competing in the same industry, for the same customers and with similar strategies.
    • Strategic management is the process of identifying, evaluating and implementing strategies in order to meet the organisational objectives.
    • Stretching a term coined by Hamel and Prahalad (1993) which refers to the exploitation of existing organisational resources and knowledge.
    • Suitability of strategy an evaluation of the proposed strategy to ensure that key organisational issues have been addressed.
    • Synergy the added benefit obtained from joining two or more organisations together. The sum of the parts is greater than the individual contributions.
    • Tacit knowledge knowledge based on personal experience, it is difficult to communicate and is only developed through practice.
    • Takeoversee Acquisition
    • Tangible resource assets that can be quantified, including cash and inventory.
    • Technology push the use of emergent scientific developments which benefit customers in a way they have not anticipated.
    • Threshold resources the minimal resources required in order to compete in a market.
    • Total Quality Management the continuous monitoring and incremental
    • (TQM) improvement of processes within the organisation, with the aim of improving quality and customer satisfaction.
    • Transnational corporation (TNC) a multinational firm that gains location benefits and achieves global learning while remaining locally responsive.
    • Unique resources resources that are difficult to obtain and provide a clear opportunity for competitive advantage.
    • Upstream functions in a value chain or value network that include supply, inbound logistics and operations.
    • Value chain the organisational process where value is added to the raw materials (or service) during the process of transformation to the final product (or service). Value chains are typically optimised for efficiency and quality.
    • Value network the extended value chain that includes relationships with external partners.
    • Vertical integration an alliance, merger or acquisition with an organisation in the supply (backward/upstream) or distribution (forward/downstream) industry.
    • Virtual organisation a collaborative network of outsourced functions centrally coordinated using information and communication technologies (ICT).

    References

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    Balogun, J. and Hope Hailey, V. (1999) Exploring Strategic Change. Harlow: Prentice Hall.
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    2nd edn.
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    Belbin, R.M. (1993) Team Roles at Work. Oxford: Elsevier Butterworth Heinemann.
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    Author Index


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