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Glossary for Strategic Management

UNIT - 1
1. A strategy is an integrated and coordinated set of commitments and actions designed
to exploit core competencies and gain a competitive advantage.
2. Intended strategy the strategy that the organization has deliberately chosen to
3. Emergent strategy where managers use their experience and leading to develop a
strategy that meets the needs of the external environment.
4. A firm has a competitive advantage when it implements a strategy competitors are
unable to duplicate or find too costly to try to imitate.
5. Sustained competitive advantage occurs when an organization is implementing a
value-creating strategy that is not being implemented by competitors and when these
competitors are unable to duplicate the benefits of this strategy.
6. The strategic management process is the full set of commitments, decisions, and
actions required for a firm to achieve strategic competitiveness and earn aboveaverage returns.
7. Strategy analysis: This involves an analysis of the General environment and the
Competitive environment. It also deals with the organizations internal environment.
It allows the organization to evaluate how well it is positioned to exploit the
opportunities in the external environment.
8. Strategy formulation is the process by which an organization chooses the most
appropriate courses of action for the realization of organizational goals and objectives
and thereby achieving the organizational vision.
9. Strategy implementation is the translation of chosen strategy into organizational
action so as to achieve strategic goals and objectives. Strategy implementation is also
defined as the manner in which an organization should develop, utilize, and
amalgamate organizational structure, control systems, and culture to follow strategies
that lead to competitive advantage and a better performance.
10. Risk is an investors uncertainty about the economic gains or losses that will result
from a particular investment.
11. Vision is a picture of what the firm wants to be and, in broad terms, what it wants to
ultimately achieve. This is often associated with the founder of an organization and
represents a desired state the organization aspires to achieve in the future.
12. Mission seeks to answer the question why an organization exists. A mission
specifies the business or businesses in which the firm intends to complete and the
customers it intends to serve.

13. Stakeholders are the individuals and groups who can affect the firms vision and
mission, are affected by the strategic outcomes achieved, and have enforceable claims
on the firms performance.
14. The general environment is composed of dimensions in the broader society that
influence an industry and the firms within it.
15. Political and Legal forces are the result of laws and regulations. Political processes
shape a societys laws which have an impact on the functioning of an industry and a
company. Government stability and Taxation policy also play an important role.
16. The economic environment refers to the nature and direction of the economy in
which a firm competes or may compete. Key economic indicators include interest
rates, disposable income, inflation, unemployment rates and currency exchange rates.
17. Social forces refer to the way in which changing social customs and values affect an
industry. The demographic segment is concerned with a populations size, age
structure, geographic distribution, ethnic mix, and income distribution.
18. Technological forces: These forces have an impact on industries through innovation.
Advances in technology give rise to new industries as well as the death of older
industries. Rate of introduction of new technology has reduced the product life cycle.
Internet has disrupted retail industry.
19. An industry is a group of firms producing products that are close substitutes.
20. The industry environment is the set of factors that directly influences a firm and its
competitive actions and competitive responses.
21. Porters Five forces framework A tool of analysis to assess the attractiveness of
an industry based on the strengths of five competitive forces. These five forces are:
the threat of new entrants, the power of suppliers, the power of buyers, the threat of
product substitutes, and the intensity of rivalry among competitors.
22. Value Net: is an extension of Porters 5 forces model using Game Theory to take into
account the dynamic nature of markets. Value Net represents the map of the whole
game, the players in the game and the relationships to each other. The players in the
game are customers, suppliers and competitors.
23. Complementors: these are organizations which supply complements to the industry
and can affect the dynamics of the industry through their bargaining power. This, the
sixth force in Industry attractiveness, was introduced by Brandenburger and Nalebuff.
24. Strategic Group: It is a group of firms in an industry that follow same or similar
strategy. The companys closest competitors are others in the same strategic group. An
industry may consist of many strategic groups.
25. Mobility Barriers: These are factors that deter movement of firms from one strategic
group to another. Conceptually these are similar to entry barriers which make it
difficult for new entrants to enter an industry.
26. Tipping point an unexpected and unpredictable event that has a major impact on an
organizations environment.

27. Hypercompetition where organizations aggressively position themselves against

each other and create new competitive advantages which make opponents advantages
UNIT - 2
28. Value is measured by a products performance characteristics and by its attributes for
which customers are willing to pay. Value or margin the difference between the
total value received by the firm from the consumer for its product or service and the
total cost of creating the product or service.
29. Value chain- Business is seen as a chain of activities that transforms inputs into
outputs that customers value. Customers value derives from three basic sources:
activities that differentiate the product, activities that lower its cost, and activities that
meet the customers need quickly.
30. Primary activities are involved with a products physical creation, its sale and
distribution to buyers, and its service after the sale.
31. Support activities provide the assistance necessary for the primary activities to take
32. Value chain analysis: An analysis that attempts to understand how a business creates
customer value by examining the contributions of different activities within the
business to that value.
33. SWOT analysis SWOT is an acronym for the internal Strengths and Weaknesses of
a firm, and the environmental Opportunities and Threats facing that firm. SWOT
analysis is a technique through which managers create a quick overview of a
companys strategic situation.
34. A threat is a condition in the general environment that may hinder a companys
efforts to achieve strategic competitiveness.
35. An opportunity is a condition in the general environment that if exploited effectively,
helps a company achieve strategic competitiveness.
36. Resource-based view A new perspective on understanding a firms success based
on how well the firm uses its internal resources. The underlying premise is that firms
differ in fundamental ways because each firm possesses a unique bundle of
resources tangible and intangible assets and organizational capabilities to make use
of those assets.
37. Resources can be thought of as inputs that enable an organization to carry out its
activities. They maybe classified as tangible and intangible. Tangible resources are
assets that can be observed and quantified. They refer to the physical assets that an
organization possesses and include plant and machinery, finance, and human capital.
Intangible resources include assets that are rooted deeply in the firms history,
accumulate over time, and are relatively difficult for competitors to analyze and
imitate. These may be embedded in routines and practices that have developed over

time within the organization. These include an organizations reputation, culture,

knowledge, and brands.
38. Valuable and rare resources provide a means of competitive advantage. However,
if the organization is to achieve sustainable competitive advantage, it is necessary that
competing organization cannot copy these resources.
39. A capability is the capacity for a set of resources to perform a task or an activity in an
integrative manner. Organizational capabilities
Skills (the ability and ways of
combining assets, people, and processes) that a company uses to transform inputs into
40. Core competencies are capabilities that serve as a source of competitive advantage
for a firm over its rivals. Core competence or strategic capability can be thought
of as a cluster of attributes that an organization possesses which in turn allow it to
achieve competitive advantage
41. Valuable capabilities allow the firm to exploit opportunities or neutralize threats in
its external environment.
42. Non-substitutable capabilities are capabilities that do not have strategic equivalents.
43. Costly-to-imitate capabilities are capabilities that other firms cannot easily develop.
44. Rare capabilities are capabilities that few, if any, competitors possess.
45. A business-level strategy is an integrated and coordinated set of commitments and
actions the firm uses to gain a competitive advantage by exploiting core competencies
in specific product markets.
46. Cost leadership strategy is where an organization seeks to achieve the lowest cost
position in the industry without sacrificing its product quality. The cost leadership
strategy is an integrated set of actions taken to produce goods or services with
features that are acceptable to customers at the lowest cost, relative to that of
competitors. Low-cost strategies Business strategies that seek to establish longterm competitive advantages by emphasizing and perfecting value chain activities that
can be achieved at costs substantially below what competitors are able to match on a
sustained basis. This allows the firm, in turn, to compete primarily by charging a price
lower than competitors can match and still stay in business.
47. Differentiation strategy involves the organization competing on the basis of a
unique or different product which is sufficiently valued by consumers for them to pay
a premium price.
48. Differentiation A business strategy that seeks to build competitive advantage with
its product or service by building it to be different from other available competitive
products based on features, performance, or other factors not directly related to cost
and price. The difference would be hard to create and/or difficult to copy or imitate.
49. Hybrid strategy this is where an organization is able to combine being a low cost
producer with some form of differentiation.
50. Focus strategy occurs when an organization undertakes either a cost or
differentiation strategy but within only a narrow segment of the market.

51. Industry life-cycle suggests that industries go through four stages of development
which include: introduction, growth, maturity, and decline
52. Product life cycle
A concept that describes a products sales, profitability, and
competencies that are key drivers of the success of the product as it moves through a
sequence of stages from development and introduction to growth, maturity, decline,
and eventual removal from a market.
53. Competitor intelligence is the set of data and information the firm, gathers to better
understand and better anticipate competitors objectives, strategies, assumptions, and
54. Benchmarking: Continuous process of measuring products, services and business
practices against those companies recognized as industry leader.
55. Corporate parent concerned with how a parent company adds value across the
businesses which make up the organization. Parenting framework: The perspective
of the role of corporate headquarters (the parent) in multi-business (the children)
companies is that of a parent sharing wisdom, insight, and guidance to help develop
its various businesses to excel.
56. Holding company structure: Structure in which the corporate entity is a broad
collection of often unrelated businesses and divisions such that it (the corporate
entity) acts as financial overseer holding the ownership interest in the various parts
of the company, but has little direct managerial involvement.
57. Corporate strategy is concerned with what industries the organization wants to
compete in.
58. Market penetration increase market share in your existing markets using your
existing products.
59. Market development A grand strategy of marketing present products, often with
only cosmetic modification, to customers in related marketing areas by adding
channels of distribution or by changing the content of advertising or promotion.
60. Product development A grand strategy that involves the substantial modification of
existing products or the creation of new but related products that can be marketed to
current customers through established channels.
61. Diversification occurs where an organization seeks to broaden its scope of
activities by moving into new products and new markets.
62. Related diversification movement into an industry in which there are some links
with the organizations value chain.
63. Horizontal integration occurs when an organization takes over a competitor or
offers complementary products at the same stage within its value chain.
64. Vertical integration exists when a company produces its own inputs (backward
integration) or owns its own source of output distribution (forward integration).
65. Unrelated diversification a situation where an organization moves into a totally
unrelated industry.

66. Conglomerate diversification A strategy that involves acquiring or entering a

business unrelated to a firms current technologies, markets, or products because it
presents the most promising investment opportunity available
67. Synergy occurs when the total output from combining business is greater than the
output of the businesses operating individually. It is often describes mathematically as
2 + 2 = 5.
68. A merger is a strategy through which two firms agree to integrate their operations on
a relatively coequal basis. Merger occurs when two organizations join together to
share their combined resources.
69. Acquisition when one organization seeks to acquire another, often smaller,
organization. An acquisition is a strategy through which one firm buys a controlling
or 100 per cent, interest in another firm with the intent of making the acquired firm a
subsidiary business with its portfolio. A takeover is a special type of acquisition
wherein the target firm does not solicit the acquiring firms bid; thus, takeovers are
unfriendly acquisitions.
70. Joint venture when two organizations form a separate independent company in
which they own shares equally.
71. Strategic alliance Alliances with suppliers, partners, contractors, and providers that
allow partners in the alliance to focus on what they do best, farm out everything else,
and quickly provide value to the customers. Partnerships that are distinguished from
joint ventures because the companies involved do not take an equity position in one
72. Portfolio techniques An approach pioneered by the Boston Consulting Group that
attempted to help managers balance the flow of cash resources among their various
businesses while also identifying their basic strategic purpose within the overall
73. BCG Matrix: The BCG Growth-Share Matrix is a portfolio planning model
developed by the Boston Consulting Group in the early 1970's. It is based
on the observation that a company's business units can be classified into
four categories based on combinations of market growth and market
share relative to the largest competitor, hence the name "growthshare". Market growth serves as a proxy for industry attractiveness, and
relative market share serves as a proxy for competitive advantage. The
growth-share matrix thus maps the business unit positions within these
two important determinants of profitability.
74. GE/ McKinsey Matrix: The GE / McKinsey matrix is similar to the BCG growthshare matrix in that it maps strategic business units on a grid of the industry and the
SBU's position in the industry. The GE matrix however, attempts to improve upon the
BCG matrix in the following two ways:

The GE matrix generalizes the axes as "Industry Attractiveness" and "Business

Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy

for industry attractiveness and relative market share as a proxy for the strength of
the business unit.

The GE matrix has nine cells vs. four cells in the BCG matrix.

Industry attractiveness and business unit strength are calculated by first identifying
criteria for each, determining the value of each parameter in the criteria, and
multiplying that value by a weighting factor. The result is a quantitative measure of
industry attractiveness and the business unit's relative performance in that industry.
Strategic Business Unit (SBU): An autonomous division or organizational unit,
small enough to be flexible and large enough to exercise control over most of the
factors affecting its long-term performance. Because strategic business units are more
compact they are more agile and respond quickly to changing economic or market


75. Competitor intelligence is the set of data and information the firm, gathers to better
understand and better anticipate competitors objectives, strategies, assumptions, and
76. A global economy is one in which goods, services, capital, people, skills, and ideas
move freely across geographic borders.
77. Globalization refers to the linkages between markets that exist across national
borders. This implies that what happens in one country has an impact on occurrences
in other countries.
78. Locational advantages The activities that go to make up an organizations value
chain may be located in different countries to take account of differential costs and
other locational advantages that a country may possess.
79. Globally integrated enterprise integrates value chain activities such as
procurement, research, and sales on a global basis in order to produce its goods, and
services more efficiently.

80. International diversification is a strategy through which a firm expands the sales of
its goods or services across the borders of global regions and countries into different
geographic locations or markets.
81. An international strategy is a strategy through which the firm sells its goods or
services outside its domestic market.
82. Global strategy the organization seeks to provide standardized products for its
international markets which are produced in a few centralized locations.
83. A multi domestic strategy is an international strategy in which strategic and
operating decisions are decentralized to the strategic business unit in each country so
as to allow that unit to tailor products to the local market.
84. A transnational strategy is an international strategy through which the firm seeks to
achieve both global efficiency and local responsiveness.
85. Entry mode strategies different types of strategy that organizations can use to enter
international markets.
86. Exporting: Exporting is the process of selling of goods and services produced in one
country to other countries. Exporting may be done directly by the company itself or
indirectly through an intermediary/ agent.
87. Licensing: International Licensing is an arrangement whereby a foreign Licensee
buys the right to produce a companys product in the Licensees country for a
negotiated fee which may consist of One time License fee or Royalty payments for
every unit produced or both.
88. Franchising: This is a specialized form of Licensing in which the Franchiser not only
sells intangible property to the franchisee (usually the right to use its trademark) but
also insists that the Franchisee agrees to abide by strict rules about how it runs its
business. Franchising is more common in Service industry and tends to involve longer
term commitments.
89. Joint Ventures: Joint ventures can be defined as an enterprise in which two or more
investors share ownership and control over property rights and operation. They entail
a more extensive form of participation than either exporting or licensing.
90. Wholly owned Subsidiary: A wholly owned subsidiary is one in which the parent
company owns 100% of the shares of the subsidiary. If the subsidiary business is
established by setting up the entire operation from the ground up, it is called a
Greenfield venture. Alternatively, the parent company may acquire an existing
91. Porters diamond of national advantage seeks to explain why nations achieve
competitive advantage in their industries by using four attributes that exist in their
home market. These are Factor conditions, Demand conditions, Related and
supporting industries, and Firm strategy, structure, and rivalry.


92. Organizational structure: Specifies the firms formal reporting relationships,

procedures, controls, and authority and decision making processes.
93. The simple structure is a structure in which the owner-manager makes all major
decisions and monitors all activities while the staff serves as an extension of the
managers supervisory authority.
94. Functional organizational structure: Structure in which the tasks, people, and
technologies necessary to do the work of the business are divided into separate
functional groups (e.g., marketing, operations, finance) with increasingly formal
procedures for coordinating and integration their activities to provide the businesss
products and services.
95. Divisional organizational structure: Structure in which a set of relatively
autonomous units, or divisions, is governed by a central corporate office. The
divisional organizational structure organizes the activities of a business
around geographical, market, or product and service groups. Each such
division contains a complete set of functions. Thus, each division would
handle its own accounting activities, sales and marketing, engineering,
production, and so forth.

96. Matrix organizational structure: Structure in which functional and staff personnel
are assigned to both a basic functional area and to a project or product manager. It
provides dual channels of authority, performance responsibility, evaluation, and
97. Boundary less organization: Organizational structure that allows people to interface
with others throughout the organization without need to wait for a hierarchy to
regulate that interface across functional, business, and geographic boundaries.
98. Virtual Organization: Corporation whose structure has become an elaborate network
of external and internal relationships. In effect, a temporary network of independent
companies suppliers, customers, subcontractors, and business around the core, highprofitability information, services and products. Creating an agile, virtual organization
structure involves outsourcing, strategic alliances, a boundary less learning approach,
and Web-based organization.
99. Learning organization: Organization is structured around the idea that it should be
set up to enable learning, to share knowledge and to create opportunities to create new
knowledge. It would move into new markets to learn about those markets rather than
simply to bring a brand to it, or find resources to exploit in it.
100. Business process reengineering: A popular method by which organizations
worldwide undergo restructuring efforts to remain competitive. It involves
fundamental rethinking and radical redesigning of a business so that a company can
best create value for the customer by eliminating barriers that create distance between
employees and customers.
101. Outsourcing is the purchase of a value-creating activity from an external
supplier. Business process outsourcing
Having an outside company manage
numerous routine business management activities usually done by employees of the

company such as HR, supply procurement, finance and accounting, customer care,
supply chain logistics, engineering, R&D, sales and marketing, facilities
management, and management/development.
102. Restructuring is a strategy through which a firm changes its set of businesses or
its financial structure.
103. Retrenchment
A business strategy that involves cutting back on products,
markets, operations, or other strategic commitments of the firm because its overall
competitive position, or its financial situation, or both are not able to support the level
of commitments to various markets or the resources needed to sustain or build
operations in some, usually declining or increasingly competitive, markets. Unlike
liquidation, retrenchment would have the firm sell some assets, or ongoing operations
to re-channel proceeds to reduce overall debt and to support the firms efforts to
rebuild its future competitive posture.
104. Downsizing
Eliminating the number of employees, particularly middle
management, in a company.
105. Leadership is concerned with creating a shared vision of where the
organization is trying to get to, and formulating strategies to bring about the changes
needed to achieve this vision.
106. Strategic leadership is the ability to anticipate, envision, maintain flexibility, and
empower others to create strategic change as necessary.
107. BHAGs big hairy audacious goals: goals that stretch the organization and are
readily communicated to all its members.
108. Organizational culture refers to the complex set of ideologies, symbols, and
core values that are shared throughout the firm and that influence how the firm
conducts business.
109. Theory E assumes that change should be based on enhancing shareholder value.
110. Theory O assumes that change should help develop corporate culture and
improve organizational capabilities.
111. Strategic flexibility is a set of capabilities used to respond to various demands
and opportunities existing in a dynamic and uncertain competitive environment.
112. Organizational controls: Guide the use of strategy, indicate how to compare
actual results with expected results, and suggest corrective actions to take when the
difference is unacceptable.
113. Strategic controls are largely subjective criteria intended to verify that the firm is
using appropriate strategies for the conditions in the external environment and the
companys competitive advantages.
114. Balanced scorecard: A management control system that enables companies to
clarify their strategies, translate them into action, and provide quantitative feedback as
to whether the strategy is creating value, leveraging core competencies, satisfying the
companys customers, and generating a financial reward to its shareholders. A set of

four measures directly linked to a companys strategy: financial performance,

customer knowledge, internal business processes, and learning and growth.
115. Corporate governance is the set of mechanisms used to manage the relationship
among stakeholders and to determine and control the strategic direction and
performance of organizations.
116. The board of directors is a group of elected individuals whose primary
responsibility is to act in the owners interests by formally monitoring and controlling
the corporations top-level managers.
117. Ethics: The moral principles that reflect societys benefits about the actions of an
individual or group that are right and wrong.
118. Corporate social responsibility is a recognition need to take account of the
social and ethical impact of their business decisions on the wider environment in
which they compete.
119. Social audit: An attempt to measure a companys actual social performance
against its social objectives.
120. Six Sigma: A conditions improvement program adopted by many companies in
the last two decades that takes a very rigorous and analytical approach to quality and
continuous improvement with an objective to improve profits through defect
reduction, yield improvement, improved customer satisfaction, and bet-in-class
121. Theory business: The assumptions that affect an organizations behavior, the
decisions about what and what not to do, and determine what an organizations thinks
are meaningful results.
122. Agency problem: Inherent in the relationship between the providers of capital
referred to as the Principal and those who employ that capital on their behalf, referred
to as agent.
123. Agency costs are the sum of incentive costs, monitoring costs, enforcement costs,
and individual financial losses incurred by principals because governance
mechanisms cannot guarantee total compliance by the agent.