Glossary

A thought-out plan that is no longer used because it is not profitable or not effective for the company. An abandoned strategy is something a company walks away from in order to pursue strategies that are more worth the company’s time and resources. [Chapter 1]

Profit from the revenue of a firm that is above the average for all competitors within an industry. Investors seek returns equal to or above what they can earn from other investments with a similar amount of risk, and they   reward firms that provide AAR with stronger stock values and willingness to loan capital. [Chapter 1]

A strategy through which one firm buys a controlling, or 100%, interest in another firm with the intent of making the acquired firm a subsidiary business within its portfolio.  [Chapter 6]

A proposed action that answers the question, “Who does what by when?” It also answers the questions of “how” and “how much” as appropriate. [Chapter 9]

An adjective is a word or phrase used to describe or modify an attribute or noun. This rule is a writing device for knowing when to quantify a data element or set of elements. For example, rather than writing, “Fiscal 2023 performance was a big improvement over fiscal 2022,” calculate the amount of the improvement and write “Fiscal 2023 performance was 15% higher than fiscal 2022” or “... $1.7 million higher…” [Chapter 9]

The differences between the legal and political systems of the home and target countries, considered when using the CAGE framework to identify potential locations for internationalization. [Chapter 8]

The individual or entity hired to act on behalf of the principal. This could be managers, employees, or external contractors. [Chapter 2]

Use analytical models to improve the quality of your analysis. They provide a process or means for analyzing data whether quantitative (e.g., ratios, break-event point, etc.) or qualitative (e.g., Strategy Diamond, VRIO analysis, etc.). Models provide a structured approach to looking at data to avoid omitting components that should also be considered. Sometimes models are also called tools, frameworks, or formulas. [Chapter 9]

A strategic planning tool for helping businesses grow by analyzing four strategies (1) market penetration, (2) market development, (3) product development, and (4) diversification.  [Chapter 6]  

The part of the Strategy Diamond that describes where the firm will be active and with how much emphasis. [Chapter 1]

A set of formal documents filed with a government body to legally document the creation of a corporation. These documents are essential for establishing the corporation as a legal entity separate from its owners and are required for the corporation to operate legally. [Chapter 2]

A specific assertion based on the identified situation and background information about the issues facing an organization. It opens the Assessment section of an SBAR analysis. The assessment statement must be accompanied by supporting data that are presented in an informative and focused manner. [Chapter 9]

Those people—boss, employees, management team, customers, customer service agents, board of directors, and anyone else to whom you’re writing—who are interested in what you have to say either in writing or orally. Sometimes referred to as a “target audience.” Communication should always be formatted in a context that will make sense for the audience. [Chapter 9]

Measures profitability of a firm by calculating the simple mathematical average of earnings over time.   A percentage figure used when reporting the historical return, such as the three-, five-, and 10-year average returns of a mutual fund. The average annual return is stated net of a fund’s operating expense ratio, which does not include sales charges, if applicable, or portfolio transaction brokerage commissions. [Chapter 1]

A strategic tool that helps an organization translate its vision and strategy into measurable goals and objectives across multiple perspectives of financial, customer, internal business process, and learning and growth. [Chapter 2]

Customers’ ability to influence sellers in terms of price, quality, or terms of service by playing competitors against each other.   The bargaining power of customers (buyers) directly affects the market when they expect lower prices or special services. High buyer bargaining power reduces operating profits and makes the industry less attractive for new entrants. [Chapter 3]

The ability of suppliers (the parties that supply goods or services to a firm or an industry) to influence prices, quality, or terms of business.   High supplier bargaining power reduces operating profits and makes the industry less attractive for all firms in the industry. [Chapter 3]

Structural factors that increase the cost and difficulty of entering a market, including the time and money required to develop the skills or capabilities needed to compete. [Chapter 3]

A strategic portfolio management tool developed by the Boston Consulting Group (BCG) that helps organizations evaluate their business units or products based on the dimensions of market growth rate and relative market share. The model’s four quadrants of high-growth + high market share (cash cows) merit significant investment because they offer strong competitive returns; low-growth + high market share units (cash cows) generate more cash than they consume and are used to fund other parts of the business; high-growth + low market share (question marks) require investment to determine their direction and should be abandoned if they don’t warrant continued ownership; and low growth + low market share units (dogs) that are candidates for divesture. [Chapter 6]

The comparison of a business’s performance to industry leaders and rival competitors. Areas of a business to benchmark include quality, profitability, customer satisfaction, and operations. By benchmarking, businesses can have a greater idea of where they stand against rivals and what it takes to match high-performing industry leaders. [Chapter 4]

A style of writing that informs the reader why the evidence provided should be important to them. Answering this is a tactic of writing for your audience to capture their attention. [Chapter 9]

A metaphor for an extremely unlikely occurrence that has an extreme impact. Typically, these events cannot be predicted except in retrospect. The metaphor is based on the observation in Europe that all swans were white; a black swan was deemed impossible. When black swans were observed in Australia, their existence was a surprise to Europeans. [Chapter 9]

A new, untapped market space where there is little or no competition. Companies that pursue a blue ocean strategy create entirely new demand by offering something unique, rather than competing head-to-head in crowded markets, where distinguishing the firm’s product is difficult and may be impossible (red ocean). [Chapter 7]

Provides oversight and guidance to an organization, acting as a fiduciary for its shareholders or stakeholders. This group of people directs the overall direction of an organization, acts in the best interest of the organization’s shareholders, and ensures the organization is well-managed and accountable. [Chapter 2]

The production level at which total revenues for a product equal the total expense to produce it. BEP helps an organization decide whether to enter or exit a market, to avoid running out of cash, and to determine the price, promotion, and other cost controls of its products. [Chapter 9]

Striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by underpricing rivals. [Chapter 5]

Seeking to differentiate the company’s product or service from rivals in ways that will appeal to a broad spectrum of buyers. [Chapter 5]

A decision framework that helps corporate-level decision makers choose the most effective way to acquire the resources, capabilities, or market positions needed for growth. Build decisions use internal resources and typically take more time. Borrow decisions are faster but often more complex as they require partnerships or alliances with external parties. Buy decisions are complicated ventures that experience issues around strategic fit, cost, speed, and risk. [Chapter 6]

How a company promises to deliver value to its customers, who then pay for the goods and services, and then allows the firm to convert those payments into a profit. [Chapter 1]

Reorganizing how a company creates, delivers, and captures value from its operations. This involves fundamental changes to how a business operates, often leveraging resources and partnerships in entirely new ways. [Chapter 7]

Internal rules and procedures established by a corporation to govern its operations and management. They provide detailed guidelines on how the corporation will be run, including the roles and responsibilities of directors, officers, and shareholders, as well as the procedures for meetings, voting, and other corporate activities. [Chapter 2]

An integrated and coordinated set of actions taken to deploy resources to achieve a specific task or a desired end state. Capabilities are the source of a firm’s core competencies; when capabilities are valuable, rare, costly to imitate, and organized to capture value   they are considered a core competency. When capabilities meet the conditions of a core competence, they are a potential source of competitive advantage. [Chapter 4]

Relates to the financial strength of different business units. A cash hog is a business unit that generates too little cash flow to completely fund its own operation. Such a business often requires cash from other sources or other business units to survive. [Chapter 6]

The highest-ranking corporate officer responsible for employee learning in an organization. The CLO typically drives strategy from the perspective of developing people and their technical skills as they support the goals of the corporation. Sometimes this person also is responsible for human resources or talent acquisition. [Chapter 4]

A blending of competition and cooperation between two firms. [Chapter 6]

When goods and services offered under different brands are located close to one another. [Chapter 6]

The benefit a firm receives by offering a greater value to its customers than its rivals can offer. To gain this value, a strategy that is hard to replicate is used so the firm can sustain its advantage over its competitors. Also see sustainable competitive advantage (SCA) below. [Chapter 1 & 5]

The ability to perceive, comprehend, and respond to conditions in the environment. Decision making in business should be informed by an understanding of conditions and events in the external environment. [Chapter 3]

Scanning, monitoring, forecasting, and assessing information about competitors to better understand them and enhance business decision making. [Chapter 3]

The number of value chains (distinctive but interrelated) in which an organization is engaged. A competitive scope is reflective of a firm's breadth of market focus. [Chapter 5]

A firm or organization that offers the same or similar product or service as your firm or organization. Competitors can be direct (selling the same or similar product or service), indirect (offer a higher- or lower-end version of your product or service, or future (offer a different product filling the same need as yours but not currently in the market).  [Chapter 3]

A condition in which many interconnected parts interact in ways that are difficult to fully understand or predict, making decision making and management difficult. In response to growing complexities in their environment, organizations often layer in new processes that inadvertently make decisions even more complex and increasing uncertainty. [Chapter 1]

Actions that firms use to try to compete successfully within only a single industry.  [Chapter 6]

A set of capabilities that leads to a sustainable competitive advantage through exhibiting all characteristics of valuable, rare, costly to imitate, and organized to capture value. Core competencies can be technical skills, knowledge, and even resources—anything that is unique and which the company controls or that gives it an advantage in the market. Typically, a company does not outsource core competencies. [Chapter 4]

A registered legal entity that is created by individuals, shareholders, or other entities, but exists separately and distinctly from its owners. It is recognized by law as having its own rights and responsibilities, like those of an individual. Corporations can enter contracts, own assets, incur liabilities, and be subject to legal action. [Chapter 2]

A competitive advantage based upon a firm having the lowest cost of operations compared to others in the industry. Typically achieved by exploiting scale of production, scope, experience, technology, or other factors. Chapter 5]

A systematic approach to estimating the strengths and weaknesses of alternatives. It is calculated by subtracting the cost of acting from the benefits attained through a decision. Generally, it includes measurable financial metrics but can also include intangible effects. All else being equal, when benefits exceed costs the project is favorable to the company. [Chapter 9]

The process by which new innovations simultaneously create new economic value while destroying existing businesses and industries.   Originally proposed by George A. Schumpeter as the basis for much of his research. When breakthrough technologies or business models emerge, they don't just add to what already exists—they actively replace and eliminate older ways of doing business. This cycle of creation and destruction is what drives long-term economic progress, even though it can be painful for companies and workers in declining industries. [Chapter 7]

The differences of the cultures between target and home countries, considered when using the CAGE framework to identify potential locations for internationalization. [Chapter 8]

The potential for a company’s operations in a country to struggle because of differences in language, customs, norms, and customer preferences. [Chapter 8]

The shared norms, beliefs, and practices that shape how members of an organization behave and work together. Answers the question, “How are things are done here?” [Chapter 2]

An advanced form of a customer-centric business. It involves learning as much as possible about your customers and their specific needs or desires. [Chapter 5]

An expression of the competitive advantage of a product or service to customers, letting them know how it's special and different from anything else on the market, and why they should buy. [Chapter 1]

The merging of statistics (business analytics) and the science for how to best represent information for communication. Sometimes referred to as data viz, it is the effective communication of information by telling stories with data and is usually expressed as graphs or charts. [Chapter 9]

A competitive advantage based upon a product or service being different from its competitors. Differentiation provides a superior level of value to the firm's customers compared to the price and attributes of its products relative to its competitors. [Chapter 5]

The part of the Strategy Diamond that describes characteristics that make the firm unique and lead to a competitive advantage in the current and future moments. They address how the firm will win in the market. [Chapter 1]

The process by which organizations leverage digital technologies to fundamentally change their operations, business models, and customer experiences, enabling improved efficiency, innovation, and value creation in response to evolving market and technological environments. [Chapter 5]

Firms that offer similar products or services and compete for the same potential markets. [Chapter 3]

Firm’s overarching, long-term plan where managers   focus operational efforts and resources by reaching higher growth levels, sustaining a stable environment, or enforcing budgetary restrictions (retrenchment). They ensure that individual departments work together toward corporate goals rather than pursuing their own goals. [Chapter 6]

A process, popularized by Clayton Christensen, in which a simpler, more affordable, or more accessible product or service initially targets overlooked or underserved customer segments before improving over time to meet the needs of mainstream customers. Unlike sustaining innovation—which improves existing products for existing customers—disruptive innovation often underperforms on traditional metrics at first but ultimately displaces established firms that fail to recognize or adapt to the threat. [Chapter 7]

A firm that controls at least half the market in which it operates and has no significant competition. Dominant firms have a competitive advantage by virtue of their size, name recognition, and resources. [Chapter 6]

An organization’s ability to integrate, build, and reconfigure internal and external resources and competencies to address rapidly changing environments and sustain competitive advantage over time. [Chapter 4]

The key economy factor differences of the target and home countries, considered when using the CAGE framework to identify potential locations for internationalization. [Chapter 8]

The part of the Strategy Diamond that describes how the firm will make money above its cost of capital. It can include environmental and social profits; a firm must also make a financial profit to keep investors engaged. [Chapter 1]

The potential for a country’s economic conditions and policies, property rights protections, and currency exchange rates to harm a firm’s operations within a country. [Chapter 8]

Cost advantages in either fixed or variable costs enjoyed by companies when production becomes efficient because these costs are spread over a larger number of goods. Such efficiencies are achieved by increasing product or lowering costs or a combination of both. [Chapter 6]

A theory in economics that explains savings as a byproduct of increasing the number of goods that use similar resources. [Chapter 6]

The strategy element that emerges from the circumstances of implementation and is not part of the firm’s stated strategy. That is, it is not planned in advance, it develops over time, and it complements or replaces parts of the intended strategy as conditions change. [Chapter 1]

Individuals who implement new combinations of resources, methods, or ideas, possessing a distinctive willingness to challenge established patterns and bear uncertain risks. Unlike traditional business managers who optimize existing operations, entrepreneurs actively seek to disrupt and transform how things are done. When employees or managers in organizations of any size drive innovation and change from within their companies, they may be referred to as intrapreneurs. [Chapter 7]

How much a company’s leadership supports and encourages innovation, risk-taking, and new ideas. Companies with strong entrepreneurial orientation make innovation a core part of their culture and strategy. [Chapter 7]

A value that is anticipated based on a specific set of product attributes. For example, everything else held constant (reputation, price, features, service, etc.), a greater quality product should yield a greater market share. [Chapter 3 & 9]

The selling of products produced in one country to customers in another country. [Chapter 8]

The factors and influences outside the control of an organization that impact the operation of its business either directly or indirectly. [Chapter 3]

A company that quickly enters a market after the first mover. They learn from the first mover’s mistakes and can still gain a strong position without taking as much risk. [Chapter 7]

The legal and ethical obligation of an individual or entity (the fiduciary) to act in the best interests of another party (the principal). This duty is characterized by trust, loyalty, and good faith, and it is commonly found in relationships where one party has a significant degree of influence or control over the interests of another. [Chapter 2]

A company that is the first to enter a market with a new product or service. They can gain early advantages like brand recognition and customer loyalty, but they also take on more risk and cost. [Chapter 7]

A set of business-level strategies proposed by Michael Porter. These include broad differentiation, broad cost leadership, narrow differentiation, narrow cost leadership, and integrated cost leadership and differentiation. [Chapter 5]

Marketing approaches for a good or service with attractive features that focus on one particular minority market (niche) subgroup. A typical product marketed using a niche strategy is easily distinguished from other products, and it is also produced and sold to fulfill the identifiable and unique needs within the niche market. [Chapter 5]

Business practice where one firm (a franchisee) purchases the rights to use a trademark, business model, and process from another (a franchisor) so they can conduct business. [Chapter 8]

Those firms not currently competing but with high potential to compete due to either market commonality or resource similarity. [Chapter 3]

The major external and uncontrollable factors that influence an organization’s decision making and affect its performance and strategies. These factors include economic factors; demographics; legal, political, and social conditions; and technological changes, as well as natural forces. [Chapter 3]

The physical distance between target and home countries, considered when using the CAGE framework to identify potential locations for internationalization. [Chapter 8]

Large corporations that operate virtually everywhere on the planet, like Adobe, Lego, and Starbucks. [Chapter 8]

One of four main international business strategies, a framework of integrating cost pressure into a firm's product while minimizing local responsiveness pressures such that a firm's product maximizes cost and efficiency with few product modifications. [Chapter 8]

The shift toward a more interdependent and integrated global economy that creates greater availability of goods and services. [Chapter 8]

When one or a few entities own a voting majority of company shares. Majority shareholders assert considerable influence. [Chapter 2]

A type of diversification that leverages the corporate relatedness of the firm’s various value chains. In horizontal diversification, the firm develops or acquires products or services that will appeal to its current customers to expand their offerings without competing with existing offerings. This is a move that leverages existing competencies such as marketing, warehousing, or logistics to benefit multiple products. [Chapter 6]

The sum value of an organization’s people in terms of knowledge, skills, abilities, and experiences. Educating or training the organization’s people will make them more genuinely productive and provide higher economic value within the firm. [Chapter 4]

The strategic act of reproducing or adapting successful products, processes, technologies, or business models from other firms to gain a competitive advantage.   Once one company successfully brings an innovation to market, others will try to replicate that success with their own versions. This imitation process ultimately transforms entire industries. Also refers to the third stage of Schumpeter’s innovation process. [Chapter 7]

Firms that offer different types of products or services but target similar customer segments and customer needs. These firms might even offer a product or service that is higher- or lower-end than that offered by another firm. [Chapter 3]

Presumes that the characteristics of and conditions present in the external environment determine the appropriateness of strategies that are formulated and implemented for a company to earn above average returns. The I/O model specifies that the choice of industries in which to compete has more influence on company performance than the decisions made by managers inside their firm. Research shows that 20% of profitability can be directly attributed to this model. [Chapter 1]

A group of companies or organizations that produce similar products or services and compete for the same customers within a defined market. The boundaries of an industry depend on your level of perspective. Defined broadly, an industry may span an entire sector; defined narrowly, it may focus on a specific product, customer segment, or geography. [Chapter 3]

The overall appeal, profitability, and growth potential of a market.   An “attractive industry” is one that offers high potential profit yields. Determining the attractiveness of an industry is the primary goal of analysis using Michael Porter’s Five Forces of Competition Model. [Chapter 3]

Describes a product, service, resource, or capability that cannot be imitated or substituted. Or, if it can be approximated, it will take a great deal of time or cost a lot of money. It is a factor of a core competency as used in the VRIO model. [Chapter 4]

A change that enhances economic value creation by reducing costs or increasing demand for products or services. Simply being new or different isn't enough—true innovation must improve efficiency or make consumers more willing to buy something. Innovation transforms inventions into commercially viable solutions that create real economic value in the marketplace—products or services that customers will buy and use. Also refers to the second stage of Schumpeter’s innovation process. [Chapter 7]

The urgent need for companies to continuously innovate or risk being overtaken by competitors. In today's rapidly changing business environment, even the most successful companies cannot remain static and expect to maintain their market leadership. [Chapter 7]

A member of a company's board of directors who is also an employee or executive of the company. Inside board members have a deep understanding of the company's operations, culture, and strategies because they are directly involved in the day-to-day operation of the organization. [Chapter 2]

Intangible resources are those nonphysical assets such as patents, website domains, manuscripts and intellectual property that cannot be seen or counted. [Chapter 4]

Giving customers more value for the money by satisfying buyers’ expectations on key product attributes (e.g., quality, features, performance, or service) while beating their price expectations. Alternatively, it may provide a product with better attributes at a comparable price to competitors. This option is a hybrid strategy that blends elements of cost leadership and differentiation strategies. [Chapter 5]

One of the forces in Porter's Five Forces of Competition. When two or more companies compete in common markets and/or with similar resources the degree of rivalry will increase. [Chapter 3]

Businesses that expand to many countries but are located in one place and negotiate in other countries. International companies are importers and exporters but have no investments outside of their home country. [Chapter 8]

One of four main international business strategies, a framework of minimally integrating cost and local responsiveness pressures such that a firm's product is globally uniform from market to market regardless of country. [Chapter 8]

The process of designing products, services, and internal operations (those processes and systems used to produce and deliver its offerings (see Chapter 4) to enter and grow in international markets.  [Chapter 8]

Creating a new discovery, device, or process, without necessarily having any immediate commercial application or economic impact. Inventions represent technological possibilities that may or may not eventually become economically valuable. Also refers to the first stage of Schumpeter’s innovation process. [Chapter 7]

A cooperative arrangement that involves two or more organizations, each contributing to the creation of a new entity. [Chapter 6]

A company that enters a market after it is already well established. They face more competition and fewer opportunities but take the least risk. [Chapter 7]

A business arrangement in which one company gives another permission to use patents, trademarks, copyrights, designs, and other intellectual property to manufacture, distribute, and sell its product in a specific geography for a specific period in exchange for a specified payment. [Chapter 8]

When no entity or group owns a clear majority of voting shares. Shareholders must form coalitions to achieve a majority and assert control. [Chapter 2]  

The degree to which companies' product and service offerings, customer segments, and geographic scope overlap. [Chapter 3]

An effort to sell existing products in new markets. See Ansoff’s Matrix. [Chapter 6]

An attempt to gain additional share of existing markets using existing products. See Ansoff’s Matrix. [Chapter 6]

The perception of a firm's customer of its product or brand in relationship to the firm's competitors. [Chapter 3]

Reflects a company’s ability to manipulate the price of its product by influencing the item’s supply, its demand, or both. Firms with market power are said to be “price makers” as they can set a premium price for the product while maintaining market share. [Chapter 6]

A strategy through which two firms agree to integrate their operations on a relatively coequal basis. [Chapter 6]

The standard referents for determining the performance of an organization. Metric is synonymous with measurement. Outcomes are results and process is how those results are produced. Use process metrics to assess the effectiveness of how a firm is performing (doing things right) and outcome metrics to assess the effectiveness of what it is doing (doing the right things). [Chapter 9]

An individual or entity that owns less than 50% of a company's shares and, therefore, does not have control over the company's decisions. Minority shareholders hold a smaller portion of the company's equity compared to majority shareholders, who own more than 50% of the shares. [Chapter 2]

The organization’s fundamental purpose and reason for existence in terms of what it does, who it serves, and why. Answers the question, “Why do we exist?” [Chapter 2]

When firms compete against each other in multiple markets in different geographical regions. [Chapter 3]

One of four main international business strategies, a framework of integrating local responsiveness pressures while ignoring cost pressures such that a firm's product is mostly unique in each country's market. [Chapter 8]

Firms with operations in more than one country. Each location functions as its own entity. Multinational companies have a centralized management structure. [Chapter 8]

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower price. [Chapter 5]

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals’ products. [Chapter 5]

A political ideology or policy orientation that emphasizes the interests, culture, and sovereignty of a nation above global or supranational considerations. In business contexts, nationalism often manifests through protectionist trade measures, domestic industry prioritization, and regulatory frameworks designed to limit foreign influence. [Chapter 8]

The process of converting privately controlled companies, industries, or assets into the control of government. [Chapter 8]

Relocating a business activity to another country with an established favorable relationship to the home country. Often, nearshore countries share borders. [Chapter 8]

The value of all future cash flows over the life of an investment.  Derived from the principles of the time value of money, a business uses a discounted cash flow (expected future inflows less expected their outflows) for a project to reflect the potential change in wealth from adopting a project. If a project’s NPV is positive, the company should invest; if it is negative the company should not invest. [Chapter 9]

Relocating a business activity like a call center or production process to another, distant, country. [Chapter 8]

The practice of a firm where all operational decisions are integrated and coordinated to allow the firm to charge a competitive price while incurring a best-of-class cost to generate above average returns. Also, a perspective allowing every employee to see the flow of value to the customer and fix it when the flow is interrupted or breaks down. [Chapter 5]

What an organization actually achieves relative to what it expected to achieve. If measured with the balanced scorecard (see Chapter 2), this would encompass elements of financial, customer, internal process, and employee knowledge and growth. [Chapter 9]

Describes a product, service, resource, or capability that is within a firm’s ability to perform and exploit for competitive advantage. It is a factor of a core competency as used in the VRIO model. [Chapter 4]

Also known as an independent or external board member, is a member of a company's board of directors who is not an employee or executive of the company. Outside board members bring an external perspective to the board, providing independent oversight and expertise that can help guide the company's strategic direction. [Chapter 2]

Contracting an external third party to perform a task or activity that was previously performed by an internal resource. This is done to create efficiency, reduce costs, or improve the value of the task or activity. [Chapter 4]

Reference points or standards used to compare an organization's performance against its own historical results or competitors' achievements. Benchmarks provide context for interpreting performance measures and identifying areas for improvement. [Chapter 2 & 9]

Quantitative measures that indicate how an organization performs in comparison to historical trends and/or competitors. [Chapter 2 & 9]

A model for analyzing the external factors of a firm in terms of the broadest general macroenvironment by examining six key factors. (1) Political, (2) economic, (3) social, (4) technological, (5) ecological, and (6) legal. These factors have the capability of impacting all firms/organizations in a global region regardless of industry, but usually in different magnitudes. [Chapter 3]

The potential for government upheaval or interference within a country that causes harm to a business's operation. [Chapter 8]

Model used to identify the profit potential of an industry. The Five Forces consist of the (1) threat of new entrants, (2) threat of substitute products, (3) bargaining power of suppliers, (4) bargaining power of buyers, and (5) intensity of rivalry among existing industry participants. [Chapter 3]

A process that helps executives assess their firms’ prospects for success within each of its markets or industries. It offers suggestions about what to do within each industry and provides ideas for how to allocate resources across industries. [Chapter 6]

The activities performed within an organization that directly add value to the firm’s product or service. Examples will vary based upon the firm and its value chain, but these activities might include logistics, procurement, operations, marketing, sales, and customer support. [Chapter 4]

The individual or entity that owns the asset or seeks a specific outcome. In a business context, this could be shareholders, a board of directors, or even top-level management. [Chapter 2]

When there is a conflict of interest between a principal (such as a shareholder or employer) and an agent (such as a manager or employee) who is supposed to act on the principal's behalf. This problem occurs because the agent may have different goals, incentives, or access to information than the principal, leading to actions that are not in the best interest of the principal. [Chapter 2]

Implementing new or significantly improved methods for producing or delivering goods and services. This type of innovation focuses on changing how work gets done rather than what gets produced. [Chapter 7]

Creating new products to serve existing markets. See Ansoff’s Matrix. [Chapter 6]

Creating entirely new goods or services or significantly improving existing ones to better meet customer needs. This involves developing offerings that provide new benefits or solve problems in ways that weren't previously available. [Chapter 7]

Describes the responsibility of management to produce a product or service of higher value to the target market than its competitors. [Chapter 5]

A competitive strategy where companies are forced to continue to cut prices to compete with their competitors and continue to get customers in their stores and generate sales. The issue with this dilemma is that companies can start cutting prices so low that they are making little to no profit and in some cases lose profit. [Chapter 5]

Describes that a product, service, resource, or capability is not readily available to other firms. It is a factor of a core competency as used in the VRIO model. [Chapter 4]

The combination of the deliberate and emergent strategy that an organization implements in practice. The changes from deliberate to realized often results from factors of executing strategic plans. [Chapter 1]

A concept or activity to which a name refers. It is synonymous with the term measure. [Chapter 9]

When a company enters a new field of business that is related to its existing products or services. Such diversification can be related constrained (restricted to products and services that have a direct relationship to existing markets) or related linked (indirectly connected to existing markets). On the continuum of diversification, related diversification is considered more risky than single or dominant businesses but less risky than unrelated businesses. [Chapter 6]

Returning offshore jobs and activities back to the home country. [Chapter 8]

The extent to which competitors possess similar types and comparable amounts of resources to create value for customers. [Chapter 3]

Presumes that the way a firm manages its resources (people and assets) has more influence on the company’s overall performance than the pressure by outside forces. Research shows that 36% of profitability can be directly attributed to this model. [Chapter 1]

Assets or inputs used to achieve a firm’s objectives.   Can be either tangible or intangible. Tangible resources include those concrete physical assets—such as cash, inventory, or machinery—that can be touched, seen, or counted. Intangible resources are those nonphysical assets—such as patents, website domains, manuscripts, and intellectual property—that cannot be seen or counted. When a firm employs tangible and intangible resources through a concentration on strategic priorities, it generates capabilities. [Chapter 4]

The process involved in changing the organization of a business through divestment, spin-off, breaking up, and liquidating individual product or service units. Corporate restructuring typically involves making dramatic changes to a business by cutting out or merging departments and displacing or terminating employees. [Chapter 6]

The reduction of costs by reducing the size of a business unit, usually through reducing the number of employees, services, or product lines. By shrinking the size of a firm, executives hope that the firm can survive as a profitable enterprise. [Chapter 6]

The profit expected from an investment. It is calculated by subtracting the initial cost of the investment from its final value, then dividing this new number by the cost of the investment, and finally, multiplying it by 100 to create a percentage. [Chapter 9]

The degree of uncertainty about the future economic gains or losses that could deviate from the expected outcome of a particular financial investment. Risk includes losing some or all of the investment. [Chapter 1]

A framework for analysis that addresses (1) situation, (2) background, (3) assessment, and (4) recommendation. It is a verbal or written structure that provides focused and concise information for important situations. [Chapter 9]

A unit of ownership in a corporation. When an individual or entity purchases shares of a publicly traded corporation, they become shareholders and own a portion of the company. Shares are traded on stock exchanges, allowing investors to buy and sell them. [Chapter 2]

A theory that asserts the primary responsibility of a company's management is to maximize shareholder value. According to this view, the interests of shareholders take precedence over those of other stakeholders, such as employees, customers, suppliers, and the community. [Chapter 2]

Also known as a stockholder, is an individual, company, or institution that owns at least one share of a company's stock. Shareholders are essentially partial owners of the company and have certain rights and responsibilities associated with their ownership. [Chapter 2]

The part of the Strategy Diamond that describes the speed and sequence of strategic moves the firm will pursue. It helps management determine what comes first and what comes next, as well as how quickly each action must be executed. [Chapter 1]

Individuals or groups that have an interest or have staked a claim in an organization. [Chapter 9]

A cooperative arrangement between two or more organizations that does not involve the creation of a new entity. [Chapter 6]

When a firm is clear about its mission and vision and has a coherent, well-articulated business-level strategy for achieving both. [Chapter 5]

Sets of firms that follow similar strategies compared to each other. The characteristics that make these firms unique are very similar to some and very distinct from others in an industry. [Chapter 3]

The development and execution of a plan of action to create a competitive advantage (CA) and generate above average returns (AAR). The SMP assumes that both planning and execution are essential to success. [Chapter 1]

A process of determining an organization’s goals, the actions needed to achieve those goals, and all other essential questions like who are we, where do we want to go, how will we get there, and how will we know when we have arrived? [Chapter 1]

The activities that the organization performs to assist the primary activities to gain the competitive advantages. In other words, firm activities that add value indirectly, but are necessary to sustain primary activities. Examples will vary based upon the firm and its value chain, but these activities might include research and development (R&D), information systems, operating management, human resources, finance, accounting, and general management. [Chapter 4]

When a company has a competitive advantage over its competitors in terms of assets, product or service attributes, or corporate abilities for an extended period, making it extremely hard for competitors to meet or surpass. Most advantages related to price, features, and similar attributes are short lived because they are easy to imitate. A competitive advantage is more likely to be sustainable when it incorporates some difficult-to-copy attributes, such as outstanding people, culture, brand, intellectual property, business property, and unique and difficult-to-find resources. [Chapter 1]

Strategic planning tool that evaluates an organization’s strengths, weaknesses, opportunities, and threats. [Chapter 3 & 4]

Tangible resources include those concrete physical assets such as cash, inventory, machinery that can be touched or seen or counted. [Chapter 4]

The application of new technologies or scientific discoveries to solve business problems or create new opportunities. This type of innovation changes what's technically possible and can have incremental or revolutionary effects on how businesses operate. [Chapter 7]

One of the forces in Porter’s Five Forces of Competition. This force describes the likelihood that new competitors will emerge in an industry and bring new capacity with them to the market to increase rivalry and decrease profitability. [Chapter 3]

One of the forces in Porter’s Five Forces of Competition. A substitute is defined as a product that meets the essential needs of an industry’s buyers at a lower price. [Chapter 3]

One of four main international business strategies, a framework of integrating both cost and local responsiveness pressures that seeks a middle ground between the two. [Chapter 8]

Lack of predictability or clarity about future outcomes stemming from unknown or unmeasurable factors like market shifts, new tech, regulations, or global events. As firms attempt to reduce uncertainty through additional planning or controls, they can inadvertently introduce new unknowns that further complicate decision making. [Chapter 1]

When a company enters a new field of business that is not related to its existing markets in any way at all. On the continuum of diversification, unrelated bears the greatest levels of risk and has historically proven to provide the least likely path to profitability. [Chapter 6]

Describes whether a product, service, resource, or capability is desirable enough for a customer to spend their money to acquire it. It is a factor of a core competency as used in the VRIO model. [Chapter 4]

The monetary, material, or assessed worth of the technical, economic, service, and social benefits a firm creates in exchange for the price it charges in the market. Ultimately, value is defined by the current and potential customers of a firm. Value is also the first element explored in VRIO analysis. [Chapter 4]

A set of activities that an organization carries out to create value for its customers. The value chain includes the full range of activities that a business goes through to bring a product from conception to delivery. Through value chain analysis organizations can ensure that they are positioned to earn above average profits. [Chapter 4]

A framework for examining the sequential activities a firm performs to create and deliver its products or services, from sourcing inputs to post-sale support. VCA identifies where value is created and where costs are incurred across the organization. VCA reveals what a firm does. [Chapter 4]

A framework of three disciplines introduced by Michael Treacy and Fred Wiersema in their 1995 book The Discipline of Market Leaders. They argue that companies must meet the industry standards in all three disciplines of operational excellence, product leadership, and customer intimacy, but must align their entire organization around a single one to achieve market leadership. [Chapter 5]

The core principles and ethical standards that guide a firm’s decision making, behavior, and interactions both within and outside of the organization. Answers the question, “What is important?” [Chapter 2]

The part of the Strategy Diamond that describes how a firm will achieve its strategy, whether it will be through internal means, an external partner, or an acquisition. Different vehicles dictate different skill sets. [Chapter 1]

An arrangement in which a firm absorbs activities or functions earlier or later in the industry value chain either through acquisition, through expansion of existing capabilities or by developing the capability organically. By integrating vertically, the firm gains more control over its product and may reduce the threat of competition. If achieved, complete vertical integration dictates that a company controls all steps of the value chain forward to the end product as well as backward to raw material extraction. [Chapter 6]

Articulates an organization’s aspirational future state representing what it seeks to achieve over the long term. Answers the question, “Where are we going?” [Chapter 2]

An analytical tool used to evaluate whether a firm’s resources and capabilities constitute a sustainable competitive advantage by assessing if they are valuable, rare, inimitable, and organized to capture value. [Chapter 4]

A company whose entire stock is owned by another company; known as the parent company. This means that the parent company has complete control over the subsidiary's operations, management, and decision-making processes. When a firm either starts or purchases an operation in another country, it is through foreign direct investment (FDI). [Chapter 8]