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A
| B | C | D | E
| F | G | H | I
| J | K | L | M
| N | O | P | Q
| R | S | T | U
| V | W | X | Y
| Z
A
Added
value. The difference between the market value of the output and
the cost of the inputs to the organisation.
Architecture. The network of relationships
and contracts both within and around the organisation.
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B
Backward
integration. The process whereby an organisation acquires the
activities of its inputs, e.g. manufacturer into raw material supplier.
Benchmarking. The comparison of practice
in other organisations in order to identify areas for improvement. Note
that the comparison does not have to be with another organisation within
the same industry, simply one whose practices are better at a particular
aspect of the task or function.
Bounded rationality. The principle
that managers reduce tasks, including implementation, to a series of small
steps, even though this may grossly over-simplify the situation and may
not be the optimal way to proceed.
Branding. The additional reassurance provided
to the customer by the brand name and reputation beyond the intrinsic
value of the assets purchased by the customer.
Break-even. The point at which the total costs
of undertaking a new strategy are equal to the total revenue from the strategy.
Bretton Woods Agreement.
System of largely fixed currency exchange rates between the leading industrialised
nations of the world. In operation from 1944 to 1973.
Business ethics. See Ethics.
Business process re-engineering.
The replacement of people in administrative tasks by technology, often
accompanied by delayering and other organisational change.
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C
Capability-based
resources. Covers the resources across the entire value chain and
goes beyond key resources and core competencies.
Change options matrix. This links
the areas of human resource activity with the three main areas of strategic
change: work, cultural and political change.
Changeability of the environment.
The degree to which the environment is likely to change.
Competitive advantage. The significant
advantages that an organisation has over its competitors. Such advantages
allow the organisation to add more value than its competitors in the same
market.
Competitor profiling. Explores
one or two leading competitors by analysing their resources, past performance,
current products and strategies.
Complete competitive formula.
The business formula that offers both value for money to customers and competitive
advantage against competitors.
Complementors. The companies whose products
add more value to the products of the base organisation than they would derive
from their own products by themselves - for example, Microsoft software adds significantly
to the value of a Hewlett-Packard Personal Computer.
Concentration ratio. The degree
to which value added or turnover is concentrated in the hands of a few firms
in an industry. Measures the dominance of firms in an industry.
Contend. The constructive conflict that some
strategists argue is needed by every organisation.
Content of corporate strategy.
The main actions of the proposed strategy.
Context of corporate strategy.
The environment within which the strategy operates and is developed.
Contingency theory of leadership.
Argues that leaders should be promoted or recruited according to the needs
of the organisation at a particular point in time. See also Style theory
and Trait theory.
Controls. Employed to ensure that strategic
objectives are achieved and financial, human resource and other guidelines
are not breached during the implementation process or the ongoing phase
of strategic activity. The process of monitoring the proposed plans as they
are implemented and adjusting for any variances where necessary.
Co-operation. The links that bring organisations
together, thereby enhancing their ability to compete in the market place.
See also Complementors.
Co-operative game. Has positive pay-off
for all participants.
Core competencies. The distinctive
group of skills and technologies that enable an organisation to provide
particular benefits to customers and deliver competitive advantage. Together,
they form key resources of the organisation that assist it in being distinct
from its competitors.
Core resources. The important strategic
resources of the organisation, usually summarised as architecture, reputation
and innovation.
Corporate governance. The selection
of the senior officers of the organisation and their conduct and relationships
with owners, employees and other stakeholders.
Corporate strategy. The pattern
of major objectives, purposes or goals and the essential policies or plans
for achieving those goals. Note that this is not the only definition.
Cost/benefit analysis. Evaluates
strategic projects especially in the public sector where an element of unquantified
public service beyond commercial profit may be involved. It attempts to
quantify the broader social benefits to be derived from particular strategic
initiatives.
Cost of capital. The cost of the capital employed
in an organisation, often measured by the cost of investing outside in a risk
free bond coupled with some element for the extra risks, if any, of investing
in the organisation itself. See also Weighted average cost of capital.
Cost-plus pricing. Sets the price
of goods and services primarily by totalling the costs and adding a percentage
profit margin. See also Target pricing.
Cultural Web. The factors that can be
used to characterise the culture of an organisation. Usually summarised
as stories, symbols, power structures, organisational structure, control
systems, routines and rituals.
Culture. See Organisational culture and International
culture. It is important to distinguish between these two quite distinct
areas of the subject.
Customer-competitor matrix.
Links together the extent to which customers have common needs and competitors
can gain competitive advantage through areas such as differentiation and
economies of scale.
Customer-driven strategy.
The strategy of an organisation where every function is directed towards
customer satisfaction. It goes beyond those functions, such as sales and
marketing, that have traditionally had direct contact with the customer.
Customer profiling. Describes the
main characteristics of the customer and how customers make their purchase
decisions.
Cyclicality. The periodic rise and fall
of a mature market.
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D
Delayering.
The removal of layers of management and administration in an organisation’s
structure.
Demerger. The split of an organisation into
its constituent parts with some parts possibly being sold to outside investors.
Derived demand. Demand for goods and
services that is derived from the economic performance of the customers.
See also Primary demand.
Differentiation. The development
of unique benefits or attributes in a product or service that positions
it to appeal especially to a part (segment) of the total market.
Dirigiste policy. Describes the
policies of a government relying on an approach of centrally directed
government actions to manage the economy. See also Laissez-faire policy.
Discontinuity. Radical, sudden and
largely unpredicted change in the environment.
Discounted cash flow (DCF).
The sum of the projected cash flows from a future strategy, after revaluing
each individual element of the cash flow in terms of its present worth.
Division. A separate part of a multi-product
company with profit responsibility for its range of products. Each division
usually has a complete range of the main functions such as finance, operations
and marketing.
Double loop learning. The first
loop of learning checks performance against expected norms and adjusts
where necessary. The second, more fundamental loop re-appraises whether
the expected norms were appropriate in the first place.
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E
Economic
rent. Any excess that a factor earns over the minimum amount needed
to keep that factor in its present use.
Economies of scale. The extra
cost savings that occur when higher volume production allows unit costs
to be reduced.
Economies of scope. The extra
cost savings that are available as a result of separate products sharing
some facilities.
Emergent change. The whole process
of developing a strategy whose outcome only emerges as the strategy proceeds.
There is no defined list of implementation actions in advance of the strategy
emerging. See also Prescriptive change.
Emergent corporate strategy.
A strategy whose final objective is unclear and whose elements are developed
during the course of its life, as the strategy proceeds. See also Prescriptive
corporate strategy.
Empowerment. The devolution of power
and decision making responsibility to those lower in the organisation.
Environment. Everything and everyone
outside the organisation: competitors, customers, government, etc. Note
that ‘green’ environmental issues are only one part of the overall definition.
See also Changeability of the environment and Predictability of the environment.
E-S-P Paradigm. This analyses the
role of government in strategy development along three dimensions: Environment,
System and Policies.
Ethics. The principles that encompass the
standards and conduct that an organisation sets itself in its dealings
within the organisation and with its external environment.
Expansion method matrix.
Explores in a structured way the methods by which the market opportunities
associated with strategy options might be achieved.
Experience curve. The relationship
between the unit costs of a product and the total units ever produced
of that product, plotted in graphical form. Note that the units are cumulative
from the first day of production.
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F
Fit.
The consistencies, coherence and congruence of the organisation.
Floating and fixed exchange
rates. Currency exchange rates, such as the rate of exchange between
the US$ and the German DM, are said to float when market forces determine
the rate depending on market demand. They are fixed when national governments
(or their associated national banks) fix the rates by international agreement
and intervene in international markets to hold those rates.
Focus strategy. See Niche marketing.
Formal organisation structures.
Those structures formally defined by the organisation in terms of reporting
relationships, responsibilities and tasks. See also Informal organisation
structures.
Forward integration. When an
organisation acquires the activities of its outputs, e.g. manufacturer
into distribution and transport.
Functional organisation
structure. A structure in which the different functions of the
organisation, such as finance and operations, report to the chief executive.
Used in organisations with a limited product range.
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G
Game-based
theories of strategy. Focus on the decisions of the organisation
and its competitors as strategy is developed - the game - and the interactions
between the two as strategic decisions are taken.
Game theory. Structured methods of bargaining
with and between customers, suppliers and others, both inside and outside
the organisation.
Gearing ratio. The ratio of debt finance
to the total shareholders’ funds.
General Agreement
on Tariffs and Trade (GATT). International agreement designed
to encourage and support world trade.
Generic strategies. The three
basic strategies of cost leadership, differentiation and focus (sometimes
called niche) which are open to any business.
Global and national
responsiveness matrix. This links together the extent of the need
for global activity with the need for an organisation to be responsive
to national and regional variations. These two areas are not mutually
exclusive.
Global product company. This
will often involve the global integration of manufacturing and one common
global brand. There is only limited national variation. See also Transnational
product company.
Growth-share matrix. See Portfolio
matrix.
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H
Hierarchy
of resources. The four levels of resource that are the full resources
of the organisation. The distinguishing feature of the higher levels
is an increased likelihood of sustainable competitive advantage.
History. See Strategy as history.
Holding company organisation
structure. Used for organisations with very diverse product ranges
and share relationships. The headquarters acts only as a banker, with
strategy largely decided by the individual companies. Sometimes shortened
to H-Form structure.
Horizontal integration. When
an organisation moves to acquire its competitors or make some other form
of close association.
Human resource audit. An examination
of the organisation’s people and their skills, backgrounds and relationships
with each other.
Human resource-based
theories of strategy. Emphasise the importance of the people element
in strategy development. See also Emergent corporate strategy, Negotiation-based
and Learning-based strategic routes forward.
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I
Implementation.
The process by which the organisation’s chosen strategies are put into
operation.
Informal organisation structures.
Those structures, often unwritten, that have been developed by the history,
culture and individuals in an organisation to facilitate the flow of information
and allocate power within the structure. See also Formal organisation
structures.
Innovation. The generation and exploitation
of new ideas. The process moves products and services, human and capital
resources, markets and production processes beyond their current boundaries
and capabilities.
Intangible resources. The organisation’s
resources that have no physical presence but represent real benefit to
the organisation, like reputation and technical knowledge. See also Tangible
resources and Organisational capability.
Intellectual capital
of an organisation. The future earnings capacity that derives
from a deeper, broader and more human perspective than that described
in the organisation’s financial reports.
International culture. Collective
programming of the mind that distinguishes one human group from another.
International Monetary
Fund (IMF). International body designed to lend funds to countries
in international difficulty and to promote trade stability through co-operation
and discussion.
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J
Just-in-time.
System that ensures that stock is delivered from suppliers only when it
is required, with none being held in reserve.
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K
Kaizen.
The process of continuous improvement in production and every aspect of
value added (Japanese).
Kanban. Control system on the factory floor
to keep production moving (Japanese).
Key factors for success.
Those resources, skills and attributes of the organisations in an industry
that are essential to deliver success in the market place. Sometimes called
critical success factors.
Knowledge. A fluid mix of framed experience,
values, contextual information and expert insight. Note that knowledge
is not ‘data’ or ‘information’.
Knowledge management. The retention,
exploitation and sharing of knowledge in an organisation that will deliver
sustainable competitive advantage.
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L
Laissez-faire
policy. Describes the policies of a government relying on an approach
of non-interference and free-market forces to manage the economy of a
country. See also Dirigiste policy.
Leadership. The art or process of influencing
people so that they will strive willingly and enthusiastically towards
the achievement of the group’s mission.
Learning. The strategic process of developing
strategy by crafting, experimentation and feedback. Note that learning
in this context does not mean rote or memory learning.
Learning-based strategic
route forward. Emphasises learning and crafting as aspects of
the development of successful corporate strategy. See also Human resource-based
theories of strategy.
Leveraging. The exploitation by an organisation
of its existing resources to their fullest extent.
Life cycle. Plots the evolution of industry
annual sales over time. Often divided into distinct phases - introduction,
growth, maturity and decline - with specific strategies for each phase.
Logical incrementalism. The
process of developing a strategy by small, incremental and logical steps.
The term was first used by Professor J B Quinn.
Logistics. The science of stockholding,
delivery and customer service.
Loose-tight principle. The
concept of the need for tight central control by headquarters, while allowing
individuals or operating subsidiaries loose autonomy and initiative within
defined managerial limits.
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M
Macroeconomic
conditions. Economic activity at the general level of the national
or international economy.
Market equilibrium. The state
that allows competitors a viable and stable market share accompanied by
adequate profits.
Market options matrix. Identifies
the product and the market options available to the organisation, including
the possibility of withdrawal and movement into unrelated markets.
Market segmentation. The identification
of specific groups (or segments) of customers who respond to competitive
strategies differently from other groups. See also Market positioning.
Market positioning. The choice of differential
advantage possessed by an organisation that allows it to compete and survive in
a market place. Often associated with competition and survival in a segment of
a market. See Market segmentation.
Mass marketing. One product is sold
to all types of customer.
Matrix organisation structure.
Instead of the product-based multi-divisional structure, some organisations
have chosen to operate with two overlapping structures. One structure
might typically be product-based, with another parallel structure being
based on some other element such as geographic region. The two elements
form a matrix of responsibilities. Strategy needs to be agreed by both
parts of the matrix. See also Multi-divisional organisation structure.
Milestones. Interim indicators of progress
during the implementation phase of strategy.
Minimum intervention. The principle
that managers implementing strategy should only make changes where they
are absolutely necessary.
Mission statement. Defines the
business that the organisation is in or should be in against the values
and expectations of the stakeholders.
Monopoly rents. Economic rent deriving
from the markets in which the organisation operates. See also Economic
rent.
Multi-divisional
organisation structure. As the product range of the organisation
becomes larger and more diverse, similar parts of the product range are
grouped together into divisions, each having its own functional management
team. Each division has some degree of profit responsibility and reports
to the headquarters, which usually retains a significant role in the development
of business strategy. Sometimes this is shortened to M-Form structure.
See also Matrix organisation structure.
Multinational enterprise (MNE).
One of the global companies that operate in many countries around the
world, for example, Ford, McDonald’s and Unilever.
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N
Negative-sum game. Actions of each
party undermine both themselves and their opponents.
Negotiation-based
strategic route forward. Has both human resource and game theory
elements. Human resource aspects emphasise the importance of negotiating
with colleagues in order to establish the optimal strategy. Game theory
aspects explore the consequences of the balance of power in the negotiation
situation.
Net cash flow. Approximately, the sum
of pre-tax profits plus depreciation, less the capital to be invested
in a strategy.
Niche marketing. Concentration on
a small market segment with the objective of achieving dominance of that
segment.
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O
Objectives
or goals. State more precisely than a mission statement what is to be
achieved and when the results are to be accomplished. They may be quantified.
Oligopoly. A market dominated by a small
number of firms.
Organisational capability.
The skills, routines, management and leadership of its organisation. See
also Tangible resources and Intangible resources.
Organisational culture. The
style and learned ways that govern and shape the organisation’s people
relationships.
Outsourcing. The decision by an organisation
to buy in products or services from outside, rather than make them inside
the organisation.
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P
Paradigm.
The recipe or model that links the elements of a theory together and shows, where
possible, the nature of the relationships.
Parenting. The special relationships and
strategies pursued at the headquarters of a diversified group of companies.
Payoffs. The results of particular game-plays.
See also Game theory, Zero-sum game, Co-operative game, Negative-sum game.
PESTEL analysis. Checklist of the
political, economic, socio-cultural, technological, environment and legal
aspects of the environment.
Plans or programmes. The specific
actions that follow from the strategies. Often a step-by-step sequence
and timetable.
Portfolio matrix. Analyses the range
of products possessed by an organisation (its portfolio) against two criteria:
relative market share and market growth. It is sometimes called the growth-share
matrix.
Predictability of the environment.
The degree to which changes in the environment can be predicted.
Prescriptive change. The implementation
actions that result from the selected strategy option. A defined list
of actions is identified once the strategy has been chosen. See also Emergent
change.
Prescriptive corporate strategy.
A strategy whose objective has been defined in advance and whose main
elements have been developed before the strategy commences. See also Emergent
corporate strategy, where such elements are crafted during the development
of the strategy and not defined in advance.
Pressure points for influence.
The groups or individuals that significantly influence the direction of
the organisation, especially in the context of strategic change. Note
that they may have no formal power or responsibility.
Primary demand. Demand from customers
for themselves or their families. See also Derived demand.
Process of corporate strategy.
How the actions of corporate strategy are linked together or interact
with each other as strategy unfolds.
Profit-maximising
theories of strategy. Emphasise the importance of the market place
and the generation of profit. See also Prescriptive corporate strategy.
Profitability. The ratio of profits
from a strategy divided by the capital employed in that strategy. It is
important to define clearly the elements in the equation, e.g. whether
the profits are calculated before or after tax and before or after interest
payments. This is often called the Return on capital employed, shortened
to ROCE.
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Q
Quota.
A maximum number placed by a nation state on the goods that can be imported
into the country in any one period. The quota is defined for a particular
product category.
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R
Reputation.
The strategic standing of the organisation in the eyes of its customers.
Resource allocation. The process
of allocating the resources of the organisation selectively between competing
strategies according to their merit.
Resource-based view. Stresses
the importance of resources in delivering the competitive advantage of
the organisation. See also Prescriptive corporate strategy.
Retained profits. The profits that
are retained in an organisation rather than distributed to shareholders.
These can be used to fund new strategies.
Reward. The result of successful strategy,
adding value to the organisation and the individual.
Ricardian rents. Economic rent deriving
from the resources of the organisation. See also Economic rent.
ROCE. See Profitability.
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S
Scenario.
Model of a possible future environment for the organisation, whose strategic
implications can then be investigated.
Schumpeterian rents. Economic
rent deriving from new and innovatory products and services that allow
the organisation to charge significantly above the costs of production.
See also Economic rent.
Seven S Framework. The seven elements
of super-ordinate goals: strategy, structure, systems, skills, style and
staff. In some later versions, the first item was replaced by share values.
Share issues. New shares in an organisation
can be issued to current or new shareholders to raise finance for new
strategy initiatives.
Shareholder value added.
The difference between the return on capital and the cost of capital multiplied
by the investment made by the shareholders in the business.
Socio-cultural theories
of strategy. Focus on the social and cultural dimensions of the
organisation in developing corporate strategy. See also Prescriptive
corporate strategy.
Split. The variety of techniques that can be
employed to develop and sustain the autonomy and diversity of large organisations.
Stakeholders. The individuals and groups
who have an interest in the organisation and, therefore, may wish to influence
aspects of its mission, objectives and strategies.
Strategic business unit (SBU). The
level of a multi-business unit at which the strategy needs to be developed. The
unit has the responsibility for determining the strategy of that unit. Not necessarily
the same as a division of the company: there may be more than one SBU within a
division and SBUs may combine elements from more than one division.
Strategic change. The proactive
management of change in organisations in order to achieve clearly defined
strategic objectives. See also Prescriptive change and Emergent change.
Strategic fit. The matching process
between strategy and organisational structure.
Strategic groups. Groups of firms
within an industry that follow the same strategies or ones that have similar
dimensions and which compete closely.
Strategic planning. A formal planning
system for the development and implementation of the strategies related
to the mission and objectives of the organisation. It is no substitute
for strategic thinking.
Strategic space. The identification
of gaps in an industry representing strategic marketing opportunities.
Strategies. The principles that show
how an organisation’s major objectives or goals are to be achieved over
a defined time period. Usually confined only to the general logic for
achieving the objectives.
Strategy as history. The view
that strategy must, at least in part, be seen as a result of the organisation’s
present resources, its past history and its evolution over time.
Style theory of leadership.
Suggests that individuals can be identified who possess a general style
of leadership that is appropriate to the organisation. See also Contingency
theory of leadership and Trait theory of leadership.
Survival-based theories
of strategy. Regard the survival of the fittest in the market
place as being the prime determinant of corporate strategy. See also Emergent
corporate strategy.
Sustainable competitive
advantage. An advantage over competitors that cannot be easily
imitated. Such advantages will generate more value than competitors have.
SWOT analysis. An analysis of the strengths
and weaknesses present internally in the organisation, coupled with the
opportunities and threats that the organisation faces externally.
Synergy. The combination of parts of a business
such that the sum is worth more than the individual parts - often remembered
as ‘2_1_2_5_5’.
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T
Tangible
resources. The physical resources of the organisation like plant
and equipment. See also Intangible resources and Organisational capability.
Target pricing. Sets the price of
goods and services primarily on the basis of the competitive position
of the organisation, the profit margin required and, therefore, the target
costs that need to be achieved. See also Cost-plus pricing.
Targeted marketing. See Market
segmentation.
Tariffs. Taxes on imported goods imposed
by a nation state. They do not stop imports into the country but make
them more expensive.
Taylorism. Named after F W Taylor (1856-1915).
The division of work into measurable parts, such that new standards of
work performance could be defined, coupled with a willingness by management
and workers to achieve these. It fell into disrepute when it was used
to exploit workers in the early twentieth century. Taylor always denied
that this had been his intention.
Tiger economies. Countries of South-East
Asia exhibiting exceptionally strong economic growth over the last 20
years, including Singapore, Malaysia, Hong Kong, Thailand and Korea.
Trade barriers. The barriers set up
by governments to protect industries in their own countries.
Trade block. Agreement between a group
(or block) of countries designed to encourage trade between those countries
and keep out other countries.
Trait theory of leadership.
Argues that individuals with certain characteristics (traits) can be
identified who will provide leadership in virtually any situation. See
also Contingency theory of leadership and Style theory of leadership.
Transcend. Given the inevitable complexities
of corporate strategy, some strategists argue that every organisation
needs an approach to management that transcends these problems and copes
with such difficulties.
Transfer price. The price for which
one part of an organisation will sell its goods to another part in a multi-divisional
organisation.
Transnational product company.
This usually involves some global integration of manufacturing coupled
with significant national responsiveness to national or regional variations
in customer demand. See also Global product company.
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U
Uncertainty-based
theories of strategy. Regard prediction of the environment as
being of little value and therefore long term planning as having little
value. See also Emergent corporate strategy.
United
Nations Conference on Trade and Development (UNCTAD). A trade
body set up to highlight the trading concerns of the developing nations
of the world and promote their interests.
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V
Value
chain. Identifies where the value is added in an organisation
and links the process with the main functional parts of the organisation.
It is used for developing competitive advantage because such chains tend
to be unique to an organisation.
Value system. The wider routes in an
industry that add value to incoming supplies and outgoing distributors
and customers. It links the industry value chain to that of other industries.
It is used for developing competitive advantage.
Vertical integration. The backward
acquisition of raw material suppliers and/or the forward purchase of distributors.
Vision. A challenging and imaginative picture
of the future role and objectives of an organisation, significantly going
beyond its current environment and competitive position. It is often associated
with an outstanding leader of the organisation.
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W
Weighted
average cost of capital. The combination of the costs of debt and equity
capital in proportion to the capital structure of the organisation. See also
Cost of capital.
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X
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Y
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Z
Zero-sum
game. Has no pay-off because the gains of one player are negated
by the losses of another.
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