Key terms

Question 1

Strategic competitiveness

Answer 1

achieved when a firm successfully formulates and implements a value creating strategy

Question 2

Strategy

Answer 2

set of commitments and actions designed to exploit core competencies and gain a competitive advantage

Question 3

Competitive advantage

Answer 3

achieved when a firm implements a strategy that creates superior value for customers and that competitors cannot duplicate

Question 4

Above-average returns

Answer 4

returns in excess of what an investor expects to earn from other investments with a similar level of risk

Question 5

Resources

Answer 5

inputs into a firm’s production process

Question 6

Capability

Answer 6

a combination of resources that perform a task

Question 7

Core competencies

Answer 7

capabilities that serve as a source of competitive advantage

Question 8

Vision

Answer 8

what the firm wants to be and ultimately achieve

Question 9

Mission

Answer 9

specifies the businesses in which the firm intends to compete and the customers it intends to serve

Question 10

Stakeholders

Answer 10

any individuals/groups that can affect the firm’s vision and mission and are affected by the firm’s strategic outcomes

Question 11

Competitor intelligence

Answer 11

the set of data to better understand and anticipate competitors’ objectives, strategies, assumptions and capabilities

Question 12

Complementors

Answer 12

companies that sell complementary goods or services

Question 13

Outsourcing

Answer 13

the purchase of a value-creating activity or a support function activity from an external supplier

Question 14

Business-level strategy

Answer 14

an integrated set of commitments and actions the firm uses to gain a competitive advantage in specific product markets (differentiate from competitors)

Question 15

Competitors

Answer 15

firms in the same market, offering similar products, targeting similar customers

Question 16

Competitive rivalry

Answer 16

set of actions and responses among firms

Question 17

Competitive behaviour

Answer 17

set of actions and responses a firm takes to build its competitive advantage

Question 18

Multimarket competition

Answer 18

competing in several markets

Question 19

Competitive dynamics

Answer 19

all competitive behaviours

Question 20

Strategic action/response

Answer 20

involves a significant commitment of resources and difficult to implement and reverse

Question 21

Tactical action/response

Answer 21

to fine-tune a strategy, involves fewer resources and relatively easy to implement and reverse

Question 22

Corporate-level strategy

Answer 22

actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets

Question 23

Transaction costs

Answer 23

costs associated with economic exchange

Question 24

Bounded rationality

Answer 24

utility maximizing but constrained by cognitive limits

Question 25

Opportunism

Answer 25

self-interest with guile

Question 26

Appropriability

Answer 26

determines risk of knowledge leakage

Question 27

Corporate-level core competencies

Answer 27

complex sets of resources and capabilities that link different businesses, primarily though managerial and technological knowledge, experience and expertise

Question 28

Hubris

Answer 28

overestimation of in-house skills

Question 29

Intertia and rigidity

Answer 29

LOOK THIS UP

Question 30

Multipoint competition

Answer 30

when two or more diversified firms simultaneously compete in the same markets

Question 31

Coopetition

Answer 31

competitors collaborating through e.g., alliances

Question 32

Vertical integration

Answer 32

when a company produces its own inputs (backward) or owns it own source of output distribution (forward)

Question 33

Financial economies

Answer 33

cost savings through improved allocations of financial resources

Question 34

Restructuring

Answer 34

a strategy through which a firm changes its set of businesses or its financial structure

Question 35

Corporate governance

Answer 35

the set of mechanisms used to manage the relationship among stakeholders and determine the strategic direction of organisations

Question 36

Agency costs

Answer 36

sum of costs because governance mechanisms cannot guarantee total compliance by the agent

Question 37

Ownership concentration

Answer 37

defined by the number of large-block shareholders and the total percentage of shares they hold

Question 38

Institutional owners

Answer 38

financial institutions that control large-block shareholder positions

Question 39

Board of directors

Answer 39

group of elected people whose responsibility is to act in the owners’ best interest by monitoring and controlling top level management

Question 40

Executive compensation

Answer 40

governance mechanisms that aligns the interests of managers and owners through salaries, bonuses and long-term incentives such as stock awards and options

Question 41

Market for corporate control

Answer 41

external governance mechanism that is active when a firm’s internal governance mechanisms fail