Glossary

Differences in politics, laws, institutions and ties (colonial, trade agreements) between countries.

Pre-contract: the agent knows more than the principal; remedy screening, signalling, due diligence.

The manager (agent) does not act in the interest of the owner (principal), for example through empire building.

Business with no fit on opportunities and with misfit on KSFs: divest.

Several different futures under high uncertainty.

Matrix of growth directions based on products/services and markets: market penetration, product development, market development and diversification.

The degree to which an investment is only valuable within one specific relationship; raises the risk of opportunism.

A buyer takes over the activities of its supplier.

Vertical integration towards inputs and suppliers.

Business with no fit on opportunities and no misfit on KSFs; no harm done, but no added value.

Transaction costs of negotiating and agreeing the terms.

Obstacles for entrants: economies of scale, switching costs, capital requirements, access to distribution, incumbency advantages.

Portfolio matrix on market growth and relative market share: star, question mark, cash cow and dog.

A network of firms that jointly create value and complement each other's offerings.

Strategy about competing in a particular industry or market.

How an organisation creates and delivers value and captures part of it; not a synonym for strategy.

A diagnostic tool with nine building blocks to describe a business model.

The ability of buyers to push prices down or force better terms.

Ghemawat: Cultural, Administrative, Geographic and Economic distance between countries.

Skills with which an organisation deploys and combines its resources (what we do well).

BCG category: high share in a low-growth market; generates cash invested elsewhere.

Source of inimitability: unclear cause-and-effect between a resource or capability and success; exists as characteristic ambiguity and linkage ambiguity.

Unclear what the distinguishing resource or capability exactly is (e.g. embedded in culture or tacit knowledge).

Problem that fragmented owners each have too little incentive to monitor managers.

Why customers choose you: a value proposition plus a unique internal set-up to deliver it.

VRIO outcome when the resource or capability is not valuable: below-normal performance.

Drivers from competition: multipoint competition, interdependence between countries and clusters.

All firms in the same industry; they are not automatically rivals.

Firms whose offerings increase the value of your product.

Source of inimitability: many internal and external linkages between activities, people and partners make imitation hard.

Stable, self-reinforcing state of mutual defection between states (tariffs, investment restrictions, breaking agreements).

Unrelated diversification: businesses without clear overlap; often distrusted because the parent's added value is unclear.

Stable, self-reinforcing state of cooperation (open markets, honouring agreements, welcoming foreign investment).

Competing and cooperating at the same time.

Rules and bodies (board, supervisory board, shares and bonus) that make managers act in the owners' interest.

Strategy about the scope and portfolio of the whole corporation.

The corporate centre above the business units; must add more value than it costs.

Strategy at the level of the whole organisation: which businesses to be in and what value the corporate centre adds.

Drivers from cost advantages: scale economies, global sourcing, bulk purchase, country-specific differences, favorable logistics.

The firm with the lowest costs; not necessarily the lowest price.

Systematically the lowest costs in the industry, with sufficient quality.

Schumpeter: by creating something new the entrepreneur destroys something old.

Corporate social responsibility: ethical behaviour and contributing to the economy and society beyond the legal minimum.

Differences in language, religion and social norms between countries; can lead to culture clash or cultural enrichment.

Model of what sustains culture: paradigm with stories, symbols, rituals & routines, power structures, organisational structures and control systems.

The part of the intended strategy that gets realised.

Being unique on a dimension customers value, making a price premium possible.

The moment an existing equilibrium changes through shifts in power, nationalism or changing beliefs.

Distinctive resources and capabilities are the source of competitive advantage (winners): valuable to customers and hard to imitate.

Fairness of the outcome: equality or equity.

New products in new markets; related (with overlap) or unrelated (conglomerate).

Structure per region or product (M-form); risk of duplication and competition for resources.

Management's shared mindset (Prahalad and Bettis) about how to run a business; determines which diversification the centre can handle.

An organisation's ability to renew and recreate its resources and capabilities for a changing environment (Teece); according to Eisenhardt and Martin specific routines.

Signals showing that a scenario is becoming reality.

Lower cost per unit because fixed costs are spread over more volume.

Advantages from using the same resources or capabilities for multiple activities (tangible or intangible).

The firm that coordinates the partners in a business ecosystem.

Strategy that arises from daily decisions and learning, without a plan.

Transaction costs of monitoring and enforcing compliance with agreements.

CSR stance: responsible behaviour out of sound business sense; supportive leadership, reactive mode.

Someone who recognises opportunities and creates something new with resources; a founder is not automatically an entrepreneur.

The way a firm enters or expands in a foreign market: exporting, licensing, franchising, greenfield, joint venture or M&A.

One of the four geopolitical consequences for MNEs: equal treatment of foreign and local firms (national treatment, MFN).

Obstacles that keep firms in an industry even when profits are low; they strengthen rivalry.

Cost per unit falls as a firm gains more experience (cumulative volume).

Goold & Campbell: low central influence and strict accountability on figures.

Porter's model for industry analysis (module 2); about the market environment.

Porter's model to explain industry profitability: threat of entry, threat of substitutes, buyer power, supplier power and rivalry.

Targeting a narrow segment, with a cost advantage (cost focus) or distinctiveness (differentiation focus).

Weighing forces for and against change; if the balance is negative, first strengthen the forces for change.

Predicting outcomes such as revenue or growth.

CSR stance: triple bottom line, champion leadership, proactive mode, partnership.

A supplier takes over the activities of its buyer.

Vertical integration towards buyers, distribution and customers.

A free basic version with a paid upgrade.

Strategies of functions such as R&D, IT and marketing.

Stakeholders with low power and high attention: provide information; they can wake a sleeping giant.

Comparison of desired and actual performance.

Porter's basic options to outperform the average player: cost leadership, differentiation and focus.

Porter's cost leadership and differentiation; distinctive resources and capabilities make them possible.

An implicit assumption about the future, usually business as usual, that steers decisions.

Pressure to integrate activities across borders and steer them centrally for scale advantages (pressures for global integration).

Searching worldwide for the best suppliers, for lower cost, better quality or unique expertise.

Bartlett & Ghoshal: high integration pressure, low local pressure; standardisation and central planning.

Drivers from government policy: trade policies, technical standards and host government policies.

Building a foreign operation yourself from scratch (DIY): slow, but with cultural consistency.

Business with high fit with parenting opportunities and no misfit with KSFs; the core of the portfolio.

Founders leave a lasting imprint on the organisation.

A group of firms that in essence supply the same product or service.

Analysis of the attractiveness of an industry in six steps, from definition to positioning.

The stages development, growth, shake-out, maturity and decline an industry goes through.

Consolidating a fragmented industry by acquiring many small players (Huizenga, Waste Management).

Moments when a development changes direction or pace.

Third VRIO criterion: competitors cannot imitate, obtain or substitute the resource or capability, or only at high cost.

Costs of raw materials, labour and other purchases; a cost driver.

One of the four geopolitical consequences for MNEs: alignment of standards and rules, affecting transaction costs.

The strategy management planned.

The activities, structure and resources that together make the value proposition possible.

The centre allocates capital better than the external market (miniature capital market), thanks to better information and lower transaction costs.

Bartlett & Ghoshal: low pressure for integration and local adaptation; the product is largely exported unchanged, usually a temporary phase.

Yip's four groups of factors (market, cost, competitive, government) that determine how strong the incentive to internationalise is.

One of the four geopolitical consequences for MNEs: protection of property rights and investments.

An alliance in which partners set up a new unit together (equity joint venture); fast, shares losses, risk of a learning race.

Environment factors with the biggest impact on the future of an industry.

Stakeholders with high power and high attention: cultivate support.

Eight steps for change: urgency, coalition, vision, communicate, empower, short-term wins, consolidate, institutionalise.

CSR stance: only comply with the law; peripheral leadership, defensive mode, unilateral relation.

In an alliance, partners try to learn as much as possible from each other; the one that is done ends the alliance and leaves the other behind.

Corporate level, business level and functional strategies.

The extra costs a foreign firm has compared with local competitors (unfamiliarity, discrimination, home-country geopolitics).

Unclear which activities and processes are linked in what order and configuration.

Pressure to adapt products, services and processes to local conditions (pressures for local responsiveness).

Value-destroying driver: diversifying for personal motives, such as status or pay that rises with firm size.

Delivering existing products to new markets: new users or new geographies.

Internationalisation drivers from the market: similar customers, global customers and transferable marketing.

One of the four geopolitical consequences for MNEs: access to a market.

The market in which companies are taken over; a parent without parenting advantage risks being broken up.

Growth with existing products in existing markets; limited by retaliation, legal and economic constraints.

Diversification driver: power through breadth, including mutual forbearance, cross-subsidising, cheaper borrowing and bulk buying.

A group of customers with similar needs within a market.

Structure with two bosses; loyalty conflicts and high costs.

The stage with saturated demand, higher barriers, standardisation and more buyer power.

Large, long-running developments that affect many sectors.

The core business of the organisation.

Obstacles to moving from one strategic group to another.

Post-contract: the agent behaves differently after signing; remedy monitoring and incentives.

Bartlett & Ghoshal: high local pressure, low integration pressure; autonomous country managers and little mutual learning.

A platform that connects several user groups (for example creators, viewers and advertisers).

Firms compete with each other in several products or markets at the same time and retaliate in a different market (Coca-Cola and Pepsi).

Competitors facing each other in multiple markets attack each other less for fear of retaliation elsewhere.

The value of a product rises as more people use it.

Environment factors outside the market: government, society, nature, rules.

The quantified, time-bound goal in a strategy statement.

Dunning's eclectic paradigm: Ownership, Location, Internalization; the advantages that must offset the liabilities of foreignness.

The risk that a party pursues its own interest at the other's expense, especially with few alternatives, complexity and asset specificity.

The taken-for-granted assumptions and behaviours in an organisation.

Fourth VRIO criterion: structure, processes and systems are arranged so the organisation actually exploits the potential.

Do the internal analysis from the context too: unique for which customers, markets and competitors?

Having an external party perform an activity instead of doing it in-house.

Parenting role with a large centre that uses its own central capabilities to develop the business units.

The corporate centre is the best owner of a business: it performs better under this parent than under another.

Campbell's matrix classifying businesses by fit with parenting opportunities and misfit with key success factors.

Performing at a level comparable to the average competitor (competitive parity).

Resources and capabilities result from a unique history of decisions and outcomes and therefore cannot be copied.

Political, Economic, Social, Technological, Ecological, Legal: analysis of the macro-environment.

Model of location advantages: factor conditions, demand conditions, related and supporting industries, firm strategy structure and rivalry.

Parenting role with a small centre, emphasising investing and intervening (e.g. private equity).

Classification of stakeholders on power and attention: key players, sleeping giants, gadflies and a group needing minimal effort.

A higher price customers are willing to pay for a distinctive offering.

The ratio between price and performance of a substitute relative to the current product.

Conflict between large and small shareholders.

Fairness of the process; three E's: Engagement, Explanation, clarity of Expectations.

Delivering new products or services to existing markets; risks lie in new resources, capabilities and project management.

Product and process design that lowers costs; a cost driver.

Why an organisation exists.

The value an organisation wants to create for its stakeholders, financial and non-financial; it must be consistent with the culture.

A range of outcomes with probabilities.

Second VRIO criterion: only one organisation or a few others possess the resource or capability (e.g. patent, unique location).

Prescriptive view: top management analyses, plans and executes.

A business model where the base product is cheap and refills or accessories generate the profit.

What the organisation actually does: deliberate plus emergent strategy.

Dynamic capability: renewing and rearranging the organisation, capabilities and investments to exploit the opportunity at scale.

The view that a firm's success is explained by its distinctive resources and capabilities, not only by its industry.

Assets an organisation owns or has access to (what we have): physical, financial and human resources.

Competitors' response that hits back at a growing player, a constraint on market penetration.

The degree to which existing players in an industry actually fight each other for customers; one of the Five Forces.

Stable, repeatable ways of working; according to Eisenhardt and Martin dynamic capabilities are specific, identifiable routines (e.g. acquisition routines at Cisco).

Test for strategic options: Suitability, Acceptability, Feasibility.

Developing alternative future stories based on key drivers for change.

Where the organisation is active: customers, offering, geography, vertical integration. Also what it does not do.

Transaction costs of finding a suitable party to transact with.

Dynamic capability: actually addressing a sensed opportunity with new products, processes or activities.

Balogun & Johnson: employees give meaning to change themselves; communication is not the same as understanding.

Dynamic capability: continuously scanning the environment and spotting opportunities or threats (e.g. R&D, market research).

The stage in which growth levels off and weak players leave the industry.

CSR stance: aiming at societal change; visionary leadership, defining mode.

One expected outcome, for example 5% growth.

Stakeholders with high power but low attention: keep satisfied.

Capabilities embedded in culture and people; hard to integrate in acquisitions and alliances.

People and groups that the organisation depends on and that depend on it (Freeman); economic, social/political, technological, community and internal.

The organisation changes more slowly than its environment; phases: incremental change, strategic drift, flux, transformation or death.

Organisations within an industry with similar strategic characteristics (scope and resource commitment).

Goold & Campbell: high central influence and lenient accountability of the business unit.

The long-term direction of an organisation, taking into account its internal organisation and external environment.

A short summary of the strategy (about 35 words) with an objective, scope and competitive advantage.

Diversification driver: applying the corporate management's capabilities to other businesses too.

The ability of suppliers to push prices up or force worse terms.

VRIO outcome when valuable, rare, inimitable and supported by the organisation: an advantage that lasts.

Costs (money, time, risk) for a customer to change supplier.

Confrontation of internal strengths and weaknesses with external opportunities and threats; the goal is to generate strategic options.

Added value because businesses together achieve more than apart (Disney and Marvel).

Parenting role with a large centre that stimulates cooperation between business units.

Circular reasoning: explaining success by 'good dynamic capabilities' and inferring those from the success. Eisenhardt and Martin's critique of the earlier literature.

VRIO outcome when valuable and rare but not inimitable: an advantage that disappears once competitors imitate.

The likelihood that new entrants enter the industry; depends on barriers to entry.

The threat of products or services from outside the industry that meet the same need.

Framework that groups activities by time: defend the core, build new businesses, explore options.

Threshold resources and capabilities are the minimum needed to compete at all (qualifiers); they give parity, not advantage.

Extension of SWOT in which each box yields options for a combination of internal and external factors (e.g. strengths x opportunities).

Williamson's theory: the choice between market and internal organisation depends on transaction costs, with opportunism as the core risk.

Costs of using the market: search costs, bargaining costs and enforcement costs (Coase).

Temporary: in fast-changing environments competitive advantage is transient, so build a portfolio with a pipeline of initiatives.

Bartlett & Ghoshal: high pressure on both axes; central where possible, local where necessary, with learning in both directions.

Choice factor for entry mode: how uncertain the market or the outcome is.

The part of the intended strategy that is not realised.

Choice factor for entry mode: how quickly the firm needs the market or capabilities.

First VRIO criterion: delivers value to customers and helps seize opportunities or neutralise threats, at acceptable cost.

The value the customer receives and why they buy.

Business that fits the parenting opportunities but misfits the KSFs: it looks attractive but the parent cannot deliver the success factors.

Bringing activities from the chain before or after your own step inside the organisation: backward or forward integration.

The desired future picture of the organisation.

Test with four criteria: Value, Rarity, Inimitability, Organisational support. All four are needed for sustained competitive advantage.

Early, faint indications of a possible change.

Barnard: the range of instructions an employee carries out without objection.