BA9210- STRATEGIC MANAGEMENT

1. Acquisition: Acquisition and merger are two commonly used ways to pursue various strategies, as is
internal realignment. An acquisition occurs when a large organization purchases (acquires) a smaller firm,
or vice versa. A merger occurs when two organizations of about equal size unite to form one enterprise.
When an acquisition or merger is not mutually desired by both parties, it can be called a takeover or hostile
takeover.
2. Alternative strategies: There are at least 13 alternative strategies that an enterprise can pursue: forward
integration, backward integration, horizontal integration, market penetration, market development, product
development, concentric diversification, conglomerate diversification, horizontal diversification, joint venture,
retrenchment, divestiture, and liquidation.
3. Annual objectives: Annual objectives are short-term milestones that organizations must achieve in order
for long-term objectives to be reached. Annual objectives should be measurable, consistent, reasonable,
challenging, clear, communicated throughout the organization, characterized by an appropriate time
dimension, and accompanied by commensurate rewards and sanctions.
4. Artificial intelligence: Thinking computers; banks call AI neural networks, which mimics the circuitry of
brain cells by learning from its own mistakes.
5. Attractiveness scores: In a QSPM, attractiveness scores indicate the relative attractiveness of different
strategies, considering only a single internal or external factor. Attractiveness scores range from 1 (not
attractive) to 4 (very attractive).
6. Auditing Annually, organizations must have their financial records audited by certified public accountants.
In preparation for scrutiny by external auditors, many organizations have internal auditors who continually
monitor the firms financial practices.
7. Avoidance: Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, diffusion, and confrontation. The strategy of avoidance includes such actions as
ignoring the problem situation in hopes that the conflict will resolve itself or physically separating the
conflicting individuals (or groups) from each other.
8. Backward integration: This is a strategy of seeking ownership or increased control of a firms suppliers.
9. Benchmarking: Comparing different aspects of the firms operations and performance with leading
competitors in the industry
10. Bankruptcy: In some cases, bankruptcy can be an effective type of retrenchment strategy. Bankruptcy
can allow a firm to avoid major debt obligations and to void union contracts.
11. Board of directors: All publicly held firms have a board of directors. Members of boards of directors are
increasingly being held liable for organizational failure. As a result, boards of directors are becoming more
and more involved in the strategic-management process of organizations.
12. Boston Consulting Group (BCG) Matrix: The BCG Matrix graphically portrays differences among
divisions in terms of relative market share position and industry growth rate. The BCG Matrix allows a multi-
divisional organization to manage its portfolio of businesses by examining the relative market share position
and the industry growth rate of each division relative to all other divisions in the organization.
13. Business ethics: Individual and group conduct or actions that constitute and support human welfare in
organizations can be referred to as business ethics.
14. Business Periodicals Index: This is a valuable library publication that references or indexes magazine
and journal articles by subject.
15. Business portfolio Autonomous divisions (or profit centers) of an organization comprise what is called a
business portfolio.
16. Buying: As the second function of marketing, buying means obtaining the goods and services needed to
produce and sell a product or service. Buying consists of evaluating alternative suppliers, selecting the best
suppliers, arranging acceptable terms with suppliers, and procurement.
17. Capital budgeting: The investment function of finance, sometimes called capital budgeting, is the
allocation and reallocation of capital and resources to projects, products, assets, and divisions of an
organization.
18. Cash budget : Perhaps the most common type of financial budget is the cash budget. The financial
Accounting Standards Board in USA mandated in November 1987 that every publicly held company in
the United States issue an annual cash-flow statement in addition to the usual financial reports. Effective
July 15, 1988, the new statement must include all receipts and disbursements of cash in operations,
investments, and financing.
19. Cash cows: Divisions that are positioned in Quadrant III of the BCG Matrix have a high relative market
share position but compete in a low-growth industry. They are called cash cows because they generate
cash in excess of their needs. The divisions are milked.
20. Chief information officer (CIO): This is a position being established in firms to enable development of an
effective information system. The CIO is usually a manager who manages the overall external-audit
process.
21. Chief technology officer (CTO): This is a position being established in firms to enable development of an
effective information system. The CTO is more a technician, focusing on technical issues such as data
acquisitions, data processing, decision support systems, and software and hardware acquisition.
22. Combination strategy: Many, if not most, organizations pursue a combination of two or more strategies
simultaneously, but a combination strategy can be exceptionally risky if carried too far. A combination
strategy spreads organizational resources thin to the potential detriment of all strategies.
23. Competitive advantage: According to Michael Porter, competitive advantage can be gained through
sharing opportunities among a firms existing and potential business units. Porters five-forces model
addresses the means for gaining competitive advantage in organizations.
24. Competitive analysis: Competitive analysis includes gathering and assimilating information about
competitors, and then developing a Competitive Profile Matrix.
25. Competitive Profile Matrix Of all the external trends and events that affect a firms strategic position,
competitive forces are often considered to have the greatest impact. The Competitive Profile Matrix
identifies a firms major competitors and their strengths and weaknesses. It is part of the internal audit.
26. Competitive quadrant: The directional vector may point in the lower right or competitive quadrant of the
SPACE Matrix, indicating competitive-type strategies. Competitive strategies include backward, forward,
and horizontal integration, market penetration, market development, product development, and joint
venture.
27. Concentric diversification : This strategy focuses on adding new, but related, products or services.
28. Concern for employees: This is a mission statement component. Organizations are becoming more and
more sensitive to the needs of their employees and should articulate this in a formal mission statement.
29. Concern for public image This is a mission statement component. Organizations are becoming more
and more concerned about the natural environment, their public image, and should articulate this in a
formal mission statement.
30. Concern for survival, growth, and profitability: This is an important mission statement component. All
organizations strive for survival. Most organizations also strive for growth and profitability.
31. Conflict: Interdependency of objectives and competition for limited resources often leads to conflict.
Conflict can be defined as a disagreement between two or more parties on one or more issues.
32. Confrontation: Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, defusion, and confrontation. A confrontation approach is exemplified by exchanging
members of conflicting parties so that each can gain an appreciation of the others point of view, focusing
on major goals such as company survival, or holding a meeting whereby conflicting parties present their
views and work through their differences.
33. Conglomerate diversification: The strategy of adding new, unrelated products or services is called
conglomerate diversification.
34. Conservative quadrant: In the SPACE Matrix, the directional vector may point in the conservative or
upper left quadrant, which implies staying close to the firms basic competencies and not taking excessive
risks. Conservative-type strategies most often include market penetration, market development, product
development, and concentric diversification.
35. Consistency: A strategy should not present inconsistent goals and policies. Organizational conflict and
interdepartmental bickering are often symptoms of a managerial disorder, but these problems may also be
a sign of strategic inconsistency.
36. Contingency planning: Contingency plans can be defined as alternative actions that can be undertaken
if certain key events do not occur as expected. Only high-priority areas require the insurance of
contingency plans.
37. Cooperative arrangements: Besides joint ventures, other types of cooperative arrangements include
research and development partnerships, cross-distribution agreements, cross-licensing agreements, cross-
manufacturing agreements, and joint-bidding consortia.
38. Cooperative mutual gain strategies: Increasing numbers of firms are joining forces with other firms to
reap mutual benefits, but without forming a separate joint venture organization. These cooperative
arrangements are called cooperative mutual gain strategies or arrangements.
39. Cost/benefit analysis Three steps are required to perform a cost/benefit analysis: (1) compute the total
costs associated with a decision, (2) estimate the total benefits from the decision, and (3) compare the total
costs with the total benefits. As expected benefits exceed total costs, an opportunity becomes more
attractive.
40. Cost leadership: According to Michael Porter, generic types of strategies allow organizations to gain
competitive advantage from three different bases: cost leadership, differentiation, and focus. Cost
leadership emphasizes producing standardized products at very low per-unit cost for many consumers who
are price sensitive.
41. Creed statement: Sometimes called a creed statement, a statement of purpose, a statement of
philosophy, a statement of beliefs, a statement of business principles, or a statement defining our business,
a mission statement reveals the long-term vision of an organization in terms of what it wants to be and who
it wants to serve.
42. Cultural products: Cultural products include values, beliefs, rites, rituals, ceremonies, myths, stories,
legends, sagas, language, metaphors, symbols, heroes, and heroines. Cultural products represent a critical
lever that strategists can use to influence and direct strategy formulation, implementation, and evaluation
activities. If a firms strategies are supported by cultural products, managers can often implement changes
swiftly and easily.
43. Culture: Strategists should strive to preserve, emphasize, and build on aspects of an existing culture that
are supportive of proposed new strategies. Aspects of an existing culture that are antagonistic to proposed
strategies should be identified and changed when implementing new strategies. Substantial research
indicates that new strategies are often market driven and dictated by competitive forces, thus necessitating
altering culture rather than strategy in many cases.
44. Customer analysis: Examination and evaluation of consumer needs, desires, and wants is called
customer analysis. Customer analysis involves administering customer surveys, analyzing consumer
information, evaluating market positioning strategies, developing customer profiles, and determining
optimal market segmentation strategies.
45. Decision Stage: Stage 3 of the strategy-formulation framework is called the Decision Stage. The Decision
Stage selects strategies from among feasible alternatives. The Decision Stage is composed of a single
technique, the Quantitative Strategic Planning Matrix (QSPM).
46. Defensive quadrant; In a SPACE Matrix, the directional vector may be located in the lower left, or
defensive, quadrant, suggesting that the firm should focus on overcoming internal weaknesses and
avoiding external threats. Defensive-type strategies include retrenchment, divestiture, liquidation, and
concentric diversification.
47. Differentiation: According to Michael Porter, generic types of strategies allow organizations to gain
competitive advantage from three different bases: cost leadership, differentiation, and focus. Differentiation
refers to producing products and services that are considered unique industrywide and are directed to
consumers who are relatively price insensitive.
48. Director of Competitive Analysis: In recognition of the increasing importance and sophistication of
gathering and assimilating information about competitors, many organizations are adding a new position to
the organizational chart. This new position is often called Director of Competitive Analysis.
49. Diversification strategies: There are three types of diversification strategies: conglomerate
diversification, concentric diversification, and horizontal diversification.
50. Dividend decision: Dividend decisions concern issues such as the percentage of earnings paid to
stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock. Dividend
decisions determine the amount of funds that are retained in a firm compared to the amount paid out to
stockholders.
51. Divisional or decentralized structure: The divisional structure can be organized by geographic area, by
product or service, by customer, or by process. Within a divisional structure, functional activities are
performed centrally and in each separate division. A divisional structure is decentralized, with separate
profit centers reporting to corporate headquarters. As a small organization grows, it becomes increasingly
difficult to manage different products and services in different markets. Some form of divisional
structure generally becomes necessary to motivate employees effectively, control operations, and
compete successfully in diverse locations.
52. Divisional structure by customer: When a few major customers are of paramount importance and many
different services are provided to these customers, then a divisional structure by customer can be the most
effective way to implement strategies. This type of structure allows an organization to cater effectively to the
requirements of clearly defined customer groups.
53. Divisional structure by process: This decentralized type of structure is similar to a functional structure
because activities are organized according to the way work is actually performed. But in divisional structure,
as opposed to a functional structure, specific organizational units are accountable for profits and revenues.
54. Educative change strategy: This is an approach to implementing change, whereby information is
presented to convince people of the need for change. The disadvantage of an educative change strategy is
that the implementation process is slow and difficult. However, the level of commitment is higher and
resistance is lower than with the force strategy.
55. Employee Stock Ownership Plans (ESOPs): This is a system whereby employees become
shareholders of the company, owning from 1 to 100 percent of the firms stock. To establish an ESOP, a
firm sets up a trust fund and purchases shares of its stock, which are allocated to individual employee
accounts. All full-time employees over age 21 usually participate in the plan.
56. Environmental stability (ES): This is the lower axis of a SPACE Matrix. Historically, firms that compete in
an unstable environment are more likely to fail than those in a stable environment. Along the axis, -1
represents a highly stable environment, whereas -6 represents a highly unstable environment.
57. Environmental scanning: Externally, research is required to gather and assimilate the wealth of
information that is published every week about a given firms industry and markets. This process is
sometimes called environmental scanning.
58. External analysis: This is a vital strategy-formulation activity that consists of identifying and evaluating
opportunities and threats associated with the following forces: economic, social, cultural, demographic,
environmental, technological, political, governmental, legal, and competitive.
59. External audit: An external audit, sometimes called environmental scanning, environmental audit, or
industry analysis, focuses on identifying and evaluating trends and events beyond the control of a single
firm, such as increased foreign competition, population shifts to the Sun Belt, a maturing society,
information technology, and the computer revolution.
60. External Factor Evaluation (EFE) Matrix: An EFE Matrix allows strategists to summarize and evaluate
external opportunities and threats.
61. External forces: External forces can be divided into five major categories: (1) economic forces; (2) social,
cultural, demographic, and environmental forces; (3) political, governmental, and legal forces; (4)
technological forces; and (5) competitive forces.
62. External opportunities and external threats: These terms refer to economic, social, political,
technological, and competitive trends and events that could significantly benefit or harm an organization in
the future.
63. Feasibility: As described by Richard Rumelt, a strategy must neither overtax available resources nor
create unsolvable subproblems. The final broad test of strategy is its feasibility; that is, can the strategy be
attempted within the physical, human, and financial resources of the enterprise? The financial resources of
a business are the easiest to quantify and are normally the first limitation against which strategy is
evaluated. It is sometimes forgotten, however, that innovative approaches to financing are often possible.
64. F&S Index of Corporations & Industries: This is a valuable library reference source that indexes
magazine articles published about specific companies and industries. The F&S Index provides an
alphabetical listing of industries and companies.
65. Financial budget: A document that details how funds will be obtained and spent for a specified period of
time is called a financial budget. Although the period of time for a financial budget can range from daily to
over 10 years, annual budgets are most common.
66. Financial strength (FS): This is the top axis of a SPACE Matrix. This axis measures how strong or weak
the firm is financially, where 1.0 = very weak, 3.0 = average, and 6.0 = very strong.
67. Financing decision: The financing decision focuses on determining the best financing decision mix or
capital structure of the firm. This decision includes examination of the various methods by which a firm can
raise capital, such as issuing stock, increasing debt, selling assets, or using a combination of these
approaches. The financing decision requires consideration of short-term versus long-term financing and
working capital needs. Two key financial ratios that indicate whether a firms financing decisions have been
effective are the debt-to-equity ratio and the debt-to-total-assets ratio
68. Flexible individualism: Japan is rapidly changing. Masakagu Yamazaki uses the term flexible
individualism to summarize the changes occurring in Japanese society and business. Young Japanese call
their parents fossils or tombstones. Workaholic attitudes in Japan are being replaced by greater emphasis
on leisure activities and consumption of leisure products and services.
69. Focus on higher-order issues: By raising an issue to a higher level, many short-term interests can be
postponed in favor of long-term interests. For instance, by focusing on issues of survival, the auto and steel
industries were able to persuade unions to make concessions on wage increases.
70. Force change strategy: This type of change strategy entails giving orders and enforcing those orders.
This approach to implementing change has the advantage of being fast, but it is plagued by low
commitment and high resistance.
71. Franchising: An effective means of implementing forward integration is franchising. Franchising involves
signing an agreement to operate a business under strict guidelines presented by the company, such as
McDonalds and Holiday Inn franchises. Approximately 1,900 companies in about 50 different industries in
the United States used franchising in 1987 to distribute their product or service.
72. Forward integration: This strategy involves gaining ownership or increased control over distributors or
retailers of the firms products and services.
73. Functional structure: The most widely used type of structure is the functional or centralized type design,
primarily because this type of structure is the simplest and least expensive of the seven alternatives. A
functional structure groups tasks and activities together by business function such as
production/operations, marketing, finance/accounting, research and development, and personnel. A
university may structure its activities by major functions that include academic affairs, student services,
alumni relations, athletics, maintenance, and accounting.
74. Functions of finance/accounting: The financing decision is concerned with determining the best
financing mix or capital structure of the firm. Dividend decisions concern issues such as the percentage of
earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of
stock.
75. Future shock: In his thought-provoking books, Future Shock and The Third Wave, Alvin Toffler argues
that business environments are becoming so dynamic and complex that they threaten people and
organizations with future shock. Future shock occurs when the nature, types, and speed of changes
overpower an individuals or organizations ability and capacity to adapt.
76. Gain sharing: This is a widely used method for linking performance and pay to strategies. Gain sharing
involves employees or departments establishing performance targets, and, if actual results exceed
objectives, all members get bonuses. Ed Lawler at the University of Southern California reports that 26
percent of American companies use some form of gain sharing; about 75 percent of gain-sharing plans
have been adopted since 1980.
77. Generalization: Shifting focus from specific issues to more general ones may increase strategists options
for gaining organizational commitment. This notion is sometimes called generalization.
78. Grand Strategy Matrix: This is a popular tool for formulating alternative strategies. All organizations can
be positioned in one of the Grand Strategy Matrixs four strategy quadrants. The divisions of a firm could,
likewise, be positioned. The Grand Strategy Matrix is based on two evaluative dimensions: competitive
position and market growth.
79. Glasnost: This was Gorbachevs overall policy to change the structure of business in the former Soviet
Union. Glasnost means openness.
80. Horizontal consistency of objectives: This concept refers to the need for objectives across departments
and divisions to be consistent. For instance, it would not be effective for manufacturing to achieve more
than its annual objective of units produced if marketing could not sell the additional units. Horizontal
consistency of objectives is as important as vertical consistency.
81. Horizontal diversification: Adding new, unrelated products or services for present customers is called
horizontal diversification.
82. Horizontal integration: This term refers to the strategy of seeking ownership or increased control over a
firms competitors.
83. Industry strength (IS): When performing a SPACE analysis, criteria that comprise the firms industry
strength are evaluated on a 1 to 6 scale, where 1 = rapidly declining, 3 = about average, and 6 = rapidly
growing
84. Input Stage : Stage 1 of the strategy-formulation framework consists of the IFE Matrix, the Competitive
Profile Matrix, and the EFE Matrix. Stage 1 is called the Input Stage because the three tools summarize the
basic input information needed for Stage 2 analyses.
85. Integrative strategies: This categorization of strategies includes forward integration, backward
integration, and horizontal integration.
86. Intensive strategies: This categorization of strategies includes market development, market penetration,
and product development.
87. Internal audit: The purpose of an internal audit is to identify and evaluate organizational strengths and
weaknesses in the functional areas of business, including management, marketing, finance/accounting,
production/operations, computer information systems, and research and development.
88. Internal-External (IE) Matrix: The IE Matrix positions an organizations various divisions in a nine-cell
display. The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organizational divisions
in a schematic diagram; this is why they are both called portfolio matrices. Also, the size of each circle
represents the percentage sales contribution of each division, and pie slices reveal the percentage profit
contribution of each division in both the BCG and IE Matrix.
89. Internal Factor Evaluation (IFE) Matrix: The final step in conducting an internal strategic-management
audit is to construct an IFE Matrix. This strategy-formulation tool summarizes and evaluates the major
strengths and weaknesses in the functional areas of business. It provides a basis for identifying and
evaluating interrelationships among the functional areas of business.
90. Internal strengths and weaknesses: Internal strengths and weaknesses are controllable activities within
an organization that are performed either especially well or poorly. Management, marketing,
finance/accounting, production/operations, computer information systems, and research and development
activities of a business are areas where internal strengths or weaknesses arise.
91. Investment decision: The investment decision, sometimes called capital budgeting, is the allocation and
reallocation of capital and resources to projects, products, assets, and divisions of an organization. Once
strategies are formulated, capital budgeting decisions are required for successful strategy implementation.
92. Joint venture: This strategy involves two or more sponsoring firms that form a separate organization for
cooperative purposes; the sponsoring firms have shared-equity ownership in the new entity.
93. Leveraged buy-out: When a company is taken private by a third party using borrowed funds, usually to
avoid a hostile takeover, this action is called a leveraged buy-out. Under this arrangement, the debt is paid
back later through funds from operations and the sale of assets.
94. Liquidation: Selling all of a companys assets, in parts, for their tangible worth is called liquidation.
95. Long-term objectives: Long-term objectives can be defined as specific results that an organization seeks
to achieve in pursuing its basic mission. Long-term means more than one year.
96. Management audit: In performing an internal strategic-management audit, strengths and weaknesses in
planning, organizing, motivating, staffing, and controlling activities of the organization should be identified.
This activity is called an internal audit.
97. Management by wandering around: Regardless of the size of the organization, a certain amount of
management by wandering around at all levels is essential to effective strategy evaluation.
98. Managing by hope: This approach to management is based on the fact that the future is laden with great
uncertainty and that if we try and do not succeed, then, we hope, our second (or third) attempt will succeed.
Decisions are predicated on the hope that they will work and that good times are just around the corner,
especially if luck and good fortune are on our side. Managing by hope is not recommended.
99. Managing by extrapolation: This approach to management adheres to the principle If it aint broke, dont
fix it. The idea is to keep on doing about the same things in the same ways, because things are going well.
This approach to management is not recommended.
100. Matrix structure: A matrix structure is the most complex of all organizational designs. The matrix structure
is characterized by both vertical and horizontal flows of authority and communication (hence, the
term matrix).

101. Matching Stage: Stage 2 of the formulation framework focuses on generating feasible alternative
strategies. Stage 2 is called the Matching Stage because key internal strengths and weaknesses and
external opportunities and threats are aligned or matched to generate alternative strategies. This is a key to
successful strategic management.
102. Measuring organizational performance: This activity includes comparing expected results to actual
results, investigating deviations from plans, evaluating individual performance, and examining progress
being made towards meeting stated objectives.
103. Natural environment: This is the earths natural resources such as the air, sea, land, plants, minerals,
atmosphere, and all living matter.
104. Opportunity analysis: An appraisal of the costs, benefits, and risks associated with marketing-related
decisions is referred to as opportunity analysis.
105. Organizational culture: Organizational culture is a pattern of basic assumptionsinvented, discovered,
or developed by an organization as it learns to cope with its problems of external adaptation and internal
integrationthat has worked well enough to be considered valid and to be taught to new members as the
correct way to perceive, think, and feel in reaction to those problems. Cultural products include values,
beliefs, rites, rituals, ceremonies, myths, stories, legends, sagas, language, metaphors, symbols, heroes,
and heroines.
106. Outsourcing: This a process whereby companies use outside suppliers, shop around for different
suppliers, play one supplier against another, and go with the best deal possible.
107. Philosophy: This is one of the nine basic components that should be included in a mission statement.
This component includes the basic values and beliefs of the organization.
108. Planning: This is the first basic function of management. Planning includes activities such as developing a
mission statement, establishing objectives, choosing among alternative strategies, forecasting, and
budgeting.
109. Planning process audit (PPA): Aaron Kelly developed the Planning Process Audit (PPA).
110. Policies: Policies are the means by which annual objectives will be achieved. Policies is considered to
be a broad term that includes guidelines, rules, and procedures established to support efforts to achieve
stated objectives. Policies are guides to decision making. On a day-to-day basis, policies are needed to
make a strategy work. Policies are needed to facilitate solving repetitive or recurring type problems.
111. Price-earnings ratio method: A widely used approach for determining the value of an organization is the
price-earnings ratio method. With this method, divide the market price of the firms common stock by the
annual earnings per share and multiply this number by the firms average net income for the past five
years. That gives an estimate of the value of the firm.
112. Pricing: Pricing is a basic function of marketing. Four major factors affect pricing decisions: consumers,
governments, suppliers/distributors, and competitors.
113. Prodigy A company, owned by Sears & Roebuck, that provides Internet services.
114. Product development: This is a strategy that seeks increased sales by improving or modifying present
products or services. Product development usually entails large research and development expenditures.
115. Product or service planning: This function of marketing includes test marketing, product and brand
positioning, warranties, packaging, product options, product features, product style, product quality, deleting
old products, and customer service. Product and service planning is particularly important when product
development or diversification is pursued.
116. Quantitative Strategic Planning Matrix (QSPM): The QSPM comprises Stage 3 of the strategy-
formulation analytical framework. This technique objectively suggests which alternative strategies are best.
QSPM utilizes input information from Stage 1 analyses and matching results from Stage 2 analyses to
objectively decide among alternative strategies.
117. Rational change strategy ; This is a widely used approach to implement change in organizations. The
approach consists of efforts to convince individuals that the change is to their personal advantage. When
this appeal is successful, strategy implementation can be relatively easy. However, implementation
changes are seldom to everyones mutual benefit.
118. Re-engineering: Also called process management, process innovation, or process redesign, it involves
reconfiguring or redesigning work, jobs, and processes for the purpose of improving cost, quality, service,
and speed. This does not usually affect the organizational chart.
119. Relative market share position: This variable comprises the x-axis of a BCG Matrix. The variable is
defined as the ratio of a divisions own market share in a particular industry to the market share held by the
largest rival firm in that industry.
120. Resistance to change: Resistance to change can be considered the single greatest threat to successful
strategy implementation. Resistance to change is found in the form of sabotaging production machines,
absenteeism, filing unfounded grievances, and an unwillingness to cooperate that occurs in organizations.
121. Resource allocation: This term refers to the process of committing human, material, technological, and
physical assets to various departments and divisions of the organization. Resource allocation is a central
management activity that allows for strategy execution. In organizations that do not use a strategic-
management approach to decision making, resource allocation is often a politicized activity.
122. Restructuring: Also called downsizing, rightsizing, or delayering, it involves reducing the size of the firm in
terms of number of employees, divisions, units, or hierarchical levels to improve efficiency and/or
effectiveness. This alters the organizational chart.
123. Retained earnings: This item appears on an organizations income statement and balance sheet. Defined
as net earnings minus dividends paid, retained earnings on the income statement represent cash to be
invested back in the firm. Retained earnings on the balance sheet represent a cumulative figure
representing historical earnings reinvested into the firm.
124. Retrenchment: Sometimes called turnaround, this strategy includes extensive asset reduction and
expense control. A retrenchment strategy can include layoffs, plant closings, divestiture, and even
bankruptcy.
125. Reverse LBO: Private firms created as part of a leveraged buy-out often go public again by selling shares
back to the public.
126. Revised EFE Matrix; Reviewing the underlying bases of an organizations strategy could be approached
by developing a revised EFE Matrix and IFE Matrix. This is an important part of strategy evaluation.
127. Revised IFE Matrix: Reviewing the underlying bases of an organizations strategy could be approached
by developing a revised EFE Matrix and IFE Matrix. This is an important part of strategy evaluation.
128. SO Strategies; In the TOWS Matrix, SO Strategies focus on using a firms internal strengths (S) to take
advantage of external opportunities (O).
129. Selling: This function of marketing includes many activities such as advertising, sales promotion, publicity,
personal selling, sales force management, customer relations, and dealer relations.
130. Social policy: Social policy issues mandate that strategists consider not only what the organization owes
its various stakeholders, but also what responsibilities the firm has to consumers, environmentalists,
minorities, communities, and other groups. After decades of debate on the topic of social responsibility,
individual firms still wrestle to determine their appropriate social policy. Social policy affects the
development of a business mission statement.
131. Social responsibility: As a function of marketing, social responsibility includes a companys obligation to
offer products and services that are safe, ethical, and reasonably priced.
132. Spying on competitors: Organizations are becoming more and more sophisticated and organized in
efforts to obtain information about competitors. Described in Chapter 4, Fortune magazine has outlined 17
ways that corporations today spy on competitors.
133. Staffing: The management function of staffing is also called personnel management or human resource
management. Human resource managers assist line managers in performing staffing activities, such as
recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding,
disciplining, promoting, transferring, demoting, and dismissing employees.
134. ST Strategies: In a TOWS Matrix, ST Strategies are based on using a firms strengths (S) to avoid or
reduce the impact of external threats (T).
135. Standard and Poors Corporation: Industry SurveysThis is an excellent library publication for finding
information about competitors strengths, weaknesses, objectives, and strategies.
136. Stars: Quadrant II (in the BCG Matrix) divisions represent an organizations best long-run opportunities for
growth and profitability. Divisions with a high relative market share position and a high industry growth rate
should receive substantial investment to maintain or strengthen their dominant position.
137. Statistical Abstract of the United States: This publication has excellent statistical tables that summarize
social, cultural, demographic, and geographic information about the United States. This type of information
represents important opportunities and threats for organizations.
138. Strategic management: Strategic management can be defined as the art and science of formulating,
implementing, and evaluating cross-functional decisions and actions that will enable an organization to
achieve its objectives.
139. Strategic business unit (SBU) structure: The SBU-type structure groups similar divisions into strategic
business units and delegates authority and responsibility for each unit to a senior executive who reports
directly to the chief executive officer.
140. Strategic-management process: The strategic-management process consists of three stages: strategy
formulation, strategy implementation, and strategy evaluation.
141. Strategic Position and Action Evaluation (SPACE) Matrix : The SPACE Matrix is a four-quadrant
framework that indicates whether aggressive, conservative, defensive, or competitive type strategies are
most appropriate for a given organization. The SPACE matrix axes are: financial strength (FS), competitive
advantage (CA), environmental stability (ES), and industry strength (IS).
142. Strategies : Strategies are the means by which long-term objectives will be achieved.
143. Strategists: Strategists are individuals in an organization who are most responsible for the success or
failure of that organization. Strategists have different job titles, such as chief executive officer, president,
owner, chairman of the board, executive director, chancellor, dean, and entrepreneur.
144. Strategy evaluation: The final stage in strategic management is strategy evaluation. All strategies are
subject to future modification because internal and external factors are constantly changing. Three
fundamental strategy-evaluation activities are reviewing internal and external factors that represent the
bases for current strategies, measuring performance, and taking corrective actions.
145. Strategy-formulation framework: This is a three-stage analytical framework widely used for generating
and evaluating alternative strategies. Stage 1 of the formulation framework consists of the IFE Matrix, the
Competitive Profile Matrix, and the EFE Matrix.
146. Strategy formulation: This is the process of establishing a business mission, conducting research to
determine key internal strengths/weaknesses and external opportunities/threats, performing analyses to
match internal with external factors, establishing long-term objectives, and choosing among alternative
strategy formulations.
147. Strategy implementation: Often called the action stage of strategic management, strategy
implementation means mobilizing employees and managers to put formulated strategies into action. Three
basic strategy-implementation activities are (1) establishing annual objectives, (2) devising policies, and (3)
allocating resources.
148. Synergy: Synergy exists when everyone pulls together as a team that knows what it wants to achieve.
Synergy is the 2 + 2 = 5 effect.
149. Takeover: When an acquisition or merger is not mutually desired by both parties, it can be called a
takeover or hostile takeover.
150. Taking corrective actions: The final strategy-evaluation activity, taking corrective actions, requires
making changes to reposition a firm competitively for the future. Some example changes that may be
needed are altering an organizations structure, replacing one or more key individuals, selling a division, or
revising a business mission. Other changes could include establishing or revising objectives, devising new
policies, issuing stock to raise capital, adding additional salespersons, allocating resources differently, or
developing new performance incentives.
151. Technology: This term refers to scientific developments in areas such as computers, robotics, and
communication that significantly affect the quality and life cycle of products and services offered by
organizations around the world. No industries are immune from technological advancements.
152. Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix This important matching tool results in
the development of four types of strategies: SO Strategies, WO Strategies, ST Strategies, and WT
Strategies.
153. Total attractiveness scores (TAS): In a QSPM analysis, total attractiveness scores are computed by
summing attractiveness score columns. Total attractiveness scores reveal the relative attractiveness of
strategies. Higher scores indicate more attractiveness strategies.
154. Total weighted score: In a Competitive Profile Matrix, an EFE Matrix, and an IFE Matrix, total weighted
scores indicate the relative strength of the firm from a competitive, external, and internal perspective,
respectively. Total weighted scores range from a low of 1.0 to a high of 4.0.
155. Trend extrapolation: This is a forecasting technique that simply projects past trends into the future
without consideration for changes in the future.
156. Vacant niche: In a product positioning map, a vacant niche represents an unserved segment. A vacant
niche is identified by an absence of products, services, or firms being positioned in a particular part of the
schematic positioning diagram.
157. Value chain: According to Porter, the business of a firm can best be described as a value chain in which
total revenues minus total costs of all activities undertaken to develop and market a product or service
yields value. All firms in a given industry have a similar value chain, which includes activities such as
obtaining raw materials, designing products, building manufacturing facilities, developing cooperative
agreements, and providing customer service. A firm will be profitable as long as total revenues exceed the
total costs incurred in creating and delivering the product or service.
158. Vision: A possible and desirable future state of an organization that includes specific goals.
159. Vertical consistency of objectives: Objectives need to be consistent through hierarchical levels of an
organization. Termed vertical consistency, an example of this is for divisional objectives to be feasible,
given corporate objectives.
160. Value Line Investment Survey: This is a very useful library publication that summarizes the financial
condition of publicly held organizations and evaluates the investment attractiveness of firms.
161. Vision statement: A written statement that reveals what we want to become, as compared to a mission
statement, which reveals what our business is.
162. Wall Street Journal/Barrons Index: This index references articles by subject that have appeared in
the Wall Street Journal and Barrons.
163. WO Strategies: In the TOWS Matrix, WO Strategies aim at improving internal weaknesses (W) by taking
advantage of external opportunities.
164. WT Strategies: In a TOWS Matrix, WT Strategies are directed at improving internal weaknesses (W) and
avoiding external threats.