KEY TERMS – CHAPTER 8
strategic management
What managers do to develop the
organization’s strategies.
strategies
The decisions and actions that determine the
long-run performance of an organization.
business model
A strategic design for how a company
intends to profits from its strategies,
processes, and activities.
strategic management process
A six-step process that encompasses
strategic planning, implementation, and
evaluation.
mission
A statement of the purpose of an
organization.
opportunities
Positive trends in external environmental
factors.
threats
Negative trends in external environmental
factors.
resources
An organization’s assets that are used to
develop, manufacture, and deliver products
or services to its customers.
capabilities
An organization’s skills and abilities in
doing the work activities needed in its
business.
core competencies
The organization’s major value-creating
skills and capabilities that determine its
competitive weapons.
strengths
Any activities the organization does well or
any unique resources that it has.
weaknesses
Activities the organization does not do well
or resources it needs but does not possess.
SWOT analysis
An analysis of the organization’s strengths,
weaknesses, opportunities, and threats.
corporate strategy
An organizational strategy that determines
what businesses a company is in, should be
in, or wants to be in, and what it wants to do
with those businesses.
growth strategy
A corporate strategy that’s used when an
organization wants to grow and does so by
expanding the number of products offered or
markets served, either through its current
business(es) or through new business(es).
related diversification
When a company grows by combining with
firms in different, but related, industries.
unrelated diversification
When a company grows by combining with
firms in different and unrelated industries.
stability strategy
A corporate strategy characterized by an
absence of significant change in what the
organization is currently doing.
renewal strategy
A corporate strategy designed to address
organizational weakness that are leading to
performance declines.
retrenchment strategy
A short-run renewal strategy.
turnaround strategy
A renewal strategy for situations in which
the organization’s performance problems are
more serious.
BCG matrix
A strategy tool that guides resource
allocation decisions on the basis of market
share and growth rate of SBUs.
business or competitive strategy
An organizational strategy focused on how
the organization will compete in each of its
businesses.
strategic business units
The single businesses of an organization in
several different businesses that are
independent and formulate their own
strategies.
competitive advantage
What sets an organization apart; its
distinctive edge.
cost leadership strategy
A business or competitive strategy in which
the organization competes on the basis of
having the lowest costs in its industry.
differentiation strategy
A business or competitive strategy in which
a company offers unique products that are
widely valued by customers.
focus strategy
A business or competitive strategy in which
a company pursues a cost or differentiation
advantage in a narrow industry segment.
stuck in the middle
A situation where an organization hasn’t
been able to develop either a low cost or a
differentiation competitive advantage.
functional strategies
The strategies used by an organization’s
various functional departments to support
the business or competitive strategy.
strategic flexibility
The ability to recognize major external
environmental changes, to quickly commit
resources, and to recognize when a strategic
decision was a mistake.
first mover
An organization that’s first to bring a
product innovation to the market or to use a
new process innovation.