Glossary Chapter 9 acquisition purchase of a company by another company analyzers an adaptive strategy that seeks to minimize risk and maximize profits by following or imitating the proven successes of prospectors attack a competitive move designed to reduce a rival’s market share or profits bargaining power of buyers a measure of the influence that customers have on a firm’s prices bargaining power of suppliers a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs BCG matrix a portfolio strategy, developed by the Boston Consulting Group, that managers use to categorize the corporation’s businesses by growth rate and relative market share, helping them decide how to invest corporate funds cash cow a company with a large share of a slow-growing market character of the rivalry a measure of the intensity of competitive behaviour between companies in an industry competitive advantage providing greater value for customers than competitors can competitive inertia a reluctance to change strategies or competitive practices that have been successful in the past core capabilities the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs core firms the central companies in a strategic group corporate-level strategy the overall organizational strategy that addresses the question “What business or businesses are we in or should we be in?” cost leadership the positioning strategy of producing a product or service of acceptable quality at consistently lower production costs than competitors can, so that the firm can offer the product or service at the lowest price in the industry defenders an adaptive strategy aimed at defending strategic positions by seeking moderate, steady growth and by offering a limited range of high-quality products and services to a well-defined set of customers differentiation the positioning strategy of providing a product or service that is sufficiently different from competitors’ offerings such that customers are willing to pay a premium price for it direct competition the rivalry between two companies that offer similar products and services, acknowledge each other as rivals, and act and react to each other’s strategic actions distinctive competence what a company can make, do, or perform better than its competitors diversification a strategy for reducing risk by buying a variety of items (stocks or, in the case of a corporation, types of businesses), so that the failure of one stock or one business does not doom the entire portfolio dog a company with a small share of a slow-growing market entrepreneurial orientation the set of processes, practices, and decision-making activities that lead to new entry, characterized by five dimensions: autonomy, innovativeness, risk-taking, proactiveness, and competitive aggressiveness entrepreneurship the process of entering new or established markets with new goods or services firm-level strategy corporate strategy that addresses the question “How should we compete against a particular firm?” focus strategy the positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment grand strategy a broad corporate-level strategic plan used to achieve strategic goals and guide the strategic alternatives that managers of individual businesses or subunits may use growth strategy strategy that focuses on increasing profits, revenues, market share, or the number of places in which the company does business imperfectly imitable resource a resource that is impossible or extremely costly or difficult for other firms to duplicate industry-level strategy corporate strategy that addresses the question “How should we compete in this industry?” market commonality the degree to which two companies have overlapping products, services, or customers in multiple markets nonsubstitutable resource a resource, without equivalent substitutes or replacements, that produces value or competitive advantage portfolio strategy corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines prospectors an adaptive strategy that seeks fast growth by searching for new market opportunities, encouraging risk-taking, and being the first to bring innovative new products to market question mark a company with a small share of a fast-growing market rare resource a resource that is not controlled or possessed by many competing firms reactors an adaptive strategy of not following a consistent strategy, but instead reacting to changes in the external environment after they occur recovery the strategic actions taken after retrenchment to return to a growth strategy related diversification creating or acquiring companies that share similar products, manufacturing, marketing, technology, or cultures resource anything that can be used to fulfil a need or solve a problem resource similarity the extent to which a competitor has similar amounts and kinds of resources response a competitive countermove, prompted by a rival’s attack, to defend or improve a company’s market share or profit retrenchment strategy strategy that focuses on turning around very poor company performance by shrinking the size or scope of the business secondary firms the firms in a strategic group that follow related, but somewhat different, strategies than do the core firms shadow-strategy task force a committee within the company that analyzes the company’s own weaknesses to determine how competitors could exploit them for competitive advantage situational (SWOT) analysis an assessment of the strengths and weaknesses in an organization’s internal environment and the opportunities and threats in its external environment stability strategy strategy that focuses on improving the way in which the company sells the same products or services to the same customers star a company with a large share of a fast-growing market strategic dissonance a discrepancy between upper management’s intended strategy and the strategy actually implemented by lower levels of management strategic group a group of companies within an industry that top managers choose to compare, evaluate, and benchmark strategic threats and opportunities strategic reference points the strategic targets managers use to measure whether a firm has developed the core competencies it needs to achieve a sustainable competitive advantage sustainable competitive advantage a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate threat of new entrants a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry threat of substitute products or services a measure of the ease with which customers can find substitutes for an industry’s products or services unrelated diversification creating or acquiring companies in completely unrelated businesses valuable resource a resource that allows companies to improve efficiency and effectiveness