| A | B |
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| Case method | provides the opportunity to move from a narrow, specialized view that emphasizes functional techniques to a broader, less precise analysis of the overall corporation |
| Common size statements | financial statements in which the dollar figures have been converted into percentages |
| Altman’s Z Value bankruptcy formula | calculate the likelihood of going bankrupt. Compare historical statements over time |
| Index of sustainable growth | used to determine whether a company embarking on a growth strategy will need to take on debt to fund the growth |
| Constant dollars | dollars adjusted for inflation |
| Prime interest rate | the rate of interest banks charge on their lowest risk loans |
| Gross domestic product | measures total output of goods and services within a country’s borders |
| Corporation | a mechanism established to allow different parties to contribute capital, expertise and labor for their mutual benefit |
| Sarbanes-Oxley, Sarbox or SOX | is a United States federal law enacted on July 30, 2002, as a reaction to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. |
| Corporate governance | the relationship among the board of directors, top management and shareholders in determining the direction and performance of the corporation. An important aspect of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principal-agent problem. |
| Due care | Board of directors are responsible that the corporation is not harmed by members of the board. Directors can be held liable |
| board of directors | is a body of elected or appointed members who jointly oversee the activities of a company or organization. The body sometimes has a different name, such as board of trustees, board of governors, board of managers, or executive board. It is often simply referred to as "the board.“ |
| Monitor | developments inside and outside the corporation |
| Evaluate and Influence | management proposals, decisions and actions |
| Initiate and Determine | the corporation’s mission and strategies |
| Inside Directors | are officers or executives employed by the board’s corporation |
| Outside Directors | are executives of other firms but are not employees of the board’s corporation |
| Affiliated directors | not employed by the corporation, handle legal or insurance work; cannot serve where conflict maybe present |
| Retired executive directors | used to work for the corporation, partly responsible for past decisions affecting current strategy |
| Family directors | descendents of the founder and own significant blocks of stock |
| Agency theory | problems arise in corporations because top management is not willing to accept responsibility for their decisions unless they own a substantial amount of stock in the corporation; basically too much at stake if there are no rewards |
| Stewardship theory | as the result of long tenure with the corporation, insiders (top management) tend to identify with the corporation and its success. Act in the best interest of the corporation more than self-interest |
| Interlocking Directorates | useful for gaining both inside information about an uncertain environment and objective expertise about potential strategies and tactics. 2 Firms share the same director; 1 serves on many firms |
| Direct interlocking directorate | when two firms share a director or when an executive of one firm sits on the board of a second |
| Indirect interlocking directorate | when two corporations have directors who serve on the board of a third firm |
| Staggered boards | only a portion of board members stand for re-election when directors serve more than one year terms |
| Lead Director | is consulted by the Chair/CEO regarding board affairs and coordinates the annual evaluation of the CEO |
| Executive leadership | is the directing of activities toward the accomplishment of corporate objectives. Sets the tone for the entire corporation: the captain is only as good as the crew and the crew is only as good as the captain |
| Strategic leadership | allows the leader to use his/her ability to anticipate events, maintain flexibility, and long term perspective to guide an organization. Strategic leaders change the environment, culture, structure, and technology to guide the organization in the right direction |
| Strategic vision | description of what the company is capable of becoming by applying strategic principles |
| Transformational Leaders | provide change and movement in an organization by providing a vision for that change. |
| Strategic planning staff | supports both top Management and the business units in the strategic planning Process |
| Strategic Management | a set of managerial decisions and actions that determines the long-run performance of a corporation; it is a continuous process |
| Globalization | the integration and internationalization of markets and corporations |
| Environmental Sustainability | the use of business practices to reduce a company’s impact on the natural, physical environment |
| Population ecology | established organizations are unable to adapt to change: Inertia is the idea that an object keeps moving unless acted upon by an outside force. |
| Institution theory | organizations adapt by imitating successful organizations |
| Strategic choice perspective | organizations adapt to change and have the ability to reshape their environment |
| Organizational learning theory | organizations adapt defensively and use knowledge to improve their relationship with the environment |
| Strategic flexibility | the ability to shift from one dominant strategy to another and requires: Long-term commitment to the development and nurturing of critical resources Learning organization |
| Learning organization | an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights However, bureaucracy can sometimes stand in the way, creating delays and unnecessary bureaucratic processes |
| Environmental Scanning | is the monitoring, evaluating and disseminating of information from the external and internal environments to key people within the organization |
| Strategy Formulation | the development of long-range plans for the effective management of environmental opportunities and threats in light of organizational strengths and weaknesses (SWOT) |
| Mission | the purpose or reason for the organization’s existence |
| Vision | describes what the organization would like to become |
| Objectives | the end results of planned activity |
| Strategies | form a comprehensive master plan that states how the corporation will achieve its mission and objectives Corporate Business Functional |
| Policies | the broad guidelines for decision making that links the formulation of a strategy with its implementation |
| Strategy implementation | the process by which strategies and policies are put into action through the development of: Programs Budgets Procedures |
| Evaluation and control | the process in which corporate activities and performance results are monitored so that actual performance can be compared to desired performance |
| Performance | the end result of organizational activities |
| Feedback/Learning Process | revise or correct decisions based on performance |
| Triggering event | (WHAT HAPPENED AT UNILEVER?) (24) something that acts as a stimulus for a change in strategy and can include: New CEO External intervention Threat of change of ownership Performance gap Strategic inflection point |
| Strategic decision making | focuses on the long-run future of the organization Characteristics of strategic decision making include: Rare Consequential Directive |
| Strategic audit | provides a checklist of questions, by area or issue, that enables a systematic analysis to be made of various corporate functions and activities |
| Societal environment | social systems that influence long-term decisions Economic forces Technological forces Political-legal forces Sociocultural forces |
| Task environment | groups that directly affect a corporation and are affected by the corporation Government Local communities Suppliers Competitors Customers Creditors Unions Special interest groups/trade associations |
| Industry analysis | an in-depth examination of key factors within a corporation’s task environment |
| STEEP Analysis | monitoring trends in the societal and natural environments Sociocultural- Technological- Economic- Ecological- Political-legal forces Global Demographic |
| Issues priority matrix | used to identify and analyze developments in the external environment |
| External strategic factors | key environmental trends that are judged to have both a medium to high probability of occurrence and a medium to high probability of impact on the corporation |
| Industry | a group of firms that produces a similar product or service |
| Threat of new entrants | new entrants to an industry bring new capacity, a desire to gain market share and substantial resources |
| Entry barrier | an obstruction that makes it difficult for a company to enter an industry |
| Rivalry Among Existing Firms | new entrants to an industry bring new capacity, a desire to gain market share and substantial resources |
| Threat of Substitute Products or Services | products that appear different but can satisfy the same need as another product |
| Bargaining Power of Buyers | ability of buyers to force prices down, bargain for higher quality, play competitors against each other |
| Bargaining Power of Suppliers | ability of suppliers to raise prices or reduce quality |
| Fragmented industry | no firm has a large market share and each firm only serves a small piece of the total market in competition with other firms |
| Consolidated industry | domination by a few large firms, each struggles to differentiate products from its competition |
| Multi-domestic Industries | specific to each country or group of countries |
| Global Industries | operate worldwide with multinational companies making only small adjustments for country-specific circumstances |
| Regional industries | multinational companies primarily coordinate their activities within regions |
| Strategic group | a set of business units or firms that pursue similar strategies with similar resources |
| Defenders | focus on improving efficiency |
| Prospectors | focus on product innovation and market opportunities |
| Analyzers | focus on at least two different product market areas |
| Reactors | lack a consistent strategy-structure-culture relationship |
| Key success factors | variables that can significantly affect the overall competitive positions of companies within an industry |
| Industry matrix | summarizes the key success factors within a particular industry |
| Competitive intelligence | (business intelligence)- a formal program of gathering information on a company’s competitors |
| Competitors | organizations that offer same, similar, or substitute products or services in the business areas in which a particular company operates |
| Social Responsibility | proposes that a private corporation has responsibilities to society that extend beyond making a profit |
| Social capital | refers to the goodwill of key stakeholders and provides a company with |
| Stakeholders | have an interest in the business and affect or are affected by the achievement of the firm’s objectives |
| Enterprise strategy | articulates the firm’s ethical relationship with its stakeholders |
| Stakeholder Analysis | the identification of corporate stakeholders in 3 steps: Step one: Primary stakeholders have a direct connection with the corporation and have sufficient bargaining power to directly affect corporate activities Step 2:Secondary stakeholders have an indirect stake in the corporation but are also affected by corporate activities Step 3:Estimate the effect on each stakeholder from a particular strategic decision |
| Moral Relativism | claims that morality is relative to some personal, social, or cultural standard and that there is not a method for deciding whether one decision is better than another |
| Preconventional level | concern for one’s self |
| Conventional level | considerations for society’s laws and norms |
| Principled level | guided by an internal code of ethics |
| Code of Ethics | specifies how an organization expects its employees to behave while on the job |
| Whistleblowers | employees who report illegal or unethical behavior on the part of others |
| Ethics | the consensually accepted standards of behavior for an occupation, trade, or profession |
| Morality | the precepts of personal behavior based on religious or philosophical grounds |
| Law | is the formal codes that permit or forbid certain behaviors and may or may not enforce ethics or morality |
| Utilitarian | actions are judged by consequences |
| Individual rights | fundamental rights should be respected |
| Justice | decisions must be equitable, fair and impartial in the distribution of costs and benefits to individuals or groups |
