fragmented industryAn industry with manysmall or medium-sizedcompanies.consolidatedindustryAn industry dominated bya few large companies.complementorsFirms providing goods orservices that arecomplementary to theproduct produced byenterprises in the industry.political and legalforcesIndustry changes resultingfrom changes in laws andregulations.industry-specificregulatorsGovernment agencies withresponsibility forformulating, interpreting,and implementing rulesspecific to a particularindustry.macroeconomicforcesForces that affect thegeneral health and wellbeingof a national or theregional economy, which inturn affect the profitabilityof firms within thateconomy.demographic forcesOutcomes of changes inthe characteristics of apopulation, such as age,gender, ethnic origin, race,sexual orientation, andsocial class.sociocultural forcesThe way in which changingsocial mores and valuesaffect an industryincremental changeChanges that do not alterthe basic nature ofcompetition in the taskenvironment.Discontinuous change

Change that fundamentally

transforms the nature ofcompetition in the taskenvironment.punctuatedequilibrium:A view of industryevolution asserting thatlong periods of equilibriumare punctuated by periodsof rapid change whenindustry structure isrevolutionized byinnovation.uncertaintyAn inability to predict withaccuracy the nature,magnitude, timing, anddirection of change in theenvironment.organizationalcultureThe basic pattern of valuesand assumptions shared byemployees within anorganization.human capitalThe knowledge, skills, andcapabilities embedded inindividuals.resource-based viewA view that resources ofan enterprise can be asource of sustainablecompetitive advantage.resourcesAssets that managers haveto work with in their questto improve theperformance of anenterprise.tangible resourcesPhysical assets, such asland, buildings, equipment,inventory, and money.intangible resourcesNonphysical assets thatare the creation ofmanagers and otheremployees, such as brandnames, the reputation ofthe company, processeswithin the firm forperforming work andmaking decisions, and theintellectual property of the

company, including thatprotected through patents,copyrights, andtrademarks.Chapter 3: GlobalizationglobalizationThe process wherebynational economies andbusiness systems arebecoming deeplyinterlinked with each other.market economyAn economy in which businessesare privately ownedand prices are set by theinteraction of supply anddemand.socialist economyAn economy in which businessesare owned by thestate and prices are set bystate planners.international tradeThe sale of a good orservice across borders.foreign directinvestmentInvestments by a companybased in one nation inbusiness activities inanother nation.tariffsA tax on imports .quotasA limit on the number ofitems of a good that can beimported from a foreignnation.regional tradeagreementsAgreements to removebarriers to trade betweennations within ageographic region.globalization ofproductionSourcing goods andservices from locationsaround the globe to takeadvantage of nationaldifferences in the cost andquality of factors of

production.

globalization ofmarketsThe merging of historicallydistinct and separatenational markets into onehuge global marketplace.social cultureThe system of values andnorms that are held incommon by people living ina society.normsSocial rules and guidelinesthat prescribe appropriatebehavior in particularsituations.multinationalenterprise (MNE)A business that hasproductive activities in twoor more countries.location economiesThe economies that arisefrom performing a businessactivity in the optimallocations for that activity.globalstandardizationstrategyTreating the world marketas a single entity, sellingthe same basic productaround the globe.local customizationstrategyVarying some aspect ofproduct offerings ormarketing messages totake country or regionaldifferences into account.exportingProducing a good at home,and then shipping it toanother country.licensingLicensing a foreign firm toproduce its product in acountry or region in returnfor royalty fees on anysales that the licenseemakes.

franchisingLicensing the right to offera service in a particularformat.joint ventureAn agreement between afirm and a partner toestablish a new enterprisein which they each take anequity stake.wholly ownedsubsidiaryA foreign subsidiary thatis fully owned by a firm.expatriatesHome country executivessent to a foreign post.geocentric staffingA staffing policy that seeksthe best people for keyjobs throughout theorganization, regardless ofnationality.ethnocentric staffingA staffing policy in whichall key managementpositions are staffed byhome country nationals.polycentric staffingA staffing policy in whichkey management positionsin a subsidiary are staffedby host country nationals.Chapter 4: Stakeholders, ethics, and corporate social responsibilitystakeholderAn individual, institution,or community that has astake in the operations ofan organization and in howit does business.business ethicsAccepted principles of rightor wrong governing theconduct of businesspeople.ethical dilemmasSituations in which there isno agreement over exactaccepted principles of rightand wrong.self-dealingSituations in which

managers find a way tofeather their own nestswith corporate funds.informationmanipulationSituations in whichmanagers use their controlover corporate data todistort or hide informationto enhance their ownfinancial situations or thecompetitive position ofthe firm.anticompetitivebehaviorBehavior aimed at harmingactual or potentialcompetitors, most often byusing monopoly poweropportunisticexploitationUnilaterally rewriting theterms of a contract withsuppliers, distributors, orcomplement providers in away that is more favorableto a firm, often using itspower to force the revisionthrough.substandardworking conditionsTolerating unsafe workingconditions or payingemployees below-marketrates to reduce costs ofproduction.environmentaldegradationTaking actions that directlyor indirectly result inpollution or other forms ofenvironmental harm.utilitarian approachThe view that the moralworth of actions orpractices is determined bytheir consequences.rights theoriesThe view that humanbeings have fundamentalrights and privileges.justice theoriesTheories that focus onattaining a just distributionof economic goods and

services.social responsibilityA sense of obligation onthe part of managers tobuild certain social criteriainto their decision making.Chapter 5: Planning and decision making

planningA process wherebymanagers select goals,choose actions (strategies)to attain those goals,allocate responsibility forimplementing actions tospecific individuals orunits, measure the successof actions by comparingactual results against thegoals, and revise plansaccordingly.strategic planA plan that outlines themajor goals of anorganization and theorganizationwidestrategies for attainingthose goals.corporate-levelstrategyStrategy concerned withdeciding which industries afirm should compete in andhow the firm should enteror exit industries.business-levelstrategyStrategy concerned withdeciding how a firm shouldcompete in the industriesin which it has elected toparticipate.operating strategyStrategy concerned withthe actions that should betaken at the level ofindividual functions, suchas production, logistic,R&D, and sales, to supportbusiness-level strategy.operating plansPlans that specify goals,actions, and responsibility

for individual functions.unit plansPlans for departmentswithin functions, workteams, or individuals.planning horizonHow far out a plan ismeant to apply.tactical plansThe actions managersadopt over the short tomedium term to deal witha specific opportunity orthreat that has emerged.single-use plansPlans that address uniqueevents that do not reoccur

standing plansPlans used to handleevents that reoccurfrequently.contingency plansPlans formulated toaddress specific possiblefuture events that mighthave a significant impacton the organization.

crisis managementplanPlan formulatedspecifically to deal withpossible future crises.scenario planningPlans that are based on“what if” scenarios aboutthe future.action plansPlans that specify withprecision how strategieswill be put into effectmissionThe purpose of anorganization.visionA desired future state.valuesThe philosophical prioritiesto which managersare committed.

goalA desired future state

that an organizationattempts to realize.

strategyimplementationPutting action plans intoeffect.bounded rationalityLimits in human ability toformulate complexproblems, to gather andprocess the informationnecessary for solving thoseproblems, and thus tosolve those problems in arational way.

satisficeAiming for a satisfactorylevel of a particularperformance variablerather than its theoreticalmaximum.decision heuristicsSimple rules of thumb.

80–20 ruleA heuristic stating that80 percent of theconsequences of aphenomenon stem from20 percent of the causes.

cognitive biasesDecision-making errorsthat we are all prone tomaking and that have beenrepeatedly verified inlaboratory settings orcontrolled experimentswith human decisionmakers.

prior hypothesisbiasDecision makers who havestrong prior beliefs aboutthe relationship betweentwo variables tend to makedecisions on the basis ofthese beliefs, even whenpresented with evidencethat their beliefs are wrong.

escalatingcommitmentArises when decisionmakers, having alreadycommitted significantresources to a project,

commit even moreresources if they receivefeedback that the projectis failing.

reasoning byanalogyThe use of simpleanalogies to make senseout of complex problems.representativenessGeneralizing from a smallsample or even a singlevivid anecdote.illusion of controlThe tendency tooverestimate one’s abilityto control events.availability errorArises from ourpredisposition to estimatethe probability of anoutcome based on howeasy the outcome is toimagine.

framing biasBias arising from how aproblem or decision isframed.groupthinkArises when a group ofdecision makers embarkson a course of actionwithout questioningunderlying assumptions.devil’s advocacyThe generation of both aplan and a critical analysisof the plan by a devil’sadvocate.

dialectic inquiryThe generation of a plan (athesis) and a counterplan(an antithesis) that reflectplausible but conflictingcourses of action.

outside viewIdentifying a referenceclass of analogous paststrategic initiatives,determining whether thoseinitiatives succeeded orfailed, and evaluating aproject at hand against

those prior initiatives.

Chapter 6: StrategystrategyAn action managers taketo attain a goal of anorganization.competitive advantageAdvantage obtained when afirm outperforms its rivals.distinctivecompetencyA unique strength thatrivals lack.sustainablecompetitiveadvantageA distinctive competencythat rivals cannot easilymatch or imitate.barrier to imitationFactors that make itdifficult for a firm toimitate the competitiveposition of a rival.legacy constraintsPrior investments in aparticular way of doingbusiness that are difficultto change and limit a firm’sability to imitate asuccessful rival.business-levelstrategyStrategy concerned withdeciding how a firm shouldcompete in the industriesin which it has elected toparticipate.low-cost strategyFocusing managerialenergy and attention ondoing everything possibleto lower the costs of theorganization.

economies of scaleCost advantages derivedfrom a large sales volume.

differentiationstrategyIncreasing the value of aproduct offering in theeyes of consumers.

focus strategyServing a limited numberof segments.

broad marketstrategyServing the entire market.value innovationUsing innovation to offermore value at a lower costthan competitorsprimary activitiesActivities having to dowith the design,creation, and delivery ofthe product; itsmarketing; and itssupport and after-saleservice.

support activitiesActivities that provideinputs that allow theprimary activities to occur.competitive tacticsActions that managerstake to try to outmaneuverrivals in the market.corporate-levelstrategyStrategy concerned withdeciding which industriesa firm should compete inand how the firm shouldenter or exit industries.vertical integrationMoving upstream intobusinesses that supplyinputs to a firm’s corebusiness or downstreaminto businesses that usethe outputs of the firm’score business.unrelateddiversificationDiversification into abusiness not related to the

existing business activitiesof an enterprise by distinctsimilarities in one or moreactivities in the valuechain.

relateddiversificationDiversification into abusiness related to theexisting business activitiesof an enterprise by distinctsimilarities in one or moreactivities in the valuechain.economies of scopeCost reductions associatedwith sharing resourcesacross businesses.internal governanceskillsThe ability of seniormanagers to elicit highlevels of performancefrom the constituentbusinesses of adiversified enterprise.