An acquisition occurs when one company takes over controlling interest in another company. This strategy is often employed to achieve specific business objectives such as expanding market share, gaining new technologies, or reducing competition.
Investors who acquire an equity stake in a publicly traded company as a means of attempting to influence the company's practices or policies. Shareholders can be ethically motivated, for example wanting an improvement in the environmental or social impact of a business, or interested mainly in changing its business strategy or management.
Agglomeration refers to the accumulation into a single entity, such as a holding company, of several diverse and unrelated activities. Conglomerate companies often embody this concept.
A pricing strategy where companies charge the maximum amount customers are willing to pay.
Alternative costs are the costs that would apply if an alternative set of assumptions were adopted, and they represent the benefits foregone when a second-ranked alternative is compared to the chosen alternative.
Backward Integration is the process whereby a firm purchases or creates production facilities needed to produce its goods, such as an automobile manufacturer that buys a steel mill.
The Balanced Scorecard (BSC) is a strategic planning and management system used by organizations to align business activities with the vision and strategy of the organization. It enhances internal and external communications and monitors organizational performance against strategic goals.
Bootstrapping involves starting a company with minimal capital, expecting to fund the business operations through subsequent profits and revenues.
The Boston Matrix, also known as the BCG Matrix, is a tool used in brand marketing and product management to help companies decide what products to keep, develop, or discontinue. It categorizes products based on market growth and market share.
Brainstorming is a group session of executives from different business disciplines, where new ideas are expressed to solve a business situation or formulate corporate policy. Originated by Alex Osborn, it focuses on generating a multitude of ideas in a non-critical environment.
Refers to a start-up company, typically in the IT field, that is designed to be sold to an acquirer at the earliest opportunity rather than built up into an enduring concern.
Business process re-engineering (BPR) is a strategic approach to improving organizational efficiency by fundamentally rethinking and redesigning business processes.
Capacity planning is a long-term strategic process that determines the production capacity needed by an organization to meet changing demands for its products.
The Carrot and Stick strategy is often used in negotiations, involving a combination of rewards and threats to induce desired behavior from the other party. It is a metaphor for the use of a carrot (reward) and a stick (punishment) to influence behavior.
A 'Cash Cow' is a term used in the Boston Matrix to describe a business unit or product that generates a steady, reliable cash flow with lower investment, often used to fund other ventures or pay down debt.
Clearance or closeout sales typically involve selling off inventory at reduced prices, often to free up retail space or discontinue specific product lines.
A competitive advantage is the measure of an organization's product, service, or unique capability that allows it to outperform its peers within the market. It signifies the unique position and value proposition that a company holds over its competitors.
A competitor is a manufacturer or seller of a product or service that is sold in the same market as that of another manufacturer or seller. Competitors offer products or services that satisfy similar consumer needs within the same market.
Conservatism in accounting focuses on understating assets and revenues and overstating liabilities and expenses to provide a prudent and less risky portrayal of a company's financial position. In business, it refers to a cautious and careful attitude, typically avoiding excessive risk. In politics, conservatism promotes limited government spending and lower taxes.
Corporate modelling involves the use of simulation models to assist the management of an organization in planning and decision-making. A budget is a quintessential example of a corporate model.
Country screening involves using countries as the basic unit of analysis for market evaluation, allowing businesses to identify the most favorable markets for their products or services.
Customer perspective in a balanced scorecard focuses on the target customers and market segments that an organization aims to serve. It measures how well the company performs from the viewpoint of customers.
Customer Profitability Analysis (CPA) evaluates the profitability of each customer or segment to help businesses focus on value-adding customers and optimize resource allocation.
The delegation of decision-making responsibilities to the subunits of an organization. The advantages claimed for decentralization are that local managers are more aware of immediate problems, are better motivated, and have greater control over local circumstances. The disadvantages are the possibility of wasteful competition between subunits, duplication of services, and the loss of central control and access to information.
A decision table is a tool used to aid decision making by listing problems that require actions, alongside the estimated probabilities of outcomes. When probabilities are hard to estimate, criterions like maximax and maximin are used to choose the most favorable action.
A decision tree is a diagram that illustrates all possible consequences of different decisions at various stages of decision-making, used primarily in decision analysis and machine learning to visualize decision paths.
Deductive reasoning is a logical method of coming to a conclusion by deducing from established facts what actions to take or what assertions to accept.
Defensive spending refers to strategic expenditures by a company aimed at maintaining its market position and countering competitive threats. It is closely related to the concept of competitive parity.
A business strategy where a large company or group splits up into multiple independent companies, or sells off subsidiaries.
A business growth strategy where a company utilizes existing equipment to produce new products with minimal addition of materials.
Differential advantage refers to the unique benefits or characteristics of a firm's product or service that set it apart from competitors and provide a superior value to customers.
Diversification refers to the strategy of spreading investments or business activities across different fields or products to minimize risks and enhance growth.
Divestiture involves the loss or voluntary surrender of a right, title, or interest. It can also be a legal remedy where the court orders the offending party to rid itself of assets, often used in the enforcement of antitrust laws.
Divestment is the process of selling off assets, subsidiaries, or business segments to realize value or streamline operations. It serves as the opposite of investment.
A 'Dog' is a term used in the Boston Consulting Group (BCG) Growth-Share Matrix to categorize products or business units with low market share in a mature industry. Typically, Dogs generate low or negative cash flow and are considered prime candidates for divestitures.
Movement of a business activity from a higher to a lower level; pejorative term describing a downgrade in the quality of clientele or products. For instance, a retail store choosing to carry lower-grade merchandise is considered to be moving downscale.
A duopoly is a form of oligopoly where only two firms dominate the entire market. This market structure can lead to unique competitive behaviors and economic outcomes. The two dominant firms may collaborate or compete aggressively, impacting market prices, output, and overall industry dynamics.
Eating a competitor's lunch refers to aggressively outperforming and gaining market share from competing firms through strategies like aggressive pricing, superior product offerings, or enhanced customer service.
Economies of scope refer to cost efficiencies that a business achieves by diversifying its product lines, leveraging shared resources and capabilities to produce a wider array of products.
Economies of scope refer to the increases in efficiency and potential sales that businesses experience when they produce, distribute, and market a range of products rather than focusing on a single product or type of product.
EMV is a critical concept in decision-making, particularly when using decision trees. It involves predicting future monetary outcomes and their likelihood to guide strategic choices.
The Experience Curve is a production phenomenon where unit costs decline as volume increases. This concept highlights the cost advantages gained from efficiency improvements, skill enhancements, process optimizations, and material cost reductions associated with increased production.
The financial structure of a company refers to the specific mixture of long-term debt and equity that it uses to finance its operations. Understanding financial structure is crucial for evaluating financial health and making strategic business decisions.
A firewall in a conglomerate is a strategic barrier designed to segregate the organization, funding, and ownership of different business entities within the group, ensuring that challenges faced by one entity do not adversely affect others.
Forward integration is a type of vertical integration strategy employed by companies to gain control over the direct distribution or supply chain of their products.
Forward Integration is a business strategy that involves a company expanding its operations to include control over its direct distribution or supply chain. This often means moving closer to the consumer by acquiring or establishing its retail outlets.
A broad group of buyers with approximately the same general needs, who can choose from different sellers offering varying ways to satisfy those needs.
A holdout is an individual or entity that refuses to sell an asset or agree to terms in the early stages of negotiation, typically in an attempt to realize a higher price or more favorable conditions.
Horizontal Channel Integration is a strategy wherein a company acquires or increases its control over some of its competitors in the same industry, often aiming to enhance market share, reduce competition, and realize synergies through expanded operations.
A horizontal combination occurs when two or more companies operating at the same level in an industry merge to form a larger entity. It is similar to a horizontal merger.
Horizontal integration refers to the strategy where a company acquires or merges with other companies operating at the same level in an industry. It aims to consolidate resources, reduce competition, and increase market share.
A horizontal merger involves the merging of companies with similar functions in the production or sale of comparable products. It is often scrutinized for its potential anticompetitive impacts.
**Hunkering Down** is a slang term used in the context of business and economics to describe taking a defensive stance and adopting a conservative strategy, usually in anticipation of tough conditions or to weather through a downturn. Companies often hunker down by reducing expenditures, postponing expansion plans, and preserving resources to maintain stability until the business environment improves.
Inductive reasoning is a process where specific observations or experiences are used to make generalized conclusions. Commonly used in fields such as science, marketing, and business strategy, inductive reasoning involves deriving patterns or theories from specific instances.
Innovation refers to the use of a new product, service, or method in business practice immediately subsequent to its discovery. It plays a critical role in the growth and success of businesses by fostering competitive advantage, enhancing productivity, and driving industry evolution.
Interindustry competition refers to the competition that develops between companies operating in different industries. For example, an automobile company may compete with an aerospace company for a government manufacturing contract for a military subsystem.
Lagging measures are performance metrics that reflect past outcomes and provide insights into how well business strategies and operations have performed historically.
A financial transaction where one party sells a piece of land to another party and then leases it back for a long-term period. This arrangement allows the seller to continue using the land while freeing up capital.
A 'leader' in various contexts can signify a stock group forefronting market trends or a dominant product in its industry.
Lifetime Value (LTV) is a metric used to forecast the future profitability a customer will bring to a business over the entire duration of their relationship with the company. It is pivotal in making strategic decisions related to marketing, customer acquisition, and retention.
Line extension refers to the addition of another variety of a product to an already established brand line of products. This strategy helps brands to capitalize on their existing reputation and market base, offering consumers more options while remaining under the trusted umbrella of the original brand.
Long-range planning involves strategizing for periods exceeding five years, taking into account the future impacts of present, short-range, and intermediate-range events. It is a crucial aspect of strategic management and organizational development.
A strategic choice in business operations regarding whether to produce goods internally or to purchase them from external suppliers. It involves evaluating various factors including cost, capacity, quality, and opportunity costs.
Market Analysis is the comprehensive study designed to define a company's current or potential markets, forecast their directions, and decide how to expand the company's share and exploit any new trends.
Market penetration is a marketing strategy aimed at increasing a product's sales within an existing market through more aggressive marketing tactics. It also refers to the degree of a product's purchase within a specific market.
Market screening is a method of scanning for desirable markets based on environmental factors that help preclude undesirable markets. It is commonly used in international business strategy to evaluate potential markets effectively.
Market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers (known as segments) based on some type of shared characteristics. The goal is to identify high-yield segments — that is, those segments that are likely to be the most profitable or that have growth potential — so that these can be targeted with tailored marketing strategies.
MBO is an abbreviation that can refer to either 'Management Buy-Out' or 'Management by Objectives.' The term's meaning depends on the context in which it is used, encompassing significant concepts in corporate finance and management techniques respectively.
Monetary Working Capital Adjustment refers to the changes made to the working capital of a company to reflect its current operational needs and financial health. It involves adjusting the components of working capital to ensure that they are aligned with the company’s operational activities and financial strategies.
Top management integrating lower and middle level managers in the planning and administration of corporate affairs.
A niche represents a particular specialty in which a firm or person finds that they prosper. In marketing, a niche strategy involves targeting a small but lucrative portion of the market, ensuring efficient marketing efforts and minimal direct competition.
An objective is a clearly defined and articulated goal or target, free from personal bias or opinion, and representing the ultimate aim of an individual or group's efforts and strategy.
Optimum capacity is the level of output of manufacturing operations that produces the lowest cost per unit.
Outsourcing refers to the business practice where an organization contracts out a business process or operation to a third-party provider. This can involve services, manufacturing, or handling specific operations to leverage expertise, cost efficiency, and other benefits.
Overshoot refers to the phenomenon where a specified target or goal, such as an economic target, earnings projection, budget, or any predefined metric, is surpassed, often leading to unanticipated consequences.
A paradigm shift refers to a fundamental change in a model or pattern that has been nearly universally accepted. It often marks a significant transformation in the way processes or concepts are understood or executed.
A person or organization at the mercy of another's will, often used in strategic games or business situations.
Penetration pricing involves establishing low pricing for a product to achieve rapid market entry and discourage competitors, with the potential to raise prices later once market share is established.
A retail pricing strategy to attract customers either with a high price image, strong personal service, and merchandise quality or by underbidding the competition in the case of below-the-market pricing.
Proactively engaging in future-oriented strategies to anticipate and address potential issues before they arise.
In the context of the Boston Consulting Group (BCG) Matrix, a 'Problem Child' represents a business unit, product line, or project that holds a small market share in a high-growth market. These units or products have the potential to grow but require significant investment to gain market share.
The structured sequence of stages involved in bringing a new product or service concept to market, encompassing market analysis, targeting, development, distribution, and feedback analysis.
A product line refers to a group of products manufactured by a firm that are closely related in use and in production and marketing requirements. The depth of the product line indicates the number of different products offered within that line.
A Product Manager is responsible for the planning, development, and overall strategic execution of a product throughout its lifecycle, ensuring that it meets market needs and aligns with the company's business objectives.
The assortment of merchandise made or held for sale by a business; a crucial element of marketing strategy.
Product Research and Development (PR&D) involves activities performed by a team of professionals working to transform a product idea into a technically sound and promotable product. This process, also referred to as Research & Development (R&D), is essential for innovation and maintaining competitive advantage in the market.
A promotional allowance is a reduction of the wholesale price as an incentive to retailers or middlemen. It compensates the retailer for expenditures made promoting the product.
Strategic advantages and disadvantages regarding a particular situation. For example, the pros and cons of launching a new product at a particular time have to be weighed in terms of competitive and other market factors.
Relevant income, also known as relevant revenue, refers to the revenue that changes as a result of a proposed business decision. Revenues that remain unchanged by the decision are considered irrelevant to the decision-making process.
Reorientation refers to the strategic redirection or adjustment of a property or business to appeal to a new target market. This process involves rebranding, altering the product or service offerings, and sometimes restructuring the business model to better align with the preferences and demands of a different customer base.
Resource allocation refers to the process of distributing available resources to various projects, departments, or business units to achieve organizational objectives efficiently.
Revenue evaporation is a significant drop in income from the sale of a product or service, often due to fundamental changes in the market, such as technological innovations.
Risk avoidance involves management methods utilized to bypass as much situational risk as possible. While the elimination of all risk is rarely feasible, in many situations it is prudent to develop strategies where specific risks can be circumvented.
A corporate strategy used to avoid a hostile takeover by disposing of valuable assets, often resulting in a significant decline in the company's value and earnings power.
A shakeout is a market phenomenon where weaker or marginally financed participants are eliminated due to changing market conditions. In financial markets, it often results in speculators being forced to sell their positions, typically at a loss.
A shakeup refers to a rapid and significant change in the management and structure of an organization. It is often intended to redirect the organization's path, often following a period of stress or underperformance.
Short-termism refers to policies and practices aimed at maximizing current profits rather than promoting long-term development and wealth creation. It can have significant negative implications on research and development, stakeholder interests, and overall company stability.
Situational Management is a management method whereby the current state of the organization determines which operational procedures will be implemented to achieve desired outcomes. It emphasizes a very adaptive management style.
A potential target that has not yet been approached by an acquirer. Such a company usually has particularly attractive features, such as a large amount of cash or under-valued real estate or other assets.
Strategic Planning involves the management act of determining a firm's future environment and response to organizational challenges. It is crucial in making decisions that determine the direction of a firm.
