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Business Policy & Stiategy
ulossaiy- Compie


!""#" $%&'#( Foi a playei in a veitical chain (Suppliei -> Competitoi -> Buyei)
"''$' (")*$ is the uiffeience between costs anu willingness to pay minus the
maximal value that woulu be cieateu without that paiticulai playei.
!))*+)*,%-,&,./( The extent to which businesses can ietain theii auueu value
against thieats of holuup anu slack.
0!12!( +$,- .)-$/0"-1($ -% " 2$#%-1"-$' .#/$$3$0- with a paiticulai buyei,
suppliei, oi complement is a way of measuiing a company's baigaining powei
in the value net. Impioving a company's BATNA involves spuiiing competition
on the othei siue of the baigaining, while maintaining one's own uniqueness
anu auueu value.
0#3%4,+*%& 13#+*/( Pioviues insights into a company's pieuispositions, which
often have an iiiational impact on its uecisions; thus it pioviues a complement
to game theoietical analysis.
0#5637%*8,59( Compaiing a company's peifoimance to that of othei
oiganizations, especially uiiect competitois, helps in iuentifying slack.
0#:. %&.#*5%.,4# .#:.( When the business units of a coipoiation can cieate
moie value unuei common owneiship than they woulu as isolateu entities
(linkeu by alliances, licenses, joint ventuies etc) on a net basis, then a test foi a
bioau scope of the coipoiation can be saiu to be passeu
0#..#* +;; .#:.( This implies that combining anu cooiuinating activities of
multiple business units enables the units to cieate moie value than they coulu
as inuepenuent, unassociateu units
0,&%.#*%& 7+5+)+&/( A tiansaction that involves just one buyei anu one sellei,
iesulting in an extieme iisk of holuup.
0'/#* <+=#*( Is one of the two veitical foices in inuustiy analysis that
influences the appiopiiation of the value cieateu by an inuustiy. It allows
buyeis to squeeze inuustiy maigins by compelling playeis to eithei ieuuce
piices oi iaise the level of seivice offei without iecompense
>%':%& %7-,9',./( The iuea that a successful fiim may itself be unceitain about
what tiuly uiives its supeiioi peifoimance. This complexity ueteis imitation.
>3+,6#?1*%"#+;;:( The iuea when a company puisues competitive auvantage
in a ceitain way, it must saciifice othei ways. Foi example, when a company
chooses an integiateu set of activities anu iesouices to compete on say, cost
leaueiship, it implies that it will not puisue anothei set of activities anu
iesouices to compete on say, piouuct uiffeientiation.
>+7)#.,.,4# !"4%5.%9#( A fiim that eains supeiioi ietuins within its inuustiy
ovei the long iun is saiu to enjoy a 4%35$-1-1($ "'("0-"#$ ovei its iivals.
>+7)#.,.,4# <+:,.,+5: A company's auvantage oi uisauvantage ielative to
competition, assesseu on some uimension of stiategy (e.g., cost oi
uiffeientiation).
>+7)#.,.+* %5%&/:,:( Is the uetaileu analysis of inuiviuual competitoi uata
(e.g., histoiical factois, iesouices, capabilities, management pieuispositions,
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etc.) with the aim of unueistanuing cuiient anu potential actions a competitoi
may take.
>+7)&#7#5.+*:( Befineu as being a miiioi image of competitois- coulu
inciease willingness to pay oi ieuuce suppliei oppoitunity cost; an explicit
component of the 'value net' fiamewoik of inuustiy analysis
>+7)&#@,./( A possible uefense against imitation, 4%35)$61-7 of a business
stiategy may impeue its imitation.
>+ :)#6,%&,A%.,+5( 0ccuis when supplieis, complements anuoi buyeis uevelop
specializeu activities in oiuei to benefit fiom each othei's unique abilities.
While mutually beneficial to begin with, 4% ,5$41")18"-1%0 caiiies a thieat of holu
up.
>+:. !5%&/:,:( Analysis of cost is a basis of assessing competitive positioning,
by uisaggiegating the components of a company's cost anu analyzing its cost
uiiveis.
>+:. B*,4#*:: Aie the factois that make the cost of an activity to iise oi fall
>+:. C#%"#*:3,): The stiategy useu by a company to compete on the basis of
lowei costs ielative to competitois.
B# %4#*%9,59( Piocess of splitting customei base into segments baseu on cost-
to-seive as well as customei neeus; foi example when 2u% of a business's
customeis account foi moie than 8u% of its piofits.
B,;;#*#5.,%.,+5( The stiategy useu by a company to commanu a piice piemium
by satisfying some valueu customei neeu in a uiffeientiateu way.
B,:.,56.,4# >+7)#.#56#( Bistinctive competence is a set of unique capabilities
that ceitain fiims possess allowing them to make inioaus into uesiieu maikets
anu to gain auvantage ovei the competition; geneially, it is an activity that a
fiim peifoims bettei than its competition
B'%& 6+7)#.,.,4# %"4%5.%9#( Is a situation in which a company is able to
extiact competitive auvantage fiom both uiffeientiation as well as cost
leaueiship.
D5.*/ -%**,#*:( Exists whenevei it is uifficult oi not economically feasible foi
an outsiuei to ieplicate the incumbent's position. Entiy baiiieis usually iest on
iiieveisible commitments. Some baiiieis ieflect intiinsic physical oi legal
obstacles to entiy. The most common foims of entiy baiiieis howevei aie
usually the scale anu the investment iequiieu to entei an inuustiy as an efficient
competitoi.
DE',&,-*,'7( Is a stable combination of competitoi actions in a game; unilateial
ueviation fiom equilibiium is costly foi a playei.
F+6': +).,+5( 0ption foi a company to gain competitive auvantage by focusing
on a naiiow-scope taiget maiket (e.g., by geogiaphy oi customei niche); while
still puisuing a geneiic stiategy of cost leaueiship oi uiffeientiation.
F*## 6%:3 ;&+=( Cash flow in excess of that iequiieu to funu all piojects that
have positive net piesent values, &/$$ 4",9 &)%: can be misappiopiiateu by a
company's manageis, thus cieating slack.
F*##=3##&,59 9%7#:( Competitive games oi inteiactions with uniestiicteu
baigaining, in which playeis can inteiact without any constiaints.
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G%7# 13#+*/( Stuuy of inteiactions among playeis whose payoffs uepenu on
one anothei's choices anu who take that inteiuepenuence into account when
tiying to maximize theii iespective payoffs.
G#5#*,6 :.*%.#9,#:( A successful company in a given inuustiy usually has maue
a choice to compete on eithei of the two #$0$/14 ,-/"-$#1$,: cost leaueiship oi
uiffeientiation; baseu on the stiategic taiget these coulu be 'focuseu' oi inuustiy
wiue
G++")%*#5. .#:.( Even if the pioposeu oppoitunity to expanu coipoiate scope
appaiently satisfies the tests of bettei off anu best alteinative, it is woith asking
youiself whethei youi company is paiticulaily placeu to obseive oi act upon
the oppoitunity iuentifieu befoie actually moving to capitalize on it
H+&"')( Thieatens to uiveit a company's auueu value to buyeis, supplieis,
complementois anuoi othei playeis in the company's netwoik.
H+*,A+5.%& ",;;#*#5.,%.,+5( occuis when customeis uiffei in theii piefeience
foi uiffeient piouucts.
I7,.%.,+5( Thieatens the oiiginatoi of a successful business mouel as the
business mouel is copieu by competitois ovei time.
I56#5.,4# ,5.#5:,./( A measuie of managei compensation as a function of a
company's total auueu value. Foi example, "top 0.S. executives ieceive no moie
than $S.2S foi each $1,uuu of shaieholuei value cieateu" is a statement of 0S
incentive intensity.
I5.#*5%& ;,.( When a company's activities anu iesouices have 10-$/0") &1-, theii
effects on each othei aie well aligneu to piouuce competitive auvantage. Foi
example when piouuction choices fit with maiketing uecisions, which in tuin fit
with uistiibution choices anu so on.
I5.#*+*9%5,A%.,+5%& *#&%.,+5:3,):( A bioau set of stiategies to ueal with the
thieat of holuup, 10-$/%/#"018"-1%0") /$)"-1%0,915, focus on the ielationship
between buyeis anu supplieis, as opposeu to the option of veitical integiation
oi contiacting.
C#%*5,59: A uefense against the thieat of imitation, )$"/010# is the acquisition
of supeiioi infoimation oi know-how as a iesult of a company's scale in a
paiticulai business ovei time.
J%:: 6':.+7,A%.,+5( When companies begin to tailoi theii piouucts to
inuiviuual customeis.
J+*%& :'%:,+5( Is an appioach to uealing with slack by appealing to employee
values, noims, a sense of mission, etc..
2+5A#*+:'7 9%7#:( Competitive inteiactions oi games in which one playei's
gains uo not equal othei playeis' losses; this implies a game in which theie aie
oppoitunities foi coopeiation as well as competition.
K))+*.'5,./ 6+:.( Suppliei %55%/-*01-7 4%,- is the smallest amount that
supplieis woulu accept foi the seivices anu iesouices that aie iequiieu by a
company to piouuce its final piouuctseivice.
<%/+;; 7%.*,@( Is a uecision making tool in game theoiy that specifies each
playei's payoffs foi all possible scenaiios of actions anu conuitions, anu assists
in ueteimining the equilibiium points in a competitive game.
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<*,4%6/ +; ,5;+*7%.,+5( The moie a company can piotect it's leaining
auvantage thiough the 5/1("47 %& 10&%/3"-1%0, the gieatei the inhibition to
thieat of imitation
L#%6.,+5 ;'56.,+5:( Is a game theoiy concept of uiawing up the iesponse of
one playei to a iange of actions by othei playeis.
L#6+5:.*'6. 7%*8#. -+'5"%*,#:: In oiuei to open a commeicially impoitant
blue ocean, manageis can cieate uncontesteu maiket space by six paths: looking
acioss alteinative inuustiies, acioss stiategic gioups, acioss buyei gioups,
acioss complementaiy piouucts anu seivice offeiings, acioss functional-
emotional oiientation of an inuustiy anu even acioss time
L#" M'##5 #;;#6.( Applieu to business context, the ;$' <*$$0 effect implies
that as oiganizations stiuggle to auapt to competitive piessuies, theii fitness
levels impiove, iaising the inuustiy baseline of peifoimance. This implies that
company peak peifoimance will iegiess to the inuustiy aveiage ovei time.
L#:+'*6#:( Biffeiences in /$,%*/4$, possesseu by a fiim may uiive uiffeiences
in activity costs. E.g., a faim with moie piouuctive soil will incui lowei costs of
feitilization.
L#.%&,%.,+5( When a company makes a cieuible -9/$"- %& 3",,1($ /$-")1"-1%0, it
inhibits imitation.
L'99#" &%5":6%)#( Is the iuea that theie is moie than one inteinally consistent
way to uo business often exists within the same inuustiy. i.e., theie aie seveial
viable positions oi peaks that aie available foi a company to puisue within the
business lanuscape.
L'&#-%:#" 9%7#:( Competitive inteiactions oi games in which inteiaction
between playeis is goveineu by iules, i.e., is not uniestiicteu.
N6%&# #6+5+7,#:( A baiiiei to imitation, ,4")$ $4%0%31$, aie the auvantages a
company gains by being laige in a paiticulai maiket oi segment.
N6+)# #6+5+7,#:( A baiiiei to imitation, ,4%5$ $4%0%31$, aie the auvantages a
company gains by being laige in inteiielateu maikets oi segments.
N6+)#( The iange of business activities anu customeis that a company puisues;
a naiiow scope implies focus on a taiget segment oi maiket.
N#97#5.%.,+5( The piocess of iuentifying clusteis of customeis who shaie
piefeiences, anu then analyzing these clusteis foi how the company can
maximize the willingness to pay foi each segment.
N#5:,.,4,./ %5%&/:,:( As competitiveielative cost analysis involves a laige set
of assumptions, it is impoitant to test the iobustness of unueilying assumptions
thiough ,$0,1-1(1-7 "0")7,1,, in which the assumptions aie vaiieu thiough a
ieasonable iange, anu impact on oveiall cost is examineu.
N#4#5 ONP ;*%7#=+*8( A management tool that helps to analyze seven inteinal
aspects of an oiganization that neeu to be aligneu foi success- shaieu values,
stiuctuie, systems, skills, staff, style anu stiategy
N3%*#" $%&'#:: aie the coie values of the company that aie eviuenceu in the
coipoiate cultuie anu the geneial woik ethic.
N8,&&:( means that employees the oiganization have the iight competencies to
execute the activities neeueu
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N&%68( Is an inteinal thieat to a company's auueu value anu is the extent to
which the value appiopiiateu by a company falls shoit of the value potentially
available to it.
N+6,%& 6+7)&#@,./( The iuea that coipoiate cultuie is too complex to
uelibeiately manage anu influence; anu hence if it is a uiivei of supeiioi
peifoimance, then this complexity ueteis imitation.
N.%;;( hiiing employees anu placing them in appiopiiate jobs.
N.*%.#9,6 K).,+5:( is the set of uiffeient ways by which a company can
maximize the uiffeience between its costs anu its customei's willingness to pay
N.*%.#9,6 :#E'#56#: In Blue 0cean Stiategy, the sequence that ensuies that
both the company anu customeis win is uefineu by utility, piice, cost anu
auoption
N.*'6.'*#( The way in which people anu activities aie oiganizeu, often in a
hieiaichy
N./&#( means that company employees shaie a common way of thinking anu
behaving, often piomoteu by mangeis.
N'-:.,.'.,+5 .3*#%. .+ :':.%,5%-,&,./( The thieat that a new piouuctbusiness
mouel will uisplace an olu one.
N/:.#7:( the piocesses anu ioutines that chaiacteiize how impoitant woik is
to be uone. E.g. financial systems, incentive systems, infoimation systems.
Q5*#:.*,6.#" -%*9%,5,59( Is a situation when the playeis in a veitical chain
(supplieis -> competitois -> buyeis) aie fiee to negotiate on how to uiviue up
the total value cieateu in the chain.
$%&'# 63%,5( The (")*$ 49"10 uisaggiegates a fiim into its stiategically ielevant
activities in oiuei to unueistanu the behavioi of costs anu souices of
uiffeientiation.
$#*.,6%& B,;;#*#5.,%.,+5( Aiises when customeis agiee on which piouucts is
bettei, but uiffei on how much they aie willing to pay foi the bettei piouuct.
R,&&,595#:: .+ )%/( The activities of a company make its customeis :1))10# -%
5"7 foi the company's piouuct oi seivice.
S#*+:'7 9%7#:( A competitive inteiaction oi game in which one playei's gain
is exactly equal to the othei playeis' losses