KEY TERMS – CHAPTER 8

strategic management What managers do to develop the

organization’s strategies.

strategies The decisions and actions that determine the

long-run performance of an organization.

business model A strategic design for how a company

intends to profits from its strategies,
processes, and activities.

strategic management process A six-step process that encompasses

strategic planning, implementation, and
evaluation.

mission A statement of the purpose of an

organization.

opportunities Positive trends in external environmental

factors.

threats Negative trends in external environmental

factors.

resources An organization’s assets that are used to

develop, manufacture, and deliver products
or services to its customers.

capabilities An organization’s skills and abilities in

doing the work activities needed in its
business.

core competencies The organization’s major value-creating

skills and capabilities that determine its
competitive weapons.

strengths Any activities the organization does well or

any unique resources that it has.

weaknesses Activities the organization does not do well

or resources it needs but does not possess.

SWOT analysis An analysis of the organization’s strengths,

weaknesses, opportunities, and threats.
corporate strategy An organizational strategy that determines
what businesses a company is in, should be
in, or wants to be in, and what it wants to do
with those businesses.

growth strategy A corporate strategy that’s used when an

organization wants to grow and does so by
expanding the number of products offered or
markets served, either through its current
business(es) or through new business(es).

related diversification When a company grows by combining with

firms in different, but related, industries.

unrelated diversification When a company grows by combining with

firms in different and unrelated industries.

stability strategy A corporate strategy characterized by an

absence of significant change in what the
organization is currently doing.

renewal strategy A corporate strategy designed to address

organizational weakness that are leading to
performance declines.

retrenchment strategy A short-run renewal strategy.

turnaround strategy A renewal strategy for situations in which

the organization’s performance problems are
more serious.

BCG matrix A strategy tool that guides resource

allocation decisions on the basis of market
share and growth rate of SBUs.

business or competitive strategy An organizational strategy focused on how

the organization will compete in each of its
businesses.

strategic business units The single businesses of an organization in

several different businesses that are
independent and formulate their own
strategies.

competitive advantage What sets an organization apart; its

distinctive edge.
cost leadership strategy A business or competitive strategy in which
the organization competes on the basis of
having the lowest costs in its industry.

differentiation strategy A business or competitive strategy in which

a company offers unique products that are
widely valued by customers.

focus strategy A business or competitive strategy in which

a company pursues a cost or differentiation
advantage in a narrow industry segment.

stuck in the middle A situation where an organization hasn’t

been able to develop either a low cost or a
differentiation competitive advantage.

functional strategies The strategies used by an organization’s

various functional departments to support
the business or competitive strategy.

strategic flexibility The ability to recognize major external

environmental changes, to quickly commit
resources, and to recognize when a strategic
decision was a mistake.

first mover An organization that’s first to bring a

product innovation to the market or to use a
new process innovation.