Dictionary of Strategy

Strategic Management A-Z

Louise Kelly, Chris Booth

• Publisher: SAGE Publications, Inc
• Year: 2004
• Print ISBN: 9780761930730, 9780761930723
• eBook ISBN: 9781483391908
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

The Dictionary of Strategy: Strategic Management A-Z is a lively, contemporary sourcebook that will help illuminate major debates, issues, and scholarship in strategic management. The dictionary is a teaching tool that introduces the reader to the major terms in the field, giving them a general framework of strategic management. The book presents a unique, existential view of strategy that emphasizes strategic debate of the big issues, strategic thinking at all levels of the organization, and the idea that that one can start at many different points and gain information about the environment and constraints necessary to form an appropriate strategy.

Truly student oriented, the Dictionary of Strategy was compiled based on author Louise Kelly?s MBA classes and presents over 550 important strategic management terms and concepts. The entries present a historical context showing how views have changed and evolved, and invite the reader to think more deeply about the issues raised. Over 20% of the terms and concepts reflect very recent material from magazines, academic journals, and conferences, offering the latest cutting edge research and debates. It also contains multinational and multicultural examples and is not solely focused on US companies and business situations.

The dictionary will be an essential reference to practitioners, managers, academics and students in management and strategic management classes at the undergraduate, MBA, and doctoral level.

A

A–Z of Strategic Management The approach is based on strategic debate, addressing the big issues. There is an existential view of strategy: The strategist can pick any starting point, and this will bring her up against the constraints of the situation. These constraints are unknowable until some action is taken (as Donald Rumsfeld says, “there are the unknowns that are known and then there are the unknowns that are unknown”), so the situation cannot be strategically assessed in any complete sense without the element of action—of making a strategic choice.

Absence of Strategy Reactive approach to the market or environment. Passive, at times indicating confusion, disarray.

Accretion The growth of a company through additions and purchases of plant or value-adding services.

Acquisitions and Mergers (See also Mergers and Acquisitions.) Falls under corporate strategy, meaning those strategies that answer the question,“What business or set of businesses do we want to be in?” M&A refers to the purchase of a company that is already in operation. An acquisition is a strategy by which one firm buys controlling or 100% interest in another firm, with the intent of using a core competence more effectively by making the acquired firm a subsidiary business within its corporate portfolio. Acquisitions have become a strategy for many giant firms in the software and pharmaceutical industries that are no longer able to achieve entrepreneurial Schumpeterian innovation through internal investment and R&D, and therefore “buy rather than build” new technologies.

Acquisitions can also be a human resource strategy for large firms. In a knowledge-based economy, social capital becomes the most critical factor of production and can be a bottleneck for implementing innovation-based strategies especially in high-tech industries.Examples are Microsoft’s acquisition of smaller firms and IBM’s acquisition of Lotus. Acquisition strategies are common in industries that are consolidating, such as the DaimlerChrysler acquisition in the automobile manufacturing industry. Acquisitions are notoriously difficult to manage. The costs of incorporating the acquired company into the parent company are significant, and paper synergies (those that appear in the planning stage—see Formal Strategic Planning) often disappear in battles of dueling cultures and systems and the “them versus us” quagmire. After an acquisition is announced, the stock of the acquiring company typically falls while that of the smaller acquiree rises. Thus, acquisitions are notoriously unstable, risky, and difficult to manage. Many firms look for more flexible arrangements such as alliances, networks, and joint ventures in lieu of acquisitions. Acquisition capability is a distinctive competence that can be developed through a series of acquisitions.

Acronyms An acronym is a linguistic invention in which the first letters of the words in a phrase form a newly coined or previously existing word to distill the essence of at-times complex concepts and programs into a memorable, inspiring word. A key idea in strategy is for leadership to capture and convey a concept in a brief, memorable manner. An acronym to be effective must sound like a word. This highlights the artistic side of strategy, where thinking in imagery, soundbites, and off-beat, seemingly off-the-cuff insights often can be very effective. Many examples of memorable acronyms come from the U.S. military:

MOPP: Mission Oriented Protective Posture, the acronym used to describe a military unit’s alert level against gas attacks and the like. Marines call their protective gear “MOPP suits.”

USA PATRIOT ACT: Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism.

OK:“0 (zero)” killed.

Are you into strategy?

Scenario setting: Mapping the future.

Tasking: Assigning tasks and defining roles.

Reconnaissance: Reconnaissance time is time well spent.

Attack: Attack only when you know you can win.

Target setting: Target goals to solve the main problem.

Existentialism: Defining oneself through choices that reflect values.

Generalship: You have to be a general.

Y: The why of the actual strategy, the mission.

As a WW II veteran notes, “SNAFU” brought back memories, good, bad, and funny. During his time in the military, the word was so completely appropriate so very many times that they often speculated on how incredibly screwed up the enemy must be, since the Allies seemed to be winning. This is a common theme in the military; for example, recently in Iraq, American military are frequently quoted as saying that they were saved only because “the Iraqi could not shoot straight.”

Recent news should provide a plethora of acronyms that reflect the various stages of disarray that emerge when strategy implementation goes awry. See Murphy’s Law.

Some acronyms help to communicate the organizational hierarchy such as POTUS, FLOTUS, SCOTUS,VPOTUS. These are President, First Lady, Supreme Court, or Vice President of the United States, respectively. Many strategic initiatives in companies are given acronyms such as GE’s FMP (financial management program) or general leadership theory in the army’s “Be, Know, Do” (BKD) model of leader development (LD). An acronym often gives followers energy and makes them feel part of something special. Another example is the U.S. military’s HUA (heard, understood, acknowledged), now written as it’s pronounced: Hoo-ah.

Action Action is something that happens while you are strategizing, or as a result of strategizing.

Action-Centered Leadership A leadership model that focuses on what leaders actually have to do in order to be effective. There are three main activities: achieving the task, building and maintaining the team, and developing the individual.

Action Learning The concept of action learning is based on a simple equation: L = P + Q. Learning (L) occurs through a combination of programmed knowledge (P) and the ability to ask insightful questions (Q). Learning must be free-flowing and “opened up” through asking questions.

Action Plan Pertains to the behavioral side of learning—what we do differently as a result of new discoveries.Action is akin to the strategy implementation process.

Reminiscent of Winston Churchill’s famous dictum in memoranda to bomber command—action this day! This often motivated and energized subordinates to complete a specific task. Nowadays the action plan process still requires motivating and energizing players in the organization; however, the impetus for change can no longer be top-down directives from the command center.

Action Research The researcher takes an active role as a participant in planning and implementing change in an organization. Experiments are conducted by making changes while simultaneously observing the results. Employees are encouraged to participate in developing practical solutions to real organizational challenges.

Active Supporter (See Sponsor.)

Acts of Symbolism Odd or unusual behavior that seems to run contrary to common sense but turns out to be deeply significant for employees and other stakeholders. For example, William Watson, the CEO of IBM, by allowing himself to be challenged by the security guard, shows that IBM is democratic and nobody is above the rules.The effect was instantaneous, though many outsiders may have thought that IBM was oversensitive to security.

Adaptability Not indicated by measures; however, measures can help people to see the areas of adaptability or lack of adaptability to adapt.

Adaptive Strategy Emphasizes fitness with the environment.

Adding Value Adding value to a product consists of any activity that increases the product’s worth to the customer, such as design, manufacturing, packaging, service, and so forth. The mouse added value to the keyboard on the personal computer. The mouse was invented, and subsequently lost, by researchers at Xerox PARC in Palo Alto, California, who could not grasp its added value. Steven Jobs instantly recognized the practicality of the mouse and hence the added value to the Macintosh computer.

Ad Hoc Management Ad hoc management necessarily involves the ability of a manager to respond without consulting a formal plan. Ad hoc management gives more flexibility to managers.

Administration The management of the affairs of a business, especially the planning and control of its operations.

Administrative Behavior “Organization is not an organizational chart, but a complex pattern of communications and other relationships in a group of human beings.”—Herbert Simon. Simon, in his landmark book Administrative Behavior (for which he won the Nobel Prize in 1978), says that “administrative man” usually does enough to “get by” (satisficing) when making decisions.

Advice Networks Informal networks that connect people who turn to one another to seek counsel, get technical answers, and solve specific problems. Some say it is a phony concept, false nomenclature for friendly relationships. This can be extremely valuable to women and minorities in top management. Often a useful communication circle prior to successful self-establishment or getting your foot in the door. The neophyte’s crutch.

Agency Theory The basic conflict between owners and managers. How can the owners ensure that the managers are acting in the owners’ interests and not toward maximizing their own wealth and power? For example, a CEO can go on a wild spending and acquisition spree and end up with a much bigger compensation package as she is now managing and leading a much larger and more complex organization. However, eventually these acquisitions may need to be divested if they were not made with the strategic intent of the firm.Was Carly Fiorina’s acquisition of Compaq for HP empire building or strategic positioning? Only time will tell.

One area of research known as agency theory suggests that managers frequently place their own interests above those of their shareholders. This appears to be true when strategic decisions involve diversification.While stockholder value may be maximized by selling a company, managers in the acquired field may lose their jobs—a potential conflict of interest.

Aggressive Accounting Pushing the envelope of generally accepted accounting principles (GAAP), as Enron did. Sometimes unethical, sometimes illegal, always innovative.

Aggressive Action Relating to investment strategy marked by a willingness to accept high risk while trying to realize higher-than-average gains. Typically, such a strategy involves investing in rapidly growing companies.

Aggressive Expansion Devoting considerable resources to a market penetration strategy. Used in describing BMW’s strategy in trying to capture the automotive market in China. Despite a weak economic situation in Europe and North America, BMW is taking an aggressive approach in reaching out to the Chinese market.¹

Aggressive Posturing Reminiscent of the jungle warfare among alpha males but carried over into internecine struggles among corporate giants. Many firms under the threat of hostile takeover develop poison pill policies. Firms that are losing ground or in financial trouble often react aggressively by acquiring smaller rivals, introducing new products, discounting prices, and so on. Such actions can heighten crosscompany rivalry and can trigger a hotly contested battle for market share.

Agility “The starting point for next year’s strategy is almost always this year’s strategy. . . . the company sticks to what it knows, even though the real opportunities may be elsewhere.”—Gary Hamel. A company that builds a more agile platform is one that will exploit future opportunities and respond more quickly to change.

Algorithm A solution to a problem that is certain to work; for example, the formula to solve quadratic equations that always gets the answer to any quadratic problem. If a company in NYC wants to make sure that it has a seat on a plane going to London every day, it uses the algorithm book on, cancel off. This is an example of an algorithm, or decision rule, that allows strategists to move forward through a complex set of situations and information and make effective choices. An algorithm is certain to work. Fear of flying can be alleviated by the same principle: Book on, cancel off. You need to find surefire solutions that can’t fail.

Often in an undertaking, such as introducing a new product, the developers are confronted with a...

Table of contents

• Cover
• dedication
• Title
• Copyright
• Contents
• Preface
• Acknowledgments
• Entries A Through Z
• Bibliography
• About the Authors