463 A Activity Ratios measures used to assess the efficiency of a firm’s use of assets; e.g., sales divided by assets. Area Structure an organizational form that divides and orga- nizes the firm’s activities according to where operations and people are located (also known as place structures, geo- graphic divisions). B Backbone a high-speed transmission line (often of fiber-optic cable) that forms a critical pathway in a telecommunica- tions network. Backbones represent the most important building blocks of modern telephone and Internet-based networks. Backward Integration a strategy that moves the firm upstream into an activity currently conducted by a supplier (see vertical integration, forward integration). Bandwidth the defined range of frequencies used by a trans- mission signal to carry voice, video, data, or other informa- tion. The need for greater bandwidth is a fundamental con- straint that limits the speed with which all types of information (voice, video, data) is transmitted across the Internet and other networks. Barriers to Entry economic forces that slow down or prevent entry into an industry. Benchmarking a firm’s process of searching, identifying, and using ideas, techniques, and improvements of other compa- nies in its own activities. Boundaryless Organization an organization design in which people can easily share information, resources, and skills across departments and divisions. Bureaucratization the gradual process by which information flow becomes steadily slower within the firm. Business Managers people in charge of managing and operat- ing a single line of business. Business Strategy plans and actions that firms devise to compete in a given product/market scope or setting; addresses the question: how do we compete within an industry. Business System the subset of value chain activities that a firm actually performs. C CAD/CAM Network the linking up of multiple design and manufacturing activities (both within and across) firms through the use of complex networks of computers. CAD stands for computer-assisted design; CAM stands for computer-assisted manufacturing. Capability Drivers the basic economic and strategic means by which a firm builds an underlying source of competitive advantage in its market or industry. Examples of basic capa- bility drivers include first-mover advantages, economies of scale, experience effects, and interrelationships among busi- ness units. Centralization the degree to which senior management has the authority to make decisions for the entire organization. In a highly centralized organization, senior management makes most, if not all, decisions; in a highly decentralized organization, middle managers and employees have great latitude and power to make decisions on their own. Chaebol a complex arrangement in which Korean firms (often family-owned) assume equity stakes and other ownership positions to maintain a web of companies. Collaboration cooperation between partners that is often short-term or limited in scope. Collaboration is actually another form of competition between partners seeking to learn and absorb skills from one another. Comparative Financial Analysis the evaluation of a firm’s financial condition across multiple time periods. Competence-Changing Technology a technology that markedly changes or redefines the structure of an industry; often new processes or innovations that disrupt and erode the market for existing products. Competing on Time speeding up the time needed to innovate new products and get them to market faster than competitors. Competitive Advantage allows a firm to gain an edge over rivals when competing. Competitive advantage comes from a firm’s ability to perform activities more distinctively or more effectively than rivals. Competitive Environment the immediate economic factors— customers, competitors, suppliers, buyers, and potential substitutes—of direct relevance to a firm in a given industry (also known as industry environment). Competitor-Intelligence Gathering scanning specifically tar- geted or directed toward a firm’s rivals; often focuses on a competitor’s products, technologies, and other important information. (Glossary) 464 GLOSSARY Composite Materials a new material made from a distinct combination of metal, polymers, or ceramics that offers great strength and endurance; examples include carbon fibers and graphite used in tennis rackets and golf clubs. Computer-Integrated Manufacturing (CIM) the use of modern computer and information technologies that closely link up design and marketing activities with those of manufacturing. Conglomerate Discount an empirical finding of what a con- glomerate firm’s stock is worth because the market believes management is destroying the value of its individ- ual businesses. Conglomerates firms that practice unrelated diversification (see unrelated diversification, holding company structure). Continuous Quality Improvement (CQI) the deliberate and methodical search for better ways of improving products and processes. Convergence the blurring of industry boundaries in such a way that the economic and competitive factors shaping one industry begin to influence the evolution of another. Con- vergence tends to occur most often when the characteristics of a product or service begin to substitute or complement those of an existing offering (e.g., Internet and the personal computer, Internet and financial services). Core Processes and Technologies the key levers or drivers that form the basis of a firm’s distinctive competence and critical value-adding activities. Corporate Culture the system of unwritten rules that guide how people perform and interrelate with one another; the embodiment of a firm’s shared values and its way of think- ing and doing things. Corporate Managers people responsible for overseeing and managing a portfolio of businesses within the firm. Corporate Restructurings steps designed to change the corpo- rate portfolio of businesses to achieve greater focus and effi- ciency among businesses; often involve selling off businesses that do not fit a core technology or are a drag on earnings. Corporate Strategy plans and actions that firms need to for- mulate and implement when managing a portfolio of busi- nesses; an especially critical issue when firms seek to diver- sify from their initial activities or operations into new areas. Corporate strategy issues are key to extending the firm’s competitive advantage from one business to another. Cost Driver a technological or economic factor that deter- mines the cost of performing some activity. Creative Tension a process in which senior management sys- tematically attempts to encourage people to think about new strategies and directions, which prevents the firm from becoming complacent. Cross-Functional Teams small units that work across a wide range of functions, technologies, products, and services based in different parts of the firm. Cross-Subsidization using financial, technological, and mar- keting resources from one market to fight a competitor in another; involves extensive use of “parry and thrust” tactics to gain new market positions. Cumulative Volume the quantity that a firm has produced since the beginning of that activity up to this point in time. Current Ratio a measure used to assess a firm’s ability to make payments to its short-term creditors; current assets divided by current liabilities. Customer-Defined Quality the best value a firm can put into its products and services for the market segments it serves. Customer-defined quality is more important to competitive strategy than what the firm thinks its quality should be. D De-Integration the process by which a firm becomes less ver- tically integrated, often by selling off those activities that it once performed in-house. Debt Ratio a measure of a firm’s leverage; the amount of debt it possesses divided by stockholder equity. Defending an activity designed to help the firm shield or insu- late itself from environmental change (see prospecting). (Term originally conceived by Miles and Snow in 1978). Delayering the removal of excess levels of management that impede fast information flow within the firm. Denominator Management the actions of managers who seek to maximize short-term financial performance by manipu- lating financial data used to calculate return ratios, often at the expense of the firm’s long-term competitive strengths. Development Policies the training and skill improvement guidelines or practices used by a firm to cultivate its people. Differentiation competitive strategy based on providing buy- ers with something special or unique that makes the firm’s product or service distinctive. Digital a method used to capture or represent information by discrete or individually unique signals (usually bits of binary data). Distinctive Competence the special skills, capabilities, or resources that enable a firm to stand out from its competi- tors; what a firm can do especially well to compete or serve its customers. Diversification a strategy that takes the firm into new indus- tries and markets (see related diversification, unrelated diversification). Diversified Firm a firm that operates more than one line of business. Diversified firms often operate across several industries or markets, each with a separate set of customers and competitive requirements (also known as a multibusi- ness firm). Firms can differ in the degree or extent of their diversification. Downscoping the reduction of a firm’s wide-spanning corpo- rate diversification by shrinking the scope of activities it performs. GLOSSARY 465 Downstream Activities economic activities that occur close to the customer but far away from the firm’s suppliers. Examples include outbound logistics, distribution, market- ing, sales, and service (see also upstream activities). E Economies of Scale the declines in per-unit cost of production or any activity as volume grows. Economies of Experience cost reductions that occur from continuous repetition of activities that allow for improve- ment with each successive act (also known as experience curve effects or learning curve effects). Economies of Scope an economic characteristic that results when production of two or more goods can be done more efficiently with one set of assets than from separate assets dedicated to each product. Empowerment delegation of decision-making authority and responsibility to those people most directly involved with a given project or task. Environment the external forces, factors, and conditions that influence or shape the strategies, decisions, and actions taken by the firm (see macro or general environment, also industry or competitive environment). Environmental Scanning the gathering of information about external conditions for use in formulating strategies. Ethical Dilemmas difficult choices involving moral, legal, or other highly delicate issues that managers must weigh and balance when considering the needs of various stakeholders. Ethical dilemmas work to shape and sometimes constrain a firm’s ability to take certain actions. Executive Search Firms specialized organizations whose pur- pose is to match the firm’s need for skilled management with available talent. Also known as “headhunters.” Exit Barriers economic forces that slow down or prevent exit from an industry. Experience Curve Effects cost reductions that occur from continuous repetition of activities that allow for improve- ment with each successive act (also known as economies of experience or learning curve effects). External Partnering the process of including suppliers and customers in the firm’s set of value-adding activities. F Fiduciary Responsibility the primary responsibility facing top management—to make sure the firm delivers value to its shareholders, the owners of the firm. First-Mover Advantages the benefits that firms enjoy from being the first or earliest to compete in an industry. Flexible Factories production facilities capable of producing a variety of products, often by using state-of-the art computer technologies to promote fast changeover of designs and tools (see flexible manufacturing). Flexible Manufacturing the ability of equipment in factories to change easily from the production of one good to another (see flexible factories). Focus Strategies competitive strategies based on targeting a specific niche within an industry. Focus strategies can occur in two forms: cost-based focus and differentiation-based focus. Forward Integration a strategy that moves the firm down- stream into an activity currently performed by a buyer (see vertical integration, backward integration). Full Integration vertical integration that seeks to control every activity in the value chain. In full integration, firms bring all activities required to design, develop, produce, and market a product in-house (see partial integration). Functional Structure an organizational structure that groups managers and employees according to their areas of expert- ise and skills to perform their tasks. For example, manufac- turing people are placed in a manufacturing unit, marketing people are located in a marketing unit, and finance people are located in a finance unit. G General Environment the broad collection of forces or condi- tions that affect every firm or organization in every industry (also known as macroenvironment). Generic Strategies the broad types of competitive strategies— low-cost leadership, differentiation, and focus—that firms use to build competitive advantage (see low-cost leadership, differentiation, focus strategies). Geographic Division an organizational form that divides and organizes the firm’s activities according to where operations and people are located (also known as place structures, area structures). Global Strategy a strategy that seeks to achieve a high level of consistency and standardization of products, processes, and operations around the world; coordination of the firm’s many subsidiaries to achieve high interdependence and mutual support. Globalization viewing the world as a single market for the firm; the process by which the firm expands across different regions and national markets. On an industry level, global- ization refers to the changes in economic factors, such as economies of scale, experience, and R&D, that make com- peting on a worldwide basis a necessity. Goals the specific results to be achieved within a given time period (also known as objectives). Goals guide the firm or organization in achieving its mission (see vision, mission). 466 GLOSSARY Group a larger version of the strategic business unit (SBU) structure that often houses many different SBUs under one reporting relationship; sometimes called a sector (see sector, strategic business unit (SBU), product division, product structure). H Harvesting the systematic removal of cash and other assets from a slow-growth or declining business; may be thought of as “milking” a business before it loses all its value. Hierarchy-Based Reward System a type of compensation structure that encourages close superior–subordinate relation- ships, an emphasis on group achievement, use of both quali- tative and quantitative measures of performance, and promo- tion from within (see performance-based reward system). Holding Company Structure a lean form of a product divi- sion structure used by conglomerates in unrelated diversifi- cation (see conglomerates, product division, product struc- ture, unrelated diversification). Hollow Out the process by which a firm becomes steadily less competitive as a result of delegating its core value-adding activities to other firms. Homogeneity of Demand similarity of demand patterns and wants across customers, regardless of where they are located. Horizontal Organization an organization design in which teams and small units replace the strict separation of func- tional activities such as design, manufacturing, marketing, finance, distribution, sales, and service. Hybrid Products products that result from combining or fus- ing together different sources of technologies (see technol- ogy fusion). Hybrid Structures combining different basic organizational structures to attain the benefits of more than one (also known as mixed structure). I Industrial Espionage systematic and deliberate attempts to learn about a competitor’s technologies or new products through secretive, and often illegal, ways. Industry Attractiveness the potential for profitability when competing in a given industry. An attractive industry has high profit potential; an unattractive industry has low profit potential. Industry Environment the immediate economic factors— customers, competitors, suppliers, buyers, and potential sub- stitutes—of direct relevance to a firm in a given industry (also known as competitive environment). Industry Initiative the ability of a firm to shape, influence, or introduce new product ideas, standards, or technologies within an industry. Industry Structure the interrelationship among the factors in a firm’s competitive or industry environment; configuration of economic forces and factors that interrelate to affect the behavior of firms competing in that industry. Inertia the difficulty that established firms face when trying to adjust to change; inhibits fast response to new developments in the environment. Informal Integrators people who work to resolve potential sources of conflict or to promote better understanding of key issues between managers, usually at a divisional or SBU level. Intangible Assets resources based on skills or other hard-to- imitate assets that are not physical in form; examples include brand equity, fast product development, manage- ment techniques, proprietary means of developing knowl- edge, innovation, etc. Internal Task Forces committees whose purpose is to share knowledge and to encourage joint development of technolo- gies and products across divisions or business units. International Division a structure by which all of the firm’s managers and employees in nondomestic activities report to a single senior manager who is separate from other domes- tic divisional managers; a structure traditionally used by firms that are starting to increase their overseas operations. Internet the enormous collection of interconnected networks that share the similar use of transmission and delivery proto- cols (TCP/IP). The Internet evolved from early government- related programs to construct a huge network of research centers, universities, and government installations that would link up computer systems together. Interrelationships the sharing of activities, technologies, skills, and resources among a firm’s subunits, particularly divisions or strategic business units (SBUs). Invisible Assets intangible sources of competitive advantage such as brands, images, corporate cultures, knowledge, and organizational practices that are hard for competitors to imi- tate and duplicate. J Joint Ventures a form of strategic alliance in which partners work closely—usually through a third company that is set up by both partners—to pursue a mutually shared interest. Just-in-Time (JIT) a sophisticated approach to inventory management in which firms receive material from their sup- pliers at the time it is needed; it reduces inventory and its associated costs. K Keiretsu a complex arrangement in which firms take equity stakes in one another as a long-standing strategic alliance; used in Japan to link up many different companies. GLOSSARY 467 Knowledge-Based Assets intangible assets such as reputation, brand names, scientific skills, or quality techniques that are hard-to-imitate and critical to making a firm’s distinctive competence valuable. Knowledge-Based Competition economic competition and competitive advantage derived from the creation and use of new forms of knowledge, skills, and technologies. L Learning Curve Effects cost reductions that occur from con- tinuous repetition of activities that allow for improvement with each successive act (also known as economies of expe- rience or experience curve effects). Learning Organizations firms that view change as a positive opportunity to learn and create new sources of competitive advantage. Licensing Arrangement a form of strategic alliance in which one firm agrees to license or sell a technology, marketing rights, brand name, or other intangible asset to another firm in exchange for a fee, royalty, or share of profits. Liquid Crystal Displays (LCDs) a display technology that consists of three parts: two glass substrates, a liquid crystal (made from a chemical compound) in the middle, and an electronic device that changes or “stimulates” crystals to produce different colors. LCD technology allows visual dis- play of numbers, images, or other data through the use of crystal, as opposed to conventional tube technology. Location of Activities the physical place where an economic, value-adding activity occurs. Location can be an important source of competitive advantage for some types of firms. Loose Coupling an organization design and structure that fos- ters a balance between the need to centralize and decentral- ize activities. Low-Cost Leadership a competitive strategy based on the firm’s ability to provide products or services at lower cost than its rivals. M Macroenvironment the broad collection of forces or condi- tions that affect every firm or organization in every industry (also known as general environment). Mass Customization the capability to produce a growing vari- ety or range of products at reduced unit costs. Mass cus- tomization is a strategic competitive weapon that helps firms to expand the range of their product offerings and modifica- tions without incurring the high costs of variety. Matrix Structure an organizational form that divides and organizes activities along two or more lines of authority and reporting relationships. Managers and employees in a matrix structure report to two or more bosses. Mechatronics the combining of precision, mechanical engi- neering with microelectronics to design highly intelligent (and often miniaturized) machines and robots. Microchip a flat semiconductor device in which tiny (often microscopic) amounts of chemical elements are deposited, etched, and sealed to create integrated circuits. Microchips lay the foundation for the semiconductor industry. Microprocessor a microchip that performs arithmetic, control, and logic-based operations; used as the central processing unit of personal computers and workstations. Minimum Efficient Scale (MES) a level of production volume that a factory must reach before it achieves full efficiency. Mission describes the firm or organization in terms of its busi- ness. Mission statements answer the questions “What busi- ness are we in?” and “What do we intend to do to succeed?” Mission statements are somewhat more concrete than vision statements but still do not specify the goals and objectives necessary to translate the mission into reality (see vision, goals, objectives). Mixed Structures combining different basic organizational structures to attain the benefits of more than one (also known as hybrid structures). Modularity an element of product design that allows for the mixing and matching of different components and parts that all share the same interface or means of connecting with one another. A product exhibits modularity if its constituent parts can be rearranged among themselves or with addi- tional parts that share the same pattern of linkage. Multibusiness Firm a firm that operates more than one line of business. Multibusiness firms often operate across several industries or markets, each with a separate set of customers and competitive requirements (also known as a diversified firm). Firms can possess many business units in their corpo- rate portfolio. Multidomestic Strategy a strategy that seeks to adjust a firm’s products, processes, and operations for markets and regions around the world; allows subsidiaries to tailor their prod- ucts, marketing, and other activities according to the needs of their specific markets. Multipoint Competition a form of economic competition in which a firm commits its entire product line against a simi- larly endowed competitor’s array of products. N Nanotechnology science and technology based on combining different types of amino acids or molecules to create new types of enzymatic-based circuits and other miniaturized products. Network Organization organizational format in which firms try to balance stability with flexibility through less reliance on traditional organizational structures (see loose coupling). Network organizations typically de-emphasize a high level of vertical integration and foster closer cooperation with other firms to perform value-adding activities. 468 GLOSSARY O Objectives the specific results to be achieved within a given time period (also known as goals). Objectives guide the firm or organization in achieving its mission (see vision; mission). Off-Line Coordinator a senior corporate staff member whose job is to manage and coordinate interrelationships among divisions or business units. Organization Design Practices the support mechanisms— staffing policies, reward systems, corporate cultures, shared values, and other human resource management issues—that facilitate the implementation of a strategy within the frame- work of a given structure. Organization design practices are easier to change and modify than organizational structures, depending on the needs of the strategy. Outsource the use of other firms to perform value-adding activities once conducted in-house. P Partial Integration vertical integration that is selective about which areas of activity the firm will choose to undertake. In partial integration, firms do not control every activity required to design, develop, produce, and market a product (see full integration). Perceived Value a customer’s notion of value based on a lack or incompleteness of information. Performance-Based Reward System a type of compensation structure that puts a premium on a high level of individual per- formance, a strong reliance on bonuses as part of total compensation, and a relative de-emphasis on close superior– subordinate relationships (see hierarchy-based reward system). Peripheral Businesses business units or divisions that are not central to the firm’s core set of activities, skills, or technologies. Perishability the ease with which a product spoils or decays; a major economic consideration that promotes the use of mul- tidomestic strategies. Pirating hiring individuals from a competitor specifically to gain their knowledge (also known as raiding). Place Structure an organizational form that divides and organ- izes the firm’s activities according to where operations and people are located (also known as area structures, geo- graphic structures). Primary Activities economic activities that relate directly to the actual creation, manufacture, distribution, and sale of a prod- uct or service to the firm’s customer (see support activities). Process Development the design and use of new procedures, technologies, techniques, and other steps to improve value- adding activities. Product Development the conception, design, and commer- cialization of new products. Product Differentiation the physical or perceptual differ- ences that make a product special or unique in the eyes of the customer. Product Division the most basic form of product structure, in which each division houses all of the functions necessary to carry out its own strategy and mission (see product struc- ture, strategic business unit, sector). Product Realization the product development process, begin- ning with product idea and concept and ending with pro- duction and distribution. Product Structure an organizational structure that divides the firm into self-contained units able to perform all of their own activities independently; examples include product divisions, strategic business units (SBUs), sectors or groups, and conglomerate/holding company formats. Productivity Paradox the economic trade-off that managers must make when using traditional manufacturing technol- ogy: to achieve low-cost efficient production, flexibility and variety of production are sacrificed. Prospecting an activity designed to help the firm search, understand, and accommodate environmental change; a proactive attempt by a firm to make an environmental change favorable to itself (see defending). (Term originally conceived by Miles and Snow, 1978). R Raiding hiring individuals from a competitor specifically to gain their knowledge (also known as pirating). Rapid Prototyping a design technology that accelerates the testing of new product concepts, ideas, and designs, often through the use of computer modeling techniques. Ratio Analysis the use of a proportion of two figures or num- bers that allow for consistent comparison of performance with other firms. Reengineering the complete rethinking, reinventing, and redesign of how a business or set of activities operates. Related Diversification a strategy that expands the firm’s operations into similar industries and markets; extends the firm’s distinctive competence to other lines of business that are similar to the firm’s initial base (see related industry, unrelated diversification). Related Industry an industry that shares many of the eco- nomic, technological, or market characteristics of another industry. Two industries are related if they are similar in some important way (see related diversification, unrelated diversification). Resource-Based View of the Firm an evolving set of strategic management ideas that place considerable emphasis on the firm’s ability to distinguish itself from its rivals by means of investing in hard-to-imitate and specific resources (e.g., technologies, skills, capabilities, assets, and management approaches). GLOSSARY 469 Resource Sharing the transfer of skills, technologies, or knowledge from one business to another; vital to building synergy in related diversification. Return on Assets net income divided by total assets. Return on Capital net income divided by total capital. Return on Equity net income divided by stockholder equity. Return on Investment net income divided by total investment. Revitalization the process of renewing a company’s sources of distinctive competence and competitive advantage. Rightsizing shrinking of the firm’s work force and resource commitment to the firm’s businesses. S Scope of Operations the extent of a firm’s involvement in dif- ferent activities, products, and markets. Sector a larger version of the strategic business unit (SBU) that often houses many SBUs under one reporting relationship; sometimes called a group (see group, strategic business unit (SBU), product division, product structure). Selection Policies the hiring guidelines used by a firm to choose its employees and managers. Semipermeable Boundaries flexible separations between organizational subunits—divisions, departments, and func- tions—across which communication, knowledge, and infor- mation flow more readily. Semiconductor electronic device containing many transistors that serve different switching functions on a small chip, usu- ally made of silicon, germanium, or gallium arsenide. Each transistor, in itself, can serve as a switch, amplifier, or oscil- lator. Semiconductors are vital to the function of many con- sumer and industrial products. (The term semiconductor actually refers to a type of material or substrate that is part insulator and part conductor.) Shared Values the basic norms and ideals that guide people’s behaviors in the firm and form the underpinning of a firm’s corporate culture. Single-Business Firm a firm that operates only one business in one industry or market (also known as an undiversified firm). Socialization the process by which shared values and ways of behaving are instilled in new managers and employees. Specialization the assignment of particular tasks and activities to those people who are best able to perform them. Spin-Off a form of corporate restructuring that sells businesses or parts of a company that no longer contribute to the firm’s earnings or distinctive competence. Standardization the process of defining the organization’s work practices and procedures so that people can repeatedly perform them at a given level or measure of performance. Static Organizations firms that have adapted extremely well to a particular environment but lack the ability to respond quickly to change. Statistical Process Controls (SPCs) the use of statistics to measure and control a production process, often with the desired intent of achieving high product conformity. Strategic Alliances linkages between companies designed to achieve an economic objective faster than either company could do so alone; take the basic forms of licensing arrange- ments, joint ventures, or multipartner consortia. Strategic Business Unit (SBU) an important modification of the product division form of organization; often represents larger product divisions or collections of smaller product divisions under one reporting relationship (see product divi- sion, product structure, sector). Strategic Groups the distribution or grouping of firms that pursue similar strategies in response to environmental forces within an industry. Firms within the same strategic group will tend to compete more vigorously with one another than with firms from other strategic groups. Strategic Management Process the steps by which manage- ment converts a firm’s values, mission, and goals/objectives into a workable strategy; consists of four stages: analysis, formulation, implementation, and adjustment/evaluation. Strategy the ideas, plans, and actions taken by firms and peo- ple to compete successfully in their activities. Strategy Implementation the process by which strategies are converted into desired actions. Structure the formal definition of working relationships between people in an organization. Support Activities economic activities that assist the firm’s primary activities (see primary activities). Switching Costs costs that occur when buyers or suppliers move from one competitor’s products or services to another’s. SWOT Analysis shorthand for strengths, weaknesses, oppor- tunities, and threats; a fundamental step in assessing the firm’s external environment; required as a first step of strat- egy formulation and typically carried out at the business level of the firm. Synergy the whole of the company is greater than the sum of the parts; also, the primary economic objective of related diversification. Systemwide Advantage the building and sustaining of com- petitive advantage across multiple business units to achieve corporatewide strengths. T Technological Convergence growing technological similar- ity of products and businesses, such as components, designs, and production processes, among once-distinct industries. Technology Fusion the blending of existing and emerging technologies to design new products that no single technol- ogy alone could create (see hybrid products). 470 GLOSSARY Terrain the environment (or industry) in which competition occurs. In a military sense, terrain is the type of environment or ground on which a battle takes place. From a business sense, terrain refers to markets, segments, and products used to win over customers. Total Quality Management (TQM) the cultivation and prac- tice of quality in every person’s tasks and activities through- out the organization. Transaction Costs economic costs of finding, negotiating, selling, buying, and resolving disputes with other firms (e.g., suppliers and customers) in the open market. Turnover Ratios measures that assess the speed with which var- ious assets (inventory, receivables) are converted into cash. U Undiversified Firm a firm that operates only one business in one industry or market (also known as a single-business firm). Unrelated Diversification a strategy that expands the firm’s operations into industries and markets that are not similar or related to the firm’s initial base; does not involve sharing the firm’s distinctive competence across different lines of busi- ness (see related diversification, related industry). Upstream Activities economic activities that occur close to the firm’s suppliers but far away from the consumer. Exam- ples include inbound logistics, procurement, manufacturing, and operations (see also downstream activities). V Value Chain an analytical tool that describes all activities that make up the economic performance and capabilities of the firm; used to analyze and examine activities that create value for a given firm. Value-Added/Weight Ratio a key economic factor that influ- ences the globalization of industries; high value-added/weight promotes global strategies; low value-added/weight ratios promote multidomestic strategies. Value Engineering process by which each step in engineering and product development activities directly contribute to the value of the final product. Vertical Integration the expansion of the firm’s value chain to include activities performed by suppliers and buyers; the degree of control that a firm exerts over the supply of its inputs and the purchase of its outputs. Vertical integration strategies and decisions enlarge the scope of the firm’s activ- ities in one industry. Vision the highest aspirations and ideals of a person or organ- ization; what a firm wants to be. Vision statements often describe the firm or organization in lofty, even romantic or mystical tones (see mission, goals, objectives). . often focuses on a competitor’s products, technologies, and other important information. (Glossary) 464 GLOSSARY Composite Materials a new material made from a distinct combination of metal, polymers,. corpo- rate diversification by shrinking the scope of activities it performs. GLOSSARY 465 Downstream Activities economic activities that occur close to the customer but far away from the firm’s. that make up the economic performance and capabilities of the firm; used to analyze and examine activities that create value for a given firm. Value-Added/Weight Ratio a key economic factor that