GLOSSARY

OF
STRATEGIC MANAGEMENT TERMS1

Activity Ratio: financial analysis technique which compares a firm’s revenues with the
resources used to generate them. Examples include asset turnover, sales to fixed assets,
inventory turnover, accounts receivable turnover.
Adaptive Mode: a stage of firm development where strategic decisions are closely linked
to the firm’s existing strategy; usually applies to medium sized firms. See also
Entrepreneurial Mode, Planning Mode.
Allocators: real estate firms that view investors as their primary customers; allocators
work closely with investors to develop and fine tune real estate portfolios; firms usually
organized on a matrix basis with a top down strategic orientation. See also Operators,
Matrix Organization, Top down Investment Strategy.
Annual Goals: Company goals tied to specific accomplishments in specific time periods.
See also Company Goals
Annual Objectives: a firm’s anticipated results on a yearly basis; much more specific
than long-term objectives; also called short-term objectives. See also Long Term
objectives.
Asset Assemblers: real estate firms which generate value from the success of the real
estate assets they own or manage (e.g. investment advisors, real estate mutual fund
managers, REITs that do not develop, etc.)
Asset Enhancers: real estate firms which add value through the assets they own as well
as their ability to reposition the asset use, physical design, tenancy, or capital structure
(e.g. REITs with development capabilities, REOCs, developers, opportunity funds, etc.)

Backward Integration: a form of vertical integration in which supplier firms are

acquired. See also Vertical Integration.
Balanced Scorecard: an evaluation system which helps define and evaluate a firm’s
strategy in four major areas: financial, customer, internal business, and innovation and
learning.
Barriers to Entry/Exit: Economic or other characteristics of a marketplace that make it
difficult for new firms to enter or exit. Examples include: economies of scale; product
differentiation; capital requirements; cost disadvantages other than size; access to
distribution channels; government policy; etc.
Benchmarking: an analysis of competitor strengths and weaknesses; used to evaluate a
firm’s relative competitive position, opportunities for improving, and success/failure in
achieving such improvement.
Best Practices: the business methods and procedures utilized by firms considered the
leaders in an industry.
Bottom-Up Investment Strategy: portfolio investment strategy based on changes at the
firm or property level. See also Top-Down Investment Strategy.

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Copyright 1998 by John McMahan, all rights reserved.
Boundaries of Industry: the outer limits of an industry where firm similarities begin to
disappear.
Brainstorming: group discussion and generation of ideas in a non-critical environment.
Buy-in: generalized agreement and internalization of strategic changes by a firm’s
management, employees, customers, suppliers, shareholders and other stakeholders.

Chaebols: Korean industry organization. See also Consortia.

Coalition Phenomenon: the banding together of sub-units of a business firm to support
certain alternatives and oppose others; usually associated with large organizations.
Company Creed: statement of a company’s philosophy; usually appears in company’s
mission statement. See also Company Mission.
Company Culture: the mix of important assumptions shared by members of an
organization; may be explicit or implicit. usually determined by the business environment
of a firm’s industry; the prior experience of employees in other firms, professions,
communities, etc.; and the experiences that the employees share in their everyday work
environment within the firm.
Company Goals: what a firm strives to attain through its operations. Usually stated as
economic goals, namely survival, growth, and profitability. See Company Objectives.
Company Mission: the unique purpose of a firm that sets it apart from firms of its type;
identifies scope of operations including markets, customers, products, distribution,
technology, etc. in a manner that reflects values and priorities of the firm’s strategies.
Company Objectives: translates company goals into specific long-term targets and time
frames for their achievement. See also Company Goals.
Company Philosophy: See Company Creed.
Company Policies: broad guidelines that influence the thinking, decisions, and actions of
managers and subordinates in implementing the firm’s strategy.
Company Profile: describes the quality and quantity of a firm’s human, physical, and
financial resources; evaluates strengths and weaknesses of the firm’s organization and
management structure; compares firm’s historical successes with current capabilities in
order to determine firm’s future capabilities.
Company Self-Concept: how a firm thinks about itself.
Competencies: a bundle of skills and technologies representing the sum of learning
across individual skill sets and organizational units; in essence, an efficient, standardized
way of completing tasks. See also Core Competencies, Non-Core Activities, Distinctive
Competence.
Competency Convergence: when competition between firms becomes so intense that
the customer has little basis to differentiate one firm from another.
Competitive Advantage: advantages that a firm has over its competitors. See also
Sustainable Competitive Advantage.
Competitive Environment: see External Environment.
Competitive Forces: description of forces influencing the competitive position of firms
within an industry. According to Michael Porter, the most critical forces are the
bargaining power of suppliers and customers, the threat of substitute products/services
and new entrants; and the rivalry among existing firms in the industry.
Competitive Position: the position that a firm has or wishes to achieve within its
industry as measured against its competition.

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Competitive Reaction: anticipated reaction of competition to a firm’s strategic
initiatives.
Competitive Space: areas of business where a firm can operate with less competitive
pressure; often associated with industry leadership and dominance.
Concentrated Growth: a strategy of growing a firm by focusing on specific products
and markets similar to or complementary with existing activities.
Concentrated Industry: an industry in which one or a few firms command a significant
market share and can thereby influence industry outcomes. See also Fragmented
Industry.
Concentric Diversification: a strategy of growing a firm by acquiring other firms which
are similar to and synergestic with the acquiring firm in terms of markets, products, or
technology. See also Conglomerate Diversification.
Conglomerate Diversification: a strategy of growing a firm by acquiring other firms for
investment purposes; usually little or no anticipated synergy with the acquired firm. See
also Concentric Diversification.
Connexity: interdependence between individuals and global communication systems.
Consolidation: the merger of business units and/or property portfolios.
Consortia: interwoven ownership relationships be

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Customer Survey: the process of asking customers about buying practices and/or
intentions; may be used to determine customer attitudes towards a firm’s or competitor’s
products or services.

Defensible Niche: a specialty activity of a firm that can be defended over time from
significant competition.
Delphi Method: a forecasting technique in which individual points of view are
developed, evaluated, and synthesized through a set of predesigned questionnaires;
interspersed with feedback of opinions from previous questionnaires.
Deviation: the degree to which progress in implementing a strategic plan varies from the
expected progress. See also Control and Evaluation.
Dialectical Inquiry: a forecasting tool in which separate management groups debate
points of view; groups then assemble to present and synthesize their conclusions.
Differentiation: creating and explaining to the customer the differences in a firm’s
and/or competitor’s products or services.
Differentiation Strategy: one of three generic strategies in which a firm strives to create
and market unique products/services for various customer groups. See also Focus
Strategy and Low Cost Strategy.
Distribution Channel: the means by which products or services are moved from
production to the customer.
Distinctive Competence: a competence that provides a firm with a competitive
advantage in the marketplace. See also Competencies; Competitive Advantage.
Divestiture: the sale of all or a major part of a firm.

Early Entrants: firms entering new markets or developing new products before other
firms.
Econometric Model: a forecasting technique utilizing a computer-assisted simulation of
future events based on the historic relationships of key dependent and independent
variables; usually considers the future behavior of international, national, or local
economies, industries, or businesses.
Economy of Scale: a reduction in costs through larger operating units, spreading fixed
costs over large numbers of items/units.
Emerging Industry: a newly formed or restructured industry growing faster than the
overall economy. Usually created by changing customer needs, technological change or
other socioeconomic conditions. See also Mature Industry.
Entrepreneurial Mode: a stage of firm development where one or a few owners make
most or all of the strategic decisions; usually applies to smaller firms. See also Adaptive
Mode, Planning Mode.
Entry Threats: firms that pose a threat of entering a market. See Barriers to Entry.
Experience Curve: an increase in productivity as a result of the ability of a worker to
apply lessons learned in one activity to another activity. See also Learning Curve.
External Dependence: the dependence of a firm on external parties such as customers,
competitors, suppliers, owners, government, unions, etc. The greater the dependence of
firm on these parties, the more limited its strategic options.

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External Environment: the conditions and forces that define a firm’s competitive
position and influences its strategic options. Also called Competitive Environment;
Operating Environment.

Flat Organization: an organizational structure in which most middle management

functions are eliminated, allowing senior management to have greater exposure to
customers and to those in the organization that deal with customers. See also Functional,
Matrix, Networked, and Virtual Organizations.
Focus Group: a forecasting technique which assembles informed individuals in an
organized setting to develop, evaluate, and synthesize individual points of view on a
specific subject.
Focus Strategy: one of three generic strategies in which a firm tries to appeal to one or
more customer groups focusing on their cost or differentiation concerns. See also Low
Cost Strategy and Differentiation Strategy.
Forecast: a prediction of future events.
Forward Integration: a form of vertical integration in which channels of distribution are
acquired. See also Vertical Integration; Backward Integration.
Fragmented Industry: an industry in which no firm has a significant market share and
the ability to influence industry outcomes. See also Concentrated Industry.
Functional Organization: an organizational structure along functional lines (e.g.
marketing, acquisition, asset management, development, finance and accounting, etc.
See also Flat, Matrix, Networked, and Virtual Organizations.
Functional Strategies: strategies for each firm’s function or division; integrates into
Grand Strategy and ties to Long-Term Objectives. See Grand Strategy; Long-Term
Objectives.

Game Theory: computer simulation of future events to determine their impact on major
planning premises; can be used to make changes in strategy as new information becomes
available (e.g. a competitor’s response to a firm’s actions).
Generic Strategies: three approaches to strategic planning based on different
fundamental ideas about how to appeal to the customer. See Low Cost Strategy,
Differentiation Strategy, and Focus Strategy.
Grand Strategy: a firm’s comprehensive plan of key actions by which it plans to achieve
its Long-Term Objectives; usually considers factors such as market development, product
development, innovation, horizontal and/or vertical integration, diversification, joint
ventures and strategic alliances, turnaround, divestiture, liquidation, etc.
Growth Industry: an industry growing at the same rate as the nation’s economy.

Horizontal Integration: the acquisition of similar firms operating at the same stage of
the production/marketing chain as the acquiring firm. Utilized to expand into new
markets and/or eliminate competition. See also Vertical Integration.
Human Resource Management: activities associated with the recruiting, training, and
development of personnel.

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Implementation Control: a process of assessing whether an overall strategy should be
modified as various elements of the strategic plan are implemented
Implementation: the process of translating a plan into reality.
Inbound Logistics: activities associated with receiving, storing, and disseminating
production inputs. See also Outbound Logistics.
Information Systems: management reporting system on the status of various business
indicators (e.g. sales, operations, cash, profits, suppliers, etc.).
Institutionalization: the process of translating a firm’s strategic plan into short-term
action guidelines for all employees; requires integration of a firm’s structure, culture,
leadership, and employee rewards.

Joint Venture: a third party commercial operation established by two or more firms to
pursue a particular market, resource supply, or other business opportunity. Created and
operated for the benefit of the co-owners. See also Strategic Alliance.

Keiretsus: Japanese industry organization. See Consortia.

Late Entrants: firms entering new markets or developing new products after they have
been established by other firms. Also called Latecomers. See also Early Entrants.
Leadership: the people and tools utilized to lead managers and employees in operating
an organization. See also Organizational Culture.
Leapfrogging: establishing entirely new competitive space in which a firm is not only a
leader but establishes most, if not all, of the standards by which other firms in its industry
are measured.
Learning Curve: the ability of a worker to increase productivity as tasks or portions of
tasks are repeated over time. See Experience Curve.
Long-Term Objectives: a firm’s intended performance over a multi-year period of time;
usually includes measures such as competitive position, profitability, return on
investment, technology leadership, productivity, employee relations and development,
public responsibility, etc. see Short-Term Objectives; Annual Objectives.
Low Cost Strategy: one of three generic strategies in which a firm attempts to establish
itself as the cost leader in the industry. See also Focus Strategy and Differentiation
Strategy.

Make-or-Buy Decision: a management decision whether to conduct an activity

internally or by contracting with other firms. See Contract Alternative; Outsourcing.
Market Opportunity Analysis: a forecasting technique that identifies market factors
that will influence the demand for a particular product or service.
Market Segmentation:

Market Share: the revenues generated by a firm as a percentage of total revenues;

usually measured by industries, markets, or products.
Matrix Organization: an organizational structure which delegates power to independent
operating units which then rely on centralized corporate facilities for functional support.
See also Functional, Flat, Networked, and Virtual Organizations.

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Mature Industry: an industry growing slower than the overall economy or actually
declining. See also Emerging Industry.
Migration: the repositioning of a firm.
Milestone Reviews: key time elements in the implementation of a strategic plan. May be
in the form of passage of time, critical events, or the use of a predetermined amount of
resources.
Mission Statement: See Company Mission.
Multiple Regression Analysis: a forecasting technique utilizing a computer-assisted
simulation which measures changes in dependent and independent variables.

Networked Organization: an organizational structure which divides a firm into units

which operate independently from each other within a framework which is consistent
with broader corporate goals and objectives; data and information are widely shared,
largely through a telecommunication system linking all of the units to each other and to
the corporate support group. See also Functional, Matrix, Flat, and Virtual
Organizations.
Nominal Group Technique: a forecasting technique in which individual points of view
are presented and synthesized in a group setting.
Non-Core Activities: activities of a firm not required to fulfill its value proposition with
its customers; in some cases, may be eliminated or out-sourced to others. See also Core
Competencies.

One-off Interviews: an interview by one person of another person.

Operating Effectively: the ability of a firm to provide its customers with better
performance by creating greater value or by delivering comparable value at a lower cost.
Operating Environment: See External Environment.
Operators: real estate firms that view tenants as their primary customers; specialize on
focused niches of real estate, largely differentiated by geography, property type,
investment structure, or management style; usually organized on a vertically integrated,
bottom-up strategic orientation; internally manages all disciplines necessary to deliver the
full range of services required; on occasion, may take investment positions with
allocators and/or investors. See also Allocators, Bottom-Up Investment Strategy.
Outbound Logistics: activities associated with storing and distributing a firm’s product
to its customers. See also Inbound Logistics.
Outcomes: results arising from management actions.
Outsourcing: contracting an activity to another firm. See Contract Alternative; Make-
or-Buy Decision.

Partnering: a strategic alliance with another firm(s); see also Strategic Alliance.
Pioneers: See Early Entrants.
Planning Mode: a stage of firm development where strategic decisions are made through
a comprehensive, formal planning process which considers totally new initiatives; usually
applies to larger firms with multi-product/service lines. See also Adaptive Mode,
Entrepreneurial Mode.
Portfolio Approach: a method of looking at each of the “businesses” of a firm as
elements in a total portfolio.

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Premise Control: during implementation of a strategic plan, a system of systematically
determining if the premises on which a strategy is based are still valid.
Procurement: a component of Inbound Logistics associated with purchasing inputs
required in the production process. See also Inbound Logistics.
Product Life Cycle Analysis: a forecasting technique which analyzes/predicts the
performance of a product/service during each stage of its development.
Product Market Impact Analysis: a forecasting technique which analyzes the successes
and failures of a diverse group of firms.

Recovery Response: in a turnaround situation, growth strategies to improve a firm’s

fortunes. See also Retrenchment Response.
Remote Environment: factors originating beyond but impacting upon a firm’s
operation. Includes economic, social, political, technological, and ecological factors.
Retrenchment Response: in a turnaround situation, cost cutting and asset reduction to
improve a firm’s fortunes. See also Recovery Response.
Risk Adverse: the desire to avoid or reduce risk.
Risk: the possibility of failure or unplanned outcomes.

Sales Force Estimate: a forecasting technique based on combined salesperson’s

estimates.
Scenario Development: a forecasting technique evaluating the impacts of anticipated
conditions suggested by forecasters.
Service Providers: real estate firms that add value by providing services to other firms;
generally do not own equity or debt interests in real estate assets (e.g. property managers,
brokers, leasing agents, tenant representatives, mortgage brokers, architects, engineers,
lawyers, consultants, appraisers, accountants, etc.)
Short-Term Objectives: see Annual Objectives.
Simulation Technique: a forecasting technique utilizing computers to simulate future
situations and then predicting outcomes of various courses of action.
Situation Severity: in a turnaround situation, the factors affecting a firm’s chance of
survival.
Situational Analysis: a forecasting technique that incorporates the systematic evaluation
of past and future data to identify a firm’s strengths/weaknesses and threats/opportunities.
Stakeholder: a person, group, or business that has an interest in the outcomes of a firm’s
operations.
Strategic Advantage: see Competitive Advantage.
Strategic Alliance: business relationship involving two or more firms in which the firms
do not take an equity position; similar to a licensing agreement. See also Joint Venture.
Strategic Analysis: contrasts a firm’s Company Profile with its External Environment to
identify a range of possible strategic alternatives; screened against the Company Mission
statement to determine desired opportunities. See External Environment; Company
Mission.
Strategic Business Units: the organization of a firm by “groups” of divisions that serve
similar strategic interests of the firm. Utilized by larger firms with multiple divisions.
Strategic Decisions: management decisions related to the future of a firm’s operations;
made at the corporate, business, functional, and individual level.

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Strategic Gap Analysis: a forecasting technique that measures the difference between
the extrapolation of current performance levels and desired performance objectives.
Strategic Issue Analysis: analysis of Critical Success Factors. See also Critical Success
Factors.
Strategic Tradeoff: substitution by a firm of one strategic objective for another.
Strength: a skill, resource, or other advantage that a firm has relative to its competitors
that is important to serving the needs of customers in its marketplace(s). See also
Weakness.
Stretch Thinking: “out of the box” strategic thinking; not necessarily tied to available
resources.
Sustainable Competitive Advantage: competitive advantages that can be maintained
over a fairly long period of time. See also Competitive Advantage.
Sustainable Growth Model: a forecasting technique which analyzes the sales growth
rate necessary to meet market share objectives; may also evaluate the amount of capacity
required to achieve the sales growth rate
Switching Costs: the costs incurred by a customer in changing from one firm to another
to meet their requirements.
Systematic Procedure for Identification of Relevant Environments (SPIRE):
computer-assisted tool for forecasting environmental changes that may affect a firm’s
operations.

Technological Substitution: a customer’s substitution of one product for another based

on its technological superiority.
Technology Development: activities involved in designing, producing, and distributing a
firm’s products.
Times Series Model: a forecasting technique utilizing linear, exponential, S-Curve, or
other types of projection devices.
Top-Down Investment Strategy: portfolio investment strategy based on changes in the
economy, demographics, business cycle, and other macro forces. See also Bottom-Up
Investment Strategy.
Total Quality Management (TQM): an organizational policy and culture focusing on
improving customer satisfaction through improvement in the firm’s products, services,
and processes.
Trend Extrapolation: a forecasting technique utilizing linear or exponential smoothing
or averaging of historical values.
Trigger Point: key threshold of change in predetermined measure or activity (e.g. market
share; competitor action; cost change; etc.) which represents unusual threat or
opportunity; may lead to management action including implementation of Contingency
Plan(s). See also Contingency Plan.

Value Proposition: the mix of products and services offered by a firm to it’s customers
and the price and terms by which it will perform its obligations; defines the relationship
between the firm and its customers.
Vertical Integration: the acquisition of suppliers (backward integration) or distributors
(forward integration). Utilized to expand operations, achieve greater market share,

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increase the efficiency of capital, and/or improve economies of scale. See also
Horizontal Integration.
Virtual Organization: an organizational structure in which a firm performs internally
only its core activities with heavy reliance on an advanced telecommunications system
linking individual units. See also Functional, Matrix, Flat, and Networked Organizations.

Weakness: a limitation or lack of skills, resources, or capabilities that impedes a firm’s

effective performance. See also Strength.
Work Teams: a form of organization in which employees and other resources are
dedicated to developing and marketing one or more new products or services.

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