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SARBANES-OXLEY ACT of 2002 - accounting reform legislation. Summary highlights at: http://www.aicpa.org/info/sarbanes_oxley_summary.htm SCENARIO - see Industry Scenario. SCENARIO VARIABLE - See Industry Scenario Variable. SEGMENT SCOPE - The product varieties produced and customers served by a
business. SERVICE - see Customer Service. SHAREHOLDER VALUE - the economic value of the equity portion of a business
unit or company based on forecasted data. Also, Shareholder Value =
Corporate Value - Debt. Shareholder Value = [(PV of Cash Inflows) - (PV of
Cash Outflows)] + (PV of Residual Value). [Source: A. Rappaport] (Above
equation assumes residual value includes sale of marketable securities and
disposition of debt, if any.) SHAREHOLDER VALUES - (usually the right
answer) the goals of the owner's of the company. There may be
only one goal, to maximize shareholder value (or economic value measured by
discounted cash flow analysis), or the owner's may have other financial and
non-financial goals. SIGNALING CRITERIA - Buyer purchase criteria that stem from signals of value or means used by the buyer to infer or judge what a supplier's actual value is. Signaling criteria reflect the signals of value that influence the buyer's perception of the firm's ability to meet its use criteria. Examples include advertising, the attractiveness of facilities, market share, reputation, time in business, and customer list. The other type of buyer purchase criteria is use criteria. [Source: M. Porter] SIX SIGMA
- A quality measure and improvement program developed by Motorola that focuses
on the control of a process to the point of ± six sigma (standard deviations)
from the mean. At a high level, six sigma means systematically improving
a process. It includes identifying factors critical to quality as
determined by the business and, theoretically, by the customer. The goal is to
reduce process variation and improve capabilities, increase stability and
design systems to support the six sigma project team goals. STAKEHOLDER - a broad term specifically used to encompass more than
just the company's shareholders. Depending on the context used, stakeholders
may also include one or more of the following: employees; directors; bond
holders; vendors; the community; customers; or anyone else affected by the
actions of the organization. STATEMENT OF DIRECTION - the plans of a strategic horizontal unit. A Statement of
Direction, at a minimum, identifies the activities the horizontal unit
performs for specific SBUs, and uses the strategies of those SBUs as the
horizontal unit's planning framework. STRATEGIC BALANCE SHEET - a statement of the strategic (non-financial) assets and
liabilities of a business. When used in combination with the financial
statements of the business, the analyst has a much better measure of the
true health of the SBU. Some of the measures of a strategic balance sheet
include: market image; customer service quality rating; information
technology architecture position; employee morale; market share; and quality
of new products. STRATEGIC BUSINESS UNIT (SBU) - a relevant entity for business strategy formulation. A
collection of activities that are performed to design, produce, market,
deliver, and support a product or closely related products (or services). An
SBU is a business unit that represents a strategically distinct business
(industry) and encompasses products and services where the sources of
competitive advantage are similar. There may be related industries that
provide services that share customers, technologies, or channels, but they
have their own unique requirements for competitive advantage. [Source: M.
Porter] STRATEGIC BUSINESS UNIT (SBU) PLANNING - is product-market driven. The issue is how a sustainable
competitive advantage can be established. The optimal strategy for a
business unit will be influenced by industry structure and the competitive
position of the business in that industry. STRATEGIC HORIZONTAL UNIT - a cost center, a resource center, or any department or
functional area that is not part of a specific business unit. A Strategic
Horizontal Unit performs one or more activities for the benefit of two or
more business units. The plans of a Strategic Horizontal Unit are outlined
in a Statement of Direction. STRATEGIC HORIZONTAL UNIT (SHU) PLANNING - is appropriate for a cost center, resource center,
utility department, or any organizational unit which performs one or more
activities for the benefit of two or more business units. See Statement of
Direction. STRATEGIC PLANNING - is the activity of defining a firm's competitive strategy
that will direct its route to competitive advantage that will determine its
performance. [Source: M. Porter] See corporate strategic planning,
group-level strategic planning, strategic business unit strategic planning,
and global strategic planning. STRATEGICALLY
RELEVANT INDUSTRY - the correct level to perform an industry analysis,
for example, a Michael Porter 5-forces industry analysis. The term "industry" is loosely used in general
conversation to mean "The commercial production and sale of goods and
services." [Source: Webster's II New Riverside Dictionary] . Not appreciating the difference between the
loosely used term "industry" and the specific term "strategically
relevant industry" is a major reason why strategic planning has not been well
grounded at many companies. For a list of the
"Strategically Relevant Industries" that make up over 92% of the world's
economy, see:
www.eCompetitors.com.
STRATEGY FORMULATION - entails analyzing the attractiveness of the industry and
the position of the business vis-à-vis its competitors. The analysis then
seeks to understand how alternative strategies might affect industry
attractiveness and the competitive position of the business. STRATEGY VALUATION - involves an estimation of the economic value created by
alternative business strategies. STUCK IN THE MIDDLE - refers to a firm (or business unit) that tries to be all
things to all people; it incorrectly believes it can be both a Cost Leader
and a Differentiator over a long period of time. Failure to make a choice
usually leaves a company with no advantage and below industry average
performance. A firm that is stuck in the middle will compete at a
disadvantage because the cost leader, differentiators, and focusers will be
better positioned to compete in any segment. [Source: M. Porter] SUBSTITUTE PRODUCT - is one which can perform the same function as the product
of the industry. Substitutes represent one of the five industry forces which
defines industry structure (and profitability potential). The fewer and less
attractive (in terms of price/performance) the substitutes are, the easier
it will be for firms in the industry to maintain the industry's profits, if
any exists. (See also Threat of Substitutes.) SUPPLIER CONCENTRATION - refers to the number of suppliers. For each input
required by the industry, the fewer the number of suppliers (and the more
coordinated they behave) the more power suppliers will be able to exert
(i.e., higher prices, less service, lower quality) assuming everything else
is equal. SUPPLIER LINKAGES - refer to the linkages between a firm's value chain and
the value chain of suppliers. The goal is to coordinate and to optimize all
supplier linkages in order to lower costs and / or enhance differentiation.
[Source: M. Porter] SUPPLIER POWER - refers to the relative amount of influence suppliers have vis-à-vis firms in the industry. (For scoring, use: Very Low (5); Low (4); Moderate (3); High (2); Very High (1).) SUPPLIERS - companies which provide inputs to firms in the industry. (For example: the steel industry, the glass industry and the tire industry are major suppliers to the auto industry.) supply chain management - The coordinated set of activities used to acquire raw materials from vendors, transform them into finished goods, and deliver both goods and services to customers. It often includes corporate-wide information sharing from global sources, planning, resource synchronization, and performance measurements. supply chain planning - The set of supply chain activities that focus on evaluating demand for material and capacity and formulate plans and schedules based on meeting that demand and company goals. SWITCHING COSTS - are one-time costs facing the buyer in order to switch from using one product to another, or from one supplier to another. Switching costs don't have to be direct costs. Retraining, for example, is often a major switching cost for buyers. |
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