MBA AMP flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Span of control
- The number of subordinates reporting directly to one manager. Wide spans flatten hierarchy but demand standardized work; narrow spans suit complex, variable tasks requiring close supervision.
- Porter's five forces
- A framework assessing industry attractiveness through supplier power, buyer power, threat of new entrants, threat of substitutes, and rivalry among existing competitors. Strong forces together compress profitability.
- Economies of scale
- Decline in average cost per unit as output volume increases, driven by fixed cost spreading and specialization. Beyond an optimal scale, coordination complexity can reverse the effect into diseconomies.
- SMART goals
- A goal-setting standard requiring goals to be specific, measurable, achievable, relevant, and time-bound. Measurability matters because control requires comparing results against a defined standard.
- BCG growth-share matrix
- A portfolio tool plotting business units by market growth rate and relative market share, producing stars, cash cows, question marks, and dogs, each implying different investment and cash-generation priorities.
- Compound interest formula
- Future value equals present value multiplied by one plus the periodic rate raised to the number of periods. Doubling time is approximated by dividing 70 by the percentage rate.
- Weighted average
- The sum of each value multiplied by its weight, divided by the total of the weights. Averaging subgroup averages is valid only when subgroup sizes are equal.
- Break-even point
- The sales volume at which total revenue equals total cost, computed as fixed costs divided by the unit contribution margin (price minus variable cost per unit). Profit is zero there.
- Expected value
- The probability-weighted sum of all possible outcomes. It summarizes the center of a risky distribution but ignores variance and the decision maker's risk aversion.
- Base-rate neglect
- Ignoring the prior prevalence of a condition when interpreting test evidence. When a condition is rare, even an accurate test generates many false positives.
- Necessary assumption
- A statement that must be true for an argument's evidence to support its conclusion. Negating it destroys the reasoning, which is the standard test for identifying it.
- Sufficient assumption
- A statement that, if added to the premises, guarantees the conclusion follows. It is stronger than a necessary assumption and need not be required by the argument.
- Correlation versus causation
- An observed association between two variables does not establish that one causes the other; a lurking variable or reverse direction can produce the same statistical relationship.
- Self-selection bias
- A sampling flaw in which respondents choose themselves, so the sample overrepresents people with strong views. Generalizing such results to the whole population is unsupported.
- Accounting equation
- Assets equal liabilities plus equity. Every transaction affects at least two accounts and preserves this balance under double-entry bookkeeping.
- Accrual versus cash basis
- Accrual accounting records revenue when earned and expenses when incurred; cash basis records them on receipt or payment. Reported profit and cash flow therefore diverge.
- Contribution margin
- Sales revenue minus variable costs. The contribution margin ratio expresses this as a percentage of sales and determines how much each sales dollar covers fixed costs and profit.
- Relevant cost
- A future cost that differs between decision alternatives. Sunk costs and allocated fixed costs are irrelevant because they do not change with the choice.
- Absorption versus variable costing
- Absorption costing includes fixed manufacturing overhead in product cost; variable costing expenses it immediately. Reported profit differs when inventory levels change between periods.
- Price elasticity of demand
- The percentage change in quantity demanded divided by the percentage change in price. Absolute values above one are elastic; below one, inelastic.
- Profit maximization rule
- A firm maximizes profit at the output level where marginal revenue equals marginal cost. Producing beyond that point adds cost faster than revenue.
- Opportunity cost
- The value of the best alternative forgone when a resource is committed to one use. Economic profit subtracts it; accounting profit does not.
- Price ceiling effect
- A legally imposed maximum price below equilibrium creates a shortage, reduces quantity supplied, and lowers total surplus relative to the unregulated market outcome.
- Real versus nominal GDP
- Nominal GDP values output at current prices; real GDP uses base-year prices to isolate changes in quantity. Real GDP is the appropriate measure of growth.
- STP framework
- Segmentation divides a market by needs or behavior; targeting selects attractive segments; positioning establishes a distinct place for the offer in customers' minds.
- Customer lifetime value
- The expected margin from a customer over the whole relationship, typically average margin per period times a retention multiple. It should be compared with acquisition cost.
- VRIO framework
- A test of sustainable advantage: a resource must be valuable, rare, costly to imitate, and supported by the organization. Failing any criterion limits durability.
- Stuck in the middle
- A strategic failure in which a firm pursues both low cost and premium differentiation without achieving either, losing both cost-sensitive and premium customers to focused rivals.
- Herzberg two-factor theory
- Hygiene factors such as pay and working conditions prevent dissatisfaction but do not motivate; motivators such as achievement, recognition, and growth create genuine satisfaction.
- Expectancy theory
- Motivation equals expectancy times instrumentality times valence. A value of zero in any factor drives motivation to zero, so all three must be addressed.
- Groupthink
- A deterioration of group judgment marked by illusion of unanimity, self-censorship, and pressure on dissenters. Assigning a devil's advocate is a standard countermeasure.
- Transformational leadership
- A leadership style using idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration to raise followers' commitment beyond transactional reward exchange.