MBA Executive CMB cheat sheet

Porter's Five Forces: threat of new entrants, supplier power, buyer power, threat of substitutes, rivalry; high combined force intensity compresses industry profitability toward the competitive floor.

VRIO test: a resource yields sustained advantage only if it is Valuable, Rare, costly to Imitate, and the firm is Organized to exploit it; failing any criterion downgrades the outcome to parity or disadvantage.

Ansoff matrix pairs product (existing/new) with market (existing/new) to yield market penetration, product development, market development, and diversification; diversification carries the highest execution risk.

Agency theory: separation of ownership and control creates monitoring costs; governance mechanisms (board independence, equity-linked pay, audit) aim to align principal and agent interests.

Board structure decision rule: independent directors should dominate the audit and compensation committees; CEO/chair duality raises entrenchment risk and warrants a lead independent director.

BCG growth-share matrix: stars (high growth, high share) fund cash cows (low growth, high share); question marks need investment decisions; dogs are candidates for divestiture.

Transaction cost economics: vertical integration is preferred when asset specificity and opportunism risk make market contracting costlier than internal hierarchy.

Strategic fit and resource-based view: competitive advantage derives from resources that are valuable, rare, hard to imitate, and non-substitutable; dynamic capabilities explain adaptation under rapid change.

Customer lifetime value (CLV) = sum of expected margin per period discounted at rate r, minus acquisition cost; retention rate increases CLV nonlinearly because it extends expected tenure.

CLV simplification for constant margin m, retention rate p, discount rate r: CLV = m × p / (1 + r − p) − acquisition cost.

Customer equity = sum of individual CLVs across the customer base; it links marketing spend to firm valuation and frames acquisition vs retention trade-offs.

Price elasticity of demand = % change in quantity / % change in price; |elasticity| > 1 means revenue rises when price falls, < 1 means revenue rises when price rises.

STP sequence: segmentation (group by needs/value), targeting (choose segments by attractiveness and fit), positioning (differentiate on attributes customers value and competitors lack).

Contribution margin per unit = price − variable cost; break-even volume = fixed costs / contribution margin per unit; marketing campaigns should be judged against incremental contribution, not revenue.

Brand equity dimensions (Aaker): awareness, perceived quality, associations, loyalty, proprietary assets; loyalty reduces price sensitivity and lowers acquisition cost per retained customer.

Share of wallet and Net Promoter Score: NPS = % promoters (9–10) − % detractors (0–6); treat NPS as a diagnostic, not a causal driver of growth.

Net present value = Σ CFt / (1 + r)^t − initial outlay; accept projects with NPV > 0; IRR rule agrees with NPV only for conventional cash flows.

WACC = (E/V) × Re + (D/V) × Rd × (1 − tax rate); use market values of equity and debt, not book values, for weights.

CAPM: Re = Rf + β × (Rm − Rf); beta measures systematic risk only; unsystematic risk is diversifiable and not priced.

Contribution margin approach: operating leverage = contribution margin / operating income; higher fixed cost share amplifies profit sensitivity to sales changes.

Relevant costing: include only future, incremental cash flows; exclude sunk costs and allocated fixed overhead; include opportunity costs and cannibalization effects.

DuPont decomposition: ROE = net profit margin × asset turnover × equity multiplier; identifies whether returns come from profitability, efficiency, or leverage.

Variance analysis: price variance = (actual price − standard price) × actual quantity; quantity variance = (actual quantity − standard quantity) × standard price; label each favorable or unfavorable.

Cash conversion cycle = days inventory outstanding + days sales outstanding − days payables outstanding; a shorter cycle frees working capital.

Little's Law: average inventory (WIP) = throughput rate × average flow time; applies to any stable system and links cycle time to capacity.

Economic order quantity: EOQ = √(2DS / H), where D = annual demand, S = order cost, H = holding cost per unit per year.

Reorder point = demand during lead time + safety stock; safety stock rises with demand variability, lead-time variability, and target service level.

Capacity utilization = actual output / design capacity; systems near 100% utilization exhibit sharply rising queue times and are vulnerable to variability.

Lean waste categories (TIMWOOD): transport, inventory, motion, waiting, overproduction, overprocessing, defects; overproduction is often treated as the primary waste.

Six Sigma DMAIC: Define, Measure, Analyze, Improve, Control; target defect rate of 3.4 defects per million opportunities at six sigma.

Bullwhip effect: demand variability amplifies upstream in the supply chain; mitigations include information sharing, shorter lead times, and reduced order batching.

Quality cost categories: prevention and appraisal (cost of good quality) versus internal and external failure (cost of poor quality); prevention spending typically reduces total quality cost.

Expectancy theory: motivation = expectancy × instrumentality × valence; a zero in any factor nullifies motivation, so interventions should target the weakest factor.

Equity theory: employees compare input/outcome ratios to referents; perceived inequity produces tension resolved by reducing effort, demanding more reward, or leaving.

Herzberg two-factor: hygiene factors (pay, conditions, policy) prevent dissatisfaction but do not motivate; motivators (achievement, recognition, growth) drive satisfaction.

Tuckman stages: forming, storming, norming, performing, adjourning; conflict peaks at storming and should be surfaced, not suppressed.

Groupthink symptoms: illusion of invulnerability, self-censorship, pressure on dissenters; countermeasures include devil's advocate roles and leader withholding initial opinion.

Human capital metrics: turnover rate = separations / average headcount; cost per hire = total recruiting cost / number of hires; time to fill measures recruiting cycle speed.

Job design (Hackman–Oldham): skill variety, task identity, task significance, autonomy, feedback drive internal work motivation via meaningfulness, responsibility, and knowledge of results.

Organizational culture (Schein): artifacts are visible, espoused values are stated, basic assumptions are unconscious and drive actual behavior; misalignment between espoused and enacted values erodes trust.

Transformational leadership components: idealized influence, inspirational motivation, intellectual stimulation, individualized consideration; transactional leadership relies on contingent reward and management by exception.

Situational leadership: leader style (directing, coaching, supporting, delegating) must match follower readiness or competence-commitment level.

Ethical decision frameworks: utilitarian (greatest good), deontological (duties and rights), virtue ethics (character); a defensible decision is often tested against all three.

Stakeholder salience (Mitchell): power, legitimacy, and urgency determine stakeholder priority; high on all three defines a definitive stakeholder.

CSR pyramid (Carroll): economic, legal, ethical, and philanthropic responsibilities; economic and legal are required, ethical expected, philanthropic desired.

Triple bottom line: people, planet, profit; ESG reporting links environmental, social, and governance metrics to risk and long-term value.

Conflict of interest rule: disclose and recuse; a decision made where personal interest could bias judgment is compromised even absent actual bias.

Moral disengagement mechanisms (rationalization, diffusion of responsibility, dehumanization) explain how otherwise ethical individuals permit unethical organizational acts.

Price elasticity of demand = %ΔQ / %ΔP; income elasticity > 1 indicates a luxury good, 0–1 a normal necessity, < 0 an inferior good.

Market structures: perfect competition (price takers, zero long-run economic profit), monopoly (price maker, deadweight loss), oligopoly (strategic interdependence), monopolistic competition (differentiated products).

Marginal revenue for a linear demand curve is twice as steep: if P = a − bQ, then MR = a − 2bQ; profit maximization sets MR = MC.

GDP expenditure identity: GDP = C + I + G + (X − M); government spending and net exports shift aggregate demand.

Inflation and interest rates: nominal rate ≈ real rate + expected inflation (Fisher); central banks raise policy rates to cool demand and anchor expectations.

Comparative advantage: trade benefits arise from lower opportunity cost, not absolute productivity; tariffs raise domestic prices and reduce total surplus.

Business cycle phases: expansion, peak, contraction, trough; leading indicators (yields, orders) turn before the economy, lagging indicators (unemployment) after.

Currency effects: domestic currency depreciation makes exports cheaper and imports costlier, improving trade balance with a lag (J-curve).

Disruptive innovation (Christensen): entrants win by serving overlooked low-end or new-market segments with simpler, cheaper offerings, then move upmarket as incumbents over-serve.

Sustaining versus disruptive: sustaining innovations improve performance for existing customers; disruption redefines performance dimensions and value networks.

Lean startup loop: build–measure–learn; validated learning replaces assumptions with evidence; minimum viable product tests the riskiest hypothesis first.

Innovation portfolio: 70/20/10 allocation across core, adjacent, and transformational bets balances near-term returns against future optionality.

Technology adoption lifecycle: innovators, early adopters, early majority, late majority, laggards; the chasm separates early adopters from the early majority and demands different go-to-market.

Open innovation: external ideas and paths to market complement internal R&D; absorptive capacity determines how well a firm converts external knowledge into value.

Digital transformation: data, cloud, and automation shift cost structures; the binding constraint is usually process and organizational redesign, not technology purchase.

Platform economics: multi-sided platforms create value through network effects; pricing often subsidizes one side to attract the other, and winner-take-most dynamics raise antitrust scrutiny.

Contract formation requires offer, acceptance, consideration, capacity, and legality; a counteroffer operates as a rejection and terminates the original offer.

Agency law: an agent binds the principal when acting with actual (express or implied) or apparent authority; the principal may be liable for the agent's acts within scope.

Fiduciary duties of directors and officers: duty of care and duty of loyalty; the business judgment rule protects informed, disinterested decisions made in good faith.

Antitrust: Section 1 Sherman Act targets agreements restraining trade (price fixing, market allocation); Section 2 targets monopolization; merger review applies the Herfindahl-Hirschman Index (HHI).

Insider trading: material nonpublic information traded on or tipped breaches Rule 10b-5; liability extends to tippers and tippees who know or should know of the breach.

Employment law: discrimination claims under Title VII use disparate treatment (intent) or disparate impact (neutral policy with adverse effect); retaliation claims require protected activity and adverse action.

Data protection: GDPR principles include lawfulness, purpose limitation, data minimization, accuracy, storage limitation, integrity, and accountability; cross-border transfers need a valid mechanism.

Anti-corruption (FCPA): prohibits bribery of foreign officials and requires accurate books and records; third-party intermediaries create liability if the firm knows or should know of improper payments.

Corporate governance codes emphasize board independence, audit committee oversight, disclosure, and shareholder rights; comply-or-explain regimes allow deviation with disclosure.

M&A value creation: synergies must exceed the acquisition premium; most studies find acquirer shareholders capture little of the combined gains, with targets capturing the premium.

Corporate strategy: parent advantage exists only when the corporate center adds more value to a business than alternative owners would; portfolio pruning follows from this test.

Risk governance: a three-lines model separates operational management (first line), risk and compliance (second line), and internal audit (third line) to preserve independence.

Shareholder activism: activist campaigns target undervalued firms and press for divestitures, buybacks, or board seats; boards should assess the strategic merit, not only the threat.

Executive compensation design: align pay with long-term value using equity, clawbacks, and relative performance metrics; excessive short-term incentives encourage risk-taking and earnings manipulation.

Regulatory environment: competition authorities scrutinize horizontal mergers for unilateral and coordinated effects; remedies include divestitures or behavioral commitments.

Sustainability governance: boards increasingly oversee climate and ESG risk; materiality assessments determine which issues warrant disclosure and strategy integration.