MBA Executive CMB flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

VRIO framework

An internal analysis test asking whether a resource is Valuable, Rare, costly to Imitate, and backed by Organizational support. Passing all four supports sustained competitive advantage; failing any one weakens the outcome.

Agency problem

The conflict that arises when managers (agents) pursue self-interest rather than owner (principal) interests. Monitoring, incentive alignment, and board independence are standard governance responses to reduce the resulting costs.

Porter's Five Forces

A framework assessing industry attractiveness through rivalry, new entrants, substitutes, supplier power, and buyer power. Stronger forces compress margins, so strategy aims to position where these pressures are weakest.

Vertical integration

Bringing a supplier or distributor function in-house. It is justified when asset specificity and opportunism make market contracting costlier than internal coordination, but it reduces flexibility.

Customer lifetime value

The discounted sum of margins from a customer over the relationship, minus acquisition cost. It rises nonlinearly with retention, so retention investment often beats acquisition spending.

Price elasticity of demand

The percentage change in quantity demanded divided by the percentage change in price. Values above one in absolute terms mean revenue rises when price falls.

Contribution margin

Price minus variable cost per unit. It measures how much each sale contributes to covering fixed costs and profit, and drives break-even and campaign profitability analysis.

Net Promoter Score

The percentage of promoters (scores 9–10) minus the percentage of detractors (scores 0–6) on a likelihood-to-recommend question. It is a diagnostic metric, not proof of causal growth.

Net present value

The sum of expected future cash flows discounted at the cost of capital, minus the initial outlay. Positive NPV signals value creation; it is the preferred capital budgeting criterion.

Weighted average cost of capital

The blended required return on a firm's debt and equity, weighted by market values, with interest tax-shielded. It serves as the discount rate for projects of average risk.

Cash conversion cycle

Days inventory outstanding plus days sales outstanding minus days payables outstanding. A shorter cycle frees working capital and reduces financing needs.

Operating leverage

The ratio of contribution margin to operating income. It measures how sharply profit responds to sales changes; higher fixed cost shares amplify both gains and losses.

Little's Law

Average work-in-process inventory equals throughput rate multiplied by average flow time. It links capacity, cycle time, and inventory in any stable process.

Economic order quantity

The order size minimizing total ordering and holding costs, calculated as the square root of twice annual demand times order cost, divided by holding cost per unit.

Bullwhip effect

Upstream demand variability amplification caused by order batching, forecast updating, and rationing. Information sharing and shorter lead times are standard mitigations.

DMAIC

The Six Sigma improvement cycle: Define, Measure, Analyze, Improve, Control. It structures problem-solving around data and targets a defect rate of 3.4 per million opportunities.

Expectancy theory

Motivation equals expectancy times instrumentality times valence. Because the factors multiply, a zero in any one nullifies motivation, so interventions should target the weakest factor.

Equity theory

Employees compare their input-to-outcome ratio against referents. Perceived inequity creates tension resolved by reducing effort, seeking more reward, or leaving the organization.

Groupthink

A deterioration of group judgment driven by pressure for consensus, marked by self-censorship and illusion of invulnerability. Devil's advocate roles and leader silence are common countermeasures.

Transformational leadership

A leadership style built on idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration. It raises follower commitment beyond transactional reward exchange.

Stakeholder salience

A model ranking stakeholders by power, legitimacy, and urgency. A stakeholder high on all three is definitive and commands immediate managerial attention.

Carroll CSR pyramid

A layered model of corporate responsibility: economic, legal, ethical, and philanthropic. Economic and legal duties are required, ethical duties expected, and philanthropic duties desired.

Fiduciary duty

The legal obligation of directors and officers to act with care and loyalty in the company's interest. The business judgment rule protects informed, disinterested, good-faith decisions.

Business judgment rule

A judicial presumption shielding directors from liability for informed, good-faith decisions made with loyalty and due care, even when outcomes prove poor in hindsight.

Rule 10b-5

The US antifraud provision prohibiting deception in securities transactions. Trading on material nonpublic information or tipping it to others who trade can violate it.

Comparative advantage

The principle that trade benefits arise from producing goods at lower opportunity cost, not from absolute productivity superiority. It underpins gains from specialization and exchange.

Price maker versus taker

A price taker faces a horizontal demand curve and cannot influence market price, as in perfect competition. A price maker faces downward-sloping demand and sets output where marginal revenue equals marginal cost.

GDP expenditure identity

Gross domestic product equals consumption plus investment plus government spending plus net exports. It decomposes aggregate demand and shows which components drive growth.

Disruptive innovation

An entrant's simpler, cheaper offering that serves overlooked low-end or new-market customers, then improves and moves upmarket. Incumbents often ignore it because it initially looks unprofitable.

Lean startup loop

The build–measure–learn cycle using a minimum viable product to test the riskiest assumption with real evidence. Validated learning replaces untested assumptions before further investment.

Network effects

A condition where a product becomes more valuable as more users join. They create winner-take-most dynamics and often require platform pricing that subsidizes one side.

Digital transformation

The use of data, cloud, and automation to change how value is created and delivered. Success depends more on process and organizational redesign than on technology purchase alone.

Contract formation

A binding agreement requires offer, acceptance, consideration, capacity, and legality. A counteroffer rejects and terminates the original offer rather than accepting it.