MBA Executive CMB key terms

A position where a firm's resources or capabilities deliver superior value that rivals cannot easily copy, substitute, or erode over time, typically because they are rare, valuable, hard to imitate, and organizationally supported.

A structured test asking whether a resource is valuable, rare, costly to imitate, and supported by the organization; answers determine whether it yields parity, temporary advantage, unused potential, or sustained advantage.

A theory explaining performance differences through internal assets and capabilities rather than industry position alone, arguing that heterogeneous, imperfectly mobile resources drive returns and shape diversification choices.

A bundle of skills and technologies that lets a firm deliver distinctive customer benefit across several products, is difficult for competitors to replicate, and can be extended into new markets without starting from scratch.

An industry-structure model assessing rivalry intensity, threat of new entrants, threat of substitutes, supplier bargaining power, and buyer bargaining power to judge how attractive average profitability in a sector will be.

A cluster of firms within an industry pursuing similar competitive approaches along key dimensions such as price, breadth, and channel, so that members watch and react to each other more closely than to outsiders.

Entry into a new business that shares value-chain activities, technology, customers, or channels with existing operations, allowing synergies and transferred capabilities that unrelated expansion cannot easily generate.

The risk that managers, acting as agents for shareholders, pursue personal benefits such as empire building, perks, or risk avoidance instead of maximizing owner value, creating monitoring and incentive costs.

The degree to which directors, especially on audit and compensation committees, have no material employment, family, or commercial ties to management or major shareholders, enabling objective oversight of executives.

Competing by offering attributes buyers value enough to pay a premium, such as design, reliability, service, or brand prestige, with cost control sufficient to keep the price gap profitable rather than merely distinctive.

The present value of expected future profit from a customer relationship over its duration, used to set acquisition budgets, prioritize retention spending, and judge whether segments deserve premium service levels.

Total sales and marketing spending divided by the number of new customers won in a period; compared with lifetime value it reveals whether growth spending produces profitable relationships or destroys value.

The share of customers or recurring revenue lost during a period, a core driver of lifetime value and a signal of satisfaction, competitive pressure, or onboarding weakness in subscription and service businesses.

The added value a brand name gives a product, reflected in willingness to pay, price premium tolerance, distribution access, and resilience to setbacks, built through consistent associations and experiences over time.

Dividing a heterogeneous market into groups with distinct needs, behaviors, or economics, then choosing targets whose preferences the firm can serve more profitably than competitors can.

The distinctive place a product or brand occupies in target customers' minds relative to alternatives, expressed as a concise value proposition that guides pricing, messaging, and channel decisions.

Sales revenue minus variable costs, showing how much each unit or order adds toward fixed costs and profit; central to break-even analysis, pricing floors, and product-mix decisions.

The sales volume or revenue at which total contribution equals fixed costs, producing zero profit; a key threshold for pricing, capacity, and venture feasibility decisions.

A future cost that differs between decision alternatives; sunk costs and allocated fixed overhead that do not change are excluded, preventing distorted make-or-buy, special-order, and drop-product judgments.

The value of the best alternative forgone when a resource is committed to one use; it belongs in economic decision analysis even though accounting records usually omit it.

The sensitivity of operating profit to sales changes caused by a high proportion of fixed versus variable costs; it magnifies gains in upturns and losses in downturns.

Deliberate choices within or beyond accounting rules, such as accrual timing or expense deferral, that smooth or shift reported profit to meet targets, obscuring underlying performance and weakening governance.

Accounting profit less the cost of all capital employed, including equity; positive values indicate the firm earned more than investors could expect from comparable-risk alternatives.

The blended after-tax required return on a firm's debt and equity, weighted by capital structure; used as the discount rate for projects and as the hurdle for value creation.

The sum of a project's expected cash flows discounted at an appropriate required return, minus initial outlay; a positive result means the investment adds value under stated assumptions.

The time needed for cumulative cash inflows to recover an initial investment; simple and liquidity-focused but blind to cash flows after recovery and to the time value of money.

The order size minimizing the sum of ordering and holding costs under stable demand and lead times, balancing bulk economies against inventory carrying expense and obsolescence risk.

Extra inventory held to buffer demand variability and lead-time uncertainty, sized by desired service level and forecast error; excess amounts tie up cash and hide process problems.

Amplification of demand variability as orders move upstream, driven by forecast updating, batch ordering, price promotions, and rationing games, causing excess inventory and poor capacity planning.

A system that removes waste such as waiting, overproduction, and excess motion while pulling work at the pace of demand, aiming for flow, short lead times, and continuous improvement.

A data-driven quality methodology targeting defect rates near 3.4 per million opportunities through define, measure, analyze, improve, and control phases, emphasizing root-cause statistics over inspection.

An improvement approach identifying the bottleneck that limits system throughput, exploiting and elevating it, and subordinating other resources to its pace rather than optimizing every step locally.

Total spending caused by defects, including prevention, appraisal, internal failure such as scrap and rework, and external failure such as warranty, recalls, and lost goodwill; failure costs usually dominate.

The rate at which a system generates money through sales of finished output, distinct from capacity or production volume; constrained by the bottleneck and by actual demand.

The unwritten set of mutual expectations between employee and employer about effort, loyalty, development, and job security; breach erodes engagement, trust, and retention even without contract violation.

The degree to which employees invest discretionary effort and emotional commitment in their work, shaped by purpose, autonomy, recognition, fair treatment, and manager quality.

An employee's conscious plan to leave the organization, predicted by dissatisfaction, weak commitment, poor fit, and external opportunities; a leading indicator of actual attrition and knowledge loss.

A leadership approach prioritizing followers' growth, autonomy, and well-being, using persuasion and stewardship rather than control, which tends to raise trust and organizational citizenship behavior.

Influencing through idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration, moving followers beyond self-interest toward shared goals and higher performance.

A situation where personal, financial, or family interests could improperly influence professional judgment; disclosure, recusal, and independent approval are standard controls.

Reporting suspected wrongdoing inside or outside the organization; effective programs protect reporters from retaliation, provide confidential channels, and investigate claims independently.

The percentage change in quantity demanded divided by the percentage change in price; absolute values above one indicate elastic demand where price rises reduce revenue.

The money, time, risk, and effort a buyer incurs to change suppliers; high switching costs reduce price sensitivity, deter entry, and stabilize revenue but can invite regulatory scrutiny.

The ability to produce a good at lower opportunity cost than a trading partner, explaining gains from specialization and exchange even when one party is absolutely more efficient at everything.

Declining unit cost as output rises because fixed costs spread over more units and processes become more efficient, creating a barrier to entry and pressure to build volume.

An offering that starts simpler and cheaper in underserved segments, then improves until it displaces incumbents who rationally ignored the low-margin niche and are trapped by existing customers.

A model creating value by facilitating interactions between two or more participant groups, where network effects, matching quality, and governance of participants matter more than owning inventory.

A situation where each additional user raises the value of the product for other users, producing winner-take-most dynamics, rapid scaling, and defensibility once critical mass is reached.

A managed mix of incremental, adjacent, and radical initiatives balanced by risk, horizon, and strategic fit, reviewed like an investment portfolio to avoid overconcentration or starvation of long-term bets.

The right, but not obligation, to defer, expand, stage, or abandon an investment as uncertainty resolves; valuable in volatile settings where rigid net present value analysis undervalues flexibility.

The legal obligation of directors and officers to act in the corporation's best interest with care and loyalty, including avoiding self-dealing and disclosing material conflicts.

A judicial presumption that directors acted on an informed basis, in good faith, and honestly believed their decision served the company, shielding reasonable decisions from hindsight liability.

A deal between the company and a director, officer, or their affiliates; requires disclosure, independent review, and fair terms to prevent tunneling of value from shareholders.

Regulatory assessment of whether a combination would substantially lessen competition through unilateral effects, coordinated effects, or foreclosure, often remedied by divestitures or conditions.

Trading securities on material nonpublic information in breach of a duty of trust or confidence; liability extends to tippers and tippees and carries severe civil and criminal penalties.