Frank T. Rothaermel — Strategic Management 3e — Chapter 5

Individuals or organizations that own one or more shares of stock in a public company.
risk capital
The money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt.
total return to shareholders
Return on risk capital that includes stock price appreciation plus dividends received over a specific period.
market cap
A firm performance metric that captures the total dollar market value of a company’s total outstanding shares at any given point in time.
economic value created
Difference between value (V ) and cost (C), or (V – C).
reservation price
The maximum price a consumer is willing to pay for a product or service based on the total perceived consumer benefits.
The dollar amount (V )
a consumer attaches to a good or service; the consumer’s maximum willingness to pay; also called reservation price.
Difference between price charged (P ) and the cost to produce (C ), or (P – C); also called producer surplus.
producer surplus
Another term for profit, the difference between price charged (P) and the cost to produce (C ), or (P – C ); also called profit.
consumer surplus
Difference between
the value a consumer attaches to a good or service (V ) and what he or she paid for it (P), or (V-P).
opportunity costs
The value of the best forgone alternative use of the resources employed.
balanced scorecard
Strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals.
triple bottom line
Combination of economic, social, and ecological concerns—or profits, people, and planet—that can lead to a sustainable strategy.
sustainable strategy
A strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet.
business model
A firm’s plan that details how it intends to make money.

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