Glossary

A 50-50 joint venture is when two parent companies establish a new shared entity, a child company, and each parent company owns 50 percent of the child company.

An acquisition is the process in which one company purchases and takes control of another company, integrating its assets, operations, and management into the acquiring business.

Administrative law is made by U.S. federal executive governmental agencies and forms the basis of federal regulations, many of which impact businesses.

Analysis is the process and result of examining all the data available for the firm and identifying and classifying all the data for each category in a strategic management tool.

An analytical framework provides a structured format for analyzing data.

Architectural innovation involves the reconfiguration of existing technologies into new forms and the creation of products that open up entirely new markets.

The average amount of money owed to a company by its customers over a period, calculated by averaging the beginning and ending accounts receivable balances.

Example: If a company’s beginning accounts receivables $30,000 and its ending accounts receivable is $50,000, the average accounts receivable would be ($30,000 + $50,000)/2 = $40,000.

The typical amount of inventory a company holds over a period, calculated by averaging the beginning and ending inventories for that period.

Example: If a company’s beginning inventory is $50,000 and its ending inventory is $70,000, the average inventory would be ($50,000 + $70,000)/2 = $60,000.

Backward vertical integration occurs when a firm moves back along the industry value chain and enters a supplier’s business.

Balanced scorecard is a management system that evaluates a company using four measures: financial measures, customer measures, internal business processes measures, and employee learning and growth measures.

Best-cost strategy is a hybrid business-level strategy that combines elements of both cost leadership and differentiation in an existing market or market segment.

A blue ocean business-level strategy is a combination of cost leadership and differentiation with the goal of market creation. The core element of the blue ocean strategy is to create uncontested market space and ideally make competition irrelevant.

Broad approaches to strategic market size target large markets.

A broad cost leadership strategy is a business-level strategy that combines a broad strategic market size and a cost leadership strategic market position. Most people within the market buy the product or service, and those customers are price-sensitive customers.

A broad differentiation strategy is a business-level strategy that combines a broad strategic market size and a differentiation strategic market position. Most consumers within the market buy the product or service, and those customers want a quality product.

A business is a single company within an industry or an organization in the private sector that is engaged in commerce and aims to make a profit.

Business ethics strategies are strategies embedded into business-level strategies at the strategic business unit level that include a company’s approach to increasing ethical behavior and focus the firm on remaining legally compliant.

Business functions include essential areas of business, such as accounting, business information technology, business law, finance, human resource management, marketing and sales, supply chain management, operations, and procurement.

Business integration is the process of combining different components of a business into a unified and cohesive operation.

A business portfolio consists of all the products and services a firm sells, all the business it conducts, and all the market segments, markets, and industries in which it participates.

Business support units focus on specific business functions, such as accounting, business information technology, business law, finance, human resource management, marketing and sales, supply chain management, operations, and procurement.

Business-level strategy focuses on how to compete within an organization’s chosen market and market segments to create and sustain competitive advantage. Business-level strategy addresses a firm’s strategic market position (whether it chooses a cost leadership or differentiation approach) and its strategic market size (whether it competes in a focused market segment or a broad market).

Capabilities refer to the organizational and managerial abilities to orchestrate a diverse set of resources and deploy them strategically, driving competitive differentiation and adding value to customers.

Case analysis is an umbrella term that means applying strategic management concepts and theories alongside analytical frameworks and tools to analyze, interpret, and evaluate company information through a written scenario that uses real or hypothetical data about a company, by researching a company, or by working directly with a company through a consultancy project.

Cases are written scenarios about companies that present real business issues faced by firms. Cases may also be written scenarios about hypothetical companies that use realistic but hypothetical data about the organizations.

A systematic management process for guiding an organization through change, which involves assessing its change readiness as well as planning, implementing, and sustaining change.

Long-term shifts in temperatures and weather patterns. These shifts may be natural, but since the 1800s, human activities have been the main driver of climate change, primarily due to the burning of fossil fuels (like coal, oil, and gas), which produces greenhouse gases that act as heat-trapping gases.

Organization in the private sector that is engaged in commerce and aims to make a profit.

Competitive advantage refers to the unique characteristics and capabilities of a firm that allow it to outperform its competitors in economic value creation.

The competitive environment of a firm consists of companies that pursue similar strategies in the same industry.

A competitor is a business within the same industry that offers similar products or services and competes for customers.

Concepts are ideas. A collection of concepts is referred to as a theory.

Congruence means there is a one-to-one relationship between two or more things. In case analysis, it refers to one-to-one reconciliation between steps in the case analysis process or across an entire strategic analysis.

Core competencies are unique strengths, embedded deep within a firm, that allow the firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost.

Corporate governance refers to the system of rules, practices, and processes by which a company is directed, managed, and controlled.

Corporate social responsibility is the idea that a business has a responsibility to the society in which it operates.

Corporate-level strategy is a companywide strategy that focuses on creating and maintaining a firm’s competitive advantage by creating synergy within and between multiple industries, markets, market segments, and businesses across multiple industry value chains and in different geographical locations.

Cost leadership is a strategic market position that focuses on consumer preferences for low-cost alternatives. A company deploying this position competes primarily by being the lowest-cost producer or provider in its chosen market. The goal is to offer products or services that are of an equal or similar value to competitors’ products or services at lower prices than competitors.

The cost of goods sold represents the direct costs of producing goods sold by a company, including materials and labor directly involved in production.

Example 1: For a bakery, COGS includes the cost of flour, sugar, and wages for the bakers.

Example 2: If a company manufactures bicycles, its COGS would include expenses for materials, labor, and manufacturing over-head used to produce the bicycles sold.

Current assets are expected to be converted into cash or used within one year, such as cash in a company’s bank account.

Obligations or debts a company must pay within one year, such as accounts payable, which represents money owed to suppliers.

Customer measures on a balanced scorecard evaluate how well a company attracts, satisfies, and retains customers. Customer measures include new customer acquisition rates, customer satisfaction scores, and repeat customer percentages.

Data is the information in the case being reviewed, in the company being researched, or in the company receiving consulting services.

Data governance encompasses the policies, processes, roles, metrics, and standards that ensure data is used ethically, effectively, and efficiently.

Delayering is the reduction of hierarchical levels in a company.

A deliberate strategy is the strategy a firm implements as a planned response to alter, but not completely change, an intended strategy in the face of dynamic conditions.

Differentiation is a strategic market position that focuses on consumer preferences for high-quality products. The company competes primarily by offering products that are notably unique from others in its chosen market in terms of quality.

Digital transformation uses existing or new digital technologies to address evolving market conditions and customer expectations.

Disruptive innovation occurs when a smaller company with limited resources challenges an established incumbent firm by entering an existing market with a new technology at a lower tier and gradually moving up.

Diversification refers to how a company simultaneously deals with different products and services in different multiple industries, markets, market segments, and businesses.

Divestment is selling an unprofitable business or product line.

A dominant business firm derives between 70 percent and 95 percent of its revenues from one business.

Dynamic capability refers to an organization’s ability to use its existing resources continually in creating new core competencies and enhancing, upgrading, and improving existing capabilities to satisfy customers and beat competition.

Earnings per share is a metric that reflects how much profit is attributable to each share of stock, which is crucial for assessing a company’s value from an investor’s perspective.

Economies of scale are created when the costs of offering goods and services decrease as firms sell more, distributing expenses across a greater number of items.

Efficiency ratios assess how well an organization or individual manages resources. High efficiency means getting more out of assets, while low efficiency indicates waste or poor resource management.

An emergent strategy is a completely new and unplanned strategy that is formulated in response to unexpected circumstances, which most often originate from a firm’s external environment. An emergent strategy is completely different than the intended strategy and requires a change of strategic direction.

Entrepreneurial orientation is a firm’s strategic posture, characterized by innovation, proactiveness, and risk-taking.

A business model and strategy that simultaneously emphasizes financial performance and environmental, social, and governance performance. Investors use ESG frameworks to assess a company’s sustainability efforts and societal impact.

An equity strategic alliance is created when one company contracts with another company to purchase a certain equity percentage of the other company.

Evaluation is the process and result of examining the analysis and interpretation to identify and explain the meaning of the information to the company by considering its impact, relevance, and importance to the company and by identifying the company’s current, potential, or needed assets, organizational capacity, and managerial ability that may support or mitigate the areas of highest impact, relevance, and importance for the firm.

Exporting occurs when a company produces goods and sells them in foreign markets.

The external environment includes everything outside a company that influences its ability to create and sustain a competitive advantage.

A fast follower is a firm that enters the market immediately after the first mover.

A lower-end product introduced specifically to protect a firm’s market share without devaluing its primary brand.

Organization in the private sector that is engaged in commerce and aims to make a profit.

A first mover is a company that enters a new market or launches a new product before any competitors, aiming to establish an early advantage.

Focused approaches to strategic market size target specific, niche market segments.

A focused cost leadership strategy is a business-level strategy that combines a narrow strategic market size and a cost leadership strategic market position. Few consumers within the market buy the product or service, and those customers are price-sensitive customers.

A focused differentiation strategy is a business-level strategy that combines a narrow strategic market size and a differentiation strategic market position. Few customers within the market buy the product or service, and those customers want a quality product.

A foothold is a small entry point that a company creates in an unfamiliar market.

FDI refers to a company investing in a business in another country.

Forward vertical integration occurs when a company moves further forward along the supply chain or industry value chain and enters a buyer’s business.

Franchising is an entry mode in which a company (the franchisor) grants a foreign partner (the franchisee) the right to use its proprietary business assets (e.g., products, brand, knowledge) in exchange for fees and ongoing royalties.

Functional-level strategy focuses on implementing strategy in business support units.

The general environment is the broadest level of a firm’s external environment and includes societal events and trends that impact all firms in an industry. Sometimes the general environment may be referred to as the macro environment.

Geographical scope refers to the region or location in which firms provide their products and services.

A global strategy combines a high responsiveness to global integration pressures with a low responsiveness to local preferences. Global strategy occurs when a company standardizes its products, services, and operations across all international markets to achieve efficiency and consistency.

Global warming is a broad term used to refer to the increase in the planet’s overall average temperature in recent decades. Global warming is part of climate change and is driven by greenhouse gases (GHGs), particularly carbon dioxide (CO2).

When a company builds its operations from scratch in the foreign market, allowing for complete customization and control of the new facility.

The greenhouse effect occurs when the earth absorbs the sun’s energy or when atmospheric gases prevent heat released by the earth from radiating into space.

Gross profit refers to the revenue remaining after subtracting the cost of goods sold (COGS). It shows how much a company earns from its core operations before other expenses.

Example: If a company earns $100,000 in sales and its COGS is $60,000, the gross profit is $40,000.

A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself, instead owning stock of other companies to form a corporate group.

Horizontal integration is a business expansion strategy that focuses on relationships with another company in the same business line.

Implementation gap is the difference between the formulated and implemented strategy.

Implementation gap analysis analyzes the difference between the formulated and implemented strategy.

Incremental innovations make improvements on existing product or service and target the existing market.

Industry is a group of organizations, businesses, companies, or firms that offer similar products and services and compete in the marketplace for profit.

Industry 4.0 refers to the current trend of digital transformation in industrial application, enabling real-time decision-making and enhancing productivity, flexibility, and agility to revolutionize the way companies manufacture, improve, and distribute their products. It is the next phase in the digitization of the manufacturing sector, driven by disruptive trends including the rise of data and connectivity, analytics, human-machine interaction, and automation and robotics.

The industry environment of a firm consists of the forces that exert influence and pressure over the entire industry in which a firm functions.

An industry value chain is a model that considers the ways a firm adds value to each step or node in the production process.

An industry value chain analysis examines the production stages, from raw material procurement to the delivery of the final product, with emphasis on value creation.

Innovation strategies are strategies that are embedded into business-level strategies at the strategic business unit level that focus a firm’s approach to innovation so that it can create and sustain a competitive advantage.

Innovativeness is the tendency to engage in and support new ideas, experimentation, and creative processes that lead to the development of new products, services, or processes.

Intellectual property concerns the legal rights that individuals or organizations have over their intellectual creations, granting them control and protection from unauthorized use by others.

An intended strategy is the strategy that an organization plans to implement. It is one strategy in Mintzberg and Waters’s (1985) model that considers intended, deliberate, emergent, realized, and unrealized strategies.

Internal business process measures are an element of the balanced scorecard that measure organizational efficiency. Internal business process measures include production times, delivery efficiency, and new product development speed.

Internal development describes the process by which a firm expands its resources, capabilities, core competencies, products, or services by leveraging internal resources and expertise.

The internal environment includes everything inside a company that influences its ability to create and sustain a competitive advantage.

An international strategy combines a low responsiveness to global integration pressures with a low responsiveness to local preferences. An international strategy involves expanding into foreign markets with minimal adaptation, relying on products and capabilities developed in the home market to enter new regions with lower risk and investment.

Interpretation is the process and result of examining analysis through critical thinking to identify and explain relationships in the analysis and underlying root causes of the situation. Interpretation is not found in the case or company research.

Intrapreneurship is the practice of fostering entrepreneurial initiatives within an existing organization.

Barriers to imitation that prevent competitors from replicating the resource, capability, or core competency that provides a sustainable competitive advantage.

A joint venture is established when two parent companies establish a new shared entity, a child company.

Knowledge industries are firms that are based on intensive use of technology and human capital.

Learning and growth measures are an element of the balanced scorecard that measure how an organization can continue to innovate and create future value. Learning and growth measures focus on employee development, innovation capabilities, and adapting to changing market conditions.

Leverage measures evaluate the level of debt in relation to equity. These ratios show how much of a company’s or individual’s assets are financed by debt, providing insight into financial stability and risk.

Licensing is an entry mode in which a company allows a foreign company to purchase the rights to produce, sell, or use its products in exchange for royalties or a fee.

Line of sight means there is a direct and clear logic connecting two or more concepts or ideas.

Liquidity measures help assess if an organization or individual can meet short-term obligations. For example, can a company or a person pay off immediate debts with readily available cash?

Major areas of strategic concern are the most urgent areas that a firm needs to address immediately to ensure its success now and in the future.

A majority-owned joint venture is formed when two parent companies establish a new shared entity, a child company, and one company owns more than 50 percent of the new company.

A market refers to the overall pool of potential customers for a product or service within a specific industry.

A market segment is a distinct group within a market that is identified by shared characteristics like demographics, needs, or behaviors.

Market value measures indicate the overall value of a company as perceived by investors in the market. These metrics help assess the company’s worth based on its stock price and shares outstanding.

The McKinsey 7-S model is a framework to align structure, strategy, systems, skills, style, staff, and shared values in the process of strategy formulation and implementation.

A megatrend is a deep and profound trend that is global in scope and long term in effect.

A merger occurs when two or more companies of similar size voluntarily join forces and create a new business.

A mission statement explains why an organization exists.

A multidomestic strategy combines a low responsiveness to global integration pressures with a high responsiveness to local preferences. Multidomestic strategy involves adaptation of products, services, and operations to align closely with the unique demands of each local market, prioritizing responsiveness over global standardization.

A multinational corporation is a firm that has operations in more than one country.

Multinational strategies are strategies that are embedded into business-level strategies at the strategic business unit level that address different ways to position the company in multinational markets. These include international, multidomestic, global, and transnational strategies.

Multipoint competition refers to when firms compete against each other in multiple geographic or product markets simultaneously.

Net credit sales are the total sales a company makes on credit, minus any returns, allowances, or discounts.

Example: If a company has $100,000 in credit sales and allows $5,000 returns and discounts, the net credit sales would be $95,000.

Net profit is the amount of income remaining after all expenses, taxes, and costs have been subtracted from total revenue. It represents the company’s final profit.

Example: If a company’s total revenue is $100,000 and total expenses are $80,000, the net profit is $20,000.

Net revenue is the total revenue after subtracting returns, allowances, and discounts. It represents the actual income from sales.

Example: If a company’s total revenue is $50,000, but it gave $5,000 in discounts, the net revenue would be $45,000.

A nonequity strategic alliance is created when two or more companies enter a contractual relationship to pool their resources and capabilities together.

Opportunity cost refers to the loss of potential gain from alternative options that were not pursued.

For example: Idle cash balances represent an opportunity cost in terms of lost interest.

Organization is the broadest term used to describe a specific entity and applies to entities in all sectors: private (for-profit), governmental (public), and not-for-profit (including nonprofit, nongovernmental organizations [NGOs], and voluntary organizations). Organizations in the private sector are also referred to as businesses, companies, and firms.

Performance benchmarks are standards or reference points used to evaluate an organization’s metrics by comparing them to historical data, industry standards, or the performance of competitors.

Performance gap is the difference between the implemented strategy and organizational performance under the strategy.

A performance gap analysis analyzes the performance gap and its causes. Performance gap analysis looks at the gap between where the firm should be according to the current strategy and where it is. Hence, the performance gap analysis is the process that companies use to compare their current strategy performance with their desired, expected performance.

Performance measures are metrics used to track an organization’s progress, such as profits, stock prices, or sales figures.

The PESTEL framework is the strategic management framework that is used to analyze the general environment of a company. The acronym PESTEL stands for political, economic, sociocultural, technological, environmental, and legal.

A presidential executive order is issued by the President of the United States and gives directives that may impact businesses.

A private placement is a sale of stock shares or bonds to preselected investors and institutions rather than on a public exchange.

Proactiveness is a firm’s tendency to anticipate and act on future opportunities, needs, and market changes ahead of competitors.

Profitability ratios focus on the ability to generate profit. These measures show how well an organization or individual is able to grow their income over time, which is essential for sustainable success.

A firm’s purpose statement articulates its reason for existence beyond just profit-making.

Radical innovation is the development of new technologies or products that create new markets, often leading to significant shifts in consumer or competitor behavior.

The RASCI matrix model describes the participation by various roles in completing tasks or deliverables for a project or business process. The RASCI acronym stands for responsible, accountable, supportive, consulted, and informed.

A realized strategy is the strategy that an organization follows over time. Realized strategies include a firm’s planned intended strategy as amended to take into account any changes that arise in a dynamic environment as reflected in a company’s deliberate strategy. Realized strategies also include an emergent strategy if an unanticipated and completely new opportunity has arisen and the firm has been nimble and quick enough to capitalize on it.

Related diversification is expanding into new and similar markets, market segments, and businesses in a new industry that has similarities to a firm’s current industry or industries.

Resources are the tangible and intangible assets owned by a company.

Retrenchment is a reduction in size and product offerings intended to continue to make profits. It is also referred to as downsizing or rightsizing, which often require laying off employees.

Return on investment describes how effectively a company generates profit relative to the cost of investments, which ties directly to profitability.

Risk-taking is a firm’s willingness to engage in bold actions that involve significant uncertainty, such as investing in new ventures, entering unfamiliar markets, or committing resources to unproven projects. It reflects a readiness to take calculated risks for potential high returns.

Root cause analysis is a structured process for identifying the underlying causes of a problem and developing solutions to prevent it from happening again.

Share price is the current market price of a single share of a company’s stock, determined by supply and demand in the stock market.

Shareholder equity represents the ownership interest of shareholders in a company, calculated as the difference between a company’s total assets and total liabilities.

Example: If a company has $1 million in assets and $600,000 in liabilities, its shareholder equity would be $400,000.

Shares outstanding refers to the total number of a company’s shares currently held by all its shareholders.

A single business firm is a firm that derives 95 percent or more of its revenues from one business.

The span of control represents the number of direct reports for which a supervisor is responsible.

A spinoff involves selling part of a company, such as a division or strategic business unit.

Stock price reflects how investors perceive a company’s worth, making it a fundamental metric for market value.

A strategic alliance is a mutually beneficial contractual relationships between two independent organizations.

A strategic alternative is an action that addresses and has the potential to resolve every aspect of a strategic issue.

Strategic analysis is the process of applying strategic management concepts and theories as well as analytical frameworks and tools to conduct a thorough 360-degree analysis of a firm, enabling strategy managers to make evidenced-based decisions about strategy formulation and strategy implementation in all areas of the company’s operations.

A strategic business unit is a fully functional unit of a business that has its own vision and direction and is part of a larger organizational unit like a division. A strategic business unit focuses on one business-level strategy.

Strategic gap is the difference between a firm’s strategic objective—what it would like to accomplish—and its formulated strategy, which is based on the improvements the firm expects to realize given the operating conditions.

Strategic gap analysis inspects the difference between a firm’s strategic objective (what they would like to accomplish) and its formulated strategy (which is based on the improvements the firm expects to realize given the expected operating conditions).

A strategic group consists of companies that pursue similar strategies in the same industry.

Strategic group mapping is the strategic management framework used to analyze industry competitors that have similar characteristics to each other and differ in important ways from the companies in other strategic groups.

A firm’s strategic issue is the most important, urgent, broad, long-term matter that the company is facing. Strategic issues require significant organizational talent and resources to resolve. Addressing a strategic issue moves a firm toward its mission, purpose, and vision; therefore, the issue should be congruent with its values, and goals. A strategic issue focuses on the present and specific organizational context, addressing what is happening with this firm, at this time, in this place, and under these circumstances.

Strategic leadership includes the responsibility, talent, capacity, power, and actions to steer an organization strategically through a dynamic market to create and sustain a competitive advantage and to become and remain an industry leader.

Strategic management is the dynamic and ongoing endeavor that follows a structured process to methodically and thoroughly analyze the environment, industry, and firm as well as to formulate and implement strategy.

Strategic management frameworks provide a structured format to analyze company data as it relates to a major area of strategic management. These analytical frameworks may also be referred to as strategic management tools.

Strategy is a collection of organizational plans and processes that focus on creating and sustaining superior firm performance relative to a company’s competitors, which creates a sustainable competitive advantage. Strategies are broad and long-range, with few specifics. They do not typically address actions.

Strategy formulation is the process of designing strategies throughout all levels and areas of an organization. Successful strategy formulation relies on evidenced-based decisions that are grounded in strategic analysis.

Strategy implementation is the process of executing the strategies that a company has formulated.

Companies that attempt to combine cost leadership and differentiation approaches but fail to balance the tensions inherent between the two approaches may end up being “stuck in the middle,” unable to compete on price with low-cost leaders or on quality with premium brands.

A substitute is a product or service that comes from outside the existing industry but fills the same need for existing industry customers while offering some additional value.

A supply chain includes the steps of product production from multiple entities, ranging from raw materials to the final delivered product.

Sustainability refers to meeting our own needs without compromising the ability of future generations to meet their own needs. Sustainability addresses issues of climate change, resource scarcity, social issues, and social justice.

A company’s sustainability strategy is meant to reduce adverse environmental and social impacts resulting from business operations while still pursuing profitable growth. Such strategies include corporate social responsibility (CSR) strategies and environmental, social, and governance (ESG) strategies.

Synergy occurs when two or more strategic business units or businesses perform more effectively together than they do independently.

Synthesize means to review, critically examine, and combine diverse elements into a coherent whole.

Technology strategy involves the use of digital technology to improve an organization’s processes, operations, products, and services. Technology strategy is the “rewiring” of an organization with the goal of creating value by continuously deploying technology at scale.

Theories are collections of concepts. Business theories explain cossurrences in the business world.

A company’s total assets are everything it owns that has economic value, including both current and long-term assets. Buildings owned by the company, alongside cash, equipment, and inventory, all contribute to total assets.

A company’s total liabilities are made up of all its debts and financial obligations, such as loans taken from a bank.

The total income generated from sales of goods or services before any expenses are deducted.

Example: If a store sells $150,000 worth of products in a month, that amount is its total revenue for that month.

Transnational strategy is a strategy involving the balance of global efficiency with local responsiveness by standardizing core elements while adapting others to meet the unique needs of individual markets.

An unrealized strategy refers to the abandoned parts of the intended strategy. It is one strategy in Mintzberg and Waters’s (1985) model that considers intended, deliberate, emergent, realized, and unrealized strategies.

Unrelated diversification describes expansion into new markets, market segments, and businesses in a new industry that has little or no similarities to a firm’s current industry or industries.

A value chain analysis is a systematic process for evaluating the steps involved in creating a product or service, from the initial design to delivery to the customer. The analysis helps to deliver the most value at the lowest cost and helps to identify strengths and weaknesses a firm needs to address in the strategy formulation process.

Value statements define the core principles that companies stand by and expect their employees to uphold.

Vertical integration is a business expansion strategy in which a company takes control over one or more stages in the production or distribution of its products.

A vision statement is a forward-looking or aspirational statement that captures what a company or organization wants to achieve in the long run.

The VRIO framework identifies sources of a sustainable competitive advantage for a firm by analyzing whether resources, capabilities, and core competences are valuable, rare, hard to imitate, and organized to capture value.

A wholly owned subsidiary is a company whose common stock is 100% owned by another company. In the context of multinational corporations, wholly owned subsidiaries involve full ownership and control of foreign operations. They can be established through either greenfield investments or acquisitions.