D
Daisy chain In finance, buying and selling the same commodity several times over as a way of inflating its trading activity on a stock exchange.
Danger pay Compensation offered to employees who work where prevailing unrest poses a great danger to their physical well-being.
Databank A collection of DATABASES.
Database An organized electronic collection of information according to a schema that is built into a database management system.
Database marketing Marketing based on extensive use of DATABASES to attract new customers and explore new markets.
Data capture Insertion of information into a computer system at the point of sale or other means.
Data dredging Process of drawing conclusions from data not warranted by the data alone.
Data file Computer file, divided into records and fields, that contains data as distinguished from a file that contains a program.
Data mining Process of extracting usable information from raw data through the use of algorithms and statistical models to form predictive models that can identify significant patterns of use.
Data protection Safeguards for personal data in a company’s files to prevent potential misuse, especially without permission. The protections conform to the privacy rights and laws in force, in that data are obtained fairly and lawfully and used only for specified and legal purposes; personal information is not disclosed or used in a manner inconsistent with the purpose behind its collection; it is not exploited excessively; it is accurate and up-to-date; it is kept no longer than necessary; it is protected against unauthorized and unlawful processing and against accidental loss or destruction; and it is not transferred to a foreign jurisdiction. Data subjects have the right to find out what information is held about them and to rectify, block, erase, and destroy data that are inaccurate and irrelevant, so as to prevent their disclosure or sale to third parties, and to be compensated for infringement of privacy rights.
Data warehousing Assembly of data from multiple sources into one, single file for easier access.
Dawn raid Attempt by one company or investor to acquire significant holdings in the equity of another company by acquiring all available shares as soon as the stock exchange opens, before the target company suspects a TAKEOVER BID.
Day in the sun Time when a product or issue is most successful in the marketplace.
Daybook Book in which specific transactions are recorded for prime entries.
Dead-cat bounce Temporary, inexplicable rise after a fall in stock prices, which does not indicate an upward trend.
Dead time Unproductive time spent by workers waiting to begin work.
Deadline Time by which a contract must be completed or a sale must be concluded.
Death valley curve Movement on a graph that tracks the decrease in VENTURE CAPITAL invested in a company as that company meets its startup expenses and before its income reaches predicted levels. At this point, the company becomes less attractive to new investors.
Debenture Unsecured business loan repayable by a fixed date that pays a fixed rate of interest. Payment of interest on debentures takes precedence over payment of dividends. Perpetual debentures are not redeemable. Secured debentures have a fixed charge on the borrower’s assets. Some debentures are convertible into ordinary shares at a specified price. The advantage to the debenture’s issuer is that it carries a lower rate of interest than overdrafts and has a longer maturity date. Trustees may be appointed on behalf of debenture holders.
Debit In DOUBLE-ENTRY BOOKKEEPING, an entry on the left-hand side of an account, showing the amount owed to creditors.
Debit card Bank card issued to a customer enabling that person to pay for goods or services by directly debiting his or her bank account.
De Bono, Edward Charles Francis Publius (1933–) Maltese-born British physician and thinker. In his book Six Thinking Hats, he coined the term LATERAL THINKING. He founded the Cognitive Research Trust in 1969 and the Edward De Bono School of thinking in 1979. He is the author of 82 books including Mechanism of the Mind and I am Right, You are Wrong.
Debt-equity ratio Percentage of a company’s equity in relation to its longer-term debt, including PREFERENCE SHARES. This ratio is an indication of the financial health of a company and is used by banks to determine that company’s credit worthiness.
Debt-for-equity swap Transaction in which debt is swapped for equity during the reorganization of a troubled company.
Debt rating Level of creditworthiness of an institution, based on generally accepted criteria such as economic and political stability. The company’s debt rating affects the interest rate when it borrows money.
Debt restructuring Adjustment of a debt through a rescheduling of payments and terms, either under court order or through negotiation, to give a company more time to meet its financial obligations.
Debt-service ratio In international trade, the proportion of annual export earnings needed to service a country’s external debt obligations.
Debureaucratization Breakdown of the hierarchical structure of authority, with redefinition of managerial function and devolution of responsibility downward.
Decentering Process of relying on old principles and guidelines in a rapidly changing market, with new players, products, and needs.
Decentralization Delegation of decision-making authority to subordinates and subsidiary units to encourage greater local responsibility. The advantages of decentralization are greater relevance to the immediate environment, greater efficiency, and better motivation of associates. The disadvantages are wasteful competition, duplication of functions, and loss of central control.
Decision analysis Consideration of the key decisions in an organization, as opposed to holding unexamined assumptions. This is one of management guru PETER DRUCKER three techniques for crafting the best organizational structure for a corporation.
Decision band method Job-evaluation technique developed by sociologist T. T. Paterson, in which all job levels in an organization are analyzed and graded according to six decision-making criteria, in descending order of importance: policymaking decisions, programming decisions, interpretive decisions, routine decisions, automatic decisions, and vegetative decisions.
Decision making Act of making rational choices among multiple options or courses of action, based on experience, tradition, available means, and CRITICAL-PATH ANALYSIS. Seat-of-the-pants decisions are based on gut feeling. Similarly, many decisions are made in the absence of complete information and without knowledge of the intended or unintended consequences. Uncertainty always increases the number of possible outcomes to a decision. DECISION TREES can sometimes clarify the problem by assigning probabilities to each possible outcome. Principled decision making, whereby problems are reduced to a manageable size, can be used to assist analytical decision making. DECISION SUPPORT SYSTEMS use available information to arrive at better decisions. Sharing of information can lead to collective intuition. Additionally, conflict may stimulate better decision making by fostering creative thinking and yielding better understanding of available options.
Decision-making unit Informal group in an organization vested with the task of making purchasing decisions based on price, need, and availability.
Decision model Simulation of elements or variables inherent in a business decision, based on consideration of negative and positive factors. Decision models include DECISION TABLES.
Decision science Application of accepted scientific principles and models to decision making and problem solving.
Decision support system (DSS) Computer information system that performs complex data analysis that helps users make informed decisions.
Decision table Way of graphically presenting the estimated probabilities of outcomes, each with its maximum and minimum benefits, to aid decision making.
Decision theory Theory in which various mathematical techniques, such as GAME THEORY, RISK ANALYSIS, and SENSITIVITY ANALYSIS, are used to forecast likely outcomes of different decision options.
Decision to participate Behavioral theory that people participate in an organization’s activity so long as the benefits to them of doing so outweigh their expected contributions.
Decision tree In decision making, a diagram that illustrates the choices and possible outcomes of each possible course of action.
Deconglomeration Split-up of a conglomerate through the devolution of power to its constituent parts.
Decouple To separate two corporate units that were bound together.
Decruitment Placement of senior staff on reduced pay with lower responsibilities in the years immediately preceding their retirement.
Deed A written, validly executed, duly signed, witnessed, and delivered document.
Deep discount An interest rate higher than 15% of the redemption value of a loan stock.
Deep market Highly liquid market for a commodity, currency, or security with a large number of transactions in which the spread between bid and offer is narrow.
Deep throat Anonymous source of top-secret information; allusion to informer during the Nixon Watergate scandal.
Deep web Secure classified data in government and military websites. Also invisible web.
De facto Applied to a situation or thing that exists as a matter of reality, rather than as established by law, as in de facto discrimination.
Default 1. To fail to do something as required by law, especially to make a payment on time, comply with the terms of a contract, or observe the rules of legal procedure. 2. Predetermined setting in computer software to facilitate use.
Defender strategy Competitive tactics that protect a company’s market share by concentrating on existing products, improving quality, and offering lower prices and superior customer service. Compare PROSPECTOR STRATEGY.
Defender takeover bid HOSTILE BID for takeover of a company that is opposed by the directors of the target company.
Defensive interval ratio Relationships between income and assets on the one hand and expeditures and liabilities on the other, which demonstrates the ability of a business to meet its current debt obligations by calculating the time for which it can operate on current liquid assets.
Defensive investment Strategy for investment with the primary goal of avoiding risk rather than maximizing return. Opposite of SPECULATION.
Deferred Delayed. In accounting, relating to payments that are payable only at a later date and not in the accounting period under review.
Deficit financing In government, spending that is financed through issuance of debt. This KEYNESIAN ECONOMIC concept, by which fiscal policy is used to promote economic growth through government spending, is based on the premise that the resulting growth in economic activity will bring in the funds needed to offset that debt.
Deflation State of economy in which there is a decline in prices, accompanied by falling levels of employment, output, and trade. Opposite of INFLATION.
Deflationary gap Difference between the theoretical level of spending necessary to maintain full employment and production and the actual spending by public and private sectors.
De Geus, Arie Dutch business consultant whose book Living Company (1997) described the characteristics of a long-lived company as one of financial conservatism, sensitivity to the natural and social environment, cohesiveness, and tolerance for unconventional thinking.
Deindustrialization A decline in the manufacturing sector resulting from a loss of competitiveness, loss of skilled labor, and flight of capital.
Delayed gratification Act of forgoing immediate gratification for the sake of greater or more genuine satisfaction in the future; often applied to market research.
Delayering Removal of some middle layers of management in an organization so as to create a more flexible and responsible hierarchy.
Del credere agent A selling agent who guarantees to pay for goods sold on behalf of a principal if the buyer fails to do so.
Delegation Process of giving decision-making authority to subordinate employees. The delegation of authority or responsibility must be accompanied by empowerment, selection, and planning. The manager needs to specify the performance standards of the assignment, and the authority and responsibility must be balanced.
Delegatus non potest delegare Legal principle that a delegate cannot further delegate—that is, that a representative or delegate with vested authority cannot grant that power, trust, or authority to a third party without authorization from the principal.
Deleveraging Sale of a company’s assets and the RETRENCHMENT of its staff to reduce debt.
Delphi technique QUALITATIVE FORECASTING technique by which a panel of experts respond to questions from a forecaster or coordinator, who summarizes the responses and repeatedly resubmits them to the panel until the process yields an objective assessment.
Demand In marketing, the need for a product, translated into a potential purchase, which in turn determines the volume of its production and its price.
Demand curve Movement on a graph that illustrates the relationship of a product’s price to its sales.
Demand elasticity Extent to which demand for a product influences its price. When demand is inelastic, price changes have no effect, and when demand is elastic, even small changes in price affect the volume of sales.
Demand inflation Economic condition in which prices increase because of increased demand that cannot be met.
Demand management Stimulation or reduction of demand to achieve a desired level of employment and economic stability.
Demand-pull inflation An increase in prices created by excess money for too few commodities.
Demand-pull innovation Development of new products triggered by unmet needs.
Demarketing Actions aimed at discouraging consumers from buying or consuming a particular product, such as cigarettes.
Demerger Split-up of a large company or conglomerate into a number of units or sold off in an effort at consolidation.
Deming, W. Edwards (1900–1993) American champion of TOTAL QUALITY MANAGEMENT, who formulated 14 points for quality control that revolutionized Japanese manufacturing. He was subsequently responsible for a quality revolution in the United States and many other industrialized countries. Edwards reminded management that most business problems are systemic and that management more than labor should be responsible for correcting them. His books include Out of the Crisis (1986), The New Economics (1993), and Statistical Adjustment of Data (1943). One of his best-known theories is the System of Profound Knowledge, which encompasses (1) appreciation of a system, (2) knowledge of variation, (3) theory of knowledge, and (4) knowledge of psychology. His theory of optimization states that the goal of an organization should be to maximize the entire system and not merely the constituent subsystems. His theory of variation states that companies should eliminate variation in quality by focusing on certainty and standards in production and design. He said that most variations are due to common structural and design inadequacies, but about 20% are due to assignable external causes. His theory of knowledge states that knowledge is not possible without theory and experience alone does not constitute a theory. And his theory of psychology delves into the forces that drive human interactions, which are based on psychology.
Deming then described what he termed “the seven deadly sins or diseases of management”: (1) lack of constancy and purpose to plan, (2) emphasis on short-term profits, (3) performance appraisals and merit ratings that discourage the fearful, (4) job-hopping, (5) management based on quantitative results alone, (6) excessive medical costs, and (7) trial lawyers. He formulated 14 points to counter these seven deadly sins: (1) have consistency of purpose; (2) do not accept delays and mistakes and poor workmanship; (3) do not depend on inspection alone to ensure quality; (4) do not look to the price tag alone but value long-term relationships, loyalty, and quality; (5) continuously improve production and service; (6) train on the job; (7) have supervisors be coaches, not dictators; (8) create a fear-free environment; (9) break down internal barriers through better communication; (10) avoid slogans; (11) eliminate numerical goals, standards, and quotas; (12) foster pride in workmanship; (13) encourage self-improvement; and (14) engage the management in implementing these 14 points.
Deming prize Award established by the Union of Japanese Scientists and Engineers in honor of W. EDWARDS DEMING, father of TOTAL QUALITY MANAGEMENT. The prize is given to companies that have shown a strong commitment to quality control as an imperative in management.
Democratic leader Egalitarian leader who successfully delegates authority and promotes consensus decision making as a deliberate management policy. Organizations with democratic leaders tend to be more flexible, innovative, and motivated.
Democratic management Style of management that emphasizes consensus, persuasion, and consultation at all levels of decision making.
Demographic segmentation Division of markets into groups based on demographic variables such as age, gender, family size, life cycle, income, occupation, education, religion, race, and nationality.
Demography Study of growth, decline, and transitions in human populations, especially by race, gender, age, fertility, marriage patterns, and mortality.
Denationalization See PRIVATIZATION.
De novo (Latin, “begin again”) In computer system design, new cost burdens brought on when attempting to eliminate inequalities.
Department Traditional unit of an organization, devoted to a particular segment of the business activity and led by a departmental head.
Department store Retail organization that sells a wide variety of products and services, often part of a chain of stores.
Departmentation Establishment of subunits charged with specific functions or oversight of specific territories, products, customers, or tasks.
Depreciation 1. Diminution in the value of a fixed asset owing to wear and wear and/or obsolescence. 2. Fall in the value of a currency with a floating exchange rate relative to other currencies.
Depressed area Region where economic performance is low and unemployment is high relative to the national average.
Depression Extended or serious RECESSION in business activity, characterized by falling production, falling prices and sales, stock market crash, high unemployment; sometimes accompanied by INFLATION.
Depth interviews In marketing, unstructured interviews as part of a market research project. The interviewer encourages the interviewees to offer their candid responses informally and then compiles their responses for a formal report.
Depth of product line Description of the number of items in a product line.
Deregulation Elimination of regulations and rules governing business activity in stipulated areas of activity. Deregulation is often a reflection of both political and economic developments. It may come about as a more conservative political base gains power; or it may be the result of growing globalization and increasing influence of multinationals, who are relatively immune to domestic pressures; or it may accompany a realization that certain regulations are contributing to inefficiencies in the marketplace. Technology also makes certain existing regulations obsolete. Lastly, producers and manufacturers have powerful lobbies that craft legislation privatizing industries that had been historically under state control.
Deregulation can have a profound impact on the marketplace by reducing barriers to entry, encouraging diversification, and enhancing competition. New firms bring cost-cutting technologies essential for survival, additional capacity, and more consumer-friendly, competitive practices. As new companies enter the marketplace, prices and profitability fall and there follows a period of consolidation marked by mergers and acquisitions, as well as the departure of many new entrants. For larger companies, UNBUNDLING as a result of deregulation gives customers greater ability to make product/service and price/performance tradeoffs. The post-deregulation reorganizations last characteristically about five years.
Corporate culture changes in the process of deregulation. Companies become more opportunistic, adopting a number of strategies: (1) Broad-based distribution integrating operations information gathering and marketing over a wide geographic area. (2) Cost-focused strategies to achieve economies of scale and segment-focused strategies that provide expensive or premium services at premium prices; segments include niche markets that are more profitable with fewer providers. (3) A striving for synergies by REBUNDLING products and using alternate delivery systems, sale of high value-added items or personalized or customized services, and exploitation of small community markets. (4) Sharing of utilities by offering services to smaller firms that, if done alone, would be unprofitable. In short, deregulation is both a challenge and an opportunity to restructure and gain new momentum. The initial turbulence may introduce some uncertainty for a few years, but appropriate strategies help companies survive and grow.
Derivative Financial instrument, devised in the 1990s, that links the price of a commodity or currency to its demand in the future. The main types of derivatives are FUTURES contracts, FORWARDS, CREDIT-DEFAULT SWAPS, and OPTIONS. They are traded on derivative markets or OVER THE COUNTER.
Derivative department Department spun off from a major department but still acting as its unit.
Descriptive research Market research that explores the potentials of a market, the attitudes and buying habits of its consumers, and the demographics of the group.
Descriptive statistics Branch of statistics that provides marketers with a summary of available data, including consumption levels and other variables.
Designed capacity Maximum theoretical output of an operating system in units, based on technical capability, setup times, maintenance, and schedules.
Desk audit Work audit.
Desk research Market research that uses available data in the company files rather than collecting new data from the field.
Deskilling Process by which an operational system is automated, thereby requiring minimal human intervention and characterized by simple and standardized procedures.
Devaluation Reduction in the value of a currency in relation to gold or the U.S. dollar. A bold move in monetary policy designed to offset a serious crisis brought about by high INFLATION, adverse continuing BALANCE OF TRADE, and decline in exports. Its goal is to promote exports and discourage imports, although in practice it can have the opposite effect. Devaluation is a drastic option available only to currencies with a fixed rate of exchange. For currencies with a floating exchange rate, devaluation and REVALUATION take place continuously and automatically.
Development stage Point in the development of a new product when the concept is transformed into a prototype and a marketing strategy is developed.
Deviation Departure from a quality standard and the extent of the departure.
Diagonal communication In management, the crosswise flow of information between departments and hierarchic levels.
Diagonal expansion Business growth resulting from the creation of new products with the same equipment currently in use.
Dialectics The attempt to solve a problem through dialogue involving differing points of view.
Diamond-water paradox ADAM SMITH’S question as to why diamonds are in such high demand and water in such low demand when the former is a luxury and the latter is a necessity.
Diemer plan Wage incentive plan that calls for a 50% salary over and above wages for each 1% of the production above the task, with a bonus of 10%.
Differential analysis Assessment of the impact on costs and revenues of specific management decisions that identifies differential cash flows—that is, cash flows that are impacted by a specific decision.
Differential pricing Method of pricing a product with different customer bases at different prices. The method is based on the principle that maximum market penetration is achieved when prices are customized to the particular market.
Differentiated marketing Marketing designed to meet the unique or peculiar needs of a niche audience, such as dieters. Each market segment has not only a product modified to meet its needs but also a customized strategy that highlights the distinctive features and benefits of the product.
Differentiation In ORGANIZATIONAL THEORY, the process an organization undertakes to cope with an increasingly complex environment by way of multiple specializations.
Diffusion of new products Process by which innovations and new technologies spread through society and become accepted, as well as commercially viable.
Diffusion of responsibility In social psychology, the way a call to action or a request for assistance is spread and generalized so that no one feels a responsibility to respond. The term is stretched to apply to decision-making responsibility in business.
Digerati Experts in computer operations and cyberspace, as in literati.
Digital brand Brand identity or logo that is different from the company’s traditional one. Also termed online brand.
Dilbert principle Associated with the cartoon character Dilbert, this states that corporations allow their employees to rise to their highest levels based on their incompetence rather than their competence. The implication is that the workhorses of a company are its middle-level employees and that the higher echelons are show horses. See also PARKINSON’S LAWS, PETER PRINCIPLE.
Dilutée Worker who has received shortened training and is therefore considered semi-skilled.
Dilution of equity Increase in the number of ordinary shares of a company without a corresponding increase in assets or profits, leading to a fall in the value of those shares and lower dividends.
Diminishing returns In economics, the point beyond which any additional input of resources will result in a proportionate increase in outcome. See also LAW OF DIMINISHING RETURNS.
Dink Affluent couple with no children, considered a prime marketing prospect. From “double-income-no-kids.”
Direct costs 1. Production costs that can be directly charged to the producing unit, such as labor and materials. 2. Production costs incurred by the cost center that can be allocated directly without being treated as overhead.
Direct marketing Sales and marketing of a product from producer to consumer, without an intermediary. Traditional direct marketing is through mail order; television, radio, and social media; telemarketing; websites; and related formats.
Directive interview See STRUCTURED INTERVIEW
Direct taxation Schedule of graduated taxation imposed on personal income, as distinct from indirect taxation such as a sales tax or VALUE-ADDED TAX.
Director Person legally entrusted with the conduct of a company, with legal responsibility for all its actions and assets and liabilities. Under the articles of association, the body known collectively as the BOARD OF DIRECTORS is the executive of a company. The day-to-day operations of a company may be vested in a person elected by the board of directors known as the MANAGING DIRECTOR. Directors are required to submit an annual report to the company’s shareholders.
Director’s report Annual report prepared by the DIRECTOR of a company, as required by law. It must provide information on the principal activities of the company; current position in relation to the industry; likely prospects and future developments; principal risks and uncertainties likely to affect future performance; sale, purchase, and valuation of assets, dividends, and transfers to reserves; employee statistics; and gifts to charity.
Disaster management In business, management of the aftermath of a large-scale natural or manmade disaster in an effort to contain the fallout and reduce its ill effects on human resources and corporate image.
Disciplinary takeover Direct control taken in response to a chronic problem or poor management, either by the board of directors itself or with its support.
Disclaimer Clause in a contract or advertisement that reduces a company’s direct liability in the event of harm caused to the user or buyer.
Disclosure Obligation in legal proceedings to communicate all relevant facts and not suppress any information that might have the effect of distorting the resultant decision making.
Discontinuous innovation Product or service that represents a breakthrough in technology, or is likely to enhance consumer satisfaction and lifestyle, that calls for new forms of consumer behavior and responses. Introduction of the home computer in the 1980s is an example.
Discotectic state Confusion, uncertainty, and instability created when companies undergo rapid change with which they are ill equipped to cope.
Discount 1. Reduction or deduction in price in return for a specified benefit. 2. A method in capital budgeting to predict future streams of cash flow.
Discovery Period before a contract comes into force, during which either side may gather information to verify that the facts as represented are accurate.
Discretionary account Account placed with a stock broker, commodity broker, or securities house in which the agent is empowered to carry out transactions within certain parameters without referring back to the principal.
Discretionary costs Costs attributed to managerial decisions in certain areas, as research and advertising. Also termed managed costs.
Discriminating monopoly Form of monopoly in which products or services are sold to consumers at different prices, charging each segment the maximum price it will bear; for example, when a utility company charges different rates for its private customers and its industrial customers.
Discrimination Practice of favoring one group over another, based on race, gender, age, sexual orientation, religion, or disability; illegal with regard to consumers. INDIRECT DISCRIMINATION results when the universal and objective application of a legal provision or practice puts one group at a disadvantage.
Discriminatory pricing Setting different prices for a product in two or more places or markets, reflecting the peculiarities of those markets and not additional costs.
Diseconomies of scale Proportional costs of gaining additional market share that offset the ECONOMIES OF SCALE.
Disempowerment Elimination of special privileges that had been previously accorded to certain consumer groups.
Disequilibrium State of instability, flux, and change, characteristic of markets subject to new forces or undergoing rapid change.
Disflation Reversal of inflationary pressures, brought about by appropriate monetary measures.
Disintermediation Elimination of middlemen, such as brokers and bankers, from financial transactions as a consequence of new technologies and globalization.
Dispatching rule Any of five rules used in deciding the priorities in fulfilling orders: (1) first come, first served; (2) by earliest due date; (3) by shortest processing time; (4) by longest processing time; and (5) by ratio of time until due date.
Disproportionate stratified sampling Method by which the size of the sample is not proportionate to the size of the stratum. For example, a group that accounts for 80% of sales may be 20% of the population, and therefore may not be appropriately represented in the stratum.
Dissatisfiers Term coined by theorist FREDERICK HERZBERG to describe events that create dissatisfaction in the workplace and that demotivate people. See HERZBERG’S TWO-FACTOR THEORY.
Disseminator Managerial role identified by business thinker HENRY MINTZBERG, whereby the manager acts not only as the gatekeeper of information but also the dispenser of information.
Distance selling Sale of goods indirectly through the mail, television, telephone, e-mail, or Internet, as distinguished from sales in a brick-and-mortar retail outlet. Many CONSUMER PROTECTION laws apply to distance selling.
Distancing Subcontracting to outside contractors work that was formerly done in-house.
Distribution Payment made to shareholders in a company or someone with an entitlement to the proceeds, profits, or reserves according to an agreed-upon formula.
Distribution management Management of the resources of and the planning for efficient transfer of goods, materials, and finished products, including warehousing, handling, inventory, and packaging.
Distributive bargaining Form of collective bargaining in which the subject’s resources are limited and therefore one side’s gain is the other side’s loss, as in a ZERO-SUM GAME.
Distributive leadership Delegation of leadership functions or sharing of authority as a matter of policy.
Divergent thinking Creative and original thinking that, by definition, deviates from conventional thinking and produces multiple solutions to a problem. Distinguished from LATERAL THINKING and CONVERGENT THINKING.
Diversification Expansion of the scope of business activities into markets outside traditional interests, especially to avoid overreliance on a narrow range of products. GROWTH and diversification are parallel developments. Diversification is driven by a search for SYNERGY and may be achieved through several strategies: (1) dominant business strategy, (2) diversification strategy, (3) conglomerate strategy, and (4) acquisition strategy. There are a number of risks associated with diversification, especially that of lack of integration capacity, lack of board follow-up, unrelatedness, incorrect market identification, clash of corporate cultures, lack of synergy, inadequate skills, and imposition of the wrong style of management. External diversification takes place through mergers and acquisitions. Diversification may be vertical or horizontal. Horizontal diversification involves integration of operations at the same stage of production. Vertical diversification occurs when firms integrate operations at a different stage of production.
Diversity management In human resources, the concept of maintaining a harmonious workforce that is culturally disparate and heterogeneous in its composition, language, race, and religion, and in massaging those differences. The challenge is to make diversity an asset rather than a liability in a company’s operations.
Divest and exit strategy Strategic option to sell an asset or close down a product line in order to exit an unprofitable market.
Divestment Business retrenchment strategy in which parts of the company are spun off to create a more homogeneous organization with more focused objectives and strategies. Generally, the parts sold are the less profitable ones.
Dividend Distribution of part of the earnings of a company to its shareholders.
Dividend reinvestment program (DRIP) Program for investors whereby dividends are used to buy additional shares instead of issued as cash income.
Divisionalization Creation of self-managing units within an organization, accompanied by devolution of authority to these units. In large corporations, the functional structure grows unwieldy and inefficient. In the 1980s and 1900s, superior information technology and trends toward DELAYERING extended the concept to small businesses. Earlier, the divisional form was important in the development of an international strategy; as industries moved from regional orientation to global, complex and multiple reporting relationships became common, and country executives reported to both area and product divisions.
Dog In business, an unpromising and unprofitable product that is a drag on a company’s profits.
Dollarization Adoption of the U.S. dollar as a national currency, usually as a means of controlling INFLATION and INTEREST RATE volatility.
Domicile Place of residence or business or professional activity, irrespective of citizenship. The country might require work permits and business or resident is subject to local tax laws. Under COMMON LAW rules, a person’s civil status is determined by domicile and not by citizenship.
Dominant business strategy Business operation in which 70% or more of the profits come from one key product or business, as in the case of oil companies such as Exxon. There are four types of dominant businesses: (1) dominant-vertical, involving selling a variety of end products, none of which contributes more than 85% of the sales; (2) dominant-constrained, or businesses that have diversified nonvertically by building on the original dominant activity; (3) dominant-linked, or businesses that have diversified nonvertically by building on different strengths, resources, or skills; (4) dominant-unrelated, or businesses in which a preponderance of nonvertically diversified activities are unrelated to the dominant business.
Dominant-element job evaluation Technique in job evaluation, in which only the most important element in a job is considered relative to others.
Doomsday strike Strike at the end of a period covered by a wage agreement or on the eve of negotiations.
Double-dip recession Period of recession characterized by brief economic growth, followed by a slide back into recession.
Double-entry bookkeeping Method of recording transactions twice in account books, as a credit and as a liability. All books are required to balance.
Double-loop learning Organizational learning in which the emphasis is on learning how to learn. It involves critical examination of the assumptions underlying corporate responses in times of high uncertainty and unpredictability.
Double taxation Taxation of the same income in two different countries or contexts; for example, in both the country of domicile and the country of nationality, or taxation of corporate profits and shareholder income taxation. International double taxation is governed by treaties and agreements that provide relief to varying degrees.
Doughnut principle Formulated by business thinker CHARLES HANDY in his book The Empty Raincoat (1994), theory that presents organizations as doughnuts whose hole represents their core activities and values.
Dow Jones Industrial Average (DJI) Index of security prices issued by Dow Jones and Company, using New York Stock Exchange listed stocks. The DJI is a narrow index of only 30 constituent elements. It was begun with 11 companies, had 41 in 1932 when the market crashed, and tracked over 14,000 stocks in 2007.
Downsizing Reduction in the size and footprint of an organization to improve profitability, gain traction in the market, and improve focus and strategic leverage. It is distinct from REENGINEERING or CORPORATE RESTRUCTURING and may or may not be accompanied by staff reductions, departmental consolidations, and office closings. While companies implement downsizing plans to increase profitability and productivity, these steps do not always yield those benefits and may lead to loss of skilled workers, decline in customer service, and loss of morale. See RIGHTSIZING.
Downshifting Lifestyle change in which an employee exchanges the bustle of corporate culture for a temperate routine that affords more time with family and less stress.
Downstairs merger Merger in which the parent corporation become a subsidiary.
Downstream 1. Reference to a latter stage in the production process or the value chain. 2. Funds borrowed by a parent company for use by a subsidiary. Compare UPSTREAM PROGRESS.
Downstream progress Movement toward more realizable goals that involve going with the flow and riding a wave. Compare UPSTREAM PROGRESS.
Downtime Period of time when an operation is idle or suspended.
Downward communication Communication from senior management to lower levels of employees. Compare HORIZONTAL COMMUNICATION and UPWARD COMMUNICATION.
Doz, Yves French management expert whose book with Gary Hamel, Alliance Advantage (1998), tackled the complexities of globalization and focused on strategic partnering.
Dragon market Any of the emerging markets in the Pacific Rim, especially Indonesia, Malaysia, Thailand, and the Philippines.
Drawdown Depletion of funds from a line of credit or transfer from one account to another.
DRIP IVIDEND REINVESTMENT PROGRAM
Drip-feed To fund a new company in stages rather than with an initial lump sum.
Drop lock Bond initially issued with a variable rate of interest, which converts to a fixed rate if the index or rate falls below a set amount at a particular date.
Drop shipment Goods shipped directly from the manufacturer to the consumer or retailer.
Drucker, Peter (1919–2005) American management guru who popularized the concept of MANAGEMENT BY OBJECTIVES and introduced the concepts of ACTIVITY ANALYSIS, DECISION ANALYSIS, and RELATIONS ANALYSIS.
Drum-buffer-rope Manufacturing process that factors in possible delays or problems.
Dry test Prior to large-scale manufacturing, a trial run during which consumers are asked to use a product and express whether they would be interested in purchasing it. If the test is negative, the product will be cancelled.
Due diligence 1. Inspection of a company’s financial or other records prior to its sale or merger, as required in the LAW OF CONTRACTS 2. Level of care and judgment that a reasonable person is expected to exercise in a given situation to prevent mala fides.
Dumbsizing Reducing the size of a company so drastically that it becomes inefficient.
Dumping Sale of goods abroad, below their marginal cost, in order to gain a foothold in the market. Dumping is illegal under international trade agreements because it is against fair trade.
Dun and Bradstreet Largest mercantile agency in the United States, offering credit data and ratings.
Dunfee, Thomas W. (1942–2008) Professor of Legal Studies and Legal Ethics at Penn State University and President of the Society for Business Ethics. He was one of the foremost scholars in the field of business ethics. His path-blazing work, Ties that Bind: A Social Contracts Approach to Business Ethics (1999), is an influential text.
Dunning, John Harry (1927–2009) British economist who specialized in the economics of international direct investment In 1980 he published the eclectic paradigm or OLI-Model/Framework. His best-known works are Globalization of Firms and Competitiveness of Nations (1990), Alliance Capitalism and Global Business (1997), and Making Globalization Good: The Moral Challenges of Global Capitalism (2005).
Dunscore Index developed by DUN AND BRADSTREET to measure the position and ranking of industries over time.
Duopoly Market in which there are only two producers, thus reducing competition. See MONOPOLY.
Duopsony Market in which there are only two buyers.
Dupin, Charles (1784–1873) French engineer who pioneered industrial education in France. His Discourse on the Condition of the Workers (1873) introduced such concepts as time study and balanced workloads.
Dutch auction Auction sale that begins with a top price, which then is successively reduced until an acceptable buyer is found.
Dutch disease DEINDUSTRIALIZATION following the discovery of natural resources, such as oil and gas. Such a discovery leads to a boost in the economy and the value of the currency, making exports of manufactured products more expensive. This phenomenon occurred in the Netherlands following the 1959 discovery of North Sea gas.
Duty to bargain As stipulated in the Taft-Hartley Act, an obligation of employers and employees to bargain in good faith before a lockout or strike.
Dynamic administration Management theory that focuses on changing human relationships. It helped to develop such concepts as empowerment and visionary leadership.
Dynamic capabilities Resource-based business strategy that adapts to changing business environments quickly and nimbly to gain competitive advantage. The strategy combines innovation, boldness, sharper focus, consumer feedback, and reconfiguration of a company’s structures, as well as its competencies.
Dynamic equilibrium Economic state in which all the factors of production and consumption are so matched that there is a stable rate of growth.
Dynamic pricing Method of pricing goods and services that changes in line with patterns of demand.
Dynamic theory of profit Developed by economist FRANK KNIGHT, a theory on the relation between assumption of risk by entrepreneurs and their rewards.
Dynamically continuous innovation Development of products through marginal improvements in shape or design, without altering function or use. For example, Apple issues and markets new versions of its iPad without significantly enhancing its basic design or product life cycle.
Dystopia Place where misery prevails; the opposite of utopia.