Exercise 2
1
Michael Matheis
BUSI 690
Liberty University
30 March 2015
Exercise 2
2
Discussion Question 6.1
There are two business generic strategies. They are cost-leadership and differentiation.
They “are essentially the same as broad generic strategies except that the competitive
scope is narrower” (Rothaermal, p. 142). According to Rothaermal, cost-leadership “if a
price war ensues, the low-cost leader will be the last firm standing; all other firms will be
driven out as margins evaporate” (p. 154). When it comes to differentiation, “the viability
of a differentiation strategy is severely undermined when the focus of competition shifts
to price rather than value-creating features” (p. 155).
Discussion Question 6.4
Walmart uses cost leadership because they have negotiated the lowest prices available
with its suppliers. This in turn, makes them the cost leader because they can afford to
compete with the market. T-Mobile uses differentiation strategy by paying for (ETF)
early termination fees as well as allowing the customer to bring in unlocked phones to be
used (Tmobile.com). HP uses integration strategy; they use cost cutting strategies to
compete with companies like Dell, which holds the cost-leader position. They also
compete with Apple, a company that holds the differentiation strategy position
(Rothaermal, 2013).
Discussion Question 7.1
The new company would have to use the cost leadership strategy (Rothaermal, 2013).
This is product innovation. “Innovation is a potent competitive weapon; it enables firms
to redefine the marketplace in their favor and achieve much-needed growth” (p. 192).
Discussion Question 7.2
Exercise 2
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There are four different stages in the industry life cycle, they are introduction, growth,
maturity, and decline (Rothaermal, 2013). During the introduction stage, innovation is
important and used to gain a competitive market advantage. According to Rothaermal, the
key to objective for firms during the growth phase is to stake out a strong strategic
position not easily imitated by rivals (p. 178). Rothaermal states that in the maturity
stage, the competitive intensity rises and the companies begin to compete directly with
one another (Rothaermal, 2013). “Key success factors are the manufacturing and process
engineering capabilities to drive costs down” (p. 178,). In the decline phase, the market
shrinks, “this allows the consolidating firm to stake out a strong position” (p. 179).
Discussion Question 7.4
According to Rothaermal, it helps legitimize the new technology by reducing uncertainty
and confusion. Thus, a standard or dominant design tends to capture a lager market share
and can persist for a long time (p. 175). Once the standard is put into motion, “the core
competencies for competitive advantage in the growth stage tend to shift towards
manufacturing and marketing capabilities, with an R&D emphasis on process innovation
in order to improve efficiency” (p. 177).
Discussion Question 8.1
Walmart chose to use corporate-level strategy of diversification. “The decisions that
senior management makes and the actions it takes in the quest for competitive advantage
in several industries and markets simultaneously; addresses where to compete” (p. 203).
Discussion Question 9.1
Some advantages include the acquiring company strengthening its position. Rothaermal
states “firms may use strategic alliances to enter new markets, either in terms of
Exercise 2
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geography or products and services” (p. 245). They also have the advantage of
overcoming a competitive disadvantage (Rothaermal, 2013). A major disadvantage
according to Rothaermal, “most mergers destroy stockholder value because the
anticipated synergies never materialize” (p. 242).
Discussion Question 10.1
J. Bhagwati states that it consists of the integration of national economies in the direction
of an international trade-based economy, direct foreign investment, short-term capital
flows, the international flow of workers and people in general, as well as the flow of
technology (J. Bhagwati, 2002). Globalization 2.0 according to Rothaermal, is “from
1945 to the end of the 20th century, in the Globalization 2.0 stage, MNEs began to create
smaller self-contained copies of themselves, with all business functions intact” (p. 273).
Globalization 3.0 is from 2000 to the present day. “In the Globalization 3.0 stage, the
MNE reorganizes from a multinational company with self-contained operations in a few
selected countries to a more seamless global enterprise with centers of expertise” (p.
273). Firms try to benefit from low labor costs in manufacturing and services.
Exercise 2
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Reference
Bhagwati, J. N. (2002). Globalization and appropriate governance. Unu/Wider.
Rothaermel, F. T. (2013). Strategic management: Concepts & cases. New York, NY:
McGraw-Hill.
