Running Head: ROTHAERMEL EXERCISE 1
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Rothaermel Exercise 1
Markie Love
Liberty University
BUSI 690–B04 LUO
Dr. Thomas Spotts
September 2, 2018
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ROTHAERMEL EXERCISE 1
Chapter 1
Discussion Question 1.1. In order to build competitive advantage in the analysis stage of
the AFI framework, the manager must examine the internal and external data. Externally,
Target’s employees, customers, and the local communities can help the manager gain a better
understanding of how the company is perceived. This information can be gained through
surveys, questionnaire, interviews, focus groups, and meetings. The results will allow the
manager to review and improve the marketing strategy so that Target can improve how they are
perceived by the community and customers.
There are many ways stakeholders can affect or be affected in many ways. If business
continues to improve, customers could see better prices or more sale, employees could receive
higher wages, and the community could receive more supplies for those in need. Adversely, if
business declines, Target stores could raise price to attempt to cover their fixed costs and if that
does not work, stores could close, and employees could lose their jobs.
Discussion Question 1.2. It takes a long time to rebuild trust and restore a damaged
reputation. First and foremost, BP needs to continue to work with communities affected by the
oil spill in the Gulf of Mexico. They must show that they care about the communities and want to
improve their livelihood. BP should also join an animal activist group to learn what steps should
be taken to ensure that aquatic life is protected. By getting involved in improving what matters to
consumers, BP can build and improve stakeholder relationships. To prevent events like this in the
future, BP needs to improve their oil rigs, have a plan in place so they can solve issues quickly,
and show that they care about the communities they serve.
Discussion Question 1.3. Industry effects “describe the underlying economic structure of
the industry” while firm effects “attribute firm performance to the actions managers take”
(Rothaermel, 2017, p. 11). While the industry effects can have a huge effect on a business, it is
how businesses respond and the performance of their employees that make the biggest
difference. This might not be true in cases where industries are highly regulated such as
healthcare and pharmaceuticals. Businesses participating in this industry must follow the strict
laws set by the government.
Chapter 2
Discussion Question 2.4. Scenario planning is when “top management envisions
different what–if scenarios to anticipate plausible futures in order to derive strategic responses”
(Rothaermel, 2017, p. 47). Cell phone providers like Apple or Samsung can use scenario
planning to prepare for the future. They can improve their products and stay on top of market
trends which can improve sales, possibly increase customers, and improve cash flow. Businesses
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large and small can benefit from using scenario planning, but it depends on how many scenarios
are used in the planning phase and how thoroughly they were thought out.
Chapter 3
Discussion Question 3.1. It is important for businesses to understand the external
environment because it affects how they function. External environmental factors include
political, economic, sociocultural, technological, ecological, and legal. These factors affect all
members in the industry, but each will respond differently. Companies who fully understand how
each of the factors affect their company and the demand for their products can plan for the future
and establish solutions in case problems were to arise.
Discussion Question 3.2. Michael Porter’s five forces model is “a framework that
identifies five forces that determine the profit potential of an industry and shape a firm’s
competitive strategy” (Rothaermel, 2017, p. 73). The forces are threat of entry, power of
suppliers, power of buyers, threat of substitutes, and rivalry among existing firms (p. 73). The
entry level decides how much competition a company has. If the barrier is low, more companies
will try to join the industry, but if the barrier is high, it will be harder for companies to join the
market. Suppliers have the ability to control the price of a product. If the price is too high, buyers
will look for more affordable substitutes. Rivalry among companies relies on the other four
forces. The more businesses that enter the market, the harder it will be for companies to standout
and make a profit.
Chapter 4
Discussion Question 4.1. It is important to study the internal resources, capabilities, and
activities of firms because it provides an insight of the strengths and weaknesses of the company.
Companies can also gain information on how resources are being used as well as how the
company measures up to other businesses in the industry. These resources are the foundation for
any business and is the core competency that distinguishes a company from its competitors.
Discussion Question 4.2
A. A value chain is “the internal activities a firm engages in when transforming inputs
into output; each activity adds incremental value” (Rothaermel, 2017, p. 127). McDonald’s
primary activities include supply chain management, operations, distribution, marketing and
sales, and after–sales service. The supply chain management is where the raw food is purchased
from their suppliers and the soft drinks are exclusively provided by The Coca–Cola Company.
The operations include a grill operator, someone to manage the fry station, a soda fountain, an
ice cream machine, and cashiers for in–house and drive–thru service. Distribution for
McDonald’s can include sustainable packaging and waste management. Marketing and sales
allow the company to have localized menus so that the company can appeal to a larger audience.
After–sales service can consist of gift cards, free Wi–Fi internet access, and, in some locations, a
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PlayPlace for children. The after–sales service can have the greatest value for consumers because
it allows them to provide a meal for someone, do work on the go, and provides a safe place for
their children to play.
Once the primary activities have been established, the support activities must be
reviewed. These include research and development, information systems, human resources,
accounting and finances, and firm infrastructure. Research and development for McDonald’s can
consist of new menu items or specialized menu items for foreign countries. Information systems
can include how employees communicate what is needed, how quickly and efficiently employees
serve the customers, how managers know what needs to be ordered, and it allows corporate to
know what products are, the best sellers and what items should be removed from the menu. This
can help McDonald’s save money and be more cost efficient with their products. Human
resources can provide flexible hours, moving up in the company, and free meals during working
hours. Accounting and finance allow McDonald’s to know which stores have a positive net profit
and which stores should be closed. Finally, the firm’s infrastructure includes processes, policies,
and procedures. For McDonald’s, they are improving their technology to be more efficient and
create an eco–friendly workplace.
B. McDonald’s was known for having a super–sized menu until the restaurant industry
recognized that fast food could lead to obesity. With the introduction of salads and healthier meal
options, McDonald’s tried to keep up with other fast food chains and change how consumers
viewed the company. The McCafé items were to provide a more affordable option to Starbucks.
While these items have improved profit for McDonald’s, it has not required the company to
change their traditional value chain activities.
Discussion Question 4.3. The resource–based view of a firm is “a model that sees certain
types of resources as key to superior firm performance” and can be divided into tangible and
intangible (Rothaermel, 2017, p. 111). These factors are interdependent because a business needs
people and ideas in order to function. Without people, it is just a building or computers, and
nothing can be accomplished that way. To create and sustain a competitive advantage, managers
must evaluate their resources and discover what advantages they have and are hard or costly to
imitate. Apple would be an example of this. They have iTunes, iPods, iPads, and iPhones. While
other companies can create similar products, Apple has a unique operating system that allows
each of these devices to share information with each other even if they are miles apart.
Chapter 5
Small Group Exercise 5.1.
A. The customers for Liberty University are the students. The goal of the business school
is to assist those with a desire to obtain a higher education. They have provided
potential students the opportunity to customize their degree program so that each
student can take the proper classes to reach their goal. The customization process also
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gives students the opportunity to save time and money by completing both their
undergraduate and graduate degrees in four years.
B. Liberty University creates value by putting Christ first in everything they do. Each
student is called to use their God–given skills and Liberty helps each student apply
their skills in their positions at work and in their personal lives.
C. Liberty University has the greatest core competency. They are the largest Christian
University in the world and integrate God into every class. There is not another
school that can claim to be equal to the size of Liberty or incorporate God in every
course from enrollement to graduation.
D. For Liberty University, giving has “increased from $1.1 billion to just under $1.3
billion in financial assets” which is a growth of 19.3 percent (Smith, 2018, para. 1–2).
This proves that shareholders believe in what Liberty is doing and they want to help
so that Liberty can meet their needs and continue to help people across the globe.
Small Group Exercise 5.2.
(NOTE: This question is to be completed individually. For this question, submit
your “elevator speech” in a Word document; the minimum word count is 300 words.)
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References
Rothaermel, F. T. (2017). Strategic Management (3rd ed.). New York, NY: McGraw-Hill
Education.
Smith, E. (2018, February 19). New study finds that Liberty's endowment has spiked. Retrieved August
31, 2018, from https://www.liberty.edu/champion/2018/02/new-study-finds-libertys-
endowment-spiked/
