EXERCISE 1
Rothaermel Exercise 1
Chapter 1
Discussion Question 1.1
Consider the brief description of Target’s stakeholder relationships and combine that
information with your experience shopping in a Target store. How might Target’s
stakeholders, in particular its employees, customers, local communities, and suppliers,
influence the manager’s decisions about building competitive advantage in the analysis
stage of the AFI framework? How might Target gather information from its stakeholders to
inspire a better customer experience in the formulation stage in order to differentiate? Or
in order to lower costs? Brainstorm by jotting down as many ideas as you can think of
about how key stakeholders may affect or be affected by the implementation stage.
With stakeholders being employees, customers, local communities and even suppliers of
Target, their influence on the manger can be monumental. Targets stakeholders can influence the
managers decision by making it known on how they feel and what their view points are on things
such as pay and salary for the workers, what different prices and how accessible some given
products are and since Target gives back to its community, they can even have a say in what
specific organizations they want to support. Target can gather the information from the
stakeholders to inspire better customer experience by performing an impact assessment of the
changes and see what people think of it. Some ideas of how stakeholders may affect or be
affected by the implementation stage is by lawsuits, layoffs different tax breaks, the price goes
up on certain items or even the loss of the product availability.
EXERCISE 1
Discussion Question 1.2
BP’s experience in the Gulf of Mexico has made it the poster company for how not to
manage stakeholder relationships effectively (see Strategy Highlight 1.2). What advice
would you give to BP’s managers to help them continue to rebuild stakeholder relationships
in the gulf region and beyond? How can BP repair its damaged reputation? Brainstorm
ways that top management might leverage the experience gained by reactions in the gulf
and use that knowledge to motivate local managers and employees in other locales to build
stakeholder relationships proactively so that BP avoids this type of negative publicity
Some advice that can be given to BP’s managers to help them continue to rebuild the
stakeholder relationships in the gulf region would be to work in the given communities that were
affected by this disaster more than communities that were not. They can try to assess different
areas to see which needs their help and assistance more. To repair its damages reputation, BP
needs to be seen as a leader in the “green energy” drive and begin working more rally with the
climate and eco system change. Top management can leverage the experience gained by reaction
in the gulf by working with the impacted communities and try to create new jobs, try to use more
local suppliers so those companies can gain some profit and see the good that they are doing for
their communities, rather than using contract help and they can even try to ask the community
that they are helping to see what they think about certain plans of community development
incentives as well.
Discussion Question 1.3
EXERCISE 1
As noted in the chapter, research found that firm effects are more important than industry
effects. What does this mean? Can you think of situations where this might not be true?
Explain.
Firm effects are more important than industry effects due to the fact that managers review
and work off of the external factors and then use those to drive their own given firms
performance. A situation in where this might not be true is when different economic factors or
changes come to light and begin to affect the industry such as a stock market crash or even a
massive disaster.
Chapter 2
Discussion Question 2.4
Identify an industry that is undergoing intense competition or is being featured in the
business press. Discuss how scenario planning might be used by companies to prepare for
future events. Can some industries benefit more than others from this type of process?
Explain why.
With the evolvement and improvement of clean energy, the electric car industry has been
continuously seeing competition from all different brands. With knowing that competition is a
constant in any industry, scenario planning can be helpful because every door can be opened as
to what could possibly happen to a company or what issues may happen, so that if or when that
specific incident does happen, the company is ready for it. There are industries that can benefit
more from this type of process than others because when companies are working on such a broad
spectrum of “future planning” ideas, the technology can continuously change, yet if it was within
EXERCISE 1
a food company, the basis of the burger or fries would be the same, but jut some different
additives or changes here and there.
Chapter 3
Discussion Question 3.1
Why is it important for any organization (firms, nonprofits, etc.) to study and understand
its external environment?
It is important to study and understand its external environment because they affect how
the strategy of a business can change day to day. Knowing the external environment, managers
of companies can be aware of any threats that could be coming their way and try to influence
other given opportunities. External environments such as PESTEL (Political, Economic,
Sociocultural, Technological, Ecological and Legal) can also be a big part of a company and the
goals that they want to achieve since these create both threats but also opportunities for
companies. If a manger knows the marketplace as well as the external changes, then they will be
able to see and act on these changes and act on the challenges and opportunities as well.
Discussion Question 3.2
How do the five competitive forces in Porter’s model affect the average profitability of the
industry? For example, in what way might weak forces increase industry profits, and in
what way do strong forces reduce industry profits? Identify an industry in which many of
the competitors seem to be having financial performance problems. Which of the five forces
seems to be strongest?
EXERCISE 1
In Porter’s model: Threat of Entry, Power of Suppliers, Power of Buyers, Threat of
Substitutes, and Industry Rivalry (Rothaermel, 2017), these five given tools can identify the
main competitive forces that managers must contemplate when trying to examine the industry
environment. These forces affect the industry by determining the given industry structure and the
competition around it. If a company wants to earn profit, it would be very hard if their industry
enter barrier was low. If this is the case, then low profits can be very unappealing to other
organizations. Using the bargaining power can show just how much pressure the numerous
amount of suppliers can create in the industry and even the profitability.
There are different ways that weak forces increase the industry profits by identifying
which companies are in the given competition and then this can allow the company to try to
sway the consumers to buy from one and not the other. They can try to increase their customer
service and even their quality of the products to try to make this happen. The industry profit can
also reduce if there is not a good and honest relationship that is had between the supplier and
their consumer. If you have weak forces then there would be less competition between
companies, which then could create more profit for everyone.
Chapter 4
Discussion Question 4.1
Why is it important to study the internal resources, capabilities, and activities of firms?
What insights can be gained?
It is important to study the internal resources, capabilities, and activities for firms because
all the resources are assets of a given organization. Knowing the intangible and even the tangible
items like location or human assets allows a company great insight to develop core and main
EXERCISE 1
competencies in the given firms industry. Insights can be gained concerning how the given
resources and other activities interact and also relate to each other. An organizations ability to
exploit its resources is known as capabilities and even market capabilities can helpful for a
company’s profitability. One must understand and know the strengths and weaknesses of a given
companies internal resources, capabilities and activities because it can give the management
team an insight into the other areas that the company needs to improve on as well.
Discussion Question 4.2a
Conduct a value chain analysis for McDonald’s. What are its primary activities? What are
its support activities? Identify the activities that add the most value for the customer. Why?
Which activities help McDonald’s to contain cost? Why?
The primary activities are inbound and outbound logistics and also operations. With
inbound logistics, the raw material is moved and distributed in the different warehouses. With
outbound logistics, IT is used to make sure that the finished goods/food remains in the
warehouse and only the food that is needed at every store is delivered so that all the food is fresh.
Operations are the given activities that are being done to move and transport all the inputs into
the finished goods. McDonald’s also is known for their advertising of arch gift cards and free
Wi-Fi for others in the restaurant and use different billboards and media to promote their name.
The activities that add the most value for the customer are such things as providing
seasonal menus and also cultural menus as well. The company helps provide people with the
food that they actually desire and if there is one that is not liked, then the product will be changes
to make it more suitable for local tastes.
EXERCISE 1
The activities that help McDonald’s to contain cost are things such as franchises, supply
chain and even using Ronald to increase their mark value because seeing him brings back many
good and childlike memories for numerous people.
Discussion Question 4.2b
In the past few years, McDonald’s has made a lot of changes to its menu, adding more
healthy choices and more higher-priced items, such as those offered in McCafé (e.g.,
premium roast coffee, frappé, and fruit smoothies), and has also enhanced its in-restaurant
services (e.g., free, unlimited Wi-Fi; upgraded interiors). Did McDonald’s new priorities—
in terms of a broader, healthier menu and an improved in-restaurant experience—require
changes to its traditional value chain activities? If so, how? Try to be as specific as possible
in comparing the McDonald’s from the recent past (focusing on low-cost burgers) to the
McDonald’s of today
McDonald’s has always had a bad name for being bad food and being greasy and
unhealthy for everyone since there was so much Sodium, unhealthy fats and even empty carbs
within the food. With McDonald’s introducing healthier foods and a menu that only had foods
under 400 calories, they show that they are not just an unhealthy and greasy fast food place, but
more or a place where everyone, healthy or not so heathy can eat. How having smaller portions
and more baked foods on their menus rather than the double-bacon cheeseburger shows that they
are taking other customers ideas and suggestions to heart.
Discussion Question 4.3
The resource-based view of the firm identifies four criteria that managers can use to
evaluate whether particular resources and capabilities are core competencies and can,
EXERCISE 1
therefore, provide a basis for sustainable competitive advantage. Are these measures
independent or interdependent? Explain. If (some of) the measures are interdependent,
what implications does that fact have for managers wanting to create and sustain a
competitive advantage?
The four criteria that mangers can use to evaluate whether particular resources and
capabilities are core competencies can be seen more as interdependent. Having valuable, rare,
organized to capture value and costly to imitate can be seen as more or things that are come to
keep the competitive advantage over another company in many different forms. “Costly to
imitate” and “rare” can be seen as the same measure because if something is rare, then it would
be very hard to imitate.
Chapter 5
Small Group Exercise 5.1
As discussed in the chapter, a balanced scorecard views the performance of an organization
through four lenses: customer, innovation and learning, internal business, and financial.
According to surveys from Bain & Company (a consulting firm), in recent years about 60
percent of firms in both public and private sectors have used a balanced scorecard for
performance measures. With your group, create a balanced scorecard for the business
school at your university. You might start by looking at your school’s web page for a
mission or vision statement. Then divide up the four perspectives among the team members
to develop key elements for each one.
1. How do customers view us? (Hint: First discuss the following: Who are the customers?
The students? The companies that hire students? Others?)
EXERCISE 1
Using Liberty University as an organization, the customers are any person who is trying to
hire or bring onboard a student that has graduated from Liberty University with a degree. The
students can be seen as any person who is trying to gain higher knowledge in different fields with
also having an emphasis on Christianity and how Christ is not only in the Bible, but also in
business and other subjects as well.
2. How do we create value?
Value can be created by showing that the Lord is in everything we do, not just in our heart
and souls, and it also shows how the teachings of Christ can be used toward ones degree.
3. What core competencies do we need?
Being known as the largest Christian University, incorporation of Christ can be seen as a core
competency. Having the knowledge and the ability to show that Christ can be applied in all
degrees shows just how important it is.
4. How do shareholders view us? (For public universities, the shareholders are the
taxpayers who invest their taxes into the university. For private universities, the
shareholders are the people or organizations that endow the university.)
Since Liberty is a private school, the shareholders are people such as the alumni and donating
students. Since donations are given to a nonprofit school, these donations are used in many
different departments and used to also improve the different academic programs as well.
Small Group Exercise 5.2
(Please see word document attached)
EXERCISE 1
References
Rothaermel, F. T. (2017). Strategic management concepts (Custom 3rd ed.) New York, NY:
McGraw-Hill.
