BUSI 690
ROTHAERMEL EXERCISE 1
MAISIE NOLIN
LIBERTY UNIVERSITY
Chapter 1 Rothaermel Text
Discussion Question 1.1: The analysis stage of AFI consists of gathering data regarding internal
and external information. Stakeholders hold a plethora of data for a Target manager to review to
build competitive advantage. Customers are always a key stakeholder in gaining useful
information. A useful means to gather such information is through surveys which can be
conducted at cash registers or for target cardholders it can be attached to statements. Information
gathered from this can be used in marketing, product selection and pricing, and rewards. The
implementation stage can affect key stakeholders through better pricing and sales and increased
wages for employees. On the opposite hand, if the implementation does not go well, layoffs
could ensue, prices could increase, or stores may need to close.
Discussion Question 1.2: People are less likely to forgive an organization if they do not own up
to their errors. BP must accept responsibility for their shortcomings and the manner in which
they were handled. A culture that valued money over safety led to numerous environmental
disasters caused by BP which also resulted in a large loss of life (Rothaermel, 2017, p. 20). With
such disasters in its book, it will be difficult for BP to recover; however, it is not impossible. The
biggest piece of advice I could give to BP is to first and foremost value the safety of your
employees. Without the employees, you would not have the business. Changing safety guidelines
and working conditions can restore faith from stakeholders, specifically employees. Top
management can use this experience in the gulf to motivate lower level managers and employees
to build positive relationships with other stakeholders through donations and volunteer efforts to
areas effected by their mistake. This shows that they care and want to set their wrongs right.
Discussion Question 1.3: Rothaermel (2017) finds that the actions of managers (firm effects)
tends to have a greater impact in firm performance than external forces (industry effects) (p. 11).
There are situations in which this is not true. Technology changes over time and some
organizations have not been able to adapt regardless of the effort of managers. Numerous camera
companies struggled with the introduction of the camera phone which was a change in the
industry. Another example is the oil industry. Prices fluctuate greatly within this industry and
managers cannot control this.
Chapter 2 Rothaermel Text
Discussion Question 2.4: One industry which has intense competition and is often in the press is
the airline industry. The airline industry can benefit from scenario planning to prepare for future
BUSI 690
events. Cost of fuel is a major issue which can impact this industry as well as terrorist attacks
and harassment issues. Airplane crashes is a constant scenario which must be planned for by
airlines. Preparing for these negative scenarios allows for organizations to have strategic plans in
place. Generally, most industries can benefit from scenario planning in some capacity. Even
small businesses can attempt to plan for scenarios such as financial downturns or even
catastrophic weather such as hurricanes.
Chapter 3 Rothaermel Text
Discussion Question 3.1: An organization cannot be successful or even function without
understanding its external environment. A firm’s general external environment consists of
political, economic, sociocultural, technological, ecological, and legal factors (PESTEL)
(Rothaermel, 2017, p. 67). Government laws and regulations can impact an organization with
certain requirements such as eligible employees are legally required to have access to 12 unpaid
weeks of leave for medical issues or family members with medical issues. Economic factors
include an array of factors such as exchange rates, interest rates, and price stability (Rothaermel,
2017, p. 68). The external environment can impact organizations in numerous ways; therefore,
they must study and adapt to it.
Discussion Question 3.2: Porter’s five forces model consists of threat of entry, power of
suppliers, power of buyers, threat of substitutes, and rivalry among competitors (Rothaermel,
2017, p. 75). Threat of entry consists of risk created by competitors entering the industry
(Rothaermel, 2017, p. 75). Existing firms may lower their prices to deter entry into the industry;
however, this also lowers the industry’s profit (Rothaermel, 2017, p. 75). The power of suppliers
affects industries in multiple ways. They can increase their prices or reduce the quality of their
products. Rothaermel (2017) expresses that powerful suppliers take part of the economic value
within the industry (p. 79). The power of buyers places pressure within an industry either
through demanding lower prices or higher quality of products and services (Rothaermel, 2017, p.
80). This demand from buyers reduces the revenues of organizations within the industry
(Rothaermel, 2017, p. 80). Substitute threats also can affect the profitability of an industry.
Substitutes from outside of the given industry can limit the amount companies can charge for
their products and services to remain competitive (Rothaermel, 2017, p. 81). Rivalry is affected
by the other four forces in that increases strength of the forces leads to increased competitiveness
which will hinder the industry’s profitability (Rothaermel, 2017, p. 82). One industry that many
competitors are having financial performance problems is brick-and-mortar retail stores. With the
upswing in online retailers such as Amazon, physical stores have been met with financial issues.
The threat of substitutes may be the strongest force as this increases competition outside of the
realm of the industry.
BUSI 690
Chapter 4 Rothaermel Text
Discussion Question 4.1: For an organization to run effectively, they must understand the
resources available to implement strategy as well as its capabilities and activities. Resources,
which can be tanglible or intangible, include assets including cash and different properties
(Rothaermel, 2017, p. 108). Capabilties, which are intangible, are the skills needed to manage
and use the resources (Rothaermel, 2017, p. 108). Activities are processes which add value to the
organization through changing inputs into goods and services (Rothaermel, 2017, p.109). These
three categories effect the core competencies of an organization which are distinctive aspects of
the firm which give them a competitive advantage (Rothaermel, 2017, p. 108).
Discussion Question 4.2 (Complete both 4.2.a. and 4.2.b.)
a. McDonald’s primary activities consists of supply chain management, operations, distribution,
marketing and sales, and after-sales service (Rothaermel, 2017, p. 129). Supply chain management
for McDonald’s includes raw foods sent to the restaurant locations which is then work in process
while being made to the finished product which is served to customers. Operations for
McDonald’s is evolving as it is no longer just available through the lobby or drive-thru. Customers
can now complete mobile orders which creates a third channel in which locations must maintain
operations. Marketing and sales is important for McDonald’s as they produce commercials which
contain new food items as well as promotions such as the Monopoly Game. After-sales service
involves any complaints locations receive or customer surveys. Support activities include research
and development, information systems, human resources, accounting/finance, and
policies/procedures (Rothaermel, 2017, p. 129). McDonalds must conduct research regarding
menu items, marketing, and suppliers. McDonald’s has increased their information systems.
McDonald’s lobbies now include kiosks in which customers can type in their order without having
to speak to an associate. Human resources is important as they hire and retain employees.
Activities which assist in containing cost are information systems as using kiosks can reduce the
need for staff and suppliers as using cheaper suppliers means an increased profit.
b The previous McDonald’s was focused on cheap inventory in bulk; however, the new McDonald’s
. is focusing on quality ingredients which are healthier. These changes do require a change in the
value chain activities. No longer can the cheapest supplier be used, instead quality suppliers must
be sought to meet the needs of the organization. Marketing must also change to reflect the new
branding. Commericals now describe the quality ingredients used as well as new menu items such
as premium chicken tenders.
Discussion Question 4.3: The four criteria are commonly known as VRIO framework which
include valuable, rare, costly to imitate, and organized to use the full value of the resource
(Rothaermel, 2017, p. 113). This framework finds that a firm can only become and remain
competitive when its’ resources satisfy the entire VRIO (Rothaermel, 2017, p. 113). These
characteristics appear to be interdependent as they each build upon one another to create
BUSI 690
competitive advantage. For managers wishing to create and maintain competitive advantage,
they must meet each of the four criteria set as the product can be valuable but if its easily
imitated then competitive advantage will not be achieved.
Chapter 5 Rothaermel Text
Small Group Exercise 5.1:
1 Customers of Liberty University include students who are seeking to further their education as
. well as organizations which will hire Liberty students.
2 Liberty University School of Business creates value by teaching business from a real-world
. view with Christian principles as well as integrity and character.
3 Liberty exemplifies learning through Christ. Courses include Christian wordview which is
. applicable within one’s career. Including online students, Liberty is the largest private
Christian university. This provides Liberty a competitive advantage as well as the online
learning aspect. Students can be anywhere in the world furthering their education and
incorporating Christ in their learning.
4 Liberty University is private; therefore, alumni contribute to the school as well as outside
. donors. Employees can even contribute to Liberty through payroll deductions if they so
choose. While tuition does normally rise, Liberty attempts to limit the increases and has even
been known to implement a tuition freeze to assist students.
Small Group Exercise 5.2: The triple bottom line approach is the modern path to stronger
economic performance because consumers care more about who the organizations are they are
buying from and what they do to contribute to society. Focusing on profits, people, and the
planet allows for companies to still make a profit while caring for their employees and the
environment. It is no secret that our resources are not infinite. Organizations have to be
conscious of the impact they are leaving so that they can still be successful in the long-term.
Profit is still an important driver for organizations with this approach, it is just not the end all be
all. Forbes released a really beneficial article describing this approach and the three P’s(Scott,
2012). They even gave an example of how consumers value the “planet.” In the early 2000s, Dell
only recycled computers in Europe which created a huge controversy in the United States. The
only reason they even offered it in Europe is because it was a legal requirement. It took a year
and a half for Dell to offer the recycling in the U.S. as well. They received a huge media
backlash due to their unwillingness to contribute to the health of the planet. Consumers are
altering their buying trends based upon situations like Dell. Just like we know consumers have
brand loyalty even though it is not tangible, the triple bottom approach is beneficial even though
it may not be quantitatively measured at first glance. The three P’s also can affect an
organization’s personnel. When organizations express care for their employees and the
environment, they are creating value. Employees will be more engaged with their work in
BUSI 690
comparison to a company that strictly cares about making profits. Creating a company culture
which encompasses caring for the employees, the planet, and the organization, will benefit
numerous stakeholders. Ultimately, businesses will not be around to make a profit if they do not
starting caring about their effect on the environment.
Reference
Rothaermel, F. T. (2017). Strategic management concepts (Custom 3rd ed.) New York, NY:
McGraw-Hill
Scott, R. (2012). "The Bottom Line of Corporate Good". Forbes. Retrieved from
https://www.forbes.com/sites/causeintegration/2012/09/14/the-bottom-line-of-corporate-
good/#6564c4633576
