BUSI 690
ROTHAERMEL EXERCISE 1
Chapter 1
Strategy and Business Models
In order for a business to succeed, it must have a strategy in place to “gain and
sustain competitive advantage” (Rothaermel, 2013, p. 7). Without a strategy, a
business would appear to be flailing in its attempt to draw customers away from its
competitors. Once a strategy has been determined, a business model is developed.
The business model takes the strategy and puts it into a model that can be
implemented in the company. Strategy is different from a business model in that the
strategy is the idea and the business model is how that idea is going to be
implemented.
Threadless and Dell
Dell is currently partnering with Threadless to add design covers to their laptops.
Cusotomizing products is a growing strategy for businesses to differentiate their
products from their competitors. Companies like Nike have created NikeID where
consumers can customize their sneakers and Tesla has a Design Studio where you can
build your own car. Dell is keen on offering Threadless’s services because they gain
a competitive advantage over other laptop companies that don’t offer this service.
One example of crowdsourcing is Doritos Super Bowl Commerical Contest.
Doritos runs a contest where anyone can submit a commercial ad and consumers vote
on the best ad. The one that wins gets a spot during the Super Bowl and Doritos is
not paying for the time of producers and writers to think up new ideas for a
commercial.
According to Silverman (2012), another company that uses crowdsourcing is
CrowdFlower (para. 4). CrowdFlower helps companies get opinions on statements or
even have them try to work a new website and provide feedback.
In the future, crowdsourcing could be used in a number of business strategies.
For example, it could be used to design clothes, solve difficult problems that a
company would have to hire many people to look into. It’s such a creative way to
differentiate your products that it could be used almost anywhere.
Firm Effects and Industry Effects
Firm effects are the effects the manager’s decisions have on a company, while
industry effects are the effects that the surrounding industry environment has on the
company. Firm effects are more important because they effect how the company
reacts to industry effects.
BUSI 690
The reverse could be true if the industry environment changed so rapidly that a
company could rebound. For example, the dairy environment changed to where all
milk had to be boiled at a higher temperature for a longer period of time. When this
industry effect occurred, small manufacturers started not being able to keep up with
demand because they didn’t have a plan in place to account for the additional time of
processing.
Chapter 2
Mission Statement
A mission builds on the vision of a company and defines how the organization
plans to compete with its products or services (Rothaermel, 2013, p. 34). A good mission
statement will help employees know how to deal with situations by knowing what the
company’s mission is.
Chapter 3
External Environment
The external environment of a corporation includes forces that act in the environment that
can shift demand of a company’s products or services. These forces include “political,
economic, sociocultural, technological, ecological and legal” (Rothaermel, 2013, p. 57). It’s
important for a company to examine its environment because it helps develop a competitive
advantage by identifying opportunities and threats (Yuksel, 2012, p. 53).
For example, if a company decided to enter the Chinese market it needs to understand the
external environment. There is a much different sociocultural environment than the US and
managers and employees moving there would need to understand these differences so they do
not offend the Chinese people.
Competitive Forces
The five competitive forces that Porter identified are threat of entry, power of suppliers,
power of buyers, threat of substitutes and rivalry among existing competitors (Rothaermel,
2013, p. 65). Strong forces reduce the industry profit and weak forces increase the industry
profit.
If the threat of entry is high then companies do not have many hurdles to overcome in
order to enter the market and so this reduces industry profitability. Supplier bargaining
power can also increase profitability if this is a weak force. Suppliers with high bargaining
power can increase inventory and labor prices which decreases the profitability of the
industry. Buyers with strong bargaining reduces industry profitability because they can
demand lower prices and/or better quality. A strong force in the threat of substitutes means
that industry profits will decrease because consumers have other products they can purchase
from another industry as a substitute. Finally, if rivalry is ruthless then discounting and
product improvements can be costly to the companies in the industry.
BUSI 690
Chapter 4
Internal Resources, Capabilities and Activities
The internal environment is also important for a company to analyze. A company can use
its internal resources, capabilities and activities to create a competitive advantage from
within. A company can gain insights into the capabilities and activities that they can use to
differentiate their product and offer additional services that bring consumers into their store.
Dynamic Capabilites
IBM changed it’s focus from predominately hardware to a more flexible
hardware/services corporation. They did this by using IBM’s dynamic capabilities that IBM had.
The dynamic capabilities that IBM built up were their great employees and their investment in
R&D (Rothaermel, 2013, p 101).
Apple is an example of another company that used its dynamic capabilities to transform
its business. Apple started out selling personal computers and added in cell phones, tablets and
an online music store to make it one of the most successful technology companies.
Resource-Based Model
The resource-based model uses four criteria to ascertain if a resource offers a competitive
advantage. These four criteria are that the resource “must be valuable (V), rare (R), costly to
imitate (I) and the firm must organize (O) to capture the value of the resource” (Rothaermel,
2013, p. 91).
If a resource is not valuable it creates a disadvantage for the company. If the resource is
valuable, but not rare it creates a competitive parity. However, if a resource is only valuable and
rare or only valuable, rare and costly to imitate, then it creates a temporary competitive
advantage. Finally, if a resource is valuable, rare, costly to imitate and the firm is organized to
capture value then it creates a sustainable competitive advantage.
Chapter 5
Balanced Scorecard
Liberty University’s customer would be the student as they are the individuals using their
services. Liberty University is seen as a leader in education with a Christian foundation. They
are also very supportive of the veteran community, offering discounts for military members.
Liberty’s vision includes offering “low student-to-professor ratio and caring Christian faculty”
(https://www.liberty.edu/aboutliberty/).
Liberty’s School of Business creates value by first creating a caring faculty staff that
cares not only about education but also about the individual student. They also create value with
the student organizations and activities they offer.
BUSI 690
References
Rothaermel, F. (2013). Strategic Management. McGraw-Hill/Irwin: New York, NY.
Svensson, G. & Wood, G. (2007). "Are university students really customers? When illusion may
lead to delusion for all!", International Journal of Educational Management, Vol. 21 Iss:
1, pp.17 – 28. Retrieved from
http://www.emeraldinsight.com.ezproxy.liberty.edu:2048/doi/abs/10.1108/095135407107
16795.
Silverman, R. (2012). Big Firms Try Crowdsourcing. The Wall Street Journal. Retrieved from
http://www.wsj.com/articles/SB10001424052970204409004577157493201863200.
