BUSI 690 Rothaermel_Exercise_2.pdf ASSIGNMENTS 2018.pdf

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ROTHAERMEL EXERCISE 2

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Rothaermel Exercise 2

Module/Week 2 – Individual Assurance of Learning Exercises (AOL 2)

Chapter 6 Rothaermel Text

Discussion Question 6.1

Generic business strategy can be categorized as two different strategies:

differentiation and cost leadership. A differentiation strategy strives to create the highest

value for the customers rather than the competitors. It does so by generating products and

services with unique features, while stabilizing costs and charging customers higher

prices. Cost leadership, on the other hand, offers the same value for customers but allows

firms to offer customers lower prices. A business strategy is most likely to create a

associated with cost differentiation is the limitation by competitors and a change in the

customer’s taste, which could eliminate a firm’s competitive advantage and reduce sales.

Discussion Question 6.3

One example of a value chain firm that uses a cost-leadership strategy is the

manufacturing company BIC, which produces disposable pens and cigarette lighters at a

low cost to customers. A differentiation strategy is one utilized by the manufacturing

companies like Montblanc, which produces high quality pens with much higher value and

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cost. An example of a value innovation business-level strategy is one utilized by IKEA,

who uses value innovation to eliminate-reduce-raise-create a framework to eliminate its

own blue ocean and to achieve a sustainable competitive advantage.

profitable app companies with its introduction of the Apple App Store. Originally

launched in 2008, the apps store quickly became a popular location for iPhone users to

buy apps and for developers to create them. “Arguably, the explosive growth of the

iPhone is due to the fact that the Apple App Store offers the largest selection of apps to its

market. In the case of Apple and its apps store, the success of the iPhone and the needs

for users to have more apps increased.

utilize different aspects of the phone. Once the industry cannot expand any further, the

rate of growth declines and companies start competing against each other to attract

customers and gain a competitive advantage. “As competitive intensity increases, the

weaker firms are forced out of the industry” (Rothaermel, 2017, p. 223). In the app store

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this can be seen when developers create similar games or photo editing apps, then

compete against each other through promotions or extra features to attract more

customers. After competing against each other, only a few companies remain in the

industry morphing the structure into an oligopoly, moving into a maturity stage. At this

point, most of the demand for apps is satisfied and demand now shifts to in-app purchases

like additional features or expansion packs. Lastly, demand falls and the decline in sales

creates a strong pressure on prices. At this final point of the industry life cycle,

“managers generally have four strategic options: exit, harvest, maintain, or consolidate”

(Rothaermel, 2017, p. 224). App companies are forced to increase the prices of their apps

and in-app purchases in order to remain competitive and in the market.

Discussion Question 7.2

Gillette is a highly innovative firm that has dominated the razor industry for years,

radical innovation and incremental innovation. Being that the company is one of the first

to ever begin selling razors with disposable blades, it utilized radical innovation to gain

success. Additionally, through incremental innovation the company continues to provide

new versions of it razor through an innovative strategy that has proven to create a

successful competitive advantage.

Discussion Question 7.4

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express delivery industry by FedEx and that of big-box retailing by Walmart”

(Rothaermel, 2017, p. 218). One low-technology innovation that has helped people in

undeveloped areas of the world without clean drinking water is the LifeStraw. Millions of

people die every year from diseases contracted from drinking polluted water. LifeStraw

filters the water from polluted sources and converts it into clean water at a low price. The

device is small enough to carry and can be shared with others. Because of the low cost

and necessity to provide a clean source of drinking water to billions of people around the

world, the manufacturing company has innovatively produced a product that is now in

high demand and simultaneously has gained a competitive advantage in its industry.

Chapter 8 Rothaermel Text

dimensions of vertical integration, diversification, and geographic scope. A business-level

strategy of differentiation aims at creating higher value for customers than the value that

competitors create. It also delivers products or services with unique features, while

making sure costs remain the same or at a similar level, which allows firms to charge

higher prices to its customers (Rothaermel, 2017, p.179). When Walmart decided to add

grocery stores to its locations and create supercenters, they did so by utilizing a corporate

strategy of diversification, which expanded their scope of operations and provided

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customers with a wider variety of goods. Walmart used a business-level strategy to

compete with others and try to gain a competitive advantage.

No-equity alliance is one of the most common governing mechanisms used by

firms either through supply agreements, distribution agreements, or licensing agreements.

Non-equity alliances provide flexibility and are easy to initiate and terminate because of

their contractual nature. “However, because they can be temporary in nature, they also

sometimes produce weak ties between the alliance partners, which can result in a lack of

trust and commitment” (Rothaermel, 2017, p. 305). Equity alliance allows one partner to

companies. The advantages of joint ventures are that it creates strong ties, trust, and

commitment. Nevertheless, this type of governing mechanism requires long negotiation

and significant investment. If an alliance doesn’t work, undoing a joint venture takes time

and considerable cost.

Chapter 10 Rothaermel Text

Discussion Question 10.3

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countries and peoples worldwide, made possible by falling trade and investment barriers,

advances in telecommunications, and reductions in transportation costs” (Rothaermel,

2017, p. 330). Coca-Cola is one of the most well-known firms that operates at an

international level. Originally created in 1886, the company has grown over time making

itself one of the most recognizable brands of all time. Coca-Cola uses a simple global

strategic position of the 3 A’s: acceptability, affordability, and availability, which has

contributed to the success of the company. Additionally, it has been successful in the

market because it follows local strategies and is able to deliver to the needs of people.

Aside from manufacturing sodas, the company owns over 500 additional brands ranging

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McGraw-Hill.