Running head: ROTHAERMEL EXERCISE 1
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Rothaermel Exercise 1
Holly Koob
Liberty University
BUSI 690
Dr. Blossom
July 7, 2017
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Rothaermel Exercise 1 – Chapter 1
1. Target’s stakeholders influence a manager’s decisions helping to build competitive
advantage by helping with the analysis of internal and external environments. Employees
hear firsthand from customers what they need or wish that the store carried, or even how
the store is organized. Management should also meet regularly with all employees to
create the vision and know the goals and tasks to obtain that vision. Customers and local
communities influence how the manager chooses to support charities and volunteer
efforts. For example, when a community is faced with a natural disaster, Target might
supply volunteers and water to help in the efforts. Suppliers to the chain are sourced to
support specific populations of people around the world, such as women and minorities
as mentioned in the text.
Target might gather this information with online customer surveys or phone
surveys for in-store customers. They might also gather the information in one-on-one or
small group employee sessions to generate ideas and work as a team towards the
betterment of the local community. If something does not go as planned, management
can get involved and figure out a way to do things better next time which will result in a
better overall customer experience.
If the corporation is looking to the stake holders for lowering costs as well, it
should again look at what is going on in the local environment and to local competitors
for items that are fairly standard; trying to find items that are not thought of, but
necessary, can help keep a competitive advantage on other items as well. On the items
that are carried by other stores Target either needs to source a higher quality supplier and
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charge a price that customers will still purchase, or they need to offer an equal product for
a lower price.
Stakeholders can affect or be affected by the implementation stage by:
- Resisting the change being implemented
- Supporting the change being implemented and encourage others to join them
in the support of the change
- Push back and not feel as they are involved in the implementation of the
change.
- Pull back from supporting the organization if they feel that they were not
involved.
- Sustain the change and support the organization further for future change.
2. The best advice that I would give to BP’s managers would be to be as open and honest as
possible to all of their stakeholders. Holding regular daily or weekly meetings with
employees so that they know what is going on at all times, as well as with share holders
and investors. When something does go wrong, admitting fault immediately and fixing
whatever went wrong at whatever cost. In order to repair their reputation, BP must start
by attempting to build trust again for all.
BP cannot repair the damaged reputation, but it can restart and use the entire bad
situation to learn and move forward. They can only work on impressing all stakeholders
in the future to rebuild and regain trust, but the reputation that precedes them will always
be what it is.
Top management can leverage the situation and encourage rebuilding the
relationships with all stakeholders by:
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- Being upfront about what went wrong
- Apologizing profusely
- Working to restore the environments that were ruined by the spills
- Volunteering time and efforts in the communities effected
- Communicating clearly what is being done to restore all damages
3. Firm effects are more important than industry effects because they are about the actions
that a manager takes, whether in response to what is going on in the industry or not.
Though it is easy to blame productivity levels based on external factors such as the
industry, it is really more about how a manager manages those factors for employees.
For example, in my role of educational sales, it is easy to blame politics and changing
funding on not making sales, however, there is always a need for additional programming
for struggling readers who are not meeting the goals set by the district, state and federal
governments. This might not be true though, if the industry environment were to
completely shut down the need or allowance for the business. For example, the industry
of home telephones as well as paper phone books and even printed newspapers are all in
significant decline since the advent of cell phones and the internet. Because of this
decline, no matter how well managers affect the business, if the need or want is not there,
there is not a lot that can be done.
Rothaermel Exercise 1 – Chapter 2
4. A company that is currently undergoing intense competition from internet based
companies is Sears. Much like Radio Shack, Sears management did not plan for
customers to want to go online for home improvement and home appliance type
purchases. However, once these items, including very large items, were available online
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for much cheaper and included free shipping, customers chose these options. Sears could
have used scenario planning to better serve customers with service and offer values that
could not be received from an online vendor. I think that all industries could actually
benefit from scenario planning, however, those that have a strong service component
might benefit more. If a company were to offer only a few widgets, but supplied them to
other businesses that incorporated those into something offered to customers, and that
something that was offered to customers became unnecessary or obsolete, the industry
that does not even offer a service, still needs to scenario plan for their widget to be
unnecessary. Service industries need to plan especially since customers can choose to go
many other places for the same type of service, so scenario planning on how best to
differentiate will be necessary to survive.
Rothaermel Exercise 1 – Chapter 3
1. It is so important for an organization to study and understand its external environment
because all of the aspects affect its ability to gain and sustain a competitive
advantage. Whether the external factors are something that can be managed or
anticipated by management or not, they will impact the business’s ability to remain
competitive. The various factors in the external environment typically come from the
categories of political, economic, sociocultural, technological, environmental and
legal. Whatever is happening in each of these areas will have direct impacts on how a
manager makes plans, strategies and changes for the future. These areas can change
demand, whether in a very positive or negative way, or even keeping everything
stable.
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2. The five competitive forces in Porter’s model affect the profitability of the industry
by:
a. Threats of new entrants: making existing companies lower their costs to start a
price war. Raise their value without raising their prices.
b. Bargaining power of buyers: Demand a lower price or a higher quality.
Demand better service included.
c. Threat of substitute products/services: Limits the prices that companies can
charge for their products/services.
d. Bargaining power of suppliers: Raise the cost of production for companies.
Reduce the profitability by taking part of that economic value added.
e. Rivalry among existing competitors: Forces price discounting
Weak forces would create an industry profit because these would not be
enough for companies to lower their prices or increase their costs to satisfy
customers. In an industry such as small boutique shops, most are having
financial performance issues because of intense competition from online
stores and marketplaces, making rivalry among existing competitors the
strongest force for them.
Rothaermel Exercise 1 – Chapter 4
1. It is important to study the internal resources, capabilities and activities of a firm
because competitive advantage can be driven from these. These allow a firm to
differentiate from rivals and create a higher value for their customers. Each and every
capability and activity that are done create additional value for the customer, so
knowing what all of those are, help to establish value and create competitiveness in
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the industry. The insights that can be gained include when a firm does not invest in
continuous improvement, the competitor will, and will take over customers.
Knowing both the tangible and intangible assets that a company has allows it to
secure its place in the market/industry and create value for their customers.
2. A. Value chain analysis for McDonald’s
a. Purchase meat, bread, vegetables, fruits, etc. from suppliers
b. Use employees to put prepare raw ingredients into quickly accessible and
usable items for preparation.
c. Have employees man various stations in the kitchen, from the grill for meats
and chicken, to the fryer for fried foods, to the preparation tables for all of the
condiments and toppings
d. Use standard packaging to wrap the food and get to customers
e. Have support staff to serve the customers and ensure a smooth, large-scale
operation at all times.
f. The other “fringe” benefits of McDonalds’ now include local $1 menu
options, free wi-fi, and fundraisers for local schools and non-profits.
The primary activities of McDonald’s are really burgers and fries, but the support
activities include all of the other menu options, the customer service, the fast service,
the clean restaurants and playlands, and the free wi-fi. The items that add the most
value for the customer are low cost fast food, including burgers and fries, but also in
recent years the addition of breakfast items, healthier options including salads and
wraps, desserts and cheap drinks/coffees. The activities that help maintain the costs
for McDonald’s include their double drive through lines, allowing them to serve more
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customers that don’t actually come into the store. They also offer fun, indoor options
for children, where parents end up buying something as well…this is especially
beneficial in extremely hot summers or very cold winters.
B. McDonald’s new options for healthier menu items, premium intereriors and coffees
and free wi-fi did require adjustments in their value chain. New coffees not only required
new suppliers, but additional training for staff to know how to appropriately prepare these
new items. A lot of the new vegetables and wraps needed to be sourced differently and
also have different requirements for storage and consumption. While McDonald’s still
sells burgers and fries, the addition of chicken, salads, smoothies and healthy breakfast
options allow them to charge higher prices than they could just as the low price fast food
leader for burgers alone.
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
provide competitive advantage or not: Valuable, Rare, Costly to imitate and Organized to
capture value. These are all independent of one another in making sure, but have to be
altogether in order to really be a core competency. If only two or three of these criteria
are met, the company might be able to have competitive advantage for a short period of
time, but it will not be sustainable. Because all of these criteria have to be met in order to
be a core competency, managers need to reorganize and ensure that the resources and
capabilities that a firm has, can interact in a different way to meet these four criteria.
Since a company could have many things that only meet one or two or three of these
criteria, they need to figure out what they can do to meet all four and narrow their focus
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to those core competencies instead, in order to have competitive advantage for the long
run.
Rothaermel Exercise 1 – Chapter 5
1. In order to balance both financial and strategic goals, balanced scorecards allow
managers to look at multiple measures.
a. How do customers view us?
a. Prospective students are the first customer that a university has. The
goal is to attract students who will come to gain the knowledge and
pay the tuition for a good education at Liberty. The home page of the
website shows smiling students, a beautiful campus and several items
that show how fun and engaging it is to be a study here and become
prepared for life.
b. Another customer is the parents of these students. They are the ones
that often pay for their child’s higher education, so looking at the
website cannot be all fun and games, but show a solid Christian base
and emphasis on learning that will help throughout life, not just in the
college years.
c. After students graduate from this school, another customer is the
employer where the student potentially works. Managers might check
out the school to get a better understanding of the rigor and
environment of education that their potential employee is coming
from.
b. The University must create value for the customers by
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a. Providing an accredited and approved education
b. A solid base in Christianity, creating leaders for Christ
c. Supporting students in their academic, spiritual, athletic and social
endeavors.
d. Charging a fair price for a solid education
e. Offering support services that help students gain real world
experience, ability to work online as well as in person, and assist in
getting jobs after graduation.
c. The core competencies that Liberty has include:
a. Supporting the largest military education community in the world
b. Offering the lowest priced online programming
c. Having staff and faculty who focus on how students can positively
impact the world in business and in Christianity.
d. Financially, Liberty University’s shareholders can rely on the accounting data
from the school to understand the profit that they are gaining from the
education of so many students. Liberty holds a unique position, I feel, in that
they are somewhat of a low-cost leader for online education yet still offer a
very high value product.
2. The idea that a company can only be successful based on the economic profitability is a
bit outdated. While that is definitely still a focus for businesses there are really two other
ways that companies can be successful and sustain themselves competitively that include
social and ecological strategies as well. It’s important for some of the biggest businesses
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around today to not only take care of their profits but to also take care of their people
and the planet.
If a company is known to only care about their profitability and not care a bit
about the people or the planet, a bad reputation is sure to follow. Take BP’s huge oil spill
in the Gulf of Mexico. Though managers knew of the unsafe conditions of the workers
and the likelihood that a pipe might leak or break, but still didn’t fix it, the largest
environmental disaster of all time ensued. Would you like to have had to deal with the
management of that just because you were making a decent profit? Whereas other large
businesses like Costco are known to not only bring value and profits to their
shareholders, they also have a very high level of employee satisfaction and are concerned
with the environment so much that they put attendants at all of the gas pumps to ensure
safety for the customers and the environment.
There are even some companies that we think of as top environmentally friendly,
like Seventh Generation and Patagonia, that also help customers to be chemical-free,
employee friendly and yet still make a significant profit. When looking throughout
history at companies that have failed miserable – Enron, BP, even Radio Shack – the
focus was always on profitability and not on people or the planet, and for those reasons,
they are not around any longer. There really should be a three pronged approach to
success, profitability for sure, but also how the company impacts people and the planet in
a positive way.
