ROTHAERMEL EXERCISE 2
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Rothaermel Exercise 2
Lacey B. Johnson
BUSI 690
Chapter 6
6.1 There are certain risks and drawbacks to a broad generic business strategy. First, cost
leadership strategy would be the effects of competing firms lowering costs (Rothaermel, 2014).
The outcome of this would be the competitive edge of the company previously had could be
diminished or completely eliminated. Likewise, if competing firms utilized a focused strategy
approach and started increasing their combined market share which results in becoming a threat
to a firm. Also referred to as the differentiation strategy, there are associated risks to the generic
business strategy (Rothaermel, 2014). To provide an example, consumer preferences, or the
possible of obtainability of comparable products by competitors pose a threat to a firm.
Although, the choice to apply a focused strategy may generate their own niche. Also, as
mentioned before with the differentiation strategy, changes in the customer preference and alike
products and services given by competitors pose a risk.
6.3 Cost leadership occurs when companies compete based upon price of goods. The price of an
item is based on the efficiency of the firm. This creates a margin which allows for higher than
average returns and better costs for consumers. This ensures repetitive business. This type of
leadership works best when the products are standard or if the company has generic goods that
are useful to many consumers at a lower cost. There are numerous ways a company using this
strategy can reduce value chain costs. For example, making the decision to view the use of
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technology within the firm, a company can utilize a program to perform evaluations, hiring,
training that reduces the amount of employees need to manage human resources. Furthermore, a
firm could apply the use of a computerized inventory control system to guarantee inventory is
sustained correctly, making it more likely to reduce the amount of storage necessary which also
reduces value chain costs.
A strategy that seek to create higher value for customers by delivering products and/or
services with features that are unique while keeping the companies cost structure at similar levels
is referred to differentiation strategy. There are numerous ways that a firm can make changes in
value chain. For example, regarding marketing, a firm can strive to provide consumers with
better marketing sales which are better for competition. They can improve ordering processes to
make them quicker and convenient. Service is another example. A company can ensure that
consumers receive better quality services that are also more reliable which increases consumer
satisfaction.
A strategy that combines differentiation and cost leadership strategies is referred to as
Integration business level strategy. This strategy has similarities in value chain with the two
previously mentioned strategies. For example, a firm may decide to use technology when
processing customer’s orders to lower costs and increase efficiency. Additionally, it increases
customer satisfaction in regards to the sales process.
ROTHAERMEL EXERCISE 2
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Chapter 7
There are four different stages in regards to the industry life cycles. The stages include:
introduction, growth, maturity, and decline. These events happen during the evolution of an
industry over time (Rothaermel, 2014). A firm must adjust their strategy according to the stage
that an industry is in. For example, during the introduction stage, a focused strategy will help a
firm to appeal and start developing a new consumer population. This will result in the firm
needing to highlight the uniqueness of the new goods or services being offered to the consumer
to better fulfill their needs.
During the growth stage, it is imperative for a company to demonstrate the superiority of their
products and services over the competition. A focused approach will enable the company to
determine the type marketing campaign required to meet their goals. In the maturity stage, a
firm realizes that there are few radical innovations than during the growth stage. This means that
the cost leadership strategy would be best during this stage of the life cycle. Furthermore, the
firm could potentially increase their sales volume due to appealing to the consumer’s want for
more cost friendly good. Finally, during the decline stage of the industry life cycle, it is likely
that sales are drastically decreasing. Because of this, it is imperative that the firm reduce their
costs and to work hard to maintain their current market share. This results in using a cost
leadership strategy to remain competitive within the industry.
Google is a great example of firm that has been and continues to be highly innovative.
Google is an example of a firm that uses incremental innovation. Google released Gmail, used
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by man to be a great internet mail service, is an example of the company’s use of incremental
innovation. Initially, when Gmail launched, it had limited features but was great at delivering
emails. Different from its competitors, Gmail was user friendly and didn’t come with distracting
advertisements. Over time, Google released several more features which made their services
quicker and better to use. The advantage of using incremental innovation is that it is difficult for
things to go wrong. There is nothing radical or dramatic that the market may reject. Worst case
scenario, the market will not respond to advances while in the best case a company will
experience increases in sales, popularity, and the brand. Google is a firm that continues to use
incremental innovation in their steady release of new products and improvements.
7.4 An example of a low technology innovation is adjustable, liquid filled eye lenses.
Inventor, Josh Silver found an intelligent yet simple solution for correcting vision and a very
low cost. This product will give sight to millions across the globe without the need of an
optometrist. More than 30,000 of his lenses have been dispersed in fifteen countries, there
are plans that will scale that number up to millions. Dr. Silver, an atomic physicist,
calculates that it will be possible to make these liquid filled glasses for approximately $20 a
pair or less. This product would allow millions across the globe, many of whom cannot
afford healthcare, to purchase this product. Josh has a goal to have helped billions in the
world by the year 2020 (Centre for Vision in the Developing World, 2016). A unique yet
simple idea, turned into an opportunity to not only help millions but to have a product that no
one else offers.
ROTHAERMEL EXERCISE 2
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Chapter 8
The business-level strategy of differentiation deals with the “quest for gaining and
maintaining a competitive advantage in single product market (Rothaermel, 2014).” On the
other hand, a corporate-level strategy deals with the the “decisions that senior management
makes and the actions it takes in the quest for competitive advantage in several industries and
markets simultaneously (Rothaermel, 2014).” Walmart’s decision to incorporate grocery stores
into some of their locations means the firm chose to compete and use a corporate level strategy
of diversification. Using this strategy, diversification efforts must create significant value for
shareholders through successful mergers and acquisitions, alliances, joint ventures, and internal
development. Building a much larger version of the same store displays that the company strives
to increase their market share and profits by providing more service to their customers. Walmart
supercenters not only care more products; they are more convenient for the customers.
Chapter 9
The process of acquiring and merging with competitors, leading to industry consolidation
is referred to as horizontal integrations (Rothaermel, 2014). An advantage that Ticketmaster and
Live Nation obtained through this merger is increased market share that makes it harder for
competitors to compete against. Both companies are well known leaders in the ticket distribution
service and the two working together make them more powerful. This also increases the
likelihood for lowering costs for consumers and differentiation. However, in many instances,
mergers have not been known to competitive advantages for firms and may even destroy
shareholder value (Rothaermel, 2014).
ROTHAERMEL EXERCISE 2
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Chapter 10
I greatly enjoyed watching this video. When guessing the numbers in regards to cross
border activities including phone calls, business, relationships, trade, I significantly
overestimated. Ghemawat explains that the world is not as connected as many assume due to the
law of distance. The differences among groups of people determine the ability and willingness of
different groups of people to interact with each other. I agree that we need to fall victim to
believing that the world is completely globalized. I believe it limits opportunities for businesses
that already exist and those with a goal and dream of building their businesses. In today’s
technology driven society, I believe it is easy to fall victim to the beliefs that Ghemawat spoke
of, however, It is important for people to realize that the World is a very large place with varying
groups, beliefs, and cultures.
References:
Rothaermel, F. T. (2014). Strategic management concepts and cases (Custom 2nd ed.) New
York, NY: McGraw-Hill.
(2016). Centre for Vision in the Developing World. Retrieved from
http://www.vdwoxford.org/about/#js
(2009). Adjustable liquid filled lenses. TED Global. Retrieved from
http://www.ted.com/talks/josh_silver_demos_adjustable_liquid_filled_eyeglasses
