Running head: POLICY AND STRATEGY IN GLOBAL COMPETITION
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Policy and Strategy in Global Competition
Craig Becker
BUSI 690
Liberty University
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Policy and Strategy in Global Competition - Rothaermel Exercises Week 1
Chapter 1 Rothaermel Text
Discussion Question 1.1.
How might Target’s stakeholders, in particular its employees, customers, local
communities, and suppliers, influence the manager’s decisions about building competitive
advantage in the analysis stage of the AFI framework? The various actors considered in this
question have similar goals – the success of Target – arguably given that ultimately all benefit
from a successful store/business model. All parties therefore advance narrative to management
that supports effective and successful business practices and environment to the extent that
management integrates those details relevant to enhancing sustained success. Internal as well as
eternal forces affecting the business structure are simultaneously analyzed by management
(Rothaermel, 2017). The influence of each group’s input considered may vary in management’s
decisions in pursuit of gaining and sustaining a competitive edge. For instance, as a customer,
one might offer praise to management for a well-stocked store, having a friendly staff, or
exhibiting a positive social consciousness through green initiatives or community service.
Singularly, it seems that no one input is usually able to reap huge impact but collectively,
all reinforce management’s direction in pursuit of excellence, community-mindedness, and
increased value offerings that all serve to benefit the public as well as all members of the
company, incl;uding investors. The public, in turn, elevates its opinion of Target realizing
Target’s value offering has increased, frequents the store more often, resulting in increased
profits and sustained competitive advantage. There develops a symbiotic relationship that is
mutually beneficial to all parties. Guiding this process are the firm’s vision, mission, and values
(Rothaermel, 2017).
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Consistent with the above, Target is wise to seek the input of its stakeholders with regard
to differentiation from other competitors – like Walmart – in order to set itself apart through
comparatively increasing its value offering. Merely offering low price may not be enough to
differentiate and emerge as the competitive leader. Corporate, business, and functional
strategies/methods to gain information as suggested could include employing focus groups,
employee surveys, customer surveys, and so forth. First understanding stakeholder’s needs is
arguably able to inform management in their modality of gaining information from stakeholders.
Asking stakeholders if they think Target is profitable and why could be one place to explore.
Discussion Question 1.2.
What advice would you give to BP’s managers to help them continue to rebuild
stakeholder relationships in the gulf region and beyond? First, BP is well-advised to become
humble, acknowledging their failings in detail and be willing to repair those who have been
damaged, no matter the cost. Second, set aside any impulse to defend itself to those accusing BP
of wrongdoing. Third, adopt a transparency principle, becoming open to all within BP’s reach
either through business or by proximity. These are essential to laying the groundwork for
reestablishing trust with stakeholders and the world community.
How can BP repair its damaged reputation? Exhibiting strength with humility will go a
long way to ease public and stakeholder fears. Returning to effective business and safety
principles woven throughout the fabric of BP’s organization will help to communicate to others
that BP is trying to correct the past wrongs. Through restructuring its organization, BP can avoid
the same mistakes borne in arrogance and greed that lead to their past failures.
Brainstorm ways that top management might leverage the experience gained by
reactions in the gulf and use that knowledge to motivate local managers and employees in
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other locales to build stakeholder relationships proactively so that BP avoids this type of
negative publicity. As BP implements the suggestions above, stakeholder relationships stand the
best chance of repairing and new relationships born. Management must become vigilant and
non-complacent in order to avoid history repeating itself with such tragedies. This vigilance
should include replacing old guard apathetic individuals with new, forward-thinking, others-
oriented individuals wanting to make a positive difference in their world through BP’s safe and
effective initiatives and practices. Impressing on the new management the new attitude and
commitment to responsible behavior is imperative.
Discussion Question 1.3.
As noted in the chapter, research found that firm effects are more important than
industry effects. What does this mean? Industry effects correlate between the common
marketplace and all players in the market. Rothaermel (2017) asserted that 20 percent of the
profitablilty of a company can be attributed to industry effect or the industry in which it
competes (p.11). Logically then, 80% of the profitability is a function of management decisions
and actions (Rothaermel, 2017). In another place, Rothaermel (2017) attributed 75% of a
company’s success to both firm and industry effects, and 25% to “…business cycles and other
effects (p.12). Therefore, a wise manager should not quickly resort to blaming company failures
to meet objectives on the marketplace environment, but rather on managerial prowess and firm
effects.
Can you think of situations where this might not be true? Explain. An example where
the reverse is true would be when the bond market crashed in 2008 leaving the financial sector
largely a moonscape of financial destruction and ruin wherein the U.S. stock market fell as much
as 50% (Kumiega, Neururer, & Van Vliet, 2011). In that case, no amount of individual effort
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was able to turn that tide of market implosion that pulled many businesses into the financial
death spiral that occurred. To that point, as expressed in the commodities marketplace, hard red
spring wheat rose from around $5 per bushel in 2007 to over $25 in early 2008, only to fall back
to the $5 mark by the end of 2009 (p. 292). It could be argued that these huge market swing
forces largely negatively affected the whole market beyond the corrective control of any single
company (Meric, Welsh, Weidman, & Marmon, 2011).
Chapter 2 Rothaermel Text
Discussion Question 2.4.
Identify an industry that is undergoing intense competition or is being featured in the
business press. The automotive industry has been in the media limelight lately in the wake of
Tesla’s car crashes while in autopilot mode – the last Tesla crash incident to date being fatal
(Hull, 2018). The automotive industry has an important and relevant environmentally conscious
segment of electric vehicle technology steadily developing and gaining traction. It is not hard to
imagine that the electric vehicle is the future of personal and commercial transportation. Pitted
against the other car manufacturers for sales, particularly those powered by fossil fuel, intense
competition exists for market share.
Discuss how scenario planning might be used by companies to prepare for future
events. With respect to the fact that change is inevitable, and in contrast with Top-Down
Strategic Planning, scenario planning considers both positive and negative outcomes yet future
(Rothaermel, 2017). Asking “what if” questions to possible future marketplace conditions marks
the mechanism for market change preparedness (at least attempting to be prepared). With regard
to the electric vehicle scenario noted above, applied scenario planning would suggest planners
asking questions like “What protective measures can we build into the vehicle should a driver go
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unconscious?” Perhaps a designer/engineering response would include the vehicle being fitted
with driver sensors constantly assessing driver alertness and accordingly programmed to find a
safe place to pull over and then call 911 for emergency assistance should the driver need
assistance (assuming no one else is present in the vehicle).
Can some industries benefit more than others from this type of process? Explain why.
It seems that some industries require more safety measures in place to protect users and others
nearby should a malfunction occur depending on the level of complexity of the prodiuct or
service, or level of danger present from product use. In short, the aviation industry is a prime
example of scenario planning resulting in redundancy of systems (backup fuel pumps and
hydraulics for many systems, autopiloting). Effective use of scenario planning can reveal serious
product or system fails which otherwise might have gone unnoticed. In extreme cases, serious
injury or death is therefore avoided from such fails. Protected are consumers, manufacturers, as
well as stakeholder interests.
Chapter 3 Rothaermel Text
Discussion Question 3.1.
Why is it important for any organization (firms, nonprofits, etc.) to study and
understand its external environment? Rothaermel (2017) described demand shifters (external
forces) by highlighting six distinct factors indicated by the anacronym PESTEL (p. 66). These
categories are political (P), economic (E), sociocultural (S), technological (T), ecological (E),
and legal (L). Maintaining a clear understanding of these forces provides the ability to identify
and reduce threats, and to leverage opportunities (Rothaermel, 2017). Understanding the nature
of the threats and opportunities informs the company which of each are within or without
company control to influence each for advantage (Rothaermel, 2017). Lacking these
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understandings the company risks not attaining possible gains and as well as their competitive
marketplace advantage (p. 66).
Discussion Question 3.2.
How do the five competitive forces in Porter’s model affect the average profitability of
the industry? For example, in what way might weak forces increase industry profits, and in
what way do strong forces reduce industry profits? Perfectly competitive industry, according to
Porter, “…has many small firms, a commodity product, low entry barriers, and no pricing power
for individual firms (p. 96).” Therefore, a low force tends to pose less relative influence on
competitors allowing for a more even distribution of profitability. Conversely, a monopolist in
the mix represents high barriers to entry, a unique product offering, and wields power at pricing
product elevating the difficulty for competitors to challenge the dominant position held
(Rothaermel, 2017).
Porter’s Five Forces Model was developed to “…help managers understand the profit
potential of different industries and how they can position their respective firms to gain and
sustain competitive advantage (p. 73). The individual components of Porter’s theory are as
follows: threat of entry, power of suppliers, power of buyers, threat of substitutes, and rivalry
among existing firms (p. 73) all affecting profit potential. In essence, the winner in this scenario
is arguably the monopolist who maintains overall market power.
Identify an industry in which many of the competitors seem to be having financial
performance problems. Which of the five forces seems to be strongest? Often appearing in the
headlines are current event stories about IT security breaches, data theft, and identity theft.
Apparently, the problem is not going away any time soon. Following server hack events, public
fear elevates, and trust in IT providers diminishes along with company profits (Akamai
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Technologies, Inc., 2018). PESTEL probably better describes the problem. Threat of data
breach (T) resulting in actual data breach is a corruption of technology and the agent for
compromised account security – this security is a basic need of a consumer that is violated
resulting in low consumer confidence and reduced sales spread across the industry.
In this instance, Porter’s principles do not altogether apply seamlessly. The real threat is
an outside terrorist seeking personal gain in an ill-gotten data environment thought profitable that
has nothing to do with a competitor’s normal influence – this entity is not a competitor but
instead an unlawful intruder with the goal of unlawful enrichment. The Five Forces are
represented by: Threat of entry, power of suppliers, power of buyers, threat of substitutes, and
rivalry among existing firms however do not necessarily apply in this case. What is important
though is how this external threat affects profitability of competitors outside of each one’s
control. Even the perception of insecure data affects consumer confidence thus lowering sales
and profitability (Akamai Technologies, Inc., 2018). Most businesses lack the resources
internally to adequately defend aginst cyber attacks and must look to external vendors for such
professional protection.
Chapter 4 Rothaermel Text
Discussion Question 4.1.
Why is it important to study the internal resources, capabilities, and activities of firms?
Synonymous to the central idea of the question is understanding one’s core competencies which
provides invaluable insight into company strengths and assets informing the company how to
differentiate itself from its competition and gain a market advantage (Rothaermel, 2017).
Understanding one’s resources, capabilities, and activities is useful in forming and executing
strategy (Rothaermel, 2017).
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What insights can be gained? As one learns which core competencies, resources,
capabilities, and activities are possessed or available, strategic decisions may be made leveraging
all effectively to gain market advantage.
Discussion Question 4.2(a).
Conduct a value chain analysis for McDonald’s. What are its primary activities?
McDonalds restaurants provide good tasting fast food at affordable prices at convenient
locations. Resources can be tangible or intangible (Rothaermel, 2017). Those possessed by
McDonalds may seem similar to other competitors but are distinguishable – widely distributed
locations across the world, proprietary equipment and recipies, financial strength, and so forth.
Capabilities include, but are not limited to, complex and effective organizational structure with a
history of weathering global and domestic black swan events.
What are its support activities? Included in McDonalds support activities are research
and development (R&D), information systems, human resources, accounting and finance, and its
firm infrastructure which includes including processes, policies, and procedures (p. 129).
Complimentary activities include finding and developing human capital (Qureshi, 2013).
Identify the activities that add the most value for the customer. The customer has been
observed in one study within a China mainland context to favorably respond to physical
environment, food, and service (Ryu, Lee, & Gon Kim, 2012). A correlation was drawn between
restaurant image and customer perceived value which, in turn, correlated to customer satisfaction
(Ryu, Lee, & Gon Kim, 2012). It could be argued successfully that domestic McDonalds
customers appreciate the convenience, affordability, consistency, and taste of McDonalds
offerings. Of relevant import is the fact that globalization has encouraged McDonalds to also
reach into foreign markets. Responding to other cultures through business model adaptation has
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encouraged Chinese patrons to attribute value to McDonalds offering (Jeon, Meiseberg, Dant, &
Grünhagen, 2016). It is in these foreign markets that McDonalds also provides these same
customer benefits enjoyed domestically (Ryu, Lee, & Gon Kim, 2012). Affordability has been
largely achieved through careful attention to supply chain and through volume sales (enabling
price/unit slashing).
Why? McDonalds has recognized through many years of successful experience that
squarely meeting the customer’s desires and wants means continued business success.
Increasing the value perception results in elevated business volume. (Rothaermel, 2017).
Which activities help McDonald’s to contain cost? Efficient preparation procedures,
human capital development, customer service, and aggressively low pricing of purchases all
support McDonalds in controlling costs (Kaufman, 2012). Using a global standardized set of
operating procedures ensures a competitive marketplace position (Rothaermel, 2017).
Why? Without controlling costs carefully, expenses will eventually overrun income and
the business will collapse. McDonalds is immersed in a highly competitive pricing landscape
requiring vigilance in cost control.
Discussion Question 4.2(b)
In the past few years, McDonald’s has made a lot of changes to its menu, adding more
healthy choices and more higher-priced items, such as those offered in McCafé (e.g., premium
roast coffee, frappé, and fruit smoothies), and has also enhanced its in-restaurant services
(e.g., free, unlimited Wi-Fi; upgraded interiors). Did McDonald’s new priorities—in terms of
a broader, healthier menu and an improved in-restaurant experience—require changes to its
traditional value chain activities? Perhaps a little. It does not appear that McDonalds had to
significantly alter its traditional value chain activities except for ingredients suppliers,
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preparation procedures, and perhaps equipment to accommodate special menu items. Recent
value offerings included expanding to McCafe lattes and chicken menu items (Rothaermel,
2017) as well as breakfast all day and other items. Responding to the public’s demand for
healthier choices was a smart McDonalds strategy as customers were looking for healthier
alternatives as well as cheaper lattes than what was served at Starbucks (Kaufman, 2012).
Another change towards higher end sandwich competition was introduction of the Signature
Sandwich menu items. Other than using slightly different ingredients, the basic procedural
structure seemed to remain intact (Kaufman, 2012).
Discussion Question 4.3.
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,
therefore, provide a basis for sustainable competitive advantage. Are these measures
independent or interdependent? Explain. The products of the interaction between resources
and capabilities - core competencies - arise. Resources include “…cash, buildings, machinery,
or intellectual property that a firm can draw on when crafting and executing a strategy”
(Rothaermel, 2017, p. 108). A firm possesses core competencies comprising its internal
environment. The company also lives and moves inside an external environment. These
measures are interdependent but relate to each other (Rothaermel, 2017).
If (some of) the measures are interdependent, what implications does that fact have for
managers wanting to create and sustain a competitive advantage? First, managers must remain
vigilant to external environment changes which will inform as to corrective measures that must
be taken to accommodate those changes in order to stay relevant and competitive. Perhaps in the
case of creating competitive advantage, recognizing opportunities and skillfully utilizing core
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competencies to exploit those opportunities is critical to creating or sustaining competitive
advantage – whatever the case (Rothaermel, 2017). For instance, should a major competitor fall
away and exit the market space (external environment change), an immediate opportunity could
present to be exploited for the bene fit of the company (internal environment/behavioral change
in response).
Chapter 5 Rothaermel Text
Small Group Exercise 5.1. (see chart below)
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Small Group Exercise 5.2 (NOTE: This question is to be completed individually. For
this question, submit your “elevator speech” in a Word document; the minimum word
count is 300 words).
Elevator speech. The topic of sustaining a profitable enterprise has been studied from
various angles and perspectives for many years. It comes as no surprise though that profits have
been obtained through the years through responsible and honotable methods as well as those
nefarious. The pathway to the goal of profit and business strength is a personal choice. The
business landscape has dramatically changed in the last century along with global challenges to
business success. As the media and internet has advanced in its global reach and access, much
more is generally known about world events, especially business events.
Although business profitability is a key factor to the longevity of any business, the
lessons of this new business landscape have taught us much. For instance, we have seen that
irresponsible manufacturing practices have resulted in toxic waste and pollution – injuring the
land and its people. Out of careful study of wanton disregard for our planet, what has emerged is
the principle of 3Ps – people, planet, and profitability (or triple bottom line). To each P we have
a responsibility to protect and respect. Without careful management of all, eventually a fail
occurs damaging someone or something.
Corporate social responsibility is the principle guiding each member of the business
community to consider the implication of any action on the triple bottom line. The weight of any
decision should include consideration for the 3Ps. Balancing the effects of any decision in this
manner helps ensure careful custodial care of the planet, its resources, its people (our future), all
the while experiencing profitability while the world rewards those responsible players for
guarding the earth now and in the future.
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Of interest is the fact that major world business players like Kinkos, FedEx, and Nike, to
name a few (Scott, 2012). All have recognized the importance of protecting our resources now
and in the future so we all can convey something of worth to our children in the future. It would
be naïve to assert that all businesses conform to these ideals but as this awareness and
commitment gains traction, there is only an upside to such globally responsible business
behavior. Protecting our planet and each other will never go out of style. In this framework,
profit should never come at any cost.
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