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Chapter 1: As noted in the chapter, research found that firm effects are more important than industry effects. What does this mean? Can you think of situations where this might not be true? Explain. Choose an industry with a clear leader, and then examine the differences between the leader and one or two of the other competitors in the industry. How do the strategies differ? What has the leader done differently? Or what different things has the leader done? Chapter 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? 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? Chapter 4: 2. a. Conduct a value chain analysis for McDonald’s. What are its primary activities? What are its support activities? Identify the activities that add the most value for the customer. Why? Which activities help McDonald’s to contain cost? Why? 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? If so, how? Try to be as specific as possible in comparing the McDonald’s from the recent past (focusing on low-cost burgers) to the McDonald’s of today. Chapter 5: 3. Interface, Inc., is discussed in Strategy Highlight 5.1. It may seem unusual for a business-to-business carpet company to be using a triple-bottom-line approach for its strategy. What other industries do you think could productively use this approach? How would it change customers’ perceptions if it did? 4. The chapter highlights several firms that are developing business models around a “sharing economy.” The idea being that assets not currently in use by their owners (cars, car seats, homes, rooms, etc.) can be rented to (shared with) others. What other industries can you think of that can be disrupted by this new business model? Where do you see “excess” space or other assets that could perhaps be utilized more efficiently?

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The assertion that firm effects outweigh industry effects in influencing competitive advantage emphasizes the importance of internal firm strategies, resources, and capabilities over broader industry characteristics. This concept, rooted in the resource-based view of the firm, suggests that a company's unique assets and competencies are more decisive in achieving and sustaining superior performance than the external industry environment alone. However, situations exist where industry effects might overshadow firm effects, particularly in highly regulated sectors or industries subject to significant technological shifts that can render firm-specific advantages obsolete rapidly.

For example, in the technology sector, firms like Apple and Samsung demonstrate how firm strategies such as innovation, brand loyalty, and supply chain management shape competitive success. Conversely, in industries like utilities or pharmaceuticals, regulatory frameworks and patent laws heavily influence the landscape, often diminishing the impact of individual firm strategies. Therefore, understanding the industry-specific context is critical when analyzing competitive dynamics (Barney, 1991).

Focusing on the technology industry, Apple Inc. exemplifies a firm with a distinct competitive advantage due to its integrated ecosystem, innovative product designs, and strong brand presence. Compared to competitors like Google or Microsoft, which focus on software and services, Apple's strategic emphasis on hardware-software integration and premium branding differentiates it significantly. Apple invests heavily in proprietary technology and design aesthetics, which create a loyal customer base and allow premium pricing (Lashinsky, 2012). In contrast, Microsoft primarily capitalizes on enterprise software and cloud services, and Google dominates search and advertising markets; these differences illustrate varied strategic orientations tailored to their core strengths.

Turning to Porter’s Five Forces model, the forces significantly influence industry profitability. Weak rivalry among competitors often leads to increased profits due to less aggressive price wars and marketing expenses. For example, in the airline industry, intense rivalry tends to depress profitability, while in niche luxury sectors, less competition can foster higher margins (Porter, 1980). For industries with declining performance, the most potent force often is the threat of new entrants, which erodes existing firms’ market share and drives down prices.

A pertinent example is the retail sector experiencing turmoil—many traditional brick-and-mortar stores face declining profits. In such cases, the bargaining power of customers and the threat of new online entrants—like Amazon—are strong forces weakening profitability. Amazon’s dominance exemplifies how powerful this force can be, as it continuously expands its market reach and consumer base through innovation and logistical efficiencies (Chen & Xu, 2020).

Strategic analysis of McDonald’s reveals how its value chain activities generate competitive advantage. Its primary activities include inbound logistics—efficient procurement of ingredients; operations—standardized cooking processes; outbound logistics—rapid service delivery; marketing and sales—brand promotion; and service—consistent customer experience. Support activities such as firm infrastructure, human resource management, technology development, and procurement underpin these primary activities, enabling scale efficiencies and cost containment.

Value addition from McDonald’s is primarily driven by its operations and service activities—fast, consistent food delivery and customer convenience—crucial in a fast-food context. Cost control is achieved through standardized processes, economies of scale, and strategic supplier relationships. Recent menu innovations focusing on healthier options and premium offerings such as McCafé require adjustments in the value chain. For instance, sourcing higher-quality ingredients or developing specialized training for staff enhances service activities, while marketing efforts highlight new product lines.

These changes have also impacted McDonald's traditional value chain activities. The inclusion of healthier menu options means sourcing fresh, organic ingredients and possibly redefining supplier relationships. Enhancements to in-store amenities like Wi-Fi and interior refurbishments also entail technological investments and facility upgrades, emphasizing the need for a more diversified value chain. The shift from a solely cost-focused operation to a customer experience-oriented approach reflects a strategic evolution aligned with contemporary consumer preferences.

The triple-bottom-line approach, exemplified by Interface, Inc., extends corporate sustainability beyond profit, incorporating environmental and social dimensions. This framework resonates across industries, especially in sectors like renewable energy, manufacturing, and retail, where environmental impact and social responsibility are increasingly scrutinized. For example, renewable energy companies adhering to triple-bottom-line principles promote perceptions of corporate responsibility, attracting environmentally conscious consumers and investors (Elkington, 1994).

The sharing economy model disrupts traditional industries by optimizing underutilized assets. Industries like hospitality, transportation, and even real estate are prime candidates for such innovation. Uber, for instance, revolutionized urban transportation by leveraging existing personal vehicles for ride-sharing, disrupting traditional taxi services. Similarly, Airbnb leverages private homes for short-term rentals, transforming the hospitality landscape.

Other sectors with potentially surplus assets include commercial real estate, where vacant office or retail space can be leased temporarily; unused machinery in manufacturing; or unused parking facilities in urban centers. These assets, if effectively tapped into through sharing models, could reduce waste and generate additional revenue streams, further supporting sustainability and cost efficiency. The evolution of shared economy platforms indicates that many industries can benefit from rethinking asset utilization, aligning economic gains with environmental and social sustainability goals (Botsman & Rogers, 2010).

In conclusion, understanding the relative influence of firm and industry effects, the strategic application of Porter’s forces, value chain optimization, and innovative business models like the sharing economy are vital in modern competitive analysis. Firms that leverage their unique resources while adapting to changing industry dynamics and societal expectations will position themselves for long-term success.

References

• Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.
• Chen, S., & Xu, Y. (2020). The impact of e-commerce on retail profitability: A comprehensive review. Journal of Retailing and Consumer Services, 55, 102-110.
• Elkington, J. (1994). Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(2), 90-100.
• Lashinsky, A. (2012). Inside Apple: How America's most admired--and secretive--company really works. Hachette Books.
• Porter, M. E. (1980). Competitive Strategy. Free Press.
• Chen, S., & Xu, Y. (2020). The impact of e-commerce on retail profitability: A comprehensive review. Journal of Retailing and Consumer Services, 55, 102-110.
• Rogers, D. (2016). The Sharing Economy: The Future of Business Models. Harvard Business Review.
• Botsman, R., & Rogers, R. (2010). What's Mine Is Yours: The Rise of Collaborative Consumption. HarperBusiness.
• Elkington, J. (1994). Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(2), 90-100.
• Porter, M. E. (1985). Competitive Advantage. Free Press.