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Running head: 5.2 Module Review Assignment

Homework Assignment 5.2

Module Review Questions (PLG1) Weekly Assignment

Submitted to the Worldwide Campus

In Partial Fulfillment of the Requirements

For MGMT 436 Course

Jim Warnick

Embry-Riddle Aeronautical University

January 2018
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Running head: 5.2 Module Review Assignment

1. Discuss how collusion can have a negative effect as a business strategy. Give an actual

example of a collusion strategy used by a company.

“Collusion is the active cooperation of firms within an industry to reduce output and raise

prices in order to get around the normal economic law of supply and demand. This

practice is usually illegal.”

In 2009 a South African Competition Commission gathered six major oil companies

together to investigate there collusion of keeping diesel prices at the highest pricing

relative to what the South African Department of Energy had established. The companies

were accused of collaborating with each other by providing there sales information so that

they could equally match each other’s prices. As the investigators began digging into the

collusion it was found that this had actually stared as far back as the 1980’s. All the

companies had been providing information through the South African Petroleum Industry

(SAPIA) and they had also been able to manipulate the fuel market allowing them to be

able to keep out any other competitors. The commission’s investigation had determined

that each company had been performing illegal activities and they were each fined

penalties that were equal to ten percent of their annual profit turnover.

2. Describe how a firm develops a business strategy when in a hypercompetitive industry.

“Hyper-competition according to Concepts in Strategic Management, International

Management, and Business Policy is when an industry situation in which the frequency,
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Running head: 5.2 Module Review Assignment

boldness, and aggressiveness of dynamic movement by the players accelerates to create a

condition of constant disequilibrium and change”.

In order for a firm to be successful they need to become more flexible with their strategic

management efforts. They need to develop their 5 year plans but also realize that in order

to keep up with competition they will need to be able to make adjustments at a moments

notice as the market for products changes. They need to have personnel and capabilities

and resources that enable them to quickly move from thought to thought or from idea to

idea for product development and sales.

3. Explain how a company can have a successful business strategy based on both the cost

leadership and differentiation strategies.

“Cost Leadership, A low-cost competitive strategy that aims at the broad mass market”.

“Differentiation Strategies, A competitive strategy that is aimed at the broad mass market

and that involves the creation of a product or service that is perceived throughout its

industry as unique”

Companies that are capable of working in the grey area between both cost and

differentiation can be successful as long as they continue to monitor their efforts. If a

company would lean towards either direction it could create a failure point. If there is

weak competition this can also cause failure and vulnerabilities within the company. If

there is a strong market cost can be a great advantage. It allows the company to repurpose
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Running head: 5.2 Module Review Assignment

that money and redirect it into product and aid in an increase in cost leadership. A

company should always consider taking on any differentiation opportunity that they are

presented with that does not drive cost. Aside from that they should always be ready to

pick and choose the ultimate competitive advantage and look into what tradeoffs may be

associated with them.

4. Evaluate the differences between cooperative and competitive strategies. Give specific

examples of each type in your analysis.

“Cooperative Strategy, It is a strategy that involves working with other firms to gain

competitive advantage with in an industry”.

“Competitive Strategy, is a strategy that states how a company or business unit will

compete in an industry”.

Both Competitive Strategy and Cooperative Strategy are found to be very proficient.

Some of the items that one would look at would be Integration, Mutually Beneficial,

Number of Sources, and Decision Making Factors.

Integration:

Integration of the company’s major processes would not be a cooperative advantage but

would be a competitive advantage

Integrating the company’s Information systems could be and would be for cooperative

and conditional for Competitive.

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Running head: 5.2 Module Review Assignment

A group effort to deliver to the customer would be a positive for both cooperative and

competitive strategies

Mutually Beneficial:

Relationships would be both Cooperative and Competitive Strategies

Group work to improve efficiencies would not be a Cooperative advantage but would be

a Competitive advantage.

Number of Resources:

Working with numerous providers of products would be cooperative but would not be

competitive

Reducing the number of providers would not be cooperative but would be competitive.

Decision Making:

Price is the major factor would be cooperative but not competitive.

Quality as the major factor would be both cooperative and competitive.

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Running head: 5.2 Module Review Assignment

References

Campbell N. (2002). An international approach to organizational buying behavior.

Porter, M.E. "Competitive Strategy". New York: The Free Press, 1980.

Porter, M.E. "The Competitive Advantage of Nations". New York: The Free Press, 1990.

Porter, M.E. "Competition in Global Industries". Boston: Harvard Business School Press, 1986.

Ward, A. (2012, October 25). Shell and BP accused of collusion in South Africa. Retrieved

February 11, 2018, from https://www.newstatesman.com/business/business/2012/10/shell-and-

bp-accused-collusion-south-africa 25 October 2012

Wheelen, T. L., & Hunger, J. D. (2017). Concepts in Strategic Management, International

Management, and Business Policy. Upper Saddle River, NJ: Pearson Prentice Hall.