Summary: Nvt

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  • 1.1 week 1: The economic foundations of theories in strategy

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  • Business Models /VRC models

    Value, Revenu and Cost structure.

    How do profitable firms make money?

    Firms can make money offering value (functionality) to customers and earn revenues with a (relatively low) cost structure. It is not about factor competition since it is not the same as strategy. It is about the next implementation step: How to apply the developed strategy. Two-test to see if the business model works:

    1. narrative test: does it make sense?
    2. numbers test (hard key facts): "The story you tell, is the product you sell."
  • Limitations of the Neoclassical Model?

    • Firm is treated as a black box
    • Preferences are seen as given
    • Technology are seen as given
    • Therefore there is no room for increasing return.
    • The firm is treated as a unitary agent.
  • The resource-based school of strategy

    1. Prahalad & Hamel (1990) fill the gap of the external environment by viewing the firm's international resources (inside-out).
    2. Strategy as stretch (change the rules of the game).
    3. Resources are the ultimate sources of competitive advantage (heterogeneous resources).
    4. Strategy is therefore about having a clear vision for the future and developing unique resources combinations to realize this vision (strategic intent).
    5. Its focus is on the resources that are employed to produce their products and services.
  • Accounting Profit versus Economic Profit.

    Accounting cost focuses on objective and verifiable numbers and uses historical costs.

    Economic Cost is based on oppportunity costs and the profit that could have been achieved if invested alternatively.


    AP= sales revenues- accounting costs

    EP= sales revenu- (economic costs-accounting costs).


  • 1.3 week 2: The industrial organization perspective and the value-added view

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  • The SCP model (Structure, Conduct, Performance)

    Structure --> Conduct --> Performance.

    Structure: stronger forces lead to more competitive pressurce, identification through 5-forces (Threat of entry/substitutes, bargaining power suppliers/ nuyers and internal rivalry).

    Conduct: strategies used to secure position (generic strategies: cost leadership/ differentiation/ focus).

    Performance: outcome of succesfully implemented and managed strategy.

  • Porter's 5 forces model:

    Model to shape the CA. It shows the profitability of a firm in an industry.

    • Threat of entry, substitutes, compatitive rivalry, bargaining power suppliers, bargaining power buyers.

    After this analysis, strategist can identify a companyés strengths & weaknesses and establish an action plan to position the company, influence industry competition and exploit Industrial change.

  • What is important for Strategic Groups?

    1. Size of the firm
    2. Numbers of firms in the SG's
    3. Time of entrance --> Firs mover is cheaper (first mover advantage)
    4. Efficiency, people skills, mgt and operational excellence.
  • Zero sum games versus win win games:

    In the CGT and economic theory, a zero-sum game is a mathematical representation of a situation in which a participant's gain (or loss) of utility is exactly balanced by the losses (or gains) of the utility of the other participant(s).

    If the total gains of the participants are added up, and the total losses are extracted, they will sum to zero. A win-win game is a game which is designed in a way that all participants ca profit from it in one other by working with eachother.

  • PARTS model (Brandenburger & Nalebuff)

    The dynamic version of the CGT/ Value added view.


    • Players
    • Added-value
    • Rules
    • Tactics
    • Scope
  • 1.5 week 3: The Ricardian perspective and the RBV

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  • Ricardian (Efficiency) Rents

    It is all about the basic assumptions of RBV, it is about the Factor Market Competition; the input of the Black Box. Land Labor and capital. Labor & Capital (Value created) are variable in Perfect Condition and Land (Value appropriated) is in fixed supply which is heterogenous. Land is the main source of CA.
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