Week 1
1. Rumelt, Richard P. (2003), What In the World is Competitive Advantage?
There is still not one answer for what competitive advantage engages. Researchers have different
definitions and views. (1) There is confusion or disagreement about how value is to be conceptualized
or measured (gains to trade, value to owners, increases in value to owners); (2) There is confusion
about the meaning of rents; (3) There is disagreement or confusion about the appropriate use of the
opportunity cost concept; (4) There is disagreement or confusion about whether competitive advantage
means winning the game or having enough distinctive resources to maintain a position in the game.
2. Besanko, David, Dranove, David and Shanley, Mark (2000),
When we look at strategy choices, we must look further than accounting numbers. The best alternative
opportunity for i.e., stock or investment funds also has to be encountered in the economic cost. This
article also looks at the price strategy looking at demand, supply and imperfect competition. The
maximum price a firm can offer his products is based on the demand curve. When marginal revenues
are higher than marginal costs, the firm can lower prices, when marginal revenues are lower than
marginal costs, the firm should raise the prices and when they are equal the firm can’t do anything.
3. Conner, Kathleen R. (1991), A Historical Comparison of Resource-based Theory and Five
Schools of Thought within Industrial Economics:
This article looks at the resource-based view compared to IO. Resource-based view looks at the
physical, human and reputational capital of a firm. There are five theories that have a strong influence
in the historical development of IO. (1) neoclassical theory, which implies perfect competition. (2)
Bain-type IO, positioning school - which focusses on restraining production output by monopolism,
sees SCP-model as SP model and looks at entry and mobility barriers. (3) the Schumpeterian, which
implies that competition has to be created by innovational and new ways of rivalry. This is risky and
expensive. (4) Chicago theory, implies that advantages can be generated by productivity and
efficiency in production and distribution. (5) The transaction cost theory, looks at finding the break-
even point where the production has its
best and highest marginal benefit per
product. This is only possible with: asset
specificity, possible small number
transactions and imperfect information.
The IO theories focus on the products and
the way they are differentiated in the
market, where RBV looks at how the
differentiation is obtained and maintained
by the firm. However, they both look at
above normal returns (CA). The RBV
sees these above normal returns as rent,
rather than IO retain monopoly exercise.
RBV also supports the Schumpeterian
theory.
, 4. Ghemawat, Pankaj (1999), Strategy and the Business Landscape
This article looks into the five forces model of Porter which includes: (1) degree of rivalry, (2) the
threat of entry, (3) the threat of substitutes, (4) buyer power and (5) supplier power. Ghemawat
challenges Porter by suggesting a sixed force. The value net which implies the (6) complementors in
the industry. Other companies or services to combine your work with, so you can enhance the position
in the market. It is the combination of very different expertise’s to increase the demand for a specific
product or service.
Additional
Assumptions perfect competition:
- Large numbers: large number of buyers and sellers, firms are price takers.
- Homogeneity: standardized products.
- Mobility: resource are mobile, free entry and exit.
- Rationality: buyers and sellers have complete info. - Transaction cost: transactions are costless.
1. Rumelt, Richard P. (2003), What In the World is Competitive Advantage?
There is still not one answer for what competitive advantage engages. Researchers have different
definitions and views. (1) There is confusion or disagreement about how value is to be conceptualized
or measured (gains to trade, value to owners, increases in value to owners); (2) There is confusion
about the meaning of rents; (3) There is disagreement or confusion about the appropriate use of the
opportunity cost concept; (4) There is disagreement or confusion about whether competitive advantage
means winning the game or having enough distinctive resources to maintain a position in the game.
2. Besanko, David, Dranove, David and Shanley, Mark (2000),
When we look at strategy choices, we must look further than accounting numbers. The best alternative
opportunity for i.e., stock or investment funds also has to be encountered in the economic cost. This
article also looks at the price strategy looking at demand, supply and imperfect competition. The
maximum price a firm can offer his products is based on the demand curve. When marginal revenues
are higher than marginal costs, the firm can lower prices, when marginal revenues are lower than
marginal costs, the firm should raise the prices and when they are equal the firm can’t do anything.
3. Conner, Kathleen R. (1991), A Historical Comparison of Resource-based Theory and Five
Schools of Thought within Industrial Economics:
This article looks at the resource-based view compared to IO. Resource-based view looks at the
physical, human and reputational capital of a firm. There are five theories that have a strong influence
in the historical development of IO. (1) neoclassical theory, which implies perfect competition. (2)
Bain-type IO, positioning school - which focusses on restraining production output by monopolism,
sees SCP-model as SP model and looks at entry and mobility barriers. (3) the Schumpeterian, which
implies that competition has to be created by innovational and new ways of rivalry. This is risky and
expensive. (4) Chicago theory, implies that advantages can be generated by productivity and
efficiency in production and distribution. (5) The transaction cost theory, looks at finding the break-
even point where the production has its
best and highest marginal benefit per
product. This is only possible with: asset
specificity, possible small number
transactions and imperfect information.
The IO theories focus on the products and
the way they are differentiated in the
market, where RBV looks at how the
differentiation is obtained and maintained
by the firm. However, they both look at
above normal returns (CA). The RBV
sees these above normal returns as rent,
rather than IO retain monopoly exercise.
RBV also supports the Schumpeterian
theory.
, 4. Ghemawat, Pankaj (1999), Strategy and the Business Landscape
This article looks into the five forces model of Porter which includes: (1) degree of rivalry, (2) the
threat of entry, (3) the threat of substitutes, (4) buyer power and (5) supplier power. Ghemawat
challenges Porter by suggesting a sixed force. The value net which implies the (6) complementors in
the industry. Other companies or services to combine your work with, so you can enhance the position
in the market. It is the combination of very different expertise’s to increase the demand for a specific
product or service.
Additional
Assumptions perfect competition:
- Large numbers: large number of buyers and sellers, firms are price takers.
- Homogeneity: standardized products.
- Mobility: resource are mobile, free entry and exit.
- Rationality: buyers and sellers have complete info. - Transaction cost: transactions are costless.
