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Value‐based Business Strategy

Author

Listed:
  • Adam M. Brandenburger
  • Harborne W. Stuart

Abstract

This paper offers an exact definition of the value created by firms together with their suppliers and buyers. The “added value” of a firm is similarly defined, and shown under certain conditions to impose an upper bound on how much value the firm can capture. The key to a firm's achieving a positive added value is the existence of asymmetries between the firm and other firms. The paper identifies four routes (“value‐based” strategies) that lead to the creation of such asymmetries. Our analysis reveals the equal importance of a firm's supplier and buyer relations. Cooperative game theory provides the underpinnings of the analysis.

Suggested Citation

  • Adam M. Brandenburger & Harborne W. Stuart, 1996. "Value‐based Business Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 5-24, March.
    • Handle: RePEc:bla:jemstr:v:5:y:1996:i:1:p:5-24
    DOI: 10.1111/j.1430-9134.1996.00005.x
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    References listed on IDEAS

    as
    1. Louis Makowski & Joseph M. Ostroy, 1991. "The Margin of Appropriation and an Extension of the First Theorem of Welfare Economists," UCLA Economics Working Papers 629, UCLA Department of Economics.
    2. Judith R. Gelman & Steven C. Salop, 1983. "Judo Economics: Capacity Limitation and Coupon Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 315-325, Autumn.
    3. Kreps, David M., 1990. "Game Theory and Economic Modelling," OUP Catalogue, Oxford University Press, number 9780198283812.
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