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Lecture 13
2.
3.
4.
5.
bargaining power
Suppliers
Intensity of
Competition
Buyers
bargaining power
threat of substitutes
Substitutes
Source: Porter 1979
Customer
Value
captured
Value
created
Price
Firm
Supplier
"Value-based Business Strategy," Brandenburger and Stuart, Journal of Economics & Management Strategy 5:1, 1996, 5-24.
5
Industry average
WTP
P
C
Cost leader
WTP
Consumer Surplus
Consumer Surplus
Firm Profit
P
Firm Profit
C
Industry average
Quality leader
WTP
WTP
P
C
Consumer Surplus
P
Consumer Surplus
Firm Profit
Firm Profit
Efficiency/Cost
(if sustainable)
Innovation (IP, Speed)
8
Why hasnt Huskys strategy been copied? Why does it have the only AMC?
Are the firms culture & values, with focus on neatness & order important?
For industrial products, can often do a WTP analysis like smart buyers!
Sometimes hard to get WTP for intangibles e.g., reducing carbon emissions
Rivals Imputed P*
Husky P
Rivals P
Husky
Rival
Extra
Productivity
Costs
10
Extra
Energy
Costs
Extra
Raw
Materials
Costs
PQ/WTP
Husky
CA
Netstal
Low cost
13
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