Lecture 1

Competitive advantage: Performing better than industry averages

Ability to respond quickly is a C.A

Opportunity/Threat- External environment trend that can impact firm’s performance

favourably/unfavourably respectively

Different countries have different institutional environment that shapes up O/T

Lecture 2

Incentive capability:

Zone between 7.5 and P is Negotiation zone/ Producer surplus

Scarcity value = Value created when in transaction – Value created when not in transaction
Case 1: (2.5 lakh in this case, building a superior product and WTP going higher than money spent in
innovation)

If competitors are able to replicate innovators product at 7.5 lakh, then scarcity value is 0.

Sustainability of SV is necessary

Samsung: Unparalleled Chips with high value, dual advantage of cost leadership and differentiators

If you can use society resources more effectively and create more value for users, that’s the game.
Leveraging society resources. Increase benefits for customers or reduce costs by increasing
efficiencies or do both

Weakness - Value destroying resource

Scope:
Vertical scope – Existing In the value chain

Product/Horizontal scope

Geographic scope

General resource – Newell, Specialized – Honda (Engine)

Transferring is explicit knowledge, Sharing in Passive

How do we organize firm such that we motivate human resources?

Lecture 3
If a competitive advantage is to form the basis of corporate success, it must also be appropriable.
Appropriability is the capacity of the firm to retain the added value it creates for its own benefit.
However, who benefits from this added value depends on the decisions of the firm, the structure of the
market in which it operates, and the sources of the added value itself.

ONGC: Quasi Integration, Hybrid integration

Why theory: 1. It makes certain predictions possible to make choices called decisions

2. Help us organize data into frameworks

If I can buy an asset, It is not rare. So we can decide to make or Buy.

Googly question: If an asset is source of competitiveness, it should follow VRIO

Fallacy of broken window: Broken window good for economy

Basis of decision making is Economic costs and not accounting profits.

Co-specialised Resources: An asset is said to be cospecialized when it relies upon

another asset in order to succeed. Both assets are so highly specialized that they are
dependent upon each other: one is of no use for anything else or without the other.

Align goals of agents and firms to reduce agency costs

Influence costs: Explained in PPT

Buy: Avoidance of cost, efficiency

Run through chapter 3

Lecture 4
Common Law vs Code Law: Body of Contract Law has innumerable cases with new judgements so
Law is continuously changing (Common Law).

Design attributes: Coordination is critical

Protocol based coordination

Use Management Feat: Management command. What can’t be achieved through contracts, can be
achieved through governance and hierarchy

You can’t prevent an employee from working for a different competitor. (Can’t Handcuff)

Understand context

IP protection is more important for companies with cutting edge tech, rare tech

Coordination and Leakage are threats that arise due to transaction raising costs.

Transaction costs:

3 things needed for Transaction: Search and information for best supplier; Bargaining time and
efforts; Monitoring and Enforcement

Integration strategy: how much to make or Buy.

If Gov costs go high, Buy. If transaction costs go high, Make.

Source of transaction costs: Relationship specific, Holdup and Quasi Rent

Relationship specific costs: Assets that can’t be deployed anywhere else once relationship is
established. Earlier one could transact with anyone, but after investing in assets, time, skills related
to one firm, bargaining power decreases phenomenally

Quasi rent = Excess Profit in a transaction (let’s say 1 st) over another transaction (2nd). Bargaining
power of 1st transaction firm.