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Value-based Business Strategy

Adam M. Brandenburger and Harborne Stuart ()

Journal of Economics & Management Strategy, 1996, vol. 5, issue 1, 5-24

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. Copyright 1996 The Massachusetts Institute of Technology.

Date: 1996
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