Chapter 8 - Value Creation Models and Competitive Strategy

Question 1

Which value creation types have been introduced by Stabel and Fjeldstad, 1998?
Which is the most common in the digital economy

Answer 1

1. Value chain (was already existing)
2. Value shop
3. Value network (most common in digital economy)

Question 2

What is a value chain?

Answer 2

It is a linear chain consisting of:
1. logistics in (retrieving raw materials)
2. processing products
3. logistics out (delivery to market)

Question 3

What is the formula for the costs in a value chain?

Answer 3

C = m + p + s + A/n
where:
- m: materials needed
- p: production costs
- s: delivery to the market costs
- A: common activities costs
- n: number of products produced

Question 4

What is the acronym defining the platform necessary in CBPP?
What is in addition required in order to be allowed to modify the software?

Answer 4

Free and Open-Source Software (FOOS) is a common element in such production method.

The collaborators receive a so-called license, which enable them to start working on the project.

Question 5

Which are the most popular examples of Free and Open-Source Softwares?

Answer 5

1. Android
2. The internet

Question 6

What is a value shop?
Which is the most important market force in these value models?
Give two examples of value shops.

Answer 6

It is a problem-solving organization. The revenue model is based on how good and fast they solve specific problems.

The most important market force is their reputation, which is in turn determined by the knowledge and expertise of employees in specific fields of study / problems.

Examples: universities, consultance firms.

Question 7

What is a value network and which are its components (4)?

Answer 7

A value network is a business mediating between the members of a network.

The four components are:
1. An organization which provides services
2. Users in the network
3. Services enabling interactions among users
4. Internet access

Question 8

What is the fundamental mechanism behind the value network?

Answer 8

The network effects: Basically, the value created by the network depends not only on the quality of the product, but mainly on how present users stimulate others to join the network. –> The more members, the bigger the benefit.

Question 9

Among the most market capitalized companies, which can be considered as examples of value networks?

Answer 9

Facebook, Google, Amazon.

Question 10

Which is the costs formula in value networks? What changes in the digital economy?

Answer 10

C = m + A/n

where:
- m: direct costs
- A: common costs
- n: number of users in the network

Since m in digital economy is zero, the total costs only depend on the number of users in the network. This means that C = A/n.

Question 11

How do cooperation and collaboration take place in a value network?

Answer 11

Cooperation in value networks can be:
- vertical among the three layers (transport, user equipment, application)
- horizontal within the same layer
Competition on the other hand takes place among companies within the same layer, hence it cannot be vertical.