At the heart of any successful business model is a set of customers who value and will pay for something the firm has to offer. This is the served market. The business model, and the business itself, should be defined by a statement of the value provided by the product or service offering of the firm. This statement is the value proposition.
Would you like to own a billion-dollar business? The answer depends on who you are and what else you’re doing with your time and money.
The classical economic perspective holds that perfectly competitive markets are characterized by undifferentiated products sold based only on price. Any departure from such a characterization is viewed as evidence of an imperfect market. This view of markets has given rise to strategic thinking that focuses on the identification of market imperfections and the creation of structural barriers to market entry and the creation of supply-side competitive advantage.
Imagine that you work for the Chief Executive Officer (CEO) of Coca-Cola. He asks you for an opinion on a recommendation by the company’s Chief Marketing Officer (CMO) to raise their advertising budget from $3.2 billion to $3.5 billion. Should Coke spend an additional $300 million on advertising? The Chief Financial Officer (CFO) is opposed, saying the money would be better spent elsewhere.
The differences in the performance of Apple and Amazon versus Radio Shack, Toys-R-Us, and Blockbuster in the same economic environment raise the question of what made their fate so different. Why would a cash machine like Blockbuster go under while a thousand-dollar investment in Apple in 2008, at the beginning of the great recession, would be worth more than $7000 in 2018? Toys-R-Us, an established, innovative retailer, fell apart in this period. Meanwhile, a thousand-dollar...
