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Value-based Business Strategy

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  • Adam M. Brandenburger
  • Harborne W. Stuart

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.

Suggested Citation

  • Adam M. Brandenburger & Harborne W. Stuart, 1996. "Value-based Business Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 5-24, March.
  • Handle: RePEc:bla:jemstr:v:5:y:1996:i:1:p:5-24
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