Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview

CHAPTER 8

Strategic Assets

Some competitive advantages are based not on the distinctive capabilities of firms, but on their dominance or market position. These are strategic assets for the firm concerned. Strategic assets are of three main types. Some companies may benefit from a natural monopoly. They are established in a market which will not readily accommodate more than one firm. In some other markets, incumbent firms have already incurred many of the costs of supply, but entrants have not. In these the cost structure of firms may give them a competitive advantage. Still other firms benefit from market restrictions which are the product of licences and regulation. What distinguishes all these from true distinctive capabilities is that any other firm which had entered the industry, or had already made that expenditure or held that licence, would have enjoyed the same competitive advantage.

Firms which benefit from strategic assets are generally engaged in activities where government regulation is an important influence on business behaviour. Around 40 per cent of European business is in industries which are owned by government, extensively regulated by government, or which mostly sell to government. Sometimes the government creates, or reinforces, strategic assets; at other times, or at the same time, the state may limit the firm's ability to add value from them. The establishment and exploitation of strategic assets is often restricted by regulatory and anti- trust policies. In the final section of the chapter I outline the main rules which govern European companies.

Distinctive capabilities enable companies to produce at lower cost than their competitors or to enhance the value of their products in ways that put them ahead of their rivals. Distinctive capabilities are the product of the organization or the firm itself--its architecture, its reputation, or its success in innovation. Yet some firms enjoy an advantage over their potential competitors even though there is nothing they can do which these other firms, if similarly placed, could not do equally well. These may be firms which have a licence which is not available to other firms, or they may be firms which are

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Foundations of Corporate Success: How Business Strategies Add Value
Table of contents

Table of contents

  • Title Page i
  • Foreword iii
  • Preface vi
  • Contents xi
  • List of Figures xiii
  • List of Tables xiv
  • List of Tables xv
  • I - Corporate Success 1
  • Chapter 1 - The Structure of Strategy 3
  • Chapter 2 - Adding Value 19
  • II - Business Relationships 31
  • Chapter 3 - Co-Operation and Co-Ordination 33
  • Chapter 4 - Relationships and Contracts 50
  • III - Distinctive Capabilities 63
  • Chapter 5 - Architecture 66
  • Chapter 6 - Reputation 87
  • Chapter 7 - Innovation 101
  • Chapter 8 - Strategic Assets 113
  • IV - From Distinctive Capabilities to Competitive Advantage 125
  • Chapter 9 - Markets 127
  • Chapter 10 - Mergers 144
  • Chapter 11 - Sustainability 160
  • Chapter 12 - Appropriability 181
  • Chapter 13 - The Value of Competitive Advantage 192
  • Added Value Statements 211
  • V - Competitive Strategies 219
  • Chapter 14 - Pricing and Positioning, 1 221
  • Chapter 15 - Pricing and Positioning, 2 235
  • Chapter 16 - Advertising and Branding 251
  • Chapter 17 - Vertical Relationships 267
  • VI - The Strategic Audit 283
  • Chapter 18 - The Industry 285
  • Chapter 19 - The Firm 302
  • Chapter 20 - The Nation 320
  • VII - The Future of Strategy 335
  • Chapter 21 - A Brief History of Business Strategy 337
  • Chapter 22 - Conclusion 364
  • Value of the Ecu 369
  • Glossary 371
  • Bibliography 377
  • Index of Companies 395
  • General Index 399
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