Foundations of Corporate Success: How Business Strategies Add Value

By John A. Kay | Go to book overview

CHAPTER 20

The Nation

While the larger part of this book is concerned with the implications of my analysis for business policy, in this chapter I consider the relationship between business and public policy. What are the connections between competitive advantage in the firm and competitive advantage in the national economy? The free market system succeeds when the pursuit of the former secures the latter, but there is no identity between the two. I begin by looking at the reasons why markets may fail to produce efficient outcomes. I identify these as inequality of information, externalities, and the existence of natural or strategic monopoly. When these conditions exist, firms may add value for themselves but that added value may represent an appropriation of existing value rather than an increment to national wealth. I go on to explore some implications for business ethics, suggesting that modern corporations have both classical and relational contracts between themselves and the communities in which they operate, and that business behaviour is governed by the terms of both types of contract.

In the second part of the chapter I look at the competitive advantages of nations themselves. The basic sources are the same. The competitive advantage of nations rests on the sustainable, appropriable distinctive capabilities of architecture, reputation, and innovation, and on the ownership of strategic assets. Sometimes the value of these distinction capabilities is effectively appropriated by individual corporations, often it accrues for the benefit of the population at large. But as with firms, the pursuit of national competitive advantage relies on the identification of distinctive capabilities, the choice of appropriate markets, and the maximization of the value of these capabilities. This has implications for the industrial policies countries should pursue. Wish-driven strategies are as unproductive for countries as for firms, and effective industrial policies are directed to the reinforcement of strength rather than to compensation for weaknesses.

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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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