Strategy Dynamics Through a Demand-Based Lens: The Evolution of Market Boundaries, Resource Rents and Competitive Positions

40 Pages Posted: 19 Feb 2003

See all articles by Ron Adner

Ron Adner

Dartmouth College - Strategy & Management Area; Dartmouth College - Tuck School of Business

Peter B. Zemsky

INSEAD - Strategy; Centre for Economic Policy Research (CEPR)

Date Written: February 2003

Abstract

We develop a novel approach to the dynamics of business strategy that is grounded in an explicit treatment of consumer choice when technologies improve over time. We address the evolution of market boundaries, resource rents and competitive positions by adapting models of competition with differentiated products. Our model is consistent with the central strategy assertion that competitive interactions are governed by superior value creation and competitive advantage. More importantly, it shows how the interplay between improving technologies and consumers' valuation of the resulting performance improvements affects which market segments new technologies are able to enter, how the rents from different types of firm resources change over time, and whether or not markets are segmented according to the classic generic strategies of Cost Leadership and Differentiation. Our focus on consumer choice and value creation complements the traditional focus in the strategy literature on competition and value capture.

Keywords: Technology improvement, product differentiation, disruptive technologies, market segmentation

JEL Classification: L10

Suggested Citation

Adner, Ron and Zemsky, Peter B., Strategy Dynamics Through a Demand-Based Lens: The Evolution of Market Boundaries, Resource Rents and Competitive Positions (February 2003). Available at SSRN: https://ssrn.com/abstract=381260

Ron Adner

Dartmouth College - Strategy & Management Area ( email )

Hanover, NH
United States

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Peter B. Zemsky (Contact Author)

INSEAD - Strategy ( email )

Boulevard de Constance
77305 Fontainebleau
France
+33 1 60 72 4162 (Phone)
+31 1 60 74 5500 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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