A Demand Based View of Sustainable Competitive Advantage

48 Pages Posted: 20 Jan 2005

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: September 2004

Abstract

We develop an approach to analyzing the sustainability of competitive advantage that emphasizes demand-side factors. We extend the added-value approach to business strategy by introducing an explicit treatment of how firms create value for consumers. This allows us to characterize how consumer heterogeneity and marginal utility from performance improvements on the demand-side, interact with resource heterogeneity and improving technologies on the supply-side. Using this approach, we address a variety of questions including whether technology substitutions will be permanent or transitory; the sequence in which new technologies attack different market segments; how rents from different types of resources change over time; whether decreasing marginal utility and imitation give rise to similar rent profiles; the extent of synergies within a firm's resource portfolio; the emergence of new generic strategies; and the conditions that support strategic diversity in a market. Our focus on consumer utility and value creation complements the traditional focus in the strategy literature on competition and value capture.

Keywords: Technology trajectory, strategy, competition, decreasing marginal utility, demand heterogeneity, added value, resource rent dynamics, disruption, substitutiion, resource portfolios

Suggested Citation

Adner, Ron and Zemsky, Peter B., A Demand Based View of Sustainable Competitive Advantage (September 2004). Available at SSRN: https://ssrn.com/abstract=651184 or http://dx.doi.org/10.2139/ssrn.651184

Ron Adner (Contact Author)

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

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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