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Foundations of Competitive Strategy (Part I)
- 11. Economic Space as an Integrally Connected “Field”
- 18. Cuban Cars
- 19. So what does any of this have to do with strategy?
- 23. Brian Arthur’s “New World”
- 25. Economic Space is not a Field
Editor's Notes
- Wealth is created when men take raw materials and turn them into something people want. The secret to greater wealth creation was improving productivity – specialization of labor. Greater specialization meant people had to trade to get what they needed to survive. Competitive markets which allow people to freely pursue their self-interest are the best way to justly allocate resources and wealth across society.
- Imagine you have a glass bowl with a smooth round bottom and a small hard rubber ball. Equilibrium is achieved when all the forces acting on the system cancel each other out and the system is in balance.
- Field theory – the set of real numbers is defined by the algebraic expressions that connect each point in the field. Every point in the field effects every other point in the field (in the manner of say a gravitational field). Predominant in the natural sciences and mathematics. Economists were desperate in trying to gain recognition as a “real” science. Borrowed the field concept and applied it to the study of economics. The idea of economic engineering. Planned economies were just as good as market-based economies.
- So if economy worked as if people are perfectly rational, it doesn’t matter if people truly are or not.
- Consider … complete the following sentences in your head or on the piece of paper in front of you. Or just skip ahead to the next slide, if you prefer!
- Assume “perfect” competition, general equilibrium, ceritus paribus. Old joke – How many economists does it take to change a light bulb? Unfortunately, many of the business models that are applied and studied (including many in this book) Generic types, portfolio
- We need to identify, communicate with segments of customers. Demand is dynamic. Firms differ in their abilities. Customers (and firms) are not driven purely by maximization. They buy on factors other than lowest price. They may desire relationships with others. Profits are not monopoly based.