Managerial Economics Problem-Solving in a Digital World

This chapter is the first of two chapters relating to business strategy and covers the most fundamental aspects in terms of strategic planning and positioning. The starting point is a discussion of the concept of competitive advantage, and how this relates to value creation. Different types of competitive advantage, based on costs and benefits, are discussed, and these are related to market positioning, targeting and segmentation. The relevance of price elasticity is explained in the context of positioning and competitive advantage. Various forms of integration are discussed, in terms of vertical, horizontal and diversification aspects. The nature, costs and benefits of each of these forms is explained. Recent trends in diversification are discussed, along with empirical studies. As with other chapters, case studies are vital in order to illustrate the management principles; in this case, three prominent tech firms are discussed in terms of their strategy development since their origins: Apple, Netflix and Tesla. Although all of them are high-cap tech firms of global reach, they each have quite different prospects.