Boeing and Walmart Case Studies

1. Indicate whether each statement below is true or false, and briefly justify your answer.

a) Boeing Company can increase the threat from supplier power if it vertically integrates with aircraft parts suppliers for its construction of Boeing 787 Dreamliner.

True – Vertical integration is desirable when one firm’s investment in relationship specific assets has a significantly greater impact on the value created in the vertical chain than does the other firm’s investment. The threat of forward integration by suppliers, if credible, can enhance supplier power because either buyer’s are forced to accept the high input or risk direct competition from suppliers (Besanko, Dranove, Shanley, & Schaefer, 2013).

b) Value creation by a firm is all about enhancing benefits to its customers even if it may cost higher to do it.

False – Value is created when a producer combines inputs and purchased components to make a product whose perceived benefit exceeds the cost incurred in making the product. Therefore, the value created is the difference between the perceived benefit and cost, and is expressed as per unit of the final product (Besanko, Dranove, Shanley, & Schaefer, 2013).

c) If you manufacture a search good, you should position yourself as a cost leader to sustain competitive advantage.

True – A search good is one whose objective quality attributes the typical buy can assess prior to the point of purchase. The potential for differentiation lies largely in enhancing the products observable features. But if buyers can discern among different offerings, so can competitors, which raises risk that the enhancements will be imitated (Besanko, Dranove, Shanley, & Schaefer, 2013).

d) When Countdown provides specific ...

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...registered to a firm is their trademark and cannot be altered or modified without the prior permission of the owner. Once the legal restriction is secured, it becomes exclusive and therefore holds a sustainable amount of value. The firm that possesses this asset must be able to utilise it effectively in order to gain economic profit. Legal restrictions act as a strong barrier to any firms who want to imitate a market leader and enter the market using similar tactics as the incumbent. If deployed effectively, legal restrictions can be highly effective in gaining sustainable competitive advantage as well as allowing a market leader to hold its place in the market (Besanko, Dranove, Shanley, & Schaefer, 2013).

References

Besanko, D., Dranove, D., Shanley, M., & Schaefer, S. (2013). Economics of Strategy. United States of America : John Wiley & Sons Inc.