Question

Competitive strategy as we have understood it so far, has followed a two step process; the first step was creating value defined as the difference between the customer's willingness to pay (based on their desires) and the cost of supplying the good (based on the firm's value chain choices), and the second step of splitting this "value" created between the customer (appropriated as consumer surplus) and supplier firm (appropriated as profits). Our current module explored some ideas on conditions that drove the appropriation of value in a competitive environment. A recurrent theme in value appropriation is that asymmetry in bargaining power between the players drives who appropriates how much of the value created in a competitive situation, with above average profits flowing to the party with the asymmetry in its favor. For this module test, write up a one page note on the kinds of asymmetry in play in each of our lecture sessions - structural economies of scale, resource based view of strategy, customer captivity and the many contrived barriers to entry. A good way to keep this simple will be to write this down as a table with the following columns (with an example): Party 1 (Positive) : The Supplier Party 2 (Negative) : The Customer Type of asymmetry : Monopoly Power with effective barrier to entry Source of asymmetry : Economies of Scale with minimum efficient scale a significant proportion of market size discouraging new entrants. The same can also be described as an asymmetry between the firm and its potential competitors (even if it is secondary) and listing them both as separate line items is okay. Submit the assignment as an editable Word document in Blackboard like you did for the first module.

Answer 1

The historic and legal analysis of the labour market developed in Chapter 1 provided understanding of the nature of this market. The latter only exists because, beforehand, an asymmetry in the appropriations of production factors belonging to the individuals involved exists. Some possess capital and labour and are economically independent as individual producers (independent workers) or employer-producers. Others, bereft of capital, in order to live, are obliged to sell their labour power to employers on whom they depend economically. Labour is therefore a market in which the balance of power between the parties is fundamentally asymmetric, hence its intrinsically conflictual nature. The latter has made legislators aware that the great principle of freedom of choice, underlying the legal theory of contracts, could not be applied to most workers with respect to the relation that binds them to their employers. Hence, the whole objective of labour law (Ch. 1, §1.3) has consisted in providing a legal framework for an employer’s de facto power over employees. This has resulted in the characterisation through jurisprudence of the employment contract, whose spirit, so jurists say, is one of a relation of economic and legal subordination by which an employee exchanges a freedom against a security. On the one hand, employees give up the freedom of their availability and the use of their time as they deem fit to place themselves under the authority of an employer, who will supervise them in the execution of the work to be performed.

The historic and legal analysis of the labour market developed in Chapter 1 provided understanding of the nature of this market. The latter only exists because, beforehand, an asymmetry in the appropriations of production factors belonging to the individuals involved exists. Some possess capital and labour and are economically independent as individual producers (independent workers) or employer-producers. Others, bereft of capital, in order to live, are obliged to sell their labour power to employers on whom they depend economically. Labour is therefore a market in which the balance of power between the parties is fundamentally asymmetric, hence its intrinsically conflictual nature. The latter has made legislators aware that the great principle of freedom of choice, underlying the legal theory of contracts, could not be applied to most workers with respect to the relation that binds them to their employers. Hence, the whole objective of labour law (Ch. 1, §1.3) has consisted in providing a legal framework for an employer’s de facto power over employees. This has resulted in the characterisation through jurisprudence of the employment contract, whose spirit, so jurists say, is one of a relation of economic and legal subordination by which an employee exchanges a freedom against a security. On the one hand, employees give up the freedom of their availability and the use of their time as they deem fit to place themselves under the authority of an employer, who will supervise them in the execution of the work to be performed. On the other hand, employees benefit from the guarantee of a unit wage, agreed from the outset, for the period of time during which they remain under the authority of the employer, independently of how the latter then exploits the production performed; that is,