Classroom Companion: Business

 
Chapter 7 · Production Models

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© The Author(s), under exclusive license to Springer Nature 
Switzerland AG 2021
H. Øverby, J. A. Audestad, Introduction to Digital Economics, 
Classroom Companion: Business,
https://doi.org/10.1007/978-3-030-78237-5_8
103
Value Creation 
Models and 
Competitive 
Strategy
Contents
8.1 
 Introduction – 104
8.2 
 Value Chain – 105
8.3 
 Value Shop – 106
8.4 
 Value Network – 108
8.5 
 Competitive Forces – 111
8.5.1 
 Porter’s Five Forces – 111
8.5.2 
 Porter’s Five Forces Applied 
to the Digital Economy – 112
8.6 
 Competition, Cooperation, 
and Coopetition – 116
8.7 
 Conclusions – 119
 References – 121
8

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104
8
 
n Learning Objectives
After completing this chapter, you should be able to:
5
Identify whether an enterprise or business sector is a value chain, shop, or 
network, or a combination of these.
5
Understand the concepts competition, cooperation, and coopetition in the 
digital economy.
5
Use Porter’s five forces model in strategic analysis and planning.
8.1 
 Introduction
There are several models explaining how value is created within a company. The 
classical and perhaps most influential paper concerning the strategy of industrial 
companies was written by Michal Porter in 1979 (Porter, 
1985
). Porter’s model was 
developed for analyzing the industrial company’s conversion of raw material into 
final tangible products sold to consumers. These companies are categorized as 
value chains (
7
Sect. 
8.2
) because the production follows a linear chain of trans-
formations. In 1998, Stabell and Fjeldstad published a paper proposing two addi-
tional types of companies using completely different ways to produce their product: 
value shops (
7
Sect. 
8.3
) and value networks (
7
Sect. 
8.4
) (Stabell & Fjeldstad, 
1998
). This chapter discusses and compares all three value creation models and 
provides a broad overview of how the business strategies are different in the three 
value creation models.
Most companies in the digital economy are value networks. The value network 
is closely related to multisided platforms (MSPs) as discussed in 
7
Chap. 
10
. The 
following sections briefly review all three value models to show the differences 
between them, however, with emphasis on the value network. The value models 
presented in this chapter are supplemental to the production models presented in 
7
Chap. 
7
—production models and value models describe different aspects of the 
business operations of a company.
Competition is closely related to value creation. Competitive forces acting upon 
a company producing digital goods are considered in 
7
Sect. 
8.5
, while 
7
Sect. 
8.6
 
discusses different aspects of competition and cooperation in the digital economy.
As most economic models, these models are only crude but useful approxima-
tions of reality. They are useful in the sense that they identify some issues that mat-
ters to fully understand the roots of value creation and competition. Or as the 
British statistician George Box reminds us in an aphorism attributed to him: “…all 
models are approximations. Essentially, all models are wrong, but some are useful. 
However, the approximate nature of the model must always be borne in mind” 
(Box & Draper, 
1987
).