Part 3 of the pre-work for the strategy course, based on the tram company fictional case study.
Continuing the [bliki]PARTS analysis[/bliki] started in part 2, I now look at Added Values. In [bliki]The Right Game[/bliki] Brandenburger and Nalebuff define Added Value as “the difference between the value created with the player included and the value created by the remaining players when that player is removed”
If we imagine the Biddiford economy without the tram company, clearly the overall income will be reduced by tram company revenues. There will be other effects too – in particular the businesses in Old Orchard Bay (which rely on the tram company as the monopoly source of transport to bring them their customers) are likely to see reduced revenues too. So the added value of the tram company is greater than the tram revenues alone.
Just as the Players analysis suggested that the Old Orchard Bay bars and restaurants were Complementors, and therefore that the tram company should explore strategies that worked to mutual benefit, the Added Value analysis suggests that the tram company should be able to extract more from that relationship – in one sense the bars and restaurants need the tram company more than the tram company needs them.
