VALUE-BASED BUSINESS STRATEGY

This paper offers an exact definition of the value created by firms to gether with their suppliers and buyers. The ''added value'' of a firm is similarly defined, and shown under certain conditions to impose an upper bound on how much value the firm can capture. The key to a firm' s achieving a positive added value is the existence of asymmetries bet ween the firm and other firms. The paper identifies four routes (''val ue-based'' strategies) that lead to the creation of such asymmetries. Our analysis reveals the equal importance of a firm's supplier and buy er relations. Cooperative game theory provides the underpinnings of th e analysis.