AEM 322 – Midterm 2
Prof. Aija Leiponen
1.) When do complementary assets contribute to the sustainability of a business model?
According to Afuah-Tucci, there are two things that determine that determine the extent
in which a firm can profit from their invention, imitability and complementary assets.
Complementary assets are all capabilities (other than imitability), apart from those of the
technological invention itself, that the firm needs to exploit. These are, but not limited to, things
such as brand name, manufacturing, marketing, distribution channels, service, reputation,
installed base of products, relationships with clients or suppliers, and complementary
technologies. You have to keep complementary assets in the back of your mind when you are
analyzing the sustainability of a business model. Basically when thinking of sustainability, you
are thinking of a way to retain a competitive advantage over competitors. Also, through the
analysis of sustainability based on the two components of complementary assets and imitability,
a firm can come up with different strategies. According to Afuah-Tucci, for instance, if
complementary assets are tightly held and important, and imitability is high, a firm should
implement the team-up strategy in which multiple firms can pool their complementary assets
together to maintain a competitive advantage over their competitors.
2.) What exactly are “revenue models” when we discuss business models? Why are they
difficult to create for some types of Internet business models? Discuss in the light of an
example (of your choosing).
When talking about revenue models when discussing business models, one is following
how a firm generates revenue from their product. Examples include generating revenue based on
commission, advertising, subscriptions, subscribers etc. In the textbook, Afuah-Tucci refers to
this as following the revenue source. However, it is sometimes difficult to create some types of
Internet business models. One example is the firm Adobe. One of their key products is Adobe
Photoshop and the Adobe Acrobat Reader that is apart of Photoshop, which relies on the .pdf
technology (it is a superior image file). Normally, software companies’ revenue model would be
the direct sales of their software. However, in Adobe’s case, they determined that just the sale of
Photoshop would not be sufficient to combat the software giant Microsoft. Luckily, in Adobe’s
case, they assessed the importance of network externalities. They devised a plan in which they
actually gave away part of Photoshop, the Acrobat Reader, to ensure a large user base of the .pdf
formant. Then they can generate revenue from the sales of their software that rely on .pdf files.
3.) What does it mean if we say in the context of industry analysis (Porter’s “5+1 forces”)