AEM 322 - Midterm 2 - Simon Wong AEM 322 Midterm 2 4/10/08...

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Simon Wong 4/10/08 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”)
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AEM 322 - Midterm 2 - Simon Wong AEM 322 Midterm 2 4/10/08...

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