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Extra info for Before and after postmodernism: Rabindranath tagore and Art education in Santiniketan
Finally, with dynamic competition, we draw on the Schumpeterian view of competitive advantage, reviewing and highlighting the more recent stream of research on actions and reactions, and Nelson and Winter’s view of evolutionary economics. Chapter 3 explores how a ﬁrm can achieve a competitive advantage over its rivals by understanding its relative market position—the ﬁrst step to understanding the action alternatives available to the ﬁrm. Since a ﬁrm’s relative market position involves understanding the industry structure and dynamics in which a ﬁrm competes, we examine the most popular frameworks in performing an industry analysis, including Porter’s Five Forces and strategic group analyses, which help ﬁrms identify the best competitive positions and proﬁt opportunities in an industry.
The Chamberlin model gives rise to a substantial role for ﬁrm strategy. Patents, trademarks, customer service, reputation, and the like can all be the source of competitive advantage; as will be discussed in the following chapter, these sources of differentiation can all be considered resources in the resource-based view of the ﬁrm. Models of Monopoly or Dominant Firm Another fundamental model within neoclassical economics is the model of a monopolist. In this instance, we have one ﬁrm in the market.
If prices initially exceed marginal cost, so that ﬁrms make a positive economic proﬁt, entry occurs, which then drives down prices. 2 There is a minimal role for ﬁrm strategy within this perspective, other than to avoid, if possible, such ‘‘unattractive’’ markets. However, the model of perfect competition does drive home important lessons on the strength of competitive forces in a free market economy in eroding excess proﬁts and driving out inefﬁcient ﬁrms, particularly in the absence of product differentiation or entry barriers.