More from the Author

• Working Paper | HBS Working Paper Series | 2013

  Competing with Privacy

  Ramon Casadesus-Masanell and Andres Hervas-Drane

  We analyze the implications of consumer privacy for competition in the marketplace. We consider a market where firms set prices and disclosure levels for consumer information and consumers observe both before deciding which firm to patronize and how much information to provide it with. The provision and disclosure of information presents tradeoffs for all market participants. Consumers benefit from providing information to the firm, as this increases the utility they derive from the service, but they incur disutility from information disclosure. This in turn benefits the firm providing an additional source of revenue, but reduces consumer demand for the service. We characterize equilibrium information provision, disclosure levels, and prices as a function of the consumer population's valuation for the service, and show that competition has three main effects on the marketplace. First, competition drives the provision of services with a low level of disclosure. Second, competition ensures that services with a high level of disclosure subsidize consumers. And third, higher competition intensity tends to increase the volume of consumer information disclosed by firms. Our findings are particularly relevant to the business models of Internet firms and contribute to inform the regulatory debate on consumer privacy.

  Keywords: Information Acquisition; information disclosure; Online Privacy; Privacy Regulation;

  Citation:

  Casadesus-Masanell, Ramon, and Andres Hervas-Drane. "Competing with Privacy." Harvard Business School Working Paper, No. 13–085, April 2013.

  CiteView DetailsRead Now

  Related

• Article | Strategic Management Journal | April, 2013

  Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models

  Ramon Casadesus-Masanell and Feng Zhu

  This paper provides the first formal model of business model innovation. Our analysis focuses on sponsor-based business model innovations where a firm monetizes its product through sponsors rather than setting prices to its customer base. We analyze strategic interactions between an innovative entrant and an incumbent where the incumbent may imitate the entrant's business model innovation once it is revealed. The results suggest that an entrant needs to strategically choose whether to reveal its innovation by competing through the new business model or conceal it by adopting a traditional business model. We also show that the value of business model innovation may be so substantial that an incumbent may prefer to compete in a duopoly rather than to remain a monopolist.

  Keywords: business model innovation; imitation; sponsor-based business model; strategic revelation; strategic concealment; Business Model; Innovation and Invention; Price; Competitive Strategy; Adoption; Value; Duopoly and Oligopoly; Product; Customers; Market Entry and Exit; Monopoly;

  Citation:

  Casadesus-Masanell, Ramon, and Feng Zhu. "Business Model Innovation and Competitive Imitation: The Case of Sponsor-Based Business Models." Strategic Management Journal 34, no. 4 (April, 2013): 464–482.

  CiteView DetailsFind at Harvard

  Related

• Working Paper | HBS Working Paper Series | 2012

  Business Model Evaluation: Quantifying Walmart's Sources of Advantage

  Humberto Brea-Solis, Ramon Casadesus-Masanell and Emili Grifell-Tatje

  In recent years, the concept of the business model has received substantial attention in the strategy literature, where a number of qualitative approaches to describe, represent, and evaluate business models have been proposed. We contend that while helpful to understand a firm's overall logic of value creation and capture, qualitative methods must be complemented with quantitative analyses. The development of quantitative methods for the study of business models, however, has trailed that of their qualitative peers. In this paper, we develop an analytical framework based on the theory of index numbers and production theory to provide quantitative insight on the link between a firm's business model choices and their ultimate profit consequences. We apply the method to Walmart. Using evidence from annual reports, research papers, case studies, and books for the period of 1972–2008, we build a qualitative representation of Walmart's business model. We then map that representation to an analytical model that quantifies Walmart's sources of competitive advantage over a 36-year period. Although Walmart's business model remained the same during the years of our study, we find that the different CEOs pulled a number of business model levers differently, which partly explains the variation in Walmart's performance throughout the years. Under Sam Walton, the company's performance improved due mainly to the adoption of new technologies as well as low prices obtained from vendors. David Glass's tenure was characterized by business model choices aimed at increasing volume such as building new stores, increasing product variety, everyday low prices (EDLP), and high-powered incentives for store managers. Input and output prices played a smaller role under David Glass than under Sam Walton. Finally, Lee Scott loosened EDLP and modified Walmart's human resource practices by offering better benefits and wages to associates in response to growing social pressure. Overall, our analysis suggests that the effectiveness of a particular business model depends not only on its design (its levers and how they relate to one another) but, most importantly, on its implementation (how the business model levers are pulled).

  Citation:

  Brea-Solis, Humberto, Ramon Casadesus-Masanell, and Emili Grifell-Tatje. "Business Model Evaluation: Quantifying Walmart's Sources of Advantage." Harvard Business School Working Paper, No. 13–039, November 2012.

  CiteView DetailsRead Now

  Related