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Transaction costs
Markets are not free, they have costs. Should be compared to alternate costs
•search costs - cost of finding someone to have a contract with - time consuming
• negotiating costs
• monitoring costs - cost of monitoring and understanding deliverables
• enforcement costs - cost of lawsuits etc that are necessary
Risk and insurance costs - costs associated with mitigating risks
Sustaining advantage
Divided into requirement for imitation and isolating mechanisms.
Identification - the firm must be able to identify rival firms competitive advantage.
Incentive - need to believe that you can earn rewards by copying advantage. Deterrence - make competitor believe they won't make money. Pre emotion - occupying all niches to scare off competitors.
Diagnosis - must be able to diagnose what gave them advantage.
Resource aqusition - must be a me to acquire the necessary resources and capabilities to copy.
Reasons for competitive advantage
Cost - cheaper goods than competitors
Differentiation - different or better products than competitors
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