Cite JOURNAL ARTICLE
Die Wahl der Leistungstiefe als Element der Wettbewerbsstrategie
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 116 (1996), Iss. 1 : pp. 59–83
The usual approaches towards make-or-buy decisions neglect the role of business strategy. In the paper a theory of business strategy is developed, focussing on the acquisition of industrial suppliers to achieve internal production. This may allow a firm to commit to an aggressive business strategy increasing its market share and its profit. The extent to which acquisition costs are sunk determines the strength of the commitment. If these sunk costs are sufficiently high, competitors will be prevented from integrating themselves and consequently they will have to put up with market share losses. Contrary to common arguments, inflexibility caused by sunk costs turns out to be an advantage in the context of competitive strategy analysis.