Decision Making View
- basics
- Scarcity
- Tradeoffs
- Consumer Choice
- how can I receive the best value for my resources (money mostly)?
- production decisions
- (business) how can I best provide value to my customers?
both in consumer choice and production decisions tradeoffs play a key role.
Behavior View
satisficing behavior: people lack information, skills and time to make optimal decisions, they make decisions that are satisfactory
Herbert A Simon: Bounded Rationality example hiring decisions: I stop hiring, when I found a “good” person, not the best person
the stakeholders of a business try to advance their own interests. Goals and decisions in companies are influenced by politics, where stakeholders from coalitions, negotiate, defend their interests…
Richart M. Cyert and James G. March: Behavioral Theory of the Firm
what stakeholders contribute to the organization depends on what they expect to get in return (salary, job-related training, networks, …)
Organizations can only survive if there is an equilibrium between stakeholders’ contributions and their expected returns, as incentives to make these contributions
Chester Barnard: Barnard-Simon Theory of Organizational Equilibrium
Innovation view
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producer surplus/rent vs consumer surplus/rent
- Iphone X production cost: 350, selling price 1.000
- Apple made 650 profit per phone
-
producers were prepared to pay 1.500
- these producers have a surplus of 500
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producers only produce products with a selling price greater than the production price
-
customers only buy products with a lower selling price than the value they receive from the product
Innovation is the implementation of creative ideas for (sustainable) win-win situations between the stakeholders of a company.
Innovations overcome tradeoffs trough creativity! Having the cake and eating it too!