Case example 13 (solution):
The inability to capture value Early adopters of a labour arbitrage strategy made great gains because, for a while, the costs of services they offered were lower than any competing alternatives. But as more and more service providers made use of off-shore resources, the cost of services was lowered for everyone. This was great for customers but bad for providers - this distinctiveness was eventually eliminated. Value was created for customers but service providers were not able to keep any of it. This ability of a service provider to keep a portion of any value created is known as ’value capture’. The sourcing strategy was vitally important for fending off competing alternatives. However, service providers who focused solely on this strategy, at the expense of other distinctive capabilities, soon encountered strategic failure in the form ’mediocre performance versus competing alternatives’.