Answer to Question (a)
Value in business is typically the worth of a firm’s product or service, calculated roughly as the difference between what the firm’s customer is willing to pay and the opportunity costs of the firm’s surplus. Increasing the different between supplier’s opportunity costs and the customer’s willingness to pay is the only way for a firm to create to value (Brandenburger and Stuart, 1996).
GE is banking on creating this value using at least three different strategies. First, the firm is working on a differentiation strategy - delivering a valuable product/service to its Big-Data heavy industry customers that can truly capitalize on real-time, fast analytics of complex and large data sets. It is also creating value because of its investment in product and process innovation (for example, by investing in more R&D for their new software ventures). The product, service and process innovation that will result will help GE widen the gap between what their customers are willing to pay, and what the opportunity cost will be for their suppliers, which is what Brandenburger and Stuart (1996) suggests a firm to do. GE has first mover’s advantage and its strong alliances always the company to strengthen its offerings on a global, cross-industry, technologically advanced way which will be hard to compete with. Value is created when the value of the offering (in this case, GE’s platform-based products and services) is greater than the difference in value and price (Value - Price) of the next best alternative (Anderson, Narus and Narayandas, 2009, page: 6). Companies like Nest, Telenor are also offering solutions but there does not yet seem to be an offering similar to the scope and scale of GE.
Second, GE is also lowering the opportunity cost for its suppliers. For example, Amazon already has the infrastructure and big data expertise, but GE’s domain knowledge and R&D capabilities, along with the economies of scale that will emerge from GE’s...