1.

Economic rent
Economic rent = AAR/AR
(above average returns divided by average returns)
We have to strive for above average

Above Average returns

Average
returns

Economic
Rent

2. Definitions of strategy
Historical: strategy is warfare, always has a cost
Economic: Search for economic rent we have to strive for above average
Behavioral: Abnormal behavior that adds value, creates abnormal returns.
Search for previously unrecognized patterns (of technology, politics..)
3. The hourglass diagram and the strategic nexus

INTERIOR

at Nexus
strategy
occurs

Value
Chain
Resource Based View
(VRIO)

Capabiliti
es
Resource
Future

Big Deltas - demographic, technological,

socio-cultural,
Macro
EXTERIO
economic,
political-legal, global
Industry
R
Five
Forces
Nexus the point where any force meets and
the point of contact that goes on into the

future. This is where strategy occurs.