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Chapter 8. Appropriating the Returns to ... > Obtaining Control over Resources

Obtaining Control over Resources

You can appropriate the returns to introducing your new product or service by obtaining control over the resources needed to create the product or service.[3] Suppose, for example, that you want to go into the business of smelting aluminum. Because aluminum smelting depends on access to bauxite, which can be obtained in only certain mines, you might seek to obtain control over the mines that produce bauxite.

How can you obtain control over resources, such as bauxite? You could buy up all of the sources of supply. If you purchased all of the bauxite mines in the world, then no one else could gain access to the bauxite necessary to make aluminum. Of course, in many cases, such as this one, the acquisition approach to obtaining control over resources is very costly. Bauxite mines do not come cheap. An alternative approach would be to obtain control through contracting. For instance, you could sign a contract with all of the bauxite mines to buy up their bauxite. By contracting for the bauxite, you could keep others from gaining access to this source of supply, and so prevent them from capturing the returns from this opportunity.


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