Ability to capture the value depends on the perceived bargaining power

$\text{Value Captured}=\text{Price}-\text{Costs}$

But what determines the Price and Costs?

The price for which the exchange takes place, is the price that provides the best value for money because Customers select products that offer the best value for money across products addressing given need.¹

Hence, the price is influenced by the ability of a company to creates more value than other companies.

Value creation happens through Valuable and Supported by Organization resources and the value is superior due to Rare and Difficult to Imitate resources.

The Cost is determined the same way as Price with the shift of the company being the customer and seller being the company’s suppliers.

Because of the nature of customer comparing products between companies, and companies comparing offers between suppliers, the determinants of the Value Capture can be reduced to perceived bargaining power.

Footnotes

1. This does not mean that the price will be as high as possible while maintaining the best value for money across products. Companies does not maximize price but profit, which is a function of price and volume and in specific cases lowering the price increases volume more than the price decrease ultimately yielding increased profit. ↩