STRATEGIC MANAGEMENT MODULE I. COMPETITIVE STRATEGY
Transcript of STRATEGIC MANAGEMENT MODULE I. COMPETITIVE STRATEGY
STRATEGIC MANAGEMENT
MODULE I. COMPETITIVE STRATEGY
TOPIC 1. INTRODUCTION TO STRATEGIC MANAGEMENT
2Topic Readings
1. Introduction to Strategic
Management
• READING PACKAGE, Chapters 1 and 2.• M. E. Porter (1996)
• Zott & Amit (2010)
Definitions and basic concepts
Strategy and business models
Business model design: an
activity based perspective
Competitive strategies
Strategic interaction
How to anticipate competitors’
behavior
• Ghemawat (2010), Chapter 4
Optional additional readingsJ. Tirole, Industrial Organization, 1989, chapter 11.R. Gibbons, A Primer in Game Theory, 1992
Strategic behavior and
competitor profiling
Cases
T-Mobile • e-Learning-UnimibGap • READING PACKAGE, CAP. 23
OutlineFirms need analytical tools to elaborate effective strategies
Two analytical tools for crafting and executing strategy: game theory
competitor profiling
Both tools account for strategic interaction
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Two approches to strategic interactionGame theory:
a theory of human behaviour in strategic settings
firms as rational agents that maximize their objectivefunction in interdependence conditions
Competitor profiling:
Observation of competitors’ actual behavior – what are their objectives, beliefs and organizational practices?
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Anticipate and preempt competition
‘when you know yourself but do not know your enemy, you have equal possibilities to win or to loose ’
Sun Tsu, The Art of War
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Game theory: basic notions
A strategic game is the context where interaction among agents takes place
A strategic game draws on a set of rules which participants are assumed to comply with.
In a strategic game the utility or payoff of each participant depends on its action and the action of other participants
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Core notions: rationality Each player evaluates all possible consequences of her own actions
Assigns a consistent set of preferences over the consequences of actions
And chooses the actions which maximize her objective function
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Representation of strategic games set of strategic choices
outcomes (payoffs)
information set:
Representation of strategic games
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Static and dynamic gamesStatic games: one period
Dynamic games: sequential games and repeated games
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Static games One period
Participants make their choices simultaneously (strategicinteraction once for all)
No player can observe and react to the actual choices made by other players before making her own move
Players’ payoffs depend exclusively on the combination of strategies chosen in the same period.
Static games of complete information: each player’s payoff function is common knowledge
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Static games: normal or reduced form
player 2
L2 R2
player 1 L1 4,4 4,4
R1 0,1 6,3
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Dynamic gamesRepeated games
A constituent one-shot game (e.g., the previous game) Repeated All participants know the outcome of previous repetitions
before starting a new round of the game.
Sequential games, sequential choices. One-shot games: e.g., a chess game, a football match …Multiperiod games: e.g., Formula 1 Championship or the
UEFA Champions League
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Dynamic games: extended form(with perfect information)
1
L1 R1
2
L2 R2 L'2 R'2
(0,1) (2,-1) (-2,-1) (1,0)
Information set: the information each player has on her position in the game Player
Player
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Dynamic games: reduced form
player 2
L2 L2 L2R2 R2L2 R2R2
Player1 L1 0,1 0,1 2,-1 2,-1
R1 -2,-1 1,0 -2,-1 1,0
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Dynamic games with imperfect information
1
L1 C1 R1
2
L2 R2 L2 R2 L2 R2
(0,1) (2,-1) (-3,-2) (0,-3) (-2,-1) (1,0)