Game Theory for Business: Overcoming Rivals and Gaining Advantage

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The application of game theory in business is a natural, as it serves to answer the central question “What are my opponents thinking and what is their next move?” Chess masters know how to think a few moves ahead, and put themselves in the shoes of their rival.

The game theory approach in business can give you a clear advantage and position you for growth in highly competitive markets. In this one-hour webinar, you’ll learn to:

Get inside the motivations and strategies of your rivals
Exploit their weaknesses and bring more value to your business proposition
Identify concepts for maximizing the size of the piece of the pie you grab in business dealings
This discussion is tailored for CEOs, execs, VPs, upper-level management and anyone involved in competitive analysis and overall business strategy.

About Prof. Johnson
Prof. Justin Johnson received his PhD from MIT and is an associate professor of economics at the Samuel Curtis Johnson Graduate School of Management at Cornell University. He has written extensively on real-world applications of economics and game theory, teaches in Cornell’s Executive MBA program, and is the faculty author of eCornell’s online certificate program Business Strategy: Achieving Competitive Advantage.

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Game Theory for Business: Overcoming Rivals and Gaining Advantage

  1. 1. Game Theory: Overcoming Rivals and Gaining Advantage An eCornell webinar with Prof. Justin Johnson, Associate Professor of Economics
  2. 2. Today’s flow: 1. Poll questions 2. Presentation 3. Q & A
  3. 3. What is Game Theory?  A tool for understanding and influencing your environment  A simple goal: increase your payoff  A few key ideas:  “Complementors” and competition  Power at the bargaining table does not just come from how big you can make “the pie”  Understanding your rivals—today’s focus!
  4. 4. Understanding other Players  You need to understand what motivates others  Understanding other players let you:  Predict what they are more likely to do  Influence what they are likely to do  Secure better outcomes for yourself
  5. 5. The Importance of Understanding Others  The less-than-load (LTL) trucking industry in 2001  LTL players provide small shipment capabilities—much needed at the time  Recent consolidation and investment had made future prospects look good  Significant entry barriers compared to full- load  LTL looked good—until someone entered
  6. 6. The Importance of Understanding Others  In 2006, Collins and Aikman (C&A) stopped delivering parts for Ford’s hot Fusion automobile  Ford threatened litigation, but soon rewarded C&A with a more lucrative contract  Why did this happen?  C&A understood game theory better than Ford
  7. 7. Questions for Competitor Analysis  What do other players want?  Money? Fame? To be the biggest?  How do they believe they can achieve it?  What is their view of the world and how it works?  What resources do they have?  What are they capable of?  What do they think you might do?
  8. 8. Being the Biggest  In 2012, GM regained the mantle of global market share leader  In the past they did this by cutting prices on cars so much they were unprofitable  Former VP Bob Lutz: “There is absolutely nothing to be gained by being the world’s biggest. I tried to tell them…but they just couldn’t do it.”
  9. 9. Being the Biggest  It’s not just GM that wants to be the biggest  Toyota has made this its goal in the past  Airbus has accused Boeing of risking industry profits by trying to be the biggest  What do you do if your rival wants to be the biggest (even at the expense of profits)?
  10. 10. vs.  In 2005, eBay made a move against Craigslist  What does eBay see when it looks at Craigslist?  What might have been eBay’s plan?  But…what does Craigslist see when it looks at eBay?
  11. 11. How Others See You  Just as important as understanding  others is understanding how others see you  What strategic posture are you projecting in your market?  Are you the tough player?  Are you the non-threatening player?  Are you the team player?
  12. 12. How Others See You  Will being the “tough” player work for you?  Microsoft and Intel in the 1990s pulled it off, and Apple did more recently  But can you do that?  Maybe a different posture is better for you  Either way, know that the actions you take today influence how other players see you tomorrow
  13. 13. Back to Bob Lutz: Being the Biggest  Maybe Bob Lutz has it wrong?  How might rivals behave differently if they thought you were focused on being #1?
  14. 14. Recap: Understand Your Rivals  What motivates them?  How do they think they an achieve their goals?  What are they capable of?  What do they think you will do?  Consider these questions when making your own strategic moves
  15. 15. Recap: Understand How Your Rivals See You  Every action you take contributes to your “strategic image/posture”  How your rivals see you influences how they react  Think carefully about how your moves today’s influence how your rivals see you tomorrow
  16. 16. We’ve Just Scratched the Surface  There’s much more to Game Theory and Business Strategy  If you’re interested, consider my eCornell Series entitled Business Strategy: Achieving Competitive Advantage.
  17. 17. Grow Expertise From Within Equip your leaders and managers with MBA-level, project-based, actionable learning in over 45 courses and 200+ topics on leadership, marketing, strategy, sales, and project execution. www.ecornell.com/goredshift • Business Strategy: Achieving Competitive Advantage • High-Performance Leadership • Data-Driven Marketing • Marketing Strategy • New Media Marketing • Project Leadership • Management Reporting: Systems and Strategies • Sales Leadership Sales & Growth-Focused Content with Real World Application

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