The document discusses game theory as a tool for understanding competitors and gaining advantages in business strategy, emphasizing the importance of understanding rivals' motivations, goals, and perceptions. It highlights historical examples from industries like trucking and automotive to illustrate strategic decision-making. The presentation encourages leaders to consider their own strategic image and its influence on competitors, promoting further exploration of game theory in the context of competitive advantage.

1. Game Theory:
Overcoming Rivals and Gaining Advantage
An eCornell webinar
with Prof. Justin Johnson,
Associate Professor of Economics

2. Today’s flow:
1. Poll questions
2. Presentation
3. Q & A

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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