Category Archives: Competitive dyn/Game thry

A Modular Smartphone?

Posted on by
Reply

There has recently been some buzz about the possibility of making modular smartphones — hopefully to reduce waste as people upgrade modules instead of the whole phone. Now Motorola has joined the movement with Project Ara. This poses many interesting issues for discussion. As suggested in the WSJ, might Google really be interested in destroying profitability in smartphones to grow the market and enhance ad revenue? For that matter, is this technologically feasible? It implies that components are not strongly co-specialized and can be swapped out easily. Even if so, would the compromises to achieve modularity be acceptable? Articles by Melissa Schilling and Etheraj & Levinthal paper adds an interesting theoretical perspective. Lots to talk about in class…

Contributed by Russ Coff

Baby Click Me One More Time

Posted on by
Reply

Market signals can be rather noisy and firms may over react or miss the signal entirely. In a similar way, the resource based view draws on causal ambiguity as an isolating mechanism — firms may misread noisy observations and imitate the wrong thing. This clip illustrates that problem as a firm ramps up to meet demand triggered by unusual activity on its web page…

Contributed by Russ Coff

Apple’s Addiction to Samsung

Posted on by
Reply

Apple is famous for being secretive about it’s proprietary knowledge. One would think that they would love to stop handing over their most strategic technical knowledge to Samsung, their biggest rival in smartphones. Nevertheless, all existing iOS core processors have been manufactured by Samsung. They just can’t stop themselves — the A7 chip continues the multi-year pattern of outsourcing production of the heart of the iPhone to their chief competitor. Rumors have been flying that Apple is going to switch to a new supplier, TSMC (Taiwan Semiconductor Manufacturing Co). That may still happen in the near future but the fact that Apple could not shake it’s dependence on Samsung quickly despite large investments in TSMC speaks to the extent of Samsung’s manufacturing advantage. This would seem to prompt a nice discussion of capabilities, rivalry, and alliances…

Contributed by Russ Coff

The Problem with Credible Commitment

Posted on by
Reply

Credible commitment sends a valuable signal but can only be achieved at a substantial cost. Unfortunately, that cost can create challenges for implementing different strategies later. A tattoo might be considered one form of credible commitment…

Contributed by Russ Coff

Get Out of Jail Free

Posted on by
Reply

There are many game theory simulations available online to supplement lectures and cases. If you have limited class time or are teaching a distance course, these simulations can be especially valuable because, unlike video lectures or PowerPoint voice overs, these are quite interactive. Here are some examples:

If you really need a video, this one from Greg Mankiw’s page should work. See also the classic Dilbert Prisoner’s Dilemma video.

Contributed by Russ Coff

Oligopoly in the Classroom

Posted on by
Reply

Another 3-E Learning exercise explores market structure through an extra credit scheme. Michael Ryan’s Oligopoly Classroom Experiment allows students to get extra credit for suggesting questions for the next test based on how many questions are submitted. Each student must choose to whether to submit a question related to the topics covered. At the beginning of each class, the instructor informs the students how many total questions have been submitted but does not mention who submitted them. Here is the schedule for extra credit points:

  • If one student submits a question before the deadline, he/she gets 10 points. If two students submit, both get 9 points. If three students submit questions, each get 8 points and so on.
  • If 11 or more students submit questions, none of them receive points.
  • However, if no students submit questions, then every student in the class receives five bonus points.
  • The instructor may also add conditions to this exercise which make collusion more likely or less likely by simulating an increased number of ‘firms’ and an inability to detect when other ‘firms’ change their strategy.

Here is a more detailed writeup from Classroom Expernomics.

Contributed by Michael Ryan

Samsung owns the Android ecosystem?

Posted on by
Reply

Google may have its back against the wall and needs the new Moto X phone to be a big success. They are planning to invest $500M just in marketing the new phone (more than Apple or Samsung). This may be motivated by the fact that Samsung is capturing up to 95% of the profits from the Android ecosystem since it owns the “last mile” where consumers lay down cash for devices. Samsung has recently invested further in their Tizen mobile operating system to keep their options open and solidify their bargaining power against Google (a nice 5 forces example of tapered integration). Google’s battle to remain relevant in the Android ecosystem is a nice update to the mini case posted earlier here on Google’s $12.5B acquisition of Motorola Mobility. Also, based on this review, it appears that they may have created some of the vertical integration value. Here is a demo video for the Moto X.

Contributed by Russ Coff

A Drinking Problem: Pepsi Challenge

Posted on by
1

The 3E Learning site discussed in another post includes a nice writeup on using the classic Pepsi challenge but including generic soda. Here is an excerpt: “In this exercise, student volunteers blindly taste three different soft drinks: Coke, Pepsi, and a store brand. The student then tries to assess which one each drink is. Across several years of performing this, in every semester a majority cannot identify their preferred drink, nor can many identify any of them correctly. After several volunteers make the attempt, the class engages in meaningful conversation about how and why Coke and Pepsi capture so much market share, when their products cost 50% more than store brands.” What, then, is the basis for competitive advantage when imitation is so evident? It’s worth noting that Pepsi did not include generics in the original challenge — why might that be?

Feedback about the exercise (from 3E-Learning)
  • “The soda taste test definitely opened my eyes to realize the importance of branding, marketing, and customer brand loyalty in a business.” Continue reading →

Developer Releases Pirated Game

Posted on by
Reply

Greenheart Games developed a game (Game Dev Tycoon) where the objective is to manage a video game company. However, they did something a little different. They simultaneously released a “cracked” version of the game that was identical except that player’s new products would be pirated. Eventually, the player’s company goes broke since they can’t make any money. Here is their blog post (or pdf in case the site goes dark) describing what happened (e.g., how users of the cracked version complained that they couldn’t win). This is a great vehicle for discussions of ethics, intellectual property, and even game theory. This short video report describes the ploy:

Contributed by Rich Makadok

Fish Story: A common tragedy

Posted on by
Reply

The  tragedy of the commons refers to the inefficient use of a shared resource when individual actors have incentives that are misaligned with the larger community. Classic examples might be a shared pastures or common waters for fishing. Dennis Meadows and John Sterman offer a computer based game that simulates this problem in a fishing setting (Fishbanks: A Renewable Resource Management Simulation). Below is a short video that describes the problem.

Contributed by Russ Coff

Starbucks’ Dual Advantage

Posted on by
Reply

BusinessWeek offers a nice analysis of Starbucks’ decision to lower prices on its premium coffee. Rita McGrath describes the “hourglass economy” as thick markets for low cost and highly differentiated products. Accordingly, Starbucks is keeping prices high for premium drinks in its stores but dropping the price of coffee by 10% to draw in more price conscious consumers. This strategy leverages Starbucks’ lean supply chain operations that give it a very low cost structure despite offering premium products. Ultimately, this puts higher cost rivals at a disadvantage because Starbucks can offer a better value proposition.

Contributed by Russ Coff

Chinese Dilemma: 170 Auto Makers

Posted on by
1

Rose Yu of the WSJ has a nice recent article on the fragmented nature of the Chinese auto market and how this is leading to over capacity in the industry.electriccarconcept[1] Mark Lehrer identifies some nice classroom uses for this article in the WSJ WeeklyReview service. Here is what he suggests:

  • SUMMARY: The US auto industry has long had three big domestic car makers. China has more than 170. Optimistic Chinese auto executives send shudders through the rest of the global auto sector. Industry watchers worry that the world’s No. 1 auto market could soon be awash in overcapacity. That would rev up competition in China and pressure companies here to export more of their cars.
  • CLASSROOM APPLICATION: As a case in industry analysis, excess capacity seems to be an endemic feature of the car industry (related article). As a study in foresight, the question for class discussion is, first, how to deal with the problem in the US, and second, how to brace for the problem furling over from China in a few years.

QUESTIONS: Continue reading →

One Man Band Gets a Poor Score…

Posted on by
Reply

This Pixar short features a battle of two one man bands. They each do things fairly well but profit is limited. Then a talented violinist “makes a new market” and they are left out. The one man bands are a bit like diversified companies – competent but not excelling at any task. A rival with superior but focused capabilities might win over “jack of all trades/master of none” competitor.

Contributed by Elisa Alt

Winner’s curse at Gourmet Adventures

Posted on by
5

Often in M&A, there is a concern that the buyer has overbid – especially when there is competition for the target and the risk of winner’s curse is heightened. In essence, if firms bid based on their “unbiased estimates” of the target’s value, the bids may be normally distributed around the true value and the winner is especially likely to have overbid (cursed). The task then, is to shade one’s bid to avoid overbidding. A standard exercise to demonstrate this phenomenon is to have the students bid on a jar of coins (which I describe as a restaurant chain). This is of special interest in a strategy course since the risk of being cursed is driven by the variance around the valuation (not the mean). Variance, it turns out, is driven by aspects of the target that are hard to value. These include strategic resources, human capital, complementarities, cross business synergies (e.g., layers of coins to reflect different target business units), or any other source of uncertainty. As such, even if the winner’s curse is covered in another course, these elements will be specific to a strategy course. Here are materials needed to run the exercise:

  • Instruction sheet describing the bidding/valuation task (and to submit bids)
  • Spreadsheet to record the results and show a simple estimation method
  • PowerPoint slides to lead discussion
  • 500ml jar with quarters, pennies, and nickels (as shown)

If you teach an online course, there is also a nice online simulation of this at GameTheory.net.

Contributed by Russ Coff

Alaska Gold Mine Exercise

Posted on by
Reply

The Alaska Gold Mine case is my (Mason’s) favorite starter case for undergraduate, MBA, and executive MBA strategy courses. Reprinted here with permission of author Jeffrey Barach along with my PointPoint slides I use to administer the case.

Click to get the:

The video below provides a lot of good fodder to reference back to when doing the exercise. Start the class session by showing the video before doing anything else. Continue reading →

Awareness: See anything unusual?

Posted on by
Reply

Awareness is a critical element of strategy. Have your students count the number of passes made in the video. Then ask if they saw anything unusual. Most will miss the moon-walking bear because they are so focused on the counting task.

 

Contributed by Joan Allatta

Derek Sivers: How to start a movement

Posted on by
Reply

With help from some surprising footage, Derek Sivers explains how movements really get started. (Hint: it takes two.) Through his new project, MuckWork, Derek Sivers wants to lessen the burdens (and boredom) of creative people.

Contributed by Joan Allatta

A New Flight Plan for Japan Airlines

Posted on by
Reply

Here is a mini-case ripped from the headlines. As the article states, “As much as JAL has focused on slashing costs, it has also sought to close the service gap with local rival All Nippon Airways – putting in new seats, revamping in-flight menus and installing electronic toilet seats in some business and first class cabins. That investment underscores JAL’s belief that customers will pay a premium for full-service flights.” You can also find a companion video from CNN here. This is great for an introductory class. Allows discussing all parts of a strategic audit including strategy, performance, resources, and competitive position. Also the right size to introduce case discussion for a group that has never done case analysis and discussion before. So how did Kazuo Inamori help change the culture at JAL: ‘nommunication’. “That is when he unleashed another secret weapon. I brought six cans of beer after these sessions or to people who were working late,” he says. After a beer or two, people opened up and told me their honest opinions.” (see the follow up story and video here)

 

Contributed by Aya Chacar

The CEO who wouldn’t leave

Posted on by
Reply

I found that a recent article in BusinessWeek can be used as an interesting reading to explore power & politics in the context of M&A. The article describes how William Johnson was designated as CEO of Duke Energy after its acquisition of Progress Energy and how he was fired after only two hours. The original M&A agreement included a condition that stated that the CEO of the target (Progress Energy) would be named CEO of the merged company. However, he was fired two hours after the designation and the CEO of the acquirer (Duke Energy) was named CEO of the merged company. I think this article could motivate to further study this acquisition. It seems to be a novel illustration of a hostile acquisition.

 

Contributed by Francisco Morales

iPhone 5 as an Incremental Innovation

Posted on by
Reply

There is much hoopla about the release of each new iPhone but the innovations are, as one would predict, more incremental with each new release. The WSJ recently suggested that this is a good time to sell Apple stock because these incremental changes will allow rivals to catch up. Jimmy Kimmel offers a funny take on it when people perceive greater value added than there really is (he shows them an old iPhone, tells them its the new model, and they coo about how much better it is)…

Contributed by Russ Coff