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[G5] Growth through Entry (Using Game Theory to understand Rivaly (Types…
[G5] Growth through Entry
Using Game Theory to understand Rivaly
Game Theory
The formal analysis of conflict and cooperation among intelligent and rational decision makers
Being useful for analyzing competitive exchanges
limited number of competitors and alternatives
Known objectives and payoffs
Types of games
Multi-period repeated games
Multi-period sequential games
Single-period simultaneous move games
the idea of Look forward and reason backwards
By looking at the potential payoffs, the potential strategic moves of different actors, and then reasoning backwards, we can make a forecast or prediction of how a competitive game is likely to play out
An Entry Game
2 firms deciding whether to enter a new market
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2 firms deciding whether to invest in one of two opportunities
An investment game
Decision tree is one way of illustrating the interchange in a competitive game overtime
Payoff Matrices
Map out alternative and playoff
Identify dominant strategies
Look for the way to shift dominant strategy
Module Lessons
entry strategies take in to account rivalry
accommodate or deter them even before entry occurs
competitive actions will elicit different competitive responses by different competitors
Play the game right now
Game currently structured
How might we restructure the game
Entry Strategies
Post-entry
cooperation strategies
create a repeated gain
Tit-for-tat strategy
restructure the industry
broad strategic actions
acquiring
non-market strategies
enhance your current line of business
fighting strategy
raise your market share
High Network externalities
Price cutting
Niche position
Intensive advertising
Pre-entry
Accommodation Strategies
commit to a position that will soften competition after entry
make commitments limiting your ablity
Deterrence Strategies
reduce the quality of information on costs and demand
make retaliation more credible
erect structural barriers
How to identify potential rivals
Outside firms
Firms where value chain overlaps
Firms in the same vertical industry chain
Economic motivations
Firms with relevant capabilities and underutilized resources in stagnant or declining industries
Where are they from?
Recent entrants to related industries
Firms in same industry but in other geographic markets
Firms who have minority ownership stake of existing rivals
Entry and Rivals
rivalry
effect on each competing firms' competitive positions
five forces analysis
competitor analysis
game theory
Growth through Entry
new products and services to existing markets where its compete.
offering existing products and services into markets new to the organization
Using game theory to understand cooperation
The prisoner's dilemma
Problem:Both sides have the benefits to cut their price
Solutiions
SIgnaling
Commitment
When both decrease their price,they couldn't make the highest profit
We learned that we can be more effective and productive through cooperation
