FTMBA2024_II Economics of Corporate & Competitive Strategy

Overview
This course looks into the logic and consequences of strategic decisions which aim at advancing a firm's market position. We employ analytical methods of Industrial Organization, modern game theory and strategic management theory to answer questions such as: What competitive strategies may firms employ to compete successfully?, How do these strategies affect market outcomes (prices, firm profits, innovation etc.)? More precisely, we examine whether and when market entry will be profitable by identifying the mechanisms of strategic competition to deter or accommodate market entry and expansion of newcomers. A central integrating idea is anticipating the response of other actors in the market environment and recognizing that often a firm's profits depend on the actions of other firms. Finally, we will consider whether certain competitive strategies raise antitrust concerns.


Outline
1. Fundamentals
2. Nature of Competition
3. Competitive Strategies and Competition Policy

Markets are a fundamental economic mechanism of allocating scarce resources in an economy. Competition is an important driving force for the efficient allocation of resources. In competitive markets the purchasing prices of goods are determined by the interaction of market supply and market demand. Market supply results from the independent decisions of firms whose managers aim to maximize economic profit by producing and selling the optimal amount of a good at the cost minimizing use of input factors (such as capital and labor). Market demand is the result of the independent decisions of individual consumers who maximize their net benefit from consuming the produced goods. Market power, externalities, informational deficiencies, and strategic behavior of market participants may impair the functioning of markets.

A core determinant of competitive intensity is the number of players actually competing with each other. Whenever the number of interacting players is small – a market situation we call “competition among the few” (oligopoly) – their decisions become “interdependent”. The choice of action of one player than depends on the chosen actions of the others and vice versa. This strategic interaction allows players to behave strategically by influencing others through actions favourable for the strategic firm. In the presence of strategic interdependence, you should apply the key strategy rule of looking ahead and reasoning back. Put yourself in the shoes of the other players in your strategic market environment (e.g. competitors, suppliers, buyers, government), anticipate their most likely actions and reason back to design your game plan. The course draws on advanced microeconomics, game theory, and strategic management theory to distil concepts and tools for the business strategist to support the business organization in its endeavour to establish and maintain an advantage over competitors.

We will introduce you to the Strategic Environment Framework and to industry and competition analysis as the main tool for conducting situational analysis. You will learn:

• how firms in their competitive concurrence create market supply,
• how structural forces shape firms’ price and quantity decisions, and
• how firms create value and position themselves within the arena of markets,
• to analyzewhereandwhento compete, in particular how to distinguish attractive from unattractive markets,
• to identify and explore fundamental changes in the market environment (e.g. the emergence of new, disruptive technologies),
• to think more deeply about appropriate strategic and tactical moves, and
• howto compete strategically.

Course Pack Other material will be uploaded to mywhu.

50% in-class exam

30% group assignment(s)

20% pre-class online exam

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