This course provides a conceptual framework for thinking strategically about business decisions. Interactions between the firm and parties external to it are examined through the lens of game theory. Business is viewed as a dead serious game played between a firm, its customers, its suppliers, its substitutors, and its complementors. There are two dimensions of interaction in this game. Along the vertical dimension are the firm’s customers and suppliers – players with whom the firm transacts. Along the horizontal dimension are its substitutors and complementors – players (other firms) with which the firm interacts but does not usually transact. A firm’s share of the value created by players in a game of business depends on the players’ added values, the rules of interaction, the tactics employed, and the exploitation of links to other games.

The framework is based on ideas underlying game theory, ideas such as recognizing interdependencies among players, getting away from the win-lose mindset, the importance of added value of a player, anticipating other players’ reactions to one’s own actions. A large number of cases and other applications, including several from the information technology sector, demonstrate the usefulness of this framework in thinking about how to change the game to one’s advantage.

Although the emphasis in this course is conceptual rather than quantitative, number-crunching is required for gleaning qualitative insights from many of the cases. Classes will be a mixture of lectures and case discussions. You should read the case(s) and other reading materials assigned for each class and be prepared to discuss them. You will be asked to submit three or four written case analysis as homework.

The following written home assignments will be graded:

Note: the first three assignments are worth 4% each. Assignment 4 carries a weight of 8%.

Grades will be based on:

Class Participation 30%
Written Case Analyses 20%
Final Examination 50%

Class Outline (cases are in italics)

Mindset, Map, and Method of Changing the Game
Mindset: "Coopetition"
Map: "Value Net"
Method: "PARTS"

Read chapters 1 & 2, Brandenburger and Nalebuff (BN)
"Its Only a Game," The Economist, June 15, 1996.
"Making Game Theory Work in Practice," WSJ, Feb. 20, 1995.

H.A. 1: Submit "A Value Net Exercise"

Definition of Value
The Added Value Principle

Read "Value-based Business Strategy" by Brandenburger and Stuart
chapters 3 & 5, BN

H.A. 2: Submit Harnfischeger Industries: An added value exercise

Changing Added Values

Read chapter 5, BN

"Brand-name B-Schools: Partnering with Start-ups for Revenue and Reach"
AACSB: The International Association of Management Education

New Blood in a Dying Business

Changing the Players

Read chapter 4, BN

H.A. 2: Submit Analysis of Judo Economics

"The Season of Upstart Startups" Business Week, Aug. 31, 1992.

Read chapter 6, BN

"GM to Offer 'Loyalty' Coupons to Existing Owners," WSJ, Jan. 5, 2000

Changing the Rules

Read chapter 6, BN

"Going, Going, Gone...Sucker! Business Week, Mar. 20, 2000

Using Tactics to Change Perceptions

Read chapter 7, BN

Bundling

"Strategy and the New Economics of Information," by Evans and Wurster

Changing the Scope

Read chapter 8, BN

H.A. 4: Submit "Changing the Game Exercise"

Read chapter 9, BN