Using the 5 forces Identify long-run industry profitability Identify pressures on profits Identify ways to alter industry structure Identify attractive positions 15.834 Marketing Strategy
Using the 5 Forces • Identify long-run industry profitability • Identify pressures on profits • Identify ways to alter industry structure • Identify attractive positions 15.834 Marketing Strategy
From 5 Forces to Non Cooperative Game Theory If you are so smart why aren t others? What would you pay to get into an attractive industry? We need to know what the entry barriers are and who will get over them Game Theol RBV 15.834 Marketing Strategy
From 5 Forces to Non Cooperative Game Theory • If you are so smart why aren’t others? • What would you pay to get into an attractive industry? We need to know what the entry barriers are, and who will get over them. Game Theory RBV 15.834 Mar keting Strateg y
USing Non-Cooperative Game Theory Forecast industry evolution Decide on entry/exit Identify critical competitors Decide which game you want to play 15.834 Marketing Strategy
Using Non-Cooperative Game Theory • Forecast industry evolution • Decide on entry/exit • Identify critical competitors • Decide which game you want to play 15.834 Mar keting Strateg y
Horizontal Trading Relationships: Forecasting Industry Evolution with Increasing returns Increasing returns are the tendency for that which is ahead to get further ahead and for that which loses advantage to lose further advantage small differences in initial conditions can cause large differences in long-run outcomes ex: Network effects can dwarf product effects. "Better products can lose out to products that fit better 15.834 Marketing Strategy
Horizontal Trading Relationships: Forecasting Industry Evolution with Increasing Returns • Increasing returns are the tendency for that which is ahead to get further ahead, and for that which loses advantage to lose further advantage • small differences in initial conditions can cause large differences in long-run outcomes ex: Network effects can dwarf product effects. “Better” products can lose out to products that “fit better”. 15.834 Mar keting Strateg y
For vertical Trading Relationships: From Non-Cooperative to Cooperative Game Theory Which game do we all want to play? How can we avoid killing each other? In the long run we would expect the most efficient industry structure-that which creates most value in total. Splitting the pie is another question 15.834 Marketing Strategy
For Vertical Trading Relationships: From Non-Cooperative to Cooperative Game Theory • Which game do we all want to play? • How can we avoid killing each other? In the long run we would expect the most efficient industry structure - that which creates most value in total. Splitting the pie is another question. 15.834 Mar keting Strateg y