BUS 640 WEEK 6,
Game Theory and Strategic Behavior. Suppose that GE is trying to prevent Maytag from entering the market for high efficiency clothes dryers. Even though high efficiency dryers are more costly to produce, they are also more profitable as they command sufficiently higher prices from consumers. The following payoffs table shows the annual profits for GE and Maytag for the advertising spending and entry decisions that they are facing.
Based on this information, can GE successfully prevent Maytag from entering this market by increasing its advertising levels? What is the equilibrium outcome in this game?
Suppose that an analyst at GE is convinced that just a little bit more advertising by GE, say another $2m, would be sufficient to deter enough customers from buying Maytag, thus, yield less than $0 profits for Maytag in the event it enters. Suppose that spending an extra $2m on advertising by GE will reduce its expected profits by $1.5 m, regardless of whether Maytag enters or stays out. Would this additional spending on advertising achieve the effect of deterring Maytag from entering? Should GE pursue this option?
Sustainable Competitive Advantage. Describe the circumstances under which a firm chooses a low-cost strategy to attain sustainable competitive advantage. What about the situations when a differentiation strategy is chosen? Provide specific real world examples.
Week 6 Final Paper
Focus of the Final Paper
Research a specific company of your choice and identify some of the managerial decisions that were made over time and in response to changes in its market or competitive environment. Use the Ashford University Online Library and web-based sources for your research. At least three external scholarly sources must be used. Address all of the following areas:
Describe the company and provide a brief history of its operations. Find or use graphs to illustrate its financial performance over the years.
Identify any sources of risk or uncertainty in its operations. Do the financial reports indicate risky or uncertain activities or changes to the economic environment that ultimately appear to have affected the company’s financial outcomes? Be specific.
Are there any government regulations that have affected this company’s operations domestically or abroad? Explain.
Describe the inputs that are used in this company’s production function and identify any challenges to securing these inputs.
Determine if the company has introduced new products in existing markets or created new markets over time. What is the impact on its finances?
Determine if the price of its products increased or declined over time and analyze the reasons for price fluctuations. Study the demand elasticity for its products and discuss the availability of close substitutes for its products. How does that affect pricing decisions?
Analyze the company’s profitability. Identify the economy or industry influences on its costs, operations, and profitability.
Describe the competitive environment in which the firm operates, the distribution of market power, and the strategic behavior of the firm and its competitors. Apply your knowledge of the theory of this company’s market structure. How does the company make pricing and production decisions? Is your observation supported by the theoretical models? Refer to the financial reports for illustration.
Identify any non-price competitive strategies that the company might be engaging in? Provide specific examples.
Evaluate if the company made any mistakes in its decisions over time, and recommend any changes or improvements for the future operations. Refer to the financial reports when making specific observations or recommendations.
Use economic language and demonstrate your understanding of the concepts and theories of this course.