Lecture 5_Competitive Dynamics_Post (1)

Lecture 5_Competitive Dynamics_Post (1) - Anticipating...

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Anticipating Competitive & Cooperative Dynamics
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Prisoner’s Dilemma Player 2 Player 1 Deny Confess Deny Confess P1 P2 30 30 P1 P2 0 40 P1 P2 40 0 P1 P2 10 10
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Prisoner’s Dilemma Player 2 Player 1 Deny Confess Deny Confess P1 P2 30 30 P1 P2 0 40 P1 P2 40 0 P1 P2 10 10
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Business is War and Peace Cooperation in creating value; Competition in dividing it up Not sequences of war  peace  war … It is often simultaneously war and peace “You have to compete and cooperate at the same time” Ray Noorda, former Novell CEO & President
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Cooperating Cooperation: Increase the size of the pie But problems can arise when parties try to divide the pie up! Competitors can also be your complementors Auto row Movie studios and videos
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The Game of Business Must look ahead Predict competitor responses Not win-lose No hard and fast rule book People change the game Success comes from playing the right game
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Cooperating
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The Value Net Customers Firm Suppliers Competitors/ Substitutors Complementors Source: Adam Brandenburger and Barry Nalebuff, Co-opetition
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Power of Complementors Relative concentration: Greater concentration leads to higher power Relative buyer or supplier switching costs High switching costs leads to higher power Asymmetric integration threats Can you eliminate the complementor by doing the job yourself? Example: Google phones; Microsoft Bing
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Demand Side A player is your complementor if customers value your products more when they have the other player’s products than when they have your product alone. Example, video game console and games; smart phones and apps A player is your competitor if customers value your products less when they have the other player’s product than when they have your product alone. Example, Coke and Pepsi
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Supply Side A player is your complementor if it’s more attractive for a supplier to provide resources to you when it’s also supplying the other player than when it’s supplying you alone. A player is your
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This note was uploaded on 03/07/2012 for the course BUS 375 taught by Professor Siri during the Spring '12 term at University of Illinois, Urbana Champaign.

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Lecture 5_Competitive Dynamics_Post (1) - Anticipating...

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