Essays on Game Theory, Sensemaking, Innovation Diffusion Assignment

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The paper "Game Theory, Sensemaking, Innovation Diffusion " is an outstanding example of a business assignment.   According to Brandenburger & Nalebuff (1995), the founders of the game theory John Von Neumann and Oskar Morgenstern achieved a major scientific discovery about the economic behavior of business in terms of conduction their business. In essence, game theory is not about playing the game well or not, it is about playing the right game. By acknowledging the complexity of the business, the founders stated that there are two types of games, rule-based and players interact.

The rules, in this case, can come from loans, contracts and even terms of trade. In the second option, the players in the game interact without any influence from external forces. Notably, the business environment is usually a mix of the two games and it is also imperative to note that the two interact differently according to different environment and situations (Marco 2002). The game theory is thus an essential tool of explaining the strategic choice, for instance, in the 1990s, the U. S. automobile industry was locked on one mode of doing business where at the end of the year, rebates and dealer discounts were holding back the profits that major automobile companies such as Ford and GM could make.

In the wake of 1992, General Motors and House-hold Bank launched credit cards that allowed cardholders to apply 5 % of the charges to either lease or purchase a car in GM. This strategy allowed charges up to $500 a year and a maximum of $3,500. This GM strategy has been acknowledged as one of the best strategies in history. This was essential because of how GM managed to change the game from a lose-lose situation to a win-lose situation.

The fundamental concept of this strategy was to capture and retain clientele into buying a GM car, this also contributed to potential Ford buyers buying GM cars instead. The net effect in the market was the decrease in consumers who bought Ford cars and an increase in the number of consumers who bought GM cars. This strategy clearly re-orients us to how strategic choice through value addition to the market as GM did shape the game and created a substantial competitive advantage. Strategic choices in game theory can also came in form of cooperation, in-game theory the term coopetition is a strategic choice of finding ways to cooperate with other players (who are interdependent) or compete with them as GM did by changing the automobile game in 1992.

Through coopetition, a win-win situation can be achieved or a lose-lose situation (Saloner 1991). As pointed out by Marco, AP (2002, p. 455), in the game there are complementors and competitors, as an example, physicians like surgeons and insurance companies are complementors.

In another case, Dell Inc and Compaq are competitors because they both sell the same products to the same target market. They are however both complemetors relative to Intel which mainly manufactures Processor chips that these companies need in their products. As it is evident, the business game has many players and their interaction determines the success or failure of these businesses. According to Marco (2002, p. 454), the modern business world requires a shift from the traditional game theory and seek to establish better and innovative ways of ensuring a different and improved outcome.

This outcome creates competitive advantage meaning that despite the many players, the uniqueness of the game played by one player results in more customers and thus more sales as compared to the other players. As Marco (2002) and Saloner (1991) state, creation of value through innovation is essential to changing the game, in essence, a payer should ask one foundational question about its business, what am I doing which is different from the other players? This can be in terms of the product price, quality of the product, peculiar features of the products, accessibility in terms of supply chain management or how easy is it to get the product.

All these require that the player have an in-depth of the environment in which the game is being played and thus act effectively. Most companies have managed to achieve this in the past through aspects of coopetition, in the current times, the competition of smartphones can be felt everywhere, creativity in terms of the features and appearance is considered one of the most important competitive advantage tool (Song & Panayides 2009, 286).

Apple Inc is one of the pioneers in this field, its unique products have become households’ names because of its difference from what other companies offer. This has therefore provided the company with major leverage as compared to its competitors. Notably, in order to ensure sustainability, the ability to make strategic choices for changes in the market environment is essential (Miee 2004).

References

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Brandenburger, AM & Nalebuff, BJ 1995, The Right Game: Use Game Theory to shape Strategy. Harvad Business Review(July-August 19995).

Chia, R & MacKay, B 2007, ‘Post-processual challenges for the emerging strategy-as-practice perspective: Discovering strategy in the logic of practice’, Human Relations, vol. 60, no.1, pp. 217–242. DOI: 10.1177/0018726707075291

Ellsworth, JB 2000, Surviving changes: A survey of Educational change models, ERIC Clearinghouse, Syracuse, NY.

Hodckinson, G 1994, ‘Exploring the mental models of competitive Strategists: the case for a processual approach’, Journal of Management Studies, vol. 31, no. 4 1994

Jenkins, M, Ambrosini, V, & Collier, N 2007, Advanced strategic management: a multi-perspective approach, Basingstoke, Palgrave Macmillan, Hampshire New York. Pp. 1-20.

Marco, AP 2002, Game Theoretic Approach to Operating Room Management, The Americal Surgeon (May 2002) vol. 68, no.5, pp. 454-464.

Miee, MH, 2004,Playing with the Big, Engineering management magazine (April-May) pp.15-17.

Norberg, J & Cumming, GS 2008, Complexity theory for a sustainable future, Columbia University Press, New York. Pp. 1-30.

Rogers, E 1995, Diffusion of Innovations, (4th ed.), The Free Press, New York.

Rogers, E 2005, Diffusion of Innovations, (5th ed.), The Free Press, New York.

Saloner, G 1991, Modeling, Game Theory, and Strategic Management, strategic management Journal vol. 12, pp. 119-136.

Song, DW & Panayides, 2009, A conceptual application of cooperative game theory

to liner shipping strategic alliances, Maritime Policy & Management, vol. 29, no. 3, 285-301

Weick, KE, Sutcliffe, KM, Obstfeld, D 2005, ‘Organizing and the Process of Sensemaking Organization Science’, Frontiers of Organization Science, vol. 16, no. 4, pp. 409-421.

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