84595 - Economic Analysis for Business and Strategic Decisions

Learning outcomes

This course considers a broad array of business strategies that firms adopt when they compete with rivals, or when they decide to collaborate. In particular, it aims to combine a sound theoretical analysis of strategic decisions along with their managerial implications. On the one hand, the economic theory of strategic behaviour often neglects the real context in which firms operate. On the other hand, the simple analysis of case studies may lead only to a partial interpretation of such strategic behaviour. By taking this course, participants will understand both the economic rationale and the practical implications of adopting different business strategies in contexts such as: strategic innovation, competitive advantage, standard adoption and compatibility, network effects, and coopetition.

Course contents

Course outline

I. Course introduction. Market competition and product differentiation.

Revision of the basic notions of industrial economics which are necessary for this course. Analysis of product differentiation as a competitive strategy.

II. Indirect competition and collaboration among firms

Vertical relations, product complementarity and interoperability, negotiation among firms, collaborative behaviour, coopetition.

III. Entry and exit decisions

Traditional barriers to entry as well as more recent ones: limit pricing, predatory pricing, margin squeeze, bundling, network effects.

IV. Strategic position and competitive advantage

Competitive advantage and value creation. Strategic position: cost leadership and diversification strategies.

V. New market challenges: innovation, technology, and environment

Innovation and patents. Value innovation. Standard adoption. How to limit imitation. Environmental sustainability and green goods.

Readings/Bibliography

No single textbook is mandatory. Moreover, class material will be provided by the instructor. However, a useful textbook is:

Economics of Strategy, sixth edition (2013), by D. Besanko, D. Dranove, M. Shanley, and S. Schaefer, Wiley.

Other books:

The Wide Lens: A New Strategy for Innovation (2012), by R. Adner, Penguin Portfolio, New York.

Co-Opetition (1996), by A. Brandenburger and B. Nalebuff, Doubleday, New York

Competitive Solutions: The Strategist’s Toolkit (2005), by R.P. McAfee, Princeton University Press.

Teaching methods

10 Lectures (3 hours each).

Regular attendance and active class participation are essential for a successful performance in this course.

Assessment methods

For attending students:

Active class participation (0-3 points)

Group presentation (0-7 points)

Written exam (0-20 points)

 

For non-attending students:

Written exam (0-30 points)

Participants will not be granted the possibility to integrate/substitute marks with oral examinations. Further detailed information on the written exam will be given throughout the course. It is strongly recommended that participants attend all lessons in order to successfully prepare for the exam which will be based on materials, exercises and discussions carried out in class.

Additional exam rules

• Students are required to register for the exam by using the online application procedure.
• Students cannot refuse a positive mark. Each mark higher than 18/30 will automatically be registered by the instructor.

Teaching tools

Regular attendance and active class participation are essential for a successful performance in this course.

Office hours

See the website of Andrea Mantovani