Business StrategyStrategic PlanningCorporate StrategyCompetitive Strategy

1. Understanding Strategic Moves
2. Example: The authors discuss various types of strategic moves such as commitments, threats, and promises to influence the actions of others.

3. Action: When negotiating a deal, make a firm commitment by setting clear, non-reversible steps to show you are serious about your intentions. For example, if you are a supplier, you might offer a discount that is contingent on a long-term contract, compelling the other party to commit.

4. Simultaneous Games vs. Sequential Games

5. Example: The book contrasts simultaneous games, where all players move at once (e.g., bidding in an auction), and sequential games, where players act one after another (e.g., chess).

6. Action: In a business pitch, understand whether your competitors are making offers at the same time as you or if they are waiting for you to make the first move. Adjust your strategy accordingly—commit earlier if sequential, mirror offers if simultaneous.

7. Backward Induction

8. Example: Using the concept of backward induction, players can anticipate future actions and work backward to determine the present action. The book illustrates this through the example of a chess game where one calculates moves starting from the end-game back to the current position.

9. Action: In project management, start by defining the end goals clearly and then plan each step backward from the deadline to ensure all tasks are aligned to meet the final objective.

10. The Nash Equilibrium

11. Example: The Nash Equilibrium is a situation where no player can benefit by changing their strategy while the other players keep theirs unchanged. An example given is the pricing strategies between two competing businesses where neither benefits from altering prices unilaterally.

12. Action: When entering a competitive market, conduct thorough research to understand the current equilibrium and evaluate if a disruptive strategy might lead to a new equilibrium beneficial to you.

13. The Prisoner’s Dilemma

14. Example: The classic prisoner’s dilemma shows how two rational individuals might not cooperate, even if it’s in their best interest. Companies in competitive markets often face this dilemma, such as two firms deciding on ad spend.

15. Action: Foster a cooperative relationship with competitors where mutual restraint benefits both parties. For instance, agree to industry-wide standards or codes of conduct that curb harmful competitive practices.

16. Mixed Strategies

17. Example: Sometimes, unpredictability is a valuable strategy. The book discusses mixed strategies where randomization can keep opponents off-balance. Soccer penalty kicks are a great example where goalkeepers and kickers use mixed strategies.

18. Action: In competitive bidding, avoid predictable patterns. Use a mix of high and low bids to prevent opponents from easily outguessing your strategy.

19. Reputation and Trust

20. Example: Reputation is pivotal in strategic games. The authors use examples like the Folgers coffee example, where consistent quality helped build a strong reputation.

21. Action: Build a reliable track record in delivering products or services. In every interaction, aim for consistency to foster trust and reliability that can serve as leverage in negotiations or market competitions.

22. Signaling and Screening

23. Example: Players can influence others’ perceptions through signaling. For instance, top schools signal their quality through high entry standards.

24. Action: In job applications, highlight key achievements and endorsements to signal your competence. Similarly, screen potential hires through rigorous processes to ensure quality.

25. Bargaining Strategies

26. Example: Bargaining can involve strategies like splitting differences, making the first offer, or using deadlines. The book delves into how Apple often makes the first move in setting prices.

27. Action: When negotiating, leverage deadlines strategically. For example, offering a time-bound discount can expedite the decision-making process of the counterpart.

28. Crowding Out Effect and Altruism

    • Example: The crowding-out effect occurs when external incentives override intrinsic motivation. An interesting example is how monetary fines for late pickups at daycare centers led to more late pickups, not fewer.
    • Action: When motivating a team, blend intrinsic and extrinsic rewards. Instead of solely relying on bonuses, also nurture a sense of purpose and satisfaction in work.

Business StrategyStrategic PlanningCorporate StrategyCompetitive Strategy