What is Strategic Management? “Game Theory” an analogy of the game in terms of business.
The article discusses strategic management. It may be a dynamic field combining art and science. Nonetheless, it is sometimes monotonous and predictable. Many experts may give frameworks that go against each other. Because of this, the author warns against expecting a perfect success method. This essay aims to provide various tools for thinking about strategy while emphasising the importance of being aware of the situation when choosing the best approach.
First, try putting an element of a game into strategic management.
Undeniably, the fundamental or essential requirements for the game are the same; for example, the player is the key to driving the game or business with tactics, experience learnt, and logical reasoning.
The next thing is its environment; all of those games require a battlefield, ground play, and some boundaries or movement-restricting conditions, including time-bound conditions, just like how the actual business works.
Another significant other is another player within the game. As most games require more players to be fun or competitive, other players might play the game strategically, with strategic thinking involved.
Last but not least, the rules of the game shape what the goal or objective should or would be. There are not many differences in the business world but the same things. However, players or the environment can occasionally influence the rules.
In the business sector, game strategy refers to the collection of techniques and strategies organisations use to accomplish their goals and surpass their rivals.
Here are some of the highlights regarding the game and related strategic management related fields:
Games and game theory in business strategic management have changed over time. In the past, they were used in military strategy and economics. Now, they are used in corporate strategy and decision-making. Following are some major turning points in the growth of game theory and its commercial applications:
Early game theory: The roots of game theory were laid by economists like John von Neumann and Oskar Morgenstern in the early twentieth century, who built mathematical models to examine strategic interactions between rational individuals.
Military strategy: During the Cold War, strategists strove to simulate and anticipate the conduct of opposing superpowers, and game theory was first used in military strategy. The dynamics of nuclear deterrence were also studied using game theory.
Economically, game theory has been extensively employed to evaluate market rivalry and business strategic decision-making. This includes the well-known Prisoner’s Dilemma game, which simulates the conflict between individual self-interest and group collaboration.
Business strategy: game theory became increasingly common in corporate strategy in the 1980s and 1990s, as corporations tried to analyse and forecast competitors’ behaviour and foresee market trends. Pricing tactics, entrance and departure choices, and mergers and acquisitions were all studied using game theory.
Game theory has lately been merged with ideas from behavioural economics and psychology to develop behavioural game theory, which takes into consideration cognitive biases and emotional aspects that might impact decision-making in strategic encounters.
Nowadays, game theory and game-based techniques are employed in a variety of commercial applications, ranging from marketing and advertising to negotiation and dispute resolution. These methodologies offer a valuable tool for studying and forecasting strategic interactions, and they may assist businesses in making better-informed choices in complicated and unpredictable contexts.
All in all, Complexity and unpredictability arise from the interplay between participants and a constantly shifting environment.
In the context of business, the “elements of the game” are the many factors and situations that form the degree of competitiveness in a certain market or industry. The following are examples of these elements:
Businesses, organisations, and individuals that participate in commercial rivalry are all referred to as “players” in the market environment. Every participant is a unique person with unique priorities, resources, and competitive advantages.
The rules of the game are the many regulations and laws, as well as the industry standards, that govern market players’ conduct. Participants’ approaches to the game or tactics may change depending on the nature of the rules in play.
When we speak about a company’s resources, we’re referring to the money, people, and expertise that they have available to them. Such assets include capital, ideas, people, and tools.
The environment of the business game comprises of several extraneous components that influence how individuals function in the market. This category includes considerations such as the status of the economy, new technological breakthroughs, sociological inclinations, and the political atmosphere.
The word “strategy” refers to the general plans and methods that firms utilise to outperform their competitors. This includes, but is not limited to, varied pricing, product production, marketing, and distribution tactics.
The degree of competition in the market determines who wins the business game. Profits, market share, and satisfied customers are just a few examples.
To develop a successful business strategy and compete in a certain market or industry, it is critical to understand these aspects and how they interact.
Source: Investopedia, Warwick Business School
Some of this content has been an in-output of ChatGPT’s discussion.
(ChatGPT, personal communication, February 16, 2023)
