Economics of strategy / David Besanko.

By:

Besanko, David, 1955-

Material type: Text

TextPublication details: Hoboken, N.J. : Wiley ; Chichester : John Wiley [distributor], 2006.Edition: 4th edDescription: xxv, 606 pISBN:

0471679453 (cased)
9780471679455 (cased)

Subject(s):

DDC classification:

658.4012 BES

Holdings
Item type	Current library	Call number	Copy number	Status	Date due	Barcode
Standard Loan	Moylish Library Main Collection	658.4012 BES (Browse shelf(Opens below))	1	Available		39002100455717
Standard Loan	Moylish Library Main Collection	658.4012 BES (Browse shelf(Opens below))	2	Available		39002100455725

Enhanced descriptions from Syndetics:

Discover the art of strategic thinking

Revised and updated to reflect the cutting edge of academic thinking about business strategy, the Fourth Edition of Besanko, Dranove, Shanley, and Schaefer's highly acclaimed text offers a solid economic foundation for strategic analysis. By presenting basic concepts of economic theory with ideas in modern strategy literature, the book provides an economic lens for viewing the broad sweep of the strategic activities of the firm.

The book begins by focusing on the boundaries of the firm and examines competitive strategy from the perspective of industrial organization (IO) economics, particularly Porter's Five Forces. It then explores strategic positioning and dynamics as well as topics associated with internal organization, including personnel economics, organization structure, and strategic fit.

Features of the Fourth Edition
* Chapters on human resources management, entry, positioning, dynamics, technological change, and organizational structure are substantially revised.
* An updated chapter on business history covers the recent dot-com bubble.
* Presents economic principles without overemphasizing the math.
* Rigorous treatment of organizational topics such as structure and culture enables you to experience the full scope of strategic thinking.
* The authors use Porter's Five Forces as a tool for organizing industry analysis, building on the coverage of industrial organization and game theory. The text also considers the Value Net, another tool for organizing industry analysis.
* Includes coverage of make or buy decisions (Chapters 2-4) and benefit and cost advantage and sustaining advantage (Chapters 11-13).
* Fascinating examples, including many new to this edition, bring the economic models to life. Many of the examples involve businesses outside of the United States.

Previous ed.: 2004.

Includes index.

Table of contents provided by Syndetics

Introduction: Strategy and Economics (p. 1)
Why Study Strategy? (p. 1)
Why Economics? (p. 2)
The Need for Principles (p. 3)
So What's the Problem? (p. 3)
Example I.1 The Rise and Fall of the New Economy's Darling: The Enron Story (p. 4)
A Framework for Strategy (p. 6)
Boundaries of the Firm (p. 7)
Market and Competitive Analysis (p. 7)
Position and Dynamics (p. 7)
Internal Organization (p. 8)
Endnotes (p. 8)
Primer: Economic Concepts for Strategy (p. 9)
Costs (p. 10)
Cost Functions (p. 10)
The Importance of the Time Period: Long-Run versus Short-Run Cost Functions (p. 16)
Sunk versus Avoidable Costs (p. 18)
Economic Costs and Profitability (p. 19)
Economic versus Accounting Costs (p. 19)
Economic Profit versus Accounting Profit (p. 20)
Economic Profit and Net Present Value (p. 21)
Demand and Revenues (p. 23)
Demand Curve (p. 23)
The Price Elasticity of Demand (p. 24)
Total Revenue and Marginal Revenue Functions (p. 27)
Theory of the Firm: Pricing and Output Decisions (p. 29)
Perfect Competition (p. 31)
Game Theory (p. 35)
Games in Matrix Form and the Concept of Nash Equilibrium (p. 35)
Game Trees and Subgame Perfection (p. 37)
Endnotes (p. 39)
Part 1 Firm Boundaries (p. 41)
1 The Evolution of the Modern Firm (p. 43)
The World in 1840 (p. 44)
Example 1.1 The Emergence of Chicago (p. 49)
The World in 1910 (p. 52)
Example 1.2 Evolution of the Steel Industry (p. 57)
The World Today (p. 58)
Example 1.3 Economic Gyrations and Traffic Gridlock in Thailand (p. 63)
Three Different Worlds: Consistent Principles, Changing Conditions, and Adaptive Strategies (p. 64)
Example 1.4 Infrastructure and Emerging Markets: The Russian Privatization Program (p. 66)
Example 1.5 Building National Infrastructure: The Transcontinental Railroad (p. 67)
Example 1.6 The Risks of Modernity: The Halifax Explosion of 1917 (p. 68)
Example 1.7 Parties, Scandals, and Directors Behaving Badly: After the Ball (p. 69)
Example 1.8 Blaming Wal-Mart: The Prequel (p. 70)
Chapter Summary (p. 71)
Questions (p. 71)
Endnotes (p. 72)
2 The Horizontal Boundaries of the Firm: Economies of Scale and Scope (p. 74)
Where Do Economies of Scale Come From? (p. 75)
Where Do Scale Economies Come From? (p. 78)
Example 2.1 Hub-and-Spoke Networks and Economies of Scope in the Airline Industry (p. 81)
Example 2.2 The Division of Labor in Medical Markets (p. 83)
Special Sources of Economies of Scale and Scope (p. 86)
Example 2.3 The Ace Hardware Corporation (p. 87)
Example 2.4 The Pharmaceutical Merger Wave (p. 90)
Sources of Diseconomies of Scale (p. 91)
Example 2.5 The AOL Time Warner Merger and Economies of Scope (p. 93)
The Learning Curve (p. 94)
Example 2.6 The Boston Consulting Group Growth/Share Paradigm (p. 97)
Chapter Summary (p. 100)
Questions (p. 101)
Appendix Using Regression Analysis to Estimate the Shapes of Cost Curves (p. 102)
Endnotes (p. 103)
3 The Vertical Boundaries of the Firm (p. 105)
Make versus Buy (p. 106)
Example 3.1 Vertical Disintegration in the Pharmaceutical Industry (p. 107)
Example 3.2 Self-Insurance by British Petroleum (p. 112)
Reasons to "Buy" (p. 113)
Example 3.3 Getting "Connected" at Sony (p. 117)
Reasons to "Make" (p. 118)
Example 3.4 The Fundamental Transformation in the U.S. Automobile Industry (p. 125)
Example 3.5 Power Barges (p. 128)
Example 3.6 Underinvestment in Relationship-Specific Assets by British Subcontractors (p. 130)
Summarizing Make-or-Buy Decisions: The Make-or-Buy Decision Tree (p. 131)
Chapter Summary (p. 132)
Questions (p. 133)
Endnotes (p. 134)
4 Organizing Vertical Boundaries: Vertical Integration and Its Alternatives (p. 136)
Technical Efficiency versus Agency Efficiency (p. 136)
Example 4.1 Vertical Integration in a Mountain Paradise (p. 141)
Example 4.2 An Application of the Make-or-Buy Framework to Children's Memorial Hospital (p. 144)
Example 4.3 Vertical Integration of the Sales Force in the Insurance Industry (p. 146)
Process Issues in Vertical Mergers (p. 147)
Alternatives to Vertical Integration (p. 148)
Example 4.4 Tapered Integration in Gasoline Retailing (p. 150)
Example 4.5 Amicore Comes to the Aid of Physicians (p. 153)
Example 4.6 Interfirm Business Networks in the United States: The Women's Dress Industry in New York City (p. 156)
Chapter Summary (p. 159)
Questions (p. 160)
Endnotes (p. 161)
5 Diversification (p. 163)
A Brief History (p. 163)
Example 5.1 Changes in Diversification, from American Can to Primerica (p. 165)
Why Do Firms Diversify? (p. 166)
Example 5.2 Acquiring for Synergy: Procter & Gamble Buys Gillette (p. 169)
Managerial Reasons for Diversification (p. 173)
Example 5.3 The Rise and Fall of an Industrial Conglomerate: The Strange Case of Tyco International (p. 176)
Performance of Diversified Firms (p. 179)
Example 5.4 The Search for Synergy in New Markets: Ebay's Acquisition Binge (p. 182)
Chapter Summary (p. 184)
Questions (p. 185)
Endnotes (p. 186)
Part 2 Market and Competitive Analysis (p. 189)
6 Competitors and Competition (p. 191)
Competitor Identification and Market Definition (p. 192)
Example 6.1 Substitutes and Competition in the Postal Service (p. 194)
Measuring Market Structure (p. 196)
Example 6.2 Defining Coca-Cola's Market (p. 197)
Market Structure and Competition (p. 198)
Example 6.3 A Dog-Eat-Dog World: The Demise of the On-line Pet Supply Industry (p. 201)
Example 6.4 The OPEC Cartel (p. 204)
Example 6.5 Pricing in the Airline Industry (p. 208)
Example 6.6 Cournot Equilibrium in the Corn Wet Milling Industry (p. 214)
Evidence on Market Structure and Performance (p. 217)
Chapter Summary (p. 219)
Questions (p. 219)
Endnotes (p. 220)
7 Strategic Commitment (p. 223)
Why Commitment Is Important (p. 224)
Example 7.1 Loblaw Versus Wal-Mart Canada (p. 226)
Example 7.2 Strategic Commitment and Preemption in the Global Airframe Market: Airbus versus Boeing (p. 227)
Example 7.3 Commitment and Irreversibility in the Airline Industry (p. 228)
Strategic Commitment and Competition (p. 229)
Example 7.4 Commitment at Nucor and USX: The Case of Thin-Slab Casting (p. 239)
Flexibility and Real Options (p. 240)
Example 7.5 Commitment versus Flexibility in the CD Market (p. 242)
Example 7.6 Corning's Nuclear Winter (p. 243)
A Framework for Analyzing Commitments (p. 244)
Chapter Summary (p. 245)
Questions (p. 246)
Endnotes (p. 247)
8 The Dynamics of Pricing Rivalry (p. 250)
Dynamic Pricing Rivalry (p. 251)
Example 8.1 The General Motors Employee Discount Price War (p. 255)
Example 8.2 What Happens When a Firm Retaliates Quickly to a Price Cut: Philip Morris versus B.A.T in Costa Rica (p. 258)
Example 8.3 Forgiveness and Provocability: Dow Chemicals and the Market for Reverse Osmosis Membrane (p. 261)
How Market Structure Affects the Sustainability of Cooperative Pricing (p. 262)
Example 8.4 Pricing Discipline in the U.S. Cigarette Industry (p. 269)
Example 8.5 How Market Structure Conditions Conspire to Limit Profitability in the Heavey-Duty Truck Engine Industry (p. 271)
Facilitating Practices (p. 273)
Quality Competition (p. 276)
Example 8.6 Quality Competition among U.S. Health Plans (p. 278)
Chapter Summary (p. 282)
Questions (p. 282)
Endnotes (p. 283)
9 Entry and Exit (p. 286)
Some Facts about Entry and Exit (p. 287)
Entry and Exit Decisions: Basic Concepts (p. 288)
Example 9.1 Hyundai's Entry into the Steel Industry (p. 290)
Example 9.2 Emirates Air (p. 293)
Entry-Deterring Strategies (p. 296)
Example 9.3 Limit Pricing by Brazilian Cement Manufacturers (p. 298)
Example 9.4 Entry Barriers and Profitability in the Japanese Brewing Industry (p. 300)
Example 9.5 Predatory Pricing in the Laboratory (p. 303)
Exit-Promoting Strategies (p. 306)
Example 9.6 Symbian: Keeping Microsoft out of the Mobile Phone Business (p. 307)
Evidence on Entry-Deterring Behavior (p. 308)
Chapter Summary (p. 309)
Questions (p. 310)
Endnotes (p. 310)
10 Industry Analysis (p. 312)
Performing a Five-Forces Analysis (p. 313)
Coopetition and the Value Net (p. 318)
Applying the Five Forces: Some Industry Analyses (p. 320)
Chapter Summary (p. 336)
Questions (p. 336)
Appendix Template for Doing a Five-Forces Analysis (p. 337)
Endnotes (p. 340)
Part 3 Strategic Position and Dynamics (p. 341)
11 Strategic Positioning for Competitive Advantage (p. 343)
Competitive Advantage (p. 346)
Competitive Advantage and Value Creation: Analytical Tools and Conceptual Foundations (p. 350)
Example 11.1 The Division of the Value-Created in the Sale of Beer at a Baseball Game (p. 356)
Example 11.2 Kmart Versus Wal-Mart (p. 359)
Example 11.3 Creating Value at Enterprise Rent-A-Car (p. 361)
Example 11.4 Measuring Capabilities in the Pharmaceutical Industry (p. 362)
Strategic Positioning: Cost Advantage and Benefit Advantage (p. 363)
Example 11.5 Cost Leadership by Cemex (p. 367)
Example 11.6 Benefit Leadership by Superquinn (p. 369)
Example 11.7 Strategic Positioning in the Airline Industry: Four Decades of Change (p. 375)
Strategic Positioning: Broad Coverage versus Focus Strategies (p. 378)
Chapter Summary (p. 384)
Questions (p. 385)
Appendix (p. 386)
Endnotes (p. 394)
12 Sustaining Competitive Advantage (p. 397)
How Hard Is It to Sustain Profits? (p. 398)
Example 12.1 "Von-a-Bees" (p. 399)
Example 12.2 Apex Digital (p. 401)
Example 12.3 Exploiting Resources: The Mattel Story (p. 404)
Example 12.4 American versus Northwest in Yield Management (p. 407)
Example 12.5 Cola Wars: Slugging It Out in Venezuela (p. 412)
Example 12.6 Switching Costs for the Newborn Set: Garanimals (p. 414)
Example 12.7 The Microsoft Case (p. 419)
Imperfect Imitability and Industry Equilibrium (p. 422)
Chapter Summary (p. 424)
Questions (p. 425)
Endnotes (p. 426)
13 The Origins of Competitive Advantage: Innovation, Evolution, and the Environment (p. 429)
Creative Destruction (p. 430)
The Incentive to Innovate (p. 434)
Example 13.1 The Sunk Cost Effect in Steel: The Adoption of the Basic Oxygen Furnace (p. 435)
Innovation and the Market for Ideas (p. 437)
Example 13.2 R&D Spending and Firm Size in the Biotechnology Sector: The Role of Management (p. 438)
Innovation Competition (p. 439)
Example 13.3 Patent Racing and the Invention of the Integrated Circuit (p. 440)
Example 13.4 Organizational Adaptation in the Photolithographic Alignment Equipment Industry (p. 442)
Evolutionary Economics and Dynamic Capabilities (p. 443)
Example 13.5 The Rise of the Swiss Watch Industry (p. 444)
The Environment (p. 445)
Example 13.6 Competence, History, and Geography: The Nokia Story (p. 447)
Managing Innovation (p. 448)
Chapter Summary (p. 449)
Questions (p. 450)
Endnotes (p. 451)
14 Agency and Performance Measurement (p. 454)
The Principal/Agent Framework (p. 455)
Example 14.1 Agency Contracts in Franchising (p. 463)
Example 14.2 Pay, Performance, and Selection at Safelite Glass (p. 464)
Costs of Tying Pay to Performance (p. 465)
Example 14.3 Market Effects in Executive Compensation (p. 470)
Example 14.4 Cardiovascular Surgery Report Cards (p. 475)
Selecting Performance Measures: Managing Tradeoffs Between Costs (p. 478)
Do Pay-for-Performance Incentives Work? (p. 480)
Chapter Summary (p. 481)
Questions (p. 482)
Endnotes (p. 484)
Part 4 Internal Organization
15 Incentives in Firms (p. 487)
Implicit Incentive Contracts (p. 487)
Example 15.1 Promotion Tournaments at General Electric (p. 493)
Incentives in Teams (p. 496)
Example 15.2 Stock Options for Middle-Level Employees (p. 499)
Career Concerns and Long-Term Employment (p. 500)
Example 15.3 Career Concerns of Mutual Fund Managers (p. 501)
Incentives and Decision Making in Organizations (p. 502)
Example 15.4 Teams and Communication in Steel Mills (p. 504)
Chapter Summary (p. 505)
Questions (p. 506)
Endnotes (p. 507)
16 Strategy and Structure (p. 510)
An Introduction to Structure (p. 512)
Example 16.1 ABB's Matrix Organization (p. 520)
Structure-Environment Coherence (p. 524)
Example 16.2 Organizational Structure at AT&T (p. 528)
Structure Follows Strategy (p. 528)
Example 16.3 Strategy, Structure, and the Attempted Merger Between the University of Chicago Hospital and Michael Reese Hospital (p. 530)
Example 16.4 Samsung: Reinventing a Corporation (p. 531)
Example 16.5 Transnational Strategy and Organization Structure At SmithKline-Beecham (p. 533)
Example 16.6 WingspanBank.Com: A Network Organization (p. 534)
Chapter Summary (p. 535)
Questions (p. 537)
Endnotes (p. 538)
17 Environment, Power, and Culture (p. 541)
The Social Context of Firm Behavior (p. 541)
Internal Context (p. 542)
Power (p. 543)
Example 17.1 The Sources of Presidential Power (p. 546)
Example 17.2 Power and Poor Performance: The Case of the 1957 Mercury (p. 548)
Example 17.3 Gary Wendt at Conseco (p. 550)
Culture (p. 550)
Example 17.4 Corporate Culture and Inertia at CPI (p. 553)
Example 17.5 Politics, Culture, and Corporate Governance (p. 555)
External Context, Institutions, and Strategies (p. 556)
Example 17.6 Institutions and Culture: The eBay IPO (p. 560)
Chapter Summary (p. 563)
Questions (p. 564)
Endnotes (p. 565)
18 Strategy and the General Manager (p. 568)
Introduction (p. 568)
A Historical Perspective on the General Manager (p. 569)
What Do General Managers Do? (p. 570)
Chapter Summary (p. 580)
Endnotes (p. 580)
Glossary (p. 583)
Name Index (p. 592)
Subject Index (p. 596)

Author notes provided by Syndetics

Professor David Besanko is the Alvin J. Huss Distinguished Professor of Management and Strategy at the Kellogg School of Management at Northwestern University. Besanko is a Kellogg graduate, having received his PhD in Managerial Economics and Decision Sciences in 1982. He received his AB in Political Science from Ohio University in 1977. Before joining the Kellogg faculty in 1991, Professor Besanko was a member of the faculty of the School of Business at Indiana University from 1982 to 1991. In addition, in 1985, he held a post-doctorate position on the Economics Staff at Bell Communications Research. Professor Besanko's research covers topics relating to industry dynamics, competitive strategy, industrial organization, the theory of the firm, and economics of regulation. He has received grants from the National Science Foundation and from the Citicorp Behavioral Science Research Council to support this research.