Agree or Disagree?

Discussion: Strategy As Action

Let's start by exploring the notion of strategy as action.In the context of strategy, what specifically does this mean? Please emphasize the following concepts in your answer: market structure, collusion, and the prisoner's dilemma. emphasize other elements of our comprehensive model of global competitive dynamics.

Answer: Strategy can be as simple as you'd like to make it.In essence, an organization's strategy is its roadmap that aims to solidify their position in the market, operate its activities, serve their clients, and achieve what the organization wants to achieve (Business Jargon, 2020).Much of this strategy hinges on the characteristics and structure of the market.Rarely is a firm in a monopoly, especially a new firm.There are often competitors to contend with.This also depends on the type of industry that the organization is in; most Business to Consumer (B2C) firms have regional markets, whereas MNEs operate globally.In either case, there are other firms to worry about, and how the market is structured can dictate how competition works.

Let's take the full-sized truck market for example.Ford would much rather you purchase an F150 while Chevrolet would love to see you sign on the dotted line for a Silverado.In instances such as these, the competition is relatively pure, at least domestically.These automakers have also participated in collusion to an extent in the attempt to bar other entrants (Peng, 2013).They lobbied the government to impose an import tax on trucks produced overseas (Kagan, 2020).In 1964 the government instated a 25% tax on light-duty trucks produced elsewhere (Kagan, 2020).That's a big reason why many of the import branded trucks you see on the road in the US are manufactured there.It also severely increased the cost of entry into the US domestic truck market since the automakers effectively colluded against foreign entrants (Peng, 2013).

Now that they're all here, how does it work?Well, it's complicated.Full-sized trucks are some of the most profitable vehicles for automakers.Back in 2015, F150s made Ford over $13K in profit per unit on average (Crain, 2015).That's weird, because autos in general have razor thin profit margins until the tools and equipment are paid for to produce them.This is almost the perfect storm for the prisoner's dilemma.Automakers have the ability to cut their prices and capture a larger market share, but if one does it, the others would do it too and in a price-cutting war, everyone generally loses if it goes on for a while (Peng, 2013).This is basically another form of collusion for the automakers to get the maximum amount of profit out of every unit, and it's working for all of the brands (Peng, 2013).