The Edinburgh MBA 2008/2009 Daytime MBA Option: Economics of Strategy 1

ECONOMICS OF STRATEGY

Semester 2a 2008/09

Daytime MBA Option Lecturer(s) Dr Eddie Jones Room 3.63, William Robertson Building Tel 0131 651 3859 Email: Eddie.Jones@ed.ac.uk Objectives/Aims Economics of Strategy provides a basis for the analysis of the economic roles and interactions of the stakeholders of the firm, and so it is an essential aid to the development of strategy and a guide to tactics. Within this framework, we will consider the use of economics to help managers make decisions with regard to: cost conditions including economies of scale and scope; demand conditions and strategic positioning: product differentiation or cost-based strategies; strategy in relation to rival firms; the make or buy decision and vertical integration; diversification and the implications of mergers; and the sustainability of profits. The emphasis on the motivational analysis of each party is one way of looking at many of the problems of strategy, marketing, and public policy. The course is therefore of particular relevance to those who need to understand the workings of market competition. This would include those giving advice as consultants, investment bankers or at those senior management levels. The course is taught with a brief introduction to the ideas involved, followed by class discussion of short cases, chosen to exemplify the application of the ideas. Course Pre-requisite(s) None – previous knowledge of economics is NOT assumed. Course Outline Economic Concepts for Strategy: Setting the Goal; Pressures on Management; Profit

maximisation; Costs. Economic Concepts for Strategy: Demand and Theory of the Firm.

The Edinburgh MBA 2008/2009 Daytime MBA Option: Economics of Strategy 2

Strategic Positioning for Competitive Advantage: the analysis of cost and

differentiation strategies. Sustaining Competitive Advantage. Diversification: focus or fail? Vertical Boundaries: the make or buy decision. Transaction Costs: the strategic element of the make or buy decision. Vertical Integration to improve coordination or possibly to gain market power; the

possible loss of control or efficiency by VI. Oligopoly: The Basics of Game Theory Assessment There will be one essay of about 2,000 words which will count for 30% of the final mark, 70% for a final examination. Course Text(s) D. Besanko, D. Dranove M. Shanley, and M. Schaefer Economics of Strategy 4th Edition, John Wiley & Sons Ltd, N.York and Chichester, 2006. This is a path-breaking text, relating economics to strategy, by four of the top writers in the field.

Advised Preparatory Work N/A

Student Feedback from the last time the course ran (Semester 2a 2007/08):

Q1. The course met the stated objectives 4.22*

*(5=strongly agree, 4=agree, 3=neither agree nor disagree, 2=disagree, 1=strongly disagree)

Q2. The course was well organised 3.89*

*(5=strongly agree, 4=agree, 3=neither agree nor disagree, 2=disagree, 1=strongly disagree)

Q3. Were your expectations met by the course? Yes 6 No 3

Q4. On a scale of 1 (poor) to 5 (excellent) what rating would you give this course? 3.56

(Based on a sample of 9 students)