- Read the article titled “Game Theory” at http://www.econlib.org/library/Enc1/GameTheory.html. In the article, the authors discussed a classic case of game theory (zero-sum games) of the Prisoner’s Dilemma (PD). There are many variations of this game in use. Suggest the manner in which organizations could apply PD to their business’ strategy formulation. Provide support for your response.
- Refer to “Case 11 Ford and the World Automobile Industry in 2015” located in the “Excess Capacity” section, page 542 in your textbook, or use the Internet to research two to three (2-3) articles on the North American automobile and its market segments. Next, analyze the key ways that segmentation provides a competitive advantage or disadvantage to the North American automobile. Provide a rationale for your response.
The greatest structural problem of the industry was excess capacity. Ever since the early 1980s, the growth of production capacity had outstripped the growth in the demand for cars. Import restrictions had exacerbated the problem. During the 1980s and early 1990s, North American and European production capacity grew substantially as Japanese automakers built greenfield “transplants.” Internationalization by Korean automakers resulted in further big additions to world production capacity.
The eagerness of Western and Japanese automakers to exploit growing demand in emerging markets was a further source of new capacity. As a result, excess capacity was not only a problem in the mature markets—it was also a huge problem in China, where the large number of domestic car makers and the influx of foreign auto companies resulted in capacity growing faster than demand. By 2014, Ford had five plants in China, Volkswagen had eight, and 45% of the country’s automobile capacity was unused.
2007 2009 2011 2011
North America 79 44 69 91
South America 82 62 75 71
Europe 82 61 72 70
Japan and Korea 86 72 81 84
China and SE Asia 89 83 76 65
Global 84 67 75 74