Educational Objectives

This course is designed to help students better tailor a firm's strategy to its business environment. It develops a novel framework, based on the presence of market imperfections, for understanding the basis upon which firms create and sustain superior performance, potential forces that might undermine it, and formulating effective responses to these changes.

Overall, the course takes a broad perspective on business environment. Apart from competition, it highlights the role of laws, regulations, and social norms. Additionally, through supplemental readings and targeted discussions, the course encourages students to become effective consumers of academic research.

Course Content and Structure

The intellectual basis of the course is the economic theory of market imperfections: features of a market that soften effective competition. A wide range of firm strategies depend on the presence of market imperfections to yield long-term above-normal profits, as any excessive return would be eventually competed away in a fully competitive market.

Identifying the mechanisms through which a strategy softens competition is, thus, a valuable starting point for analyzing competitive advantage. Apart from value capture, market imperfections are also powerful indicators for opportunities to create value (by mitigating these imperfections in creative ways). But this analysis is incomplete in isolation. Market imperfections are often reduced by competition. Furthermore, many forms of government intervention also seek to preserve or enhance competition, putting the savvy strategist in tension with the determined regulator.

In Module 1 (“Market imperfections and strategy”), we introduce three types of market imperfections: imperfect information, transactions costs (e.g. identifying partners, executing and safeguarding agreements), and market power. We dive deep into private responses to these imperfections. Relevant questions are: Are there imperfections in the market? How severe are they? What business opportunities do they imply? How do competition and technological changes affect market imperfections and, in turn, incumbent firms’ performance?

In Module 2 (“Strategy and the Rules of the Game”), we introduce another type of market imperfection: externalities. This module focuses on public responses to market imperfections. What are the motivations of regulators, law makers, and social actors such as media and activist groups? How can firms better anticipate how these public players will respond to market imperfections and understand the consequences to firm performance? How can firms effectively formulate strategies to respond to these interventions? Should firms seek to shape the rules of the game (such as through lobbying)?

Grading

Grades will be based on class participation (50%) and a final paper from a group project (50%).

Separately, I will be happy to advise students for their Independent Projects. The IPs can expand on the project chosen for the course or on other topics that the students are passionate about and better prepare them for the next phase of their career.

Class schedule

There will be complementary readings available over the course.