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  • Erasmus Universiteit Rotterdam (EUR)
  • Economics of Strategy (FEM11059)
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Summary

summary - EoS - Economics of Strategy (Grade: 9,8/10)

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2023/2024 Written for academic year
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Erasmus Universiteit Rotterdam (EUR)
Course
Economics of Strategy (FEM11059)
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The summary includes all course information needed for the exam. The grade that I received last year, using this summary, was 9.8/10.

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Summary Economics of strategy




Market value

Market value=Market capitalization( P)=NPV + PVGO

P=Stock price∗number of stocks outstanding

Tobin ’ s q=P /book value of equity=Market value /Book value


Different methods of analysis
NPV-analysis  Cost and benefit when firm is viewed in isolation
Option value  Flexibility value when firms can adjust to changes in the market
IO/game theory  Strategic position in the market



NPV adjusted for uncertainty: Decision trees




You use NPV when a project is reversible

You use Real option analysis when a project is irreversible

, Options
= for Uncertain situations
Exercise prize = the price of the deal
 the lower price you pay for a share when using your call option
 the higher price you receive for a share when selling your put option


Expanded NPV =NPV +Option value

1. Timing option: value of waiting to invest / to defer
- Invest now or next year?
- American




2. Growth option: R&D
- Invest potentially in a later because there’s high uncertainty
- European




3. Operating options

- Operating options: Option to Abandon production capacity

Table of contents

  1. 01 Summary Economics of strategy 1
  2. 02 Market value 1
    1. NPV adjusted for uncertainty: Decision trees 1
  3. 03 Options 2
    1. 1. Timing option: value of waiting to invest / to defer 2
    2. 2. Growth option: R&D 2
    3. 3. Operating options 2
  4. 04 External Approach: Porter’s Five Forces Industry and Competitive Analysis 3
  5. 05 Internal Approaches 4
    1. Internal Approach: Resource based view 4
    2. Internal Approach: Dynamic Capabilities 4
  6. 06 Strategic Commitment 4
    1. Commitment should be: 4
    2. Effects of commitments 4
    3. Strategic effect 5
  7. 07 Strategic management 5
    1. Stackleberg 5
  8. 08 Patents 6
  9. 09 Innovations 6
    1. Schumpeterian Hypotheses 6
    2. Product innovations 7
    3. Process innovations 7
  10. 10 R&D spillovers 7
  11. 11 Advertising 8
    1. Persuasive advertising 8
    2. Advertising and monopoly power 8
    3. Advertising and Competition 9
    4. Advertising Information 9
    5. Nelson’s model on Advertising 9
  12. 12 Networking goods 10
    1. Monopoly provision of a Network Service 10
    2. Networks and competition 10
  13. 13 Airlines 11
  14. 14 Private equity 11
    1. Regulated 13

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Financial Economics
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