Economics of Strategy
by David Besanko, David Dranove, Mark Shanley, Scott Schaefer
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Book Summary Information
Author: David Besanko, David Dranove, Mark Shanley, Scott SchaeferEdition: Hardcover
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2006-08-07
ISBN: 0471679453
Number of pages: 632
Publisher: Wiley
Accessories:
Book Reviews of Economics of Strategy
Book Review: Correction --- See review by L. Skoufa.
Summary: 5 Stars
The reviewer L. Skoufa is correct; there's an error on pages 20-21 of the first printing of this text. We're fixing it in subsequent printings. Sorry for the mistake, and thanks for pointing it out. The paragraph should read as follows:
As discussed earlier, an important cost excluded from a firm's
accounting costs is the opportunity cost of its capital assets, such
as its plant and equipment. When a firm's accounting earnings do not
cover this opportunity cost, the firm will earn a positive accounting
profit but a negative economic profit. For example, in 2002
McDonald's had a positive accounting income of more than $2 billion,
but it had a negative economic profit of $124 million. (Table
P.3. shows McDonald's economic profit, and that for other selected
food and beverage chains, between 1997 and 2004.) What does this
negative $124 million mean? Just as with the owner of our software
firm, a negative accounting profit indicates that McDonald's assets,
when liquidated and deployed elsewhere, would have earned $124 million
more in income for its owners than McDonald's earned in 2002. In this
sense, in 2002 McDonald's "destroyed" $124 million of its owners'
wealth because its owners could have earned $124 million more that
year by deploying the funds they had invested in Starbucks in their
best alternative use. Not all firms, of course, make a negative
economic profit. In 2004, Starbucks earned an accounting profit of
slightly over $390 million and a positive economic profit of $151
million. This positive econoimc profit means Starbucks created $151
million more in income for its owners than its sources would have
created for themselves if they liquidated Starbucks assets and
invested them in their best alternative use. In this sense,
Starbucks "created" an additional $151 million in wealth for its
owners that they could not have gotten elsewhere.
Summary of Economics of Strategy
Discover the art of strategic thinkingRevised and updated to reflect the cutting edge of academic thinking about business strategy, the Fourth Edition of Besanko, Dranove, Shanley, and Schaefer's highly acclaimed text offers a solid economic foundation for strategic analysis. By presenting basic concepts of economic theory with ideas in modern strategy literature, the book provides an economic lens for viewing the broad sweep of the strategic activities of the firm.
The book begins by focusing on the boundaries of the firm and examines competitive strategy from the perspective of industrial organization (IO) economics, particularly Porter's Five Forces. It then explores strategic positioning and dynamics as well as topics associated with internal organization, including personnel economics, organization structure, and strategic fit.
Features of the Fourth Edition
* Chapters on human resources management, entry, positioning, dynamics, technological change, and organizational structure are substantially revised.
* An updated chapter on business history covers the recent dot-com bubble.
* Presents economic principles without overemphasizing the math.
* Rigorous treatment of organizational topics such as structure and culture enables you to experience the full scope of strategic thinking.
* The authors use Porter's Five Forces as a tool for organizing industry analysis, building on the coverage of industrial organization and game theory. The text also considers the Value Net, another tool for organizing industry analysis.
* Includes coverage of make or buy decisions (Chapters 2-4) and benefit and cost advantage and sustaining advantage (Chapters 11-13).
* Fascinating examples, including many new to this edition, bring the economic models to life. Many of the examples involve businesses outside of the United States.
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