BUS651 Strategic Decision Analysis Application Portfolio
Eric Schmidt
December 11, 2009
EvMBA 2010
INTRODUCTION
Welcome to Eric Schmidt’s Strategic Decision Analysis Application Portfolio. I will follow a general format where I provide my commentary just below the title line of each blog entry and include referenced content below a line separator. The content is there as a convenience to the reader and links to the source should follow each section.
Blog Topics & Titles:
Models of Competition & Cooperation - Pepsi Bottler Merger
§ Fairness & Division - Eminent Domain – Kelo vs New London
§ Simultaneous Games with mixed strategies - Patriots go for it on fourt
§ Fairness & Division - Ranking the Rich
§ Auctions & Bidding - Airline seat auction
§ Models of Competition & Cooperation - Symbiotic Relationships in Nature
§ Models of Competition & Cooperation - Airbus vs Boeing
§ Strategic Moves - Preemptive strikes - Israel vs Iran
§ Voting & Coalition Building - Electing the Pope
Friday, December 11, 2009
Pepsi Bottler Merger
Text:
The two main beverage manufacturers in the US, Coca-Cola and Pepsi, have operated by distributing product through bottler partners. This arrangement means that the manufacturer and bottler partners must decide how to divide the pie in the channel. Ultimately, this is a competitive game, or a prisoner’s dilemma, resulting in a smaller combined pie since each entity is acting in its own interest. Recently, Pepsi decide to change the game with its bottlers by acquiring the two largest bottlers in their system. The company claims this move will provide them greater control, speed to market, and efficiency. By changing the game with their bottler from a competitive game to a cooperative game, analysts estimate Pepsi could save $150 MM per year in operating costs. The positive outlook on the decision is also reflected in the stock price.
References:
“PepsiCo Nabs Bottlers After Months at Table” - Aug 5, 2009 <
“PepsiCo Offers $6B to Buy 2 of Its Biggest Bottlers” - Apr 20, 2009
<< http://www.foxbusiness.com/story/markets/industries/retail/pepsico-offers-b-buy--biggest-bottlers/>>
“PepsiCo buys bottlers for $7.8bn” - Aug 5, 2009
<< http://www.foodproductiondaily.com/Processing/PepsiCo-buys-bottlers-for-7.8bn>>
“PepsiCo to buy bottlers in deals totaling $7.8B” - 8/4/2009
<< http://www.usatoday.com/money/industries/food/2009-08-04-pepsico_N.htm>>
Eminent Domain – Kelo vs New London
Text:
In class we discussed fairness and division. A well know case involving property rights and eminent domain embodies the concept of fairness in the public stage. In the case of Kelo v. City of New London, the township expropriated several residents’ property to allow Pfizer, a pharmaceutical manufacturer, to build a plant. The idea was that the overall community would benefit from the additional tax revenue and additional jobs. The action was strongly contested by the residents and eventually made it to the Supreme Court. A highly controversial decision was made in favor of the township, requiring the residents to relocate. However, the issue is still being debated in the public domain. What is a fair allocation of property rights – at what point does community benefit become significant enough to suspend individual property rights. As a follow-up, Pfizer recently announced that it would not use the land in new London to build a new plant, and although the company has pledged to pay taxes on the vacant lot, New London will not see any of the jobs Pfizer would have brought.
References:
“Kelo v. City of New London” – June 23, 2005
<< http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London>>
“Kelo v. New London” – June 24, 2005
<< http://www.pbs.org/now/politics/domaindebate.html>>
“Pfizer abandons site of infamous Kelo eminent domain taking” – November 9, 2009
<>
“Kelo v. City of New London, Connecticut (04-108)”
<>
“Pfizer's R&D Cuts Render Kelo v. New London Eminent Domain Case a Waste of Time” – November 10, 2009
<>
“Pfizer to Leave City That Won Land-Use Case”
<>
In class we discussed fairness and division. A well know case involving property rights and eminent domain embodies the concept of fairness in the public stage. In the case of Kelo v. City of New London, the township expropriated several residents’ property to allow Pfizer, a pharmaceutical manufacturer, to build a plant. The idea was that the overall community would benefit from the additional tax revenue and additional jobs. The action was strongly contested by the residents and eventually made it to the Supreme Court. A highly controversial decision was made in favor of the township, requiring the residents to relocate. However, the issue is still being debated in the public domain. What is a fair allocation of property rights – at what point does community benefit become significant enough to suspend individual property rights. As a follow-up, Pfizer recently announced that it would not use the land in new London to build a new plant, and although the company has pledged to pay taxes on the vacant lot, New London will not see any of the jobs Pfizer would have brought.
References:
“Kelo v. City of New London” – June 23, 2005
<< http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London>>
“Kelo v. New London” – June 24, 2005
<< http://www.pbs.org/now/politics/domaindebate.html>>
“Pfizer abandons site of infamous Kelo eminent domain taking” – November 9, 2009
<
“Kelo v. City of New London, Connecticut (04-108)”
<
“Pfizer's R&D Cuts Render Kelo v. New London Eminent Domain Case a Waste of Time” – November 10, 2009
<
“Pfizer to Leave City That Won Land-Use Case”
<
Patriots go for it on fourth
Text:
Football is full of controversy. Perhaps the most controversial play call of this season happened in the November matchup between the Patriots and Colts. After giving up a fourth quarter 17 point lead, the Patriots were stopped on their 28 yard line, 4th down, with 2 more to go. The Patriots coach, Bil Belichick, decided to go for it. Unfortunately, the Patriots did not get the first down and they lost the game. Why did Belichick decide to go for it when a punt seemed like a safer play? The following week, ESPN’s NFL Sunday Countdown analyzed the decision. Belichick gos-for-it on 4th 18% of the time compared to a league average of 15%. He is also more successful, converting 59% compared to a league average of 48%. In an earlier interview, Belichick cited an academic paper written by Berkley Economics professor David Romer, “A Dynamic-Programming Analysis of Football Strategy” February 2003. In the paper, Romer analyzes two years of NFL play data to calculate 4th down play success probabilities and determined that NFL should go-for-it on fourth more frequently to maximize their winning probability. Belichick’s decision has since been analyzed extensively and the numbers all seem to support his decision, but you can’t win all the time.
References:
“DO FIRMS MAXIMIZE? EVIDENCE FROM PROFESSIONAL FOOTBALL” – David Romer, University of California, Berkeley, July 2005
<>
“Pats-Colts analysis/reaction: The 4th-down call” – November 16, 2009
<< http://www.patriots.com/news/index.cfm?ac=generalnewsdetail&pid=40326&pcid=41&rss=1>>
“Defending Belichick’s Fourth-Down Decision” – November 16, 2009
<
“ZEUS Computer Program Supports Belichick’s Fourth-Down Bid”
<
“Number-crunchers: Bill Belichick's 4th-down gamble was the right call”
<>
“Belichick's 4th Down Decision vs the Colts”
<>
“David Romer”
<>
“Fourth-down analysis met with skepticism”
<>
Football is full of controversy. Perhaps the most controversial play call of this season happened in the November matchup between the Patriots and Colts. After giving up a fourth quarter 17 point lead, the Patriots were stopped on their 28 yard line, 4th down, with 2 more to go. The Patriots coach, Bil Belichick, decided to go for it. Unfortunately, the Patriots did not get the first down and they lost the game. Why did Belichick decide to go for it when a punt seemed like a safer play? The following week, ESPN’s NFL Sunday Countdown analyzed the decision. Belichick gos-for-it on 4th 18% of the time compared to a league average of 15%. He is also more successful, converting 59% compared to a league average of 48%. In an earlier interview, Belichick cited an academic paper written by Berkley Economics professor David Romer, “A Dynamic-Programming Analysis of Football Strategy” February 2003. In the paper, Romer analyzes two years of NFL play data to calculate 4th down play success probabilities and determined that NFL should go-for-it on fourth more frequently to maximize their winning probability. Belichick’s decision has since been analyzed extensively and the numbers all seem to support his decision, but you can’t win all the time.
References:
“DO FIRMS MAXIMIZE? EVIDENCE FROM PROFESSIONAL FOOTBALL” – David Romer, University of California, Berkeley, July 2005
<
“Pats-Colts analysis/reaction: The 4th-down call” – November 16, 2009
<< http://www.patriots.com/news/index.cfm?ac=generalnewsdetail&pid=40326&pcid=41&rss=1>>
“Defending Belichick’s Fourth-Down Decision” – November 16, 2009
<
“ZEUS Computer Program Supports Belichick’s Fourth-Down Bid”
<
“Number-crunchers: Bill Belichick's 4th-down gamble was the right call”
<
“Belichick's 4th Down Decision vs the Colts”
<
“David Romer”
<
“Fourth-down analysis met with skepticism”
<
Ranking the Rich
Text:
What is a nation’s fair share of aid or fighting poverty? The Center for Global Development (CGD) <<>> has developed a scorecard to rank nations’ contributions to poor and developing countries. The CGD publishes its ranking every year, and in 2009 CGD ranks the US 17th out of 22. The rank is base on various metrics and is normalized by national GDP and per capita GDP. Scandinavian countries all rank toward the top of the list. Sweden is 1st for example. If the Aid component of the index is examined, Sweden has a high score of 14.3 by contributing $4.2 B in aid. On the other hand, the US contributed $22.5 B in aid, but only scored 2.3. The population is a factor in this difference, i.e. $4 B on 10 million people seems like a much great contribution than $22.5 B on 300 million people. The argument is that the US should be spending more, maybe $120 B per year to keep up with the Scandinavians. Is this fair – is this the right way to look at the issue? Or, could it be that the
Scandinavian per capita income is just too high and they should be contributing more on a per capita?
References:
Commitment to Development Index 2009
<< http://www.cgdev.org/section/initiatives/_active/cdi/>>
Per Capita Foreign Aid Assistance by World's Wealthiest Countries, 2002
<< http://www.infoplease.com/ipa/A0930884.html>>
Ranking the Rich 2004 - By FOREIGN POLICY, Center for Global Development
<< http://www.foreignpolicy.com/issue_mayjun_2004/cgddetail.php>>
What is a nation’s fair share of aid or fighting poverty? The Center for Global Development (CGD) <<>> has developed a scorecard to rank nations’ contributions to poor and developing countries. The CGD publishes its ranking every year, and in 2009 CGD ranks the US 17th out of 22. The rank is base on various metrics and is normalized by national GDP and per capita GDP. Scandinavian countries all rank toward the top of the list. Sweden is 1st for example. If the Aid component of the index is examined, Sweden has a high score of 14.3 by contributing $4.2 B in aid. On the other hand, the US contributed $22.5 B in aid, but only scored 2.3. The population is a factor in this difference, i.e. $4 B on 10 million people seems like a much great contribution than $22.5 B on 300 million people. The argument is that the US should be spending more, maybe $120 B per year to keep up with the Scandinavians. Is this fair – is this the right way to look at the issue? Or, could it be that the
Scandinavian per capita income is just too high and they should be contributing more on a per capita?
References:
Commitment to Development Index 2009
<< http://www.cgdev.org/section/initiatives/_active/cdi/>>
Per Capita Foreign Aid Assistance by World's Wealthiest Countries, 2002
<< http://www.infoplease.com/ipa/A0930884.html>>
Ranking the Rich 2004 - By FOREIGN POLICY, Center for Global Development
<< http://www.foreignpolicy.com/issue_mayjun_2004/cgddetail.php>>
Airline seat auction
Text:
Northwest Airlines has started auctioning vouchers for overbooked flights. It seems NWA thought they were overpaying passengers for displacing them from flights and are using the auction mechanism to lower the amount they pay per voucher. Too bad they do not take the same perspective on regular seat sales.
References:
You Tell Us What Your Seat Is Worth
<< http://freakonomics.blogs.nytimes.com/2008/07/24/you-tell-us-what-your-seat-is-worth/>>
Northwest Airlines has started auctioning vouchers for overbooked flights. It seems NWA thought they were overpaying passengers for displacing them from flights and are using the auction mechanism to lower the amount they pay per voucher. Too bad they do not take the same perspective on regular seat sales.
References:
You Tell Us What Your Seat Is Worth
<< http://freakonomics.blogs.nytimes.com/2008/07/24/you-tell-us-what-your-seat-is-worth/>>
Symbiotic Relationships in Nature
Nature provides some great models of competition and cooperation. One of the most striking examples is the symbiotic relationship between crocodiles and the Egyptian Plover bird. Typically, crocodiles eat anything and everything, including birds. However, the crocodile makes an exception for the Plover by allowing the bird to crawl into its mouth and clean its teeth. By cooperating the plover is able to eat and the crocodile maintains its teeth and is able to capture future meals. The cycle continues and both animals are better off together than individually.
References:
Odd Couple
<< http://magma.nationalgeographic.com/ngexplorer/0601/articles/mainarticle.html>>
Crocodiles
<< http://en.wikipedia.org/wiki/Crocodile>>
Egyptian Plover
<< http://en.wikipedia.org/wiki/Egyptian_Plover>>
References:
Odd Couple
<< http://magma.nationalgeographic.com/ngexplorer/0601/articles/mainarticle.html>>
Crocodiles
<< http://en.wikipedia.org/wiki/Crocodile>>
Egyptian Plover
<< http://en.wikipedia.org/wiki/Egyptian_Plover>>
Subscribe to:
Posts (Atom)